By Jean Sorensen
Brookfield Residential Property Services may have bought a piece of the rock, but it is not looking to rock the boat.
There are no plans to merge the company’s major brand, Royal LePage, and the newly acquired Prudential real estate franchises, says Graham Badun, CEO of Brookfield Residential Property Services.
“We are a multi-brand company today and will be a multi-brand company tomorrow,” says Badun, adding that for Canadian Prudential franchise owners it is “business as usual”. Brookfield’s other franchise brands are Via Capitale and the Johnston & Daniel division of Royal LePage. In the U.S., the company owns Real Living (which absorbed GMAC Real Estate).
Brookfield’s acquisition of the real estate and relocation assets of Prudential Financial Inc. include not just Canada, but the U.S. and Mexico. Badun estimates there are now 80,000 real estate agents working in North America under the Brookfield brands.
Under a licensing agreement, Prudential real estate brokerage franchisees will be able to continue to use the Prudential brand based on the terms of their franchise agreements. Badun says these agreements range in term but some are for up to 15 to 20 years. As the licensing agreements expire, Badun says business decisions will be made within the network regarding branding but there is “nothing in the short-term”.
He says that between the Prudential and Royal LePage offices, Brookfield now has approximately 24 or 25 per cent of the real estate franchise market in Canada. He is not concerned that the federal Competition Bureau will interfere in the transaction. “All our agencies are independently owned and compete,” he says.
Badun says that Brookfield moved to pick up the real estate and relocation division because it’s a good opportunity for the company. “We want to grow the entire business. It is a high-quality network,” he says. “Housing is here to stay and we are excited about the future.”
That Prudential should spin off the asset is not surprising. Prudential Financial Inc., which finally stemmed three consecutive quarters of sliding profits, rebounded in earnings in its third quarter in 2011. In a Nov. 2 release of financial data, Prudential said it needed to focus on financial planning and services for clients during “turbulent financial markets”.
The lacklustre performance posted by the real estate investments sectors comes from the still struggling U.S. real estate market. Don Campbell, author of Real Estate Investing in Canada and other investment books, says the U.S. market is not expected to rebound until “2014 at the minimum”. Under the circumstances, it is understandable that a company would retrench to its “core competency”, he says.
Badun says that Brookfield is into acquiring assets for the short term. “Royal LePage has been around for 100 years and we have had it since 1980 and we are in for the long haul.”
He says the acquisition of the Prudential relocation assets (government and corporate) is an example of opportunity for expansion. “We have a global relocation business,” he says, extending throughout North America, Asia and Europe. In 2010, it opened offices in India and Australia.
“The size of our relocation business is doubling with this acquisition,” he says, adding that relocation has been a growth market over the past two to three years.
Brookfield’s growth in the relocation side of the business has come from past acquisitions and mergers as well. In 2009, there was a global merger of Royal LePage Relocation Services and GMAC Global Relocation Services (it had purchased GMAC the prior year), to form Brookfield Relocation Services, the world’s second largest relocation service.
Brookfield’s purchase of a piece of the Prudential rock is not creating any initial concerns in the real estate industry. Fred Brown, North Vancouver Prudential Sussex manager, says the Prudential line fits nicely with Brookfield, which has solid reputation in the real estate franchising business. “It was a good run with Prudential (Financial Inc.),” he says, adding the broker’s licensing agreement doesn’t expire until 2018. Prudential has 30 per cent of the North and West Vancouver and Sunshine Coast markets, he says.
Brown says he had been hearing rumours of the acquisition prior to it occurring. “My thought was that I had to get to my salespeople first before a negative twist was put on this and help them to see they are now part of the larger entity and what benefits that could bring.”
John Grasty, a sales rep with Prudential Sterling Realty in Burnaby, B.C. works on the front lines with the public and blogs on real estate. He says, “I really believe that this is a good move for both Brookfield and Prudential, especially with the relocation services.” Grasty says the pairing of Prudential with Brookfield is likely to be a better business model. As for the possibility of a name change and what it might mean to him, Grasty is ambivalent. He will go with whatever name change comes down in the pike in the future. “These things are usually well thought out,” says Grasty, who specializes in the areas outside Vancouver (Port Moody, Port Coquitlam and Coquitlam) and counts relocation as a big part of his business.
In the northern B.C. town of Prince George, broker/owner Rod McLeod of Royal LePage Prince George says there are synergies that can be developed between the various companies, such as handing off relocations to member franchisees to find new homes. “I don’t think it will hurt us at all. I think it is a good thing,” he says.
