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BROKER NETWORKS HELP LITTLE GUYS VIE WITH GIANTS

By Dave Bodamer

Core Network gives brokers access to centers in remote markets like University Mall, Tuscaloosa, Ala.

For retail real estate brokerages wishing to compete with national companies, networking isn’t just a whim to be indulged at parties and conventions. It is a vital part of their strategy.

In markets across the United States, small brokerages are banding together in national networks to go toe-to-toe with such behemoths as CB Richard Ellis and Cushman & Wakefield. These arrangements give them national exposure and economies of scale while allowing them to preserve their identities and independence.

This is why Retail Insite, a San Diego-based retail brokerage, recently joined ChainLinks Retail Advisors, a retail-only network with about 50 members.

“We are part of a nationwide organization that represents some of the highest-profile retailers in the country,” said Retail Insite President Don Moser.

Two other networks are Oncor International and Core Network, which also serve nonretail brokerages. Core recently absorbed the 12-member, retail-only Realty Resources Network, leaving ChainLinks, which was founded in 1979, as the lone retail-only entity in the group.

By joining a nationwide partnership, each firm gains credibility with national retail tenants that might otherwise not deal with them. Brokers can also help local tenants expand to markets the small firms do not cover, keeping the retailer from going to one of the national firms.

“Say I’m in Atlanta and my client has a requirement in Boston or London,” said Lottie Gatewood, Oncor’s director of marketing and communications. “What I have is partner companies in Boston.”

Economies of scale are another important benefit to brokerage firms of entering into such networks. Individually, these firms are too small to get the rates offered to national companies on services such as telecommunications, but as a combined network they can. Each network also provides its members with such services as market databases and Internet applications.

Core, founded in 1996 by eight industrial and office brokerage firms, is the newest option for retail brokers in this growing market. It picked up a few retail brokers along the way and, today, with the addition of Realty Resources, it has about 30 of these in as many markets, out of its total of 100 member firms.

“What happened was that in 2001 we were sitting there with 14 firms that deal with retail almost on an exclusive basis that were really out of place” in a network of 70 companies covering mostly office and industrial, said Scott Rickard, Core’s president. “We really made the determination that if we wanted to be competitive, we needed to expand to major markets. At that point we opened a dialogue with Realty Resources.”

Oncor, founded in 1977, features more than 50 privately owned brokerage firms in all areas of commercial real estate. Unlike Core and ChainLinks, however, Oncor does not focus only on North American markets (ChainLinks has some Canadian members, while Core operates exclusively in U.S. cities). Oncor covers more than 200 markets in Europe, India, Latin America, North America and South Africa.

DJM Asset Management’s membership in ChainLinks was key to its winning the disposition rights to the 283 locations that Kmart Corp. closed earlier this year after filing for Chapter 11 bankruptcy protection. Melville, N.Y.-based DJM, which assists retailers with the disposition of surplus real estate, has primarily served the Northeast region, but its ChainLinks contacts enabled it to take on a national contract such as Kmart.

If each of these networks were to be momentarily considered single firms, Oncor would rank second and Core sixth in size nationally among brokers, putting them in the company of such giants as CB Richard Ellis, Colliers International and Cushman & Wakefield.

“We are basically a full-service organization,” Core’s Rickard said. “We provide property management on about 140 million-square-feet of retail space. When we brought in Realty Resources, it meant that we could expand that reach and immediately be competitive in major markets.”

In terms of gross numbers, Core’s 68 firms in 2001 and Realty Resources’ 12 did a combined $19.2 billion in gross sales and leasing transactions. ChainLinks completed about $10 billion in transactions in 2000 and 2001 combined.

As for member services, Rickard said that Core has built up a “best business practices” database that all members can access. It contains examples of reports and other documents, and provides an Internet-based project-tracking tool called Core Projects to its members and clients, with 24-hour access. This application enables participants to monitor the progress of a deal or a construction project over the Internet. Core has also been able to build its own market demographics and mapping database because of its connections to so many markets.

The operating and fee structures of the three networks differ. Each ChainLinks office is locally owned and operated. Rather than paying a fee, each company owns a portion of ChainLinks, though there is also a biannual approval process to remain a member. The network also offers an “out of market” capability to clients of ChainLinks members. This means that when serving a specific retail client, it does not necessarily have to use a designated ChainLinks partner in that market.

Oncor members don’t pay an annual fee either. Instead they purchase stock and become operating partners.

“This way the companies become part of Oncor, but maintain their independence and their own company names,” Gatewood said. Core members, on the other hand, pay annual dues and referral fees.

Joining these networks is no simple process, however. No one merely fills out a membership application, pays an annual fee and is afforded the benefits.

“If we have a particular market where we feel we need to have coverage, the recruitment process begins,” Gatewood said.

After companies are brought into the fold, they are subject to annual or biannual reviews to keep their place in the network.

Oncor evaluates the companies based on criteria that include what services they provide, how fully staffed the offices are and how profitable they are. After the initial screening process, several meetings are held before Oncor’s board of directors makes the final determination whether to bring the company into the network.

All the networks contract with only one firm in each market per property type. For ChainLinks that means one firm per market, but Oncor and Core could go with multiple firms serving different commercial property types.

But as members will quickly point out, membership is worth the hassles when local brokers suddenly find themselves catapulted into the ranks of the big boys. As Retail Insite’s Moser puts it, “ChainLinks provides us the ability to leverage local and national relationships, and gives us a pool of resources on which to draw in servicing our existing clients.”

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