RICK LOUGHLIN
Transition going well
Eight months after the merger of two of the region’s most powerful residential real estate companies, many in the industry may be asking the obvious – has it worked?
Some real estate professionals, including those working for the two firms, were caught by surprise when news of the merger of Coldwell Banker Hunneman and The DeWolfe Cos. broke last August – even though rumors had been circulating in some circles for months.
DeWolfe, a family-grown independent company based in Lexington that had become a major player in residential real estate in New England, was selling out to NRT Inc., a national real estate powerhouse based in New Jersey.
Today, some in the industry feel that the merger has had a few predictable results – dozens of agents relocated to other firms, offices were shut down and staffs and operations have been consolidated. Initially, some feared competition would diminish as the two entities were combined to form Coldwell Banker Residential Brokerage, the largest real estate services organization in New England.
Yet, those fears may have eased as more real estate firms have emerged to grab a piece of the market share. Less than two months after the merger was completed in September – and as a direct result of the deal – a new real estate firm opened in the MetroWest area. And earlier this year, another player, William Raveis Real Estate & Home Services – a Connecticut-based real estate firm that calls itself New England’s largest privately owned, family-run real estate company – started an aggressive expansion into Greater Boston.
Agents and a high-level executive at Coldwell Banker interviewed by Banker & Tradesmen said that the transition has gone relatively smoothly. While some agents inevitably reassess their affiliation during a merger, thousands of agents have stayed with the Coldwell network in New England. However, Coldwell Banker’s market share in Eastern Massachusetts remained about the same in the first quarter of 2003 compared to the same quarter in 2002, despite the addition of new offices and agents via the merger with DeWolfe.
Today the organization has more than 5,500 sales associates and employees working in more than 160 offices in the Bay State, Maine, New Hampshire, Connecticut and Rhode Island. Massachusetts, with 103 offices and a sales force of more than 3,300, contributed more than 70 percent of total sales volume in Coldwell’s New England network last year.
Coldwell’s Bay State agents completed a total of 27,405 residential transactions last year, for total sales volume of $11.6 billion. In New England overall, the company handled 43,386 transactions in 2002, representing $15.6 billion in sales volume.
“All and all, due to the magnitude of this, I think things have gone extremely well,” said Richard J. Loughlin, president of Coldwell Banker Residential Brokerage Central and Southern New England, which includes 128 offices in Eastern and Western Massachusetts, Connecticut and Rhode Island.
Coldwell Banker Residential Brokerage operates as three autonomous but mutually aligned regional companies – Northern, Central and Southern New England. Last September, presidents were appointed for each region. At the time, Loughlin, the former president of DeWolfe Real Estate, was appointed president of Southern New England, which includes Connecticut, Rhode Island and Hampden County in Western Massachusetts.
Meanwhile, James McKeon was appointed to lead the Northern region, representing offices in Maine and New Hampshire. And William E. Kiley Jr., the former president and chief operating officer of Coldwell Banker Hunneman, was appointed president of Central New England – the organization’s largest region.
But after Kiley abruptly resigned in early November, Loughlin was appointed to head up both the Southern and Central regions. Today, Loughlin’s territory includes 128 offices, 90 of which are in Eastern Massachusetts, and roughly 4,000 sales associates – and it’s continuing to grow, almost daily.
In the weeks after the DeWolfe and Hunneman deal were announced, Coldwell Banker Residential Brokerage continued its expansion by merging with independently owned affiliates in Western Massachusetts, Maine, and Rhode Island.
In Western Massachusetts, for example, a Coldwell affiliate – Coldwell Banker Keenan & Molta Assoc. in Greater Springfield, with four offices and 80 associates – was folded into the Coldwell Banker Residential Brokerage network.
“We’ve really done very well,” said Loughlin. “While we still have a lot of work to do, we still have made a lot of changes to get to where we stand today.”
Market share in Eastern Massachusetts during the first quarter didn’t rise, as might have been expected, but remained about the same – around 23 percent – as a year ago, according to Loughlin. That came during months when home sales in the Bay State slumped because of harsh winter weather and the war.
The merger hasn’t come without its challenges – one of which has been retaining agents and keeping them happy. More than 540 Bay State agents were “terminated” during those months – meaning they either relocated to another firm, retired or left for other reasons. However, according to information provided by a Coldwell Banker spokeswoman, the network had a net gain of 258 sales associates in Massachusetts in the seven months following the merger. In all, Coldwell gained a total of 466 agents through the DeWolfe merger.
In Eastern Massachusetts at least 10 offices have been shut down and consolidated and six more are expected to be consolidated by the end of the year. The consolidations occurred in Beverly, Franklin, Hingham, Norwell, North Attleboro, Sudbury, Swampscott and Westwood.
The Danvers office was closed and combined with the Lynnfield office, and in April, the Hudson office was shut down and consolidated with the Marlborough office. Plans to merge offices in Arlington, Chelmsford, Framingham, Newburyport, Waltham and Weston by the end of 2003 are currently in place, according to information provided by Roni L. Boyles, director of corporate communications for Coldwell Banker Residential Brokerage. All of the recent consolidations in Eastern Massachusetts are related to the DeWolfe acquisition.
Multiple offices still exist in Boston – which has seven offices – Cambridge, Concord, Duxbury, Lexington, Newton, Milton and Wellesley.
Asked why multiple offices are still in place in those communities, Boyles said, “Those communities can support them.” She later added that the company would like to consolidate operations in communities like Duxbury and Milton but can’t find facilities in those towns large enough to accommodate the combined office staffs.
Competition and Cooperation
Such office closings and agent departures were expected, according to industry observers.
“It would only be natural because change is difficult for any human being,” said Dick Cahill, president of Norwell-based Jack Conway & Co., commenting on the agents who relocated.
Cahill, who estimated that about 50 Coldwell/DeWolfe agents approached his company for work in the months after the acquisition, said agents going through this type of merger are bound to have concerns about various policy changes that come along with being owned by a large corporate entity.
Some agents interviewed by Banker & Tradesman, for example, expressed concerns about possible changes in the agents’ commission structure and fees that the organization collects. In addition, in some communities where there were both DeWolfe and Hunneman offices, many agents worried about having to adjust to a new set of rules and systems once offices were combined.
Instead of having to work with 20 people in one office, for example, some agents faced the prospect of having to work and compete with double that amount of associates. “Some agents view that as dilution of the pie,” said Cahill.
“When they merged, you had agents who are used to competing with each other working in the same office. There was bound to be some dissatisfaction with that,” said Cahill.
Loughlin acknowledged there were several challenges and concerns that resulted from the acquisition – including issues with agents who questioned changes in overall structure and culture.
According to Loughlin, however, such issues and a certain number of defections are expected and factored into the plans for any major real estate merger.
Company leaders tried to bring together resources and programs to make sales associates feel “comfortable,” said Loughlin, who has made it his goal to visit every office in his territory. So far, Loughlin has visited 90 percent of the offices in Eastern Massachusetts, and next wants to visit the Rhode Island and Connecticut offices.
Two months before the deal was announced, acquisitions teams were established to deal with day-to-day issues arising from the merger, including technology and marketing, explained Loughlin.
Yard signs, office signs and business cards were changed, voice and electronic mail systems were melded together and Web sites were tweaked. But one of the main issues that the teams consistently focused on was the agents.
“We told them [sales associates], ‘Let us deal with all the backroom issues’ – the technology changes, the signs, the business cards – ‘and you continue to focus on your business,'” he said. “We tried to make it simple for our sales associates so they could continue to do their business.”
Following Destiny
But despite those efforts, there were departures. In the weeks following the acquisition, for example, four top producers who had worked in DeWolfe’s Marlborough office left to start their own firm in town, Distinctive Realty. Five agents from that office followed them to work at the newly established firm.
“We left because we were looking for a more intimate corporate environment – the type of environment that DeWolfe provided,” said Pamela Wellen, one of the directors of Distinctive Realty.
“We made a business decision to have control over our own destiny,” said Donna Coffin, another director of Distinctive Realty. Dick and Henrietta Rastani are the other directors of the firm.
Coffin said she was shocked when the acquisition was announced, especially since months earlier at a DeWolfe company banquet, Richard B. DeWolfe, the chairman and chief executive of the company, told his employees that the company was not for sale. “I’m a believer,” she said. “When Dick DeWolfe stood up there and said this company is not for sale, I believed him.”
In an interview at their Marlborough office in early May, both Coffin and Wellen talked about how much they appreciated the team environment at their former office and praised DeWolfe’s leadership.
Richard DeWolfe had taken over the company, which was founded by his mother in 1949, in the mid-1970s. About 10 years ago, DeWolfe took his company public – becoming the first regional real estate company in the country to hold an initial public offering. Then last August, shareholders agreed to sell to NRT for $149 million in cash.
Soon after the sale, Wellen and Coffin started to think about their futures and all the changes that come along with being acquired by a large corporation.
“We were all quite happy there [at DeWolfe],” said Coffin. “I guess when Coldwell Banker took over it was … I just felt that maybe they were so big … I wasn’t sure how comfortable I felt.”
Wellen echoed those comments. “We loved our manager [and] we loved our office and environment. We just felt that it was a time to reflect and to evaluate where your business is coming from and where it was going in the future.”
Said Coffin, “We made a business decision to control our own destiny.”
Distinctive Realty officially opened its doors at the beginning of November and has grown to 14 full-time agents since then. In April, after the Hudson office was closed by Coldwell Banker, three agents joined Distinctive Realty.
Agents who decided to relocate to other firms said there has been lot of uncertainty over changes in policies, including the commission structure. Some who have remained still don’t have a clear picture of how their commissions will be affected by changing policies.
But while some agents were dissatisfied with the change and made the leap to other firms, other longtime DeWolfe agents have stayed.
David A. Pap, who had worked for DeWolfe since 1993, now works in one of two Coldwell Banker offices in Cambridge. Before the acquisition, there were three major real estate companies in Cambridge – Coldwell Banker Hunneman, DeWolfe and Hammond Residential GMAC.
“Initially, many of us did not like the consolidation. We didn’t like to see the competition go from three offices to two,” said Pap.
But Pap now sees the benefits. The two companies were able to combine their best resources for the benefit of agents and consumers, he said. For example, Coldwell Banker has retained some of DeWolfe’s tools – including its effective Web site – explained Pap, while bringing its better marketing materials to the table.
The merger has also brought benefits to both buyers and sellers, he said. When sellers list a property with Coldwell Banker in Cambridge, they have two offices working for them. Buyers, on the other hand, have more listings from which to choose, he said.
Coldwell’s two Cambridge offices have over 50 percent of the city’s market share, he said.
One of the reasons that Pap decided to stay with Coldwell Banker is that the DeWolfe office he works in remains open and virtually unchanged. The same agents have remained along with the sales manager, he said, and the two Cambridge offices operate separately.
“We have a very cohesive group of people here with a team approach,” he said. “We have a particular culture in the office that we want to preserve.”
As for changes in policies and commissions, Pap said, “I think people are concerned about what the new [commission] plan will be but I don’t think that they’re anxious.”
“For the time being, our previous commission structure has been grandfathered in or continued. There is talk of a new commission structure – we don’t know what it’s going to be,” he said.
“We only assume that a professional company like Coldwell Banker will want to property compensate its agents and they will come out with a plan that will make their agents want to stay rather than leave,” said Pap.
While the office that Pap worked in remained open, other former DeWolfe agents had to adjust when the offices they worked in closed.
Emily McPherson, who had worked in DeWolfe’s Beverly office for more than 10 years before it was consolidated with a Coldwell office in town, said “it was an interesting twist” to work in the same office with agents she was used to competing with.
When agents heard about the merger, McPherson joked it was almost like “finding out that Superman and Lex Luthor were brothers.”
“That [office consolidations] caused a fair amount of angst for us originally and there [is] some competition here and there,” said McPherson. But ultimately, all Realtors are independent contractors and must cooperate with each other – no matter what company they’re affiliated with, she said.
“I have found it to be a very positive experience because, although there were people down the street that we were in competition with, they were also people we had great deal of respect for and I’m happy to now be on the same team with them,” she said.
“It is a fabulous company. It has a tremendous amount to offer, there is no one else in our area that can come close to offering what this company is offering,” said McPherson. “Coldwell Banker is such a powerhouse. In our area, they have a substantial amount of the market share, so why not be with the powerhouse?,” said McPherson.
