Realogy Holdings Corp. recently announced an agreement to form a Title Insurance Underwriter joint venture with an investment from funds affiliated with Centerbridge Partners, L.P., a private investment management firm.
As part of the agreement, Centerbridge funds will purchase a controlling 70% interest in Title Resources Guaranty Company, Realogy’s insurance underwriter, for $210 million in cash, subject to closing adjustments, valuing the asset at $300 million. Realogy will maintain a 30% equity interest in Closing Parent Holdco, L.P., a newly formed limited partnership joint venture that will own the Title Insurance Underwriter. The transaction is expected to close in first quarter of 2022, subject to required regulatory clearances and approvals and other closing conditions.
“Realogy continues to demonstrate momentum on our journey to reimagine an integrated real estate transaction,” said Ryan Schneider, Realogy’s chief executive officer and president, in a statement. “While we really like our Title Insurance Underwriter, this agreement enables us to be even more laser-focused on Realogy’s core businesses, including critical consumer-facing transaction services in franchise, brokerage, title settlement and escrow, and mortgage.”
“We believe a standalone venture guided by Centerbridge’s proven asset growth and management expertise can fully unleash the underwriter’s growth potential, which is why Realogy has committed to maintaining a material ownership stake,” added Schneider. “Future growth upside from the underwriter venture, combined with our ability to unlock capital to further invest in Realogy’s strategic priorities, can help us generate additional value for both the company and our shareholders.”
“We are excited to partner with Realogy on this important strategic transaction. We are eager to support CEO Scott McCall and the talented team at the Title Insurance Underwriter to realize their vision. The Title Insurance Underwriter is one of the fastest growing companies in the sector, delivering an approximately 15% CAGR in gross title premiums since June 2010,” said Kevin Mahony, managing director at Centerbridge Partner. “We believe we can accelerate this growth even further by investing in new geographies, expanding title products and services, continuing the development of technology, and delivering value to all stakeholders, including agents and employees.”
Upon close, Centerbridge funds will purchase a 70% equity interest in the title underwriting joint venture in preferred units. Realogy’s portion of future minority interest earnings from its 30% common equity stake will be reported within the company’s Realogy Title Group segment, which includes the company’s title, escrow, and settlement services business and mortgage origination joint venture.
Realogy will continue to own and operate its national scale title settlement and escrow services that helped agents and consumers close 214,000 transactions in 2020.
Realogy’s title and escrow services operate across 43 states under 45 different brand names and in 2020, represented the majority of Operating EBITDA generated by the Realogy Title Group segment, excluding equity earnings from the company’s mortgage origination joint venture.
Consistent with Realogy’s current capital allocation priorities, the company intends to use the cash proceeds after taxes and transaction-related costs to continue to invest in its business and de-lever.
For more information, please visit www.realogy.com.