CoStar Catches Up With Two Principals to Get the Inside Story On Why So Many Brokers Are Jumping Aboard Avison Young, An Industry Upstart In The U.S. Just A Couple Years Ago
Avison Young made a major statement this week when 10 brokers and 20 other property management and support personnel from Flagler Real Estate Services decamped to the Toronto-based firm to become the core of Avison Young's South Florida operations and fill-in a major market for its expanding U.S. platform.
Avison Young followed that up on Wednesday with the acquisition of The Walsh Company, a development management firm based in Morristown, NJ, led by brothers Ed and Thomas Walsh. With 53 employees, Walsh has offices and projects in New York, New Jersey, Boston and Washington, D.C.
Over the last month, Avison Young has grown coast to coast. The company opened brokerage offices in New Jersey headed by Jeffrey L. Heller, and a third Los Angeles-area office in Santa Monica by acquiring Starrpoint Commercial Partners, Inc., headed by another CRE veteran, Randy Starr. The firm’s rapid growth previously resulted in new offices opening this year in New York, San Francisco, Pittsburgh and Charleston, SC.
CoStar connected with Avison Young Chairman and CEO Mark E. Rose and S. Pike Rowley, previous president of FRES who becomes managing director of Avison Young's Florida region, to discuss the Canadian-based company’s rapid ascension in the market and the motivations behind Rowley’s and his team’s decision to come aboard. Here's what they told us during separate interviews this week.
CoStar: Pike, what were the key factors and timing in the decision to join Avison Young? What did Avison offer that Flagler could not?
S. Pike Rowley:
About a year ago, the key players in Flagler Real Estate Services, the eight partners who are now Avison Young Florida, got around the table and asked what it was we wanted to do. We're 45 to 60 years old and at a point in our careers where we're just not that interested in being commission only.
It's what I call "treadmill honors.' If you get off the treadmill, you stop making money.
If we're all investors in the same company, then you feel like at the end of your career, you've got something to show for it, versus waking up in your 50s or 60s and seeing you’ve got nothing to show for all this hard work. We decided we weren't going to achieve that at Flagler. Then we looked at other options and we realized we couldn't do that at Cushman, CBRE or Jones Lang LaSalle.
Follow Randy Drummer on Twitter for live news updates.
When we discovered Avison Young, we went to the Flagler folks. The timing for them was fine because it was their intention to scale back on third-party delivery anyway. Flagler's focus is more about owning real estate and the railroad. For us, and for what we do, it was appropriate to partner with a larger national company that is owned and designed for third party services delivery. We felt our best fit was a company owned by service providers. Avison Young was originated by brokers in Canada and designed by brokers, so everybody wakes up every day thinking about servicing clients. What really attracted us to Avison Young is that everyone is aligned because the key players are shareholders.
That's an interesting perspective. But we’re sure you had overtures from other firms. What made you stick with Avison Young?
Word does start traveling and we did get overtures. We took a hard look at several [companies] and realized in very short order that this was our best choice.
Avison Young brags about a culture and they live it. It's more than just words or a mission statement on a web site. We got a chance to meet the other managing directors and senior brokers around the country. It was like looking in a mirror.
There's a culture of entrepreneurship, of integrity and doing it the right way, of client service that goes hand in hand with ownership. Avison Young has a bragging right that they call ‘no silos.’ Rather than having multiple profit centers where everything is about guarding their bottom line and if you want to tap into their expertise, you have to pay a toll. They don't do that in this company. It’s very decentralized.
What do clients look for when they hire a brokerage firm?
Number one, that asset manager needs to know he is going to be on the top of your list every day. He wants to know, if you are so big, will he get lost in the shuffle? However, that doesn't mean he will go to a boutique firm, even if the boutique is considered the best in the market. Because at the end of the day, he's got to go to his investment committee with a branded company. The asset manager wants to find and work with an individual broker who's going to wake up every day thinking about his assets and make him look like a hero.
In our case, we've got some international investors who are looking across the U.S. for product. And for corporate services clients, we've got to have a broad reach into other markets and know we've got people on the ground. If a client is looking for an investment opportunity, you've got to have that reach. It really is a great fit for us.
CoStar: Mark, why do brokers seem to be attracted to Avison Young’s business model?
Mark E. Rose:
Virtually every full services global real estate services company has taken on certain attributes over the last 15 years, starting with going public. Public is not a dirty word, but these companies are now working for shareholders who have nothing to do with the business. Most individuals have been put in the position where they're working 'a job,' which is fine. The interesting thing was 20 years ago, other than Grubb & Ellis, which went public 30 years ago, every one of these companies were private partnerships. Everyone worked collaboratively together, and there was a sense of family.
As we've hit 2012, the need to drive 15% EPS growth to make financial investors happy is causing a dislocation between what employees and top professionals are looking for, and what's actually out there.
How did you go about designing and building Avison Young?
We've tried to build a company without legacy. When I was COO and CFO at public companies, there were certain things you could change, and many others you couldn’t because they had been in place for so long they were considered immovable objects. To some extent, it was the same thing when I was CEO of Grubb & Ellis.
As a private company post-Grubb, we could implement all the best practices and, more importantly, eliminate things that made no sense, things that hold back a company. Almost all of it was based on feedback from clients, which was put into the plan. With 900 people joining us in the last 2 1/2 years, I think most people are appreciative that we are very discriminating about the behavior of individuals, that it's not about revenues, it’s about collaboration. Although that's turning into revenues that are turbo-charged.
Can you give us some color on the structure of Avison Young’s principal/shareholder-based program?
It’s about the ability to own the same common shares throughout the organization, in a private setting. Instead of public shareholders getting the money that brokers earn doing right by clients, they’re getting it back directly, either through distribution, and/or an increase in the equity value in the company. And we have seen a significant increase in our equity value. That has been extremely motivating to cause people to look at their existing situations and go, ‘I actually own this company.’
Our contract and our shareholders agreement, in a clear departure from what you see in other organizations, is broker friendly. It was built by us, for us. We are the owners, so we have responsibilities to each other. Because we're the ones sitting around the table, it feels so much better than a financial institution handing you a 60-year-old pyramid structure and the commanding document that supports it.
We have a collaborative document that was built by the very people who have signed it. Everything we do is at fair market value, flexible and meaningful, and everything supports the culture of collaboration.
As of this week, our firm now has almost 180 principals. We have our minority partner, which is Tricore Pacific Capital. Every single person has the same document. We have grown from 290 Canadian professionals in 11 Canadian offices to, as of this week, 1,100 North American professionals and 38 offices, 21 of those in the U.S., 17 in Canada. We have 180 principals out of 1,100 employees, so we've continued to leverage since the start of the company, when we had 53 principals out of 290 employees.