Real Estate's Changing Game

Recession fallout leads to reshuffling of agents among Nashville's firms
The Tennessean
By Bush Bernard & Richard Lawson

In a back corner if Bill Knestrick's construction company headquarters, plastic hangs down to shield the rest of the office from new space being built. Filling the space next week will be two Nashville commercial veterans, Ben Goodwin and Greg Wiel, who have joined Knestrick in starting a real estate brokerage firm. Knestrick decided to establish the brokerage after recently buying Knestrick Contractor from his father, Walter, who founded it in the 1960's. The company owns 1.2 million square feet of mostly warehouse space around Nashville. His goal is to have a more nimble form than do larger competitors.

"We're going to have everything under one roof - construction company, property management, brokerage," Knestrick said. "It's all seamless. That's basically what we're selling."

Knestrick enters competition with firms selling the same mixture, marking yet another shift in the Nashville commercial real estate market, which has seen more than two dozen agents switch firms since the recession hit last summer. Some decided to start new ones.

It's common for agents to change companies when the commercial real estate market hits a trough in the business cycle. In this go-round especially, it's tough to tell where the players are without a scorecard. Goodwin, a 28-year real estate veteran, joins Knestrick Properties form Colliers Turley Martin Tucker. Wiel spent 10 years with the Nashville office of industrial and office developer Duke Weeks Corp. and its previous incarnations.

More than half of the agents moving around came from Dallas based Trammell Crow Co.'s Nashville office. The firm pulled its name from Nashville and is selling its local business to ProVenture Commercial Real Estate. "This is a time in the (real estate) cycle when people move around," said John Whitaker, Trammell Crow's managing director in Atlanta.

Moving Around

Last year's recession stalled most real estate development in Nashville and across the country. Some tenants delayed decisions on leasing space, while others emptied theirs. Job-changing among firms is a scenario Frank Smith Jr., one of the deans of Nashville's commercial real estate market, has seen many times since he got his start in the business in 1960. Smith founded his firm, Frank L. Smith Co., in 1966. it was the precursor to the present-day Nashville office of Colliers Turley Martin Tucker, one of the areas largest industrial firms. Smith said job changes happen in the commercial and residential real estate markets when business slows. "They look at different opportunities and try to find out if they're in the right spot," Smith said. "Opportunities change. When times are busy, people don't have time to look back,"

Other cities have had similar shifts in real estate agents. Trammell Crow's Whitaker noted that Atlanta has been going through changes, as well. Nashville is different because agents moving around are more likely to start their own firms", Whitaker said.
"In smaller markets, you find a lot more entrepreneurs," he said, adding that large markets require more financial resources than smaller ones.

Nate Green, managing partner for NAI Mathews Partners, described Nashville as having "always been a market known for entrepreneurial efforts." He referred not just to real estate but also to companies started in Nashville, ranging from restaurants to health care.

For Allen McDonald, the chance to be a partner in his own firm and invest the deals he's involved in led to his leaving Trammell Crow. McDonald, David Baker and Carl Storey III left Trammell Crow in February to start their own firm that specializes in retail real estate. Trammell Crow is a publicly traded company, and it's employees aren't allowed to invest in the deals they were involved in, he said. McDonald said he began to feel like he was "just in the transaction business." The new firm allows him to take some of the risks and enjoy the rewards of being an entrepreneur. His former boss Jeff Haynes, ventured out on his own, too, with Phil Fawcett, another top Trammell Crow manager. Last September, they opened a Nashville office for Memphis-based Boyle Investment Co.

Companies Shopping

Companies also take advantage of slowdowns. Several area firms talked to retail specialists Michael Taylor and Philip Ehrlich while they were employed with Mission Property Co., which led them to think it might be the right time to strike out on their own. They formed Vision Real Estate, a firm that specializes in retail real estate. In November they opened their office in Brentwood. "We just saw a niche in the marketplace," Taylor said. They left Mission Property in June, before the recession had an impact on Nashville's real estate market. The recession has led property owners to seek more help from real estate specialists in finding economical ways to manage their property. "For what we do, it kind of worked to our advantage," Taylor said.

The slowdown gave Dave McGahren, another former Trammel Crow agent, a chance to think about the people who were trying to recruit him. McGahren, who specializes in office and industrial real estate, opted to leave Trammel Crow last month for Colliers Turley Martin Tucker. The ability to grow as an agent led to his decision to change jobs. "They've got some incredible resources," McGahren said of his new employer.

Going Private

Many of the moves have been from larger, publicly traded companies to smaller firms. A lot of that has to do with the nature of public companies. "Those guys are answering to Wall Street," said Whitfield Hamilton, vice president of Collier Turley's Nashville office. "If things go down, you've got to start looking at cutting expenses. Private firms have the ability to move more quickly in response to market changes. While public firms may look to the top eight markets in the United States to improve their quarterly earnings statements, they don't have a lot of money available to handle the needs of their offices in smaller markets, such as Nashville, Hamilton said.

Colliers Turley is a regional company based in St. Louis that merged with Frank L. Smith Co. in 1997. It has the resources of a large company and the market knowledge of a firm that's been in Nashville for a long time, said Hamilton, who joined the firm four years ago after working as an agent for Charles Hawkins Co.

Such national companies as Trammell Crow have had a major impact on the local market. They flooded into Nashville when real estate was blazing, NAI Mathews Partner's Greene said. Trammell Crow, in particular made the most concerted effort to stay, and in doing so may have laid the foundation for it's own demise, Green added.

The entry of national firms brought greater sophistication in the Nashville real estate business, especially in how to market property. "We had to match it or die," Green said of the smaller firms. "We all had to improve what we did".
Terry Smith, principal broker and partner in Mission Property Co., said he saw similar changes in the Nashville market in the late 1980's. He went through three jobs from 1988 to 1990. "Some of it wasn't my choice," he said. Smith left the Carl Storey Co., and joined the Nashville office of Cushman and Wakefield in 1988, the year before it decided to close its Nashville office. He joined Eakin and Smith, which merged with Highwood Properties and then broke out on its own two years ago and formed Mission Property.

Job changes aren't limited to the real estate industry, Smith noted. They have become ingrained in national work habits.
"People tend to keep their resumes dusted off," he said. "People keep their eyes and their ears open for opportunity".
The recent moves will change some of the dynamics in the Nashville market. Because the real estate business is based on relationships, many clients will follow their agents to new firms. "I think some of the companies will come out of it stronger than when they went into the recession," Smith said, "because they will end up with some stronger performers."

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