Opinion: Denver MLA controversy – where is the real issue?

For over 37 years, I have been a consultant to real estate brokerage firms, MLSs, Association of Realtors and other entities related to the residential real estate brokerage industry. In addition to general advisory advice, I was involved in almost 1,000 sales or acquisitions of entities in this industry.

In addition to my role as a consultant, I was editor of REAL Trends, where I reported on the same industry. Although I no longer serve in the role of editor of REAL Trends, I remain active in reading about the industry, engaging with industry groups on all challenges in the market and serving as a Senior Advisor for REAL Trends and its parent company, HW Media.

Like many, I have read with some interest the controversy surrounding the announced sale of REColorado, an MLS market area in Denver, by its two shareholders to a private group. Having done significant consulting work for both associations and knowing REColorado’s predecessor, several of the board members and leadership of all three organizations, and the fact that I live nearby, this led to me meeting with the leadership of the two associations. , known as DMAR and SMDRA.

This is what I learned.

The two shareholders own REColorado. They own all shares of REColorado. As the sole shareholders, they have control over and the authority to appoint the Company’s Board of Directors. For their own reasons, based on their assessment of the future of the industry, they decided to sell their interests in REColorado. Without personally reviewing their shareholder agreements, I am confident they have the right to take this action.

They used an external consultant to scan the market and find potential investors or buyers. Furthermore, they also had REColorado executives prepare their own bid to acquire the company. During this process, the company required shareholders to sign confidentiality agreements prepared by the company’s legal counsel. I understand that all REColorado executives and board members have entered into such agreements, which in my world of mergers and acquisitions is typical and an absolute requirement in all transactions we work on at REAL Trends Consulting.

DMAR and SMDRA leadership determined at some point that the third party bid was measurably better than the insider bid at REColorado and moved forward with the third party bidder.

At this point, a person or persons under REColorado’s direction began sharing information covered by the confidentiality agreements. As I understand it, several board members have resigned voluntarily. Due to other issues arising at the time, the two shareholder associations unanimously voted to dismiss the remaining directors and the directors elected to dismiss several REColorado officers.

Why REColorado representatives would think it was okay to violate their confidentiality agreements is difficult to fathom. Breaches of this nature simply do not occur in our mergers and acquisitions work.

Follow-up stories have suggested nefarious conduct involving the conduct of DMAR and SMDRA leaders, the identity of the buyer, and the treatment of REColorado board members and/or executives.

My own observation is that the shareholders decided to sell an asset, no different from any other asset they might own, and then did so by hiring outside, unrelated consultants and advisors, to achieve this goal. As for the identity of the party under a Letter of Intent (LOI), I do not know them, but I am confident that DMAR/SMDRA leadership will perform the normal due diligence on them before closing a sale.

Regarding the treatment of board members and executives who have separated from the company, shareholders shared with me that they intend to ensure that the company meets all their legal obligations and expect only the same in return.

Finally, knowing these three organizations as much as I do, and some of the history behind them, it’s no surprise that all of this happened. There have been tensions in the relationship between REColorado, DMAR and SMDRA for years. Why this is so, I have little to offer by way of explaining it. DMAR and SMDRA officials shared that this has a lot to do with the changed climate resulting from the recent NAR lawsuit and they believe this is in the best interests of their respective organizations and their members.

Anyway, DMAR and SMDRA had the right to go in this direction, they used outside help to do it and moved on. While the sale of a broker-owned MLS is major news, the rest of what has been reported is not.

Steve Murray is a senior advisor to HW Media and co-founder of REAL Trends.

This column does not necessarily reflect the opinion of HousingWire’s editorial staff and its owners.

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