January 27, 2009
Effective January 19th, SVN announced the closure of all of its offices in Southern California, and a consolidation of all of the Southern California offices into the Los Angeles location in an effort to cut costs and deal with the economic slowdown.
Sperry Van Ness’s strategy seems to be to move the brokerage towards a virtual office model. Whether that ultimately works or now will remain to be seen, but the brokerage industry is under tremendous pressure to cut costs in the face of significant drop off in transaction volume. In fact, after some brokerages went on acquisition sprees over the past few years, many in the industry are closely watching how some of the biggest players in the industry deal with the debt on their balance sheets at a time when business is slowing.
Grubb & Ellis (GBE: 0.00 N/A) for instance recorded a loss of $44M during the last quarter and has a stock price of $.90. In this environment it is not only difficult to raise more debt, but with a stock price so low it becomes very dilutive to issue more shares, even if you can find more investors (Grubb has $300M of debt, and a market cap of $50M).
I’m not singling out Grubb & Ellis here, but they are an example of a brokerage that made some significant acquisitions and took on a lot of debt at the wrong time and now find themselves in a bit of a pickle. Seems that the main concern now for some of these debt-laden brokerages is to do whatever they can to retain their top-producing brokers, because without them, the movie probably won’t end well.
- More Defections at Grubb & Ellis Indicate Trouble
- Shake-Up at Grubb & Ellis San Jose
- Grubb Secures 11% Loan Secured by Accounts Receivable
- Grubb & Ellis Posts $41.5 Million Loss; Renegotiates Debt
- Grubb & Ellis Q4 2009 Office Report