Hungry NRT gobbling up realty firms O'Conor, Piper & Flynn was the 16th company it bought in 6 months

'Floor shakes for industry'

Giant now involved in one of every four real estate deals

March 01, 1998|By Robert Nusgart | Robert Nusgart,SUN REAL ESTATE EDITOR

To inform those who may be wondering what kind of financial muscle is behind NRT Inc. -- the company that last week bought O'Conor, Piper & Flynn Realtors -- consider this:

Tomorrow at 12: 15 p.m., two privately chartered jets will roll down the runway at Baltimore-Washington International Airport, bound for Las Vegas. Filling the seats will be more than 300 executives, managers and top producers of the real estate company now known as O'Conor, Piper & Flynn-ERA.

It's just a little all-expenses-paid thank-you note from the people at ERA Real Estate and their parent company, NRT.

For four days this week, ERA President and Chief Executive Officer Peter Burgdorff will wine and dine the newest member of the ERA team. In a city of winners and losers, James P. O'Conor, president of the new company, believes this marriage is a "win-win-win."

The OPF acquisition is just another morsel to feed NRT's voracious appetite for leading regional real estate brokers. It seems that the company, which in the last six months has acquired 16 real estate firms, barely has time to digest one company before moving onto another.

The Baltimore transaction surprised many in the local real estate industry, but it wasn't unexpected for a number of factors. According to many in the industry, consolidation is the future of residential real estate brokerages, and cross selling a variety of services to consumers is the ultimate goal.

NRT, which stands for National Realty Trust, was formed in August, a joint venture between Cendant Corp. and Apollo Management LP, a private investment partnership led by Leon D. Black. Cendant came about after a merger between HFS Inc. of Parsippany, N.J., and CUC International Inc. of Stamford, Conn.

HFS Inc., which spent $1.8 billion for Hunt Valley-based PHH Corp. and its mortgage and relocation services last spring, brought to the table its considerable consumer services franchises, including Century 21, Coldwell Banker and ERA. Among its other franchise holdings are Avis car rentals and discount hotel chains, such as Days Inn, Ramada and Howard Johnson.

CUC, known for its entertainment coupon books as well as Net-Market online services, which directly markets club memberships such as Travelers Advantage and Welcome Wagon to 68 million people.

When combined into Cendant, according a company news release, HFS and CUC had revenue of $4.3 billion with net income of $600 million for 1996, the latest year for which figures are available.

Overall, it was a $14 billion merger. According to Henry R. Silverman, president and chief executive officer, Cendant now provides travel, shopping, auto, dining, financial and other services to more than 73 million members worldwide as well as more than 100 million customer contacts each year through its various businesses.

'The floor shakes'

When Apollo Management and Cendant formed NRT Inc., they financed it with $575 million. The aim was to acquire strong regional real estate firms that had never been affiliated with HFS, and place them under the Coldwell Banker, Century 21 or ERA brands.

"When they step forward, the floor shakes for the industry," said Lauri Moore-Moore of Real Trends, a Dallas firm that analyzes the real estate industry. "They are trying to create that critical mass, and once you create that critical mass then you can control how that business is reinvented. And I think we are going to see a totally different residential real estate business in the next five years."

It didn't take long for NRT to start forming its critical mass.

Its major acquisitions include:

* Jon Douglas Co., serving Los Angeles, with 3,150 associates and $10.5 billion in 1996 sales; the nation's third largest real estate brokerage.

* Burnet Financial Group, serving Minnesota and Chicago, with 3,000 associates and $6.7 billion in 1996 sales; the nation's fifth largest firm.

* Cornish & Carey Residential Real Estate, serving northern California, with 700 associates and $3.3 billion in sales for 1996; the nation's 10th largest firm.

* Gimeslstob Realty, serving South Florida, with 1,200 associates and $1.3 billion in 1997 sales.

* Buckhead Brokers, serving Atlanta, with 600 associates with $1.3 billion in 1996 sales.

And then there was OPF, the nation's 11th largest brokerage, with its 1,800 agents and $2.8 billion in sales for 1996.

NRT now controls 550 real estate offices with 23,000 sales associates, making it the largest owner of residential real estate offices in the country. It is involved in one of every four real estate transactions nationwide.

"There is a lot of money in their purse to fund a lot of purchases," Moore-Moore said. "They are forcing the industry to consolidate. They are one of probably three major consolidators out there. What makes Cendant or NRT a little different is that, for the first time, you have a major player who is really looking at putting together a huge market share under three banners, but under one ownership."

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