Since 1971, Marcus & Millichap (NYSE: MMI) has been the premier provider of investment real estate brokerage services. Marcus & Millichap is the largest firm specializing in commercial real estate investment sales, financing, research and advisory services, with 80 offices across the United States and Canada.
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Marcus & Millichap Turns 45
1. From left: Mitchell LaBar, William Millichap, George Marcus and Hessam Nadji Photos: James Fidelibus
www.globest.com/realestateforum
®
May 2016
2. Cover Story
T
here isn’t much on the commercial real estate landscape of 1971 that has come down to us essentially intact 45 years
later. Companies as well as individuals have come and gone, countless properties have changed hands—in many
cases, several times over—and the entire modus operandi of doing deals has been transformed. Yet one organiza-
tion that got its start in the very different world of 1971 is marking its 45th anniversary with the same basic premise that led
founders and co-chairmen George Marcus and William Millichap to set up shop: an investment sales platform that matches
properties with pre-qualified investors, and a focus on measuring success with the yardstick of client satisfaction.
“I first started in this business as a sales agent with George,” Millichap tells Real Estate Forum. “I would ask clients for
an exclusive, and they were dumbfounded that I asked. Brokerages didn’t represent the buyer and they didn’t represent
the seller—they represented the deal.”
By Paul Bubny
Marcus & Millichap has been publicly traded since 2013 and has had a
new CEO since last month, but continues to follow the principle that guided
its founders in 1971: putting the client’s best interests first
New Leadership,
Renewed Energy
3. Marcus saw a different path, believing that “a brokerage
that was committed to the client and a client that was com-
mitted to the brokerage through an exclusive marketing
agreement would produce better results, so that’s how we
set up the business,” Millichap continues. “It was the first
business model dedicated to investment real estate broker-
age as a specialized focus. To make it work, we had to cre-
ate a system for exposing each property to the largest pool
of qualified buyers, which spawned the need for size and
scale and the need for information sharing and collabora-
tion throughout the sales force.”
The model on which Marcus & Millichap’s founders based
their organization is still in place today. Yet the company
hasn’t exactly stuck to doing business at the same old stand
since 1971. For one thing, there’s the scale it has achieved
over the years, now encompassing 79 offices across the US
and Canada with more than 1,600 sales and financing profes-
sionals. From those offices and brokerage professionals came
8,700 transactions in 2015, valued at approximately $37.8 bil-
lion, including $4.9 billion in debt and equity structures
through Marcus & Millichap Capital Corp. (MMCC).
And although Marcus & Millichap successfully branched
out into the institutional segment with the launch of its
Institutional Property Advisors platform in 2010, it is the
industry’s leading firm in the $1-million to $10-million pri-
vate client segment. According to company estimates, this
category comprised 83% of all commercial property sales in
the market nationally over the last year. Marcus & Millichap
reported first-quarter growth of 10.8% in private-client
transactions over the same period in 2015, demonstrating
that there’s still plenty of opportunity to increase market
share among this investor class.
The ready availability of Q1 numbers points to another
aspect of M&M’s evolution: it has been a public company
since November 2013, when it began trading on the New
York Stock Exchange under the MMI symbol. Most recently,
the company has announced new leadership with the pro-
motion of senior executive vice president Hessam Nadji to
president and CEO, and the naming of Mitchell LaBar, also
a company veteran, as COO. Both appointments took effect
earlier this spring.
“Our primary focus has been the private, entrepreneurial
client,” Nadji tells Forum. That business model is a point of
differentiation in and of itself, he adds, “because there’s
really no other platform of our size and scale and with the
consistency in the way we do business across the country.
This has put us in a unique place within the industry,
including our ability to bridge the private capital and insti-
tutional markets, tie in research, advisory services and
financing.”
Accordingly, Marcus tells Forum, “Being public is actu-
ally more important for discipline purposes. The public
market forces you to crystalize your strategy and to make
decisions without undue hesitation.”
Focus and discipline are not new to M&M as it has dem-
onstrated through its financial success and carving out a
niche in the industry. Nadji adds, “George and Bill instilled
disciplined management of the company, even when it was
much smaller and private. We were lucky to have had that
discipline over the years; it prepared us for becoming a
public company.”
The founding of M&M marked “the beginning of what
later would be called ‘category killers,’ to describe a highly
specialized segment of industries,” says Marcus. “We decided
to specialize in investment real estate brokerage and con-
centrated our efforts on perfecting it. As with any new con-
cept, it took a while to catch on and get buy-in from investors
and new agents. In fact, training agents in this new method
of marketing investment real estate became
critical from the start since they had to
understand the nuances of our model,
such as providing a higher level of informa-
tion, research-based underwriting and
other concepts that were not common
practice. We became a training-based orga-
nization from the start.”
Historically, says Marcus, “Many brokerage
firms defined success by simply executing a
sale. Success, by our definition, has always
been measured by optimizing results for the
client, which requires collaboration and
information sharing. Many brokerages have
had legacy issues that make a collaborative
investment brokerage model with critical
mass difficult to implement. Since we started
the firm with these founding principles, we
have been able to evolve and grow it.”
“Success by our definition has
always been measured by
optimizing results for the
client, which requires
collaboration and
information sharing.”
George Marcus
Co-Chairman
4. A single agent marketing an asset to a target
client base faces “a huge competitive disad-
vantage compared to our company. We may
have 30 active investment brokers in an office
with 10 to 20 clients each that could be suit-
able for a particular investment opportunity,
and it is mandatory that the listing is shared in
our system,” Marcus adds. “Multiply this by
79 offices and over 1,600 specialized, highly
trained investment and financing profession-
als, which is the scale to which we have grown,
and the impact on client service and value
becomes clear.”
Millichap offers insights into the continu-
ing relevance of M&M’s information sharing/
collaboration approach. “Two of the core con-
cepts of client representation are that the
property being marketed has been researched
and that the offering is deliverable,” he says. “With this foun-
dation the next challenge is to effectively expose the prop-
erty to motivated and qualified buyers. We mandate that
each property that is exposed to the market is done so in a
manner that is consistent with the client’s objectives and
directives.”
Accordingly, he continues, “Our clients know that we have
the ability to expose the property throughout our entire
system and that they have a company, not just an individual
broker, representing their interests. Without information
sharing and collaboration, the marketing process goes back
to the inefficiencies that were present in 1970.”
With that foundation of sharing and collaboration in
place, LaBar tells Forum, “We’ve been very effective at
helping motivated people with the necessary work ethic
become incredibly successful in our business.” He points
out that a number of elements contribute to this success.
“If you have a manager who has been an investment bro-
ker, whose entire life depends on growing an office in a
collaborative way for the long term, who does not compete
with you for commissions and spends a lot of time training
you in a very structured way, your odds of success go way up
as an investment sales or financing professional with our
firm.
“With the manager as someone to guide you, test you
and help you along the way, the various modules of our
training programs, which have been developed over four
decades and keep getting refined, make a big difference as
well,” LaBar continues. In short, it comes down to experi-
ence trickling down. “There is a technical real estate com-
ponent, a sales component and a large piece on how to run
your practice taught by people who have done it.”
Naturally, some of the company’s new agents include
seasoned brokers “and for them, it’s more of an encultura-
tion and training on leveraging the M&M platform to
their advantage and the advantage of their clients,” LaBar
says. Since many have never experienced “our tools,
research, specialty divisions and so on,” there is a learning
curve.
That learning curve doesn’t start on the broker’s first day
of work. Well before bringing aboard anyone—regardless
of their previous experience—the firm gives them a
detailed overview of how its model works and how it’s dif-
ferent, explains LaBar, adding, “The entire business model
is built on collaboration and information sharing.” On a
day-to-day basis, this could include “referring business to
one another to help a client, co-listing among agents when
one has the client relationship and the other may have a
better product or market knowledge, or integration
between our financing experts and investment sales,”
among other scenarios.
“Marcus & Millichap is an entire system of really effective,
well-trained and equipped individuals that work together in
a web of collaboration to execute for the client locally,
regionally and nationally,” LaBar says. All of which, he adds,
is enabled by state-of-the-art technology. “Collaboration is
not just encouraged; it’s the culture and the way the whole
business model works.”
Technology became a core focus early on in the compa-
ny’s evolution, given the need for information sharing. “We
had a wide area network connecting all of our offices in
1978 long before competitors embraced computer tech-
nology,” Millichap relates. “In 1978, each office and each
of our brokers knew what properties were being marketed
by the company. This early information exchange increased
our ability to disseminate information rapidly and to ‘make
a market’ for income property. It’s relevant today because
we constantly find new ways to bring more efficiency to our
brokers and clients.” To cite an example, he says, internal
information management enables M&M’s professionals to
“Through technology we
monitor a huge number of
data points, which when
combined with ‘human
judgment’ and trend
analysis can create real
value for our clients.”
William Millichap
Co-Chairman
5. identify trends and advise clients on market changes
before the data is generally available and therefore less
valuable.
As impactful as information technology has been on the
process, “it is still limited by the fact that real estate assets
are not owned by computers,” says Millichap. “The ability
of an effective broker to respond to client concerns and act
in a consulting role allows them to create value by advising
them well beyond the online regurgitation of static data.
Properties that are primarily ‘Internet’ marketed are usu-
ally over-shopped and underrepresented and may not be
benefiting from the added value an effective broker can
bring to electronically disseminated information. Through
technology we monitor a huge number of data points,
which when combined with ‘human judgment’ and trend
analysis can create real value for our clients.”
When the time came to choose a successor to CEO John
Kerin, who retired in March after 35 years with M&M,
Nadji ranked as the most qualified candidate. “We always
have evolution in businesses and have to continually
develop leadership talent,” Marcus says. “It’s really sim-
ple: Hessam probably has the firm’s best record of hiring
executives. He is one of the most articulate people in the
industry, let alone the company. He has strategic thinking
capability and loves what he does. This combination,
along with his forthright and honest dealings with peo-
ple, makes him the natural choice to lead the firm.
Hessam literally has gained the respect of everyone in the
organization.”
For his part, Nadji sees the role of CEO as an opportunity
to apply everything he has learned in his 20 years with M&M.
“I have been fortunate to have spent the vast majority of my
time with the company working directly with our agents and
clients,” he says. “At the beginning, my job was to help transi-
tion the firm toward more of an advisory and consultative
model by implementing market research, not just as a sepa-
rate, standalone producer of reports and analyses but also
through research that enriches the agent-client dialogue, by
providing reasons to talk, reasons to meet and, essentially, to
have a relationship.”
His role then evolved into developing the long-term strat-
egy for the company and helping to prepare and execute
the IPO. Nadji also ran M&M’s specialty division sales units,
tasked with growing various lines, “which again required
working directly with many of our most senior brokers,”
says Nadji. “Having an understanding of our brokers’ and
clients’ needs through my various roles has been the most
valuable preparation to lead the company.”
Less than two weeks after Nadji was selected to replace
Kerin, he named LaBar the company’s new chief operating
officer. LaBar’s tenure with M&M dates back to 1984, when
he joined as an agent in the firm’s Newport Beach, CA
office. Before leaving in 2008 to become a private investor,
he was a regional and divisional manager, and opened the
company’s first offices in the Northeast. “So there is really
no portion of the continuum of what we do that I haven’t
personally been involved in,” he comments.
His return to the M&M fold in 2015 was initially in a con-
sulting capacity. After seven years on his own, LaBar
brought “a fresh view of the company from the outside,”
says Nadji. “Mitch is the absolute ideal COO, because he
has this 25-year treasure chest of experiences—in opening
and running offices as well as in hiring and managing man-
agers and top agents,” he adds.
According to Marcus, “Mitch exemplifies the culture
and attitude that make our company unique and we are
very fortunate to have him.” He sums
up, “Together, Hessam and Mitch will
comprise a great leadership team.”
Beyond the C-suite, Nadji points out,
“You have to remember that we have a deep
bench of senior executives and very capable
regional managers that provide incredible
depth to our management team. Our group
managers, senior specialty executives and
senior regional managers have been with
the company an average of 17 years. To
supplement this, we have brought on seg-
ment executives in capital markets, office/
industrial, retail, hospitality and IPA with
extensive experience to lead these units.
The core focus for our entire management
team is to provide the absolute best support
to our agents and assure that clients’ needs
are being met and it’s proven to be very
effective.”
“The way we integrated
services, technology and
research in the past is
evolving into a whole
new way of thinking
about productivity, yield
maximization and service
delivery.”
Hessam Nadji
Chief Executive Officer