SAN DIEGO — Guild Mortgage has sold Red Carpet Real Estate Services, a San Diego franchising operation with 400 outlets in the United States and Canada, to Central Holding Co., a Detroit financial services firm, it was announced Friday. Terms were not disclosed.
Central Holding will merge Red Carpet with its Keim Realty, a residential real estate franchising operation with 100 offices in Michigan and three in Florida. Central also owns a federally chartered savings bank in Michigan and a mortgage lending business that operates in 11 states.
San Diego-based Guild Mortgage, a privately owned company that acquired a minority interest in Red Carpet in 1984, eventually purchased all of the franchise operation's stock. It had hoped that the Red Carpet acquisition would bolster its loan origination business.
However, "the marriage of the mortgage origination business and the real estate business was not working (out for) either company," according to Red Carpet spokesman Vince Hennigan.
Central Holding expects the Red Carpet acquisition to bolster the flow of loans through to its Central Mortgage subsidiary, according to Central Holding Vice President Jack Bedard.
Industry experts believe that "there is a tremendous theoretical advantage" in blending financial services with real estate franchising, according to Stephen Roulac, managing partner of Roulac Real Estate Consulting Group, a San Francisco-based subsidiary of Deloitte Haskins & Sells.
However, translating that potential into reality has been difficult, according to Roulac. "It is a continuing challenge that exists and really hasn't been successfully surmounted."
Behind Market Leader
Red Carpet reported $80 million in gross revenue (commission income that accrues to the parent company) during 1987, according to data supplied by Roulac. Keim reported $33 million in gross revenue.
The combined operation, however, will fall far short of market leader Century 21 Real Estate Corp., according to Roulac.
Central Holding hopes to expand Red Carpet's existing franchise system through "master franchising arrangements in different parts of the country," Bedard said.
About 300 of Red Carpet's franchises are located along the West Coast. Red Carpet has about 100 franchises in the Southwest and along the Eastern Seaboard.
Central reported $3.6 million in net income and $46 million in revenue for the fiscal year ended June 30, 1987, according to Bedard.The company expects net income to be "in that ballpark" for the most recent year ended June 30, Bedard said.
Central Holding was formed in 1983 when Detroit-based Central State Savings & Loan became a wholly owned subsidiary of Central Holding Co. Central S&L acquired Keim in 1983.