Hey guys,
I'm an analyst at a small debt placement shop in a primary market. We are probably #2 in my city and go head to head with the big shops. We are essentially a private, local, mid-market HFF type of shop.
Can someone who works at HFF or somewhere similar explain to me how the comp structure works? At my company, brokers pay $100k to sit at the desk, so they are not starting at $0 for the year - they are actually in the hole $100k. They then find clients, get in touch, ideally get a meeting, and then very ideally end up getting a deal. Once you have found a client and entered them into our database, they are yours forever, and nobody is allowed to contact them without your permission. Eventually, if your are successful, you'll have amassed a few clients and have a decent stream of deal flow coming through from them. You split each deal with the house roughly 50% depending on a few different factors. My question is this:
Is this how shops like HFF/CBRE/C&W work? I know that at Eastdil, for example, your shop gets any deal in your local market from a national client (like Blackstone), because the relationship is at the national, company-wide level with national clients. However, since we only work with local and regional clients, the relationship at our shop is at the broker level, not the shop-level and obviously not at the national company-wide level.
At my company, brokers are essentially 100% in charge of their own destiny, and it is sink or swim. Is is like this at other more national shops? Or is there a steady deal flow from a relationship at a national level?
Just have some questions about the model you guys use. Not trying to derail, sorry, but just curious. I see the upside for the firm, no internal battles between brokers, no poaching clients internally, etc. But what is the upside for you, as the broker, to work under this model? You are paying $100,000 to work at the firm yearly, and if you are a young guy, many clients are off limits. Does the firm provide resources besides a phone, desk, office? What is the $100,000 used for? Will they pay marketing expenses, financial analyst expenses, etc.?
It's sink or swim everywhere. Brokerage is pretty cut throat and the burnout/turnover rate is high. We tell new brokers that they shouldn't expect to make money for the first three years. And new brokers' draws are nowhere near $100K/year; nor would you want a big draw. Technically, if you leave, you owe the uncovered portion of your draw. In practice, your senior broker usually takes care of it,
As you seem to have suspected, client control depends on the firm. JLL -- company level. CB, Newmark -- mix of broker control and company control. Savills Studley -- broker control. The one caveat is if you're a superstar broker, you will always have control anywhere you go. (I'm leaving C&W out because I think they are still figuring out how this is all going to work.)
I'll stop now before I go on too long.
I have never heard of this model. I'm in NYC, and cannot even imagine the gall of a company to CHARGE 100k just to sit at a desk. What I have heard of is companies paying a draw TO the broker, and not even to mention that you only get a 50/50 split for business after paying 100k.
C&W has a single point of contact), which allows you to be the single point of contact for a specific client in their database for national clients.
I have never heard of brokers paying for 100k as a desk fee. What "primary" market are you in where you compete with the big firms and charge that much. But going back to your question at the national level, yes clients for the most part are knocking at your door if you are a senior level originator. Quite frankly if you are bad a telephone skills and with a major national company who has a property management company it is very easy to speak to decision makers. It is like sales at a bulge bracket, it is not really sales if people want to buy the product. It is order taking.
@pudding: The only legitimate upsides are that we really do have a great reputation in our market and that the older, experienced brokers will almost always come to a meeting with a potential client with the junior brokers who are just starting out (and there is a lot of value in the latter). Also as a small firm with no corporate BS to deal with the brokers can freely invest in deals with their clients.
@MindingMySqFt: The $100k isn't a draw - it's a desk fee. Essentially the first $100k in fees that you do go straight to the house. If you take a draw you'll owe even more to the firm, so people usually just burn through savings for living expenses.
@C.R.E. Shervin: Yeah man this is what I'm trying to figure out. I don't want to become a broker at a place like this if they aren't at or better than the market in terms of broker split/ fees etc. This stuff isn't readily available information - you have to ask around to get a feel for how firms pay their brokers (and yes I've gotten different responses from two different people who have worked at the same company fairly recently).
I work in Debt Placement at what sounds like a similar firm. Our "desk fee" is usually some multiple of the broker's salary "1.5 - 2.0x's". However, every Broker is entitled to pick the salary they are comfortable with. So if you want to make minimum wage, your desk fee would be around $30K. After that it's a 50/50 fee split, until you make a certain interval (usually around $750,000 in fees), which bumps the broker's split to 75%.
I'm just starting to do my own deals, so my salary is relatively high, in order to support my lifestyle. However, once my rolodex is built up, I'm going to lower my salary to just cover my 401-K. I hope this helps.
So these guys pay 100k to get the title of the brokerage? Then they also have a split? Surely this isn't the rules of the big brokerages? I guess if you get a really good split, the 100k is less than what they lose on splits elsewhere?
I'm going to have to check on this, but I highly doubt the people I know at HFF paid $100k to work there. If they did, I will mock them. That's idiotic.
CRE guys at HFF might not do this - that's just what I'm trying to figure out. But yes please let me/us know if the brokers you know do! It is much appreciated.
pay.
I have never heard of a desk fee like this in commercial. I do know some residential firms charge desk fees.
@CRE Were you able to confirm this at all?
Sounds like a waste of time
This sounds like a crappy structure. I'd get out of there.
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