Less than a year into the launch of its brokerage brand, Berkshire Hathaway seems poised to become a major force in that industry.
The Berkshire Hathaway name has long been one of the best known on Wall Street – the company was named the most-respected brand in the world in a 2013 survey by financial magazine Barron’s. But Berkshire founder Warren Buffett is almost as legendary for his hands-off management style as he is for investing acumen; to build his $313-billion phoenix from the ashes of a bankrupt paper mill, Buffett accumulated a diverse array of companies and assets, and has generally left their existing management to run them independently under their original names.
The firm’s move last year to rebrand many of its existing brokerage subsidiaries under the Berkshire Hathaway name was a first for the company, and it was unclear whether the Buffett shine could brighten the dingy business of real estate brokerage.
Less than a year into the experiment, however, it seems to be working. In March, the company was named the most respected brand in real estate in the Harris Poll EquiTrend, an annual survey conducted by market research firm Harris Interactive.
Gail Lockberg, broker-owner of Wellesley-based Berkshire Hathaway Home Services Town and Country Real Estate, certainly has few complaints. Lockberg’s firm was the first Massachusetts-based brokerage to switch to the new brand.
“It’s really been an unbelievable change, much more than we expected or anticipated it would be. I think the name just resonates with people; it’s a conversation starter with folks. People sit up and take notice,” said Lockberg.
Buying And Acquiring
Berkshire first acquired the HomeServices brokerage subsidiary as part of a 1999 deal in which it purchased MidAmerican Energy Holdings Co. In fact, in the vast conglomerate’s public filings, its real estate business is marked down as a single line item in the “Utilities and Energy” category, since MidAmerican’s primary holdings are in natural gas and solar power.
Staring in the mid-2000s, HomeServices bought up a chain of former Prudential Real Estate brokerages, and in 2012 it acquired a majority stake in the former Prudential affiliate network, which provides franchise services to a network of independent brokerages under the Prudential brand. Last fall, it began transitioning the former Prudential brokerages to the new Berkshire Hathaway name, first switching over the brokerages it owned directly, and then offering a select number of the independently owned franchises the opportunity to make the switch.
But although it amounts to a small footnote in Berkshire’s multi-billion-dollar business, in the real estate brokerage world the new brand already has a big footprint, with 14,000 agents and almost 300 brokerage offices across 20 states. That’s enough to make it the second-largest real estate brokerage network in the country, according to its public filings.
Some of those 14,000 agents continue to operate under regional brand names, such as Minnesota-based Edina Realty, the largest broker in that state. But the success of the switch of the former Prudential brokerages to Berkshire’s own brand suggests that further consolidation may be on the horizon. Already, 16 of the regional brokerages have added the tagline “a Berkshire Hathaway affiliate” to their branding.
Berkshire is pumping significant resources into building up its brokerage brand. While brokerage revenues were up $70 million in the first quarter of the year, rising to $405 million in 2014 from $335 million at the same time last year, the brokerage group lost $24 million in earnings in the same period, as it has pumped resources into marketing and promotion and increased hiring.
And it’s also putting effort into further expansion, closing a deal this week to acquire Silicon Valley-based Intero Real Estate Services. Connecticut and California, both areas with large investment and financial services sectors, where the Berkshire name might be expected to resonate, were the first two former Prudential brokerages to make the switch.
The brand’s effort to target sophisticated, high-end consumers is reflected in the technology revamp that has accompanied the rebranding. The new Berkshire-branded brokerages get access to a branded mobile app as well as new, streamlined websites, with a focus on large, professional photos and plenty of data on listings, including previous nearby sales, a tidbit many broker websites prefer to keep off site.
Making it easy for consumers to analyze market data on their own is a philosophical shift for many brokers, acknowledged Lockberg. But Berkshire feels it’s necessary to compete with consumer focused sites like Zillow and Trulia.
What’s In A Name
Several of the independent Prudential franchisees are still operating under that name in Massachusetts, including Prudential Unlimited, Prudential Prime Properties, and Prudential Buccelli, though most plan to transition to the Berkshire branding by the end of the year. If HomeServices does further consolidate its local brokerage brands under the Berkshire brand, a full switchover could sweep up local luxury powerhouse Hammond Residential Real Estate, which is a franchisee of RealLiving, another HomeServices subsidiary.
That might not be unwelcome. Mark Lippolt, senior vice president of operations for Hammond, pronounced himself “impressed” with Berkshire’s move into the space, particularly in the way they’ve handled the former Prudential relocation business.
“Berkshire Hathaway certainly has a great deal of brand equity in this part of the world, where so many homeowners are employed in financial services. [Berkshire’s] approach has been slow and deliberate up to this point in time and that may make some impatient, but I think that they are carefully determining how to craft a value proposition different from, say, Realogy, Keller Williams or ReMax. I doubt that they are looking to become a ‘me, too’ brand,” Lippolt said.
Email: csullivan@thewarrengroup.com
