Colliers Duo a Classic Entrepreneurial Story

EDITOR’S NOTE: Guest contributor Scott McClymonds is the founder of Fayetteville-based strategic consulting firm CEO Velocity.

 

Steve Lane and Ramsay Ball of Colliers International Arkansas in Bentonville have a classic entrepreneurial story. It’s a formula that has given them success and kept them together during the high growth phase of the early 2000s, as well as the hardships of the Great Recession.

Their formula is worth studying for aspiring entrepreneurs. It started with strong backgrounds in commercial real estate as well as an understanding that they each had different skills that would provide complementary benefits to a partnership.

Second, they saw a void in the commercial real estate market space [that] they knew they could fill. The third element was their vision of building enough strength and momentum to be able to merge with a top-tier national commercial brokerage firm. The fourth part of their formula, also related to the first, was to intentionally build their partnership over the years, through trust and respect.

That formula has created success since they came together in 2002, [as co-founders of Lane Real Estate Services in Rogers], and [now] as part of Colliers Arkansas and Colliers International, they play important roles in an organization that dominates Arkansas commercial real estate. Colliers International is the third-largest commercial broker in the world, and Colliers Arkansas has nearly three times the square footage under management as its nearest competitor.

I visited with Steve and Ramsay in the Colliers office in Bentonville to discuss their firm and commercial real estate in Northwest Arkansas, and what follows is a transcript of our discussion.

Scott McClymonds: “What was the void you saw in the commercial real estate market back in 2002?”

Steve Lane: “At the time a lot of the commercial brokers in the area were with residential firms or maybe had a residential background, and weren’t even dealing in commercial real estate full time. There wasn’t much specialization in commercial, and we thought this created a void in the market that could be filled with a professional, full-service commercial real estate firm with a more sophisticated approach to the business. We saw more and more companies investing in Northwest Arkansas, like Wal-Mart [Stores Inc.] suppliers and shopping mall developers, who were demanding a higher level of expertise, and we believed our backgrounds could bring that to the market.”

SM: “What specifically is different about what you bring to the market, and can you elaborate a little more on this aspect of sophistication?”

SL: “Sure. First of all, our firm is ‘client based’ and not ‘broker based.’ In many commercial brokerages, the client hires an individual broker and you are dependent on that individual’s particular skill set and knowledge of the market. With Colliers, it is more of a team approach. We may have two or three brokers along with our support team working on a particular project based on the needs of the client. Additionally, our people have a tremendous amount of commercial real estate training, such as CCIM (Certified Commercial Investment Member) and SIOR (Society of Industrial and Office Realtors) designations. And we have top-notch support staff in our office as well as in Little Rock.

“The team approach enables us to serve our clients with different strengths. For example, Ramsay has a very strong expertise in finance. Alan [Cole] and I are retail specialists, and Butch [Gurganus] is an expert in the Walmart supplier office market. (Editor’s note: Cole and Gurganus are the other two principals at Colliers in Bentonville.) Combining that talent brings tremendous value to our clients. It is impossible to duplicate with an individual broker.

“Since we’re a full-service brokerage firm, we can represent numerous types of clients with different needs. For example, we help clients acquire and develop property, find tenants with our leasing team, manage the property, and develop investment strategies.”

SM: “What are some of the things you did in the pre-Colliers years to distinguish yourselves in the market?”

Ramsay Ball: “We actually funded and developed the methodology of the commercial component of the Skyline Report before Arvest began its sponsorship. At that time, no one really knew how big the commercial market was or how fast it was growing. We partnered with the Center for Business and Economic Research at the University of Arkansas because we wanted to take a hard analytical look at the market through research and analysis, so we could help our clients choose the best properties. We’ve always had a focus on doing the heavy lifting for our clients to give them superior service.”

SM: “Why did you choose to merge with Colliers instead of remaining independent?”

SL: “Colliers has an incredibly powerful brand that is recognized by any corporate commercial office in the country, and you have to be a market leader and meet their standards before they ask you to join them. Joining Colliers gave us instant credibility outside our market, and gives us an edge with corporations looking to open offices, stores or to invest in Northwest Arkansas.

“Companies looking for commercial real estate recognize that Colliers provides a high level of service and expertise that isn’t often or easily duplicated. Colliers Arkansas manages more than twice as much commercial square footage as [its] nearest competitor, and we have 11 brokers in Little Rock and seven in Northwest Arkansas. Those numbers support the fact that companies trust our expertise.

“The partnership with our Colliers Arkansas team in Little Rock has enabled us to be as successful as we’ve been in Northwest Arkansas. Little Rock provides us with support in property management, human resources, accounting, marketing and communications, IT, etc. We have great partners down there, and that lets us focus on doing what we do best.”

SM: “I’ve always heard warnings about getting into partnerships, but you guys have made it work for 13 years. How have you managed to do that?”

SL: “Ramsay and I have very different personalities and approaches that make us more successful together than we’d be separately. You need someone pulling you out of your comfort zone occasionally. I think over the long run we have brought out the best in each other. You need to have partners who will ask hard questions, dig into issues, and make you both sharper. Without Ramsay, I may not have grown out of a sole practitioner office, and vice versa.”

RB: “The key is respecting and trusting each other, and understanding you don’t always need to agree. Respect and trust help you accept the things you don’t agree on.

“It’s been an interesting ride. There was a boom and a time when you could hardly do anything wrong. We went through the merger with Colliers Arkansas, and then the Great Recession. When you can weather those things and find ways to service clients, you’ve got a strong partnership.

“We use each other’s strengths and respective roles really well. As the day-to-day operations manager, Steve has a great eye for detail. That isn’t my gift. He and I are micro and macro, and that combination is really complementary.”

SM: “As I toured your office, you introduced me to a gentleman named Cody Simon who recently graduated from the University of Arkansas. How do you develop a talented guy like that and turn him into a first-class commercial broker?”

SL: “There was a long interview process, after which he was assigned a mentor. There are a lot of corporate training materials to help him, and we always support our new brokers getting certified as CCIM. New hires spend a lot of time learning, at least 12 months before being directly in charge of an account. They do a lot of research and analysis to apply to live projects. They get a pretty intense training course. It’s the way the company has always developed talent.”

SM: “You could probably do a lot of different things, but what is it about commercial real estate that keeps you ‘in the game?’”

SL: “I love the business. It’s like getting a new job every year. It’s always changing, and we’re exposed to all sorts of people. I think commercial real estate plays a large role in greasing the wheels of the economy. Properly planned and managed projects really add to the quality of life in the area. Plus, it has been a real pleasure growing the business with Ramsay, and we have such a great group of associates in our office.”

RB: “I agree with Steve, it’s the people. I love working with a lot of different people, especially working with young people and passing the torch. We really have a great group of clients. It’s a lot more fun now that the recession is over. So many clients were in painful situations. It really impacted you if you owned real estate. When the tide went out it impacted everyone. New projects are a lot more fun.”

SM: “What did you learn from the recession in the last decade, and how is that impacting your business now?”

RB: “A lot of it goes back to fundamentals, the basics of real estate investing. A lot of folks got away from it during the boom. The recession kind of cleaned house up here.  There were some projects, we didn’t understand how they could work, and, at the end of the day, they didn’t. When you’re focused on advising clients and the fundamentals that you do well, you’ll rise to the top.”

SM: “Can you describe the market characteristics then, say in 2005, versus what they are now? How have things changed?”

SL: “I think an important way to look at a deal is ‘how much can I lose?’ and not necessarily ‘how much can I make?’ It’s important to look at the basics. For instance, in a retail development, [those basics are] the population, visibility, location, rents, properly drafted leases and of course your basis in the land. If those things are right, then your project is more likely to cash flow and you have a much better chance to weather a downturn.

“Speculation in land was rampant prior to the recession, and you don’t see that as much now. If we start seeing people buying and flipping land with no value created, we get nervous.”

SM: “What are smart investors doing now with their portfolios to hedge against another market collapse?”

RB:  “We won’t hopefully see another total market collapse such as during the recession. Corrections, yes, from time to time. There is the potential for rates to rise, and in that case investment properties may decline. Not many investments provide the same return as real estate.

“There’s high demand for good product now, and it’s a good time to be selling and potentially developing. It’s an active market, and people should be taking advantage of it. 

“Northwest Arkansas’ supply is lagging our demand right now. We have to catch up. There hasn’t been a lot going on until recently.

“The infrastructure projects will help a lot. It’s hard to think of something more important to the area’s economic growth than those. The strategic projects will pay big dividends.”

SM: “Thinking about the long-term growth of Northwest Arkansas, what are the best types of commercial properties to be investing in now?”

SL: “We are very bullish on Northwest Arkansas, we are big believers in the area and feel privileged to be a part of the growth here. We have many well-planned and well-managed commercial projects, and hope to see more of them as the area grows.

“Given the growth in our market, there is opportunity across the board for well-planned and [well-]thought-out projects. In many ways the commercial sector is still playing catch-up to the residential growth. It goes back to the fundamentals of job creation and continued population growth. It’s about being able to pick through individual opportunities to find the best ones, and hopefully having a good adviser to assist in that process, which is our strength.”

SM: “Does having you here help Northwest Arkansas grow?”

RB: “Yes. National and corporate tenants call us before they locate here. Part of our ‘elevator speech’ is telling people from out of town the Northwest Arkansas story. We’re well integrated into regional economic development efforts, and work closely with all the folks here helping recruit corporate tenants, like the Northwest Arkansas Council, and all the chambers of commerce.

“For example, the Northwest Arkansas Council recently had site selectors in looking at sites, tax incentives, etc. I attended a dinner with them at The Hive [at 21c] restaurant during the [Bentonville] Film Festival [in May], and let me tell you, it was a dynamic environment. They said we have a really special place here.”

SM: “Describe the financing environment right now. Are banks still as important as they were, or are private sources more prevalent?”

RB: “Banks are underwriting tougher than in boom times because of regulations and experience. All the banks are taking hard looks at property and its fundamentals, and they aren’t getting carried away with the market. The recession was good for cleaning up the market and the banks. They’re under more pressure now to find good projects to underwrite.”

SM: “Data analysis plays a big role in the direction of many industries. How does it impact commercial real estate investors, and what are some of the key metrics investors look for when evaluating properties or projects?”

SL: “Data analysis is certainly playing a larger role in our industry; however, the needs vary per individual client. Retailers, for example, want to know basic demographic data, traffic counts, and population. It is important to present the data in a way that is useful to the client, and at Colliers we have a full-time marketing director in Bentonville, as well as a full-time communications director in Little Rock who are focused on tracking data and creating compelling presentations.”

RB:  “Submarket data is key as well. You have to find the right niche and the right type of project. For example, we identified the need for a particular office and retail project in the Pinnacle Hills submarket, and we recommended the project to a group of investors and now Country Club Plaza is under construction. That was a direct result of knowing the data. We mitigated risk by not moving forward until we had tenants. We had to make sure rents were fair. That’s a true example of the team or firm approach, where all of our strengths come together to benefit the client.”

SM: “Steve and Ramsay, this has been great. I appreciate all you guys do for Northwest Arkansas.”

SL: “It was our pleasure Scott. You asked great questions.”