Industry Watch: HomeServices.com Moves into the Spotlight

Renamed MidAmerican Realty Services plans IPO, acquires Kentucky brokerage.

August 1, 1999

Recent activity within the real estate brokerage division of MidAmerican Energy Holdings Inc. has caught many industry observers by surprise. When CalEnergy, a power utility conglomerate headquartered in Omaha, acquired MidAmerican late last year, rumors quickly spread that the new ownership didn't share its predecessors' fondness for real estate brokerage as a business venture and would soon take the company out of the real estate industry.

Instead, within the past two weeks, MidAmerican has announced that it has filed a registration document with the Securities and Exchange Commission in preparation for an initial public offering of stock in its MidAmerican Realty Services Co., which is being renamed HomeServices.com Inc. The company has also completed its first acquisition ever of a brokerage company outside the central Midwest--Paul Semonin, REALTORS®, the largest company in the Greater Louisville, Ky., area.

MidAmerican officials haven't yet decided how many shares to offer in the real estate unit, or how much the proceeds might be, but say HomeServices.com will use the net proceeds for general corporate purposes, which are expected to include acquisitions and e-commerce development. US Bancorp Piper Jaffrey will serve as lead manager for the offering.

The Semonin company will join a network of MidAmerican-owned brokerage companies that includes Minnesota's Edina Realty, Edina, Minn.; Iowa Realty and First Realty Better Homes and Gardens, each headquartered in Des Moines, Iowa; CBS Home Realty; Omaha, Neb.; J.C. Nichols Realty, Kansas City, Mo., and Carol Jones Real Estate, Springfield, Mo.

Semonin's staff of 110 employees and 650 sales associates will swell the combined total of HomeServices.com companies to 1,210 employees and 4,850 salespeople. MidAmerican claims that the aggregate activities of its operating companies make HomeServices.com the second largest independent residential real estate brokerage company in the United States, based on closed transactions. Even so, its combined 1998 figures make it a distant runner-up to NRT Incorporated, the nation's largest brokerage, which operates more than 100 companies that it has acquired and franchised under one of the Cendant brands--Century 21, Coldwell Banker, and ERA.

The original MidAmerican Energy Holdings company was acquired by CalEnergy, a conglomerate that supplies and distributes energy. CalEnergy, which was founded in 1971, has acquired and developed and now operates independent power facilities in the United States and the world. Its purchase of MidAmerican represented its entry into energy transmission, delivery, and sales in the United States. Following the acquisition, CalEnergy officials decided to change the name of their company to MidAmerican Energy Holdings and shift corporate headquarters to Des Moines, MidAmerican's home base.

Shortly before the CalEnergy transaction, MidAmerican had entered the real estate field, buying six major brokerage companies previously owned by AmerUS Inc. and adding another.

Interestingly, in his chairman's message on MidAmerican Energy's elaborate Internet presence, CEO David L. Sokol failed to mention the real estate brokerage segment of the company. Such oversights gave rise to the rumors of divestiture.

Veteran REALTOR® Ron Peltier is president of HomeServices.com. His real estate career dates back two decades when he joined Edina Realty. Moving steadily upward in that organization, Peltier has remained with the company through a series of different ownerships, including Metropolitan Financial, AmerUs, and a private Minnesota investment group.

MidAmerican Energy Holdings (aka HomeServices.com) wasn't the only recent activist in the merger-and-acquisition arena. In fact, that company's activity seemed to spur numerous other moves. The DeWolfe Cos., the largest brokerage in New England, signed an agreement to acquire Yorktown Associates Inc. of Warwick, R.I., a residential real estate brokerage with four offices and a 1998 sales volume of $82 million. This was the fifth DeWolfe Co. acquisition this year.

The St. Joe Co. has acquired nine offices from two Florida residential real estate services companies--Arvida Realty Sales Ltd. and Weston Realty Sales Ltd. The two companies combined have 180 licensed sales associates and employees spread among nine Florida offices. Each of the offices will be consolidated into Arvida Realty Services, St. Joe's wholly owned realty services subsidiary headquartered in Clearwater, Fla. Arvida Realty Services is the state's largest real estate brokerage and the fifth largest in the nation, with 89 offices. The company, formerly known as Prudential Florida Realty, generated $5.9 billion in sales in 1998.

NRT Incorporated is on the verge of announcing several transactions, which will swell its acquisition total to 100 in just 18 months.

Sponsorship of and involvement in major sporting activities has become a major promotional activity for leading real estate companies. Any doubts about the exposure value to be obtained from such relationships had to be dispelled by Century 21's sponsorship of major league baseball's Home Run Derby at Boston's Fenway Park on the evening preceding the annual All-Star game.

To begin with, the entire extravaganza was renamed the "Century 21 Home Run Derby". Then, before a nationwide TV audience, extensive on-air mentions connecting the franchise with the baseball extravaganza conveyed more than 100 visual and audio exposures for Century 21. Large signs immediately beyond the Fenway Park outfield offered an additional advertising blast.

Century 21 punctuated the broadcast of the four-bagger slugfest with frequent 30-second commercials. Bob Moles, Century 21 president, was a TV personality at the show, participating in the first-pitch ceremony. In addition, there was major TV concentration on the winner of Century 21’s Derby sweepstakes, who won a $250,000 prize toward the purchase of a new home. The overall event was part of a two-year agreement between Century 21 and major league baseball, which identifies the franchise as the “Official Real Estate Organization of Major League Baseball.”

Another special promotion emanating from the agreement is now under way. It's Century 21’s “Turn Ahead the Clock” program, a series of 13 major league games in which 22 different teams will wear futuristic hats and jerseys projected as being the style of 2021. San Diego and San Francisco were the first clubs to don the attire for a July 21 game in the Bay city.

The last “special dress” contest will be in Boston, Sept. 18, when the Red Sox entertain the Detroit Tigers.

Other teams who'll model the uniforms of tomorrow: Anaheim Angels, Arizona Diamondbacks, Atlanta Braves, Baltimore Orioles, Chicago White Sox, Cleveland Indians, Colorado Rockies, Florida Marlins, Kansas City Royals, Milwaukee Brewers, Minnesota Twins, New York Mets, Oakland A's, Philadelphia Phillies, Pittsburgh Pirates, Seattle Mariners, St. Louis Cardinals, and Tampa Bay Devil Rays. Following each game, select players will autograph their jerseys, which Century 21 will later auction to the highest bidders. Portions of the proceeds from the auction will benefit charities, including Easter Seals, Century 21’s official national charity.

Meanwhile, RE/MAX International is launching its annual golf competition , known as the RE/MAX World Long Drive Championship. This year, at nearly 300 golf facilities throughout the world, more than 8,000 competitors will try to reach the finals and take home a share of the $250,000 prize money. All professional and amateur golfers are eligible to compete in one of two categories--an open division, for contestants of all ages, or a senior division for golfers 45 or older. The finals will be held Oct. 20–23 in Mesquite, Nev., 60 miles north of Las Vegas.

Wonder what it takes to be middle of the pack in this year's 500 Top Broker Survey, conducted by the REAL Trends publication? You'd need 2,199 closed transaction sides. That's the number recorded by Coldwell Banker Bob Yost Inc., York, Pa., which was No. 250 in the REAL Trends transaction sides analysis.

In terms of sales volume, the figure needed to be No. 250 is $341,753,184. Such is the figure attained by RE/MAX Hidden Creek, Independence, Mo., No. 250 in the sales volume survey.

Veteran industry observer Tom Dooley is president of TWD Associates, a real estate consulting firm in Arlington Heights, Il., and editor of two monthly newsletters. Contact him at 847/398-6410; tdoo@aol.com.

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