Compass’ intention to acquire Anywhere Real Estate sent shockwaves through the industry this week, and it solidified Compass as the Goliath of Chicago’s real estate market.
The $1.6 billion all-stock merger will combine two national real estate powerhouses and bring Anywhere’s brands — including Coldwell Banker, Sotheby’s International Realty, Century 21 and Corcoran Group — under Compass’ ownership.
The deal represents a significant boost in market share for Compass and affiliated brands, which will be especially pronounced in Chicago, since Compass grabbed a huge share of the market with its purchase of @properties and Christie’s International Real Estate last year.
Brands that would be affiliated with Compass after the merger accounted for nearly $18 billion in sales in Chicago last year, according to The Real Deal’s ranking of Chicago’s top brokerages. The rest of the top 20 brokerages amounted to $11.33 billion in sales.
Many brokerages under Anywhere’s brands are franchise-based, though, so Compass won’t be directly owning those brokerages. Franchised brokerages are owned independently and pay fees for access to technology, marketing and other support.
One example is Chicago’s Jameson Sotheby’s International Realty. The luxury-focused franchise made $1.53 billion in sales last year across 1,977 transactions, according to the TRD ranking. Linda Levin, a Jameson Sotheby’s broker, said she expects business as usual once her brokerage comes under the Compass umbrella.
“Our brand holds its own,” Levin said. “From what I understand, our world at Jameson Sotheby’s is going to stay primarily the same.”
Mark Ahmad, a broker with Century 21 Circle, a Century 21 franchise, said he doesn’t expect anything to change in his day-to-day once his franchise comes under Compass. He said his brokerage has changed hands before — first it was under Coldwell Banker, then Century 21 — and he has learned not to worry because he hasn’t seen it affect his business.
But locally based brokerages see a chance to distinguish themselves in a more consolidated industry.
Steve Baird, CEO and president of Baird & Warner, said the merger strengthens his firm’s position as a local, independent brokerage in an increasingly national and centralized industry. Baird & Warner — which has been family owned since its inception in the 1850s — bought Dream Town earlier this year. The firms made a combined $3.53 billion in Cook County sales last year and $6.7 billion in sales overall.
Baird also said he expects some agents will leave the firms Compass picked up, and Baird & Warner will be an attractive option for them.
“I think it only helps us. It’s only a positive thing,” Baird said. “Because it creates disruption in the marketplace. It also shows the people that work at that company that the main interest is in profit, and not in what’s good for the agents or good for customers.”
Baird called the move a “Wall Street play” and said it follows Compass’ path of chasing growth through acquisitions, but he questioned whether it would help Compass turn profits.
“They keep buying other companies. Great for them, but I don’t quite know how that works. I run a company where it’s important to make money and be successful.” Baird said. “They’re playing more to the investors than they are about the future potential of all this.”
Reffkin said in the Monday call the merger will allow the company to cut costs by streamlining operations between the two companies, and that income streams from Anywhere’s title, escrow and relocation businesses will help diversify cash flow.
Matt Laricy, managing broker at Americorp, was shocked by the news and equated it to Pepsi buying Coca-Cola or McDonald’s buying Burger King. In the long term, he said, Compass’ growth could crucially alter the industry — including how listings are distributed to other brokerages and consumers, which has become increasingly controversial as Compass has taken aim at rules upheld by multiple listing services and the National Association of Realtors limiting some of the brokerage’s preferred marketing techniques.
“If they don’t want an MLS, they don’t have to have an MLS,” Laricy said. “If they don’t want NAR, they don’t have to have NAR. If they want to keep all listings private, they can keep all listings private. Who’s going to stop them?”
Compass has fought with the National Association of Realtors, multiple listing services and Zillow over public listing mandates like Clear Cooperation Policy and has pushed a marketing strategy that features some houses starting as exclusive listings marketed only to Compass agents. Reffkin has argued that listing service rules limit choices for sellers and agents and use agents’ products without compensation.
When asked for comment on the merger, a spokesperson for NAR said the trade organization “does not comment on the business models of industry participants.”
Laricy said he sees potential as an independent broker to find success among the bigger players in the industry. Agents who don’t want to be connected to a big corporation will be more motivated to look to a small firm to work with, he said.
“You can be a lot more nimble. You can be a lot more creative,” he said. “You can be a lot more innovative, because you don’t have to go through all those steps. For independents, that’s where you can take advantage of it.”