Three-Year Goal Still a Big Climb for Crye-Leike
When Memphis-based Crye-Leike Inc. opened an office in Little Rock in June last year, Harold Crye set a goal of becoming the largest real estate firm in central Arkansas within three years.
Crye, the company’s chief executive officer, was aiming at a market including Pulaski, Saline, Faulkner and Garland counties.
Crye-Leike made a good state in its first year, totaling about $46 million in residential home sales in Pulaski and Saline counties, ranking No. 11 in the market. But it still has a long way to go before it becomes the largest.
From July 2002 through June 2003 – the first 12 months Crye-Leike was in central Arkansas- the Janet Jones Co. was the No. 1 firm in Pulaski and Saline counties by a wide margin, selling 676 houses totaling almost $160 million. The No. 2 firm in the two-county market was McKay & Co. with more than $118 million in sales.
The top six firms – Janet Jones, McKay & Co., Rainey Realty, Adkins, McNeil Smith & Associates, Rector Phillips Morse, and Real Estate Central – each did more than twice the business of Crye-Leike for the first 12 months it was in central Arkansas. Most real estate agents and brokers said business this year has been exceptional because of continued low mortgage rates.
Last year, Crye said his goal was to have $300 million in home sales in Pulaski, Saline, Faulkner and Garland counties within three years.
“Last year, Harold Crye talked like he was going to run the rest of us out of business, and it hasn’t happened,” one Little Rock real estate agent, who asked not to be identified, said last week.
Crye-Leike hasn’t run existing firms out of business in its other markets, but it has become the largest agency in some Tennessee cities.
Crye-Leike began business in Memphis in 1977 and became the largest real estate firm there in only three years. It opened an office in Nashville, Tenn., about 10 years ago and became No. 1 in that market the first year. It took four years before it moved to No. 1 in Chattanooga.
Crye-Leike has about 40 percent of the market in the massive Memphis area, which in Arkansas includes West Memphis and Crittenden County. It is the 10th largest firm in the country, with more than 2,500 agents in 68 branch offices. It had sales volume of $3.2 billion and closed more than 22,000 transactions last year.
“First of all, I never said we’d run anybody out of business,” Crye said by phone last week as he checked on construction of Crye-Leike’s 18th office in Nashville. “That may have been Realtor talk or the perception. We don’t intend to run anybody out of business, but we’ll be good competitors. In every market we’ve been in, we’ve raised the bar.”
Little Rock is Crye-Leike’s first regional hub outside Tennessee. Since opening its first office on Financial Centre Parkway in west Little Rock in June 2002, Crye-Leike has added offices on Hinson Road in West Little Rock and in Bryant, Conway, Hot Springs, North Little Rock and Maumelle. The firm has 160 agents in seven offices.
“Little Rock has some really fine, old companies and some really good folks in the real estate business at firms like the Janet Jones Co. and McKay & Co. and other firms,” said Roddy McCaskill, the No. 2 agent in central Arkansas in sales volume. “And 80 percent of our business comes from repeat customers and referrals. So it’s not like somebody can step in just because they are big and start gobbling up market share.”
Janet Jones, owner of the Janet Jones Co., said her business has remained strong since Crye-Leike moved into Little Rock.
“I think there is enough business for all of us so that it will not hurt anyone else’s business.” Jones said.
Mike MacKinder, president of Rainey Realty Inc., said Crye-Leike should be able to move into the top 10 firms in Pulaski and Saline counties, but breaking into the top five will be more difficult.
“I just don’t think his prediction of becoming No. 1 in the market in three years will happen,” MacKinder said.
TOP PRODUCERS Crye-Leike’s plans of becoming the largest firm haven’t sat too well with some agents. Even with 160 agents in central Arkansas, some noted that Crye-Leike still hasn’t recruited a top producer from another firm.
Truman Ball, owner of Truman Ball & Associates, said there may be a reason for that.
“That may be the way they want it,” Ball said of Crye-Leike.
Jeff Fuller, owner of Agentonline.com Realty and the No. 1 agent in the market with almost $50 million in sales, noted that with 2,500 agents and volume of $3.2 billion, Crye-Leike’s average agent has sales of $1.2 million.
“If you assume the agent gets 3 percent, that is a gross of $36,000 before expenses,” Fuller said. “Burger King management pays more than that. I’m not picking on Crye-Leike but [the real estate business] is a hard job for that kind of money. What Crye-Leike is good at doing is acquiring a large number of agents but they’re not good at creating a large amount of wealth for their agents.”
Fuller said top producers tend to demand higher splits on commissions, while less-productive agents draw lower commissions, which is more profitable for the real estate firm.
Crye disputed Fuller’s claim.
“He’s so far out in left field he can’t see home plate,” Crye said.
Crye acknowledged that Crye-Leike hasn’t attracted one of the top producers in central Arkansas, but he said it is only a matter of time before that happens.
“Hide and watch,” he said when asked if Crye-Leike will recruit some top producers.
Johnny McKay, managing broker of Crye-Leike’s office on Hinson Road in west Little Rock, the firm’s largest central Arkansas office, said there is “no question” that some of the area’s top producers will switch to Crye-Leike.
“It is not like we are waiting on that to happen,” said McKay, whose father once owned McKay & Co. “The marketing department has all the tools to give to the individual agent. We have the training for people new to the business. We’re confident that people will continue to see the benefit of going with Crye-Leike.”
CONSOLIDATION TREND Crye now anticipates reaching $250 million in sales next year and $400 million and 350 agents by 2005 in Pulaski, Saline, Faulkner and Garland counties. Crye-Leike already has had $20 million months in central Arkansas, and Crye expects several $30 million months next year.
There also are plans to open an office in Northwest Arkansas, but Crye declined to say when.
He also expects there to be consolidation in the central Arkansas real estate market in the next few years.
“I assume Little Rock is not any different than most cities in the country,” Crye said. “It is not necessarily us who will cause it to happen, but we may benefit from it. The main Reason is just the cost of competition.”
Randy Alexander, president of McKay & Co., said Crye-Leike has a pattern of buying companies in other markets and likely will be able to consolidate existing companies in the central Arkansas market.
“I think there is not reason to underestimate the potential they have,” Alexander said. “It’s a challenge for all of us to deliver service to our individual customers so they can see a difference in one company.”
Ellen Roche, vice president of research at the National Association of Realtors, said consolidation is a slow trend developing nationally but “in some individual metropolitan areas it can be more extreme.”
“Even though real estate always has been and continues to be a really high-touch business, we are seeing ways in which technology is adding to the business,” Roche said. “That’s one thing that is driving consolidation. The cost of technology means it can be more effective to spread that out over a larger number of transactions.”
Roche said 11 percent of home buyers last year reported that they found the house they eventually bought on the Internet, compared with less than 1 percent in 1995. The number of people who say they search for homes on the Internet is 71 percent, Roche said.