A luxury real estate brokerage that handled some of Orange County’s biggest and most iconic home sales has shut down, becoming one of the first casualties of a market slowdown that’s likely to continue reverberating throughout the industry.
Villa Real Estate, which generated at least $2.6 billion in sales over the past two years, closed all three of its offices in Newport Beach and Laguna Beach, leaving 125 agents scrambling to find a new brokerage.
Steve High, Villa co-founder and president, said at least 64 of Villa’s agents joined the Coldwell Banker Newport Beach office — the same office from which Villa recruited about 40 agents when it opened in 2013.
High blamed the shutdown on declining home sales and rising interest rates.
“(Villa CEO) Gary Jabara saw a lot of headwinds in the market,” High said in a telephone interview. “He didn’t think there were any short-term solutions. … He decided it was better for our company to merge or affiliate (with another brokerage).”
Less money flowing in
Observers say the shutdown may be among the first in an industry-wide shakeup. Southern California home sales have fallen for 16 consecutive months, cutting transactions by 33% in the past year. That’s crimping brokers’ ability to cover fixed costs like rent and salaries.
“They’re making considerably less money right now, and we’re seeing a downsizing of companies,” said Steve Thomas, author of Reports On Housing. “They don’t have giant margins to begin with, and when things slow down, … it squeezes their margins even more.”
Villa’s shutdown comes after news reports of layoffs at national real estate chains like Compass, Redfin and Coldwell Banker parent Anywhere Real Estate.
Real estate consultant Patrick Veling named a half-dozen Southern California brokerages from Pasadena to Mission Viejo that were once busy but now appear to be doing no business.
“This is only the largest profile (closure) that we have seen in Orange County,” said Veling, president of Laguna Beach-based Real Data Strategies. “There are others that are teetering.”
Corcoran Global Living in Claremont sent an email to employees and agents in December announcing it planned to close at the end of last year after losing its Corcoran Group affiliation due, in part, to “a rapidly declining economic and real estate environment,” according to the RealTrends website.
Jamie Duran, president of Coldwell Banker Realty Southern California, said her division has been “very busy in talks with quite a few brokers.”
“Companies call us and want to be acquired,” Duran said “They just want to get out of Dodge with their shirt on.”
The average number of transactions per active firm fell 21% in the year ending in March, and the average dollar volume per active firm fell 20%, according to a Real Data Strategies analysis of the California Regional MLS, which includes much of Southern California.
Villa’s losses were even worse, Veling said. Transactions were down 47% and dollar volume fell 52% in the most recent year.
“You can see the pain and suffering Villa has been enduring, far worse than the overall market,” Veling said.
That’s partly due to their concentration in the luxury home market, which got hit harder during the downturn than lower-priced homes.
Still, it raises the question: Why would a brokerage that handled more than $2.6 billion in home sales shut down? Is there a cash flow problem, or is CEO Jabara getting out to cut his losses and conserve his profits?
High said it’s the latter, that Jabara had the wherewithal to keep going if he chose to.
“He wanted to get out before things got worse,” High said. “Everybody’s been looking at this market and saying … we need to tighten our belts. Gary said it’s better to merge with a company that has economies of scale.”
And the 117-year-old Coldwell Banker is just such a company, he said. The Southern California division claims the Newport Beach office has had the highest dollar volume in the Coldwell chain three years in a row.
“When the market turns, you want to be on the biggest battleship you can be on,” High said. “I think that’s what CB represents.”
A coastal focus
Founded in 2013, Villa quickly became associated with some of Orange County’s biggest home sales.
That included the $70 million sale of an ocean-front Laguna Beach mansion that set an Orange County record. That sale eclipsed the $50 million record set 19 months earlier when Villa helped best-selling author Dean Koontz sell his Newport Coast compound.
Villa agents also listed a Newport Beach home formerly owned by John Wayne and handled celebrity deals at $55 million and $61 million apiece. Villa also represented the buyer of Balboa Island’s landmark “Jaws house” by acclaimed architect John Lautner.
The first signs of trouble for Villa Real Estate surfaced in January, when the brokerage’s top salesperson, John Stanaland, defected to the Douglas Elliman chain.
Villa agent Morgan Just, a former member of the Stanaland Team, speculated that Stanaland’s departure may have been “a large contributing factor to (Villa’s) closing down.”
Just joined Stanaland at Douglas Elliman, but decided he preferred working at Villa. “I went back. It was a shock to find out several weeks later it was shutting down,” Just said.
David Girling said most of his fellow Villa agents loved working there.
“For me, it’s sad,” said Girling, who’s moving to Coldwell Banker. “But I’m looking toward the future, and I’m very optimistic how things are going to play out.”
Jabara, who also leads Boardwalk Investments Group and Mobilitie, signed an agreement in mid-April with Coldwell Banker. The terms of the deal weren’t disclosed. But Coldwell Banker agreed to honor the commission arrangements agents had with Villa.
The Villa Real Estate name will be retired in July after current listings and escrows are settled, High said.
In addition to High, four other Villa partners are joining Coldwell Banker. They include some of the biggest names in Orange County’s luxury real estate industry: Tim Carr, Evan Corkett, Kim Bibb and Jon Flagg.
Veling said the move probably will give Coldwell Banker the largest market share in Newport Beach, moving it ahead of No. 1 Compass.
Villa’s average sale price of $3.3 million during the year ending in March was the highest for any active brokerage in the Newport-Laguna Beach coastal area, Veling said.
Bibb had an average price of $5.1 million on 16 deals, and Flagg averaged $6.1 million per deal on 10 transactions.
“Agents coming into Coldwell Banker from Villa are bringing significant closed-business potential,” Veling said. “It’s a significant shift.”