Daum-Johnstown Boss Says Broker ‘Pirating’ Has Nullified Buyout

The chairman of Daum-Johnstown American, a Los Angeles-based commercial real estate brokerage, said Wednesday that the “pirating” of 29 brokers and other staffers from Daum’s Orange County offices by a rival broker killed a deal in which Daum’s management and employees would buy the brokerage from its parent company.

Daum’s competitor, Scher-Voit Commercial Brokerage Co. in Irvine, took the unusual step last week of issuing a press release denying that it had recruited the brokers, some of whom once worked for Scher-Voit founder Lawrence M. Scher in another brokerage that he sold to Daum-Johnstown.

Most of the defecting employees were from the Anaheim office, where Scher-Voit said it had recently opened a branch office of its own.

Daum-Johnstown Chairman Bruce A. Endendyk said he met with employees Monday to tell them that the deal to buy the brokerage from parent company Johnstown American--itself a subsidiary of Southmark Corp. in Dallas--was dead for now.

“After what happened in Anaheim, a significant amount of revenues walked out the door,” Endendyk said.

“We told employees (the deal) was mutually agreed to, but for the most part Southmark said, ‘Let’s not do it now.’ ”

At least 100 managers and employees were expected to be involved in the buyout.

Endendyk said Southmark was deciding whether to sue Scher-Voit over the possibility that improprieties were involved. While it is considered bad etiquette to aggressively recruit--or “pirate”--other company’s brokers, it is nevertheless legal and often done quietly in the brokerage industry.

But the listings a brokerage lives on, however--the land and buildings it has to sell or rent for owners in return for a commission--are another matter, Endendyk said.

He would not comment, however, when asked whether Scher-Voit had appropriated listings from Daum-Johnstown’s Anaheim office, its biggest sales-producing office of 12 in Southern California. The company has one other branch office, in Phoenix.

Scher also would not comment on the question of listings Tuesday.

The acrimonious dispute over the defecting brokers has been the talk of the Orange County brokerage industry, where a booming economy has kept the real estate market hot and the brokerage industry extremely competitive.

Both companies are considered medium-size local brokers in a market dominated by a few large out-of-town brokers.

Daum is an old-line Los Angeles broker founded in 1904 and specializing in industrial buildings.

It was acquired in 1984 by Johnstown American in Atlanta, which in turn was acquired by Southmark, a Dallas real estate investment company that is now heavily in debt.

Also in 1984, Johnstown bought an 8-year-old brokerage founded by Scher, Business Properties Commercial Brokerage, in order to diversify from industrial buildings into offices.

Scher went on to found Scher-Voit last year with Robert D. Voit, who is developer of the enormous Warner Center project in Woodland Hills.

Scher said the flap started in this way: Two of his former brokers from the Anaheim office of Daum-Johnstown contacted him earlier this year about moving to his new brokerage. When he hired the two, many of the other Daum-Johnstown brokers also walked out with them in an unusual mass defection that Scher described in his press release last week as “a surprise” and “unsolicited.”

“But it seems a little unique to me that so many of our people went to one firm,” Endendyk said. “And it’s also curious that the only offices that lost people were former Business Properties offices in Anaheim, Newport Beach and La Jolla.”

Whether Scher recruited the employees or not, industry insiders say one reason so many Daum-Johnstown employees walked out was that talk of another change of ownership at Daum-Johnstown worried the brokers, who feared that clients might also worry and desert the brokerage.

Also, Scher acknowledged that he is paying at least some of the brokers better commissions.

Daum had problems with other rumors, including one that said Daum had been offered for sale to other brokers, which Endendyk says is not true.

“Rumor also has it that Daum is in financial problems,” Endendyk said in a telephone interview from his Dallas office. “And that is simply not the case either.”

Further complicating Daum-Johnstown’s problems, President and Chief Executive Joseph Sojka left the firm several weeks ago under circumstances that Endendyk won’t comment on.