Loss for LeBron? King James lists Brentwood mansion

Lebron James and his Brentwood home (Getty, Redfin) LeBron James isn’t used to losing, but it looks like he may be willing to accept an “L” on the Brentwood mansion he just listed. The future Hall of Famer and Los Angeles Lakers superstar is asking $20.5 million for the 9,440-square-foot home, according to the New York Post. James paid $20.9 million for the property in 2015. It was the first home he bought in L.A. and preceded his move to the Lakers from his hometown Cleveland Cavaliers. James bought his third L.A. home — a 9,146-square-foot mansion in Beverly Hills — in the fall. His other property in the city is also in Brentwood and is the biggest of the three, at 15,850 square feet. The Brentwood home that James just listed is in the so-called Rockingham Rim area, on South Rockingham Avenue. It was built in 2011 and has been updated with more modern amenities, according to the report. The home has six bedrooms and eight bathrooms, along with a library, home theater, and a gym. There is also a deck outside the second-floor main suite. The home includes a 20-foot lap pool. Overall in the fourth quarter of 2020, L.A. properties that sold were bigger and left the market faster compared to the same time in 2019. But that led to an increasing number of owners pushing their properties on the market. [NYP] — Dennis Lynch

How much Compass paid to scale up

Compass CEO Robert Reffkin (iStock, Getty/Illustration by Kevin Rebong for The Real Deal) Since 2018, Compass has spent more than $300 million to scale its business, buying other brokerages and tech companies to support its “end-to-end platform,” according to the company’s IPO filing. Backed by $1.5 billion in venture capital from investors including Fidelity, Wellington and SoftBank, Compass’ growth story has been unmatched in residential real estate. The brokerage aggressively courted agents after launching in 2012, but six years later, it switched gears and began scooping up firms wholesale. Generally speaking, Compass’ acquisition strategy is to buy brokerages in markets that are top priorities for recruitment. Recent purchases of technology companies indicate Compass is not above buying a ready-made platform instead of building it in-house. The S-1 doesn’t disclose the purchase price for all of Compass’ transactions, but it highlights some of the biggest, including two key deals that helped cement its dominance in San Francisco. Here’s a look at what Compass has paid to scale up since 2018. Paragon Real Estate | 2018 | $18.9 million Compass’ foray into the San Francisco market started with its $15.8 million purchase of Paragon, which had 225 agents and $2.3 billion in annual sales. The deal also had a $5.9 million contingent consideration, based on profitability targets and payable over four years. Compass has paid $3.1 million so far, for a total of $18.9 million. Pacific Union International | 2018 | $83.3 million Compass paid $68.2 million in cash and $3.7 million in stock as part of a blockbuster deal to buy Pacific Union, a 1,700-agent firm with $14 billion in annual sales. The 2018 deal also included a $24.4 million contingent consideration, based on profitability targets and payable over three years. So far, Compass has paid $15.1 million of that amount for a total of $83.3 million. Platinum, Conlon, Avenue Properties et al. | 2018 | $20.5 million Compass spent another $20.5 million on a brokerage acquisition spree in 2018. In addition to Paragon and Pacific Union, it bought Platinum Drive Realty (a 100-agent firm in New York), Conlon Real Estate (with 200 agents in Chicago) and Avenue Properties (with 110 agents in Seattle). Contactually | 2019 | $26.1 million In February 2019, Compass acquired Contactually, a 32-person firm that creates customer relationship management software for the real estate industry. Compass paid $24.5 million in cash at closing and another $1.6 million was earmarked for the “elimination of pre-existing relationships.” At the time of purchase, Contactually and Compass said existing customers would be able to continue using the CRM, though several competitors balked at the idea. Stribling, Alain Pinel, Delectica et al. | 2019 | $22 million When Compass bought Stribling & Associates in 2019, it marked a shift in New York City’s residential industry. Stribling was one of the last major independent firms, and provided Compass with a major boost in sales, with 270 agents and $1.62 billion in sell-side deals in 2018. Also in 2019, Compass purchased San Francisco-based Alain Pinel and Delectica, a New York City-based AI firm. None of the deals got their own line items, but they cost Compass $14.6 million in cash, plus contingent considerations of up to $13.1 million to be paid out over six years based on profitability targets. Compass has paid $7.4 million so far. Modus Technologies | 2020 | $70 million In October 2020, Compass struck a deal to buy title and escrow startup Modus for $50 million in cash and $20 million in stock, payable over three years and based on transaction-based targets. So far, it’s paid $20 million. Lila Delman Real Estate | 2021 | $6 million+ Compass kicked off 2021 by shelling out $6 million in cash for Lila Delman Real Estate, a luxury firm in Rhode Island. The firm, founded in 1964, has 120 agents across six offices. It’s done $6 billion in sales in the past 25 years. The deal includes another $3.7 million “upon meeting certain requirements,” the filing said. Bold New York | 2021 | $2 million+ Just ahead of its IPO, Compass scooped up Bold for $2 million. The firm, which has 120 agents, focuses on new rental developments in New York City. The deal includes up to $2 million more in cash for hitting certain business targets. KVS Title | 2021 | $52.2 million+ Compass upped its bet on ancillary services, shelling out $52.2 million for KVS Title last month. The Washington, D.C.-based firm has 90 employees. The deal includes an additional $26.4 million in cash “in connection with certain contingencies and compensation related arrangements.” Contact E.B. Solomont Contact Erin Hudson

Inside Compass’ S-1: How it measures the upside of its tech

Compass CEO Robert Reffkin (Instagram, Compass, iStock/Photo illustration by Kevin Rebong for The Real Deal) Compass’ pitch to investors is all about its agents. The company’s S-1 — a prospectus that details its financial performance and business strategy filed ahead of an IPO — kicks off with a founder’s letter from CEO Robert Reffkin, who said he started Compass to build better tools for real estate agents like his mom. “The brokerage model was originally designed to be a one-stop shop for everything an agent needed,” he wrote. But the business hasn’t progressed past the pre-internet era, something Compass is trying to change. “We are replacing today’s complex, paper-driven home-buying and selling process with an all-digital, end-to-end platform that empowers real estate agents,” Reffkin wrote. Although Compass has touted its technology as a key differentiator from other residential brokerages, the prospectus describes the agent as remaining central to buying and selling real estate. “Despite various ‘agentless’ models such as iBuying and for-sale-by-owner, nearly 90 percent of sellers and buyers in the U.S. work with real estate agents,” Reffkin wrote. Last year, more than 5.6 million homes were sold in the U.S., representing $1.9 trillion in value. “We believe that real estate agents are an underserved group of business owners,” he said. Sticking with the empowerment theme, Reffkin said Compass aims to provide its agents with tools to serve clients and grow their businesses. “At Compass, we are agent-obsessed,” he wrote. “When agents succeed, Compass succeeds.”The filing also shows where Compass believes it can make its profits, much of which it accredits to its software platform.Here are six key financial takeaways from the prospectus. Ramping up revenue Compass’ revenue more than doubled between 2018 and 2019, as the firm broke into new markets and expanded through acquisitions of other brokerages. The firm generated $884.7 million in 2018 and $2.4 billion in 2019. Bolstered by the hot U.S. housing market in 2020, Compass’ revenue hit $3.7 billion in 2020, up 56 percent year-over-year. Deals, deals, deals Compass’ gross transaction value Compass’ sales volume jumped 55 percent last year to $151.7 billion, up from $97.5 billion in 2019. (In 2018, sales volume was $33.7 billion.) The number of transactions rose 66 percent between 2019 and 2020 to 144,784. How many agents? Of its 19,385 agents, Compass considered about 9,368 “principal agents” — meaning they are team leaders or work independently — as of Dec. 31, 2020. Compass said it has retained 90 percent of principal agents over the last three years; 30 percent of them are enrolled in “Compass Anywhere,” meaning they’re fully mobile and don’t have a designated desk. The bottom line: 88 percent of agents use the Compass platform at least once a week and 66 percent use it daily. Internal measures Compass’ S-1 also disclosed an internal metric called “net platform contribution retention,” which measures its platform’s ability to make the company money year-over-year. “Platform contribution” is defined as revenue after expenses — in other words, how much money Compass keeps after paying agent commissions. The contribution grows as a result of increased commission dollars, “enhanced economics” with agents, and when agents and clients pay for additional services like title and escrow. The Compass Platform Per the filing, Compass’ “net platform contribution retention” was 105 percent in both 2018 and 2019. It jumped to 118 percent in 2020, due to agents who joined in 2018 and were counted for the first time. (A key caveat is the calculation includes only principal agents who have been using its platform for at least five quarters.) About the losses In the S-1, Compass disclosed $1.1 billion in cumulative losses as of Dec. 31, 2020. But on an annual basis, the losses narrowed last year. Compass lost $223.8 million in 2018, $388 million in 2019 and $270.2 million in 2020. It cut at least $10.3 million in costs due to the Covid-19 pandemic, including slashing 15 percent of its staff. Where’s the spend? Sales and marketing was the big-ticket item in 2020, accounting for $407.9 million worth of expenses, up from $382.8 million in 2019 and $174.3 million in 2018. That bucket includes advertising, employee compensation, agent acquisition incentives and costs associated with programs like Compass Concierge, where the brokerage fronts sellers money for home repairs. Its R&D spend in 2020 was $146.3 million, up from $56.7 million in 2018. Its lease costs were $110.2 million last year. Contact E.B. Solomont Contact Erin Hudson

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