HousingWireHousingWire
Compass created quite the buzz earlier this week when it announced its acquisition of Christie’s International Real Estate and @properties for a total of $444 million in cash and stocks. But executives say this move should not have come as a surprise.
“Robert [Reffkin] and Kalani [Reelitz] have shared on multiple earnings calls that M&A is going to be part of our strategy going forward, and one that we are really excited about,” said Rory Golod, Compass’ president of growth and communications.
“We did two other significant deals earlier this year — Latter & Blum and Parks Real Estate, who were also leaders in their respective regions and markets. This is really an extension of that and it just happens to be a little bigger of a deal, but in no ways different than what we’ve been doing the last year.”
Compass has been vocal about its desire to make significant market share gains, and Golod says its latest acquisition certainly won’t hurt.
“Looking forward, as we continue on this path that we have laid out of wanting to grow significantly in markets we have strong footholds in, it helps us to do this in a way where we are bringing on companies that already have a lot of credibility,” Golod said. “I think it helps you get to the outcomes you are looking for faster, and that is certainly the case here.”
Another goal Compass has been vocal about is further expansion of its ancillary services and integration of these services into the Compass agent platform. According to Golod, the Christie’s International and @properties acquisition also helps toward this goal.
“This acquisition accelerates us toward that goal significantly. If we look at just the Chicago market, for example, @properties has a really strong title business and now that gives us a footprint in that market,” Golod said. “Chicago was already a strong market for us, but we didn’t have a title business there and this gives up a really solid title partner for our agents in that market to work with.”
Like the Compass-backed OriginPoint, @properties also has a mortgage joint venture with Chicago-based Rate — Proper Rate — which Golod said will help to strengthen Compass’ mortgage offerings.
As Compass looks ahead to 2025, Golod said the housing industry should expect to see more M&A action out of the largest firm in the country by sales volume.
“We are actively working to grow all facets of our business, so that includes a mix of growing our current operations organically by bringing in great partners,“ Golod said. “Not only are we looking to attract and recruit top agents but also great loan officers on the mortgage front, and great title reps and escrow officers. But we are also looking at acquiring other companies in markets that give us a new foothold and allow us to slot into the space.”
M&A activity is not the only way Compass wants to expand in the coming years. Through its acquisition of Christie’s International, Compass also gained Christie’s affiliate network, which has 100-plus affiliations across 50 countries and territories.
While Compass has stated that it plans to retain the Christie’s name on the affiliate network, this does give the company the option to franchise. This was something Reffkin first expressed interest during the firm’s fourth-quarter 2022 earnings call.
“This acquisition is far more transformational for us than maybe just your standard acquisition as it really accelerates the opportunity for us to look at different business models,” Golod said.
“We now have the ability to launch affiliates and power independent broker-owners over the long term via Christie’s, and this accelerates that because we don’t have to build the infrastructure for it from scratch. We’ve also brought in a partner with someone that has the experience and knows how to do it, because it isn’t easy.”
While expansion and growth are clearly on the horizon for Compass in 2025, Golod said it will look different this time around than it did in Compass’ early days.
“One of the lessons we really learned this year is just how important it is to run the business with really strong fiscal discipline,“ Golod said. “Many people in the industry thought that by mid to late 2024, rates would start coming down quite aggressively and 2025 would be a really strong year with a really big bounce back. And it still might be, but we are not seeing that certainly right now.
“So, part of what gives us strength as a company now is that we are able to run the business for the environment that we are in, where we are still generating significant EBITDA, which has afforded us the ability to do some of these acquisitions.”
To be able to keep expanding the business through M&A activity, Compass plans to continue operating in a conservative manner — even if it finds itself in a position where it no longer has to, according to Golod.
“If you start to lose sight of that — and making predictions on where the market is going — it is hard to base the strategy of the business off of that because those things are subject to change,” Golod said. “When the market does start to really bounce back, and rates come down and transaction volume goes up, I think we will all be better having learned those lessons and operating the company in this way.”
In addition to its growth goals in 2025, Compass also plans to continue to apply pressure to the National Association of Realtors (NAR) over its Clear Cooperation Policy (CCP). Under the policy, listing brokers are required to submit a listing to their MLS within 24 hours of marketing a property.
Earlier this year, Reffkin came out in strong opposition to CCP, claiming that the policy is harmful to home sellers. According to Golod, this is a message the company plans to continue to spread in 2025.
“Ultimately, our focus has always been, how do we ensure and provide the best tools and resources to sellers, and ultimately work with our agents and their clients to create a company that better serves those sellers and homeowners?” Golod said.
In Golod’s view, the current system for selling a home puts sellers at a disadvantage.
“The most well-known real estate websites have built their businesses at the expense of homeowners by showing negative insights on those listings — like days on market, price drops and value estimates — so what we are trying to do is level the playing field by giving individual homeowners the same playbook and best practices that real estate developers and professional homebuilders have already been using and already benefiting from,” Golod said.
“When the system doesn’t give homeowners the autonomy and ability to do what they want with their listings — and effectively forces them to do things against their will — that is not a great recipe for long-term success and that is why we are so strongly advocating for this.”
In an effort to give sellers more options, Compass has launched a private exclusives internal network. Golod said the company has seen an uptick in usage of the internal listing platform and expects that to continue.
“It provides agents with a tool that they can give to their sellers to help them figure out the best ways to market their property. They can test price and build anticipation and interest in the property,” Golod said.
“Our focus is going to continue to be on, how do we use the system to help agents better serve their homeowners as clients? And it is a platform for homeowners to do what they want to do when it comes to how they sell and market their properties.”
