Posted on: Friday, March 26, 2004
Realty firms maintain local feel amid consolidation drive
By Mary Umberger
Chicago Tribune
CHICAGO — Cendant Corp. is the biggest company you've probably never heard of. Even its executives acknowledge that.
But the average consumer will recognize the names of some of its real estate businesses — Coldwell Banker, Century 21, ERA.
The three "brands" were collectively involved in one-quarter of the nation's agent-assisted home sales in 2003, a record year when 6.1 million existing homes changed hands, according to the New York-based corporation.
If you've refinanced recently, your loan might have been handled by Cendant Mortgage, even if you didn't realize it. That's because in addition to being a consumer-based mortgage company (the nation's 10th largest), Cendant handles the loan operations of Merrill Lynch, Charles Schwab and American Express. One of its two dozen title companies may have processed your closing.
"There wants to be one god in real estate, and that's Cendant," jokes James Kinney, president of Rubloff Residential Real Estate. Kinney heads a venerable Chicago firm that has remained independent through a decade-long tide of consolidation in the residential real estate industry.
Whether by acquisition, franchise affiliation or licensing agreements, "brand name" national realty companies are involved in about half of all home sales that use real estate agents, according to Steve Murray, an industry consultant in Littleton, Colo. It's a remarkable change, one that some critics view as "Wal-Martization" of a traditionally local business.
But in a departure from the saga of big-box retailers that squeeze out their little-guy competitors and up-end the local business landscape, real estate consumers may not be particularly affected by such consolidation, at least for a while.
For one thing, consumers don't seem to be particularly "brand-driven" when it comes time to buy or sell a house. And for another thing, the little-guy real estate companies are not only alive, they appear to be kicking.
"The small, independent companies, the one- or two-office operations, they're doing well," says Chris Eigel, president of a company that joined the ranks of the brand-name "nationals" when his family's sizable Koenig & Strey realty firm was acquired in 1999 by GMAC Home Services, an arm of General Motors Corp. Koenig & Strey GMAC went on to acquire Seery & Keim Real Estate, west Chicago suburban company.
Cendant competes with Re/Max, Realty Executives, Prudential, GMAC, Keller-Williams, and HomeServices of America (the latter an affiliate of Warren Buffett's Berkshire Hathaway Corp.) and another handful of companies that are major regional players. But it is the industry's undeniable leader, having acquired about 50 real estate businesses a year since the late 1990s.
Still, Cendant executives recognize the strength of local brand-name identities.
"Our company isn't national in scope," said Mark Panus, vice president for communications and public affairs for Cendant Real Estate Services. "Real estate is inherently a local business. (The Cendant companies) aren't making blanket decisions at their national headquarters that what works in Chicago must be applied in San Francisco. You've got company presidents with local responsibility for their operations."
In all, Cendant franchises or corporately owned realty firms account for 263,000 sales associates in 12,800 offices. Revenue for the real estate operations was $1.6 billion in 2003. Its stock is traded on the New York Stock Exchange.
Cendant also has travel-oriented holdings that include Budget and Avis car-rental firms and such hotel brands as Howard Johnson, Ramada Inn and Days Inn.
Panus sees all this as an asset for consumers and franchisers. "You've got the resources of a very strong Wall Street company," he says. "You've got a leading company behind all of these brands. The brands have the autonomy and are operating their own businesses."
"We're in a brand world, and Cendant is about brand," says Stephen Baird, president of Chicago's Baird & Warner. "They're going to be successful and they're going to be around for a while."
But Baird states that it will be without help from him, as he continues to turn away suitors who have approached his 149-year-old firm. Owners of other large independents echo his views.
"In a backwards kind of way, I like Cendant," Baird says.
"They've taken a lot of my competitors and made them less competitive.
"I'd much rather compete against Coldwell Banker and Cendant than with individual guys who are driving the market; they're much stronger competition. Cendant doesn't have anything on me. I have capital, and I have market position."
