Hungry for Growth

Hungry for Growth

COMPANIES by Sean Roth | Real Estate Editor

Prudential Florida WCI Realty wanted a presence beyond Manatee, Hillsborough and Lee counties. It also wanted Charlotte and Sarasota counties. So the company recently acquired Prudential Village Realty, with 185 associates and six offices in southern Sarasota County and Charlotte County.

Coming on the heels of a major acquisition of a five-office realty chain in Orlando, it seems certain the second largest public real estate firm in Florida is making a run to further establish itself as the dominant player. Prudential Florida WCI Realty President Rei Mesa isn't focused only on growing the company into the biggest real estate firm with the most offices, he's pushing for gains in per-agent-productivity.

Now, as Prudential Florida WCI Realty tries to separate itself from its large homebuilder parent company, WCI Communities, it's seeking to leverage many of the attributes that made competitor Coldwell Banker dominant in Florida.

Many people are under the mistaken impression that because Prudential Florida WCI Realty is a subsidiary of the Bonita Springs-based WCI Communities, it handles only WCI-built properties. But WCI Communities has its own in-house real estate wing that markets and sells its own products. Prudential Florida WCI Realty is a full-service stand-alone real estate firm that handles all types of products.

Given the financials inherent in the relationship, though, Prudential Florida WCI Realty has a symbiotic relationship with its builder parent.

"Obviously being part of the family, we encourage our sales associates to focus on driving traffic to WCI, because that is additional value we bring to the company as an entity," Mesa says. "[But] we're not inside their sales offices. WCI has its own sales staff to do that."

Always growing

WCI acquired the Prudential franchise and started Prudential Florida WCI Realty in 1999 with three offices and about 70 sales associates. Today, the 6-year-old company is the fifth largest Prudential franchise in the nation, based on sales out of the several hundred Prudential franchise companies. The company recorded sales volume of $5.06 billion on 11,518 transactions in 2005. Prior to the two recent mergers, the company operated 41 offices and 1,953 agents. Now, the company has about 2,200 agents and 56 offices.

With a few exceptions, the company has staked out offices in the lower half of Florida. The majority follows the hyper-growth coastline markets. On the east coast, the company has a row of offices that run south from Port St. Lucie to Pinecrest with a second line just to the west of those offices from Wellington to Pembroke Pines. On the west side, Prudential has grabbed the coastline from Sun City Center to Marco Island to the south. The company also owns offices in Pensacola and Perdido Key.

"We target areas with a high number of transaction concentrations and markets where there is a higher average sales price, which is basically 90% of Florida today," Mesa says. "Now we have the middle of the state with Orlando, and although there isn't a coastal area there, it does meet the numbers that we look for as far as average sales prices and a higher number of acquisitions."

As part of a public company, Mesa says the company is always expected to grow.

"We can grow through acquisitions and through organic growth, which is one-on-one recruiting of sales associates," he adds.

Specifically, Mesa talks about tying up the loose ends in the company's market coverage, deals that expand on its existing offices. He focuses on productivity and individual agents that handle more transactions because it's essentially expense-free growth.

"You get better economies of scales," Mesa says. "It improves retention. You gain marketshare. It's what separates you from the office across the street that may have the same numbers of employees."

A 'viable competitor'

James Crumbaugh III, part of the three-person partnership that previously owned Prudential Village Realty, praises Prudential Florida WCI. He cites the advertising program as top-notch and is impressed with the close-knit atmosphere between agents, fostered by perks, such as a comprehensive health-care package.

"[Before the sale] we used to model ourselves off them," Crumbaugh says. "They were just a great company. We had been talking to them on and off for several years. We wanted to sell to the very best."

The move into Charlotte and Sarasota counties puts Prudential Florida WCI again in direct competition with the top real-estate firm in the state, Coldwell Banker Real Estate Corp., which generated a reported $23.27 billion in sales volume last year. Charles Richardson, Coldwell Banker's regional senior vice president for Southwest Florida, says Prudential Florida WCI is a "viable competitor," particularly because the two are both owned by public companies.

"You spend money differently [when you're a public company,]" Richardson says. "We can invest more in areas like Internet marketing."

As for the monetary advantage of being a public company, Mesa says that while the company may appear to have more money to spend because of the dictates of being public, its spending has to be restrained.

"I know sometimes in people's minds they say, 'Well, they're a bigger company. They can go willy nilly with dollars,'" Mesa says. "The reality is that we have to justify that we are getting back something for every dollar we invest, whereas a private company can say. 'I'll take a loss on this investment, but I'm going to do it anyway.' '"

The vast majority of the company's business, roughly 90%, is focused on residential, although Mesa says that could change as the business continues to grow. One area the company has a strong commercial presence in, Mesa says, is tony Fifth Avenue in Naples.

Looking further ahead to the growth of the company, Mesa says while national expansion is a possibility, it's not on "the radar screen for the very immediate future" because there are still so many opportunities in Florida.

AT A GLANCE

Prudential Florida WCI Realty

Years ended Dec. 31

2003 2004 2005

Revenues $108,885 $135,321 $156,740

Gross margin $ 18,912 $ 21,652 $24,271

Gross margin percentage 17.4 % 16.0 % 15.5 %

Transaction volume 9,710 10,949 11,285

(Dollars in thousands)

Top Florida-based companies

Ranked by sales volume

Name Transactions 2005 Sales volume 2005

1. Prudential Florida WCI Realty $5.06 billion 11,518

2. Watson Realty Corp. $4.98 billion 21,763

3. The Kayes Co. $2.64 billion 8,298

4. Century 21 Sunbelt Realty $1.99 billion 11,866

5. Coldwell Banker JME Realty $1.17 billion 6,560

(Coldwell Banker isn't on the Florida list because it's based in New Jersey). Source: RISmedia's Real Estate