Powering Into The Future: Why We Decided To Sell Warburg Realty To Coldwell Banker
Two weeks ago, Warburg Realty became the first ever Coldwell Banker Global Luxury Division partner for New York City. As the CEO (now President) of Warburg, a brokerage that remained independent for thirty years as consolidation went on all around us, I thought long and hard about how most effectively to move my company into the new world of real estate brokerage. I chose Coldwell Banker for many reasons: its extraordinary CEO, M. Ryan Gorman, its deep analytical capabilities, its award-winning original branding and marketing portfolio, and its extensive offering of buyer and seller enhancement services, to name a few. But the decision was also spurred by an awareness of how profoundly the business of real estate brokerage has changed. Here is the how and why:
Through the early 1980s, the residential business in New York was a family affair. Most brokerages were run by founders or long-time owners. Douglas Elliman was the exception, having already had more than one corporate owner. The firms were small, as was the entire business. Property listings were written on file cards and were given non-exclusively to a handful of firms. Agents worked hard to acquire those listings, making cold calls and walking the avenues chatting up and tipping doormen. No one co-broked listings, since none were given exclusively to agents. Our only advertising was columns of listing ads in the New York Times Real Estate section and the occasional display ad in the Times Magazine or, as time went on, Quest Magazine. No firm had more than 60 or 70 residential agents; L.B. Kaye, where I (along with a number of other industry executives) started my career, had fewer than 50.
There were no condominiums at that time, and a limited number of co-ops. Artists actually lived in Soho, in unimproved or barely improved loft spaces. Alphabet City was not a safe place to venture, and the Lower East Side was not much better. The Bowery was still inhabited by winos.
The mid-80s brought a cascade of rental-to-co-operative conversions. Landlords saw an opportunity to cash out of buildings; at the same time they maintained cash flow by creating wraparound mortgages at high interest rates which they imposed on these conversions. Because of this trend, the number of apartments for sale probably tripled between 1980 and 1988, until the market crashed and conversions and sales both ran aground.
During the early 1990s, multiple changes shook the market. First, we were forced to acknowledge that, as the number of co-op buildings exponentially increased, the old way of handling listings no longer worked. File cards gave way to the first clunky computer listing systems. Exclusive listings and co-broking came to Manhattan, championed by a small company led by Susan Byrd; her work transformed the way we sell property here (the superbroker Sharon Baum is one of the few remaining Susan Byrd veterans still plying her trade among us). Equally significant, the brilliant innovator Barbara Corcoran forced upon her reluctant colleagues the twin ideas of branding and marketing, which many of us were slow to understand were NOT the same thing as advertising.
And so, as the millennium turned, the industry was poised on the cusp of a sea change: technology, branding, and capital pushing their way to center stage of our formerly tame backwater of a business. Over the past 20 years, the goalposts which enabled small firms to continue to succeed kept moving. Cendant (now Realogy) acquired Corcoran and then Sotheby’s Realty, Douglas Elliman changed hands to become a part of the Vector Group portfolio, Terra Holdings took over Brown Harris Stevens and Halstead, Town Residential came and went to be replaced by its vastly better capitalized and more sophisticated sibling Compass. The worst excesses of the finance and tech industries came to our market, as the huge companies offered six-figure signing bonuses to agents, as well as multiple assistants, vast marketing budgets, all in the belief that today’s loss leader would somehow morph into tomorrow’s profitable company.
In such an environment, a small company faces the ultimate challenge: not how to be profitable (Warburg Realty has a long history of profitability, although 2018, 2019, and 2020 were a big challenge for us all in New York) but how to provide competitive, best-in-class technology, customer relationship management, and seller engagement tools to our agents. These considerations drove me, in the end, after much thought and analysis, to sell Warburg Realty to Coldwell Banker. The Global Luxury brand will connect us with like agents in every major city and town in the country and throughout most of the world. In addition, it will also provide every Warburg agent with the ability to match any tools a competitor may offer to win client business. And on an even playing field, I know our agents will likely win, because they are simply better managed, better trained, and more knowledgeable. While giving up our independence is bittersweet, the association with the dominant and admired CB Global Luxury brand powers Warburg Realty into the future.