Real estate firms diversify to weather downturn

SUNNY OUTLOOK: Keller Williams Realty of Newport opened amid turbulence in the mortgage industry. The company has expanded operations in order to prosper. Pictured above is Cathy Leary, a Realtor at the company. / PBN PHOTO/RUPERT WHITELEY
SUNNY OUTLOOK: Keller Williams Realty of Newport opened amid turbulence in the mortgage industry. The company has expanded operations in order to prosper. Pictured above is Cathy Leary, a Realtor at the company. / PBN PHOTO/RUPERT WHITELEY

The common thread among the most successful real estate-related companies in Rhode Island is that they diversified services to increase revenue throughout the downturn, continued investing in business and forged ahead with growth strategies – economy be damned.
Keller Williams Realty of Newport opened in 2006 just as the mortgage industry started falling apart. But with a national name brand behind it and smart business management from its independent owners, the real estate company more than stayed afloat.
“We opened our office almost to the day that the market collapsed. We had no idea it was about to happen,” said Julie Costa, Keller Williams managing partner. “The news was depressing – we couldn’t watch it. We just put our heads down and focused on getting the right agents on the bus and generating leads. We never looked back.”
The company carved its niche for homes in the $320,000 range and sells about 300 homes per year, mainly to first-time and second-time home buyers. It also expanded services to commercial properties and added a location in Bristol, Costa said.
Keller Williams Realty of Newport reported more than $2.7 million in sales in 2010, representing 39 percent growth over the past three years. It ranks ninth on the list of Fastest Growing Private Companies in Rhode Island with sales of up to $5 million in 2010 (based on sales-percentage growth comparing 2008 and 2010) and also ranked 87th the Top Private Companies list (ranked by 2010 sales).
The firm’s 2011 revenue is shaping up to be even better. It hit a historical sales high in May 2011 and beat that milestone in June, Costa said. In July, the company signed a joint venture with Citibank, and is the first Keller Williams in New England to have an on-site mortgage lender.
“Now, we are a one-stop shop for lending and real estate, and we continue to look for new ways to grow,” Costa said.
Costa credits the company’s 100 real estate agents for the success, along with Keller Williams’ corporate philosophy of attracting quality agents by supporting them through educational opportunities, high commission splits and profit-sharing. “We always put our agents first,” Costa said. “The better the company does, the better our agents do.”
While the Keller Williams crew in Rhode Island knows nothing other than tough economic times, Embrace Home Loans Inc, a Middletown-based mortgage lender that’s been in business for 28 years, has been through many real estate highs and lows and lending fads.
With the wisdom of years, Embrace Home Loans’ management knew not to rely too heavily on nonconforming loan business. So when the subprime mortgage industry ballooned and then fell apart, the company didn’t, said Embrace Home Loans CEO Kurt Noyce.
“There is a right and a wrong way to do conforming lending. We did it the right way,” Noyce said. “Through the boom years, we preserved capital and we also communicated our strategy so employees were confident in the way we do business.”
As mortgage companies collapsed, Embrace used its strong position to improve relationships with banks and over the past two years, it opened 18 lending offices as far south as Florida. The company also practiced predictive statistical modeling to identify pockets across the country that weren’t as affected by economic conditions. It now operates in 46 states and became one of the top providers of FHA loans in the U.S.
Those moves paid off, and the company saw 116 percent sales growth over the past three years. It ranks second on the 2011 list of Fastest Growing Private Companies in Rhode Island with $25 million or more in sales, with 2010 sales of over $120 million. It is also on the list of Top Private Companies, ranking 21st.
Second-generation, family-owned real estate business Michael Integlia & Co. in Providence also increased revenue despite the downturn.
Once a real estate and insurance firm, Michael Integlia Jr. expanded his father’s company when he took over in 1976, adding design, engineering and construction services. The company also manages all of its own properties and provides services to tenants now.
Like many real estate management businesses, it suffered large and sudden vacancies by business tenants that folded or downsized during the recent economic crisis.
To remain stable, Integlia Jr. restructured the company’s debt, lowered its property-rent levels and adjusted costs down by carefully trimming operating expenses, he said. To help the company’s office-space occupants stay in business, Michael Integlia & Co. restructured some tenant rent payments. The company has since successfully backfilled vacancies.
“We went from 25 percent vacancy a few years ago to about 5 percent vacancy now,” he said.
The company also expanded to new areas during the downturn, adding locations in parts of Massachusetts, Connecticut and Florida.
“Our geographic diversity is the key to our success,” Integlia Jr. said. “It permits us to take advantage of growth in different areas when there may be issues in others. For instance, there are high vacancy rates in Florida now compared to Mass. and Rhode Island.”
With that strategy, the company’s sales increased by 13 percent over the past three years to over $37.7 million for fiscal 2010. It ranks 16th on the list of Fastest Growing Private Companies in Rhode Island for companies with $25 million or more in sales and ranks 39th on the list of Top Private Companies in the state.
The company continues expanding and recently broke ground on a 50,000-square-foot, general-purpose office building in Warwick at 125 Metro Center Blvd.
“We are building the inventory because we see the demand — albeit a soft demand,” Integlia said. “But we are coming to the end of this economic cycle, and we are building our way out of it knowing we will see increased demand in 12 to 24 months.”
Rhode Island Property Advisory Co. in Warwick also grew throughout the downturn by adding new services as opportunities arose, said John P. Morgan, president and CEO of Rhode Island Property Advisory.
The 13-employee property-management company provides maintenance for condo and apartment complexes and now offers transportation services for residential clients who don’t drive. The company also does collection services, which became a bigger part of the business over the past few years as tenants fell behind on rents.
“When there is a need for something affiliated to real estate services, and it’s a good idea that benefits the company, I’m not afraid to try something new to generate income,” Morgan said.
With that flexibility, RIPAC’s business grew 3 percent over the past three years, with $2.5 million in sales during fiscal 2010. It ranks 25th on the list of Fastest Growing Private Companies, for firms with up to $5 million in sales.
Morgan said though he has increased revenue slightly, the state’s business and property tax climate eats into profits, making it difficult to do business in Rhode Island.
“Our return is not what it should be, because of the taxes here,” Morgan said. “Just our vehicle and building taxes are $24,000 a year.”
Integlia Jr. also said that Rhode Island’s business and property tax burden is too high – about 15 to 20 percent of his company’s rental revenue goes towards property tax. That tax climate made it difficult to attract new businesses to fill office spaces and buy property in the state, he said. •

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