Growing Brokerage
Sperry Van Ness co-founder talks about brokerage climate and growth in an exclusive interview.
Interview by Randall Shearin

Heading into the ICSC Spring Convention next month, Shopping Center Business interviewed Rand Sperry, co-founder of Sperry Van Ness and CEO of Sperry Van Ness Equities and Asset Management, to get a feel for the retail real estate market nationwide and to see what was happening with the company.

SCB: How do you see the market for real estate investments currently?

Rand Sperry, co-founder of Sperry Van Ness

Sperry: I would say the market is choppy waters right now. It could go lots of different directions based on lots of different things, based on everything from the world’s political environment, gas prices and unemployment, to the interest rates. There are so many things at play that affect consumer confidence relating to retail. Anybody trying to project where this goes over the next few years is really going out on a limb because I don’t see any clear direction. We are in a cyclical business. We have been on one of the longest up cycles in the history of commercial real estate.

SCB: How do you think retail is performing compared to the other property sectors?

Sperry: A little weaker. Office, industrial and hospitality are the strongest right now. Oftentimes, we get caught up in grouping everybody into one broad market. The larger institutional deals, for instance, behave differently than the private deals. Markets also differ. Austin, Texas, has been one of the worst markets in the nation for the last 5 to 7 years for commercial and residential real estate. Salt Lake City never saw any boom. Now they are both starting to firm up. Los Angeles and Orange County, for retail and multifamily, is starting to get a little choppy, but office and industrial are doing great. The nice thing about our business is that it is not a homogenous market. It is multiple property types and a few hundred markets that each act differently.

SCB: When we last featured your company, Sperry Van Ness had just completed a huge growth spurt. Have you leveled off or are you still growing?

Sperry: Interestingly enough, 2006 was the best growth year for us by far. We are in 36 states and we have 800 brokers, which puts us among the very top in the nation. From an expansion standpoint, we are in most of the markets that we want to be in. Our model allows us to be in tertiary or primary markets. We are not discriminating against any market. We want to be absolutely everywhere. By the next time you interview me we will be in every state. The reason why is really simple: high net worth individuals are everywhere. You can’t service them without being everywhere. The other reason is the liquidity in the market. For deals over $5 million, 50 percent of the time the buyer comes from out of state. The cutoff for institutional investors is about $15 million to $20 million, so that means private investors are going out of state too. They are going from small markets to big markets. The REITs and institutions have been buying in the tertiary markets over the last 36 months. We want to be everywhere and we have lots of room to grow. We also want to strengthen our presence in some of the markets where we are already. We think there is a lot of room for growth in markets like Chicago, Miami, Dallas and New York, for example.

SCB: What are some of the markets where you have recently created a presence?

Sperry: We just opened an office in Hawaii. We opened in St. Louis. We have opened offices also in Michigan, Montana and Wisconsin. We’ve expanded heavily in Charlotte [North Carolina] and we are just getting going in Minnesota. We are all over Virginia and the Carolinas at this point. We have been in Florida for awhile, but we are filling in quite a bit in the last 18 months. In 2006, we added about 250 advisors.

SCB: How do you find good brokers?

Sperry: The majority of the people who joined us at first were high performance, independent brokers who were already out on their own and wanted to have a national platform. Now, we are getting many brokers from the regional and national firms. It is pretty representative of the market overall. To us, it does not matter whether they come from national firms or the independent ranks. We have a few basic rules. One, they have to be able to prove to us that they are in the top 20 percent of their marketplace as far as sales volume. We also put them through background and ethics tests. We have a pretty rigorous process. Our senior advisors, on average, have 13 years in the business and about 28 percent of them carry the CCIM or SIOR designation. There is no firm out there with this kind of tenure and accreditations. Seventy percent are licensed brokers, not just sales agents. Most are between 35 and 50 years old. We are very focused on recruiting top performing women as well. Women are still very much a minority in our business. They are not in residential real estate. We think it is a huge opportunity for us. Half of our senior management staff is female. As a company, we have the kind of culture and approach that makes this a female friendly company.

SCB: How are you continuing to improve the Sperry Van Ness model?

Sperry: We think we have a good model, but we are always trying to make it better. We listen to our advisors. To our corporate staff, the client is our advisors.  Don’t get me wrong, we care about the investor. But the best way we can serve the investor is by making sure that our advisors who serve the investors are the best in the business and have the tools they need to get excellent results for investors. We consider that if we add a terrific new advisor to our team, then our company’s sales and profits will grow. If we lose a terrific person, our sales and profits will decline. You have to listen intently to the person that is out there doing the job. That is where most of our innovation comes from. However, the advisors don’t always know how to articulate what they want. Ford used to say that it was customer driven. Now, unfortunately, their customer is driving a Toyota. We have doubled in size every 2 years over the last 6 years. The Number 1 opportunity for us is to make sure that we execute our priorities, we keep our commitments and we run this company well. It doesn’t always take new and innovative ideas in the brokerage business — sometimes it just means being better at executing the advantage you already have. 

SCB: What are some of the initiatives that you are putting into place to improve your processes?

Sperry: One of the big things for us in 2006 was our technology. We launched a customer relationship management system — most people would call it a contact management system — with Microsoft. It is incredibly innovative. It uses all of Microsoft’s programs together with our data. Even Microsoft’s Earth program so that any addresses in your database will automatically have an aerial photo or road map attached to it. Our system also deals with the multiple owners and partners that own real estate together and separately. It connects the dots between multiple owners, each of their projects and their projects together. We have also launched a product called 575. It is aimed at the tenant business. It is artificial intelligence that works from nine databases. It does profiling. If one of our advisors has a client that needs to fill space, we will do a profile that will generate 500 prospects and have a 75 percent chance that one of those 500 will take the space. We are also working to allow outside brokers to use some of our technology tools. We have paid out over $150 million in commission to our competitors over the last 4 years. We’d like to increase that significantly. We think it is the key to setting us apart from the competition.

SCB: You have always been very adamant about sharing information with other brokerages. How has this helped?

Sperry: It is policy at our company. It is grounds for termination not to cooperate with the brokerage community. We want the highest, most qualified bidder to get the deal, not the highest and most qualified that we know. It is amazing to me that people are still holding on to these old beliefs. There are millions of private investors in the United States. No brokerage firm has more than a few percentage points of the relationships with those people. Nobody knows all the qualified buyers.  We have paid out more than $150 million in fees to competitive brokers to ensure we get our client the highest price for their property.