Business Management Executive Q&A
Oct 1, 2007
Frankfort, KY—Commercial real estate sales should increase in Kentucky, thanks to the national exposure that is following a federal judge’s ruling that the state’s “turf law” was unconstitutional, according to Harvey Green, chairman & CEO of Marcus & Millichap Real Estate Investment Services Inc. The national brokerage firm filed a lawsuit in the U.S. District Court for the Western District of Kentucky last year alleging that Kentucky’s law, which required brokers to be licensed in Kentucky to operate there, harmed consumers by blocking access to the national market and possibly depressing real estate prices. Judge Charles Simpson III recently ruled that the law prohibited cooperation with out-of-state brokers, unconstitutionally constraining interstate commerce. Green spoke with contributing editor Gail Kalinoski about the ruling and its implications for the national commercial real estate market.
CPN: Why was it important to file the lawsuit in Kentucky?
Green: Kentucky was one of the turf states in which the real estate commission was unwilling to reconsider changing the way they were enforcing their laws. The only option they left us with was filing a lawsuit to rectify it.
CPN: Have you taken or have you considered taking legal action against any of the seven other turf states: Nebraska, New Hampshire, New Jersey, Oklahoma, Pennsylvania, Missouri and Utah?
Green: We’re not involved in any other legal action. We’re hoping the other turf states are watching what happened in Kentucky and will of their own volition make changes without having to be involved in any legal action.
CPN: Do you anticipate more national firms increasing their activity in Kentucky? Do you expect local firms there to seek national partners?
Green: The ruling allows brokers to promote Kentucky properties to investors nationally, which should result in more activity. With the ruling, national firms will be less dependent on small local firms from a licensing point of view, but their local knowledge is still very valuable and should result in a fair amount of cooperation.
CPN: What will the impact be on smaller brokerage firms? Will it differ from the impact on large firms like Marcus & Millichap?
Green: The increased exposure to national investors will benefit Kentucky owners in terms of buyer interest and, therefore, values. On the positive side, local brokerages with strong relationships will be able to leverage that. It’s a win-win for both types of brokerages, but mostly for investors.
CPN: Does this ruling help REITs?
Green: The impact goes beyond Kentucky in that it sets a precedent for other turf states. Because most REITs have multi-market portfolios, an open market expands their investment choices.
CPN: You have talked about working on the “portability of licenses on a national level.” How can your firm and the industry could lobby for such a measure?
Green: This has been an issue for many years, along with the turf state laws. It’s our responsibility to inform lawmakers of the changing real estate industry, especially given the impact of technology, as related to license portability. The ruling will clearly help us in this process.
Frankfort, KY—Commercial real estate sales should increase in Kentucky, thanks to the national exposure that is following a federal judge’s ruling that the state’s “turf law” was unconstitutional, according to Harvey Green, chairman & CEO of Marcus & Millichap Real Estate Investment Services Inc. The national brokerage firm filed a lawsuit in the U.S. District Court for the Western District of Kentucky last year alleging that Kentucky’s law, which required brokers to be licensed in Kentucky to operate there, harmed consumers by blocking access to the national market and possibly depressing real estate prices. Judge Charles Simpson III recently ruled that the law prohibited cooperation with out-of-state brokers, unconstitutionally constraining interstate commerce. Green spoke with contributing editor Gail Kalinoski about the ruling and its implications for the national commercial real estate market.
CPN: Why was it important to file the lawsuit in Kentucky?
Green: Kentucky was one of the turf states in which the real estate commission was unwilling to reconsider changing the way they were enforcing their laws. The only option they left us with was filing a lawsuit to rectify it.
CPN: Have you taken or have you considered taking legal action against any of the seven other turf states: Nebraska, New Hampshire, New Jersey, Oklahoma, Pennsylvania, Missouri and Utah?
Green: We’re not involved in any other legal action. We’re hoping the other turf states are watching what happened in Kentucky and will of their own volition make changes without having to be involved in any legal action.
CPN: Do you anticipate more national firms increasing their activity in Kentucky? Do you expect local firms there to seek national partners?
Green: The ruling allows brokers to promote Kentucky properties to investors nationally, which should result in more activity. With the ruling, national firms will be less dependent on small local firms from a licensing point of view, but their local knowledge is still very valuable and should result in a fair amount of cooperation.
CPN: What will the impact be on smaller brokerage firms? Will it differ from the impact on large firms like Marcus & Millichap?
Green: The increased exposure to national investors will benefit Kentucky owners in terms of buyer interest and, therefore, values. On the positive side, local brokerages with strong relationships will be able to leverage that. It’s a win-win for both types of brokerages, but mostly for investors.
CPN: Does this ruling help REITs?
Green: The impact goes beyond Kentucky in that it sets a precedent for other turf states. Because most REITs have multi-market portfolios, an open market expands their investment choices.
CPN: You have talked about working on the “portability of licenses on a national level.” How can your firm and the industry could lobby for such a measure?
Green: This has been an issue for many years, along with the turf state laws. It’s our responsibility to inform lawmakers of the changing real estate industry, especially given the impact of technology, as related to license portability. The ruling will clearly help us in this process.
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