If Zillow, Trulia and Realtor.com have come to symbolize the way the Internet has revolutionized the real estate industry, don’t assume that brokerage and franchising giant Realogy Holdings Corp. is a proxy for the traditional way of doing business.
After pulling off a successful initial public offering Thursday, CEO Richard Smith told Forbes’ Tom Taulli that the traditional real estate marketing model of classified ads is dead.
While that’s not news to anybody in the real estate business, Smith also pointed out something that’s sometimes forgotten — that Realogy has "invested heavily" in online channels like Trulia and Zillow, Taulli said.
Realogy’s IPO prospectus noted that the company has "attractive financial arrangements with third-party websites such as Google, Yahoo, Trulia, Zillow, and others that significantly advantage our agents and franchisees."
In April 2011, for example, Zillow announced that it would provide exclusive discounts to Century 21 Real Estate brokers and agents on featured listings on Zillow.
In June 2011, Realogy Corp. subsidiary NRT LLC announced it had signed agreements to add advertising enhancements to 100,000 property listings on Trulia, Zillow, Realtor.com and Yahoo Real Estate. Under an agreement announced in April 2011, Trulia offered brokers affiliated with Realogy subsidiary Century 21 Real Estate LLC discounts on premium listings for a limited time.
Zillow’s broker advisory board includes Sherry Chris, president and CEO of Better Homes and Gardens Real Estate LLC, and Beverly Thorne, chief marketing officer for Century 21 Real Estate LLC.
After Realogy priced its IPO at $27 per share, Zillow CEO Spencer Rascoff wrote "Rooting for our friends at Realogy #IPOs" on Twitter.
In their first day of trading Thursday, shares in Realogy closed at $34.20 — nearly 27 percent above Realogy’s asking price from the deal’s underwriters.
So it was no surprise when Realogy announced today that underwriters of the IPO have exercised their option to purchase an additional 6 million shares of common stock at the $27 IPO price, bringing the total offering to 46 million shares.
After paying commissions and other expenses, Realogy expects to see $154 million in additional proceeds, bringing the net proceeds from the IPO to $1.2 billion.
The sale of the additional shares also means that parent company Apollo Global Management LLC’s stake in Realogy will fall to 48 percent and Realogy will no longer be considered a "controlled company," exempt from certain corporate governance requirements.
That means Realogy will have one year to appoint a majority of independent directors to its board, and ensure that the company has a compensation committee and a corporate governance committee each composed entirely of independent directors.
In its IPO prospectus, Realogy said it expects one additional director to join the company’s five-member board "immediately following the completion" of the IPO, and that one additional director would be added within 90 days of the company’s listing on the New York Stock Exchange.
Francis Gaskins, founder and editor of IPO Desktop, doesn’t think Smith — who in March added chairman of the Realogy board of directors to his existing titles of CEO and president — will have to relinquish any of his roles due to corporate governance requirements for noncontrolled companies, which he described as just "bluff and icing."
In its prospectus, Realogy predicted that even if it controls less than 50 percent of Realogy’s common stock, Apollo "will continue to be able to significantly influence or effectively control our decisions," and have the ability "to prevent any transaction that requires the approval of our board of directors or our stockholders, including the approval of significant corporate transactions such as restructurings, mergers and the sale of substantially all of our assets."
