05/26/2010

Defections Leave Holes in Cushman Network

As the investment-sales market finally begins to show signs of thawing, Cushman & Wakefield may find itself in a struggle to retain market share.

Key defections have left the brokerage shorthanded in some major markets. Most notably, Cushman's top sales team - the New York-based office group - jumped to Jones Lang LaSalle two weeks ago. But the firm has also been weakened in suburban New York, Los Angeles and Houston.

In recent years, Cushman has consistently ranked third nationally in investment-sales volume, behind Eastdil Secured and CB Richard Ellis, according to Real Estate Alert's Deal Database, which tracks sales of $25 million or more. But its position may be in jeopardy. Three rivals nipping at its heels - Jones Lang, Holliday Fenoglio Fowler and Grubb & Ellis - all stand to benefit from having poached veteran Cushman earners over the past year.

Cushman's failure to replace some big-name defectors so far is fueling speculation that the firm might de-emphasize investment sales in favor of tenant representation, leasing and property management. The company employs nearly 600 leasing brokers, compared to about 120 investment-sales brokers.

"In 2006, 2007, the sales guys became the darlings [at Cushman] because business was booming," said one former Cushman sales broker. "But if you look at it honestly, Cushman is a leasing and management firm."

Cushman chief executive Glenn Rufrano, who took over the company in February, didn't return calls seeking comment.

As Cushman struggled with debt problems in 2008 and 2009, its top money-makers became prime targets for rivals looking to pick up market share. Although all big firms had turnover, Cushman suffered disproportionately.

Grubb picked off a dozen Cushman sales brokers, including office specialist Richard Plummer in Los Angeles, Ken Page in Houston and John Gavin and Paul Lundstedt in Chicago.

But the departures in the New York metropolitan area could take the biggest toll. In 2007, the last boom year, the New York City team that has jumped to Jones Lang - Richard Baxter, Ron Cohen, Scott Latham and Jon Caplan - accounted for nearly one-third of the firm's $22 billion of total large sales, according to Real Estate Alert's Deal Database.

Cushman lost bench strength in New York last year when the team of Charles Kingsley, Jon Epstein and Yoav Oelsner jumped to Grubb. The trio, which made up Cushman's private-client team, generally handled relatively small properties in the city, but could have been tapped to step in for the exiting New York team.

Also, Jose Cruz's multi-family team in New Jersey decamped to HFF in March. Cruz had steadily ranked among Cushman's Top 20 earners in recent years and cracked the Top 10 last year, according to market players.

Cushman has announced that its metropolitan-area team headed by vice chairman Andrew Merin will step in to cover the crucial New York City market. But some observers said Merin, who has made his name in the outer boroughs and tri-state area, would find it challenging to break into the city while continuing to cover his traditional turf. There has been talk that Cushman might make a play for veteran Jones Lang broker Nat Rockett to help replace the exiting New York team, but it's unclear if that will happen.

Brokers said that the replacement of brand-name sales brokers is particularly challenging. Despite the size of the New York market, the number of rainmakers with institutional Rolodexes is small.

To replace a top team in a major market, a brokerage usually has to raid one of its competitors. But given its cash squeeze, Cushman may not have the wherewithal to lure a team with incentives.

"I don't think the leaders at the brokerages like to admit this," said a top executive at a rival brokerage, "but these guys are hard to replace and hard to recruit."

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