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Real EstateAppraisals & Valuations

Inside Compass’s colorful past and publicly traded future

Real estate brokerage scrutinized over profitability path, agent retention, tech promises

Real estate brokers are a chatty bunch, but a few can be draining socially. Discuss the weather, how your pets are handling the pandemic, even the housing market, but these brokers will steer the conversation to one subject, and one subject alone – the residential real estate brokerage Compass.

Compass – the broker will lament – puffs itself up as a “tech” company, but it’s really just another brokerage. And, so, while Compass’s $1.6 billion pot of venture capital money may seem impressive it’s vaguely irresponsible.

As for Robert Reffkin, Compass’s chief executive officer and co-founder…Well, don’t let them get into the youthful-looking Reffkin’s Twitter affirmations – “The bad news is time flies. The good news is you’re the pilot.” – and especially not his aspirations about Compass.

Reffkin is famously ambitious. In 2018, he told an interviewer, “In five years, I think we’ll be in the top 50 markets in the world, and No. 1 in all the U.S. cities – and top three in the international ones.”

Today, as Compass readies to be a publicly traded company this year – the brokerage did an Initial Public Offering filing with the Securities and Exchange Commission last month but did not disclose financials, and it is not known when their stock may trade – the brokers and real estate agents are getting antsy.

“The brokerage community would like them to go public sooner rather than later, because we are getting sick of the Compass blather,” said D.J. Grubb, the Oakland broker behind Grubb & Co. who, nonetheless, blathered (helpfully!) about Compass for an hour.

Once public, Compass will become less an object of fascination, jealousy, scorn and puzzlement from the brokerage community. It will leap into the rat race of quarterly reports along with a handful of competitors, most notably Realogy, which owns Coldwell Banker, Sotheby’s International Realty, the Corcoran Group and Better Homes and Gardens.

Like an over-budget blockbuster movie, Compass may never make money.

(Compass declined to answer questions or make executives available for an interview.)

“The real estate industry, and brokerages in particular are ripe for disruption,” said Gilles Duranton, a real estate professor at the University of Pennsylvania. “That said, I’m not really sure of Compass’s appeal.”

“We assume they are not profitable,” said Jack Micenko, a research analyst at Susquehanna International Group, who added he’s not sure how Compass will ever become profitable.

And yet, it bears watching if the brokerage can be another “Titanic” – the movie, not the ship.

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