Mark Stark isn’t afraid of taking chances when it comes to the future of the housing market.
The CEO of Prudential Americana Group, one of the two largest residential real estate brokerages in Las Vegas, has acquired a franchise operating in Phoenix, Prudential Arizona.
Very few would have thought that remotely possible in November 2007, when Stark filed for Chapter 11 bankruptcy protection.
Stark had a debt of more than $20 million, but with the financial help of the corporate office of Prudential, he was able to buy back his company at a fraction of the cost he originally borrowed from two lenders .
Stark said he was one of a handful of companies that to bid for financially troubled Prudential Arizona, that which was taken over in what amounts to friendly foreclosure. Prudential Americana acquired the assets but doesn’t have any of the previous financial liabilities of the firm, he said. The debt for the acquisition comes from Prudential, and Stark said he’s not beholden to outside lenders as he was before. It’s rolled into his existing debt and is based on the current cash flow of the Arizona operation, he said.
“I get to start completely fresh,” Stark said. “That’s powerful. There’s a huge financial benefit for me to do this over the long run . When you make a purchase at this price, the value is going to be much greater in the future.”
Since his company exited bankruptcy in 2008, Stark said he returned to profitability in 2009 and that success continued in 2010 even after debt payments. Because of the high debt, his company wasn’t profitable in either 2007 or 2008, he said.
“Our issues in the past were debt load,” Stark said. “It wasn’t operational. Once that was handled, we were flexible in what we needed to do. We are in a much stronger position with the support of Prudential.”
Prudential Americana has more than 1,000 sales executives and recorded 8,294 home closings in 2010 with a value of $1.47 billion, Stark said.
“You aren’t going to earn big profits in this market and now it comes down to how good you are at running your organization,” he said. “If the market never changes, we would still be very successful.”
The franchise it takes over in Arizona has 11 branch offices in Phoenix and surrounding suburbs. Its sales staff of more than 550 recorded 3,079 closings in 2010 with a value of $700 million, Stark said.
Stark said he had been interested in the Arizona market for long time. Like Las Vegas, it has similar challenges but because the two franchises are in neighboring states, there will be some economic efficiency.
“We don’t have to recreate a lot of operational aspects that a stand alone company would,” Stark said.
Stark said his deal with Prudential doesn’t allow it to add any other franchises in the Phoenix area at this time. There are two smaller Prudential franchises operating today, he said.
As for Las Vegas, Stark said he expects the housing market in 2011 to mirror 2010, remain fairly stable in terms of prices and sales. Prices will rise on some properties, fall on others and remain the same on even others.
Once the market gets through 2012 and eats through its foreclosure inventory, then prices may start to resemble what they did in the early 1990s and rise 2 percent to 5 percent a year, Stark said.
A larger recovery would be defined by improvement in the new home market that remains stalled because of the excess inventory, Stark said.