Managers Buy Prudential’s California Realty Division

The top managers of Prudential California Realty said Wednesday that they bought the Los Angeles-based company from Prudential Insurance Co. of America for an undisclosed amount.

The deal, they said, makes the company the state’s largest independent residential real estate brokerage.

The buyout comes at a time when the home-selling business has soured, resulting in significant consolidation and ownership turnover among real estate brokerages.

“It’s as good a time as any” to buy a real estate firm, said George Rathman, a member of the buyout group and chairman and chief executive of Prudential California Realty.

Prudential California Realty was part of a transaction last year in which Prudential Insurance, a Newark, N.J.-based financial services firm, bought a national real estate brokerage operation from Merrill Lynch & Co. for $300 million. The national operation included a 450-office network and a corporate relocation company. The relocation company was Prudential’s real target, and the company has sold most of the residential real estate operations to local managers, Rathman said.

Prudential California Realty is the largest independent home seller in California with 78 offices and 4,200 salespeople, said Rick Merrill, its president and chief operating officer. A franchise company like Century 21 is larger as a whole, but is actually composed of many individually owned real estate offices, he said.

Prudential California Realty had sales of $9 billion last year, up from $8.2 billion in 1988 and $3.5 billion in 1985.

Prudential California will keep its name and will maintain its ties with Costa Mesa-based Prudential Real Estate Affiliates’ national brokerage network and the Prudential relocation company, Merrill said. Prudential California will pay a royalty fee to use the name and to participate in Prudential’s training and advertising programs, he said.

The current state of the market is not something that worries Prudential California’s new owners.

“We think we’re in a unique position to weather the storm and to grow in good times because of our size,” Rathman said. “Most importantly, our future view of California real estate is very strong.”

Rathman called the current market downturn a “temporary correction” that will turn around because of California’s diversified economy, desirable climate and expected participation in the growth of the Pacific Rim region.

“I think 1991 will be a better year than 1990” as sellers become more realistic in the prices they ask and a pent-up demand for houses is unleashed, Rathman said.

Also included in the senior management buyout group is Prudential California Executive Vice President Robert LeFever. Four regional directors will participate as limited partners. They are Joseph Balla in Northern California, Rolinda Smith in West Los Angeles, Roger Ewing in Northern Los Angeles and Robert Foster in the region covering the South Bay, Orange County and the Inland Empire.