Valuations of Real Estate Brokerages

Topic #3 from Real Trends Gathering of Eagles: Values of Real Estate Companies

The playing field for acqusitions has changed. The big buyers were NRT and HomeServices. Both have either slowed their pace or stopped buying real estate companies recently. After Apollo Group took Realogy (the parent of NRT) private, their acqusition formula changed. The multiples people are seeing for stellar companies is somewhere between 3.5 and 4.5 times EBITDA. This is not too different from the past, but now they are not offering cash of 80% of the price upfront like they used to.

Another player has emerged since they went to Wall Street for a large private debt offering - Remax International. They have been buying back their own regional franchises recently, and may also start buying other brokerages - but at the same terms as mentioned above.

This is a significant change in the industry; HFS-Cendant-Realogy has been the large acquisition player through its NRT subsidiary for years. It will be interesting to see how this plays out.