The Westside Real-Estate Wars : An Aggressive Newcomer Is Changing the Tone of the Fight to Control the Most Exclusive Property Market in the Country
HANDS SLICING THE air with the intensity of propeller blades, Mike Glickman can barely contain himself. He is pacing, twirling, pacing again among rows and rows and rows of desks, each grounded by identical white phones and pink bouquets. “If you think like a millionaire, you become a millionaire,” he says confidently. “No matter what happens, make it work for you. . . . Before you go to bed at night, write down something you want to accomplish the next day, or a goal you want to reach. . . . You want to always make yourself feel as good as possible. . . . For five years, I refused to think anything negative, believe anything negative, read anything negative, talk about anything negative. I would avoid all negative people. I would never read the front page of the newspaper, only the sports. . . . Good-luck charms definitely work to keep you self-motivated.”
This is not a motivational seminar with the latest best-selling author of the latest best-selling “how-to-get-rich-without-really-trying” book. It’s just another routine staff meeting at Mike Glickman Realty Inc. And Glickman, at age 27, has decided that the topic of his talk today is “How to Become a Millionaire.” Curly brown hair falls below his shoulders, a rose-quartz good-luck charm hangs at the open neck of his bright-yellow shirt, and his mother, Harriet, sits glowingly at his left. “When I was No. 1, everyone hated me,” Glickman says, as though recalling a lengthy career on the eve of his retirement. “When I wasn’t No. 1, I hated myself.”
Anyone who lives in the San Fernando Valley knows the Glickman name, which marks waves of “For Sale” signs in front of homes. In just three years, Mike Glickman Realty has taken over the Valley, elbowing aside competitors to become the residential brokerage company with the largest number of agents in the area--and leaving controversy in his wake. Some of his aggressive techniques have generated sharp criticism from other firms, and, in one case, an industry oversight board. Now this energetic entrepreneur is moving into the Westside in hope of carving out a large chunk of the nation’s most affluent market. In fact, he saved his millionaire speech for this Tuesday afternoon meeting of agents at his first Westside outpost, ranks of desks in an office on Wilshire Boulevard in Brentwood that opened in October. He’ll open a Beverly Hills office, he says, this summer.
So far, competitors say, Glickman hasn’t made a dent in their business. But his entry into that market raises the ante in an already ferocious war among residential real-estate brokers on the west side of Los Angeles. The three largest residential brokers in Los Angeles County--Merrill Lynch Realty, Fred Sands Realtors and Jon Douglas Co.--according to a survey published in August, 1987, by the Los Angeles Business Journal, are well-entrenched in the wealthy Westside communities that stretch across the basin from Beverly Hills to Malibu.
Moreover, those three companies are run by tough, ambitious men who experienced success early in their lives, not unlike what the youthful Glickman is enjoying now. Jon Douglas is a former star athlete who has built one of the largest residential real-estate firms on the Westside by carefully cultivating an upscale, old-money image. Fred Sands came out of Boyle Heights to build an aggressive company that mirrored his own fevered drive. And Richard Merrill, president of Merrill Lynch Realty/Beverly Hills, is the company boy wonder who arrived in town at the end of 1986 to test his talents in this lucrative market.
Real estate has a reputation for being a rough, sometimes vicious, business. And as practiced on the Westside, in particular, it has never been a place for the fainthearted. Brokers and their sales agents are not above circulating rumors--sometimes true, sometimes not--that a competitor bends the rules, has a shady past, or, even worse, is about to go out of business. And firms’ standings in the market are sometimes hard to pin down: Local real-estate people often refer to the Los Angeles Business Journal’s surveys of the industry--which up until now have relied on information provided by the agencies themselves. It’s an environment in which the three major companies are ever locked in a battle for the allegiance of the city’s top-producing sales agents.
The Glickman style--competitors call his company “the K mart of real estate”--may be out of sync with the affluent Westside, where home prices at the major firms range from nearly $200,000 to $25 million, and average a hefty $400,000. No other residential market in the country matches this area in size and wealth. And industry observers question whether Glickman can tap the business of the Big Three, which are launching their own expansionary drives there. In addition, other companies, including Coldwell Banker and George Elkins Co., once the largest player on the Westside, are also stiffening the competition.
THE DAY AFTER Mike Glickman entertained his new Westside staff with the how-to-be-a-mil lionaire speech, his chief rival, Fred Sands, is entertaining two dozen of his top people over lobster salad and veal medallion at Westwood’s posh and private Regency Club. No motivational speeches needed here. The sales agents seated on either side of Sands are wearing Rodeo Drive finery, and there are enough diamonds around the table to fill a window box at Tiffany’s.
This scene is a measure of how far Fred Sands, now in his late 40s, has come. Sands was just a shy but scrappy kid when , he recalls, he read a book called, “How I Turned $1,000 Into $3 Million in Real Estate in My Spare Time.” He didn’t go to college, and his father worked jobs ranging from deli clerk to cabdriver. As a teen-ager, Sands would drive by immaculate Westside homes and fantasize about the lives of the people inside the gates. And when he went into the real-estate business, he aimed straight for Beverly Hills clients. Now Sands drives a gold Rolls-Royce Corniche, has houses in Bel-Air and the Malibu Colony and owns KNAC, an L.A. rock radio station.
The women surrounding Sands at the table have their own rags-to-riches tales to tell. These are his top-producing sales agents in Pacific Palisades, where $400,000 buys a tiny, two-bedroom house (and don’t bother asking about the ocean view; one doesn’t exist in this price range). Most of these women will sell well over $10 million worth of homes, and make a couple hundred thousand dollars, this year. Irene Dazzan, in her early 30s, is the top salesperson: She’ll have an income in the half-million-dollar range.
Sands has a reputation for maintaining an iron grip on his company’s affairs. He is a perfectionist who can be impatient and exacting; one longtime colleague describes a hot temper. But, at the luncheon today, he is all charm, pampering his top people.
In a city where top sales agents are being constantly lured by other firms, Sands knows that lunches like these are well worth the cost. When one of the agents at the table complains that one of the company’s Pacific Palisades offices is beginning to resemble the TV series “Upstairs, Downstairs”--with the top salespeople in plush offices set apart from the others--Sands has a ready reply.
“I see both sides to what you’re saying,” he says. “We are preferential. We don’t treat someone who comes in and earns, say, $10,000 the same as someone who comes in and earns $250,000. That’s why you people are here today. There is a difference. It doesn’t mean we don’t love and care for the person who makes $20,000 a year, but we sure like the person who makes $75,000 a year better.”
Major real-estate companies realize that sales agents hold the key to a firm’s success. The more big producers it can get and keep, the more the company grows and profits. Companies in this business make money by sheer volume, and a time-tested way of increasing volume is to steal your competitor’s best agents, preferably those who sell tens of millions of dollars in real estate a year. “It’s increasingly important that you stock yourself with the right people,” says Doris Gustafson, vice president/marketing and sales for Fred Sands Realtors. Jerry Berns, a real-estate veteran who sold his San Fernando Valley agency to Glickman last year, puts it another way: “More than a real-estate business, it’s an agent business.” Former Fred Sands employees recall that at one luncheon, Sands took out a pen and pad and started soliciting from his agents the names of top salespeople in their area.
By all accounts, today the war for agents on the Westside is the most intense ever. Top agents are being lured with offers of generous commissions, even more generous bonuses and lavish prizes for high sales figures. Often it works. “The top brokers are wined and dined constantly,” says Richard Merrill. “It’s been at a fervor for the last couple years, and there doesn’t seem to be any letup in sight.”
Competitors say newcomer Merrill is one of those doing the wining and dining. The company lost some of its top people during the turmoil over the sale of Merrill Lynch & Co.’s real-estate division about a year ago. As a result, Merrill has been busy since his arrival replenishing--and expanding--his troops.
Merrill (who is not related to the Merrill in Merrill Lynch) assumed control of the Beverly Hills office in October, 1986, shortly before Merrill Lynch Realty was spun off in a public offering. Although his unit, which covers the entire Westside, remains under the corporate umbrella of the nationwide Merrill Lynch Realty, Merrill operates much like the chief executive of his own company.
Still a virtual unknown on the Westside, Merrill has a reputation within his company as the 34-year-old whiz kid who turned around the financial fortunes of two troubled Merrill Lynch offices--one in energy-depressed Oklahoma, the other in steel-depressed Pittsburgh--and was rewarded with the presidency of the company’s most profitable, and glamorous, unit. The tall, dark-haired Merrill is methodical and measured, sounding like a young lieutenant preparing a detailed, bloodless battle plan. “We not only need to prevent the competitors from taking our market share, we also need to grab market share from them,” he instructed his office managers, who were celebrating their best month ever at a morning meeting last October.
Already, he is opening new offices in Westwood and west Malibu, and moving five others to larger spaces. To fill those offices, he has been recruiting people from other agencies. At least 40 of the agents he hired during the past year had a record of annual sales in the millions. “We needed to establish that Merrill Lynch was here to stay, and one way to do that is to invest money in the company,” Merrill says.
Merrill has also been busy keeping his own people happy. In October, he took his top agents on an all-expense-paid vacation to London, complete with hotel rooms overlooking Hyde Park. And he offers such tantalizers as mink coats to his best salespeople.
Glickman has a different style. He, too, keeps his agents happy with endless rounds of parties and gifts and catered lunch meetings, punctuated by trips to Catalina, Las Vegas and the horse races. “My goal is to spoil all my agents rotten,” Glickman says. But, his offices have the air of a college fraternity. The noisy halls of one were filled with bulletin boards and scrapbooks commemorating staff outings, birthday parties and charitable affairs. “Our meetings were like playtime during kindergarten,” complains one former Glickman agent. Glickman follows a meticulously egalitarian approach: Top producers don’t get preferential treatment.
GLICKMAN IS, by far, the most controversial and flamboyant player on the Westside, an un abashed promoter of himself and his company. Interviewing Glickman is like interviewing a press release: He is a font of his own accomplishments and victories. “By this time next year, I hope to have the largest real-estate company in Los Angeles,” he insists. “For my 30th birthday, which is in 1990, through the year 2000, I intend to open up a Mike Glickman Realty office in every major market in the United States.” He also wants to buy a theater someday (he says he’s written a couple of plays) and own the winner of the Kentucky Derby.
He began his short career at 15, delivering flyers on home sales to real-estate offices in the Valley and on the Westside. At age 18, he joined Jerry Berns & Associates as a sales agent, and later struck out on his own. His company experienced astonishing growth, capped last spring by his purchase of the Berns company itself.
He quickly gained a reputation as an imaginative promoter. When the real estate market softened in the early 1980s, he attracted crowds to open houses with raffles to give away cruises to the Bahamas. During the energy crunch, he gave away gasoline. During a garbage strike, he hired a private trash company to service some neighborhoods. “I was a local hero,” he says.
Colleagues and competitors describe Glickman as a marketer, not a real estate broker. “He’s an adman,” as one former employee put it. They’re correct--literally. While Glickman has a sales-agent license, he does not have a broker’s license, which California requires of anyone who supervises real estate sales agents. He was advised against maintaining a broker license, he says, in part to avoid the legal liability: Dissatisfied customers can sue a broker. Moreover, he says this frees him to focus on his marketing duties. The top broker responsibility in the firm falls to general counsel Michael N. Pennell. The former attorney for Sears, Roebuck & Co. came to the company by way of Glickman’s father, Beverly Hills lawyer David Glickman, who handles much of his son’s legal work.
Glickman boasts that, in the Valley, he has already raided other agencies for salespeople. “We have well over 150 agents that used to work at Fred Sands, well over 200 from Merrill Lynch and well over 100 that used to work at Jon Douglas,” says Glickman, “and we’re only three years old.” That’s the kind of exaggeration that fuels an intense distrust of Glickman by competitors. After checking their records, officials at Douglas, Sands and Merrill Lynch provided figures ranging from seven to 30 agents who had left their companies to join Glickman. Each company was also quick to point out that some of the agents they lost had since returned. One longtime Valley competitor knowledgeable about Glickman’s activities says most of his recent recruits are newly licensed sales agents, not agents he lured away from other firms. Says a former Glickman agent: “He goes for quantity, not quality.” When asked about the discrepancies, Glickman revised his comments, saying that he was referring to all agents who had been interviewed by, as well as employed by, his three main competitors. But he continued to maintain that he had recruited at least 50 agents from each of the three firms. UNLIKE THE other major Westside brokers, Fred Sands has had a close-up view of Glickman’s company: The two firms have gone head-to-head in the Valley for the past three years, and the size of Glickman’s staff recently surpassed Sands’, making it the largest in the area. Now Jon Douglas is stepping up his efforts in the Valley, opening new offices and expanding others, so he, too, is battling Glickman on both sides of the Sepulveda Pass. Merrill Lynch Realty also runs a Valley operation.
Competitors claim that one reason for Glickman’s success in the Valley is that he will go to great lengths to get the listings that will enable him to put his signs up, including offering free or discounted commissions. In this battle of images, the signs are a way of planting an agency’s name in the mind of the public. One agency’s sea of signs in an area can give it cachet, as Glickman has found. But Jerry Berns says Glickman’s business practices, including his policies on commission rates, are no different from other companies’. “Salespeople constantly butt heads with Glickman and then scream foul play,” he says.
The San Fernando Valley Board of Realtors, which reviews grievances filed against brokers, has put Glickman’s firm on one-year probation because of his excessive use of “Open House” signs in Valley neighborhoods. The company’s practice of putting up several signs around one house in a neighborhood, a former board official recalls, had drawn complaints from local governments, and Realtors worried that these complaints could lead communities to place stiff restrictions on the use of the signs.
Michael Pennell, Glickman’s chief broker, concedes that the company had been “very aggressive” in its use of open-house signs, though he denies abusing the system. Pennell attributes the real-estate board’s action to “politial pressure” from competitors, and notes that he and other Glickman company officials have urged the board to adopt sign-use guidelines.
Glickman acts unconcerned about all the commotion he has caused in the Valley and, now, on the Westside. He insists that industry criticism of him and his firm is simply frustration over his quick success in the Valley--a success that he is confident he can reproduce on the Westside. “When I was in junior high school, these companies were all established companies. Over the past 10 years, I’ve grown up to own a company challenging them and competing with them,” Glickman says. “When you go from a very small firm . . . to where he is today, he’s got to have taken a lot of business from established firms,” adds Pennell.
Industry observers point out that Glickman’s efforts to make inroads on the Westside will be especially difficult because Sands and the others are more prepared to do battle with him than they were when he emerged in the Valley.
In the early 1980s, when the economy was in a recession and the housing market was weak, selling real estate was a bleak, frustrating job. “Then in 1984, here comes Glickman, marching down the street like the Pied Piper--smiling and saying we’ll have lots of fun and lots of parties,” says a Valley broker who lost several agents to Glickman. “He had a whole trail behind him.”
The real question for Glickman is whether his style--the parties, the youthfulness, the raucousness--will attract top agents on the Westside. Jon Douglas, who is one of the most successful raiders there, refuses to use much bait to recruit his agents. Douglas claims to offer one of the most conservative commission policies in the business, and he doesn’t treat his agents to trips or prizes. “I’m trying to establish a team,” Douglas insists. “I’m not interested in getting on my knees and saying, ‘Why don’t you come over and I’ll give you a better commission split, and give you manicures, and we’ll all go on the bus to Las Vegas together.’ I want them to think that this is a company they want to work with for the rest of their life.” His emphasis, he says, is on building the reputation of firm and making it a stable and attractive place to work.
AT A COMPANYWIDE Jon Douglas meeting at the Beverly Hills Hilton in October, sales agents mingled in the foyer amid posters and brochures for Sotheby’s, the New York auction house. The Douglas company has formed an affiliation with Sotheby’s International Realty in an attempt to market its highest-priced homes to the clientele that buys its art and jewelry from Sotheby’s.
Whether the Sotheby’s connection is an effective marketing tool or just hype, as some competitors contend, is really beside the point here. The Douglas company has carefully cultivated an upscale, almost Eastern Establishment image--and the Sotheby’s connection is like a polish on its brass doorknobs. That image is a direct reflection of the company’s leader. Fifty-one-year-old Jon Douglas has a sterling resume. Star quarterback at Santa Monica High School and, later, Stanford University. Phi Beta Kappa graduate from Stanford. Former No. 1 player on the U.S. Davis Cup tennis team.
He planned to cap those achievements with a career in law but was diverted when he began selling real estate to kill time the summer before law school started. He made $500 on his first trip out the door, selling a $40,000 two-and-a-den in Westwood to a high-school counselor. That was enough to hook him.
Douglas has an easygoing, affable style and often lapses into the vernacular of a college jock. He’s the the kind of guy who seems more comfortable talking about the Super Bowl than himself; colleagues say he’s a loner. He’s also extremely competitive: When his tennis game got a little rusty because of the demands of his work, he simply stopped playing and took up running. He couldn’t tolerate his inability to play up to his former Davis Cup standards. “Jack puts a lot of pressure on himself, but not a lot of pressure on other people,” says his executive vice president/marketing and sales, Lou Piatt. “If there is a weakness, it’s that he’s unbelievably loyal to people he works with. He’s probably not as critical as he could be.”
Douglas has made his company a pre-eminent force in the estates market, those homes that sell for more than $1 million. Merrill Lynch also has carved out a large chunk of that stratum through its Rodeo Realty division. And now Sands, after an unsuccessful attempt to attract estate owners with discounted commissions in the late 1970s, has moved aggressively back in, setting up a Beverly Hills office to handle those properties.
The right image is the key in the real estate business, particularly in the most chic Westside neighborhoods. The big companies coach their sales agents on how to act and dress. “People on the Westside want to know the pedigree of the person they’re working with,” Sands says. “If an agent is lucky enough to be called in on a listing interview, they’d better know the names of the celebrities and others living in the neighborhood. You better have read their profile in ‘Beverly Hills (213)’ (a society publication). You don’t have to be rich in order to deal with these people, but you’d better be polished.”
More important, though, companies need to overcome the broad perception that real estate brokers are in the same league as used-car salesmen. “People have this perception of brokers that they’re not particularly trustworthy, that they’re a little sloppy, they’re not well-educated, and they’re not really professional,” says Douglas.
As the Westside wars heat up, brokerage companies are falling all over one another to show that they, unlike their sorry competitors, can be trusted to guide you through the purchase and sale of your home. The companies pour money into charities and local causes, particularly causes that will get the name of the company into the press.
Fred Sands is keenly attuned to his company’s image, personally directing advertising efforts and avidly offering his name and face to the media. His company, even more than Merrill Lynch and Douglas, is also involved in a variety of charitable causes. The firm has “adopted” Santa Monica High School, providing financial support to the school; it sponsors 10K runs to benefit a boys’ home, the Special Olympics, and on and on.
Glickman is active in the community, too, and seems to have no shortage of ways to attract a neighborhood’s attention. He delivers 100,000 pumpkins to Valley homes at Halloween, holds contests to choose the father and mother of the year, and takes ice cream to neighborhood kids. “I have a different promo every month,” he says. The real estate companies also play a numbers game, doing whatever they can to make their firm look bigger. Sands, for example, touts his firm as the largest single-ownership real-estate company in Southern California. That, Jon Douglas counters, is because his company, though larger, is owned by a two-man partnership.
THE WESTSIDE could become particularly treacherous for real estate brokers if the economy slips into a recession, as some economists are predicting. The market has softened somewhat since the October stock-market crash, after which a few deals fell through or were put on hold. Expensive areas are particularly sensitive to the vagaries of Wall Street, says Joel Singer, an economist at the California Assn. of Realtors. But industry officials on the Westside say business remains brisk and they are optimistic, arguing that investors who are turned off by the stock market will turn to real estate.
A full-scale recession would have much broader repercussions in the housing market. During the last recession, dozens of real estate brokers went out of business, while stronger companies used the opportunity to buy up cash-strapped firms.
“You can’t forget that this is a cyclical business,” says Fred Sands. “We watched companies much larger than us go bankrupt during bad times. You’ve got to be prepared to fund a negative cash flow into the millions.”
Only time will tell whether Glickman’s company can survive economic swings and competitive pressures. Only time will tell, too, which of the Big Three will prosper. The competition is stiff for sales agents, but for their bosses it’s brutal. “If you’re not made of steel, you shouldn’t be in this business,” says one longtime broker. “This is a jungle, and it’s survival of the fittest.” But for those who last, the rewards are rich--fat commissions on the highest-priced homes in the country.
