Chinese Real Estate Company and a United States Real Estate Company
The objective of this study is to conduct a comparison of a Chinese real estate company vs. A real estate company in the United States.
For the purpose of this study, the real estate companies to be compared are those of Century 21, a real estate company located in the United States and Xinyuan Real Estate Company, Ltd. located in China. Century 21 is reported as the "franchisor of the world's largest residential real estate sales organization." (Marketmag, 2012) Xinyuan Real Estate Company, Ltd. Is a "developer of large scale, high quality residential resale estate projects aimed at providing middle-income consumers with a comfortable and convenient community lifestyle." (Xinyuan Real Estate Company, Ltd. website, 2012) The company was founded by Yong Zhang in 1987 and is ranked number one is Zhengzhou by residential contract sales in 2004. (Xinyuan Real Estate Company, Ltd. website, 2012, paraphrased)
I. Century 21 Real Estate LLC/Realogy (Owned by Parent Company Domas Holdings Company)
Century 21 Real Estate LLC is headed by the company known as Realogy Corporation, "a leading global provider of real estate and relocation services with a diversified business model that is inclusive of "real estate financing, brokerage, relocating and title services." (Realogy, 2012) The world-renowned brands and business units of Realogy include Better Homes and Gardens, Real Estate, Century 21, Coldwell Banker, The Corcoran Group, ERA, Sotheby's International Realty, Coldwell Banker Commercial, NRT LLC, Cartus and Title Resource Group (TRG). Realogy is owned by affiliates of Apollo Management L.P. A subsidiary of Apollo Global Management, LLC, a leading global alternative asset manager. (Realogy.com, 2012) Century 21 Real State LLC's president and CEO is Richard W. Davidson. The company has approximately 103,000 brokers and sales associates throughout the world. Century 21 system is the largest residential real estate sales organization in the world and is reported to provide "…comprehensive training and marketing support for its members. CENTURY 21 brokers and sales associates use cutting-edge technology to make the transaction as smooth and convenient as possible. Founded in 1971, the System is comprised of approximately 7,250 franchised broker offices in 73 countries and territories." (Realogy.com, 2012) Realogy is owned by parent company Domas Holdings Corporation. Realogy Corporation, the real estate brokerage and franchise company that owns Century 21 is reported as "preparing to go public again, nearly six years after the company was taken private by a hedge fund at the height of the housing boom." (Realogy, 2012) The report states that the 2006 deal was a highly leveraged deal. As of March 31 company had $7.23 billion in outstanding debt. A plan was filed with regulators by Realogy's parent company and details show that the company has the hopes of paying down $3 billion in debt by issuing up to $1 billion in new shares and converting $2 billion in convertible notes into common stock. It is reported that in the first two months of 2012 that Realogy had already slashed $500 million from the operating cost of the company and $2.1 billion in loss carryfor4wards." (Realogy, 2012) Realogy's business sectors are shown in the following chart labeled Figure 1 in this study.
Realogy Business Sectors
Source: Realogy (2012)
The provision of real estate franchise services to company operating under 13,800 offices under the Century 21, Coldwell Banker, Era, Sotheby's International Realty, Coldwell Banker Commercial and Better Homes and Gardens Real Estate brands are reported to have "accounted for 61% of Realogy's adjusted (EBITDA) earnings." (Realogy, 2012) Realogy is reported as having 725 NRT-owned brokerage offices -- which operate under the following:
(1) Coldwell Banker,
(2) Sotheby's International Realty,
(3) ERA, Corcoran Group
(4) CitiHabitats brand names (Realogy, 2012)
These four are reported to account for 11% of adjusted earnings of the company.
Cartus is Realogy's relocation business and is reported to have assisted in the facilitation of in excess of 150,000 relocations for 1,500 clients in 2011, which accounts for 22% of the company's adjusted earnings. (Realogy, 2012, paraphrased) Title Resource Group is Realogy's title and settlement services business and is reported to have accounted for 6% of the company's 2011 adjusted earnings. (Realogy, 2012, paraphrased) Title Resource Group, accounted for 6% of 2011 adjusted earnings. The report states, "Most TRG offices are co-located within one of Realogy's company-owned real estate brokerage offices. Last year, approximately 38% of the customers of Realogy's company-owned brokerage offices that offered title coverage also utilized the company's title and settlement services." (Realogy, 2012) According to management of Realogy:
"Our four complementary businesses and mortgage joint venture work together to form our 'value circle,' allowing us to generate revenue at various points in a residential real estate transaction," the company said. "Unlike other industry participants who offer only one or two services, we can offer homeowners, our franchisees and our corporate and affinity clients ready access to numerous associated services that facilitate and simplify the home purchase and sale process." (Realogy, 2012)
Estimations stated by Realogy management is that "brokerages it owns and brokerages it provides franchise services were involved in 26% of 2011 home-sale transaction volume involving a real estate brokerage firm." (Realogy, 2012) The intentions of the company includes growing its franchise business by "selling new franchises "and helping current franchisees recruit productive sales associates and grow their businesses. We believe we have significant incremental franchise sales opportunities with real estate brokers that are unaffiliated with a real estate brand, currently estimated to represent 46% of the market, as well as real estate brokers that are affiliated with competing brands." (Realogy, 2012) Independently owned brokerages affiliated with Realogy's franchise brands are reported to have "…handled 909,610 transaction sides, down 1.4% from 2010 and 51% from a 2005 peak of 1.85 million. During the first three months of 2012, Realogy franchisees closed 197,458 transaction sides, up 6.5% from the same period a year ago." (Realogy, 2012) 254,522 transactions were handled by Coldwell Banker, Sotheby's International Realty, ERA, Corcoran Group and Citihabitats in 2011. It is reported that between 2006 an d2011, there was a decline in the number of residential real estate brokers and sales associates working at Realogy-affiliated franchises and company owned franchise by 23.4%. (Realogy, 2012, paraphrased) During the same time there was a 25.6% decline in the memberships of the National Association of Realtors.
The strengths of this company include the length of time the company has been in business and its repeat customers.
Weaknesses for this company includes the unethical business practices which the company was involved in and which the company is presently financially responsible for.
The opportunities that are present for this company include the countries to which the company is presently expanding its business and services.
There is relatively little threat for new market entrants at this time.
II. Xinyuan Real Estate Company Ltd.
Xinyuan Real Estate Company Ltd. adheres to a strict Code of Business Conduct and Ethics, which is focused on deterring wrongdoing and on promotion of the following:
(1) Honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships;
(2) Full, fair, accurate, timely and understandable disclosure in reports and documents that the Company will file with, or submit to, the U.S. Securities and Exchange Commission (the "SEC") and in other public communications made by the Company;
(3) Compliance with applicable governmental laws, rules and regulations;
(4) Prompt internal reporting of violations of the Code; and (5) Accountability for adherence to the Code. (Realogy, 2012)
The work entitled "Differences Between Corporate Governance Practices of Xinyuan Real Estate Co., Ltd. And the Requirements Under the NYSE Listing Standards" states as follows:
"Section 303A of the Corporate Governance Rules of the New York Stock Exchange, or the NYSE, requires listed companies to have, among others, a compensation committee and a nominating and corporate governance committee each comprised solely of independent directors. As a foreign private issuer, however, we are permitted to, and we do, follow home country practice in lieu of the above requirements. The corporate governance practice in our home country, the Cayman Islands, does not require the implementation of a compensation committee or a nominating and corporate governance committee, nor does it require any such committees to be comprised solely of independent directors. Xinyuan is committed to a high standard of corporate governance and as such, Xinyuan endeavors to comply with most of the NYSE corporate governance practices. Xinyuan has established a separate compensation committee and a nominating and corporate governance committee, and requires that a majority of the members of such committees be comprised of independent director." (Xinyaun Real Estate Company, Ltd. 2012)
Xinyaun Real Estate Company Ltd. announced its first quarter 2012 financial results and states the following highlights for this year's first quarter.
Total first quarter revenues were U.S.$172.6 million, an 88.0% increase from U.S.$91.8 million reported in the first quarter of 2011, and a 13.6% decrease from U.S.$199.8 million recorded in…