The shake-ups keep on coming in the real estate industry. While some companies are shouldering the loss of top executives, the Corcoran Group is cutting ties with Corcoran Global Living.
The Anywhere Real Estate subsidiary is ending its franchise agreement and shuttering all offices and operations of its largest affiliate by the end of the year. In an emailed statement sent to RISMedia, a Corcoran spokesperson confirmed that the New York-based franchisor is pulling the plug on its largest franchise.
“We made the difficult decision to terminate the franchise agreement with Corcoran Global Living weeks ago,” the spokesperson said in the statement.
At its height, Corcoran Global Living had 70 offices and nearly 2,600 agents across Southern California, Northern California, Nevada and Ohio while tallying gross annual sales of $10 billion.
The shutdown is slated to take effect by December 31, 2022.
The announcement comes days after Corcoran Global Living CEO Michael Mahon sent a now-leaked email to agents announcing the end of the affiliate’s franchise agreement and pending shutdown of the southern California region.
However, Friday’s announcement from Corcoran widens the scope.
“We have experienced a number of business challenges in 2022 that have interfered with our ability to meet our financial obligations to our franchisor and other secured creditors,” Mahon wrote.
Among those challenges were a declining real estate and economic landscape and an “ongoing multi-million dollar business dispute” with Corcoran as a contributing factor, according to the memo.
The announcement comes amid a hodgepodge of legal controversy that Mahon has been caught in the middle of.
Mahon sued Corcoran through his company, ELI Realty Investments LLC., in June, accusing the franchisor of fraud and breach of contract. Among the allegations made in the complaint, he claimed that Corcoran provided his business with a faulty transaction management data system that cost him hundreds of thousands of dollars.
“Corcoran’s DASH system was not fully functional as represented, causing major disruptions to Plaintiffs’ businesses and the repeated and uncured Royalty Fee overpayments alleged,” read an excerpt from the lawsuit.
Mahon indicated in his memo that Corcoran’s tech system contributed to the challenges that ultimately led to the demise of the franchise’s business.
Corcoran filed a counterclaim shortly after Mahon’s, claiming that the allegations made in the initial suit were a tactic by the executive to hide misdeeds allegedly committed by Eli Realty.
“This controversy has little to do with the allegations contained in the Complaint–which are a smokescreen,” read an excerpt from the counterclaim. “This matter really involves the unlawful (and often clandestine) conduct of ELI Realty and its current management.”
The countersuit accuses Mahon and company of misusing loans Corcoran issued to Eli Realty meant for buying other brokerages to fund personal matters, including paying bonuses to Mahon, his wife Pamela Mahon and others.
Pamela Mahon is Corcoran Global Living’s vice president of business development in California, Nevada and Ohio.
Michael Mahon is also on the receiving end of another lawsuit filed by former CGL agents and affiliates accusing him of “fraudulent behavior and breach of contract.”
Jessie Rodriguez, Josh Painter, Amy Green, Jose Zavalza, Oscar Mendoza, Jason Lucero and entities identified as Avance Real Estate Inc., ZMR Real Estate, Inc. and LMM Real Estate, Inc. (“LMM”) were named as plaintiffs in the case.
According to the file, Rodriguez and fellow plaintiffs claimed they were lied to about the company’s financial condition and were stiffed on payments they were owed, among other things.
“Defendants used lies, false financial statements and every other conceivable fraudulent financial artifice to convince Plaintiffs to sell their thriving, profitable real estate businesses,” read an excerpt from the lawsuit.
The lawsuit also alleges that the commissions owed to agents were used to keep Mahon’s businesses afloat.
“Defendants missed several payments to various real estate agents from escrows—a betrayal that none of the Plaintiffs would ever let happen in their own businesses,” read the lawsuit.
According to the lawsuit, when agents approached Mahon about missed payments, they were told that it was due to “an externality for which they had no control.”
Corcoran Global Living did not immediately respond to requests for comment from RISMedia.
Amid the controversy and tragedy, there is a silver lining for some of the impacted agents.
Corcoran announced Friday that it would launch Corcoran Icon Properties on Monday in Northern California. Several former Corcoran executives will run the new affiliate, which will encompass 24 offices and 900 sales associates and employees.
Randall Kostick, Corcoran Global Living’s former chief risk officer and partner will be Icon Properties CEO. Steve Belluomini, the former regional vice president, and partner of Corcoran Global Living Northern California region, will be president of Corcoran Icon Properties.
Matthew Borland—formerly COO—and Melody Foster—chief experience officer—will serve as COO and CMO, respectively.
“Not only will this continuity of leadership benefit the broader team, creating a new entity within the Corcoran Affiliate Network allows agents to have access to the same tools and services that they’ve relied on, ensuring they don’t miss a beat when servicing their clients,” read a Corcoran statement.
A Corcoran spokesperson said the move “made the most sense for our business.”
They stated that Corcoran is “actively examining options to find the right affiliate in many of the markets in which Corcoran Global Living previously operated.
In the days following the announcement that the SoCal offices would shut down, dozens of agents found a new home at Berkshire Hathaway HomeServices (BHHS) Drysdale Properties.
The offices moving to BHHS Drysdale from Corcoran Global Living include those in South Lake Tahoe, California; Tahoe City, California; Minden, Nevada; and Truckee, California.
According to Gretchen Pearson, president and CEO of BHHS Drysdale, up to 70 agents are transferring to her brokerage.
“A lot of them are longtime real estate agents that are very much the ones that were entrenched in the area,” Pearson says.
“There are great competitors up there, and they could’ve gone anywhere,” Pearson continues. “We all moved quickly to try to minimize the negativity of real estate agents in the marketplace and not have anything happen to the clients with the market as it is, so moving listings without trying to have them off the market.”
The biggest acquisition for BHHS Drysdale was Alison Elder and the Elder Team. Elder recorded $132 million in sales volume last year and tells RISMedia that she is on track to finish 2022 with $114 million in sales volume.
“I think Dan and Gretchen Pearson could be deemed angels because they have such a strong operational alignment, which is why we were a perfect fit inside their organization,” Elder says. “They are such veterans in the industry by providing the opportunity to come to BHHS for those agents. I just think that it’s really an extraordinary and fortunate situation.
This is a developing story. Stay tuned to RISMedia for further updates.