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Giant Real Estate Brokerage Re/Max Files for IPO

Re/Max at Park Place, NYC

DENVER—Re/MAX, one of the world's largest real estate brokerage franchisors, announced yesterday that it has publicly filed with the Securities and Exchange Commission for a proposed initial public offering of stock. The timing of the IPO has not yet been determined.

The Denver-based franchisor states that it has had the number one market share in the United States and Canada since 1999. According to its SEC filing, the franchising company has 92,239 agents in 6,374 offices in 95 countries. In 2012 the franchisor sold 739 franchise licenses. The firm is interested in expanding through franchising and touts that it has low franchise fees, a strong training program for franchise owners and agents, and has a its practice of high commission splits attracts strong performing agents to franchises.

ReMax wrote in its SEC filing that it plans to drive growth through franchising, agent recruitment and retention. "We believe that our history of sustained agent and franchise growth coupled with our position as the leading residential real estate brand in the U.S. enables us to capitalize on the continuing recovery in the U.S. housing market."

Re/Max Growth Engine
Growth Engine Chart from Re/Max's SEC filing for IPO

The Colorado real estate firm plans to raise franchise fees. Its filing states, "Given the low fixed infrastructure cost of our franchise model, modest increases in aggregate fees per agent have a significant impact on our profitability. We are pursuing opportunities to increase our aggregate fees per agent over time in order to improve our results of operations." It explained, "We maintain a low fixed cost structure which requires little additional investment as we add franchisees and agents. Accordingly, incremental increases in agents and franchisees drive additional revenue and Adjusted EBITDA. This also allows us to deliver consistently high margins over market cycles and in 2012, our Adjusted EBITDA and net income margins were 47% and 23%, respectively."

The company added this point to future stock holders on the benefits of investing in franchising firms. "Further, given that our franchise model requires little capital investment, we are able to generate strong cash flow as well."

The franchisor plans to use some of its IPO money to "reacquire independent Re/Max regional franchises" in the Central Atlantic and Southwest regions, increasing its company-owned territories to 54 percent of its U.S. and Canadian count. The company points out that it makes $2,288 per agent in company-owned territory compared to $803 per agent in independent regions.

Morgan Stanley, BofA Merrill Lynch and J.P. Morgan will act as joint book-running managers for the offering.  Perella Weinberg Partners is acting as advisor to RE/MAX.

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