This past December, Canadian-based Brookfield Residential Property Services (Brookfield RPS)—a master franchisor in the Canadian real estate market for 25 years with Royal LePage, Via Capitale and Johnston & Daniel—made big news when it acquired Prudential Real Estate and Relocation Services. Having already established roots in the American real estate market with the 2008 purchase of GMAC and the Real Living brand, Brookfield’s latest acquisition of the Prudential Real Estate network gives the firm a vast, well-entrenched footprint in the United States…and a significant relocation presence around the globe. The question on everyone’s mind? Who exactly is Brookfield and what are its plans for the American marketplace? In this candid interview, Brookfield Chief Operating Officer Stephen Phillips, Chief Marketing Officer Aleya Chattopadhyay, and Prudential Real Estate President Earl Lee, share a look into Brookfield’s DNA and what it brings to the table for current and future affiliates.
Maria Patterson: Let’s begin by hearing a little bit about Brookfield RPS history and how it developed an interest in the American real estate market.
Aleya Chattopadhyay: Brookfield has been around since the 1890s and was started by a group of Canadian entrepreneurs who wanted to invest in the Brazilian market. Our three core areas of focus are real estate, power and infrastructure, and we have more than $150 billion in assets under management. We are first and foremost a real estate company and we are in all components of the real estate business—real estate funds and investments, commercial property, property management, residential development, global relocation services, residential real estate, shopping mall operations and many other facets of real estate.
Brookfield is an entrepreneurial firm that is always looking for opportunities to grow. We have been interested in the U.S. residential franchise brokerage sector for a number of years, but there wasn’t an opportunity to get into the American market when it was going strong. Over the last 25 years, we’ve grown Royal LePage to 23 percent marketshare in Canada. Today, that market grows organically in the single digits. We wanted a way to grow again from a double-digit standpoint and the systems in the American real estate industry are of significant size and quantity. In 2005 and 2006, we started to look for different opportunities and the acquisition of GMAC Home Services brought us a significant platform, especially with the global relocation services business, which set us on a path for international growth. The GMAC franchise and company-operated stores gave us a footprint in the U.S. brokerage market and, in 2009, we added to the platform with the acquisition of Real Living. This gave us the opportunity to learn the ins and outs of the U.S. market. The opportunity to acquire Prudential Real Estate was of great interest to us—they are the “who’s who” of U.S. real estate and both the quality and size of the network are significant. We now have 75,000 agents under our umbrella across North America.
MP: Did the U.S. housing downturn of the past few years and the unsteady pace of the current recovery deter you at all?
AC: Not at all. Homeownership is an integral part of the American heartbeat. While the market had a downturn, it’s a cyclical market and one that we believe in over the long-term. The downturn allowed us an entry point to make these strategic acquisitions at an opportune time.
MP: How did Brookfield executives foster relationships with Prudential executives to pave the way for a successful transition?
Earl Lee: The way the transaction was structured, there was not a lot of discussion between the operational staffs until just before the closing. So, discussions about how to merge the organizations took place post-signing. But just before the closing, I—and a number of our folks—had an opportunity to interact with the leadership at Brookfield. It became very clear that there was a lot of alignment between the two organizations in terms of core values and corporate culture—things that allowed us to quickly define what was important to both sides, what was needed to make the transition successful and to understand what was in the best interests of our affiliates, stakeholders and employees. This was not about two small organizations coming together—therefore, there were a lot of services and technologies that we had to disengage from Prudential. The ability to make this happen stemmed from the fact that our core beliefs are very similar.
MP: What does it take to successfully pull off an acquisition of this size?
EL: First off, to conduct a transaction of this size, you have to have capital and synergy. These types of large transactions are also very complicated and require a fair amount of patience and huge amounts of communication—communication that has to cascade not only through the corporate structure but also through the client and affiliate base. In this case, very little information could be dispensed until after the deal closed.
MP: What groundwork was conducted among the individual Prudential Real Estate brokers to make sure their support and cooperation was in place?
EL: Literally, the day the deal closed, every one of us was on the road criss-crossing this great country in order to communicate with as many of our affiliates as we could get in front of. We felt it was very important to be there in person to show our affiliates that the new leadership is very open, very transparent and very willing to listen. There is a level of authenticity that transcends throughout the Brookfield organization that is apparent to anyone who has an opportunity to speak to the leadership. Over about a three-week period, there were a lot of us on airplanes, meeting with affiliates from early in the morning until late in the evening. We continue to keep this communication flowing. We see great value in this transaction and we believe this acquisition will help us grow the business.
MP: How have you/will you go about merging company cultures?
Stephen Phillips: In our case, you not only have the culture of two different franchise organizations coming together, you also have the history of the affiliate networks. I’ve been through this type of transition before and there are different stages of cultural integration. When I first went to GMAC, we had 20 cultures we were attempting to merge. The first stage is sort of an “us versus them” mentality where people who are legacy with one company or another believe that their point of view is the correct one. When I came into this new role, I had my ears tuned to determine where we were in that process. But I have not heard a single “us versus them” conversation. We have already transitioned into the second phase of merging cultures, which involves everyone looking into how their respective legacies can contribute to the future of the organization. It’s a very healthy sign that we’ve reached that stage already and says a lot about what was here to begin with, in terms of the quality of the people involved.
AC: Merging company cultures is always a difficult task and it’s an ongoing effort throughout the organization, whether you’re at the water cooler or an official event. We all love this business. Real estate is in our DNA and we love the opportunity that’s in front of us. Whether you’re speaking to someone at Prudential Real Estate or Brookfield, there’s a connective tissue that binds us together.
MP: Did the timing help pave the way for a smooth transition? In other words, did a tough U.S. real estate market make brokers more amenable to big changes?
SP: Within the last year, there has been much more willingness for people to seek out change in this industry and that wasn’t apparent to me at all in my earlier experience. At GMAC, there was tremendous resistance to change at that time. Now, having been through what we’ve all been through, the opportunity for this type of change is better than it’s ever been. That’s a big part of what Brookfield sees in making this kind of commitment and investment at this time.
AC: The downturn in the U.S. market, particularly the housing market, has been significant and can’t be underestimated. It’s been significant for brokers and agents in the real estate business but also for homebuyers and sellers. The way that real estate is transacted today is very different than when Prudential Real Estate was built; and we now have the chance to build something that is sustainable and profitable, to redefine the relationship between the agent and consumer that is based on trust and confidence while embracing a socially enabled digital environment. Our affiliates understand that this is a real opportunity for all of us.
MP: Have you encountered resistance due to the fact that Brookfield is a Canadian company? Any “they don’t understand the U.S. market” vibes?
EL: I don’t see that at all. Clearly, the real estate business has its unique aspects based on region, state and country. But the desire for homeownership is pretty universal, and while Brookfield has its origins as a Canadian organization, they have been in the U.S. market for a number of years and they clearly understand the business in this country. If you look at their other businesses, they are in some of the most robust markets in the U.S. They can be defined as Canadian-based on their residence, but not on their business experience.
MP: Will there be any significant structural changes to Prudential’s existing business model?
EL: Our franchise model has been very broker-centric. We believe in the local entrepreneur and believe they know what’s best for their marketplace. We provide the best tools and services to attract the best real estate companies and they, in turn, attract the best agents who then provide the best level of service to consumers. That business model is not changing. What will change are some of the tools and resources we can now offer.
SP: From my point of view, the history of the franchisor and franchisee relationship in the Prudential network has been the strongest in the industry. We have a great opportunity to build on that with the quality of service we can provide to the local entrepreneur.
AC: The broker-centric model has always been the primary focus for us. As we look to the experience we offer our affiliates, we want to create value and pass that on to them through things like technology best practices, new tools, and opportunities to combine purchasing power.
MP: Specifically, how does the acquisition benefit existing Prudential brokers and agents?
EL: The most immediate benefit is the talent Brookfield has deployed into the organization. That’s not to say Prudential didn’t have good talent, but this provides us with talent that brings a whole different mindset and different outlook on how business is done. For many organizations, change has to come from the outside.
The other immediate benefit to Prudential Real Estate brokers is the ability to now leverage the resources that Brookfield has that are focused on real estate versus the resources we previously had that might have been focused more on insurance.
MP: I understand there is a new brand currently in development. What are the cornerstones of this new brand and how will it better serve real estate consumers in the future?
AC: Brookfield has always operated a multi-brand strategy and mindset. In Canada, we have Royal LePage and Via Capitale, a regional brand in Quebec, and we now have a handful of Prudential affiliates in the Canadian market. We also have a luxury division in Toronto—Johnston & Daniel. In the U.S., we have the Real Living brand, which will continue to exist. We believe Real Living has carved out a particular niche and is firmly rooted in the position it occupies. In addition, we have the Prudential Real Estate brand and, in terms of the franchise agreements, we will continue to support that brand and enhance the tools and technology we offer and the service we deliver.
We will also be introducing a third brand into the U.S. marketplace. We believe the time is right to build a fresh, new brand that talks about today and tomorrow. Earlier this year, we formed a brand council with 10 affiliates representing the network from across the country to determine what this brand would be. The new brand will take the best of what exists today and blend that with best-in-class technology, lead generation tools, digital and social marketing, differentiated products and services and great support. Our new brand will be bold, intelligent and genuine—in short, it will let consumers know that we get it.
MP: What are your plans for future expansion?
SP: The history of brands from the U.S. growing internationally or globally has not been one that is very well connected to benefit affiliates in the U.S. We have growth aspirations that are international and global for a particular reason—that is to benefit the growth of U.S. brokers. So we plan to grow internationally and globally in a manner that’s different from how it’s been done historically.
AC: For us, there’s a clear synergy between the two. If you look at the relocation business, it’s a great pipeline for the real estate business. Now, having the second largest relocation company in the world creates an automatic pipeline for referral opportunities both ways: inbound into the U.S. marketplace and opportunities for expansion outbound as we look to understand those markets.
EL: The organization does have aspirations for the real estate and relocation business worldwide. The United States is the standard bearer for real estate throughout the world. People want their real estate market to operate like it does in the United States. In all, we have a huge opportunity to grow internationally.
The Brookfield Faces
Stephen Phillips and Aleya Chattopadhyay are no strangers to the real estate business. Here, a brief look at their impressive stats.
Stephen Phillips is chief operating officer of the Brookfield U.S. Franchise business, as of June 2012. His initial focus has been on the Prudential platform and ensuring services and technology are positioned for conversion success. Phillips brings a wealth of experience from his prior roles in real estate and financial services management, including serving as executive vice president and chief operating officer for GMAC Home Services from 2001-2006. According to Phillips, his entry to GMAC represented his “first in-depth experience in the operating side of residential real estate. It was a life-altering experience.” Phillips also served as interim CEO of the GMAC Relocation Services business, where he implemented Premier Service. Prior to joining GMAC, Phillips worked at US Bancorp, the sixth-largest commercial bank in the U.S., as a senior vice president, and served as managing director for Koch Ventures, Inc. Based on his rich, varied experience, Phillips intends to bring a different point of view to his tenure at Brookfield RPS.
Aleya Chattopadhyay is chief marketing officer for Brookfield RPS’s U.S. and International Real Estate business platforms, including Prudential Real Estate, Real Living and the new brand that will be introduced in due course. In this capacity, she is responsible for brand strategy, marketing, digital and product development, conferences and meeting services, public relations and communications. Chattopadhyay has been with Brookfield since 2003. Initially, she worked in the company’s Canadian Real Estate operations, followed by developing a Canadian online real estate and home services lead generation portal. In 2009, she was seconded to India to set up initial operations for Brookfield RPS and, upon successful completion, was posted in London, England, with a focus on developing further international opportunities.