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Among seemingly disruptive tech companies, the narrative is as important as the product itself. WeWork’s culture was expressed in a fever dream atmosphere, tales of tequila-fueled rage and megalomaniac tendencies, all led by a man who had previously founded a company that sold baby clothes with built-in knee pads. Tesla was going to throw out all established ideas about how to make cars (not to mention the tunnels they drive through) and rethink it all from the ground up. Compass Real Estate, however, was a little different: It was a persistent, stable and bankrupt disruptor to a bankable industry. Co-founder Robert Reffkin was a McKinsey and Goldman Sachs alum who ran marathons for charity. He’d grown up with a single mother who’d been a Bay Area realtor, giving him exposure to a field he’d never worked in, but his relative distance meant he didn’t run the risk of becoming contaminated with outdated ideas. Investors were eager to put money into a company that could grab a piece of an incredibly profitable, relatively low-tech industry.
Compass seemed like a safe bet, even if its own technological innovations were modest at best—the company’s platform helps agents do everything from planning open houses and determining market values to creating renovation visualizations with an AI-powered tool (much of it AI-powered, actually). The technique is actually great, current and former agents told me, but less revolutionary than simply pleasing. “I feel like I’m just as efficient now,” said one agent who left, explaining that it hasn’t changed the types or quantities of properties he sells. “But it was great to work with.” The problem is that the technology had to be more than nice because, like many other startups, Compass was burning money to gain market share.
For a long time, the burning rate did not matter. The company had a lot going for it: sophisticated branding that appealed to sophisticated brokers and their city-dwelling clients (city dwellers, that is, when they weren’t in a second home in Aspen or the Hamptons) a place that felt fresh and not cheesy in an industry where high-end brokerages tend to be either shabby or towards the flamboyant. Over the past decade, Compass’ tasteful black-and-white signs have become ubiquitous, not only in the fringes of New York where the company originated—from Red Hook to the Upper East Side—but also in every affluent enclave. across the country. They are located in Aspen and San Francisco, Boston and Austin, Palm Beach and Palm Springs, trendy and dirty areas. The badges are an effective and elegant means of conveying Compass’ increasingly powerful position. Yet they’re curiously old-fashioned technology for a startup that has raised $2 billion by portraying itself as a revolutionary technology company. Critics have pointed out that the most disturbing thing about the company was the amount of money it had to spend.
And Compass spent it, much of it acquiring other brokerages and finding agents with big incentives (stock options, signing and referral bonuses, and expense accounts, to name a few), allowing him to build massive operations in these high-profile areas. . But all that growth was a problem in another way. Initially, Compass focused on recruiting elite agents, but over time, according to a former Compass agent, they started throwing money at anyone and everyone.
“Earlier agents were told, ‘You’re so great and special to be here,’ but a few years later it was, ‘Anyone in line gets in.'” Agents trying to build their teams found that junior agents in Recruiting side meetings with Compass, which gave them better deals. Not only did such manic recruiting waste money and cause morale problems, it also meant there weren’t enough support staff to go around. One former agent said the number of PR and tech support people never grew in proportion to the number of agents the company carried, and marketing meetings lasted 25 to 30 minutes, so short that he stopped bothering to do them. And while he was initially impressed by Compass’s marketing templates, he quickly realized that elaborate designs were useless when half the city brokers used the same “I thought the first week this stuff was great. But then they started to grow by leaps and bounds and I thought: doesn’t everyone have the same shit?
Either way, it looks like the fun may be over. The company’s share price fell to $3.53 last Wednesday, down from $18 in its 2021 initial public offering (and even that was significantly less than the proposed price of $23 to $26). It won’t crash and burn – more will come back to Earth, settling into the reality that it’s not the next big thing, but just another brokerage, albeit one that still spends more money than it makes. By comparison, Reology (now known as Anywhere Real Estate), which is owned by Corcoran, Sotheby’s and Coldwell Banker, among others, posted a profit of $23 million in the first quarter of 2022. Earlier this month, Compass announced during its earnings review that it would lay off 10 percent of its workforce — about 450 employees. Its geographic expansion plans and mergers and acquisitions are also on hold, and some offices are likely to be consolidated. Even with these cost-cutting measures, claims that the company will be profitable in 2023 look increasingly unlikely as interest rates rise and the country’s sales market slows. “It’s never been clearer that this is a traditional brokerage — that’s how it makes money. It’s at the whim of home sellers and home buyers,” said Mike DelPrete, a researcher at the University of Colorado Boulder who analyzes the financial health of real estate companies. “The difference between it and Realogy is that its cost of money is astronomically high.”
Compass has framed its cost-cutting as a sensible response to a cooling sales market. “Due to clear signs of slowing economic growth, we have taken a number of measures to protect our business, including the difficult decision to reduce the size of our workforce by approximately 10%,” a company spokesperson wrote in an email. “These actions allow us to continue to focus on our strategy to be the best company in the world, empowering real estate agents to grow their business while making steady and steady progress toward our profitability and free cash flow goals.”
It’s certainly not the only company pulling back amid rising interest rates and hints of a recession. Other brokerages, including Redfin, have also laid off people recently. But as DelPrete pointed out, Compass is spending far more than its publicly traded peers and will need to lay off far more workers — about half — to break even. “Their model has always been that they raised a lot and spent a lot, but then the market slowed,” he said.
In an earnings call, Compass CEO Robert Reffkin said that while the company has halted geographic expansion, it does not plan to stop adding agents. “It’s just a much more profitable recruitment … where of course there’s still demand to come to Compass as an opportunity,” he said. But the problem with layoffs is that it’s likely to drive some independent contractor real estate agents away from the business, not toward the business. If they take hold, revenues will fall, necessitating further cuts. A big part of the appeal of turning to Compass wasn’t just the sleek branding; it was a collaboration with a company that has a lot of resources.
Or there were. According to a current Compass agent, it hasn’t really felt that way for a while, saying that before the company went public, it started charging agents for things like Docusign, Adobe and Property Shark. “Belittling support services is really annoying when you’re an agent bringing in all this money and they have to pay for basic things like this,” he said. Although that was hardly the most depressing thing since the IPO – that would be the share price. Prior to the IPO, many agents purchased stock through Compass’ agent stock program, applying a portion of their commissions to future stock options. “The supply is broken,” said the agent. “It’s worth significantly less now than when I bought it. Those who went hard got smoked. They’d have been better off buying it now than at a ‘bargain’ price.”
In the first three months of 2022, the company spent $142 million and confirmed in its latest earnings call that it has $476 million in cash and access to $350 million. It’s not a terrible position. “Running out of money is a relative term,” DelPrete said. “They certainly have about a year of runway left.” But this year is not as profitable as the last, even in the New York market. The Olshan Report, which tracks Manhattan sales $4 million and up, recorded 20 contracts last week, compared with an average of 30 between early 2021 and early May of this year.
The promise was that Compass technology would fill that gap: increasing productivity and efficiency, ultimately enabling the company to turn a profit. But even if technology helps, it’s increasingly clear that it’s not a magic bullet: real estate is still a time-consuming personal business, where the biggest factor influencing “efficiency” is often the market itself. It’s unclear whether AI-powered tools like the company’s “likely to sell” feature, which provides agents with names of people who might be willing to list their properties, is a significant advance over older technologies like sending postcards and holiday greetings. Acquiring other brokerages and poaching agents, on the other hand, is clearly efficient—Compass has grown by sales volume to become the nation’s largest brokerage—but also expensive. And it doesn’t work so well if you plan to include not only rainmakers, but also junior brokers who may start working independently (instead of an experienced team). Despite all this, the company is still just one player among many: its market share in this country increased to 6.1 percent in the first quarter of 2022.
Compass was always aspirational. Of course it was: it’s a real estate agency and a startup, both feeding themselves and creating dreams of more comfortable and financial futures. It encapsulates both the sane appeal of the industry and its insanity: somehow real estate is supposed to be both a safe, responsible investment and a get-rich-quick scheme all rolled into one. In reality, returns are often less than stellar and people get burned. Discontinuity itself sometimes gets disrupted when it comes into contact with the physical world. WeWork put a sexy twist on subletting office space, a potentially lucrative business but hardly new and whose fundamentals still apply. Zillow’s i-purchase, on the other hand, was quite innovative, but it was also a fiasco, with the company shutting down after suffering huge losses due to an overly optimistic algorithm, leading the CEO to conclude that the practice had “a high probability of at some point compromising the entire company.
“At the best of times, our business was a tight-margin business, but I think their strategy of growing market share without considering the cost of market share is a very dangerous strategy,” said Frederick Warburg Peters, president of Coldwell Banker. Warburg — admittedly, a competitor, but with a very clear eye. “For this to work, a series of very complex things have to go right.” And now is not the time when things are going well. “We’re going into what’s going to be a tough period for at least the next eight months. Interest rates are going to rise further and most economists believe we’re going to go into a mild recession to contain inflation,” Peters said. In 2008, Compass was not profitable, and under the best of circumstances. Two thousand twenty-three is not their year.”
Is Compass Real Estate in Canada?
Compass manages a broad portfolio of office, industrial, retail and multi-residential properties across Canada.
Is Compass a luxury brand? Founded in 2012, Compass, the nation’s fastest-growing luxury real estate technology brokerage, is quickly dominating the luxury landscape in 80 cities across the country. See the article : The real estate market is weathering the “perfect storm” for family homes: Carroll CEO. Today, Compass has 165 offices with 7,000 representatives in 13 states and over 1,000 employees.
Where is Compass based?
Founded in 2012, the company is headquartered in New York. The company offers software for real estate agents. Compass is the first company to create a proprietary mobile app for real estate agents.
Who is Compass owned by?
Operations. Compass Group Index is the parent/holding company and directly owned by Compass Group. Read also : Industrial real estate developers are popular in cold storage. Compass Group owns the following brands and companies: 14Forty.
What is the difference between Zillow and Compass?
As we discussed at length in our Best Subletting Websites post, the main difference between Compass and Zillow is that Compass is a single brokerage with many agents and offices, while Zillow is a listing aggregation portal that showcases inventory and offers from thousands of different companies. See the article : Station Casinos agrees to a $ 80,000 fine for sports betting failures – The Nevada Independent. brokerage firms.
Who is the largest private landowner in the world?
Roman Catholic Church: 70 million hectares The world’s largest landowner is not a major oil tycoon or real estate investor. No, it’s the Roman Catholic Church. According to Lovemoney.com, the church owns over 70 million hectares.
Who will own the most land in the world in 2022? The largest landowners in the 2022 Land Report 100:
- Emmerson Family – 2.33 million acres.
- John Malone – 2.2 million acres.
- Reed Family – 2.1 million acres.
- Ted Turner – 2.0 million acres.
- Stan Kroenke – 1.627 million acres.
Who has the most land in the world?
The largest country in the world is Russia, with a total area of 17,098,242 km² (6,601,665 mi²) and a land area of 16,376,870 km² (6,323,142 mi²), accounting for 11% of the world’s total land area of 148,940 sq m (5 000,940 square meters). See also: Most popular countries.
What is the largest privately owned piece of land?
CNN founder Ted Turner owns 2 million acres of land, mostly in New Mexico, South Dakota, Nebraska and Georgia. Much of Turner’s land is used as grazing land for more than 50,000 head of buffalo, the largest private bison herd in the world. John Malone is the largest private landowner in the United States.
Is Compass real estate a good buy?
Our market share was 1.1% three years ago, 4% in 2020 and 5.6% in 2021, reflecting 40% year-over-year growth and 50% three-year CAGR." By 2022, Compass continues to expect positive EBITDA of “at least $40 million.” which translates to an adjusted EBITDA margin of approximately 5% on expected revenue of $7.9 billion to $8.1 billion.
Does Compass Real Estate Make Money? Commission fees. Compass makes most of its money from commissions that customers pay during a home transaction. As mentioned above, Compass bought and sold 145,000 homes in 2020 with a total transaction volume (“GTV”) of $152 billion.
Is Compass a good buy?
Compass has a consensus rating of Moderate Buy. The company has an average rating score of 2.78 based on 7 buy ratings, 2 hold ratings and one no sell rating.
Will Compass Real Estate survive?
The two companies later reached an agreement. Despite these issues, Compass Real Estate is still going from strength to strength. Now that the situation is stabilizing after the pandemic, the real estate market is definitely recovering and Compass continues to hire more and more agents.
Is Compass better than Keller Williams?
Keller Williams scored higher in 7 areas: Overall Rating, Career Opportunities, Work-Life Balance, Top Management, Culture & Values, Recommend to a Friend % and Positive Business Outlook. Compass scored higher in two areas: compensation and benefits and CEO approval.
