LOS ANGELES, Calif. - The parent company of Realogy Corp., which operates franchise real estate brokerage brands such as Century 21 and Coldwell Banker, plans an initial public offering of stock that looks to raise as much as US$1 billion.
Preliminary documents filed Friday by Domus Holdings Corp. do not say how many shares the company plans to offer or at what price.
The Parsippany, N.J., company intends to use the net proceeds from the offering to reduce the debt on its books, which stood at $7.23 billion as of the end of March, according to the documents filed with the Securities and Exchange Commission.
Domus also plans to redeem some $2 billion in convertible notes owned by its principal investors, Apollo Global Management LLC and affiliated funds, as well as by funds managed by Paulson & Co. Inc.
Assuming the IPO delivers $1 billion in net proceeds and at least $2 billion of the notes are converted into Class A stock, Domus expects its debt will be trimmed by about $3 billion.
In addition to Coldwell Banker and Century 21, Realogy is a franchisor of several other real estate brokerage brands, including ERA, Sotheby's International Realty and Better Homes and Gardens Real Estate. As of March 31, its franchise system had about 13,800 offices in 103 countries and territories.
Realogy also owns and operates about 725 brokerage offices in more than 35 U.S. metropolitan areas, and runs relocation, title and settlement services businesses.
The company makes money from royalty fees received under long-term agreements with its franchisees. The fees are based on a percentage of the franchisees' sales commissions.
It also collects commission income from transactions handled through company-owned brokerages, and revenue via its other business segments.
Last year, Domus' revenue totalled $4.09 billion, essentially flat with 2010. The company's net loss grew in 2011 by more than fourfold to $441 million, compared with a loss of $99 million a year earlier.
Still, Domus said it believes the housing market is starting to recover, noting that in the first five months of the year the company's volume of completed home sales — or average home sale price multiplied by the number of transactions — grew 12 per cent versus the same period last year.
It also points to a forecast by the National Association of Realtors that sees sales of previously owned homes increasing 12 per cent this year from 2011, and growing another 10 per cent next year.
"We believe that our business is well positioned to benefit from a sustained recovery in the residential real estate market as a result of our scale, market leadership, breadth of complementary service offerings and operations, and the substantial brand equity of our portfolio of brokerage brands," Domus said.
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