Brokerage Benefits Part of the problem with being a third-party manager is that you work hard to turn a property around and meet the requirements of an owner, and then all of a sudden the building is sold and you are left with nothing, says Stan Harrelson, president and CEO of Pinnacle Realty Management Co. That’s why Pinnacle formed a brokerage division in 1994. Pinnacle no longer wanted to be in the position where “the building [suddenly] goes away and the broker sends you a fruit basket. We decided that there was room for us to insert ourselves into a brokerage position, but on a niche basis.”
About 50 percent of Pinnacle’s brokerage business is with existing clients. “Our brokerage group is there to help clients expand their portfolio or dispose of some properties,” says Scott F. Mencaccy, Pinnacle’s regional president for the West. “We like to think of ourselves as a critical part of the investment strategy. We have the capacity to know exactly what is going on in all markets of the country.”
Not to mention that property management and brokerage work hand-in-hand, adds Harrelson. “Our brokers are not the used-car variety. We are very selective about who we bring on as brokers, because they are dealing with our clients on the management side. If [our brokers] abuse the relationship it will hurt us in [our] core business,” he says.
At Pinnacle, brokers are required to bring property managers into a listing. Instead of creating a situation where managers are disenfranchised because they will lose their management fee, the managers work with the brokers, because they know they will get a percentage of the transaction fee if the property sells.
When a broker shows a client a potential property to purchase, the first thing the client wants to know is what the management people think, explains Harrelson. “Property managers get involved and help to underwrite, do the due diligence and so forth,” he says.
“We wanted to have very meaningful relationships with a group of clients who would look to us when they were ready to make a buy or sell decision,” says Harrelson. “That’s not only rewarding from a business standpoint, but also you get some great relationship opportunities there, and you become part of the clients’ extended team.”