Realty Executives International is investing up to US$10 million to expand in Canada, with a primary focus on growth in Alberta and B.C.
The Scottsdale, Arizona-based real estate company hopes to obtain that growth by dropping its regional developer model in Alberta and B.C. In this model “a franchisor sort of sub-franchises territories out,” says David Tedesco, CEO of Realty Executives International and True North Companies.
Canada “had some great performing groups,” for the brand, he says, but “we thought we were missing an opportunity. We have some awesome regional developers who were really interested in building a relationship with us, but we’ve had some regional developers that were challenging along the way.”
Tedesco says Realty Executives “really had no focus in British Columbia. We were interested in entering that market in a bigger way but we didn’t have the support of the regional developer in that territory.”
The company has changed its franchising model, a move that has resulted in some departures.
“We’ve now worked out that situation such that we can go into there on our own and bring some of our financial wherewithal to bear and make some acquisitions.” Alberta and B.C. are now “totally open to us to develop at our discretion as opposed to having worked through the regional developer model,” Tedesco says.
To kick-start growth, the company is seeking to acquire a number of larger brokerages in Western Canada to “boost our numbers in those areas and increase the brand presence. We’ve been in dialogue with some very large brokerages in Canada.”
Tedesco is giving a 24-month window to find opportunities in Alberta and B.C. that make sense for the company. “We’re interested in expanding in other (provinces) but those are the two provinces that we’re sinking most of the capital in right now. “
In Edmonton, Realty Executives has signed with Darlene and Steven Reid, formerly of Rock Point Realty, to create a new brokerage known as Realty Executives Vision. The two “are very well regarded in their market (and) had an appetite to expand,” Tedesco says. “We think by partnering with them we can go and find 300 to 400 new agents in a market like Alberta that we didn’t have before. We’re hoping to find five or six people between those two provinces that really want to expand like us and we’re hoping that adds another 1,200 agents altogether.”
Realty Executives obtained its first Canadian franchise in 1988 and now has 1,100 agents in about 115 locations in Canada. More than 20 locations are corporate-owned.
The company’s Canadian representation is over weighted in comparison to the U.S., in terms of population. There are 6,200 agents in the U.S.
Established in 1965, Realty Executives was founded in Arizona and owned by same family until the real estate bust in the U.S., when Tedesco’s group acquired a controlling interest in the company.
True North Companies acquired majority ownership of Realty Executives in 2014 and earlier this year acquired the remaining shares of the company from former president and co-owner Rich Rector.
Privately held True North, the parent company of Realty Executives, is worth about US$500 million and also includes entertainment, health care and aerospace divisions. The True North name is being rebranded as Outlier Ventures.
“We’ve spent a lot of time restructuring the company; we’ve redone a lot of the technology and a lot of the operating parameters for our franchisees, ” says Tedesco.
His thinking is that if “you bring the wrong person in you get one person, you bring the right person and three years later you’ve got 100 people. Our goal is to really find the right people in each territory to partner with them and support them from a human capital perspective and an investment perspective. “
Instead of the gross commission income (GCI) model that’s used by most large brands, Realty Executive agents can pay the company a per-month fee and a transaction fee upon closing each transaction. Agents keep 100 per cent of their listing and sales commissions for themselves.
Tedesco contends that on average agents are paying 3.5 times more to be an agent in a GCI-oriented brand than the Realty Executives model. “As soon as you start to perform as an agent it gets really expensive to be involved in the GCI models.
“You’re not getting anything at the GCI brands that you’re not getting with Realty Executives. In fact, in some cases you’re getting less.”
Tedesco says the GCI model is “going to come under further and further pressure. We really don’t even see how those models will survive over the course of the next 20 or 30 years.”
To improve awareness, Realty Executives has started a “seven figure” traditional and digital advertising campaign in key markets. “Of course, the best way to bring brand awareness up is to get lots of agents out with signs on people’s front yards. That’s why the acquisition strategy is important.”
Realty Executives recently invested more than US$5 million to redo its technology, which is now company-owned. As a result, technology issues can be dealt with in under 48 hours as opposed to much longer lead times when working with a third party, he says.
Realty Executives’ agents have long been known as “executives” at the company. “I very much believe in it, that notion of differentiating yourself and presenting yourself to the market in a way that’s more premium. I think that is a huge win and it ties into our brand,” Tedesco says.
As of the end of July, organic agent growth rate this year in North America has been in the 14-per-cent range, “which is really remarkable for a 52-year-old company,” he says. “We’re happy with the company and where it’s going.”
Note: An earlier version of this story said that Realty Executives was dropping its regional developer model in Canada. In fact, it is doing so only in Alberta and B.C.