Annual Letter to our Clients and Colleagues | December 2021

To our Clients and Colleagues,

This is my second annual letter, written for our clients, partners, loyalists, and fellow agents.  I have only been a CEO for 15 months, but I take great responsibility running an incredibly public, and fast growing, real estate firm.  At this time last year, SERHANT. was in the beginning stages of a disruptive and unique business plan, backed by my own dollars, and about two dozen passionate believers. I wanted to create a profitable real estate ecosystem, mobile first, with an in-house content studio for organic lead generation, creating customer acquisition for our two core businesses: brokerage and education. 

One year later, we have fired on all cylinders, grown our total people base to 150 with expansion plans in place, completed nearly $1.5B in closed transactions in multiple states including many record breaking sales, grown VENTURES (our education platform) to 10,000 enrollees in 109 countries, creating an 8-figure revenue business, and STUDIOS has grown 5x, releasing over 400 short-form videos all promoting our agents’ brands, garnering +50M views across platforms, further proving our top-of-funnel content to commerce strategy. This was made all-the-more real when New York Magazine featured me, and our business, in a stand-alone article at the top of the year - something they’ve never done for a real estate brokerage, ever.

Last year’s letter was somber and optimistic. We had only launched SERHANT. a few months prior, and looking back on that letter, I stand by what I said one year ago in the opening paragraph:

“It is my belief that from crisis comes opportunity and from endurance comes a path forward.”

While it’s hard to believe that we are now nearing the 2-year anniversary of the first US COVID-19 case, the predictions we made about a great economic recovery have mostly come true, albeit not without sacrifice.  Our collective recovery sits on the horizon, yet Omicron and Delta variants remain a concern and inflation is impacting our daily lives.  Also, I want to make sure to thank all of the front-line workers, doctors, nurses, and researchers who have been instrumental in reconstructing a healthy future for us all.

Our success is only a small piece of the pie, and global markets must be understood and dissected in order to develop proper strategy for 2022.  My thoughts and opinions in this letter are my own, and with that said, our SERHANT. family wishes you a healthy and even more successful year ahead.

The Future Impact of Blockchain, Crypto and the Metaverse

Globally, businesses are hyper-focused on the blockchain, NFTs and the concept of Metaverse integration.  Still, there is much criticism and skepticism around these technological advancements.  Regulators and politicians in Washington along with conservative money managers and risk-adverse corporate executives seem less willing to see the potential for value creation.

The market size of cryptocurrency and Blockchain is staggering and is growing exponentially. The cryptocurrency market cap today is $2.2T.  NFTs (non-fungible tokens) will generate ~$20B this year (Loup) but the total addressable market NFTs participate in is over $1T (art, music, sports, gaming, etc).  Bloomberg estimates that the Metaverse was worth $478B in 2020 and is estimated to reach $800B by 2024.  And projections don’t account for a lack of historical context.  In fact, Bloomberg analysts believe that the video gaming space alone could boost the value of the Metaverse 2.7x.  Okay, but what is it?  @meta writes “The metaverse is the next evolution of social connection. It's a collective project that will be created by people all over the world, and open to everyone. You’ll be able to socialize, learn, collaborate and play in ways that go beyond what’s possible today.”

It feels like there is a lack of buy-in around understanding the value in what is new, decentralized, progressive, and unarguably, complex.  We are most threatened by the things we don’t yet appreciate and understand…  Sometimes, the cost of our inability or unwillingness to pivot causes a business or sector irreparable harm. (i.e. Blockbuster Video, blacksmiths, Borders Bookstore, Sears, indoor retail shopping malls and brick and mortar traditional real estate brokerages!).  

There are 15K different tokens across 484 global exchanges.  Bitcoin represents about 40% and Ethereum, 21% of total market cap respectively.  Many of these tokens and platforms will not survive.  In fact, the 15 largest tokens account for 84% of the total cryptocurrency market cap (CoinMarketCap).  To provide some current and potential scale:  The global equity market is valued at ~$97T.  There is $296T of global debt.  The market cap of gold is ~$10T (Bloomberg).  The value of all US residential real estate is $36T.  As the blockchain becomes central to the way we transact and build, there is a massive wallet for capital investment.  

To comment a bit on scale, impact and penetration, the Pew Research Center believes that nearly 90% of Americans have heard of cryptocurrency and 16% say they have invested, traded or used cryptocurrency.  To put this in perspective, Pew polled the market on Bitcoin in 2015, too:  Only 48% of Americans had heard of it and less than 1% had interacted with it!

This year, the mayor of Miami proposed a rule that will allow residents to pay property taxes or city fees with cryptocurrency. Then, a Miami apartment at Arte Surfside sold to an anonymous buyer for $28 million — paid fully in cryptocurrency (Fun fact: we sold the Penthouse for $33M in the same building, albeit in US dollars). This marked the most expensive known residential crypto real estate transaction in the U.S. to date. Our agents are currently working and many wallet-to-wallet crypto transactions now, both in NYC and Florida - a trend you’ll read a lot about in 2022 as wealthy crypto holders look to diversify into hard assets.

Here are some ways we might see the blockchain support the real estate market. Security and speed will enhance the transactional side of deals. Decentralization can reduce liquidity risks and may even begin to even the playing field with large banks. Expensive “middle-person” services could be disintermediated, significantly reducing closing costs. Algorithms will help buyers and sellers combine requirements across legal, documentation and financing. And through tokenization, the real estate blockchain platform can be used to document, store, and verify ownership stakes. The tokens can then be more easily traded, sold, and liquidated. Our technology team at SERHANT. has been working diligently on this front, with more details to come in the new year.

Cryptocurrency, blockchain and the Metaverse all converge on what is referred to as Web 3.0, something we have been slightly obsessed with here at SERHANT., as a mobile-first firm. The below evolution shows the progression from the AOL and Netscape days we all remember but shows amazing potential as we shift from “cloud” and “social” to “AI” and “Decentralized”. Edge computing is a distributed computing construct that brings computation and data storage closer to the sources of data – and that increases bandwidth, response times and speed.

I’m excited to interact with the blockchain and to implement these technologies as SERHANT. grows. There are some really innovative real estate companies and servicers that are already succeeding in leveraging the blockchain. Built-in.com defines this as: “Blockchain’s inherent system of trust makes it the ideal technology for real estate. Real estate companies all over the globe are using blockchain’s smart contracts and ledger abilities to transparently and efficiently facilitate renting, buying, investing and even lending.” For example:

RealT is a fractional real estate investment platform that allows investors around the world to invest in the US real estate market through a fully-compliant, token-based blockchain network.

RealBlocks uses blockchain to create new avenues for real estate investing. Through tokenization, its platform lets investors buy fractional interest rather than entire portfolios or assets.

As a mobile-first real estate firm, in a business that hasn’t always been known for its honesty, I couldn’t be more thrilled to build our company during the birth of Web 3.0. The Metaverse provides the opportunity for uniting our virtual community of salespeople with a virtual culture instead of just content. Cryptocurrency has created the largest wealth transfer of our lifetime, and thus many of our buyers in 2021 have either used those profits to make home purchases or actually transacted in crypto, wallet to wallet.

I see a world very soon in which 50% of all real estate transactions are done with crypto (as I famously told Yahoo! Finance the other day), and where contracts are recorded on the blockchain and “signed” as NFTs. Can you believe that we still sign contracts and transmit them with paper, or via PDF, which anyone can alter and is ripe for fraud? The PDF was invented in 1991 during the first ‘paper to digital’ revolution! It’s been 30 years - it’s about time to innovate!

The SERHANT. Ecosystem

The Entrepreneur always searches for change, responds to it, and exploits it as an opportunity”  
— Steve Jobs

Developing the SERHANT. ecosystem means focusing on integration among our suite of client offerings and using the market knowledge I’ve written about in the above sections to power our engines.  As our business has become a unique thought leader, we remain hyper-focused on thoughtful client-servicing.  We continue to break down industry barriers while providing our clients access to an “experience” instead of just a “transaction.”  Our team believes this adds a totally unique dimension to real estate while increasing customer acquisition and retention.  Our business is built on our client feedback for our client’s successes. 

The SERHANT. business model operates like a “flywheel” and we believe that we invented the first residential  “content to commerce” brokerage house.  A house that is tireless in its effort to innovate, think and reshape residential luxury real estate.  We’ve built a world-class real estate business by creating the intersection of media, education, technology and real estate sales and leasing.  When I started the STUDIOS business, I wanted to leverage our in-house film studio to create content which could drive customer flow.  This model allows for us to develop the brand by encouraging salespeople to take their client relationships to the next level. 
 
I’d like to take some time to discuss the SERHANT. brand business results, accomplishments, and new developments from this past year.  From our BROKERAGE business to STUDIOS, VENTURES, ID LAB, ADX, NEW DEVELOPMENT, RESEARCH and PHILANTHROPY:

BROKERAGE: The SERHANT. executive team started 2021 with a $500M sales target. After several upward adjustments, we are closing the year up +160% with $1.5B in closed transactions while generating a 43% gross profit margin. If we include deals carrying over into 2022, in-contract deals now surpass $2.0B for our first fiscal year as a firm. Our profit margins were attributable to our more efficient “lean” business model, lower overhead costs, and the ability to integrate and monetize new business segments like STUDIOS and VENTURES. We have no debt, and no investors.

We started 2021 with 10 agents and I’m thrilled to report that SERHANT. has now hired over 108 agents all with 5 or more years of luxury sales experience. This far surpassed my goal of adding 50 new agents this year, and I must give credit not only to the buzz surrounding our firm, but also to our Director of Agent Operations, Scott Hill. My commitment isn’t to building the largest agent count - it’s to building the greatest, most respected, and successful agent roster in the country, and helping those agents grow their own brands. We’ve grown our talent by 10x and we’ll continue to grow headcount based on performance and market conditions. Most impressively, all agent hires had a minimum of $500K in gross commissionable income (GCI). As the market rebounded, we added more talent from competitors. We were able to onboard Loy Carlos from Corcoran, Chase Landow from Elliman, acquire The Tricia Lee Team from Compass, Sara Gore and several other strategic hires.

We commenced the year with our sale of 535 North County Road in Palm Beach, FL for $122.7M, closing the most expensive home ever sold in the state of Florida and fulfilling my own prophecy that I would one day start my own firm and sell a home for over $100M. I know I noted this deal earlier in this letter, but I believe it’s important enough to mention it twice. Just prior, we sold the Penthouse at Arte Surfside in Miami for $33M, a record price for Surfside. In March, we completed the first resale at 220 Central Park South (NYC) for $33M, representing a record purchase price per/sq. ft (PPSF) of over $10,100 since the beginning of the pandemic.

In June, we sold 12088 Banyan in Palm Beach for $40M right before opening the highly anticipated SERHANT. House at 372 West Broadway. Our “house” was featured in Architectural Digest, amongst other publications, and it creates the first “real estate ecosystem” club and content house. Our clients and vendors and course members are using it and our agents absolutely love it as a marketing, sales, and social tool. Come say Hi, and keep your eyes open for new future SERHANT. House openings this coming year.

SERHANT. Signature, our Private Client division for buyers and sellers in the $10M+ bracket, has far exceeded expectations. In July, we listed the Penthouse at 432 Park Avenue (NYC) for $169M, the most expensive active listing in New York City history. All $10M+ transactions and listings are done through the guidance of Signature, with extra care and concierge service. From the listing of 24 West 10th on Manhattan’s Gold Coast for $28M to orchestrating the $33M sale of the two top floors of Robert AM Stern’s 150 East 78th in a custom combination, to listing nearly 50 other $10M+ homes, our Private Client team has carved a sizeable piece of the luxury pie in a very short period of time.

STUDIOS: Our business is able to build and monetize original entertainment production capabilities to connect buyers, sellers, and developers. The business unit is having a strong year of growth bolstered by the hiring of Cody D'Ambrosio, formerly of Buzzfeed (content lead), to Head our STUDIOS business. The team has grown 5x to 15, and is producing 16 original digital shows on our LISTED network, and has created 400 unique video assets and content, providing SERHANT. agents with consistent lead flow and unparalleled exposure to buyers, sellers and developers. Supported largely by growth in STUDIOS, we also have increased our social following to 4.3M followers and subscribers.

I am excited to report that we hired James Rockford to lead our New Development Films Division. The acquisition’s impact was felt immediately with successful films produced for Quay Tower (Brooklyn), Jolie (NYC) and the award-winning marketing campaign for The Library at 61 Rivington (NYC), which won “Best Sales & Marketing Campaign for a Luxury Development” at the 2021 Inman Golden I Awards, crediting STUDIOS and ID Lab for their accomplishment.

I’m very pleased by the achievements of our STUDIOS team during 2021 and expect its success to accelerate in 2022. Year over year, we saw a 54% increase in average monthly engagements and a 510% increase in monthly video views. In addition, we were honored to produce a nationally televised commercial for real estate developer Extell. On the brand sponsorship side, we secured our largest programs to date with Dell and Facebook.

We will expand all content products for marketing, especially as we support new developer / development projects and partnerships. During 2021, the marketplace has learned a lot about our STUDIOS business, and its power to generate business. Our focus on strategic talent acquisition supported by strong market demand for high quality media content has us favorably positioned to capitalize on opportunities as the go-to choice in 2022.

VENTURES: Our EdTech business had a very successful 2021 highlighted by the late Fall release of our 4th course, “How to Build Your Personal Brand”, our biggest course launch to date. Led by Kyle Scott, we grew our VENTURES team by 400% and enrollments were strong, growing by 100% YOY. VENTURES continues to post phenomenal results with our 2021 gross profit margin at 85%. Our team grew by 9, we added two courses, and revenue growth exceeded our forecasts at +120%. We’ve also seen great referral business from course members to SERHANT. agents, and vice versa. In 2022, we’ll continue to expand our publishing strategy cross-platform in order to increase attractive content packaging for brand partners. I am excited to announce that Glynis O'Leary from REBNY was hired by SERHANT. VENTURES as our Director of Education. Her ability to lead our course curriculums will help bring our student salesperson programs to the next level.

VENTURES prides itself on its ability to pivot based on real-time feedback from our students, instructors and content designers. Our programs and courses are stronger than ever and we just launched our ambassador program for the “real-time” integration of realtor communications. The program is a “boots-on-the-ground” initiative measuring the national agent community and supported by continuous two-way dialogue. Future offerings in VENTURES will include expanding our courses into new real estate content verticals and offering coaching and consulting programs. Our growth plan will develop a dynamic and engaging curriculum that will serve professional salespersons outside of the real estate industry, which is very exciting.

NEW DEVELOPMENT: Growth at SERHANT. was also driven by our success in identifying new business opportunities and collaborating with our world class architects and developers. In 2021, led by Jennifer Alese, we signed 15 new development projects representing $6B in inventory while growing the team’s capacities to include in-house project management and research services. When combined with the talents and resources of ID LAB, led by Kristen Kipilla, we are well positioned to manage new development project lifecycles from initial creative to final sellout.

Some highlights include launching RAL and Vanke’s Quay Tower in Brooklyn Heights ($500M sellout), and quickly breaking the record for the most expensive residential property sold in Brooklyn this year for $11M. We also launched sales at Trinity Holding’s Jolie, at 77 Greenwich Street in lower Manhattan ($300M sellout), and sold over 100 units at Extell’s Brooklyn Point ($800M sellout). One of our largest new development projects will be announced, and launched, in just a few weeks!

ID LAB is SERHANT.’s strategic sales ideation and creative workshop. It generates compelling communication products for new developments through an integrative and creative client experience. By leveraging SERHANT. and our STUDIOS resources, we’re set up to disrupt markets through offering design, production, and technological services. In 2021, we doubled our team and branded/launched 10 new developments. The Library was awarded “Best Marketing Campaign for a New Development” from INMAN. The property was 95% sold in just 5 months.

Our team creates high impact campaigns through ID LAB that allow us to capture more deal flow and more favorable client economic outcomes. We are especially proud of our work on fully branding and creating all marketing materials in-house for Jolie, The Library, The Melrose, 11 Greene, Huxley and redesigning and launching the website for Quay Tower. SERHANT. is honored to work with Wonder Works, our developer of Huxley, as our teams jointly donate $101,000 (a portion of all sales commissions earned) back to the local community.

ID LAB momentum will carry over into 2022 supported by an active pipeline of events. We will soon launch a new marketing platform for agents and are projected to triple our branded template resources for our agents in all market centers. We will brand 10+ agent teams and commit to branding and launching 18 new developments with a healthy pipeline of 6+ properties slated for 2022. In the coming months, our branded apparel line will expand and we will feature some very cool exclusive brand “drops”. Storefront x SERHANT. will soon open, featuring interactive content through state-of-the-art AI video technology in our windows. There are no cubicles at S. House - the building will literally interact with people on the streets of SoHo!

ADX (Amplification Data Exchange): the SERHANT. tech team, led by Ryan Coyne, had a strong 2021 growing product and technology infrastructure. We developed and launched a mobile-first company intranet that quickly achieved a 94% adoption rate among agents and staff. Our company is now able to perform all work on any device to bring our “office” into the “field” to better serve our clients. We won’t shy away from technological investment and we hired a talented full-stack developer who will help transition our business through a decentralized peer-to-peer Web3 migration. More to come on this in the months ahead so as not to ruin the surprise : - )

Our RESEARCH:

Our RESEARCH desk, led by Garrett Derderian, provides clients with a full suite of products developed in-house with support from top economists, consultants, teachers and databases. Drawing on large repositories of SERHANT. in-house market intelligence and industry partnerships, we can offer our team and clients on demand access to proprietary research solutions. RESEARCH outputs can be filtered and created custom to bespoke output requirements. Our team can also offer access to a suite of in-depth market studies and literature tailored to client’s objectives and areas of interest. And make sure to watch Garrett’s weekly market report, The Scoop, airing each Tuesday on the @serhant Instagram channel.

The RESEARCH team maintains a comprehensive list of market reports covering Manhattan, Brooklyn, Queens, New Developments, the Signature market ($10M+), and South Florida. Our research, commentary, and media is frequently quoted across national and international outlets. We provide market data and recommendations from pre-development through the final sellout stage. This includes everything from unit mix recommendations, layouts, stacking plans, pricing, and optimal release schedule.

Our ENTERTAINMENT:

This year has brought out many achievements as we’ve built the foundation of our brand.  My second book, Big Money Energy, was released in February and became an international best seller after I taped the physical book to my hand in a 30-day marketing stunt.  Hachette, the publisher, signed me to a large 3rd book deal shortly thereafter. The BME Podcast with iHeart Radio dropped this Spring, with some incredible guests, and our 2nd season is currently underway (you can listen to episodes anywhere you get your podcasts).  The 9th Season of MILLION DOLLAR LISTING NEW YORK aired on BRAVO, and my 3rd spin-off show, RYAN’S RENOVATION, premiered over the summer. Lastly, Listed, our digital real estate network, hosted on YouTube, will premiere new shows this January.  The STUDIOS team has 16 shows in the works, so get excited!

Our PHILANTHROPY:

In addition to supporting our initiative at the Huxley, we have increased our philanthropic endeavors on a national and local community basis.  This year I had the honor to become the national ambassador to the “Real Men Wear Pink” campaign for the American Cancer Society.  We beat our $75K fundraising target, raising over $216K!  I know many reading this letter participated in supporting SERHANT. and for that, I sincerely thank you.  Our team continues to support food initiatives at City Harvest, as well as children and families in hospitals through Project Sunshine.  I also provided free access to the Sell it Like Serhant real estate course for all US Military Veterans interested in participating.  Throughout January we will meet and finalize our 2022 “Philanthropy Plan” so please be on the lookout for some really exciting events and programs!

“There are risks and costs to action.  But they are far less than the long range risks of comfortable inaction.”
— John F. Kennedy