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If there were to be a theme for the business climate of the 1990s, it likely would be titled, "Bigger is Better." Mergers, acquisitions and IPOs dominated the headlines, driven early in the decade by a need to combine resources to survive a difficult economy and later by the desire to control a larger share of a steadily improving market.
Real estate services firms, hard hit by the early '90s recession, were quick to align with each other in a true "survival of the fittest" (or should I say "biggest") struggle. The number of small private firms dwindled as the big nationals saw opportunity to increase their resources and regional reach. The smaller firms, in turn, saw opportunity to endure where many others could not.
As the national and local economies improved beyond our wildest expectations, the stock of many of the public real estate services firms surprisingly did not. Even now, the stock values of these firms have not risen at levels proportionate to overall market performance.
In a market that is changing faster than ever due to technological advances and a thriving economy, real estate investors, managers and users of real estate more than ever before want to stay a step ahead of the opportunity curve. Many of the large publicly-held services firms are finding that they do not have the flexible structure to respond quickly to changing client requirements.This does not mean that the big public firms are destined for poor returns or failure. Instead, this simply opens a new window of opportunity for well-positioned private firms who have the resources, talent, management foresight, flexibility and expertise to fill a gap that some of the larger public firms cannot. The smaller full-service regional providers have the ability to tap into local opportunity through existing connections or to facilitate changing requirements more quickly than the big nationals. Local market knowledge, service level and ability to respond are the primary evaluation criteria for most owners and users of real estate when selecting service providers in specific markets.
In 1997 and 1998 Burnham Real Estate Services (then known as John Burnham & Company Real Estate) actively pursued several significant merger and acquisition opportunities with larger national firms. Several came close to fruition.
Our senior management/ownership team explored these opportunities carefully, taking into consideration our core corporate culture, our people, and our projections for client requirements over the next 10 years. After doing so, we unanimously reached the consensus that by giving up our private ownership we would be going for a "quick fix" and missing the opportunity to expand our own leadership position in a fast-changing market. After 108 years of successful service we determined that there were far more benefits to be had by remaining private.
We were not the only ones who agreed. In early 1999, John Burnham & Company announced that JMI Realty, Inc., the real estate entity owned by John Moores, was making a substantial capital investment in our firm. This investment has given us the capital necessary to strategically expand our scope of services and geographic reach while retaining private ownership and the entrepreneurial spirit that has distinguished our firm for more than a century.
With our decision to stay private, we are able to control our own destiny by anticipating and being ready for change. Our focus is keenly directed at expanding and fine-tuning the services our clients need and want. We are small enough to be "nimble," yet large enough to offer a complete menu of services implemented by top industry talent. Most importantly, we are able to maintain a long-term outlook without the distraction of quarterly earnings requirements that can cause sudden adjustments in business game plans to meet short-term needs.
As we step into the new millennium, challenges await. In 2020, we judge that most of the real estate services provided today will still be needed. These include the management of real properties, financing of investment real estate, the development and redevelopment of commercial and multi-family residential product, and sophisticated advisory and consulting services that help clients achieve strategic business and real estate goals.
Over the next 5-10 years, the traditional brokerage business faces its biggest challenge as the internet plays an increasing role in day-to-day business transactions. Looking ahead, Burnham recognizes that there are benefits for our clients and for us to be gained by internet-created efficiencies. However, these efficiencies will not replace the need or desire for human interaction. Nor will they provide the accurate intellectual interpretation of current and future market trends - that last 10% of critical information needed to make informed and effective real estate decisions. Our transactional professionals will need to be "tuned-up" on technology; however, their need to facilitate transactions will be as important as ever.
Being ready for the future is the biggest challenge faced by all companies. Service businesses, particularly those that are real estate based, are especially vulnerable to changing market conditions and economic crises. Fortunately, the outlook is bright for the foreseeable future. However, no matter how rosy the future may seem, being prepared and able to respond to the unexpected is the lifeline for companies like ours.
As Burnham turns the page into yet another century of leadership, we will focus on our people, our systems and our information - the three most critical elements needed to help our clients harvest that last 10% of information that will make a positive difference to their ownership position.
At Burnham we are committed to always being on the cutting edge of changes in the industry and technology, to being two steps ahead of our competition and one step ahead of our clients.
Stath Karras is chief operating officer of Burnham Real Estate Services, one of San Diego’s oldest locally founded companies and a leader in the Southern California real estate services industry. The firm has offices in downtown San Diego, South County, La Jolla, Carlsbad and Orange County.
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