Real Estate & Retail

Carpenter moving forward as independent brokerage: Execs confident of success without GMAC affiliation Name has value

February 21, 2005

Armed with a stack of market research chock full of industry sales figures, Tom Prall says he's certain Carpenter Realtors will carry on just fine without any outside assistance.

Prall has led the south-side residential real estate agency the past 30 years and recently guided its divestiture from national franchise GMAC, a division of Detroitbased General Motors Corp.

With the contentious split behind him, the former Marine first lieutenant, who served in South Vietnam, is poised to navigate Carpenter through an ambitious growth plan.

The 35-year-old firm boasts 25 offices throughout central Indiana. Under Prall's seven-year initiative, that number would swell to 52 by not only adding agencies in existing markets but also tackling new ones. Targets might include such untapped cities as Bloomington, Columbus, Lafayette, Muncie and Kokomo.

Carpenter already ranked as the thirdlargest local residential brokerage in 2004 by the value of homes sold, according to IBJ's Book of Lists. Counting its Bedford office outside the metropolitan area, Carpenter sold 8,327 homes with a total value of more than $1 billion.

With those types of numbers, Carpenter ranked as GMAC's second-most prosperous franchise. And Prall said the corporation went to great lengths to persuade the local agency to continue its relationship with GMAC. When Prall balked, GMAC portrayed Carpenter as the bad guy, Prall said.

"We were terribly frank and forthcoming with them. If they did not grow their brand, we told them we likely would not renew our contract," he said. "[GMAC is] attempting to suggest Carpenter was a bit of a malcontent and GMAC is alive and healthy."

Indeed, in a Dec. 9 announcement, GMAC said it was ending its relationship with Carpenter because the local firm never "embraced" GMAC's business strategy of providing mortgage, title services and closing services along with home sales.

"The main point of contention was they [Carpenter] wanted to remain a pure brokerage company," said Lane Barnett, president of GMAC's real estate franchise offices. "The most important thing is the quality of service we are providing through our franchisees. Ultimately, that guided our decision in Indianapolis."

GMAC wants to re-enter the Indianapolis market and is evaluating its options, Barnett said. The most likely scenario would have GMAC starting a new company in the area or awarding a franchise to an existing agency, he added.

Mike Watkins, an independent real estate agent in Greenwood, said a GMAC representative made him aware of the franchising opportunity. While he didn't make a direct pitch, Watkins nonetheless said he's not interested.

"[GMAC] lost a huge presence in the marketplace," Watkins said. "I can't imagine having to replace a 25-office company."

Conversely, Watkins does not expect Carpenter to experience negative fallout from the divorce. He described Prall as one of the brightest real-estate minds in the country.

Jim Litten, president of F.C. Tucker Co. Inc.'s residential real estate services division, concurred.

"I think the Carpenter name has value," he said. "Is it as strong as the GMAC name? I'm not sure about that. But [Prall] is a good businessman. I'm sure he had valid reasons that he thought [the split] would bring value and business to his name."

Prall's said his market research validates his belief that the Carpenter name could survive without the backing of GMAC.

Prall recruited Miller Brooks, a locally based advertising agency, to consult on Carpenter's brand identity. Through a survey of 400 people who had bought or sold a home in the past few years in the ninecounty metropolitan area, Miller Brooks found the majority had no strong opinion of Carpenter's connection to GMAC.

Respondents placed the Carpenter name in the same league as competitors F.C. Tucker, Century 21 Realty Group Cos. and Re/Max Preferred Realtors, said Cleve Skelton, a Miller Brooks partner.

"It was clearly black and white," Skelton said. "Overwhelmingly, there was little or no equity in the [GMAC] affiliation."

With the study in hand, Prall said he made the decision to break ties with GMAC, which Carpenter had been affiliated with since 1998. GMAC had purchased the real estate subsidiary then known as Better Homes and Gardens, which Carpenter had enjoyed a relationship with since 1981.

The Better Homes and Gardens franchise gave Carpenter total control of its sales territory instead of dictating where the agency could sell, which is what led Carpenter to leave Century 21 in 1981. Carpenter until then had been an independent agency ever since its founding by Roy Carpenter in 1970.

The decision by Better Homes and Gardens' parent, Meredith Corp., in Des Moines, Iowa, to exit the real estate franchise market left the door open for GMAC.

Prall and his top officer said they believed renewing their agreement under the new GM ownership would be a smooth transition, since they were told GMAC would retain all of Better Homes and Gardens' employees.

"We got in line like good soldiers," said David Caveness, Carpenter's senior vice president. "What's good for General Motors is good for America."

They later learned, however, that seven of the top franchisees had fled the group after GMAC's purchase became final. And in a period of 2-1/2 years, GM let go all of the Better Homes and Gardens employees while the real estate division underwent three management changes, Prall said.

Meanwhile, Carpenter was locked in a five-year commitment with GM beginning in 2000. In March 2003, GM's management began to pressure Carpenter to renew its agreement with GMAC for another 10 years, Prall said. With the seven largest franchises gone and few growth prospects, Prall and Caveness figured GM was desperate to re-sign Carpenter, they said.

But the two had seen enough and had begun preparations to become an independent agency. The possibility of having no control over its territory swayed Carpenter from considering other franchise opportunities.

Further, Carpenter had begun its own sales training and advertising programs, and Prall wasn't about to waste more of the company's money sending franchise fees to an out-of-state corporate office, he said.

GMAC made two more bids to convince Carpenter to remain under its umbrella, even sending its No. 2 and No. 3 executives to Indianapolis to court Prall, he said. By that time, though, Prall said, the "horse was out of the barn."

Meanwhile, GMAC plans to take advantage of the name value it established in central Indiana, Barnett said.

"It's not desirable for us to lose distribution in a major market like Indianapolis," he said.
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