Experienced Hires Help Get Job Done for Broker

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It has been less than a year since Marcus & Millichap Inc. debuted on the New York Stock Exchange, but the Calabasas real estate brokerage is already climbing fast and surpassing Wall Street expectations.

Determined to increase the firm’s productivity and market share across North America, Chief Executive John Kerin announced earlier this year a new strategy to recruit brokers with greater experience. The company has since hired 92 employees who fit that bill, which subsequently contributed to a 23 percent year-over-year increase in quarterly operational expenses.

But the additional costs appear to be paying off. Second quarter revenue rose 27 percent to $134 million, well above analysts’ consensus estimate of $128 million. Net income nearly reached $12.8 million (33 cents a share), easily topping an anticipated $8.9 million (25 cents).

That news cheered investors, who drove the company’s shares to close at $27.12 on Aug. 13, 13 percent higher than the prior week. The increase made Marcus & Millichap one of the top gainers on the LABJ Stock Index. (See page 26.)

While staffing up might have helped the company’s numbers last quarter, its real revenue driver was the strength of the broader commercial real estate industry. Credit availability and occupancy rates have improved, said Brandon Dobell, an analyst with Chicago financial services firm William Blair & Co., helping Marcus & Millichap outperform Wall Street expectations.

Kerin reiterated in an Aug. 7 earnings call that his company plans to continue hiring sales professionals who have more expertise, even if they come at a higher cost.

“Local competitors in all of our marketplaces can see the value in our platform,” Kerin said. “We’ve been pretty successful in getting them to come on board, which then takes us less time to get them into becoming revenue producers.”

Experienced brokers are valuable assets for the company, Kerin explained, because they typically have vast knowledge of a particular market and better understand how to complete transactions.

Dobell said he thinks the impact of a larger staff will only grow in the future, especially if the company continues to recruit experienced brokers.

“The more quarters they string together in which 25 percent or more of their new additions already have experience, the more comfortable we feel about the company’s agent productivity metrics in our 2014 and 2015 projections,” Dobell said.

Representatives of Marcus & Millichap did not return a call for this article.

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