Homestore revamps contract with Realtors

Instead of paying a royalty to the NAR based on the revenue earned by the NAR's Realtor.com Web site, Homestore will be making fixed payments of more than $1 million a year over the next six years, the company said in a recent regulatory filing.

Homestore will pay less under the renegotiated agreement, but declined to give details or say when the contract was renegotiated, company spokeswoman Delise Keim said.

"Since the fourth quarter of last year, we have done a major overhaul of our cost structure. We've done lots of cost cutting, and I imagine this was one of those measures," Keim said.

Representatives for the National Association of Realtors did not return calls seeking comment.

Homestore has been reeling since it warned investors last fall that its third-quarter earnings would come in lower than it previously had anticipated. Following an internal investigation, the company restated its revenue and net loss for 2000 and the first nine months of 2001, acknowledging that it overstated its revenue during both periods by millions of dollars. The company, which is under investigation by the Securities and Exchange Commission, has also gone through two rounds of layoffs and a management shake-up.

The company's troubles have already led to problems for some of its other partners.

Last month, online marketer MemberWorks sued Homestore little more than six months after Homestore bought MemberWorks' iPlace unit. MemberWorks, which received much of its compensation for iPlace in Homestore stock, charged the company with securities fraud, unfair trade practices and negligent misrepresentation.

Meanwhile, Cendant, which owns 16.3 percent of Homestore and is the company's largest shareholder, took a $285 million charge in the fourth quarter of last year, related to the write-off of much of the company's stake in Homestore. Cendant has said that the write-off will have "no impact" on the company's 40-year agreement to provide real estate listings to Homestore from Cendant subsidiaries Century 21, Coldwell Banker and ERA.

Homestore signed an exclusive lifetime deal with the National Association of Realtors in 1996. Under the agreement, Homestore operates the NAR's Realtor.com official Web site, which includes home listings from real estate agents nationwide. The company's previous agreement called for Homestore to pay the NAR a 15 percent royalty on the revenue it earned through Realtor.com.

Under Homestore's new agreement with the NAR, the company must pay the NAR $1.18 million this year in two equal installments. The fixed payments increase each year until 2005, when the yearly total will hit $1.5 million. After 2005, Homestore must pay the NAR the amount it paid the previous year, adjusted for inflation.

Meanwhile, despite the company's problems, many of Homestore's top executives saw their base salaries jump in 2001, compared with the year before, according to the company's preliminary proxy statement, filed Monday with the Securities and Exchange Commission.

Homestore paid co-founder Stuart Wolff a base salary of $240,097 in 2001, up from $212,115 in 2000 and $197,308 in 1999. Wolf, who in January resigned as chairman and chief executive officer of Homestore as part of the management shakeup, also received 900,000 stock options in 2001, up from 400,000 in 2000. Wolf's bonus was cut to zero from $275,000 the year before.

The base salary for David Rosenblatt, the company's senior vice president and general counsel, jumped from $163,231 in 2000 to $247,346 last year. Like Wolff, Rosenblatt, who resigned from Homestore in January, didn't receive a bonus in 2001 after receiving a $79,500 bonus in 2000.

Other Homestore executives whose base salary increased last year include Allan Merrill, executive vice president for corporate development; Patrick Whelan, president of the company's real estate services group; and Steve Ozonian, president of the company's Realtor.com site.

The executives' salary increases in 2001 were based on the company's performance in 2000, when Homestore was one of the few dot-com success stories, Keim said.

"Clearly if we could pay people in retrospect, it would be a different situation," she said.

Homestore also plans to lose the ".com" from its moniker. The company is asking shareholders to approve a change of the company's name to simply "Homestore."

Following the market downturn and the demise of dozens of dot-coms, a number of Web companies have dropped the "dot-com" from their names in recent years. Keim said she didn't know if the market issues played into the decision, saying that the name change reflected the company's sense of what it is.

"We have always referred to ourselves as 'Homestore,'" Keim said. "'Homestore.com' doesn't jive with the way we refer to ourselves. It seems logical to have our name refer to what we call ourselves."