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Battle Royal
Real estate strategies by Mark Gordon | Managing Editor
Billions of dollars in home sales are at stake - even in the down market - as luxury realty firms duke it out for the tip-top of the well-heeled homebuyers. Two firms have hired 25 agents during the past month.
Steve Bailey and Chad Roffers, heads of competing Sarasota-area luxury real estate firms, are acting like its early 2005, not late 2006. Selling properties with regularity and hiring agents at rapid-fire speed is supposed to be a thing of the past.
But in just the last month, SKY Sothebys, the Sarasota-based luxury realty firm Roffers heads up, sold six separate multimillion dollar properties: The buyers, all out-of-staters, saw the ads in the luxury property section of the Wall Street Journal. They flew into town, took a peek, bought the homes and jetted out of town the next day. Company-wide, the average transaction recently crossed the $1.5 million threshold, double the 2004 average of $750,000.
What's more, the firm is going on a Roffers-led hiring binge. The company's hired 11 agents since mid-September and another eight since June, for a total of 35 as it works toward its goal of 50 agents. It has a waiting list of 11 agents to work in the downtown Sarasota office. Finally, SKY's Sarasota performance has been so stellar, the corporate office awarded it a second franchise, in Minneapolis, in September.
Roffers says even a whiff of a down market was all he needed to go into attack mode, using what he calls SKY's top-shelf Tiffany's-like customer service approach as his cannon. "When the market hit a wall, we accelerated our media spending," Roffers says. "We felt like it was an opportunity to be aggressive while people were scratching their heads, wondering what was going on."
Bailey, a former executive vice president with Sarasota luxury real estate leader Michael Saunders & Co., wasn't one of those doing the head scratching. Bailey is the director of Premier Properties of Southwest Florida's Sarasota office, a new competitor in the Sarasota luxury market. The firm, a branch of the Naples-based luxury real estate company with the same name, has hired 12 agents in anticipation of its debut later this year.
Neither entrenched local competition nor a down market is enough to dent Bailey or Premier Properties' plans. While not putting on blinders to potential problems, Bailey asks: "What better statement can you make in your own confidence and ability then expanding in a market correction?"
It's not enough to explain the trend by leaning on the old saying that the ultra-rich "are different," Bailey, Roffers and others in the industry say. While not even the most Pollyannaish of Realtors can honestly say the 2006 market is as good as it was the previous three years, there are still successful strategies and techniques. Those include thinking creatively, patience and being comfortable with risk-taking - otherwise known as spending more money on marketing, even when buyers are scarce.
This approach is shared by other top luxury real estate firms in the Greater Sarasota market, each with it's own spin. Michael Saunders & Co. has hired almost 100 agents in 2006 and other firms, such as Coldwell Banker and Prudential Palms Realty continue to find ways to adjust to the market.
'Sarasota Showcase'
Bailey is not looking to adjust, as much as he's looking to rely on his trump card: Premier Properties. He's counting on the company's stellar Naples-area reputation, as well as the nuts-and-bolts of the company's strategy and mission, which Bailey says "personifies what an entrepreneurial heavyweight should look like." It's big enough to have heft, Bailey says, but small enough to make decisions without multiple committee input.
Also, the company plans to capitalize on having a presence in Naples and Sarasota, communities that have similar demographics and cultural amenities. Bailey says the 225 Naples-based agents will have access to Sarasota properties and steer the right clients in that direction. The company is even buying newspaper ads in the Naples Daily News under the banner "Sarasota Showcase" to reach potential Naples buyers.
Premier Properties is an arm of the Naples-based Lutgert Cos., a group of about 50 firms focusing on various building and development sectors. Executives point to its commitment to following customer needs and its ability to protect and maintain its reputation as benchmarks of its success. While the privately held company declines to release revenue figures, it has been a major participant in some of Naples' most well-known projects, such as The Mercato and Park Shore.
Despite the track record, Michael Saunders, Bailey's boss for more than two years when he was in charge of residential real estate services for the firm, was somewhat surprised about the Premier Properties expansion. She told the Review in March that "it's hard to start from scratch."
Bailey, 60, started by hiring a stable of agents. The 4,000 square foot office at the Plaza at Five Points on Central Avenue is filled to capacity, Bailey says, with 12 agents ready to go when the office officially opens. There are plans in the works to lease another 3,000 square feet on the eighth floor for more agents if necessary. "We could open tomorrow," Bailey says, "and have it all filled."
But Bailey also says he's not driven by having a certain number of agents, just ones that stick to the Premier Properties template. That includes Realtors with a reputation for integrity and experience in the local market. On the former, Bailey says he made some "discreet inquiries" to check out potential hires.
Those hires make up an eclectic mix of Realtors, including Cindy Morton, a former advertising executive who hosts a local radio show about Lakewood Ranch; Sheldon Paley, a retired dentist and active entrepreneur who, among other accomplishments, founded a packaging business and a now-popular tomato festival in Reynoldsburg, Ohio; and Monica Slater a former marketing executive with Godiva Chocolatier who has an MBA from Columbia University.
No 'mean' agents
The SKY Sotheby's agents are also a diverse bunch, including one who is fluent in Spanish, German and Italian, another who is a licensed commercial pilot and several former small business owners. There are also a handful of former Michael Saunders agents, including Roffers and Michelle Burke-Phillips, SKY's vice president of residential and new homes sales associates.
Roffers says the current SKY strategy is based on simple math: "We felt there was $1 billion on the table," he says, "and we could get it with 50 or less agents" bringing in $20 million a year in sales. The firm had $212 million in 2005 sales and grew considerably in slumping 2006. With $111 million in the first quarter, it expects to reach nearly $450 million by the end of the year.
Roffers traces the first two years of success back to SKY's 2004 debut, when he teamed up with former Michael Saunders agent Brandyn Herbold to open the franchise realty office. The duo listened to the thoughts and ideas of several focus groups on what the industry was lacking. "There were people who value service over everything else," Roffers says he found out, "whether they are buying or selling something that's their most expensive asset."
In the frenzy of the hot market, there was an "anything goes" mentality and a lot of hocus-pocus to sell homes, Roffers says, but few agents prepared a clear, written strategy. The competitive atmosphere was at times bringing out the worst in agents. On top of that, there had been few technological innovations in how to sell homes.
Herbold and Roffers, who once worked in a management position for a Silicon Valley technology firm, set out to change that atmosphere when hiring agents, also bringing a numbers-focused approach. The plan was to make SKY more like a business firm that brokers deals with a variety of expensive products, as opposed to a "loose association of independent contractors."
Call it the ask-a-lot-give-a-lot program. The requirements for being an agent at SKY include:
• Being among the top 10% of agents in the coverage area;
• Posting an average of at least $750,000 in transactions;
• Listing at least 12 properties a year;
• Spending at least 15% of sales on marketing and promoting homes.
There are a few other facets of working for SKY that is different from most other firms. Agents don't have their pictures on their business cards and they don't put cell phone numbers on listing signs. In an interview, Roffers adds one more requirement to work for SKY Sotheby's: Agents can't be mean. He says rude and uncooperative agents bring the whole profession down with them.
Roffers says the firm gives a lot, too, when the demanding expectations are met. Agents own part of the company through a stock option program and they also have access to top technology. Every agent has a BlackBerry that can be used for e-mailing, phone calls, checking MLS data and calculating mortgage and financial information. Another perk is having access to the Sotheby's worldwide marketing and client base.
Finally, each agent is assigned a life coach they can use to talk about balancing work and family and other issues. "We have a platform geared toward hiring sophisticated, veteran agents," says Roffers. "We are not a real estate training company."
Maintaining the throne
The agents and executives at Michael Saunders & Co. have the luxury of being number one when it comes to approaching the luxury real estate market. Still, Drayton Saunders, son of company founder Michael Saunders and a company vice president in charge of the firm's mortgage and title arms, isn't sitting still when looking at the competitive landscape.
The agency continues to follow its general strategy of following the customer. It opened offices in North Port and Lakewood Ranch recently and also hired almost 100 new agents in 2006. It now has 545 agents working out of 16 offices in Sarasota and Manatee counties.
But Drayton Saunders considers technology to be one of the best investments, both in time and money, the firm has made to keep itself in the number one slot for Greater Sarasota real estate; it had $3 billion-plus in 2005 sales.
The firm has a five-person technology staff, covering Web sites to internal servers. One of the technology gurus, Ryan Roslansky, set up a Yahoo! national real estate Web site. What's more, Saunders says the firm has spent $300,000 this year on technology, a figure that's grown annually.
The idea, Saunders says, is to back up the technology with real people working on the systems that base their strategy on what the client needs to sell and buy a home. "Web sites are great," he says, "but if you don't have an intellectual insight into how the customers are using it, it's a waste of time."
Challenger: Chad Roffers
Chad Roffers had a diverse business career before co-founding SKY Sotheby's realty firm with Brandyn Herbold in 2004.
The Minneapolis native, who has an MBA from the University of Colorado, has worked executive positions for companies in Silicon Valley and New York City. He was executive vice president of Ad Auction, an online media advertising service and was in charge of business development for a technology company that later became Quest. In the latter position, Roffers worked on deals with companies such as AOL Time Warner, AT&T and Yahoo!
The boyish looking Roffers, 35, completed the New York City marathon in 2001 and plans to run in it again next year.
Challenger: Steve Bailey
Steve Bailey's early resume and life experiences are not standard real estate executive fare. The head of Premier Properties of Southwest Florida's new Sarasota office considers a U.S. Senator one of his life mentors, for example. His background also includes a stint as a first lieutenant in the U.S. Army, where he served in an infantry unit in the Vietnam War. He was awarded a Combat Infantry Badge, the Vietnamese Cross of Gallantry, a Bronze Star and a Purple Heart.
Bailey, 60, was shot in the arm while riding in a helicopter over the country, three weeks before he was scheduled to return home. While he modestly dismisses his Army experience as a series of quick decisions made by a young man, he does say that the officers' training he went through nearly 40 years ago remains the best leadership training he's ever had, which included painstaking attention to detail.
That training, combined with getting to know John P. East, his political science professor at East Carolina University who later became a U.S. Senator from North Carolina, represent two of Bailey's greatest life-learning times. Bailey says East, a former U.S. Marine who suffered from polio and was confined to a wheelchair for more than half his life, taught him valuable lessons about career choices and taking risks.
Bailey later earned his law degree from Tulane University and began a varied business career that included running Merrill Lynch realty offices in Long Island, N.Y. and Connecticut and forming his own business and real estate consulting firm. Bailey, who grew up partially in Miami and Jacksonville, moved to Sarasota in 2003 for an executive job with Michael Saunders & Co. He took the Premier Properties position in April.
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