Recently Elevated Leader Emphasizes Lee's Principal-Based Ownership, Entrepreneurial Approach In Competing For Broker Talent
|Jeff Rinkov was officially named president and CEO of Lee & Associates in May.|
Jeffrey M. Rinkov has been with Lee & Associates since 1995 and served in executive roles for nearly a decade, a period in which it has expanded from largely a Southern California-focused brokerage to a full-service real estate provider with an increasingly national reach.
As Lee & Associates announces its 50th office today, entering the Ohio market in Cleveland,
one of the Buckeye State's largest metro areas, Rinkov has assumed the Los Angeles-based firm's top post. In May, he was officially named CEO and chairman by a vote of the brokerage’s board of directors and 41 presidents to replace former president and chairman Edward Indvik, who resigned in November.
The top broker who became a senior vice president and principal in 2001 made a name for himself working the central Los Angeles and downtown industrial market. Rinkov took over a firm with more than 790 agents in offices throughout the U.S. As a member of the board, Rinkov has also been actively involved in developing the firm’s technology and communications infrastructure and expanding its national platform -- top priorities he plans to carry forward as CEO.
The board and presidents decided to promote Rinkov to CEO after conducting a national search both within and outside the company founded by Bill Lee in 1979. Each office is independently managed by its president and managing partners and a board of directors elected from the firm’s presidents and managing partners.
CoStar News connected with Rinkov to learn what goals he has in store for the firm as CEO, the competition among mid-market brokerage firms for talent, and Lee’s national expansion aspirations.
CoStar:What can we expect from Lee & Associates in the second half of 2014 and going into 2015 in terms of new offices and the company’s sales force?
Expansion continues to be a major focus for us. We implemented a new strategic plan at the beginning of the year, and part of it is staffing and leadership. We’ve identified 15 to 20 U.S. markets where we don’t currently have a presence. We’re typically looking in larger, top-100 MSA markets and there are a number of East Coast, Midwest and even some West Coast locations -- as well as in the Northwest and in the Mountain region -- where we don’t have a presence.
We’ve just opened our 50th office in Cleveland, and we will soon announce our 51st office in the Rocky Mountain region. Both are cities are high on the list in our strategic plan, which means they are important for our client base and for our ability to transport business throughout the network.
We have more than 790 agents. It’s important that we continue to recruit and bring fresh blood into our existing offices. Because we’ve had so much success at expansion during the last five years, many of those offices are still growing.
What other areas of expansion do you see besides opening new offices and new hires?
We’re rolling out the new technology platform that will allow us to tie the offices together and aggregate our national data, which will help us better exhibit our strength. Candidly, we’ve struggled to show how strong we are and communicate the power of having 700 or 800 agents throughout the country. Our tech platform will help us do that. Expansion will also occur internally through the development and growth of our specialty groups.
We have really great momentum in our industrial practice where we’ve always been strong. We’ve also gained momentum in our office practice, and we had a tremendous showing at the ICSC national conference in May by our retail group. We had 60 or 70 retail professionals from around the country. We also see great growth in multifamily and investment and corporate services. Those six specialties will grow internally and attract talent, and that diversity also allows for expansion of offices and agents throughout the country.
Of those six practice areas, which three will get the top focus by the company?
Excluding industrial, where we’ve historically been strong, our corporate services business, which has been able to service clients nationwide with a multi-market presence, is becoming very important to us. Our multifamily business and retail have also become extremely important.
How do you see governance of the company changing from the previous structure under Ed Indvik and his predecessors? How does your style differ from that of Ed, your mentor?
Ed and I are a bit different personalities, but the focus is going to be on collaboration and building the specialty groups. I hope that will be the hallmark of Lee & Associates going forward because we have a tremendous talent base, both on a per-office basis and an individual basis when you drill down to the brokers. Our talent comes from many of our competitors who migrate to Lee because they believe our platform helps them service their clients better and is more broker-friendly.
Our goal here is to centralize those talents and create better messaging to clients. We’ve done a great job of communicating to the broker world about how outstanding our platform is. But one thing we’ve missed out on is expressing that to our clients and prospects. Because of the senior nature of our brokers and how we’re market experts at the local level with a national presence, that affords clients a unique opportunity to take advantage of our services.
What are the challenges and opportunities for a mid-market brokerage like Lee in the ever-consolidating world of global, full-service CRE services companies, where the sharks are continuing to be eaten by the larger sharks?
Or maybe whales are eating the larger sharks? From a strategic angle, I think it’s very interesting how focused Wall Street has become on commercial real estate brokerage firms. However, we will not engage in a one-time capital event such as a sale, offering or recapitalization. That’s because our structure is so unique that not only is [going public] not an opportunity for us, but we see it as a negative.
In competing against extremely well-capitalized competitors, our opportunity is to continue driving business through the quality of our talent and their ability to service clients. Our talent stream may still come from our top three to five competitors, but they’re going to migrate to Lee because they want to pursue their entrepreneurial business plans.
Those people who are successful at Lee are those that either started their careers at Lee or started elsewhere and found out that they were the company rainmakers, and they realize they can better service their clients, and that Lee is better for them as brokers.
We see consolidation in the brokerage world as both a challenge and an opportunity. It’s an interesting time where we’ve seen more brokers get locked up by competitors because of employment contracts -- their giving out signing bonuses. For example, one firm was looking for retention (after a major acquisition) and they were offering employment contracts. That resulted in fewer ‘free agents’ in the market from an agent recruiting standpoint, but we think that’s temporary and more cyclical. Two to three years out, we may see a flood of agent talent looking for new homes.
You said Lee's board leadership doesn’t see any advantage in going public a la Marcus and Millichap. Where is the value in the broker-owned CRE service model?
The essence of our structure is that we are owned by the senior principals in each local market in part, and the balance of the ownership in each local office comes from the ‘student body,’ or the other senior principals in the other Lee offices. We have a co-investment opportunity that ties the offices together, and we have an ownership opportunity for the local market professionals.
Our goal as a private company is to service our clients in the best possible capacity within the many disciplines they operate. It’s the goal of corporations in this country to both serve demands and provide returns for their shareholders. The nice thing about our model is that the revenue producers are the shareholders, either within the local office or within the network.
There’s an unprecedented flow of capital into commercial real estate right now. How much of an opportunity does that provide for Lee on the investment side? Will you focus on a balance between tenant and landlord leasing representation, or will there be more of an emphasis on investment sales?
That’s a great question. We’re unquestionably seeing a flood of capital from every type of source, whether it is institutional capital -- pension retirement funds, local families, high-net-worth buyers, opportunity buyers -- it really runs through every discipline and covers almost every quality grade of product. We’re seeing institutional capital taking not only Class A product but also B and C and C+. It’s been very difficult for owner-users that are in the market competing with investors. Local investors who are competing with international or institutional capital are also very challenged.
There’s tremendous opportunity on the brokerage side in our investment services group. They continue to be very successful, whether it’s selling triple-net investments or multifamily or stabilized or value-add opportunities. So we see that as a big focus, both at the national and local market level. We have the capacity to serve all those masters, and we have the need and have the discipline to be entrenched in all sides of those transactions, because I’m certain that while conditions may be going in a certain direction now, conditions are going to change.
At a certain point, capital will ebb and flow, and the need for having savvy leasing professionals is going to be there, whether we’re servicing institutional or local or regional landlords. We plan to continue to maintain a position on all sides of those transactions.
Will Lee continue to focus on growing its valuation and appraisal, and facilities management businesses?
We’ve seen great growth in our appraisal and facilities management. Facilities management, headquartered out of the Detroit office, finished their first ground-up development this year in Pomona, CA. Our appraisal group is growing throughout the country in many of our offices. We see them as being very additive in making a huge contribution to our technology platform, allowing our agents to have a greater understanding of each of the local markets.