Published: Wed, Dec. 17, 2008 12:30AM
Warren Buffett has bought one of the Triangle's oldest residential real estate firms.
The parent company of Prudential Carolinas Realty -- one of numerous companies owned by the billionaire CEO of Berkshire Hathaway -- has bought York Simpson Underwood.
The merger creates the region's third-biggest brokerage -- and one that hopes to grow bigger still.
Winston-Salem-based Prudential Carolinas, which has offices in the Triangle, Triad and Charlotte, will operate locally as Prudential York Simpson Underwood. The merger will give it 1,300, or about 10 percent, of the Triangle's active listings, and 500 agents -- behind only Coldwell Banker Howard Perry & Walston and Fonville Morisey Realty.
Terms of the deal, which closed late Monday, were not revealed. Nor would Smedes York, chairman of the York family of real estate companies, and the other executives discuss the deal's genesis.
They were quick to say why they thought a merger would help win business when business has dried up. A bigger team of agents could help, said York, a former Raleigh mayor, who will be chairman of the new company.
"When somebody lists a home with us, instead of 250 agents that have connection right away, we have 500 agents," he said.
The deal allows Prudential to expand its reach inside the Raleigh Beltline, where York has had a dominant presence since 1910.
The combined company will be able to save money by merging accounting, administrative and technology expenses. The companies also will merge some offices in Raleigh and Cary.
And then there are obvious marketing and networking benefits.
"Instead of people seeing a certain number of YSU signs and a certain number of Prudential signs, people will see Prudential-YSU signs and more of them," said Ross Rhudy, general manager of Ammons Pittman GMAC Real Estate, who also has worked as a general manager at York Simpson Underwood and Prudential. "It would raise public awareness of their brands and convert that into more business."
Sales declining
Monthly sales of Triangle homes fell to an eight-year low in November.
The slowdown has cut into business and boosted competition among brokerages.
"This [merger] would have made sense regardless of market conditions -- whether it's a strong market or a not-so-strong market," said Tommy Camp, chief executive of Prudential Carolinas.
Yet the slowdown likely made conditions more favorable for Prudential's parent to buy.
York recorded about $717 million in closings in 2007, down about 28 percent from 2005, when home sales were surging.
Prudential Carolinas is owned by HomeServices of America of Minneapolis.
That company is owned by MidAmerican Energy Holdings, a subsidiary of Berkshire Hathaway, the public company controlled by Buffett.
Berkshire has about $33 billion in cash, making it easier for affiliate companies such as HomeServices to finance acquisitions than it is for many competitors.
York hopes that the financial muscle behind Prudential will help the merged company recruit more brokers, preparing it for battle when the market turns around.
York's own ranks were pilfered last year when Allen Tate, one of the nation's biggest brokerages, entered the Triangle market. That wasn't forgotten Tuesday, when York Simpson Underwood brokers learned of their new ownership.
During a presentation with brokers, Camp read a text message sent from his daughter Kristen, commenting on the merger:
"I wish I could see Allen Tate's face."
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