Wednesday, July 30, 2008 - 3:30 PM MST
Arizona Title Agency shuts its doors, 50 employees affected
Phoenix Business Journal - by Chris Casacchia
Related News
- Arizona Title expanding north [Phoenix]
- Ex-Intero manager jumps ship [East Bay]
One of the state's largest title agencies is out of business and 50 of its employees are out of work.
Arizona Title Agency is the latest casualty of the national housing slump that already has claimed dozens of businesses across numerous sectors. The Phoenix company, which operated 15 branches in Arizona, closed its doors Tuesday without warning.
Arizona Title Agency officials received a call from parent company Mercury Cos. Inc. late in the day informing them of its latest closure. That same day, the Denver firm shut down operations in Texas and California.
"We had no prior warning or prior notice," said Danny Sullivan, who has been president of Arizona Title since 1998. "It's unfortunate."
He said Mercury Cos. didn't have the capital to keep its subsidiaries outside of Colorado in business.
Established in 1996, Arizona Title experienced tremendous success and expansion before its collapse. At its height in 2005, it operated 26 offices throughout the state and employed nearly 200 people. On its last day of operations, seven offices were open.
Revenue also plummeted with the real estate market here. In 2005, Arizona Title reported $26 million in revenue. This year, the company expects to bring in $7.5 million to $8 million.
In September 2007, Arizona Title merged with two of its sister companies: Title Guaranty Agency and American Heritage Title Agency. Despite staff reductions and consolidations, the moves weren't enough to save the drowning company.
"The whole market has declined so dramatically," Sullivan said. "Everyone is going through those same cutbacks."
According to Phoenix Business Journal research, Arizona Title Agency Inc. was ranked 14 among title agencies in insurable transactions in 2007. The firm insured 6,472 transactions in Maricopa County, down 27 percent from 2006. Officials at the company said all escrow funds are solvent and secure. Arizona Title's underwriter, First American Title Insurance Co., is gathering all files, closing escrow funds and will conduct any pending closing transactions. First American is the county's largest underwriter.
As of press time Wednesday, Arizona Title had not notified state government agencies of its closure and its Web site did not allude to any problems.
Severance packages will not be dispersed to employees. Four executives, including Sullivan, temporarily will remain on board through the transition.
Much like the mortgage sector, which as seen hundreds of closures, the title agency industry is going through its own cleansing process and those that don't streamline practices quickly, can expect the same fate.
"Title companies are going to need to find new ways of doing business," said Frank Busch, president of Scottsdale-based Thomas Title & Escrow. "The old models will not work. The idea of having 15 offices in an environment like this is not going to work for anyone."
Bob Catalana, executive vice president of Scottsdale-based First Arizona Title, said its tragic for the industry but a sign of the times. "The expenses were far exceeding the income," he said.
Catalana said his title agency, which goes under a similar name, has received calls all day from clients inquiring about the company's status and he's ensuring them his company is in good financial shape.
John Vatistas, owner of Camelback Title Agency, was surprised by the shutdown.
"Mercury Cos. was the 800-pound gorilla in their markets," said Vatistas, who also is chairman of Russ Lyons/Sotheby's International Realty. "My understanding is they are in dire financial straits."
Mercury Cos. Inc. reported revenue of $1 billion and assets of $432 million, as of Jan. 1, 2007.
The holding company, which is one of the largest title agencies on the West Coast, has been hit hard by slow housing sales, rising foreclosures and home depreciations.
The Arizona Title closure occurred under similar circumstances as one of its sister companies late last year. Northern California-based Alliance Title Co. in mid-December closed all its offices in California. Alliance was a fast-growing player during the real estate boom of the past decade, growing from five branches to nearly 200. At its peak it had more than 2,000 employees, according to a report by the Sacramento Business Journal, a sister publication.
Financial Title Co., also a Mercury subsidiary, shut its doors Wednesday in California.
The decision by the largest real estate title agent in the Silicon Valley area followed a move by Mercury's lenders to pull their line of credit after it failed to meet loan requirements, according to Jim Hilbun, president of United Title of Texas. United Title also is owned by Mercury.
The Sacramento Business Journal reported that examiners representing the California Department of Insurance, which regulates and polices title-policy underwriters and agents, were on hand at all 57 Financial Title offices in California to ensure escrow funds were properly handled and not stolen or lost.
<script type="text/javascript"></script>
Comments(0)