ASPEN — The Aspen real estate industry got its second jolt of the week Wednesday when one of its largest firms announced it is closing and that its franchise with Sotheby’s will be taken over by a former rival.

Aspen Sotheby’s International Realty will close Feb. 13, according to managing partner Mike Russo.

“We are going out of business,” Russo said. “We couldn’t scale back enough to survive.”

The firm’s franchise agreement will be acquired by Morris and Fyrwald Real Estate, according to Russo. Craig Morris, a name partner with Morris and Fyrwald, declined comment.

Russo said none of his firm’s assets are being purchased by Morris and Fyrwald. It’s essentially two separate transactions — the closing of Aspen Sotheby’s International Realty is freeing that franchise, allowing Morris and Fyrwald Real Estate to acquire the franchise agreement.

There will be no formal merger of the two firms, although Russo said he and some other agents will go to work for Morris and Fyrwald Real Estate. He didn’t know how many of his current employees will make the switch or be invited to the other firm. He said between 50 and 60 real estate agents worked for his firm prior to recent tough times.

Second big shake-out

The closing of Aspen Sotheby’s is the second big shakeout in the industry this week. Joshua & Co. announced Sunday it had acquired Coates, Reid and Waldron, a 57-year-old firm that arguably had Aspen’s highest name recognition in the industry. That consolidation creates one of Aspen’s largest real estate firms. Wednesday’s developments place Morris and Fyrwald in a position to be the market leader.

Morris and Fyrwald’s website says it has grown to almost 50 brokers since its founding in October 2000. It has offices in Aspen and at Willits Town Center in Basalt. The firm handled $42 million in sales in 2001 and $242 million last year, its website said.

The Sotheby’s franchise is lucrative because of its marketing power. Sotheby’s International Realty Affiliates Inc. is a strong national brand that is a top real estate firm in many of the top “feeder” markets for Aspen. Wealthy buyers who are familiar with the company in places like Los Angeles, Chicago and New York City might be attracted to the franchise in Aspen.

Russo said he had talks with Morris and Fyrwald over the years about a formal merger, but no deal was ever arranged.

It is also to Sotheby’s advantage to be affiliated with a strong company in Aspen, a top luxury market in the world under typical circumstances. However, the dollar volume of real estate sales plunged 46 percent last year from 2007.

Carnage in the industry

Russo and his partners realized early in 2008 that they needed to make changes in order to survive. They laid off employees, closed their Basalt office and scaled back marketing.

“We were making due,” he said. “We were cutting back after the first quarter.”

But the worsening of the credit crunch in September delivered a tough blow to the Aspen real estate market. Russo’s firm lost $60 million worth of deals that were under contract to sell in October and November. Business has essentially disappeared so far this year.

“We didn’t know it would decline to this level,” he said.

The firm currently has offices in Aspen, Carbondale and Aspen Glen. Russo said he hopes that Morris and Fyrwald takes over the Carbondale and Aspen Glen offices.

He remains confident that the Roaring Fork Valley market will recover despite the current carnage. The firm isn’t the only real estate company to go under. Harrington Real Estate closed and vacated its spot beside the El Jebel City Market last month. Other firms are rumored to be in financial trouble and actively seeking mergers.

“The business is going to be forced to consolidate,” Russo said.

scondon@aspentimes.com