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With commercial real estate leasing and sales down sharply from their peak of a few years ago, commissions paid to the area’s top brokers,either to retain top talent, or hire them away from competitors,are piquing the interest of many.
Executives for OC’s largest commercial brokerage, Los Angeles-based CB Richard Ellis Group Inc., raised some eyebrows during a call with analysts last month. Officials said they wanted to tweak the commission rate paid to the company’s brokers in an effort to cut more than $500 million in costs in 2009.
Analysts said they expect CB Richard Ellis to drop commission splits slightly, especially for the company’s less established brokers. Brokers’ commissions are expected to fall a few percentage points from the traditional 50/50 split.
Company officials said they didn’t expect to see brokers leave because of the revised terms and noted other competitors were enacting similar measures.
But not all brokers are cutting commissions, at least not for better-performing brokers, sources say.
Local officials said incentive packages to recruit top brokers from competitors have been ramping up as of late. The head of one Irvine-area brokerage said a few of his top brokers were lured away by competitors with promises of commission splits in the 80% to 90% range, as well as good salaries for the brokers’ assistants.
When he heard those numbers, he said he encouraged the brokers to leave.
Santa Ana-based Grubb & Ellis Co. officials said they haven’t gone that far with incentives, but they are paying to grab top talent these days.
In the first quarter, the company said it took a $4.9 million charge to account for signing bonuses and stock-based compensation packages used to hire new talent across the country.
The good news is these days, “the cost of acquiring good people has come down,” said Grubb & Ellis Chief Financial Officer Richard Pehlke, during a recent call with analysts.
Grubb & Ellis said its typical broker gets about a 60% cut on commissions, with higher-earning performers getting closer to 70% and those on the low end of production getting about 50% splits.
Buchanan Hire
Newport Beach-based real estate investment bank Buchanan Street Partners has a new managing director.
The company has hired Bob Peterson, most recently the chief investment officer of Irvine’s Cornerstone Real Estate Funds, to the position. Buchanan Street now has six managing directors, according to the company’s Web site.
Peterson will be responsible for investing in structured debt and value-add equity opportunities for Buchanan Street’s discretionary funds and dealing with the company’s clients throughout the Western markets. He’ll also be involved in acquisitions and marketing and branding.
The company says it is looking for investment opportunities in both equity and debt in major metropolitan areas across the U.S.
Peterson has 28 years of experience in commercial real estate, primarily in investment management capacities. He’s led the investment process on more than $5 billion in office, industrial, retail and apartment deals.
He’s the second recent hire Buchanan Street’s made from Cornerstone, which currently runs two non-traded real estate investment trusts. Last October it hired Dominic Petrucci, previously Cornerstone’s chief operating officer, as its chief financial officer.
Coreland Lands Work
Tustin-based real estate service provider Coreland Cos. says it is seeing a surge in new business, with a large chunk of that business tied to managing distressed properties.
Coreland has taken on more than 1 million square feet in property management contracts in the past four months. About half of the assignments are for properties currently or recently run by state court-appointed receivers, according to the company.
Coreland said it was retained to manage two assets after the receivership period, including a new 193,709-square-foot light industrial and office condominium development in Downey and a 15,172-square-foot office complex in Irvine on Gillette Avenue. Coreland’s Patrick Galentine was the appointed state court receiver for these assets.
Galentine’s also acting as a state court receiver for the Corona Corporate Centre, a 114,990-square-foot, seven-building office park in Corona, and a 257,198-square-foot retail project in Northridge, among other projects.
Other big retail management assignments the company’s picked up include the Centre Pointe Marketplace in Valencia, Ontario Freeway Center and Palm Desert’s Palms to Pines shopping center. Those three properties count more than 300,000 square feet of space. Local retail properties Coreland’s added include 22,736 square feet of retail space at Lake Forest Center.
