The cityʼs investment sales slowdown has claimed its first victim.
After nearly 40 years in business, Eastern Consolidated will shut its doors at the end of July leaving 100 brokers looking for new firms and admin staff out of work.
“After thorough and thoughtful consideration, we determined that the best path forward is to wind down the operations of Eastern Consolidated,” said a statement issued by Daun Paris and Peter Hauspurg, the husband-and-wife team who founded and operated the company for the last 37 years. “This was an incredibly difficult and complicated decision to make as Eastern has been a huge and incredible part of our lives for nearly 40 years.”
A hemorrhaging investment sales sector sent the company in pursuit of a partner earlier this year, however the couple said it couldn’t make a deal work.
“We engaged an investment bank to evaluate the opportunity and gauge the market,” they said in their statement. “During this process, other opportunities arose, but they all came with terms and conditions with which we were not comfortable.”
Paul Massey, the one-time head of investment sales at Cushman & Wakefield, said there are a number of reasons why a deal might have materialized for the Eastern Consolidated brass, but he noted that such negotiations can be especially difficult if the firm’s top brokers aren’t on board. “Selling a business without a major commitment from the major producers would have been challenging for a company their size,” Massey said. “It often takes a major commitment from the sellers, the top producers to get something like that done.”
Rainmakers at Eastern include Adelaide Polsinelli, Brian Ezratty, Ron Solarz, James Famularo and Robin Abrams who joined the firm from Lansco last May.
Marcus and Millichap Northeast Division manager JD Parker noted that Eastern had ramped up its hiring over the past year as it attempted to capture more market share. Many small firms have fallen out of the market in recent years not only because of decreased sales velocity, but also because of technological advancements that have made the industry more efficient.
Parker said, “Itʼs been a challenging market cycle during the last few years. One of the things that has allowed us to continue operating well is to really try to export capital from New York to other markets elsewhere in the country. Boutique firms have struggled to do that.”
According to a fourth quarter 2017 market report from the Real Estate Board of New York (REBNY), citywide investment sales activity dropped 37 percent in the second half of 2017, compared to the second half of 2016.
Eastern placed 10th in the annual ranking of New York’s top investment sales firms produced by The Real Deal in February. The company closed 47 deals during 2017 with a transaction value of $622.4 million, according to the publication. The numbers are billions behind powerhouses such as Cushman & Wakefield, which closed of $6.36 billion worth of business during the same time period, according to TRD.
JD Parker believes the landscape looks bleak for upstart boutique brands as the market continues to contract both in terms of transaction velocity and a shrinking ownership pool which trends towards larger platforms with proven track records.
“I think that will stop a lot of people from starting new platforms,” he said. “As a fan of the industry, itʼs sad for me to see companies like Eastern Consolidated and Massey Knakal no longer in the market place because they added to what I viewed as a strong and rich community of local brokers. Itʼs kind of an end of an era of the local broker brand dominating the client market place,”
Massey has first-hand experience selling a smaller firm to larger one. He and his long-time business partner Robert Knakal sold their company, Massey Knakal to Cushman & Wakefield in 2014. Though the market has seen fewer transactions in recent years, Massey said that might not have been the driving force behind Paris and Hauspurg’s decision to step away from the industry.
“I’m sure they were affected by the current market but I think they were probably at an inflection point where they had a fantastic 40-year run and they wanted to exit on a high note,” he said.
-Holly Dutton contributed to this report.