~ reprinted with the permission of Virginia Business Magazine
July 2003 Cover Story, Virginia Business Magazine
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
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.
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
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.”
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
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.’”