Christopher M. Wright is a Washington, D.C.-based freelance writer.
Thriving for the Duration
Success for the country’s oldest real estate companies springs from their ability to meld tradition with innovation.
May 1, 2008
As San Francisco lay devastated from the earthquake of 1906 — a full two years before the birth of the NATIONAL ASSOCIATION OF REALTORS® — someone had tacked a sign to the side of a gutted building that read, “Don’t talk earthquake. Talk business.”
That was advice Colbert Coldwell took to heart. From the ashes of his ruined city, he launched Tucker, Lynch, and Coldwell, the predecessor of Coldwell Banker Real Estate, which today has 120,000 sales associates in 3,800 offices around the country.
The 102-year-old company continues to grow even in today’s slowing national economy.
“We see [the slowdown] as an opportunity to grow share in the marketplace,” says Charlie Young, Coldwell Banker’s chief operating officer.
Young’s optimism stems in part from his company’s history of changing with the times, an optimism that’s shared by other real estate companies that have been around longer than the National Association of Real Estate Exchanges (today, NAR), launched 100 years ago this year.
These members of the century-plus club show that keeping on eye on what made a company strong while also changing with the times can point the way to a long and profitable existence.
“You can change yourself right out of business, but if you don’t change, you can get run over,” advises Steve Baird, president of Baird & Warner in Chicago, one of the country’s oldest real estate companies at more than 150 years.
Getting into Dodge
In 1855, when Grenville Dodge was using his engineering background to help lay the tracks of the Union Pacific Railroad, his younger brother was using his management skills to lay the foundation of NP Dodge, one of the great grandfathers of today’s residential brokerage industry.
The Omaha-based company launched more than 150 years ago in Council Bluffs, Neb., as a land company. Today, the company’s roots are so deep in its market that when people give directions in Omaha, destinations are mapped out based on where they fall relative to Dodge Street.
The company is leveraging those deep roots to attract sales associates looking for a place to prosper in a slow market.
“NP Dodge has lived, learned, and grown in every type of market,” says Mike Riedmann, president of the company’s residential sales division. “That brings an unmatched level of confidence in the NP Dodge name, especially for sales associates looking for stability when things get tight.”
The company’s effort to grow its sales ranks while others are downsizing isn’t the first time it’s moved in one direction while competitors were moving in another.
After World War II, NP Dodge jumped into multifamily rental housing at a time when that segment of the industry was struggling because of strong home sales. Why? The company saw a way to cultivate future home buyers while tapping steady rental fee revenue, says Riedmann.
Over the years, the company has added to its core services. Now it has about a dozen business affiliates handling auctions, builder services, business brokerage, development, insurance, relocation, rental management, and title, among others.
Residential sales remain its core business, though, with some 550 sales associates in more than a dozen offices.
At that size, its residential operation is substantial but far from a giant. And that follows the company’s business approach: It has been and continues to be conservative about its use of debt, says Riedmann. It won’t use debt to fund operations or new facilities. Those are self-financed out of retained earnings. Dodge uses debt only for acquisitions.
The result is that the company, after all these years, can present itself as a bedrock of stability no matter what the market conditions, Riedmann says, and he thinks that’s a surefire way to attract people in the industry.
“We knew that the slowdown would create turmoil in agent ranks and so we felt our opportunity was to grow by attracting and retaining those at the top,” Riedmann says.
In a town where “north of Dodge” has helped people get their bearings for generations, it will come as no surprise if at least some of those sales associates end up at the company’s door.
Back in 1855, when Chicago had about 40,000 people and was considered the frontier, Lucius Olmsted extended a $5,000 loan for the development of a parcel of land that would later become the heart of the city’s financial district.
It was the start of a symbiotic relationship between the city and the company, called L.D. Olmsted & Co. at the time but today known as Baird & Warner.
That relationship extends to this day. Indeed, in 2005 March 28 was Baird & Warner Day in the city, thanks to a proclamation issued by Mayor Richard M. Daley.
But being a fixture in the Windy City isn’t the same as being fixed in place, says Steven Baird, the company’s president and CEO, the fifth Baird to oversee it.
“My grandfather wouldn’t recognize this company,” he says.
Baird & Warner has evolved with each generation to seize upon new market opportunities. While the hot business might have been property management during the Great Depression and urban renewal in the 1970s, the mix is different today.
The firm has entered and exited property development, commercial leasing, and commercial mortgage, among others, but today is focused on residential sales, which it supports with divisions offering mortgage insurance, title, and home services.
Baird’s challenge today is positioning the company for success during the market slowdown as well as after it.
He has cut costs by 5 percent, in part by trimming staff. To succeed over the longer term, he’s looking to acquisitions, one of the company’s chief avenues for growth over the decades. In Baird’s view, now is a good time to go shopping. “I’ve been waiting for this,” he says.
The company likes to self-finance its acquisitions. Internal cash flow provides the down payment and the acquisition is completed over a number of years with revenue from the acquired brokerage.
Baird sees his role as change manager, not operating officer. “You have to know how much to change, but not change too much,” he says.
Building a City
Frederick Woods, an Illinois transplant, founded the Woods Bros. Cos. in Lincoln, Neb., in 1886 to do essentially whatever needed to be done to grow the city at a time when it was little more than a railroad stop of about 2,500 people.
At one time or another, the company has been involved in farming and truck manufacturing, has held interests in telephone, streetcar, and aviation companies, and has operated commercial and residential development arms. Today, one of every four residents lives in one of the more than 70 housing developments the company has built over the years.
The company’s days as a developer are largely over. But because of its willingness to get involved in all types of businesses and to try different operational models, the company has the confidence to position itself to succeed in any market, says Gene Brake, Woods’ general manager.
“We’ve learned some lessons over the last 119 years,” he says.
When the 100 percent commission model arose, for example, the company offered its sales associates that option. It watched as other companies fought the change and lost associates as a result, says Brake.
Twenty years ago, the company also was an early adopter of mortgage services, a business line that, along with title insurance, now makes up 24 percent of its net revenue.
Not all of its forays have worked out. The company went into property management in the 1980s, but exited when managers with the right experience couldn’t be found.
In today’s market slowdown, success for Brake means getting costs in line with sales volume. When an administrative assistant not long ago pointed out that many of the phone lines were rarely used because sales associates prefer their cell phones, the company cancelled 250 lines and saved more than $5,000 a month.
Brake says cost control is a constant theme at the company. In the 1992 downturn, it launched its own title company to give clients the option to use an in-house company for their closings, turning a cost into a source of revenue, for example. “Part of the Woods Bros. tradition is being innovative,” he says.
The Phoenix Rising
True to a company whose birth was from the ashes of a ruined city, Coldwell Banker is reacting to the market slowdown by reinventing its sales force. The vast majority of the associates have been in the business for too few years to have experience working in a down market.
That’s why the company has rolled out a training approach to cover what COO Charlie Young calls the “hand-to-hand combat” of daily sales activity — something that wasn’t needed before, Young says.
The company’s reinventing its customer services too. After studying consumers’ online search behavior, the company rolled out Web changes to reflect that people are typically spending six months or so online researching communities and properties before entering the market.
Coldwell Banker positioned its online presence to assist buyers in what it terms this dreaming phase of the home shopping process. That means more videos and how-tos on the sales process. It also has a mapping tool to find shops, schools, and churches, and a home valuation aid.
Coldwell also became the first major real estate company to experiment in the virtual reality platform called Second Life, where it offered virtual homes for sale and built a 3-D version of a real house for sale that people could tour with their avatars — online representations of themselves. The company has since scaled back its Second Life efforts while it waits for consumers to catch up to the technology.
In late February, Coldwell launched a new ad campaign featuring portraits of its two founders. The effort touts the company’s 100-year history as a traditional real estate brokerage and its online services that help households during the dreaming phase of home shopping. “With this new campaign, Coldwell Banker is communicating with consumers in a way that the real estate industry has never seen before,” Young says.
Innovating while holding onto core values is the successful formula that has allowed Coldwell Banker and its 100-plus-year-old brethren to prosper. Other brokers who would like to see their companies light 100 candles on their birthday cakes someday would do well to remember those lessons.