uction house. The three largest — San Francisco’s Pacific Union, Westchester’s Houlihan Lawrence and Colorado’s Howard Hanna — collectively sold more than $33 billion worth of real estate last year, according to published reports.
“The reality is, they’re not delivering enough value to justify the rates,” said Chris Meyers, president of Houlihan Lawrence, which was bought by Warren Buffet’s HomeServices of America in January.
Dan Conn, CEO of Christie’s International Real Estate, defended the fee hikes, saying they were largely focused on longtime affiliates paying below-market rates. “Our objective is to get to a point of fairness with every one of our affiliates,” he said. “Yes, we’ve lost some larger affiliates, but there’s an economic decision that we’ve made that we should have a fairer fee structure.”
But Meyers said Christie’s accounted for just two or three sales a year — out of about 9,000. “I think Christie’s has overestimated the value that they bring to the brokerage affiliates,” he said, and added the company is “overplaying its hand” in New York City.
While Christie’s doesn’t disclose its fees, a lawsuit filed in California last year by Pacific Union — in which the firm alleged Christie’s breached the terms of its affiliate agreement — offers a glimpse at how much it costs to use its name.
According to the suit, which was later settled, Pacific Union paid Christie’s an annual fee of $210,000 in 2011, its first year as an affiliate. The brokerage was also on the hook for a slew of other fees and agreed to participate in two “bespoke” campaigns in which Christie’s created a custom marketing campaign for an exclusive listing. Christie’s earns 25 to 50 percent of the commission for such campaigns, according to court documents.
But Pacific Union’s CEO Mark McLaughlin said when Christie’s tried to raise rates recently, it wanted fees amounting to roughly 30 percent of the firm’s bottom line. Pacific Union sold $10.5 billion worth of real estate in 2016. “I don’t know what goes on in their conference room, but the fee structure is so imposing that either they don’t understand the business or they want to drive us out,” McLaughlin said.
In New York, of course, everything costs more – sources said BHS had been paying Christie’s millions of dollars a year for the affiliation, though brokers were reluctant to offer up exclusives to be marketed via the “bespoke” program.
“Giving up 35 percent of the commission was too big a bite,” said one broker. “It didn’t mean they’d open their client list to us. They agreed to do mailings.”
In a twist, William Zeckendorf, co-chairman of BHS parent company Terra Holdings, sits on the board of Christie s. He declined to comment.
Picassos to pied-à-terres
Conn joined Christie’s in 2014 from Brookfield Asset Management. He said he began thinking of the auction house operating a wholly-owned brokerage the following year, during Christie’s spring sale, which netted $1.7 billion in art deals.
“It’s a little-known fact that previews are open to the public, and it’s some of the most incredible art you’ve ever seen. You can walk up to it, poke it, check it,” he said.
Going from an auction house to a real estate brokerage as a natural step, according to Conn, who is betting that the firm’s art-shopping clients will appreciate an in-house brokerage more than a licensee here anyway.
“The referral volume in New York has been significant for a number of years,” he said. “We have the infrastructure, and we have clients who want to deal with us and only want to deal with us.”
Christie’s also hopes that in-house agents will return the love to its flagging art business, where sales dropped 16 percent last year to $5.4 billion, according to its annual report. Referrals from real estate agents to Christie’s had been falling short of expectations, Conn said. The dream scenario is that someone like hedge fund titan Steve Cohen, who paid a record $141.3 million for Alberto Giacometti’s “Man Pointing” at a Christie’s auction in 2015, will also choose to buy his trophy real estate through the Christie’s brokerage. (Cohen owns a penthouse at One Beacon Court, and bought a $62 million East Hampton home in 2013.)
Or, that Christie s — which was tapped to sell the personal art collection of Peggy and David Rockefeller — would also get the listing for the lat阿爱上海同城