Warren Buffett buys Koenig & Strey
(Crain's) — A unit of billionaire Warren Buffett's investment firm Berkshire Hathaway Inc. has acquired Koenig & Strey GMAC Real Estate, ending months of speculation about who would buy the Chicago-area residential real estate brokerage.
It has been rumored that Koenig & Strey was in play ever since the brokerage's parent company, GMAC Home Services LLC, was acquired late last year by Canada-based Brookfield Residential Property Services.
Since that transaction closed, Brookfield has sold off several locally controlled brokerages, such as Hammond Residential GMAC Real Estate in Massachusetts, and many observers expected Koenig also would trade hands.
The deal, which closed Monday, gives the Berkshire unit, Minneapolis-based HomeServices of America Inc., about 15,000 real estate professionals in 20 states.
Terms were not disclosed, but observers estimate the firm sold for between $5 million and $10 million.
Koenig & Strey is one of the Chicago area's largest residential real estate brokerages, but like many of its peers, it has been battered by the recession and housing slump. The Wilmette-based firm saw its home-sale transaction volume in 2008 drop 27% from the previous year to about $2.69 billion, according to REAL Trends Inc., a publication and consulting firm based in Castle Rock, Colo.
The company has said it expects sales to fall again in 2009, for what would be the fifth consecutive year, and has closed at least seven offices, including branches in the Lincoln Park, River North and Roscoe Village neighborhoods.
Related story: Koenig & Strey closes River North, Lincoln Park offices
HomeServices Chairman and CEO Ron Peltier says he isn't planning a major shakeup. The management team, led by Koenig & Strey President Doug Ayers, who at one time expressed interest in buying the firm, will stay in place, and no job cuts or branch closings are planned.
"The only way we would enter a market is to acquire a solid company with a strong reputation," Mr. Peltier says. "Our acquisition of Koenig & Strey would suggest that if (the market) hasn't stabilized, then at least we're very close."
The Koenig & Strey acquisition was the 21st brokerage acquired by HomeServices, which is owned by Berkshire affiliate MidAmerican Energy Holdings Co. and touts itself as one of the country's largest independent real estate firms.
Mr. Ayers said Koenig & Strey's connection to Mr. Buffett, one of the world's wealthiest men, will be attractive to Koenig's clientele and is "going to be very positive for us."
Mr. Peltier confirmed that HomeServices came close to acquiring Koenig & Strey last summer, before Brookfield bought its parent company, but the deal fell apart at the last minute.
HomeServices' "modus operandi is to come in and leave the unit alone," says James Kinney, president of Chicago-based rival Rubloff Residential Properties, which was not involved in the deal. "They usually follow the mantra that real estate is local and local management dictates how things are run."
Koenig & Strey will remain a Brookfield franchisee. The firm will retain its name, though Brookfield, a division of Brookfield Asset Management Inc., plans to drop the GMAC part by the end of the year as it looks to rebrand its North America real estate franchises, says Graham Badun, CEO of Brookfield Residential Property Services.
"This is a good move" for all the parties, says REAL Trends Editor Steve Murray. "Koenig & Strey is a really good company with a strong brand name, both downtown and in the North Shore ... This gives HomeServices a good start in the Chicago area."
