Mariwyn Evans writes about commercial real estate for REALTOR® Magazine. You can reach her at firstname.lastname@example.org.
Top 100 Companies: A Step Ahead
Introducing 2004's top 100 companies list
July 1, 2004
The desire to grow is fundamental to the American experience. From the Trans-continental Railroad, which opened the West to expansion, to the development of the suburbs after World War II, this country has achieved its greatness in part because of its unwillingness to accept the status quo. The companies that stay a step ahead in real estate reflect that growth ethic.
To make REALTOR® Magazine’s “Top 100 Companies” list by transaction sides, a company needed to close 5,153 sides in 2003. That’s up from 4,872 sides last year. On the sales volume list, the No. 100 company had $1.26 billion in closed sales in 2003; $1.04 billion made the cut on last year’s list.
That kind of growth doesn’t happen by accident. Often, it’s the result of mergers. In the 2003 NATIONAL ASSOCIATION OF REALTORS®Member Profile, 14 percent of REALTORS® reported that they worked for a company that had merged or been acquired between January 2001 and January 2003. Last year saw many notable mergers, including
- The acquisition of Kentucky’s Rector-Hayden, Nebraska’s HOME Real Estate, and Florida’s Esslinger-Wooten-Maxwell, REALTORS®, by HomeServices of America
- The purchase of Fred Sands Desert Realty of Palm Springs, Calif., Coldwell Banker Sammis of Huntington, N.Y., and National Homefinders Signature Properties of Ronkonkoma, N.Y., by NRT
- The merger of several RE/MAX companies in the Washington, D.C., metro area to form RE/MAX Allegiance
- The marriage of Howard Hanna Real Estate Services, Pittsburgh, with Smythe, Cramer Co., Cleveland
- The acquisition of Douglas Elliman, New York, by Prudential Long Island Realty
- Sotheby’s International Realty’s buy of Jackson Hole (Wyo.) Realty (Sotheby’s itself was acquired by NRT in 2004.)
Activity in the acquisition arena is likely to continue apace or even heat up, predicts Scott Hileman, national director of real estate business transformation for Ernst & Young. “We’re near the peak of the residential market cycle, so brokerages that want to maximize their company sales price are getting more serious. We’re seeing a lot of tire-kicking among buyers and a lot of clients asking us for state-of-the-market studies.”
Hileman expects continued consolidation among both national and large regional companies. “The big guys have to justify their existence by continuing to grow,” he says.
Of course, growth isn’t always dependent on acquisition. The stories that follow show how “Top 100” brokers are using a variety of methods, from aggressive recruiting to sales associate support and coaching, to achieve their growth vision.
Still a local business
NRT Incorporated, Parsippany, N.J.; www.nrtinc.com
In real estate, it doesn’t get any bigger than NRT Incorporated. With its 950 offices and 55,500 sales associates operating in more than 30 metropolitan markets in 2003, the Cendant-owned real estate brokerage operation represents one of the few completely national real estate companies. Size offers many benefits: purchasing power, cutting-edge technology, marketing resources. But it also creates the challenge of how to make the best day-to-day decisions in such varied markets.
“A large company has more difficulty maintaining local expertise and staying in contact with workers as it expands,” says Randy I. Anderson, William Newman Chair at Baruch College of the City University of New York.
When conducting research into the efficiency of residential brokerage companies during the 1990s, Anderson and his colleagues found that although some of the benefits of size become greater as a company grows, at some point large companies have to add more levels of management infrastructure to maintain efficiency.
That’s just what NRT did. NRT President and CEO Bob Becker first sensed the need for realignment close to home in New Jersey. “I wanted our leadership to get in front of our associates more often so we could obtain feedback,” recalls Becker.
Three years ago, with fast-growing regions such as California, New England, and Florida ever expanding, NRT decided to reconfigure these top performers into smaller units and place a president over each. “These are large geographic areas and the demands of one market may be dramatically different from those of another in the same state,” explains Becker. The goal, he says, was to ensure that each company’s leadership could keep decision-making local and maintain personal relationships with brokers and sales associates. NRT now has six presidents who oversee operating companies in Florida, three in California, and two in New England. Local presidents have authority over their companies’ operating decisions, such as hiring, marketing, and budgeting.
“In some ways it was contrary to today’s general business practices of cutting costs and eliminating positions,” says Becker, “but we felt that, as we grew, nothing was more important than staying close to the associates and to the homebuyers in local markets.”
Although there are no specific criteria for how big is too big, when a company reaches between $300 million and $500 million in gross commission income, it may be time to consider dividing it, says Becker. Geography and the different demands of each market also contribute to the decision.
NRT offices within a region continue to share back-office and support services, such as accounting, as well as offering relocation, mortgage, and title services through their affiliated companies. NRT regional senior vice presidents oversee an average of seven companies in each region and are responsible for helping company presidents grow their companies.
An extra benefit of creating more company units is the chance to promote top performers like Scott Gibson, says Becker. Gibson, who was the general sales manager for NRT in California, assumed the role of president and COO of Coldwell Banker Residential Brokerage in Los Angeles in 2001. “In some ways, becoming a local president is about perception. Brokers and sales associates react to you as the decision maker. They feel that they’re talking to the top person when they talk to you,” says Gibson.
Being responsible for fewer offices also allowed Gibson to visit each more frequently than when he was covering the entire state. “You can touch more people and let the sales associates know they have support behind them when they need it,” he says. As this article was written, Gibson was again promoted, to NRT regional senior vice president, overseeing a team of local presidents in the northeast.
NRT has no immediate plans to divide other companies, but the organization will continue to evolve. Says Becker, “There’s still an enormous amount of opportunity out there on so many fronts.”
RE/MAX Achievers, Scottsdale, Ariz.; www.azachievers.com
Prudential Americana Group, REALTORS®, Las Vegas; www.americanagroup.com
Mergers generally produce the huge one-year jumps in sales volume or sides you sometimes see on the “Top 100 Companies” list. Getting that performance boost from internal growth alone is a lot tougher. Yet RE/MAX Achievers in Scottsdale, Ariz., last year achieved nearly a 48 percent increase in sides, with no acquisitions in 2003. That feat was almost matched by Prudential Americana Group, REALTORS®, of Las Vegas, which achieved more than 42 percent year-over-year growth in sales volume completely through internal expansion. Compare those numbers with the average increases of 9.7 percent in sides and 18.7 percent in sales volume for the two “Top 100” lists as a whole, and you’ll see why these companies are ones to watch.
RE/MAX Achievers’ 2003 success rests on both significant recruiting and improvements in productivity it made at companies it acquired in past years, says CEO Tim Hatlestad, CCIM. “When businesses change hands, it takes a while for the chemistry and the environmental support tools to fall into place. Once that happens, you benefit from the fruits of your labor. And that’s what happened in 2003,” he says. Hatlestad credits attention to detail and the day-to-day business involvement and coaching of managers Larry Hibler, Bob Starr, Sue Flucke, and Trudy Moore with making a big difference in bringing acquired offices to high productivity.
The diversity and booming growth of the Phoenix metro market also helped sales surge. “Arizona has a net in-migration of more than 100,000 people a year, ranging from retirees to young families attracted by the great business opportunities,” says Hatlestad. To serve them, RE/MAX Achievers offers properties at every price level, from the Surprise office that caters to entry-level buyers in the expanding neighborhoods near Sun City to three Scottsdale offices and one in the corporate enclave near the Arizona Biltmore that serve high-end second-home buyers and business executives.
Practitioner productivity at RE/MAX Achievers gets a boost from in-house tech support that associates can use to post MLS listings on their Web sites. A company intranet makes it easy for practitioners to stay connected when working from home. RightFax services allow associates to fax documents to a customer’s e-mail for quicker response, while the one-stop shopping option of an in-house mortgage operation and a companywide relationship with Stewart Title help associates get to closing more efficiently.
The hot market was also a contributing factor to the 2003 success of Prudential Americana Group, REALTORS®, in Las Vegas. But, again, it was a long-term commitment to performance that made the crucial difference in sales.
“I think our model of really putting the interests of the customer first, which we’ve believed in for years, is taking hold in this aggressive market,” says CEO Mark Stark. That may sound trite since every real estate company says it emphasizes the customer. But what Stark sees in his market is a lot of commission discounting and a lack of full service on the part of competitors. “They’re going out to a market like ours and just telling buyers that they have to get ready to pay more because the market is hot. That’s not representation; it’s just acting as a taxi service and driving customers around,” he says. Stark’s company emphasizes full service with virtual tours and color flyers available for every listing.
Focusing on small-scale residential investors has been another key factor in Prudential Americana’s 2003 growth. Investors represent about 30 percent to 35 percent of the company’s business, says Stark. To help the company’s more than 1,000 associates serve that market, the company offers regular classes on evaluating and managing a real estate portfolio.
“How often has an investor client purchased real estate and known more about how to buy it than the salesperson,” says Stark. “We teach our associates how to help sellers maximize their equity and how to help buyers structure offers and locate financing that meets their investment needs and exit strategies.”
Synergies between residential and commercial investment activity also play a part in the success of RE/MAX Achievers. Although it’s a separate company, RE/MAX Commercial Investment brokers operate in three of the company’s 11 offices.
In both offices experience is an important factor, too. RE/MAX Achievers’ mission statement is to cater to the high-producing, career-oriented real estate professional, says Hatlestad. About 30 percent of the company’s 405 sales associates work in teams, while many more use licensed assistants. The company even helps associates mentor and grow their teams by providing team leadership skills training.
Although Americana hires both new and experienced associates, Stark says, it supports successful “sales executives” building their careers. Its VIP division, based on a production level of $250,000 in annual gross commission income, provides consultations to associates on hiring and managing assistants, reorganizing and perfecting their business systems, financial planning, and stress management. “We want to build business knowledge, not just real estate knowledge,” says Stark.
Out of nowhere
Intero Real Estate Services, Cupertino, Calif.; www.interorealestate.com
If you’re looking for the real estate equivalent of a Ferrari Enzo (0 to 60 mph in 3.3 seconds), Intero Real Estate Services may be it. This Bay Area startup had only $24 million in closed sales volume in 2002 but reached $1.64 billion in 2003. To accomplish this growth organically seems almost too much to believe, but that’s just what former NRT senior vice president Gino Blefari and his dynamic team have done.
“We chose to grow organically because it enabled us to set our vision and values of trust, respect, and integrity and be sure that every person we hired is aligned with those values. You can buy your way to market share, but you can’t buy your way to a great company,” says Intero President Blefari. He also believed that both real estate practitioners and consumers would be attracted to an independent company in the California market, where so many brokerages had consolidated.
Intero combines the entrepreneurial spirit of an independent real estate brokerage with the fiscal discipline of working for a public company. “They weren’t burdened with anything from the outside, so they chose the best and designed the technology and training systems from the ground floor up,” says Bob Moles, the former president and CEO of Cendant’s Real Estate Franchise Group, who joined Intero as chairman in April.
It’s this passion for building the best—along with leaders who’ve earned respect and loyalty at other top real estate companies—that has enabled the company to attract top associates so rapidly, says Blefari. “Great people like to be with great people,” agrees Moles.
Neither Moles nor Blefari believe the company has reached its full potential. “We’re in this for the long haul, and there’s still a lot we can do in the Bay area and in Northern California,” says Moles. “One-third of the revenue in the real estate industry comes out of California. And we’ll be in a position to capitalize on that opportunity based on the great foundation Gino has created. If you can make it in the volatile Silicon Valley real estate market, you can make it anywhere.”