Hanna Commercial Real Estate, the Cleveland commercial brokerage belonging to Pittsburgh-based Howard Hanna Real Estate Services, is taking a page from its corporate parent’s playbook and entering business brokerage.
It’s a natural move for the Howard Hanna empire that offers homebuyers one-stop shopping for related services typically provided by third parties. The company not only includes its household-name residential brokerage but offers services from lending, title and escrow to insurance services. That provides opportunities for cross-selling and additional profit centers from peddling properties.
And in typical Hanna fashion, it’s jumping into business brokerage by acquisition. In this case, it bought Clifton Capital, a business sales firm operated by Tom Jelepis, a high-profile commercial real estate professional, and business partner Dennis Dunn.
Mac Biggar, president of Hanna Commercial, said in a video interview that the move “checked a lot of boxes” for an ancillary business the commercial brokerage has long wanted to pursue, also a new endeavor for Howard Hanna.
“In our experience, it’s very common for business owners to have specific needs in both real estate and business planning,” Biggar said. “Now, with our expanded services, Hanna Commercial will be able to better support business owners and help them make the connections and plans they need to succeed.”
Biggar said Hanna Commercial sees it as another step in building a full-service organization that can benefit from Howard Hanna’s network and wide geographic reach.
“We run across a lot of businesses that may want to sell the real estate as well as the business that goes with it,” he said.
Conversely, Jelepis said on the same video call, Clifton thinks there are advantages to associating with Hanna Commercial because of the 13,000-agent reach of Howard Hanna.
Jelepis said venturing into business brokerage, where he received professional certification, was like an additional education.
“(Dunn) and I have both sold businesses and know what it takes to sell a business, which is different than selling a building,” he said.
Jelepis previously launched Bass Real Estate and sold it to Coldwell Banker Commercial before going into business sales. Dunn operated and sold Garden Food Services, a Middleburg Heights food vending business he expanded into a coffee service for companies.
While business brokerage is commission-based like realty brokerage, it requires the ability to assess the intangible assets of the business itself, profit and loss statements, and analyzing a company’s growth potential.
“We do an analysis ourself to see if there is a business there that’s marketable,” and then bring in accountants and other experts to fully assess the value of the business, Dunn said.
Hanna Business Brokers will provide that service at no cost because it will be compensated by its sales fee, Biggar said, while larger merger and acquisition shops may charge $50,000 for such a service.
“This is like the other things Howard Hanna has done,” Biggar said. “We find people with the right skills and experience. We will put money into it to market it and build the business over time.”
Prospective clients are small businesses, which Biggar and Jelepis describe as those with sales of $250,000 to $10 million. Typically investment bankers who provide such services pursue larger prospects with sales of more than $10 million.
There are additional opportunities now, Jelepis said, because of the challenge that the pandemic has posed for businesses, rattling some such as restaurants to the core but aiding others such as medical supplies providers.
Jelepis, who was formerly the mayor of Bay Village, said he undertakes the challenging situation as providing a passionate purpose because the retirement plans of many business-owning baby boomers have been put at risk by the recession.
While going into business brokerage is rare for commercial firms, it often is an area that residential agents pursue as an allied sale.
Barry Berkowitz, chair of the board of governors of the Independent Business Brokerage Association trade group based in Independence, said in a phone interview that more residential brokers have gotten into business sales since the end of the Great Recession. Most have not fared well because it requires financial acumen, although it is likely a good fit for a commercial brokerage due to synergy.
The president of Berkowitz Acquisitions of Boynton Beach, Fla., said he also holds a real estate license for the same reason. He said he has found that more real estate companies are moving into business brokerage than in the past, but some fail if the principals do not have adequate experience dealing with business issues.
“You can have two Subway franchises a few miles apart,” Berkowitz said, “but understanding each one and how it functions can be quite different. We’ve got to worry about licenses, lawsuits and is the income they are reporting real? Did they really file that tax return? With a business, it’s all under the covers.”