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Lessons Learned from Ten Real Estate Legends
By Desiree French, Mike Sheridan
Urban Land InstituteCopyright © 2004 ULI-the Urban Land Institute
All rights reserved.
TRAMMELL CROW: Transforming the Business Model
Leaders create more leaders.
"A group of people, working closely together, can provide the deliverables of direction, ensuring competence and ensuring that change is implemented. To do so requires participants to share similar values, to develop a commitment to each other and the organization, and to allow those who possess complementary skills to lead when appropriate."
Leading for a Change: How to Master the 5 Challenges Faced by Every Leader — Ralph D. Jacobson, Keith Setterholm, and John Vollum
In national and international real estate circles, the Trammell Crow Company stands out as one of the top commercial real estate services companies in the United States.
The man who made it all possible is Trammell Crow, the company's legendary founder who started out more than 55 years ago building industrial warehouses in Dallas. He went on to grace the landscape with the likes of the deluxe Anatole Hotel in Dallas, Peachtree Center in Atlanta, Embarcadero Center in San Francisco, and Dallas Market Center, the largest wholesale trade and merchandise mart in the world.
In the 1970s and 1980s, the Trammell Crow Company was the largest commercial developer in the country. It attained that distinction based on a unique and powerful corporate culture that embraced a spirit of entrepreneurialism and trust.
"I believe [he] is the father of the partnership structure in real estate. He probably has created more partners, who have created more wealth in real estate, than anyone else."
Crow, a visionary and risk taker who surrounded himself with very capable people — specifically, young people with fire in their bellies — pioneered the concept of speculative real estate development. But he is, perhaps, noted most for creating partnerships to build projects rather than adhering to a traditional corporate organizational structure.
"I believe [he] is the father of the partnership structure in real estate," says Ron Terwilliger, national managing partner of Trammell Crow Residential and a former ULI chairman. "He probably has created more partners, who have created more wealth in real estate, than anyone else."
And for that, his former partners are eternally grateful. Hundreds have achieved huge financial success and security. But, more important, they were given the opportunity of a lifetime, while in their 20s and 30s, to become partners in the fastest growing show in town. In exchange for extremely low salaries at the outset, many were able to reap hefty future rewards and eventually move on to create their own companies and organizations.
"He spawned a whole generation or two of very successful real estate people. Many of them today are great leaders all over the country," says Ned Spieker, one of those former partners who, today, is managing partner of Spieker Partners, Inc., in Menlo Park, California. He is also the former chairman of Spieker Properties, Inc., an office-industrial real estate investment trust purchased by Equity Office Properties for $7.3 billion in 2001.
Spieker was 25 when Crow made him a general partner more than two decades ago. He remained with the company for 17 years. "The lesson I learned from Trammell," says Spieker, "was to share. The only way you can build a large business is to share the profits and the glory. You have to create trusted leaders that you treat on an equal plane. I took that principle from Trammell and applied it in my own companies."
Crow's strategy was simple but innovative. After developing industrial projects in Dallas, he ventured into other parts of the country in the mid-1960s and began to diversify his portfolio. To expand his reach, he built the business using capital and operational partners.
Crow gave his partners, who opened offices for him around the country, meaningful ownership shares in the projects, not just lip service. They shared in the equity of a building and the decentralization of the organization, allowing them to have tremendous control. He recognized that ownership was a very powerful incentive to monitor expenses and maximize profits.
The partnerships, as one former partner put it, were a "rising tide business." If one of his partnerships did well, then Crow also did well. If one did not, he had to ride along with the tide.
"The only way you can build a large business is to share the profits and the glory. You have to create trusted leaders that you treat on an equal plane. I took that principle from Trammell and applied it in my own companies."
Crow was different from other executives in that he met with his young recruits, many of whom were leasing agents — on the first rung on the partnership ladder — during their first interviews at his company. But he did not ask the typical interview questions. He would ask someone about his relationship with his father and whether the recruit was a churchgoer — questions generally considered taboo today.
"He was more interested in the composition of the individual. Trammell looked for someone with brains who was a good guy," says Jon Hammes, a former partner and now managing partner with Hammes Company, a development firm in Milwaukee. "He wanted to be associated with people who would succeed."
Eventually, some in the real estate industry began to refer to Crow's partners as "clones" because they all had something in common with Crow and with each other. They shared the fundamental and very intangible attributes that Trammell sought — high personal standards and sound character, a strong work ethic, enormous energy, and an entrepreneurial spirit.
"The principles and entrepreneurial spirit that Trammell fathered have molded many of us as we have gone on to establish our own companies and organizations," continues Hammes. "Those principles include employing the type of people you build a company around, using the concept of meritocracy, making ownership possible, having ethical standards, and building an organization where people are more than just employees. The model he mentored me on is a sound model. It has worked for me in my own business."
During its heyday in the mid-1980s, the Trammell Crow Company was hiring 125 master of business administration graduates per year, up from a mere one or two in the early 1970s. At one point, Crow had more than 600 partnerships.
His partners were a loyal bunch. When Crow ran out of money and was hit hard by rising interest rates, mounting debt, and a glut of office buildings and other real estate in the mid-1970s, his partners rallied to the rescue and anted up $100 million.
"We just sat around in a circle and said we would raise the money and loan it back to him," says Spieker. "That doesn't happen often, but because he created such trust among the partners, he just called on us and we came to his aid. There was a great deal of love there."
It was an example of the very powerful bond that Crow had forged, one that was truly unique in comparison to other organizations. The partners shared a strong sense of brotherhood. It was something that Crow had personally cultivated within the organization. The partners were partners in the truest sense of the word.
In fact, when Crow once spoke at the Harvard Business School, he was asked to identify the most important element in creating a successful organization. He replied that it was "love."
"Trammell believed in that, and he felt that if you had a general sense of love for people you would be more successful than not. And if you believed in what you were doing, you would be more successful," says Hammes. "He created a culture that I don't know has ever been replicated."
Crow is said to have put forth to all his employees a fatherly or grandfatherly disposition, whether they were secretaries or accountants. "He was not the aggressive, pin-you-to-a-corner type. On the other hand, he was not a fool either. If you got on the wrong side of him, it could be taxing," says Bob Kresko, a former Crow partner who has a part ownership in Krombach Partners, an affiliate of a real estate brokerage business in St. Louis. "The great thing about Trammell is that you didn't have to agree with him 100 percent in order to work with him."
"Trammell ... felt that if you had a general sense of love for people you would be more successful than not. And if you believed in what you were doing, you would be more successful."
* * *
At 89, Trammell Crow has, by all accounts, lived a full life as a humble yet extraordinary entrepreneur. But besides developing properties and establishing himself as an icon in real estate, the former Navy commander has been equally fond of collecting Asian art, particularly jade, of which he has accumulated more than 1,200 artifacts.
Some even quip that Crow went into the hotel business — he built the upscale Anatole Hotel in Dallas and founded the Wyndham Hotel chain — simply to have a place to store his voluminous works of art from Japan, China, and India.
Crow seemed to make purchases of all kinds — a ranch, land, paintings, or sculptures — wherever he traveled. "Trammell never saw a deal he didn't like. He didn't like to say 'No,'" chuckles Ned Spieker. "Trammell knew where the accelerator was, but he never knew where the brakes were."
When Spieker worked in San Francisco, Crow would visit about once every six months, presumably to talk shop. Instead, they would end up in Gump's — a famous retail store that sells exclusive and high-quality merchandise mostly from the Pacific rim — for a behind-closed-doors art sale. Afterwards, Crow would hop into the car and head back to the airport.
A graduate of Dallas public schools and Southern Methodist University, Crow was the fifth of eight children from a lower-middle-income family. Formally trained as an accountant, he had no previous experience in real estate or architecture before setting foot in the real estate arena to help his wife manage a warehouse she had inherited.
Throughout his career, Crow had an exceptional ability to cultivate relationships in the political as well as business and financial arena. He was actively involved in the Republican Party. He supported, and was very close to, George W. Bush and Gerald Ford.
Bob Kresko, a former Crow partner and current part owner of Kromback Partners in St. Louis, was amazed by Crow's intellect, which he says was extensive. He says Crow could be around the likes of Henry Kissinger, Herman Kahn, and Elliott Richardson and still hold his own.
"Other people in the circle would kind of become numb and listen to what Henry Kissinger, for example, had to say. Not Trammell. He engaged them all one on one. They listened to what he had to say," says Kresko.
And his perseverance, particularly in business, was virtually unmatched. "He did everything," says Kresko. "He would go into a building and solicit clients and the building manager would kick him out. He wouldn't go back the next day. He would go back within five minutes."
Crow sought in others what he possessed himself — drive, a will to succeed, and moral standards.
Highly religious, Crow's business philosophy was to do business with someone he could trust, as if on a handshake basis. He often delivered great messages to employees not only about the future of real estate, but also about his ethics. He would tell them they did not have to negotiate a deal to death. It was okay, he said, to leave a few nickels on the table and let the other guy walk away with pride.
Crow, who today is afflicted with Alzheimer's disease, was also more concerned about walking away with what he wanted than acquiring something at the cheapest price. The desire to succeed is what really drove him. Money was just a way he kept score.CHAPTER 2
CHARLES FRASER: Living the Vision
"The people who can achieve something truly unprecedented have more than enormous talent and intelligence. They have original minds. They see things differently. They can spot the gaps in what we think we know. They have a knack for discovering interesting, important problems, as well as the skills for solving them. They want to do the next thing, not the last one. They see connections. Often they have broad interests and multiple frames of reference. They tend to be deep generalists, not narrow specialists. They are not so immersed in one discipline that they can't find solutions in others. They are visionaries and problem-solvers ... (and) they have the tenacity that is so necessary to accomplish anything of value."
Learning to Lead — Warren Bennis and Joan Goldsmith
In the late 1950s, word began to circulate about an ebullient and brilliant young man who envisioned turning the barrier island of Hilton Head into a unique resort community for well-heeled vacationers and retirees.
Many thought he was crazy. At the time, neither Hilton Head nor South Carolina were popular vacation destinations. But Charles E. Fraser — daring, confident, and driven by incredibly lofty vision — saw the opportunity of a lifetime: to develop 5,000 acres of land that he named Sea Pines Plantation. The sheer ambition and scale of the development set it apart. But it would also become one of the first developments to incorporate master planning, retention of open space, mixed-use facilities, and the use of creative deed restrictions and covenants to ensure high-quality design — all extremely revolutionary measures back then.
"There was a great sense of pioneering. It all had a sort of evangelical feel. There was quality and innovation in the [Hilton Head] project with land planning and everything else that we did."
"He had a belief in what could be done," says Michael Ainslie, former president of the National Trust for Historic Preservation, who once worked for Fraser. "He said, 'We're not just peddling dirt, but creating a community.'"
Fraser's brand of conservation-minded planning, which set aside a tremendous amount of green space, was both legendary and unprecedented. He embraced large-scale community planning with a total commitment to the environment, ever mindful of striking a delicate, harmonious balance between natural settings and manmade ones.
"Environmentalism and the kind of care and protection he championed is so commonplace and overused today that you just couldn't imagine that he started this nearly 50 years ago. It seems so mundane and obvious now," says Peter S. Rummell, a Sea Pines alumnus and chairman and chief executive officer of The St. Joe Company, a real estate development company in Florida.
Fraser understood the importance of planning, design, and architecture. Indeed, he influenced an entire industry of architects and designers with his use of natural colors and building into wooded areas. Perhaps more than anyone at the time, he successfully brought value to the interior land away from the ocean. The houses at Sea Pines blended elegantly into the natural beauty of the landscape. Golf courses were built near new homes inland. Recreational facilities abound. There were bike trails, tennis courts, swimming, boating, and a high-end playground for children. Residents had vegetable gardens. And Fraser, always in step with, or ahead of, the latest trend, was one of the first developers to hire professional athletes to run sports facilities and design first-rate golf courses.
"He had a history of doing these things, which was linked to him being a prolific reader and being determined to understand his customer," contends ULI chairman Harry H. Frampton III, another Fraser protege whose real estate development company, East West Partners, is headquartered in Beaver Creek, Colorado. "Many of the things Charles pioneered at Sea Pines became commonplace up and down the seacoast. Everybody seemed to copy it."
Fraser was passionate about quality. He relentlessly pursued it, and in the end, people got what they paid for. This was evident time and again in several projects that his company, Sea Pines, later developed, including Amelia Island Plantation in Florida, Kiawah Island Resort in South Carolina, and the Palmas del Mar resort in Puerto Rico. The same fundamental design and strategies used at Hilton Head were applied to these properties.
At Sea Pines, Fraser consistently emphasized to his young protégés the importance of having high-quality design, great market research, and tremendous value behind everything they did.
Excerpted from Leadership Legacies by Desiree French, Mike Sheridan. Copyright © 2004 ULI-the Urban Land Institute. Excerpted by permission of Urban Land Institute.
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