Edward S. Gordon Co. finds success in Northeast dominance.

When you're having a heart attack you don't ask, `How much are you charging?' The first question is, `Are you the best in the business?"

Ed Gordon has spent the last 25 years of his life creating the hugely successful Edward S. Gordon Co. (ESG) by following the simple premise behind that apropos one-liner.

From its lifelong Manhattan home (Gordon formed ESG in 1972), the company has carved out the most successful brokerage business in the Northeast, and its performance in 1995 solidified its status as the No. 1 broker in New York City (see box on facing page).

While many think of ESG only as a Northeast firm, it has actually grown to become the largest independent real estate brokerage firm in the United States, and the fourth largest overall. Its eight divisions include brokerage, consulting, the Gordon Property Group, a property management group, the ESG Retail Group, ESG Financial Services and the ESG National Accounts Group.

The real key behind the firm's success is the management team led by Gordon, senior partner Martin Turchin and company president Stephen Siegel. Collectively they have charted a consistent management course that reinvents the organization every two to three years and maintaining some of the highest consulting standards, with many salaried personnel, in the business.

By the way, that's a philosophy that runs right in lockstep with the increased level of sophistication, professionalism and outright change that now dominates the commercial real estate industry. In other words, today, change is good.

Gordon's own bent for analytical review led him to realize early on that if he could create a company that dominated its niche in the largest city in the United States, that would be a good thing. So instead of branching across the contiguous 48 states, Gordon has stuck to his knitting close to home. Today, the firm operates offices only in the Northeast, specifically in Midtown and Downtown Manhattan, Saddle Brook, N.J., White Plains, N.Y., and a new office just opened in Stamford, Conn.

Last year, ESG brokered New York's largest office lease transaction, CS First Boston's taking of 1.15 million sq. ft. at 11 Madison Avenue for its headquarters, and the largest office building sale, 63 Madison Avenue, representing New York Life. ESG's retail brokerage also has grown to represent about 10% of its overall business.

Of course, ESG has not ignored the necessity for a certain degree of national presence either, which it achieves through its affiliation with the ONCOR International brokerage network, as well as through alliances with various overseas partners.

"We made a very strategic decision," says Gordon. "We're not interested in being all over the United States. We are interested in identifying and relating to those major clients who understand the services we render and will allow us to make a profit at what we do."

That is a common theme among every single member of ESG's management team. "We won't sacrifice the integrity of the operation for revenue. If we can't do it well, we're not going to do it," says Turchin, who joined the firm in 1984.

One could make the analogy that ESG deals in Cadillacs instead of Chevys, preferring to stick to the larger (50,000 sq. ft. and up) transactional niche. "We are not a price firm," says Gordon. "We are not interested in being the lowest price supplier to the marketplace. We relate and do business with those companies who understand all of the tactical and strategic implications that real estate has on their business."

My, how far the business has come since Gordon first set up shop in the 1970s. "In those days, most people were order-takers, and my background was merchandising," says Gordon. "That had a different spin on how I saw real estate. We spent every waking moment designing a process for building a business, and we made a dramatic impact on the marketplace. "We changed the whole concept of promoting real estate, not only in New York but nationally. We began to make a dramatic impact on the way the business was operated."

Certainly the nation's real estate ownership profile has also changed dramatically. Corporate America has become much more cognizant of the impact of its space utilization expenses and the raw numbers associated with rental costs on its bottom line.

"When we started this company, rents were very incidental to the operating costs of most companies," says Gordon. "Rents were 5% to 10% of what they are today on a general basis. People also began to understand that there were better ways to run a business if the real estate was properly attended to, as opposed to having some people run around with listings. There's a much greater level of sophistication and professionalism required in the business than back then."

Change change change

Four years ago, ESG tapped Stephen Siegel as company president. Siegel brought with him one of the most impressive pedigrees in the business, having served in production and management roles at Cushman & Wakefield for nearly 27 years. He actually started his real estate career at C&W when he was only 17.

Siegel's role -- to add another dimension to the ESO management team.

"While most people spend the majority of their time focusing on what they are, I pay attention to what I'm not, and I try to fill in the pieces with talented people," says Gordon.

At ESG, the mantra is change, but not just for change's sake. Rather, Gordon, Turchin and Siegel agree that it is the very nature of the business, and the changing nature of ESO's customers, that dictates change.

"We reinvent ourselves continually," says Gordon. "The reason we're constantly energized is that every two or three years we have a new business."

That doesn't mean radical or immediate reinvention. "Evolutionary" is probably a better description for the ESG process. "If you look at us today as compared to three years ago, we're totally different," says Turchin. "But you can't find any definable moment in the three years and say, `Here's when it happened.' There is a very conscious behavior that that occur. It's not happening by accident."

As one might imagine, competition is stiff, and leading firms are constantly positioning themselves for the future.

"We have to be aware that things are constantly changing," says Siegel. "If we ever get complacent to think that things will remain the same for any sustained period of time, we will be caught and we'll lose our edge and we'll lose our market share. We have to always be aware that nothing will remain the same. The real estate business is a moving target. And we must change ourselves appropriately to meet the challenges and also to provide the talent at a level with the competency add the intellect to deal in the business today."

Turchin hammers home the real reason driving that change. "The thing that has caused us to change, and causes us to continue to change, is that the customers' needs, and the relevancy of the real estate to his business agenda, has changed. If we are to be a value-added service provider, we've got to continue our development consistent with the changing dynamics of our customers."

ESG sees value in investing heavily in technology and interactivity. Siegel says that all of ESG's professional staff should have computers on their desks by year-end 1996.

ESO's research department has long published monthly and quarterly market reports on Midtown, Midtown South and Downtown Manhattan, but its five-year-old Tentracs proprietary software program is dedicated to profiling tenants for both tenant rep and agency business.

"Knowledge is power," says Siegel. "It's critical. It's the thread that filters through this organization because we need to have all the facts, all the information, and we can make ourselves more competitive and we can service our clients more effectively."

As usual, Turchin and Siegel think alike. "Our ability to be successful on behalf of a customer requires that we have a very comprehensive database, and that database must be organized in a way which makes it a very viable and important tool, and that it is relevant," says Turchin. "The database is necessary in order for us to do our job effectively, and in order to give the corporation or our client the information that he needs in order to make the right decision."

Broker training has also become part and parcel of the ESG process. Every ESG broker is required to take 100 hours of training annually. The program involves internal seminars and workshops, outside speakers, understanding financial engineering, lease clauses, abstracting, financial statements and balance sheets, book vs. cash value and much more.

"We're much more professional about how we hire and how we train and develop people in the business," says Siegel. "There was a time when it was, 'Everybody into the water' and if they swam, terrific. If they couldn't swim, goodbye, they drowned. There was very little in terms of a process."

With the entire process that's now in place, ESG's revenues are expected to continue marching upward at a dramatic rate. But even so, ESO will continue to change, as its management keeps looking ahead with a fresh mindset.

"We're just not interested in seeing the business double and triple for its own sake," says Gordon. "It is to grow efficiently with good people. The service quality has to be maintained. We have to be ahead of the information curve."

"Every meeting I leave, and I've been doing this for 25 years, I turn to the people and say, "What was wrong with the meeting? What could we have done better in that meeting?"

Always pushing.

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