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Wes
Foster
Revving up the troops and tenacity helped him build
a Fairfax firm into the No. 3 real estate company in
the U.S. It dominates in Virginia and the D.C. area
by
Doug Brown
Virginia
Business
July 2003
They
put on ties and pumps and drove to a dingy, suburban
American Legion hall to spend time with the boss, Wes
Foster, the founder and president of the Fairfax-based
real estate powerhouse Long & Foster Companies.
Bouquets
of balloons hang over the crowd. A line of tables hold
tall, metal coffee urns and breakfast snacks. As the
roughly 180 regional real estate managers flit about
the banquet hall chatting, Foster clutches a Styrofoam
cup of coffee and quietly works the crowd. Eventually,
the managers return to their tables, Foster joins a
handful of other senior executives at a dais, and the
meeting starts. There is the Pledge of Allegiance, some
announcements, and plenty of rah-rah.
But
there are sharp questions for Foster, too. He hunts
for hands in the air calling people by name. Employees
comment on issues surrounding the credit histories of
Realtors, and the use of email by them, meaning they
weren’t using it enough.
One
woman asks why he would dare to even consider dropping
the annual purchase of expensive guides to area demographics.
Another employee starts talking about the Internet,
and how the information in the guide is available for
free online. After a few minutes of back-and-forth,
another woman says the offices needs the printed publications.
The Web sites don’t cut it. “Marge says we
need to keep the hard copy,” Foster says. “Is
that true?”
The
crowd claps and people shout, “Yes!” “Well
where the hell were you before,” says Foster archly.
He elects to keep buying the printed version of the
publication. “We don’t want to shoot ourselves
in the foot just to save money,” he says.
The
meeting is something regional managers at Long &
Foster do every other month, and it’s important
to Foster. So are the weekly visits he makes to one
of his roughly 200 field offices sprinkled from Virginia
to New Jersey to West Virginia, where he buttonholes
agents to find out what’s working, and what’s
not.
This
intensive, hands-on approach has helped Foster propel
his firm into the No. 3 spot among all independent real
estate companies in the U.S. Since its founding in Northern
Virginia in 1968, the company has grown into a behemoth
that sells more houses in the platinum-plated Washington,
D.C., market than any other competitor. In 2002, the
company had $33 billion in total sales, about $650 million
in revenue, more than 1,600 employees and 11,000 sales
associates. Only a pair of corporate giants sell more
houses than Long & Foster.
From its plain office building in Fairfax, the company
lords over a frenzy that has gripped the region for
more than two years: The buying and selling of homes.
In many ways, real-estate fever has defined Northern
Virginia since the 1970s. People have flocked to the
area for its jobs, and developers have gobbled up farmland
at a fast clip to meet the demand for housing. People
leave old houses in Fairfax for new ones in Sterling,
or leave new houses in Reston for historic homes in
Alexandria.
With
interest rates at an historic low, the market remains
intense, and Long & Foster continues to stand in
the middle, grabbing new listings and fending off its
many challengers, many of whom have been deep-pocketed
corporations. “You’d think, `How could he
outlast Sears or Prudential or Merrill Lynch?’
But he did,” says Steve Murray, editor and publisher
of the influential real estate newsletter Real Trends.
“They all were backing people that came after Wes
Foster. All ultimately failed to prevail.”
How
did Foster beat them back? People. “It’s getting
the good people that makes the difference, and being
able to afford it,” Murray says. Explaining his
tremendous success, Foster echoes Murray’s explanation.
Real estate, Foster says, is a “people business.”
For the business to flourish, he’s got to be close
to his people. Indeed, at 69, Foster could have retired
years ago. He’s dramatically successful, and wealthy.
But he still gets to the office most mornings. He works
the phones, cobbles together deals, visits with employees,
and hatches the company’s vision and strategy.
He even gets involved with the design of new field offices,
including the decorations. “Most owners of large
companies sort of become more like the chairman of the
board, and they distance themselves from the day-to-day
activities, and some of the people,” says George
Eastman, a Long & Foster vice president who has
worked beside Foster for more than 30 years. “But
he stays right in. Wes has a lot of energy for a person
his age, and he doesn’t have a lot of outside interests
or hobbies. This is his life.”
Foster
remains at the center of his company, and his constant
attention to details is one foundation of his success.
He’s on the ground, talking with the people doing
the selling every day, and from them he picks up on
trends in the market, the strengths of the company,
and problems. “He’s high touch,” says
Cindy Ariosa, the regional manager for the Baltimore
region, during the College Park meeting. “He’s
definitely a father figure. No doubt about it.”
With
his helmet of white hair, his deep Georgia drawl, and
his easy smile, there is something at least avuncular
about Foster. For all of his affluence and power, he
is disarmingly approachable. He does not fit the caricature
of the fabulously rich real estate tycoon: Lots of gold,
flashy suits, a collection of ex-wives, a flood of braggadocio.
Foster is soft-spoken. “For an industry that seems
to reward highly sociable, gregarious people, he is
neither,” says Murray. “He has a dignified
charm that attracts loyalty and encourages it.”
U.S. Congressman
Johnny Isakson (R-Georgia), an Atlanta real estate entrepreneur
who has known Foster for 26 years, says they often traveled
in the same circles, and “everybody had an ego.”
Yet, “Wes always had his in check,” he says.
“Because he was so congenial he could move a group
because his ego didn’t override his point. There
were always some people in our business who had to win
a point to win a point, whether it was right or wrong.
Wes won the point because he was right.”
That
Georgia charm, however, disguises an intense competitive
drive. Dick Nelms, who has worked for Long & Foster
ever since Foster bought his Richmond real estate firm
about five years ago, calls Foster a “Southern
gentleman,” but like everybody else interviewed,
he also stressed Foster’s fiery desire to win —always.
Foster, he says, didn’t become the owner of the
busiest independent real estate company in the country
by just being a nice guy. “He’d make a good
general,” he says.
Foster
takes a military approach to his tactics. The Long &
Foster approach to survival is, “You overwhelm
them with massive firepower,” says Murray. “You
don’t finesse people — you crush them.”
For years, many companies were well ahead of Long &
Foster in the D.C. metropolis — Shannon and Luchs.
Town and Country. Mount Vernon. After perpetual pounding
by Wes Foster, “They’re all gone,” Murray
says. “He’s still there.”
Corporations
like Merrill Lynch and Prudential also tried to muscle
into the market after Long & Foster was established.
Merrill Lynch failed, and sold its interests to Prudential.
And then Prudential “got crushed right out of the
gates,” Murray says. “Long and Foster just
crushed them.”
Competition
between real estate firms usually revolves around Realtors:
Whoever has the most aggressive and talented Realtors
wins the battle. When Merrill Lynch tried to take over
the Washington region’s real estate market in the
mid-1970s, they tried to take Foster’s people,
and they failed because Foster, who is not profligate
with the company wallet, always made sure he had enough
money to either meet or surpass the deals offered to
his people by competitors, Murray says. Merrill Lynch
sold their interests in area real estate to Prudential
in 1989, Prudential tried to bring down Long & Foster
by stealing agents, and it failed again.
The
cut-throat side of Foster was on display at his American
Legion meeting. A manager mentioned that an agent had
listed his own home with a company other than Long &
Foster. “Shoot them,” Foster retorts, adding,
“If that happens, fire them. That’s heresy.”
Back in his Fairfax office, Foster looks out from a
balcony that offers a view only a real estate magnate
could appreciate: A horizon of subdivisions, townhouses,
apartment buildings, strip malls, and office buildings.
From here Foster plots the husbanding of profits from
his far-flung real estate empire, which in addition
to the agents and the field offices involves an insurance
company, a mortgage company and a title company.
The
sprawl that Foster’s office perches above —
and which ultimately his success depends at least in
part upon — is precisely what some increasingly
vocal activists, politicians and entire communities
have railed against in recent years. Earlier this year,
Loudoun County, a center of the so-called “slow
growth” movement, passed a “slow-growth”
zoning ordinance making it tougher for developers to
transform open space into housing tracts.
Foster
says he is “disappointed” that the politicians,
business leaders and citizens of the area can’t
agree upon ways to deal with traffic problems. “People
are as frustrated as they can be about traffic, but
when we decide to add an outer beltway, they fight it
to death,” he says“So they are upset, and
yet the same people just want it to go away, they want
everybody to use public transportation. It’s just
not happening.”
As
for the “slow growth” advocates, Foster says
“the people who they are keeping from getting decent
housing in Loudoun County at a decent price are their
own children. It’s pull up the drawbridge, I’ve
got mine, but they’ve forgotten their own children
needing decent housing, close in, at a decent price.”
It
wasn’t from a grand office filled with modern and
native art that Foster started his career in real estate.
He grew up near Atlanta, the son of a struggling grocer.
After graduating from the Virginia Military Institute
in Lexington, he went to work for Kaiser Aluminum, toiling
as a salesman. That job took him to Washington for a
spell, where he knew one person, his college roommate.
Returning
to Georgia was on his mind. But then he met his future
wife Betty. He decided to stay put. “I had every
thought of going into the real estate business and going
home to do it,” he says during an interview at
a table in his office, where he wore a blue suit and
red tie, with small, gold-rimmed, oval spectacles perched
on the end of his nose. When he took Betty, a Connecticut
Yankee, home to Georgia, the state “scared her
to death.”
He
worked for several local real estate companies before
he and Henry “Hank” Long in May of 1968 started
Long & Foster in a small office in Fairfax. The
men did well, and less than 10 years later, Merrill
Lynch waded into the local real estate market and tried
to buy Long & Foster. Long wanted to sell; Foster
wanted to hang on and ended up buying Long out.
The
company has grown at a steady clip, but its trajectory
is full of highs and lows. The years between 1983 and
1989 were “wonderful years,” but in 1974 the
company went through “one of the largest downcycles
we ever had,” he says. “They cut off the oil
and scared the heck out of people, and they quit buying
houses,” he says.
Foster describes his business philosophy simply. “I
have always been growth minded,” he says. “In
the early days, we said we’ve got to stop growing,
we’ll never make money.”
He
hasn’t borrowed to grow, he says. Instead, profits
have always been plowed back into the company to satisfy
Foster’s appetite for growth. The company has expanded
by buying other agencies and picking off rival agents.
Five years ago, for example, Long & Foster did not
have a presence in Richmond. When it bought Dick Nelms’
real estate business, Long & Foster suddenly owned
half of the market. The company has also rammed its
way into brand new markets just by opening new offices
and competing, as it’s doing now in the Philadelphia
region.
The
current market rivals and may even surpass the dizzying
1980s market, Foster says. He adds, however, that “it
will end, and we want to be ready for it when it does.”
To prepare for the inevitable, he says, he scrutinizes
the market to try to divine when the big dip will occur.
He’s careful with the company wallet, he said.
The man who has a reputation as a tightwad adds: “I’m
not as tough on our people as we will be when the market
turns down.”
And
when this market does fizzle, the once-comfortable world
of real estate sales will likely be much different than
it was during the last market dip, in the early 1990s.
Much of that had to do with the rise of the Internet,
which has empowered property buyers. They are logging
on and finding information that until just a few years
ago was tightly held by real estate agents. They are
taking online tours of houses and learning about listings
through Web sites instead of agents.
This
is not good news for the industry. “Agents are
no longer in control of the relationship,” Murray
says. “What I’m talking about is it’s
not so much that people have access to the data, although
that’s a big powerful thing in itself, but they
can also find out what’s been sold, and soon they’ll
be able to find contracts and disclosure forms they
will need to do a deal, and find how-to books online.”
Foster
doesn’t shrink from the challenges wrought by technology.
The company has invested $40 million in the past 10
years on technology, with $12 million of that being
spent last year. His belief that real estate is a “people
business” supports Foster’s shrug at the blizzard
of challenges technology brings to the business. “Technology
is an aid, but it’s not going to replace good,
sensitive, aggressive people,” he says. “If
you’re smart, you will choose an agent to buy a
home because it’s a complicated affair to buy a
home. It costs you nothing and the payout is huge. Any
buyer is foolish” to fail to use an agent.
These days, it’s not technology that worries Foster.
It’s margins. Fifteen years ago, he said, Long
& Foster paid agents an average of 55 to 60 percent
of the commissions on sales, and the company walked
away with 40 to 45 percent. Now, he said, Long &
Foster is down to 27 cents for every dollar an agents
harvests in commission. Intense competition between
companies for agents drove down the numbers, Foster
says.
At
the same time, the public constantly pressures agents
to ratchet down the commission rate from the current
6 or 7 percent that agents usually enjoy. “It’s
hard to make a profit,” Foster said. “You
do OK in a good market like this, but just OK. We have
gotten some relief from auxiliary businesses” like
the insurance, mortgage and title companies, “that
have really helped us to survive. It’s hard for
everyone, for all of us, to make a buck. It’s a
national problem for all of us in real estate.”
That
includes one of Foster’s biggest competitors, Coldwell
Banker, owned by the real estate leviathan Cendant Inc.
in New York. Thomas Stevens, a senior corporate official
in the D.C. region, called Foster “a great competitor”
who has “done a phenomenal job.”
But
the trend in real estate right now, he said, is toward
corporate ownership. Corporations’ deep pockets
give real estate companies the competitive bite they
need to win in an increasingly tough marketplace.
As
in so many other corners of American industry, consolidation
has been a big real estate story. Corporate interest
in residential real estate first appeared about twenty
years ago, Murray says, when Sears Roebuck & Co.
and Merrill Lynch started buying firms, before leaving
the business in the early 1990s.
And
then the Cendant Corporation entered the fray “and
within a year and a half snatched up Century 21, Coldwell
Banker, and ERA,” Murray said. “It stunned
the industry. Boom, from February 1995 to May 1996,
they bought the two largest, and then a year later they
ended up with six or seven or eight brokerage companies.
Then they started buying more.”
Over
the years, several buyers have labored to snap up Long
& Foster, but Foster refused to let go of his company,
a position he continues to hold. “I’d much
rather be running our company and having a good time
doing that for as long as I can,” he says. By selling
the company, “I can have three-quarters of a billion
dollars and not have anything to do.”
When
he’s not working, however, Foster, who lives in
McLean, spends some of his summer on the coast of Connecticut.
He has three children, and three grandchildren. He plays
tennis a bit, but prefers to spend his leisure time
traveling, including a recent sojourn to Australia.
“We’ve been literally all over the world,”
he says.
His
wife is a sculptor, and a few of her pieces are on display
in his office, along with other contemporary and tribal
works of art. Foster has handed over half the company
to his children, he says. One son, Paul, runs half of
Northern Virginia, and a son-in-law recently opened
the first office in Philadelphia. By keeping it in the
family, Foster hopes to ensure that the company remains
out of corporate clutches.
But Foster’s battle against distant corporate real
estate powers hasn’t translated into an embrace
of some sort of esprit de corps with other independent
competitors in the region. Just as the corporate juggernauts
leer after Long & Foster, so does Wes Foster after
his own competition. “We were talking one day and
he says, ‘Now tell me young lady, tell me why we
haven’t bought you,’” according to Clarke.
“And I said, ‘Well, Wes, because we’re
not for sale.’”
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