Last month, top-grossing CB Richard Ellis sales broker Bill Palmer officially left the company, closing a stellar 18-year run with the Sacramento, Calif., office of CBRE. The move by Palmer, a former tight end with the Miami Dolphins in the 1970s, underscores the challenge of retaining top brokerage talent in one of the hottest investment sales markets in history.
“There's nothing worse than your top sales person walking into your office and saying, ‘I have something to tell you,’” says Peter Pike, founder of the online real estate news site PikeNet. “You never see this as a happy event when your top producer resigns.”
Unlike most star brokers who can only lay claim to fat commissions, Palmer is credited with pioneering the “broker team” concept at CBRE. The idea is simple: match up brokers with complementary skills so that all sides of the deal can be serviced.
“The reason I got into this business was because it was so unprofessional,” says Palmer, who worked on Wall Street from 1974 to 1987. “There was an opportunity to bring my investment banking experience into the brokerage field.”
The concept worked. By 1998, Palmer, primarily an office and industrial specialist, and his team were handling more than $500 million worth of deals annually. In 2004 alone, the so-called “Palmer Team” worked on combined deals valued at more than $800 million. Palmer's new firm, The Palmer Group Inc., officially opened on March 1. The 19 members of Palmer's CBRE team will be joining him at the new firm.
|July 2002:||CBRE hires Insignia broker Mary Anne Tighe.|
|March 2004:||CBRE hires top Cushman & Wakefield investment sales team in Philadelphia.|
|September 2003:||CBRE loses broker Woody Heller to Julien Studley.|
|February 2005:||CBRE loses top broker Bill Palmer, who begins his own brokerage firm.|
|Source: CB Richard Ellis|
Palmer isn't the first, and certainly not the last, top broker to jump ship. High-level defections are common in this industry, which is at its core a relationship business. Who can forget CB Richard Ellis hiring Mary Anne Tighe from Insignia in 2002, or Julien Studley tapping CB Richard Ellis' sales powerhouse Woody Heller in 2003.
Defecting brokers typically retain their book of business. So who does the client relationship ultimately belong to? In most states, it's the broker of record — meaning the brokerage firm — that is responsible for executing a deal in process, if the broker walks.
By that standard, CBRE will absorb any deals that Palmer was working on before mid-January, but once those deals are finished it's up to the client to stick with CBRE or Palmer's new outfit. As Pike of PikeNet explains, the relationship really belongs to the client who will choose to work with the firm or the broker. “It's the client who works with the broker on these deals. That's the person they have a relationship with,” says Palmer.
CBRE doesn't necessarily agree. “We consider these clients of the firm, broadly speaking, so Bill's clients are firm wide. We also work with many of these clients across other markets,” says Palmer's former boss Gregory Vorwaller, president of investment properties at CBRE.
Even with Palmer's departure, however, it's doubtful that publicly traded CBRE will feel too much pain. JP Morgan analyst Bradley Safalow wrote in a research note dated Feb. 11 that the Palmer Team earned somewhere between $8 and $12 million in annual commissions doing deals in the Sacramento area.
“While the ‘Palmer Team’ represented one of the top-performing teams in Sacramento, we don't expect his departure to have an impact on EPS [earnings per share],” wrote Safalow.
“When successful people have left us the organization has proven to be very durable,” says Vorwaller. “It's status quo here. Our objective is to fortify our position in as many markets as we can.”