Realtor's parent goes public

NRT of N.J., owner of O'Conor, Piper, to sell stock today

Fast expansion continues

Raising of capital pressures rivals, observers say

June 09, 1999|By Shanon D. Murray | Shanon D. Murray,SUN STAFF

O'Conor, Piper & Flynn ERA will become the area's first public real estate company today after its New Jersey-based parent, NRT Inc., sells a 41 percent stake of itself in an initial stock sale that is expected to raise $225 million.

NRT, a joint venture of Cendant Corp. and Apollo Management Inc., owns and operates brokerages franchised by Cendant's Coldwell Banker, Century 21 and ERA.

James P. O'Conor, president and chief executive of O'Conor, Piper & Flynn ERA, said OPF knew before it was acquired that NRT had the "intention and expectation" of going public.

"We are very pleased to be part of this kind of organization with a national and international presence," O'Conor said yesterday. "Going public will give our company and associates wonderful opportunities to directly contribute in NRT's success."

Laurie Moore-Moore, editor of Real Trends, an industry newsletter, said she does not believe that OPF becoming a public company will change its day-to-day operations as far as the consumer is concerned, but it may affect its competitors.

"What they are saying is that [NRT] will put up about half a billion dollars into merger acquisition activity," she said. "And certainly that gives a company like O'Conor, Piper & Flynn the feeling that they can make some significant market moves as a part of NRT.

"That certainly is a market play that has an impact on competitors."

At least one competitor, Long & Foster Real Estate Inc., said the initial public offering will give it some advantage.

"As a public company, there will be more public scrutiny to see how successful the ventures are. We will use the offering to see what information we can garner about the competition," said George Eastment, Long & Foster's executive vice president.

O'Conor said phenomenal growth in the real estate industry has allowed NRT to become one of the first real estate companies to go public.

DeWolfe New England, which covers the entire New England market area, went public a few years ago. DeWolfe is the 11th-largest real estate broker in the country, according to Real Trends.

"The industry has been enjoying an unprecedented increase in business. It has never been this way before," O'Conor said. "And forecasters say this will continue for at least the next five years."

At the time of its acquisition by NRT in February 1998, OPF was the nation's 10th-largest real estate company, with 51 offices and 1,870 agents. Today, OPF has 54 offices and 2,005 agents.

Parsippany, N.J.-based NRT was the top real estate broker in the nation with 348,134 transactions in 1998, according to Real Trends. For 1998, NRT posted net income, before preferred dividends, of $1.31 million, on revenue of $2.12 billion.

The company was formed in 1997 as a joint venture between Apollo and Cendant, then known as HFS Inc.

NRT has more than tripled in size to 710 offices by scooping up smaller competitors. In terms of sales, NRT is five times the size of its nearest competitor, Weichert Realtors.

The expansion coincided with record-breaking times for housing sales, which reached an all-time high last year. But with mortgage rates rising, there are signs that Cendant and Apollo may be selling at the top.

"We've had a few really great years, and people are now saying it's got to slow down a bit," said Fred Flick, an economist at the National Association of Realtors in Washington, D.C.

Apollo, a multibillion-dollar investment firm begun in the early 1990s, has invested in commercial real estate in the Baltimore area, buying the debt on a 26-story skyscraper at 250 W. Pratt St., near Oriole Park at Camden Yards, and backing the purchase of 22 office and industrial buildings known as the Meadows Business Park in Woodlawn.

Last month, Cendant said that it will sell Hunt Valley-based PHH Vehicle Management Services, the Hunt Valley-based car-leasing subsidiary, to Avis Rent A Car Inc. in a deal valued at more than $5 billion.

Cendant's forerunner, HFS, bought PHH in May 1997 for $1.8 billion. HFS bought Avis in 1996 for an undisclosed price. Avis was spun off by Cendant in an initial public offering of stock in 1997.

In its initial public offering tomorrow, NRT plans to raise $225 million by selling 14.1 million shares at a price between $15 and $17 each, according to filings with the Securities and Exchange Commission.

Sun staff writer Robert Nusgart and Bloomberg News contributed to this article.

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