Ron Peltier is enjoying HomeServices of America’s view from the top, but he’s not spending too long taking it in. On Wednesday, the company ended rival NRT’s two-decade reign as the top real estate brokerage in the country in transaction sides, according to the Real Trends 500 — the first time in Peltier’s tenure.
Peltier isn’t just satisfied with reaching the peak. HomeServices of America still sits in the No. 2 spot in transaction volume, and Peltier said he’s more focused on being the best than being the biggest.
Peltier served as the CEO and president of HomeServices of America for two decades, before transitioning to the role of executive chairman earlier this year as Gino Blefari, took over the CEO role.
Peltier started his real estate his career in 1977 after joining Edina Realty and held numerous executive positions within the company before advancing to president and chief executive officer in 1992.
In 1998, MidAmerican Energy Company purchased Edina and Iowa Realty, and a year later, Berkshire Hathaway acquired MidAmerican Energy Company. Peltier was appointed CEO and president of the HomeServices of America in 1999 and then chairman in 2008.
Peltier spoke with Inman in an exclusive interview and outlined HomeServices of America’s acquisition strategy and plans — including hopefully several more acquisitions this year — as well as dished on startup real estate brokerages and even discussed his own company’s place in industry conversations.
Congratulations on taking the top spot on the Real Trends 500.
Yeah, thank you. It certainly feels good. It’s certainly not the end goal and it was not, our primary goal. We’d rather be the best than be the biggest. But at the end of the day, if we can continue to realize our vision of trying to be the premier providers of homeownership services, and keep growing in that quest, it’s a milestone that we’re proud of.
Why has growth been such a focus for HomeServices of America in recent years?
Well, realistically, we’ve had this focus, really for the last 20 years. When we started Home Services America, the vision was was to expand the business model and the operations from where it started in the greater Twin Cities, after running the Edina Realty, to be operating in key markets around the country. It’s probably zero surprise to you that 50 percent of the population lives within 40 miles of each coast. We started our expansion 20 years ago in the Midwest just because that’s where our roots were.
But couple years later, we started moving to the coast. We have made expansions and acquisitions, virtually every year, four, five or six per year, the first five or six years and then as we got into the correction of not just real estate, but the the whole economy and the recession, we slowed some.
Some of that is that frankly, our targets are great companies that have a long reputation and history in the market. We acquire those companies and really don’t change the brand and don’t change the leadership and to continue to invest in those companies for the long term success.
Yet if you’re a seller, that during the downturn, if you gave them the same valuation multiple when your EBITDA (earnings before interest, tax, depreciation and amortization) is cut in half or you have no EBIDTA, you’re probably not a serious seller. But then as the market continued or began to heal and companies came back to some sort of normal valuation, normal earnings, the opportunity to accelerate or acquire companies again maybe at a faster pace came back to reality.
We have been on a fairly constant quest to identify good companies in key markets in America. And yet the timing isn’t such that we have to do any at any time, it’s just when timing and opportunity converge.
The biggest thing that I think in the last couple of years and the largest company that was a standalone was Long & Foster. We’re very proud that we had the opportunity to acquire a great company in the Mid Atlantic. And others like Houlihan Lawrence up in Westchester, and last year Ebby Halliday, which is a great, great company that we’ve talked to for years. So it may look like we’ve accelerated. But truth be known, we have been making three, four or five acquisitions a year for most of those 20 years.
Can you expand a bit on what you’re looking for in an acquisition?
Well, I’d say what we’re really looking for is companies that have a great reputation, a long operating history, that are known for their integrity, their culture, their commitment to the communities they serve.
We want to basically be the owner of those companies and provide an exit strategy and a monetizing event for the owner so that we can keep the legacy and keep the company going beyond the founding ownership. We have been an ongoing source of opportunity for those types of companies. We were not interested in just any company.
At this point in time, we’re not really interested in markets where there’s not a lot of transactional activity like some of the very lightly populated states and in the central part [of the country]. So we don’t want to be in every market in America. We want to be in the transactional activity markets where there’s lots of opportunities and so our focus has been on great companies with some very solid reputations, that is paramount and when an opportunity presents itself for the founders or the owners who are looking to preserve that legacy and preserve what they built beyond their own ownership — that’s who we’re attracted to.
Is there a general range of multiples of EBIDTA HomeServices of America looks to pay, or is willing to pay when acquiring another brokerage?
Well, I think we may not be the highest. We wont chase a company beyond what makes sense. I think generally four to six which is, what all of the people that are promoting and telling the story do — we do that. The key is, what we’re more committed to helping people do, is, as I say, preserve the legacy of the company and its brand and it’s we want to continue to grow it as opposed to just manage it in and milk it.
Looking ahead this year, will that acquisition strategy continue? Do you plan on trying to acquire more brokerages?
We do. We are engaged in multiple conversations around the country. There’s no shortage of brokerages. There’s still probably 75,000 of them and while they’re not all in front of the radar screen and on our radar screen, we certainly have a good many that are on the radar screen. And we’re in ongoing discussions with lots of brokers. We would expect that we will make several acquisitions this year. We’re never sure how many actually get done, but if I had to guess, three, four or five, will probably happen this year.
Are there certain markets you want to get into or you’re looking to grow your presence? Compass, for example, has made a number of headline acquisitions in the Bay Area and a lot of their growth has been focused there.
San Francisco and others are, you might say, marquee markets that everybody wants to have a presence in. We are in Silicon Valley with Intero, so we do have a presence.
We don’t have to be anywhere at any time. The coastal markets, as I said earlier are of course, key targets, but we’re not gonna we’re not going to try to force ourselves into a market just to be there. If the right timing and opportunity comes, we want to be all those same markets.
Frankly, we’re in almost every key market. One market that we’re really not in is Boston. But we’re in largely every other key market in America and will continue to build in those markets as well as new additional ones.
There’s a lot of noise around some of your rivals and it kind of seems like HomeServices of America has been more quietly growing and you guys aren’t creating as much noise. Is that partially a strategy? Or do you think the industry and media as a whole just aren’t paying as much attention to you?
You guys are the media, and you’re the ones writing it, so that’s a very good question. I have my own perspective, and that is: I’ve been in this business 42 years, and I would say during that entire time, and probably before me, every year there were, as the media has come to call them, picking on sort of what the tech industry called disruptors.
The reality is, if you really look at most of those companies, they are, even though they don’t tell the story, they’re largely moving towards traditional real estate brokerages. And their lead story or their elevator speech may look a little different or act a little different, but that’s really what they’re in.
And so I think, when, there is a conversation about, ‘this is a new tech-driven startup,’ even though it’s very hard for me to see where — we’re all using technology. And yet that they get a lot of air time.
They get a lot of attention, when in fact, they’re, in many ways shape or form still doing the same business that we are and we probably get cast into that category of a traditional old school real estate enterprise. But but maybe when you look under the covers anything or everything in this space that is being used and is being deployed either to agents and or to customers and clients at the end of the day, that’s the business.
I think, in many cases, not just HomeServices but some of the other call it old school real estate companies have been developing and innovating and we don’t get credit for being innovators. I would say probably HomeServices was the first — starting back you know 35 years 40 years ago with Edina Realty that I ran — to pair real estate brokerage with mortgage origination and title insurance and property and casualty insurance.
Now, all of the companies and the startups are sort of targeting in different ways those four core activities of real estate but we weren’t ever looked at as disruptors or innovators.
So who do you see as your biggest competition then? Is it NRT or is it some of these startup brokerages?
Well, I think there’s still a 1.2 million agents, they’re independent contractors, even ones with us and, they tend to, sometimes get influenced by what the loudest noise is out there, what the flavor of the day and the story is and so there’s movement.
I think we continue to attract a lot of good agents and good companies and we’re growing, and fortunately, that’s why we’re having this conversation.
How I think about it, which may be indicative of the years I’ve been in the business is that, HomeServices, closed about 350,000 transactions last year. That’s about 3 percent of the existing home sales market and we’re largest in the country.
So if I read what Real Trends said, I think, Compass — just to use one if you exclude Realogy, which is now behind us and Howard Hanna who I would characterize them maybe you would to as similar to us, old school companies that are probably not getting any real attention by the Inman’s of the world or the media like these creative new technology-driven real estate that enterprises.
But if you go down to Compass, you know we’re 10 times their size and we have 3 percent. Is Compass going to take over the world? And I’m not just focused on Compass. Redfin, are they going to take over the world?
I would hope that as time continues to march on, that our customers and clients and our agents and other agents in the business make a decision on who they want to be with, based on the value proposition that the company offers, the integrity and the reputation, and then ultimately delivering the best tools and services to them and to the customers and clients they serve. That’s how we should be judged.
And like I said, up front, if we get to be the biggest, that will be a secondary goal. Our first goal is to be the best. So we spend a lot of time and a lot of energy and resources at HomeServices developing platforms and programs and services that help agents be more efficient and effective, and ultimately help our customers and clients realize a better experience. So it’s an ongoing, fluid-moving target.
There’s clearly going to be new players coming in. And new players telling a new song and playing a new song and a new story. At the end of the day, is it credible? And is it sustainable? And is it something that is really at the end of the day giving the agents better tools and programs? And is it giving the customers and clients a better experience? I’m not an expert on every other company, but I certainly have not seen any companies that are delivering those two things better tools and services to agents and better experiences to the customer. We have to continue to build on that. And every other company is chasing that similar type of quest.
A lot of the big real estate companies in the industry have been having an issue with commissions rising and high commissions splits are almost required to compete for agents. Is that an issue at HomeServices of America and how do you keep commission splits from getting out of hand?
This is not a new problem, it’s been an ongoing, I will say, tension, between agents and brokers in the business. I think at the end of the day there needs to be an ongoing learning process and educational process. An agent needs to fully assess the company that they’re with and the value proposition that company offers for them to be successful in their business. That value proposition is a combination of you know the culture, the reputation, the tools, the services and the programs. And the commission’s are part of it it isn’t all about the commission.
Certainly, Compass’ success here of late is well funded by venture capital buying agents. Agents aren’t making a decision based on services or culture, or leadership or reputation. They’re making a decision based on one thing, and that’s a check. That doesn’t make it right or wrong, but at some point in time agents will begin to ask the questions for their own long term success, is this best place, whether it’s HomeServices, Realogy, Howard Hanna, Compass, Redfin, or whatever — is this where I want to plant my stake long term?
I think to your point commissions are part of it. But I think all those other things add to the equation so agents make the decision, sometimes a quick judgment and then after a while they find out that there’s more to it than just the commission. And and then they move again. So we try to work very hard.
You can’t pay people 100 percent of the commission and stay in business, right? So at some point in time, you have to convince an educate the agents that the value proposition, the whole package that you’re presenting to them is the best chance for them to be successful in the market. And then if it’s not, then they should look someplace else.