The Holt Companies
Key text from version of January 12, 2004 that may be missing from newer revisions.
Adapted Jan 28, 2006 John Macomber
MIT Center for Real Estate
=================================
Preamble
Holt Lunsford gazed at the bronze statue of Colonel Travis on his desk and pondered both the future of his company, and a major decision facing his oldest client. It was March 2003 and Lunsford, founder and chief executive officer of The Holt Companies, had just opened his firm’s third commercial real estate office: this one in San Antonio, Texas. San Antonio was home to the famous Alamo fort, which Colonel Travis had valiantly tried to defend in 1836, during the Mexican-American War. Legend said Travis had drawn a line in the sand with his sword and challenged his men to cross it and stand united beside him. The issues facing Lunsford were not life-and-death matters, but the statue inspired him. It was a call to action.
Founded in Dallas, Texas in 1993, The Holt Companies provided property management, leasing, and development services, primarily to institutional owners of industrial buildings. By 2003, the firm had 50 employees across three offices in Texas, and managed or leased over 27 million square feet of property. Lunsford had recently hired a group of "young guns" with MBAs to fuel further expansion and eventually open new offices across the country, yet he had started to wonder if continued growth might strain the organization and its existing customer relationships. He needed a corporate strategy.
.....
Growth Opportunities
Internal growth
In 2002, Lunsford hired seven MBAs and started a management-training program. He hoped the MBAs would help launch additional offices around the country by 2005. To help speed learning and overcome the MBAs youth and inexperience, Lunsford had begun leading offsite group training sessions to convey the firm’s vision, and to discuss the rewards of expansion.Acquisitions Lunsford had considered an accelerated growth plan involving the acquisition of several similar firms around the country. "If we can expand to a few more cities, we’ll be a national player," said Lunsford. "The question is: how do we export our culture? I t is difficult to bring new people up-to-speed and train them."
Vertical integration
Lunsford had also debated raising equity capital to move upstream and penetrate the ownership side of the business. In 2003, investors were favoring the real estate asset class, and a firm like The Holt Companies, with its relationships and local market knowledge, could conceivably raise funds and move away from exclusively providing services. Lunsford had done some private real estate investing apart from The Holt Companies, including a successful industrial venture four years earlier (see "Shady Trail," HBS Case No. 899-143). To fund that deal, he had raised a total of $1.2 million in equity from 11 friends and business associates. "There’s a gap in the market where you can buy small industrial buildings for under $4 million," explained Lunsford, "It’s too small an amount to get institutional investors and their advisors interested."Lunsford liked the idea of building an investment portfolio that was loosely tied to The Holt Companies. It would allow him to give small ownership stakes to employees who discovered lucrative deals in their day-to-day dealings with real estate owners and tenants; however, Lunsford was wary of creating the perception that he was competing with the advisory firms and institutions that comprised the bulk of his existing business. Perhaps, he thought, an open and honest approach with these clients could mitigate any potential conflicts of interest.
Tenant representation
Strong tenant relationships, like those possessed by The Holt Companies, could often lead to transactions in multiple cities, development work, or tenant representation assignments. The Holt Companies conducted these activities on behalf of a few tenants like Staton Wholesale, but Lunsford had to balance the opportunities to work on behalf of tenants with his firm’s duties to its advisory firm and institutional owner clients.....
Conclusion
When Lunsford returned to his office, his eyes rested once again on the statue of Colonel Travis, who had fought gallantly with his men at the Alamo, only to be defeated so many years ago. The time had come to commit to a corporate strategy, thought Lunsford. What could he learn from his many dealings with Staton? Should the firm continue to add new offices? Would his track record in Texas, with the institutions and advisory firms, be enough to earn him credibility in Atlanta, for example? How should he compete against the large third-party service providers, and how should he structure and grow his organization? What exactly did the future hold for The Holt Companies?