LuxeSF regularly profiles members of The Luxury Marketing Council. On this occasion, we chat with Jeffrey Gibson who heads the San Francisco office of Sotheby’s International Realty (SIR). An attorney by training and former practice, Jeffrey discusses the directional change he made from practicing real estate to managing one of the Bay Area’s most successful real estate brokerages.
LuxeSF: Let’s start with Sotheby’s office here on Greenwich Street in San Francisco, when was it founded?
Gibson: The San Fracisco office was established in 1995, and we have been at this location since 2003..
LuxeSF: Number of agents currently?
Gibson: I manage three offices, one in San Francisco and two in Sonoma. We have about 100 agents in San Francisco who cover from the Peninsula to Marin and another 30 agents in Sonoma-Napa.
LuxeSF: Do you feel comfortable talking about sales?
Gibson: In 2011 this office did over a billion dollars in sales. It had never done that before. So far, for the first seven months of 2012, we have the highest sales volume reported in the San Francisco MLS of any real estate office.
LuxeSF: The 2011 figure, the billion dollars, equates to approximately how many properties?
Gibson: We traded about 576 sides.
LuxeSF: This is a Sotheby’s corporate office, not a franchise operation?
Gibson: That’s correct.
LuxeSF: And the management structure?
Gibson: I am the Vice Presicent and manage the office, but I have an incredible staff that I rely on very heavily. They make me look really good.
LuxeSF: And the geographical coverage area for this office?
Gibson: I have agents who selling as far north as Mendocino and as far south as Palo Alto.
LuxeSF: The international network for Sotheby’s – how many offices, how many agents?
Gibson: There are 560 offices in 44 countries.
LuxeSF: Do you tap into that on a regular basis?
Gibson: Constantly and daily.
LuxeSF: What percent of your business do you think is driven by inbound or outbound network referral?
Gibson: In the 20% range. We have a huge amount of incoming referral business through the network. For example, the $100 million salel we did last year was a referral from Hawaii.
LuxeSF: And the bulk of that inbound referral business is coming from what region?
Gibson: It’s all over the place…Europe, Asia, and we get referrals from the East Coast almost on a daily basis – from New York, Philadelphia, Chicago, Boston and Florida.
LuxeSF: Is the business transacted by phone or Internet?
Gibson: A lot of it is done phone-to-phone. Many of the Sotheby’s agents have now developed referral relationships with other agents. I also get a lot of the calls myself, and then I just distribute them to the appropriate agents.
LuxeSF: The notion of a Unique Selling Proposition, what would it be for SIR?
Gibson: It’s our global reach. For example, we can take a property and advertise it in Moscow, in Russian, and on our website the brochure is actually translated by a Russian-speaking person into Russian. That’s just one example of how broadly we can reach on a listing. And then of course we complement that with expertise about the local market and valuation of properties.
LuxeSF: What do you think is the perception of the Sotheby’s name?
Gibson: There’s no doubt that the Sotheby’s name is linked to high-end luxury real estate. Without wanting to brag, I believe we own that title. The downside, if there is one, is that it’s sometimes a little off-putting to people who feel “Gee, my house really isn’t a Sotheby’s house…it’s not a $5 million house”. The reality is that 65% of the transactions that we did in 2011 were under $1 million.
LuxeSF: How did you get into the business?
Gibson: My mother was a real estate agent in New Orleans and in Connecticut. I grew up with the MLS book in the front seat of the car. And my long-term domestic partner was an agent, and so I grew up with the business. I became Sotheby’s San Francisco real estate lawyer in 1994. At the time, I had a real estate practice here in San Francisco and was a partner with Goldstein Gellman Melbostad, Gibson and Harris, LLP. The Sotheby’s originating manager at the time, William Holloway, hired me as the firm’s outside legal counsel. I think he had six agents at the time. Then he was succeeded by another manager, who remained my client for 12 years. Then when that manager left, a lot of the agents recommended me to Corporate. They knocked on my door and a marriage was made.
LuxeSF: And you took the reins in what year?
Gibson: June 2010.
LuxeSF: What do you do on a daily basis, management-wise?
Gibson: I manage a lot of problems, and hopefully solve them. If there is difficulty on a deal, I handle that. I get involved with our agent, or with the client or the broker on the other side, if it escalates to that point. I handle a lot of contract review or crafting language for an addendum. I do a lot of risk-avoidance… “Can we do this?” “Well, if you do that it’s going to have this effect.” I walk people through the thought process and educate them accordingly. So, a big part of my job is deal-doctoring or problem-solving for the agents. I conduct the sales meetings. I try to visit our entire inventory, and I like to see other companies’ inventories as well. It’s really important for me to know the inventory. And I look for talented agents to join us.
LuxeSF: What’s the frustrating part of your job?
Gibson: Because the stakes are so high on a lot of these deals, the emotionality of it can be a little overwhelming, and sometimes I get roped in.
LuxeSF: Rejection?
Gibson: Yes, when something goes south or there’s great challenge with another side, you have to have the skill set to be able to manage the situation.
LuxeSF: Do you think you’ve made the transition well from lawyering to real estate?
Gibson: I will concede it was a much bigger transition than I was expecting. The volume of it is staggering. I reviewed every listing agreement and every contract on 550 deals last year. This year we’re going to exceed that by probably 30%. I’ve got 130 agents for whom I act as an advisor, mentor, general counsel and confidante. And I’m also running a very large business, so I’m developing reports and monitoring finances.
LuxeSF: Your management style. Are you a micro-manager?
Gibson: Not at all.
LuxeSF: So, what do you slough off?
Gibson: It’s not that I slough off. I want to know that if I’m going to delegate something, it’s going to be done competently. For the first six months I was micro-managing everything because I wanted to review every single invoice and make sure that the numbers matched. But once I developed confidence that my staff was doing their job and the agents were doing their jobs , I’m happy to give them the reins, and be available to them if they have a problem.
LuxeSF: How would you define your style today?
Gibson: I think you’d have to ask other people, but hopefully they’d say that I’m “fair”, “consistent”, “thoughtful”, “encouraging”, “business-like”.
LuxeSF: What would you like your peers to say about you behind your back?
Gibson: Hopefully, that he’s doing a good job, taking care of his agents, delivering the business, and earning the respect of the people he works with. That’s the most important thing that matters to me.
LuxeSF: Most rewarding part of the job?
Gibson: I brought on a couple of newer or younger agents, and one in her first week contracted a $3.5 million deal. We just had a young gentleman I brought on about a year ago who just closed a $10 million apartment. Those are game-changers for these agents, and it’s so satisfying for me personally.
LuxeSF: How are recruiting and accepting new agents? What are the criteria?
Gibson: I want agents who have good track records, have a decent book of business, and who have a reputation for being honest and ethical. I get a contacted at least every week – sometimes a couple of times a week – by somebody who is moving to San Francisco, just got a license, etc. I just say, “Thank you, but I’m not sure you are ready yet. But I’m happy to help you try to find the best place.” I want them to get well-trained but I don’t have the resources to do the initial training here at Sotheby’s.
LuxeSF: If I’ve had 10 years in the business and I come from a respectable competitor), but something about me tells you that
I’m not the right fit for Sotheby’s, why would you reject me?
Gibson: A lot of this business is built on reputation, so if there was anything questionable about your reputation, that would have an impact on me. I never want to get the call from a client who says, “My agent doesn’t call me back,” or “My agent didn’t pay some bill that they were supposed to pay.”
LuxeSF: How did your agents survive the downturn?
Gibson: Most agents struggled financially. To survive, they shared the listings and income when opportunities arose. They were very generous with each other that way. They got creative. There were people who said, “I’ll never do a short sale,” and all of a sudden they’re going after REO business, much less short sales. Somebody who is successful in this business is someone who is intrinsically entrepreneurial. They’re self-directed. They’re independent. They have to go do it themselves.
LuxeSF: What drives a successful agent, in your opinion?
Gibson: I think there’s an internal, personal drive to succeed, and I don’t think it’s just about the dollars; and then lining up that drive with a certain amount of intrinsic skill – people skills, business skills, salesmanship, etc. Every once in a while you’ll find this magical confluence where it all comes together in the same package.
LuxeSF: Are they smarter?
Gibson: I don’t know that they’re necessarily smarter on an IQ level. They’re just streets-smarter.
LuxeSF: Do they work harder?
Gibson: Absolutely.
LuxeSF: But they want to make money?
Gibson: They’re rewarded for their hard work.
LuxeSF: The marketplace. How difficult was it through 2011?
Gibson: I arrived at a very down market in June of 2010, which I expected. I was seeing reports on what had been happening in the prior years. Thankfully, these last seven months have been off the charts in San Francisco.
LuxeSF: Why do you figure that is?
Gibson: I think it’s a series of things…global economies, pent-up demand, the fact that people didn’t spend and lenders weren’t lending. There was a chill in the air. Even the ultra-wealthy were afraid to spend money. I think that chill, that freezing, has thawed somewhat and that thawing is creating a lot of momentum out there. We also live in a very exceptional market. If we see the same activity in Ohio, Dallas and Arizona, that’s when you’ll know it’s really turned around.
LuxeSF: Why did you take the job when the market was so bad?
Gibson: I really like the company. I had worked with the company for 16 years. I had been practicing law for 25 years, so personally I was ready to take on a new challenge, and see if I had the mettle to do it.
LuxeSF: Profile for me, today’s Sotheby’s buyer. Who is coming in to buy property?
Gibson: We have some of the most high-profile internationally-known names that you would read about in any magazine or financial report.
LuxeSF: But that’s not the sweet spot, is it?
Gibson: As I mentioned earlier, 65% of our deals last year were under a million dollars. But over $5 million, we have about 35% – 40% of the market share in the Bay Area. At the super high-end, the ultra-luxury home buyer segment, we own that.
LuxeSF: Why are you getting so much business under a million dollars?
Gibson: Prices were down last year, so that had some impact. But we’re a full service brokerage. We do everything. Sometimes we’re selling to our clients’ children or grandchildren. They’re buying their first condo for $750,000. There’s a lot of that business as well.
LuxeSF: There’s a lot of money out there from the banks. Why is credit not being used more?
Gibson: There’s the challenge that you’ve got to have the right score. Appropriately, the strictures on it are now tighter. It’s not such a bad thing, but there’s got to be a balance. The pendulum has swung a little bit too far in the other direction, but it will swing back eventually. Even with parties who are buying a property for $5 million cash, we’re often seeing them put a million dollar loan on it two weeks later. Their accountant says, “Listen, let’s get the write-off, and money is so cheap.” We’re seeing record low interest rates in the “3s.”
LuxeSF: What’s the barrier to the freer use of credit right now?
Gibson: There are so many different challenges. One is appraisers. They’re getting tougher. They’re being called out of area. We’re losing deals or having deals go sideways on an appraiser who is coming in from Aptos to appraise a South of Market condominium. He doesn’t even know where South of Market is, much less current comps.
LuxeSF: Are you seeing short sales and foreclosures in this office?
Gibson: We are. They comprised 50% of our deals last year in Sonoma. In San Francisco we are also seeing them, but I’d estimate it’s 10% of our transactions.
LuxeSF: Are you surprised that it’s even that much?
Gibson: No, because, three years ago, there were a lot of investors and home buyers who didn’t have financial depth, so that when the rates changed they couldn’t hold on anymore.
LuxeSF: Let’s pick a manageable number. We have $3 million to invest in real estate. What are the opportunities?
Gibson: Right now prices in Noe Valley are really moving up. One thing we’re seeing a lot of in the last year is a lot of new properties are coming to market. New properties always command a premium, so if prices have dropped 10-15-20 percent and you can pick up a new property today at that discount, you’d be crazy not to take advantage. A lot of smart money is buying that way. Beyond that, units are great. Rents are so out of control right now. People are buying units and immediately becoming cash positive.
LuxeSF: Marketing. Sotheby’s versus the local competition? Your point of difference from a marketing perspective?
Gibson: I think our big marketing advantage is our global reach. We truly are the international brand. When somebody in Lisbon starts looking for a property anywhere in the Bay Area, they’re going to go to sothebysrealty.com. I get emails on a weekly basis from people who are logging onto our website from all over the world looking at the Bay Area.
LuxeSF: If I’m a local seller or local buyer, why do I care?
Gibson: Admittedly, there is a high probability is that a local person is going to be buying your house. But for that other buyer – the transferee from London, the investor from Asia who is trying to get money out of Hong Kong – that person is going to be coming through Sotheby’s, not a smaller, local brokerage.
LuxeSF: Where and how do you focus your marketing dollars, geographically and demographically?
Gibson: The Sotheby’s International Realty brand has an over-arching, huge monetary budget that funds big events, the Cannes Film Festival, the London Olympics for example.
LuxeSF: This office?
Gibson: Locally, we are in all of the local publications – the Nob Hill Gazette, the Chronicle. We have an exclusive relationship with Condé Naste, so we’re in Architectural Digest and Vanity Fair.
LuxeSF: Regional issues of those publications?
Gibson: Yes. The Wall Street Journal and NY Times as well.
LuxeSF: So, one of your key mandates is to grow the business. What’s the strategy for growth? More agents? More expensive listings? More international traffic?
Gibson: It’s all of the above. Obviously, growing the company organically with good agents is a top priority because good agents want to work with good agents. And the amount of business that is transacted between good agents is staggering.
LuxeSF: Are you constantly on the prowl for new agents …proactively or passively? Proactively meaning, “I’m going to knock on his door and put a bug in his ear” versus you getting a phone saying, “I want to talk to you.”
Gibson: Both
LuxeSF: Sources of leads and listings for your agents. Where do they get them?
Gibson: My mantra has always been, “Get the first client. You do an incredible, knock-out job with the client – that client is going to send you the next client; and then you do a great job with that client and so on”. That’s also the best business to have because you’re coming in the door with a recommendation. You’re not out there fighting with everybody else for the client’s attention.
LuxeSF: So it’s primarily a networking strategy…
Gibson: And exceptional service.
LuxeSF: How do you check up on your people to see that they’re networking effectively? Even the experienced ones get stale.
Gibson: Our sales meetings touch on ideas and we host networking events for our agents throughout the year. Sometimes I just ask the question: what are you doing this week to network? Just that thought can spur action.
LuxeSF: Let’s quickly review some strategies. Local PR?
Gibson: We participate in all of the large social events. We recently had a table at the SFMOMA Ball, we sponsor the opening of the Symphony, the opening of the Ballet, etc.
LuxeSF: How many times a week do you go out socially for the business?
Gibson: Probably four or five a week. A lot.
LuxeSF: Web presence, social media?
Gibson: Yes, on many levels.
LuxeSF: Do you have a defined marketing budget for this office which you spend collectively on behalf of the office, and also a separate budget that you co-op with the agents?
Gibson: Yes. It’s a mixed bag, but the agent will contribute on certain spending initiatives.
LuxeSF: Do you have a definable charity that this office is collectively committed to?
Gibson: The agents have a lot of independent relationships, but our over-arching relationship, company-wise, is Conservation International.
LuxeSF: Why?
Gibson: It’s the mother ship of conservation entities. Conservation International has 30 or 40 full-time scientists on staff, but they also fund the World Wildlife Federation. They fund 20 or 30 other well-known conservation entities around the globe. We attended a dinner last month at Gordon Moore’s house down in Woodside, with Harrison Ford and other conservation luminaries. It’s a five-star conservation group. And since we’re a five-star real estate company, it’s an appropriate fit.
LuxeSF: How long do you do this for, and what is completion for you? When will it be time to move on?
Gibson: It’s too early. I have a feeling I’ve just gotten my hands around the reins, so I just don’t know. I’m really enjoying it. At first it was like a tsunami hit me, but now I’m two years in and have some understanding of what I’m doing. I’m running the best real estate office in San Francisco. I feel like the luckiest guy in the world.
LuxeSF: What have you learned about yourself in the two years?
Gibson: That I have more patience than I imagined, and less patience than I thought.