The merger of two Miami-area Realtor associations and merger talks in the St. Paul, Minn., market are driven not by financial woes but by the conviction that bigger is better when it comes to providing services to members, backers of both efforts say.
With 23,493 members, the Realtor Association of Greater Miami and the Beaches (RAMB) can now claim to be the largest regional Realtor association in the nation, following the association’s Aug. 2 merger with the Realtor Association of Miami-Dade County (RAMDC).
In St. Paul, the St. Paul Area Association of Realtors (SPAAR) and the North Metro Realtors Association (NMRA) say they’re working on a plan to become a single association serving 6,600 members.
Merger proponents in both markets say their aim is to increase the level of services provided to association members while keeping costs in check.
Both mergers are expected to produce cost savings, but primarily as a result of increased negotiating power and clout with vendors, rather than drastic cuts in staff and management.
No multiple listings services (MLSs) are being eliminated or consolidated because the associations in both markets already belong to regional MLSs.
Listings impasse sparks merger talks
In Miami, merger talks began spontaneously, growing out of an impasse between two rival associations over access to listings data, said Teresa King Kinney, the former RAMB association executive named as CEO of the merged association.
(The merged association is expected to officially change its name to the Miami Association of Realtors at the end of this month, once its request for a name change is approved by the National Association of Realtors).
RAMB — the larger of the Miami associations in terms of revenue — was seeking access to RAMDC’s listings in order to feed them into Listingbook, a popular third-party market comparison and client management tool that RAMB provides to its members.
But RAMDC said it wouldn’t release the listings data unless RAMB made Listingbook available to RAMDC members, Kinney said.
Residential brokers serving on one of RAMB’s three governing boards vetoed that idea, saying they were not ready to abandon the association’s policy of providing services like Listingbook only to its own members. The brokers felt that providing services on an exclusive basis gave RAMB a competitive advantage in recruiting, Kinney said.
RAMB brokers decided they would rather provide Listingbook exclusively to their own members, even if it meant Listingbook would have gaps in its coverage of the Miami market.
A meeting was held to attempt to resolve the impasse. When the meeting came to a standstill, RAMB board member Charles Richardson — regional senior vice president for Coldwell Banker Residential Brokerage — declared "all of this would be a moot point if we were one association," Kinney recalled.
Leaders of both associations immediately got behind Richardson’s proposal, scheduling a follow-up merger meeting on the spot.
"It was sort of the shock of the century," Kinney said.
The two associations had explored the idea of a merger more than a decade before, in 1998, with negotiations dragging on for nine months, Kinney said. This time, it was different, she said, with terms of a merger finalized in only two additional meetings of two hours each.
The combined association’s 36 employees — down from a total of 44 in 2009 — serve members from five office locations. The office count was unchanged in the merger.
Kinney accepted an offer to stay on as the merged association’s CEO. RAMDC CEO Martha Bullman and one other RAMDC executive elected to receive severance packages, Kinney said.
The budget picture
According to their most recent tax filings, RAMB and RAMDC experienced significant revenue declines last year, which neither was able to match with corresponding cuts in expenses.
In RAMDC’s nonprofit tax return for the fiscal year ending Sept. 30, 2009, the association reported revenue fell by 26 percent from the year before, to $2.8 million.
During the same period, expenses increased by nearly 5 percent, to $2.57 million. Salaries and other compensation and benefits paid to 17 employees increased by nearly 18 percent, to $970,097, with Bullman’s compensation totaling $243,729.
RAMDC’s revenue exceeded expenses by $258,904 — a slimmer cushion than the $1.37 million revenue surplus posted the previous year. But with $9.4 million in net assets, RAMDC was not facing an imminent financial crisis.
At RAMB, managers trimmed expenses by almost 6 percent, to $5.13 million, according to the association’s tax filing for the year ending June 30, 2009. But revenue was down even more sharply that year, falling nearly 18 percent, to $4.7 million.
As a result, RAMB spend $394,957 more than it took in, although the association could still claim $3 million in unrestricted net assets, down from $3.4 million the year before.
One factor limiting RAMB’s attempts to cut expenses was that salaries, benefits and other compensation paid to 27 employees increased by more than 7 percent from 2008, to $2.04 million.
According to public filings, Kinney’s $288,860 in total compensation included $53,320 in bonuses and incentives. Compensation for two other managers exceeded $100,000: Chief Operating Officer Deborah Boza-Valledor ($146,530 in salary and benefits) and Chief Administrative Officer Robert Sadler ($101,754 in total compensation).
Exclusive services played key role
While some cost savings are expected from the merger, the decision to join forces was not driven by any necessity to do so, Kinney said.
"The reason to do this was not cost savings, but to better serve the members," Kinney said. "We had a situation where we had 69 services on our side that were exclusive to us."
RAMDC also provided some services RAMB didn’t offer its members, she said. Because agents working for the same brokerage might belong to one of the rival associations but not the other, "In some offices, some agents had one set of services, and other agents (in the same office) had another," Kinney said.
Talk of forming a single association grew out of discussions "totally unrelated to a merger," agreed Terri Bersach, who was chairwoman of RAMB’s board of directors during the talks.
"I think it came more from the members, and the boards and the leadership of both associations, knowing it would best serve our members," Bersach said. "These two associations were equally big and powerful. For us to work together and pull in the same direction is a huge member benefit."
Victor Ulloa, who chaired RAMDC’s board during merger talks, did not respond to requests for comment.
"Don’t get me wrong, we are going to save a huge amount of money with contract negotiations (with vendors)," Kinney said. "The savings are really big, but the savings were not the reason to do it."
Streamlining is driver in St. Paul discussions
In St. Paul, SPAAR and NMRA have also seen revenues decline, but are also emphasizing member benefits as the driving force behind merger talks.
In a press release, NMRA president James Stanton said NMRA and SPAAR opened merger talks "as two financially healthy associations," with both negotiating "from a position of strength." Stanton did not respond to requests for comment.
Savings from "streamlining redundant processes will be invested in new and enhanced services for members," the associations said in a press release announcing their plans.
SPAAR, the larger of the two associations, reported in an April 15, 2009 tax filing that the $3.27 million in revenue it brought in for the year exceeded expenses by only $21,843. The previous year, the association posted $200,221 in surplus revenue.
Although SPAAR saw revenue decline by more than 9 percent, it managed to stay in the black by slashing expenses by nearly 5 percent, to $3.25 million. SPAAR managed to trim salaries, benefits and other compensation to the association’s 11 employees by 3 percent, to $607,912.
Tax records show SPAAR’s top manager, Executive Vice President Keith Holm, took a 13 percent pay cut, to $177,644 in total compensation.
In a Feb. 2, 2010, tax filing, NMRA said it managed to bounce back from 2007, when expenses exceeded revenue by $93,893, to take in $33,414 more than it spent in 2008. Although revenue fell 6 percent, to $1.15 million, NMRA cut expenses by more than 15 percent, to $1.12 million, according to the public filing.
Salaries, benefits and other compensation paid to nine employees totaled $350,355, down more than 7 percent from the year before.
Merger benefits
Tony Maurer, broker and managing partner of Tradition Realty LLC and president of SPAAR’s board of directors, said the association had budgeted for a 10 percent decline in membership but has seen a rebound in the last year.
SPAAR’s membership currently stands at 5,065, and NMRA’s at 1,508. It’s hoped a merger of the two associations would provide increased member benefits without an increase in membership dues, he said.
"By merging, we will eliminate duplication and be able to, at the very least, stabilize membership dues," Maurer said. "We may even be able to look at some modest reduction in dues."
The associations are hoping that a merger would allow them to offer more educational and professional development programs, including a peer-to-peer review program. A merger would also give the combined associations a "more powerful and influential voice" in the government affairs and public relations arena, he said.
Maurer said it’s too soon to say whether the merger talks, if successful, would lead to layoffs. NMRA "runs a very efficient company," he said. But "inevitably, with any merger, there are changes that do occur — that’s how you reach the efficiencies.
When SPAAR merged with the smaller Southern Twin Cities Association of Realtors last year, "there were very few personnel changes, (but) a lot of shifting of responsibilities."
Both executive officers were retained in that merger, with the expectation that one would retire at the end of this year, Maurer said.
The idea of a merger with NMRA has been "primarily board driven," Maurer said, having been identified as a goal in a strategic plan drawn up by the board two years ago.
More mergers on the way?
Maurer said he’s talked to association executives around the country who are engaged in similar discussions.
"It becomes a necessity in order to meet the needs of the associations without increasing dues," he said. "You create synergies, reduce duplication, and make a more powerful association. I think you’ll see more of this, I really do."
If SPAAR and NMRA pull off a merger, the region’s MLS, NorthstarMLS, would serve them and one other association: the Minneapolis Association of Realtors.
Asked if there were opportunities for further consolidation in the Twin Cities, Maurer said the Minneapolis association serves a distinct geographic area.
"Having two, friendly associations competing makes everything better, but at some point, regionalization is going to occur," Maurer said. Although there are no discussions between the St. Paul Area and Minneapolis Realtor associations at the moment, he said, "There’s pretty significant outreach from the membership to explore that."
In Florida, the merger of RAMB and RAMDC means the East Florida Regional MLS now serves four associations, instead of five.
"If it can happen between our two associations, it can happen between any, because we were (so far apart)," Kinney said.
Although the Miami association is "doing great the way we are, we’re wide open to bringing people together in the marketplace. This has been a great example of how smoothly it can happen. It continues to amaze us, how well everything has fit, and how quickly it came together."
Asked if she had any advice for other associations hoping to pull of a merger, Kinney said it’s important not to get mired down in details that can be taken care of after the merger.
"Focus only on what’s important," Kinney advised. "Many times, associations think they have to make all the decisions that (eventually do have to) be made before they merge. You become so tied up in the details, you lose site of the big picture."
If big is better, is there also such a thing as too big?
"It probably doesn’t make sense to have Miami and Orlando in the same association, because of the distance," Kinney said. "But think about MRIS, the largest MLS in the nation. If (it) can serve 55,000 people, providing probably the most important service we offer to members, why couldn’t an association do that with the right focus, offices and team?"
The merger makes the Miami association the biggest regional association in the nation — and larger than all but 12 state associations. Only California, Florida, Texas, New York, New Jersey, Illinois, Arizona, North Carolina, Virginia, Pennsylvania, Ohio and Georgia are bigger, according to National Association of Realtors statistics.
Top 10 regional Realtor associations:
- Miami Association of Realtors* (23,493 members)
- Houston Association of Realtors (22,992)
- Long Island Board of Realtors (21,888)
- Chicago Association of Realtors (12,547)
- Metrotex Association of Realtors (Dallas, Texas — 12,235)
- Greater Las Vegas Association of Realtors (12,229)
- Mainstreet Organization of Realtors (Downers Grove, Ill. — 10,982)
- Pacific West Association of Realtors (Anaheim, Calif. — 10,749)
- San Diego Association of Realtors (10,563)
- Orange County Association of Realtors (Orange County, Calif. — 10,171)
- Southeast Valley Regional Association of Realtors (Mesa, Ariz. — 10,044)
*Name change pending approval by NAR.
But not all Realtors think bigger is better.
A planned merger of the San Diego Association of Realtors (SDAR) and the smaller North San Diego County Association of Realtors (NSDCAR), backed by the boards of both associations, was scuttled after NSDCAR members rejected the plan in a June 30 vote.
In an open letter to NSDCAR board, members opposed to the merger complained that its terms were not approved in a "completely open and transparent process." The letter requested details on how the merger would result in cost savings, and demanded guaranties that all service centers and current levels of service would be maintained.
Although NSDCAR officials attempted to address opponents’ concerns, 56 percent of NSDCAR members voted against the merger. By contrast, 93 percent of SDAR members cast votes in favor of the merger. SDAR’s membership is roughly twice the size of NSDCAR’s membership, which stands at about 5,000.
