Two Major Southland Realty Firms to Join Forces : Mergers: Jon Douglas and Prudential California say the new company will employ 4,000 agents in 70 offices.
Two of the best-known names in the Southern California real estate industry, the Jon Douglas Co. and Prudential California Realty, announced plans Sunday to merge, creating a firm that will have 4,000 real estate agents and more than 70 offices throughout the state.
The new firm, to be called Prudential Jon Douglas Co., combines two rivals that together sold more than $11 billion in properties last year and generated operating revenues of $300 million. The deal is expected to close in 30 days.
Jon Douglas, whose 24-year-old company bears his name and specializes in high-end residential sales, will be chairman of the combined company.
Chief executive for the new firm will be George Rathman, chairman and chief executive of California Prudential Realty, which was formed in 1990 as an affiliate of Prudential Insurance Co.
Although Rathman during initial merger talks earlier this year insisted that he would not sell his company, he characterized the arrangement Sunday as a “true merger where one and one equals three.”
Douglas said the merger would broaden the sales network of the two companies and bring savings as the former residential real estate rivals combine forces. Some of the duplicate offices located in the same locations would be either closed or consolidated, but details have yet to be worked out, Douglas said.
Douglas’ company has 30 offices, most of them in the San Fernando Valley and the Westside, while Rathman’s company has 51 offices, many of them in similar locations and with 20 more in Northern California.
In addition, Rathman said the new firm would be able to work with 70 real estate offices that carry the Prudential California name but are independently run and are not part of the merger.
The new company is expected to get an infusion of capital from Levine Leichtman Capital Partners, a Los Angeles investment fund that will become a minority shareholder. Douglas and Rathman declined to provide details about the new company’s ownership.
The melding of the two companies illustrates the impact tough times have had on the industry. The residential real estate industry has been in a slump since the early 1990s.
“I don’t think we’d be bringing our companies together if it hadn’t been for the softening of the market,” Rathman said. The two firms together sold $15 billion worth of property in 1990--a figure that has declined by $4 billion in the past five years.
The merger would enable the new firm to grow, despite the downturns in the residential real estate market, they said.
But Fred Sands, owner of competing Fred Sands Realty with its 43 offices in Southern California, said that Douglas, Prudential and Sands dominate residential real estate sales in the San Fernando Valley and the Westside.
Because 60% of the sales listings normally expire without being sold, Sands said, the merger actually means less competition. Instead of three major agencies to list their homes, homeowners will have two.
“It bodes well for our agents because they will only be competing with one other company,” he said.
Douglas, a former star quarterback at Santa Monica High School and Stanford University, started his company with offices in Brentwood and Beverly Hills, concentrating on higher-priced homes but expanded to include market-rate houses.
Prudential California Reality was created as part of a transaction involving Prudential Insurance, a Newark N.J.-based financial services firm. Prudential Insurance bought the real estate brokerage from Merrill Lynch & Co. and later sold the operations to the company’s managers.
