by Kathleen Pender | SF Chronicle<\/p>\n\n\n\n
Compass,\na New York real estate brokerage firm, will buy San Francisco brokerage Pacific\nUnion International less than two months after it purchased Paragon Real Estate\nGroup, also of San Francisco.<\/p>\n\n\n\n
Pacific\nUnion is the nation\u2019s fifth-largest residential real estate firm based on\ntransaction volume and Compass is sixth, according to Real Trends,<\/a> a Colorado consulting firm.\nBased on those numbers, the combined firm would leap to number three. Pacific Union is majority owned by Fidelity\nNational Financial, a publicly traded title insurance company based in Florida\nthat also owns 100 percent of J. Rockcliff Realtors, an East Bay brokerage\nbased in Danville.<\/p>\n\n\n\n Compass\nhas been aggressively luring top agents from other Bay Area firms, offering\nhigher commission splits and bonuses. \u201cI\nknow they are giving them stock and paying a tremendous amount of marketing\nfunds for them,\u201d said Sposito, who has lost some agents to Compass. \u201cThey are\ngetting ridiculous amounts of money to come on board.\u201d<\/p>\n\n\n\n Compass\nsaid in December that SoftBank Vision Fund agreed to invest $450 million<\/a> in the company, bringing its\ntotal capital raised to $775 million.<\/p>\n\n\n\n In early July, Compass bought Paragon <\/a>to form San Francisco\u2019s largest residential brokerage firm. Terms were not disclosed.<\/p>\n\n\n\n Its\npurchase of Pacific Union will probably be the nation\u2019s second largest real\nestate brokerage acquisition this year, said Steve Murray, president of Real\nTrends, whose firm consults on real estate mergers but was not involved in this\none. He estimated that the purchase price will be between $100 million and $200\nmillion, which would trail only one larger deal he was involved in. That one\nwas not disclosed publicly but involved the acquisition of a privately held\nbrokerage by a private equity firm, he said.<\/p>\n\n\n\n Pacific\nUnion was founded in 1975 and acquired by CEO Mark McLaughlin in 2009. In\nDecember 2014, Fidelity bought a controlling stake, reported to be two-thirds.<\/p>\n\n\n\n Pacific\nUnion has been on a buying spree itself, having acquired The Mark Company,\nwhich specializes in new-condo developments, in October 2015, followed by a\nstring of other deals including one with Southern California\u2019s John Aaroe Group\nin December 2016.<\/p>\n\n\n\n Mergers\nin the industry \u201chave picked up considerably\u201d over the past 12 to 18 months,\nMurray said. \u201cThe economics of the industry are getting more difficult. The\nlack of inventory, the decline in unit sales, is putting enormous pressure on\nbrokerage firms and agents.\u201d<\/p>\n\n\n\n Companies\nsuch as Redfin and eXp Realty are offering sellers lower commissions while\nventure-funded startups like Compass are luring agents with fat compensation\npackages and techy benefits such as free lunches.<\/p>\n\n\n\n