Some of the biggest names in residential real estate traded the boardroom for a drab Manhattan courtroom this week.
The four-day hearing kicked off on Tuesday with testimony from Compass CEO Robert Reffkin on his firm’s lawsuit against Zillow’s rules barring agents from listing homes on the platform that were publicly marketed outside of the MLS.
Compass sued the aggregator in June, seeking to block what it deemed “anticompetitive” policies enacted after the firm rolled out a new marketing strategy, which begins with sellers listing their homes on Compass’ private exclusive listing network.
Joining Reffkin in the courtroom were some of his top New York City agents, including the company’s chief evangelist, Leonard Steinberg, leader of the Litvak Team, Eugene Litvak and Heather Domi, who co-founded the New York Residential Agent Continuum.
Reffkin and his attorneys echoed arguments laid out in court filings, including that Zillow’s updated rules, dubbed the Zillow Ban, were adopted specifically “to quash the threat posted by Compass,” the firm’s lawyer, Kenneth Dintzer, said in court.
The following day, Zillow CEO Jeremy Wacksman, in from the company’s headquarters in Seattle, took the stand, where he pushed back against the notion that Zillow implemented its listing rules to target Compass alone. He also rebuffed Dintzer’s attempts to cast Compass as one of Zillow’s direct competitors.
If you ask the two firms involved, the fight unfolding in court isn’t just a clash of corporate egos. It’s also about the future of how residential agents conduct their business and who gets a hand in the process. (Though what it’s really about is the potential millions of dollars either company could forfeit if the other gets its way.)
Manhattan is a fitting venue for the two companies to duke it out. It’s not just that Compass is headquartered here, but if Reffkin prevails, he’ll also be expanding a home marketing system that already exists, to a certain degree, in New York City and other luxury markets.
The city runs on deals inked off public listing platforms. Earlier this month, a mansion in Gravesend, Brooklyn, sold for $32 million, setting a borough record without ever hitting the open market.
At new developments, developers often start signing contracts for units before any listings ever make it to StreetEasy or Zillow. Take Zeckendorf Development and Atlas Capital’s 80 Clarkson. Rumor has it that a significant share of its condos have already found buyers, yet the sales team hasn’t posted a single listing.
Relying on well-connected agents who facilitate trades for high-profile or high-net-worth clients behind closed doors, the city’s market thrives on relationships and access, and having the right dose of both is how agents prove their value. Reffkin’s vision mirrors this environment: agents working with Compass, soon to be the largest brokerage by far, have access to the most inventory, which they can (and likely already are) leveraging to bring more buyers their way.
Despite the prevalence of off-market deals in the city, most sales are still the result of properties hitting the open market, and it’s likely that will remain the case. Even Compass’ own data shows that most homes marketed as private exclusives ultimately end up on MLSs, and therefore, aggregators like Zillow.
Not so fast…
A New York City-based proptech startup just snagged a fresh venture capital infusion.
Tulu, which allows tenants to rent items such as vacuum cleaners, virtual reality headsets and Play Stations through an artificial intelligence-powered app, closed its Series A funding round with $37 million in investments, including $17 million from GreenSoil PropTech Ventures, Bosch Ventures and New Era Capital Partners.
The fresh round of financing for the startup — which counts among its clients major landlords in the city such as Related, Brookfield and RXR — comes after venture capitalists largely shied away from investing in proptech startups.
Funding for proptechs hit all-time highs in 2021, when investors pumped roughly $9.5 billion into the sector to back ventures such as residential agent back-end service, Place, and data platform, CompStak.
But the rush of capital proved to be overkill. Several once-promising startups were failing or showing major signs of collapse, scaring off venture capitalists looking to throw their weight behind a rising industry. In the first half of 2024, funding for proptechs fell more than 14 percent compared to the same period in 2023, according to data from the Center for Real Estate Technology and Innovation.
But earlier this year, Brendan Wallace, CEO and CIO of venture capital firm Fifth Wall, told The Real Deal that the tide could be turning. He may have cited his own company’s moves as proof — including CBRE’s acquisition of Industrious, a company Wallace backs, in a deal valued at $800 million — but he was firm in his prediction of a “momentum shift.”
NYC Deal of the Week
The priciest deal to hit city records last week was a condo at Extell Development’s 50 West 66th Street. Unit 42E, which has eight bedrooms and eight bathrooms, sold for just under $45 million to a buyer whose identity is shielded by an LLC known as Pipedream 66.
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