Gavin Swartzman doesn’t want to talk about equity stakes or partnership models. First and foremost, he wants to talk about people.
“We look at ourselves as being in the human-capital business,” says Swartzman, CEO of Peerage Realty Partners. “Our other lines of business — throughout our history of 35 years, our businesses from asset management to marketing services to real estate brokerages — are what we call ‘human capital intensive’ businesses.
Peerage seeks out “best-of-breed” real estate brokerages, makes an initial investment in the company and leaves partners with a meaningful equity stake to align everyone’s interests for the long term — with Peerage helping drive growth and expansion by providing expert support, says Swartzman.
Peerage has invested in several brokerages nationwide, including Toronto-based luxury real estate firms Baker Real Estate Corp., a major player in the new home and condo/townhome market, and Chestnut Park, a premier brokerage with offices across the province, including in Muskoka and Prince Edward County. The company’s founder, chairman and CEO is Miles Nadal, the international entrepreneur and philanthropist whose vision it was to approach real estate brokerages to consolidate and offer corporate support to take them to the next level.
“Our view is that the big differentiator is talent — and the difference between good talent and average talent is exponential. It’s not a linear thing. So if you’re a really good agent, you’re not just 10 per cent better than an average agent — you’re multiples greater. And those people are really rare, and hard to get.”
Talent doesn’t like being told what to do — a top performer has no interest in outside control, and clearly doesn’t need it. Peerage Realty Partners’ network therefore operates, Swartzman says, with “a very different structure than ‘we buy you.’”
“Yes, we invest in you,” Swartzman says, “but people join us because they continue to operate the firm that they founded; they have a path to liquidity but retain autonomy; they have a support system to accelerate their growth. We complement what they do, but we all share a very common vision, which is uncompromising around quality and standards.”
Autonomy is a key word here. Barbara Lawlor, president and CEO of Baker Real Estate, acknowledges that a new partnership typically brings “some apprehension.” Too many cooks in the kitchen, as they say, can spoil the broth.
Baker, which provides pre-construction sales and marketing expertise to projects throughout North America — including condominiums, townhouses, single-family homes, hotel condominiums and resort properties — had already carved out its auspicious niche in the market with prestigious projects.
But Lawlor says the company’s founder, Pat Baker, was ready to make changes in her life and career: “And it was an opportunity to capitalize on a hugely successful career, financially.”
The right approach
“Obviously, over the history of the company, it was not the first approach,” Lawlor says of Peerage’s offer. “But it was the right approach, and I think that has a lot to do with the people behind Peerage.”
In the near-decade of their partnership, Baker has opened new offices in Montreal and Shanghai — the latter capitalizing on interest in Toronto from Chinese investors — and forged ahead with proprietary technology that allows for seamless transactions anywhere in the world.
“It has been a really fortuitous partnership for us in many ways,” Lawlor says. “We brought a successful, established company, and they brought their business acumen and people and vast experience, as a partner … it is a seamless fit.”
“They recognized that we were running a successful business — and they left us alone to continue doing that.”
Chestnut Park’s president and CEO Chris Kapches tells a similar story — founder Catherine Deluce was looking to take a step back, while seeking some form of continuation for the luxury real estate firm. Peerage stepped in with financial support and industry expertise, Kapches says, and they “formed a partnership that has co-existed brilliantly for the better part of 10 years now.”
Operating in some of the top price brackets in luxury and recreational markets, Chestnut Park ran offices in Toronto and Port Carling (Muskoka), pre-Peerage — and post-Peerage, they opened two more.
“With Peerage’s help, financially and otherwise, we immediately opened an office in Collingwood, which is one of the dominant offices in that marketplace, and then subsequently opened an office in Prince Edward County in Picton, which is also a dominant office now,” Kapches says. “It was with Peerage’s guidance and support that we were able to do something that we didn’t have the manpower or capacity to do before.”
The partnership also allows Chestnut Park to stay on the “cutting edge”, he adds. Peerage brings a breadth of perspective across its partner network and other businesses — including technology, marketing, industry insights and legal and financial expertise.
He does, however, still have room to breathe.
“They are our partners but they’re not a meddlesome partner,” Kapches says. “I run the company — you can imagine what it would be like having someone second-guessing every decision that you make.”
Endgame vs. new beginning
Swartzman points to the unique challenge of cashing out in the real estate industry — when it’s time to retire, who will buy your company?
“For founders of companies, what’s the endgame look like for them?” he asks. “Most entrepreneurs have a real challenge with how to ensure the continuity of their business, but also get some value for them over time.”
The Peerage partnership model is more than a pre-retirement package, however — it can also be a jolt of new energy, a catalyst for growth. Swartzman says some of that verve is lost over the decades’ worth of maturation of a successful, established company.
“If you’re a founder of a firm — and it doesn’t matter what industry you’re in — you reach a certain stage where you become a little bit less bold over time,” he says. “The next initiative that you’re going to take, that extra is coming out of your pocket exclusively.
“But if you’re sharing that risk, it’s a different calculation.”
Swartzman highlights Baker’s expansion to China, Chestnut Park’s move into Prince Edward County, and half a dozen new offices for Street City — a brand they’ve crafted — already this year.
“We have perspective because we’ve grown a lot of businesses,” he says. “We’re a partner that brings capital and direct resources, as well as the strategic benefit of having gone through many, many years of ups and downs, growing businesses in various sectors — we have that benefit where we can see a little further down the road.”
So what, exactly, does Peerage look for in a partner? Who is this near-mythical talent they want to work with?
Swartzman doesn’t skip a beat — he immediately fires off a bullet-point list.
“Independent. A maniacal passion and commitment to their people. The highest level of professionalism and quality. Someone who can still see the value in having a partner grow with them, as opposed to someone who’s looking at purely an exit.”
“A firm,” he adds, “that still sees its brighter days ahead of them.”
By the numbers
- Peerage Realty Partners, through its partner firms, transacts more than $5 billion in residential real estate annually.
- Baker Real Estate boasts more than $2 billion annually in new home sales.
- Chestnut Park Real Estate Ltd. sold approximately 2,500 properties in 2016, with the highest sale $21 million; the Toronto office, the top producing office, sold almost $2.5 billion in real estate.