A management team from Lender Processing Services Inc.’s Real Estate Group has completed a buyout of most of that division’s business lines, members of the buyout team announced today, forming a new entity called Real Estate Digital.

The split with LPS is "really along the lines of product lines," said Jay Gaskill, CEO for the newly formed company who has served as president of LPS Real Estate Group for the past five years.

LPS Real Estate Group managers Prem Luthra, Mike Kovar and John Hensley also participated in the buyout and will continue in their roles at Real Estate Digital. Rich Lull, senior vice president of Multiple Listing Service Systems for LPS Real Estate Group, remains with LPS, as do the Paragon and reInsight product lines for MLSs.

The new entity, though separate from LPS, will still have business ties with LPS, Gaskill explained. "(LPS is) going to be a customer of ours in some respect, (and) we’re going to be a customer of theirs," he said.

In a statement, LPS Inc. officials said, "LPS is a leading provider of technology and services across the mortgage and real estate industries, and the LPS Real Estate Group represents a very small part of the overall assets of the company.

"This recently announced management buyout makes perfect sense for all involved. The MLS systems, which LPS will continue to offer, provide innovative technology solutions to our customer and LPS will maintain ongoing professional relationships with Real Estate Digital on several fronts."

The remaining LPS Real Estate Group business unit will focus largely on public records while the new entity will have a specialty in data aggregation systems, serving customers ranging from real estate agents, brokerages and franchise companies to MLSs and real estate associations, Gaskill said.

Among the product lines that Real Estate Digital will take over: rDesk websites and customer relationship management, Internet Data Exchange and comparative market analysis products; the Real Estate and Living Media Network (REALM) online advertising service; reDataVault; TransactionPoint; DocCentral; FormCentral; MLS Portal; and neighborhood and school reports. Inman News is a client of the REALM service.

The new company counts relationships with about 400 MLSs, 350 brokerage companies, 60 settlement services companies and about 250,000 real estate professionals.

The buyout was prompted by an LPS Inc. analysis of its core operations, Gaskill said. Managers within the LPS Real Estate Group "looked very carefully at various businesses, in particularly real estate assets," and concerns that the business unit wasn’t "going to be nurtured" by the parent company led to their decision to break away.

The buyout was made possible by investments from the management team as well as a contribution from a "noninstitutional private investor." The identity of the private investor and the terms of the buyout deal were not disclosed.

"We’re debt-free and the management team owns the majority of the company," Gaskill said.

Gaskill also told Inman News that the split from LPS Real Estate Group is "pretty close down toward the middle" in terms of employee count, and he said he does not anticipate a staffing reduction at Real Estate Digital as a result of the buyout.

"All … of our product lines are growing. We may be looking to hire people," Gaskill said. Real Estate Digital will have about 105 employees, and a roughly equivalent number of employees will remain with LPS, he said.

The majority of Real Estate Digital employees already work in Irvine, Calif., Gaskill also said, while the majority of employees remaining with LPS work in Oletha, Kan., which also "made a logistically clean and tidy separation," he said. Real Estate Digital will at least for now retain the same office in Irvine, Gaskill also said.

Gaskill said key competitors to Real Estate Digital include companies like Move Inc. and its TopProducer contact management and marketing tools, real estate brands of Dominion Enterprises, "any companies that (offer) IDX and data aggregation" services and tools, and online portals that operate online real estate ad networks.

The buyout from LPS will allow the new company to be more agile and innovative, said Gaskill and John Hensley, chief product and technology officer for Real Estate Digital.

"We’re a growing concern and we have momentum," Gaskill said, "notwithstanding the difficult real estate environment and not withstanding what was going on with our parent company." He noted that "LPS has had some challenges as of late." LPS Inc.’s stock price has fallen about 52 percent on a year-over-year basis.

LPS Inc. reported net earnings of $21.4 million in the second quarter ended June 30, 2011, compared with $80.4 million in the same quarter last year. And net earnings in the first half of this year, at $77.3 million, were down about 49.4 percent compared to the same period last year.

The parent company has also faced numerous lawsuits in the past year, including a lawsuit by the Federal Deposit Insurance Corp. related to appraisal services provided by LPS subsidiary LSI Appraisal Inc., a lawsuit by American Home Mortgage Servicing Inc. related to the electronic signing of mortgage documents, a lawsuit by LPS shareholders alleging violation of securities laws, and a lawsuit by CoreLogic against LPS Inc. and other companies alleging patent infringement related to property valuation techniques. LPS Inc. was spun off from parent Fidelity National Information Systems in 2008.

Jeffrey S. Carbiener, LPS Inc. CEO, president and director, announced in July he was stepping down due to "significant health-related reasons," with Lee A. Kennedy, the company’s executive chairman of the board, serving as interim president and CEO.

Hensley, who has 25 years of experience in software development and management and was a pioneer in bringing real estate listings online, said Real Estate Digital is "heavily focused on mobile," and the company will enhance its mobile offerings to ensure that its products are optimized for tablet computers, for example.

He said that the usage of tablet devices and mobile devices to access consumer-facing real estate portals has expanded more rapidly than anticipated. "Clearly tablet device usage has been going up considerably," he said.

He noted that Real Estate Digital will continue to work with the Realtors Property Resource (RPR), a data service for real estate professionals operated by the National Association of Realtors.

Real Estate Digital’s reDataVault product, now in presales, is expected to launch later this year, and will assist MLSs and vendors in data licensing and standardization. Hensley said that product will allow MLS staff to "easily see what the contracts are (and) what the terms of use are" for industry data, and to provide data in a standardized export format.

The company’s website offerings are focused on making clients competitive with some of the major national online real estate portals, he said.

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