Dealing’s Done At Charles Dunn

It felt more “trick” than “treat.” In a dramatic Halloween morning memo to staff and agents, Charles Dunn Co. Inc. announced that the company’s brokerage business was closing suddenly the next day. The firm, which is based in downtown Los Angeles and, until this year, had offices in Glendale, Sherman Oaks and Century City, will continue operations of Charles Dunn Real Estate Services property management group. However, the firm’s Valley-active brokerage side has gone dark. “With a heavy heart, we will close the current operations of Charles Dunn Company Inc. effective Thursday, Nov. 1, 2018,” wrote Charles Dunn Co. Chief Operating Officer Patrick Conn in the memo. According to the chief’s memo, Charles Dunn’s focus moving forward was on closing out current transactions and completing existing listing assignments, with an embargo on new accounts. Conn did not respond to the Business Journal’s requests for an interview. However, according to conversations with several current and former employees of Charles Dunn, the owners, who bought the company more than 10 years ago, understood the relatively stable property management business but never fully got the boom-and-bust commission-based brokerage side. The memo said the brokerage lacked a sustainable business plan as well as “dedicated leadership.” The brokerage side apparently suffered a decline in business, and the memo said owners had tried to sell the division for up to a year, without success. Still, the abrupt closing came as a shock. Stacy Vierheilig-Fraser, a longtime broker in Sherman Oaks who specializes in office deals, was blindsided by the Oct. 31 memo. Vierheilig-Fraser said she and other agents and employees had no reason to suspect such a memo was imminent or that the brokerage side had become unsustainable. “I had to figure out what the heck was going on,” she said. “Unfortunately, it hit the press so fast that I was bombarded.” Vierheilig-Fraser, who was still employed at Charles Dunn as of last week, admitted she’s not yet sure how things will play out after mid-November. “I’ve worked here since I was a child; I’m the longest person who has worked here,” said Vierheilig-Fraser, who has been with the company for 30 years and whose father Ed Vierheilig, who passed away in 2015, worked at the firm when it was run by the Dunn family. Longtime Charles Dunn Glendale office manager William Boyd, now heading Kidder Mathews’ new Glendale office, and partner Linda Lee, who had worked with Boyd at Charles Dunn, both expressed surprise and sadness over the brokerage’s abrupt dissolution. “We appreciated our time there,” Boyd said. “But an announcement this sudden, with no advance notice, is a horrible punch to the stomach for the brokers and salaried staff.” Boyd and his team had defected from Charles Dunn before the implosion to open the Kidder Mathews office Oct. 15. Following their departure, Charles Dunn did not maintain a Glendale office. Management troubles According to the Business Journal’s list of commercial real estate brokerage firms published in the Oct. 1 issue, Charles Dunn had the 17th largest brokerage business in the Valley area, ranked by sales and leases in the Valley area. However, the firm reported a 20 percent drop in Valley-area deal volume, going from $102 million to $80 million from 2016 through 2017. Charles Dunn reported 45 people in its brokerage stable. Sources confirmed that the company had about 30 or so brokers and 15 or so staff, all of whom stand to be affected by the division’s sudden death. Conn said in his memo that directors concluded that it was in the company’s best interest to cease operation “before we incur further expenses and potential losses… “As some of you may know, over the past year we have explored various options to ensure the stability and future growth of Charles Dunn Company Inc.,” Conn continued. “This included a possible sale of the firm. Despite our diligent efforts, we were unable to find viable options and we have also come to the realization that a sale of the company will not occur as we had hoped. We believe it’s unfair to all of you to continue operating the company without a sustainable business plan and dedicated leadership.” Several familiar with Charles Dunn’s operations traced the brokerage’s implosion to the company’s top brass, who know about property management – keeping real estate holdings maintained and leased up – than the sales-oriented brokerage business, which calls for landing and serving clients. Fred Sheriff, a realtor who had been at Charles Dunn for 15 years until 2016: “The issue and the resulting fate of the company lies with the ownership. There were probably 10 presidents in the 15 years I was there, many of whom were fine people.” Sheriff said: “For the Conns to say (in Patrick Conn’s memo) there is no business plan or dedicated leadership should be directed to them.” In February 2017, veteran broker Craig Stevens and his son, Clay Stevens, joined Charles Dunn’s office in Century City to expand its investment sales expertise. Craig Stevens, who previously worked at a Keller-Williams agency, initially saw this as a ripe opportunity to work alongside his son. “That’s one reason I came aboard,” Craig Stevens said. It didn’t end well. In less than a year, both Stevenses bolted from the company. With four decades of experience, Craig Stevens, one of the original founders of Lee & Associates, specialized in representing investors in the acquisition and disposition of commercial real estate. But “Charles Dunn was probably a terrible fit for me,” Stevens admitted. He said he has never seen anything like the sudden demise of the firm’s brokerage side. Sheriff, who is now deputy director at the Gazarian Real Estate Center at California State University – Fresno Craig School of Business, spent 15 years at Charles Dunn’s Century City and downtown L.A. offices. He remembers a parade of company presidents and believes the firm must have gone through 10 brokerage presidents during his time there. By the 2000s, the company changed hands from the Dunn family to the Conns, led by Walter Conn Sr. and son Patrick and daughter Eilene. Stevens recalled an old rule of thumb: “Property managers don’t make good brokers.” The historically volatile brokerage business requires a different temperament from the stable revenue streams of property management. “It’s a different business,” Stevens said. “(Property management) is consistent where brokerages, it’s up and down; you can’t manage cash flow … When times were good, they were happy, in a slow month, they were unhappy.” Stevens noted that even before his arrival, the company had a reputation of discarding presidents. “It was probably the worst company I’ve ever been at based on management, not because of the agents,” he added. Sheriff said that during his time, the number of brokers plunged roughly by half from 120 to 50 agents, which should have been an indicator of management difficulties. The company also shed several offices, including in Orange County and the South Bay, he said. Glendale switch A big blow came in early October with the high-profile departure of the firm’s Glendale-based broker Boyd after his team jumped ship to Kidder Mathews. “Bill made a lot of money his last year or two at Charles Dunn, but it was not because of Charles Dunn, it was because of Bill Boyd,” Stevens said. “He’s a very well-known and respected broker.” While at Charles Dunn, Boyd and company had been a prolific mover of large building sales and leases. Last year, the team sold the Doheny Eye Institute headquarters building to University of Southern California for $110 million, as well as handling Doheny Eye Institute’s $50 million purchase of the 115,000-square-foot former Avery Dennison headquarters building in Pasadena. Boyd’s office-sector transactions for Charles Dunn over the years have also included cementing leases in excess of 100,000 square feet with such locally based international companies as Walt Disney Co., Princess Cruises and Warner Bros. A major question when a brokerage closes or agents switch companies is the disposition of clients and transactions. For example, Boyd’s team recently took the assignment to lease remodeled office space at the Northridge Fashion Center. That listing was terminated at Charles Dunn but the brokers now at Kidder Mathews will continue to follow up on this lease for Brookfield Property Partners, the indoor mall’s parent company. “The client is hiring the agent and not the company,” Boyd explained. “The former firm is perhaps disappointed, but the industry understands that agents are independent contractors.”