Century 21 Real Estate Corp., the real estate giant founded in Santa Ana by two brokers 24 years ago, is being sold for $200 million in cash and stock to the world's biggest hotel franchiser.
Hospitality Franchise Systems Inc. of Parsippany, N.J., said Wednesday that it had agreed to buy Irvine-based Century 21, with about 6,000 offices in 11 countries, from Metropolitan Life Insurance Co. of New York. Anxious to return to its core operations, Met Life sold the company for $51.2 million less than it paid for Century 21 in 1985.
The deal is expected to close in August. Met Life could also receive a $30-million bonus from the sale if Century 21 achieves certain levels of home sales by 1997.
No layoffs are planned at Century 21, which has about a 10% share of the home sales market. The company is expected to remain in Irvine with its current management, officials at both companies said.
"We have no intention of moving our headquarters out of Orange County," company President Richard J. Loughlin said Wednesday. "We are excited about this. Hospitality knows the franchise business extremely well. We don't expect any changes to our service or franchise system."
Century 21 has about 180 workers at its Irvine headquarters, a building owned by Met Life at 2601 S.E. Main St. Loughlin said the lease expires in 1997.
The purchase is the hotel franchiser's first move into residential real estate. Hospitality currently has 4,400 hotel franchises, including Days Inn, Howard Johnson, Park Inn, Ramada, Super 8 and Villager Lodge hotels. Hospitality provides hotel operators with advertising campaigns, reservation systems and training programs.
"This extends Hospitality's experience in franchising to residential real estate. And their choice of Century 21 is an excellent one," said Mark Mutkoski, an analyst with Ladenburg, Thalmann & Co. in New York. "This is an opportunity for them to improve the relationship between the franchiser and franchisee at Century 21 and increase the company's market share."
Gus Modaffari, who owns two Century 21 franchises--one in Garden Grove, the other in Seal Beach--said he was shocked to hear of the sale.
"Jeepers, creepers. I'm surprised. I knew Met Life wanted to get rid of them, but they were doing so well," Modaffari said. "Well, Met Life did nothing for us, so maybe this will be a good thing."
Acquired by Met Life in 1985 for $251.2 million, Century 21 is one of the world's largest real estate companies and one of the pioneers of the real estate franchise technique. Known for agents clad in gold blazers throughout the world, Century 21 was formed by two California brokers, Art Bartlett and Marsh Fisher, in 1971.
Bartlett, 61, is now an investor in San Diego, and Fisher, 70, runs an Irvine computer software company called Idea Fisher Systems Inc.
"It might be very good for Century 21 in the sense that these people are good marketing people and tough bottom-line business people," Bartlett said. "They could be an excellent partner. Especially if they don't drain out every cent as soon as it comes in."
The company went public in October, 1977, on the Nasdaq market but merged in 1979 with TransWorld Corp., the New York-based food and lodging chain. Last year, Century 21 reported revenue of about $130 million.
Hospitality's experience supporting hotel franchisees will help it succeed in the real estate franchising arena, said Stephen P. Holmes, Hospitality's chief financial officer.
"We are in the business of providing services to franchisees and can provide those same skills to the real estate industry," Holmes said. "One of the reasons we looked at the residential real estate industry is that it is fragmented and very competitive--no one who has stepped up to take a significant lead. Century 21 has been that leader, but we think there is still room for growth."
In 1994, Hospitality had net income of $53.5 million, or $1.06 a share, on revenue of $312.5 million.
In heavy trading Wednesday on the New York Stock Exchange, Hospitality's stock was down 25 cents a share, to $28.50.
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Hospitality Franchise Systems Inc. agreed to buy Irvine-based Century 21 Real Estate Corp. for $200 million on Wednesday. Here are profiles of the two companies:
CENTURY 21 REAL ESTATE * Business: Residential real estate broker * Headquarters: Irvine * President/CEO: Richard J. Loughlin * Employees: More than 60,000 * Offices: 6,000 worldwide * 1994 revenue: $130 million
HOSPITALITY FRANCHISE SYSTEMS * Business: Hotel franchiser * Headquarters: Parsippany, N.J. * Chairman/CEO: Henry Silverman * Employees: More than 103,000 * Franchises: 4,400 Days Inn, Howard Johnson, Park Inn, Ramada, Super 8 and Villager Lodge hotels * 1994 revenue: $313 million
CENTURY 21's HISTORY * 1971: Founded in Santa Ana by brokers Art Bartlett and Marsh Fisher * 1975: Relocates to Irvine; first international office opens in Canada * 1979: Merges with TransWorld Corp. * 1985: Purchased by Metropolitan Life Insurance Co. for $251 million * 1995: To be purchased by Hospitality Franchise Systems Inc. for $200 million
Source: Century 21 Real Estate Corp, Hospitality Franchise Systems Inc., Times reports
Researched by JANICE L. JONES / Los Angeles Times