Biggest U.S. residential firms

Every year, The Real Deal publishes its much-anticipated ranking of the largest (and most prolific) residential real estate firms in New York City. But how do those firms, along with New York’s premier suburban brokerages, stack up on the national stage?

This month, TRD examined a recently released ranking of the country’s 500 largest residential brokerages — published by the research company Real Trends — and came up with a detailed breakdown of how the New York–area firms on the list performed.

Real Trends’ ranking, which used 2011 sales volume along with several other metrics, confirmed the often-repeated refrain that New York was spared the crushing fate the rest of the country met during and after the recession. But New York and its suburbs have continued to struggle, as lulls in activity have followed bursts of improvement.

Consequently, the area’s largest firms have also seen their fortunes wax and wane. The New York region, and especially the New Jersey submarket, “slowed down like everyone else,” said Steve Murray, president of Real Trends. “They just don’t want to admit it.”

Indeed, most of the major firms in the metropolitan area saw revenues decline in 2011 (albeit slightly), compared with 2010, according to Real Trends’ analysis.

Many of the marquee firms in the area made the list, including NRT, the parent company to the Corcoran Group and Citi Habitats. (NRT also owns some Sotheby’s International Realty and Coldwell Banker offices, but others are franchises. In addition, all of its Century 21 offices are franchises) (note: correction appended). Prudential Douglas Elliman, William Raveis Real Estate and Houlihan Lawrence are also represented.

But the ranking relied on companies to voluntarily submit their data, and some of New York’s biggest firms did not participate. For example, Terra Holdings — parent of Brown Harris Stevens and Halstead Property — opted out. Others, who looked less likely to make the list here — including Rutenberg Realty, Bond New York, NestSeekers, Town Residential, Bellmarc and Stribling & Associates — either declined to participate or told TRD that were never contacted by Real Trends. All of those New York firms that were not included declined to provide TRD with their 2011 sales volume figures or didn’t respond to our requests for comment.

According to TRD’s own biggest-firms ranking last month, those brokerages all had a significant dollar volume of listings. For example, BHS had $2.7 billion in listings, Sotheby’s had $1.5 billion, Halstead had $845 million and Stribling had $584 million, to name a few. Also noteworthy is that the Real Trends list did not fold individual brands — such as Prudential, Keller Williams and RE/MAX — under one umbrella. Instead, it looked at their individual franchises.

Of those who did participate, many said their fortunes have improved in the first six months of 2012 after last year’s declines. Below is a look at some of the most active New York City and metro-area firms that made the list.

From left: Pam Liebman, Dottie Herman, Bill Raveis, Chris Meyers

1. Corcoran Group: $12.7 billion
Click to enlarge

NRT, Corcoran’s parent company, had a higher sales volume than any other firm in the country — even if its numbers were down from 2010. The mega company did $108.9 billion in sales in 2011 versus $112.8 billion the year before.

And its darling brokerage, Corcoran, had a higher sales volume than any of its New York rivals, with $12.7 billion in sales in 2011 — about 11 percent of NRT’s total. But that, too, was a dip of 2 percent over its $12.9 billion haul in 2010, according to a breakdown provided to TRD by Real Trends based on Realogy data. (Figures for NRT’s other firms, including Citi Habitats and Sotheby’s, were not available.)

“We’re excited to be at the top of the list,” said Pam Liebman, the president of Corcoran, which has 2,000 agents and 45 offices in New York City, the Hamptons and Florida.

NRT is a subsidiary of Parsippany, N.J.–based Realogy, which was involved in 26 percent of all national home sales in 2011.

However, Realogy has had a mixed track record since the financial crisis.

Domus Holding Corp., the arm of Apollo Global Management that owns Realogy, along with hedge fund Paulson & Co. has reported net losses every year since 2008. (Apollo, a leveraged buyout firm, bought Realogy at the beginning of the downturn for $6.6 billion and took it private. It also saddled itself with debt in the process.)

Those losses at Domus continued into this year, according to news reports.

J.P. Morgan Securities reported last month that the company was spending $360 million a year on interest payments to service its debt.

Still, relief may be in sight. Domus filed the paperwork last month required to take Realogy public, a move that might raise $1 billion. That could retire some of Realogy’s debt and provide capital to allow the firm — and perhaps Corcoran — to grow, James Krapfel, an equity analyst with research firm Morningstar, told The Real Deal.

And although the IPO market is weak at the moment, the actual offering will likely not be issued until the fall, when the climate could improve, Krapfel added. That IPO could lower Realogy’s monthly expenses by $300 million a year, J.P. Morgan’s report stated.

But investors need to like the stock, and “the appetite for debt-laden companies is low,” Krapfel said. Investors tend to view such debt as “a bit of a red flag, implying that [the company’s] valuation won’t get much better,” he added.

2. Prudential Douglas Elliman: $11.1 billion

Prudential Douglas Elliman saw $11.1 billion in sales last year, though that was down from $11.5 billion in 2010 — a 3 percent dip.

That loss came in a year of transition for the firm, which has 60 offices in New York City, Long Island, Westchester and Florida. A few of its top agents decamped for other firms in 2011, including Ilan Bracha and Efraim Tessler, who went to Keller Williams, and Tamir Shemesh, who went to Corcoran.

Elliman saw a drop in listings and in dollar volume of listings in May 2011, when TRD conducted its annual top firm’s spread.

But in this year’s top firms spread, it saw its listing totals increase by 13 percent and the value of those listings increase by 22 percent to $3.2 billion. (While the firm is a franchise, it’s an independent company and its sales volume figures do not include other Prudential franchises.)

And as TRD reported last month, one move in particular is widely expected to boost the company’s fortunes further. According to sources close to the company, the firm will soon shed its affiliation with Prudential, ending a decade-old partnership.

In giving up the “Prudential” part of its name, Elliman will relinquish a national agent network that’s said to generate leads from people relocating to New York.

But many analysts say the Douglas Elliman brand is so well-established, it doesn’t need a national parent to boost business.

And the firm will also no longer have to pay the fee (reported to be 6 percent of all transactions) that being a franchisee requires, which could help cushion any blows if the housing market continues its mixed performance, sources said.

Dottie Herman, Elliman’s president, declined to comment.

3. William Raveis Real Estate: $4.5 billion

Raveis, which has 35 offices in Connecticut and seven in Westchester, plus much of New England, was a rare bright spot in 2011, posting $4.5 billion in revenue. That was up from $4.4 billion in 2010, a 3 percent uptick.

The success seems to have come mostly on the strength of the Fairfield, Conn.-based firm’s non-Westchester business. Indeed, a TRD ranking of top Westchester firms last year put Raveis at No. 10 in the county with just $104 million in listings. By comparison, Houlihan Lawrence, the first-place finisher (see below), clocked a massive $1.7 billion in listings.

While some firms became austere in the face of the recession, William Raveis doubled down, increasing its agent head count from 2,200 in 2009 to 3,000 in 2011, according to Bill Raveis, the firm’s founder.

That was despite the fact that the cost to maintain those agents has been rising, he said, noting that the company pays for its brokers’ Internet marketing. (Brokers cover their own direct mailing costs.)

Raveis added that a key to his firm’s success is an emphasis on mobile gadgets, like a new app for Android phones and iPhones that makes it easy for clients to navigate Raveis’s website, which the firm claims gets 10 million users per year.

Also, he’s now redesigning his offices with fewer desks and more benches, “so it will look like a sort of Apple-store-meets-Kinko’s,” he said. The idea is to give agents a comfortable place to charge their smartphones and trade tips.

“The chemistry of the real estate branches is changing,” said Raveis, a former systems analyst who founded the firm in 1974 above a Fairfield grocery store.

Plus, his firm wants to build on its recent push into Westchester with offices in Brooklyn and Manhattan, though a deal to buy Manhattan firm Bellmarc collapsed last spring.

“We have a long-term view of being in the industry,” he said, “and reinvesting back in the company is very important to us.”

4. Houlihan Lawrence: $3.3 billion

Last year, this Westchester-focused firm hauled in $3.3 billion, versus $3.4 billion the previous year, a 3 percent drop.

Why? Home prices sank, by up to 10 percent, and the firm simply did not sell enough homes to cover the difference, said Chris Meyers, a principal of the Bronxville-based firm.

But Meyers said “the market has really picked up considerably” since the numbers were collected last year, noting that prices have shot up 15 percent in the last six months.

Meyers — who with his brother and sister bought the firm from the Lawrence family in 1990 — said the company has 24 offices and 1,000 agents, about 30 of whom were added in the last year.

The firm has shown that it dominates in Westchester. As mentioned above, according to a TRD ranking in March 2011, the firm bested its competitors with $1.7 billion in listings — far more than the second-place firm, which had roughly $550 million.

Unlike Raveis, an emerging rival, Houlihan generally has no goal to blitz other counties with new offices, Meyers said.

In fact, it has closed or combined some recently. In 2009, the firm shuttered its Harrison office, and around the same time merged several smaller offices into larger ones. For example, the Cross River and South Salem offices were folded into the Katonah and Pound Ridge offices, respectively.

“A small office does not create the buzz of a large office,” said Meyers, by way of explanation.
Rather than expanding, he said Houlihan’s competitive edge will come from investing in and focusing on the communities where the firm already exists. And that strategy is boosting market share — in 2007, the firm claimed 25 percent of the sales volume in Westchester; now it has 40 percent, Meyers said.

5. Prudential Connecticut: $2.5 billion

Through the stop-and-start recovery of the last few years, two suburban markets have been particularly hard-hit, brokers say: Connecticut and New Jersey, especially in the luxury segment (see “Wells Fargo-go-go”).

Perhaps unsurprisingly, then, Prudential Connecticut Realty, a 1,400-agent, 51-office firm whose listings are mostly focused in Fairfield, Hartford and New Haven counties, took a big hit.
In 2011, it did $2.5 billion in business, down from $2.9 billion in 2010, or a 14 percent drop, according to the Real Trends figures. That was among the sharpest sales drops in the region.

Whether its business improves in 2012 might depend on who’s at the helm. In April, the independently owned firm was sold by chief executive Peter Helie to HomeServices of America, mogul Warren Buffet’s real estate company. HomeServices — a subsidiary of Buffet’s Berkshire Hathaway — is making its first foray into the Northeast with the purchase.
The terms of that acquisition weren’t disclosed.

HomeServices, which is based in Minnesota, operates in 20 states and has 16,000 agents.
In addition to new ownership, gains in the New York suburbs could also help.

“Business has picked up, pending sales are higher than the same period last year at this time,” Helie told the Connecticut Post in April. “Our biggest barometer is our salespeople. They’re busy and a lot happier.”

Candace Adams, the firm’s president, was traveling overseas and was not available for comment, a spokesperson said.

6. William Pitt Sotheby’s International Realty: $2.3 billion

Last year, this Stamford, Conn.–based firm took in $2.3 billion. But in 2010, its haul was $2.5 billion, meaning its sales volume tumbled 8 percent over that time frame, according to Real Trends.

The continuing woes of the suburban markets may have dogged the firm, whose 30 offices — which include some operating under the banner of Julia B. Fee Sotheby’s and Litchfield Hills Sotheby’s — are spread across Connecticut as well as Westchester County. It has 1,100 agents.

But the battlefront may be in Westchester, which it entered in 2010 with the acquisition of four nonfranchised Sotheby’s offices in Scarsdale, Rye, Larchmont and Chappaqua. (William Pitt became a Sotheby’s franchise in 2005. Around the same time, it also brought in an equity partner).

The climate in terms of competition for listings and buyers also seems increasingly fierce in Fairfield, where William Raveis, Douglas Elliman and Warren Buffett’s HomeServices are all competing for a piece of the Connecticut residential sales market. As a result, William Pitt may have another tough year on its hands, according to news reports.

But the firm, which was founded in 1949, seems to be making a renewed push for the luxury market. This spring, it unveiled a partnership with PlanOmatic, a web design company, to improve the tools on its website for high-end listings. There will now be floor plans and property photos along with an option to virtually stage furniture in the listing.

Paul Breunich, the firm’s chief executive, was traveling and unavailable for comment, a spokesman said.

7. Daniel Gale Sotheby’s: $1.6 billion

Daniel Gale — which was founded in Huntington, Long Island, in 1922 — did $1.6 billion in sales in 2011, which was on par with its previous year.

Unlike some of its peers, the firm proudly strikes a decidedly less-is-more approach, even though it has almost 600 agents and 21 offices scattered around Long Island. While the firm does have listings in Queens, the majority of its business is concentrated in affluent North Shore towns like Manhasset.

It has managed to keep its business healthy in part due to an influx of Asian buyers, who are now snapping up Long Island residences as investments, agents say. In a recent deal, for example, a Taiwanese buyer from Bayside purchased a Manhasset property for his sister in Taiwan, who wants her daughter to go to school here, said Deirdre O’Connell, a senior vice president at Daniel Gale Sotheby’s.

Coaxing from agents has also prompted clients to cut their prices, which has helped move inventory, offsetting dips in prices, O’Connell explained. But at the same time, there’s also been an increase in bidding wars. She pointed to a gut-rehabbed, five-bedroom 1928 house in Plandome, which was listed for $2.675 million, but sold for $2.8 million 10 days later.
Being relatively small gives the firm flexibility in deciding to, say, implement new content management systems for agents, she said.

“We can make small changes without having to go to Parsippany to ask permission, if you will,” O’Connell joked, in a nod to Realogy.

8. Better Homes and Gardens Rand Realty: $1.2 billion

By one measure, it’s been a tough couple of years at Better Homes and Garden Rand Realty; sales volume fell 10 percent from $1.32 billion in 2010 to $1.18 billion in 2011, Real Trends data shows.

But in many ways, that belies a notable expansion at the 28-year-old firm, which has 25 offices and 800 agents. Focused mostly in Rockland (where they claim 35 percent market share) and Orange counties, the firm also entered New Jersey six months ago.

Why? Because “we were losing transactions because of people who are looking at homes in Rockland and Jersey, but using other agents there,” said Joseph Rand, the family-owned firm’s managing partner, who likened Rand’s foray there to Manhattan firms’ hanging up their shingles in Brooklyn a few years ago.

All told, Rand has added eight new offices since 2007, at the onset of the recession, Rand said.

Though perhaps unknown on this side of the George Washington Bridge, Better Homes is a growing brand with national appeal, which is why Rand became one of its franchisees in 2009.

“There are advantages to be associated with a well-known brand” that dates to the 1920s, when the Better Homes and Gardens magazine was launched, said Rand.

Rand, who has a law degree from Georgetown, noted that the while the firm is independently owned, Better Homes and Gardens is a Realogy brand.

Rand’s brokers take a 50 percent commission split until they have $25,000 in their pocket, then 80 percent until they earn $150,000 and then 90 percent for everything above that. The firm covers the marketing costs for its agents. That’s in contrast to other models that are now popular, like Keller Williams, for example, which gives its agents full commissions, but generally lets them fend for themselves.

“Agents need a support system,” said Rand, who estimates he’s on track to do $1.5 billion in business this year.