Information sharing - seems like a reasonable concept in this modern day with e-mail, the Internet and computerization everywhere. But 27 years ago, this was a very foreign concept to brokerage firms. One firm decided to change all that and sell investment properties a new way.
With the opening of its 30th office, located in Tampa, Fla., and with an aggressive expansion program, which includes plans to open 21 additional offices over the next three years, Marcus & Millichap Real Estate Investment Brokerage Co., a $4 billion, Palo Alto, Calif.-based firm, has shown that "a culture of information sharing" leads to success. This concept, which Marcus & Millichap has found to be so successful, is still foreign to most brokerage firms today according to William A. Millichap, president and CEO.
When Millichap, and co-founder, George E. Marcus, chairman, started the company in 1971, their idea was for a different kind of real estate investment brokerage firm. They had an image of a company with agents who shared information and brought "Wall Street kinds of capabilities and sophistication to Main Street clients." These concepts involve a significant amount of information only obtained through market research.
"We'll spend, probably, $4 million this year on various phases of market research. What we are trying to do is to bring the Wall Street analytical techniques to the Main Street real estate investor," Millichap says. "But it is much more than information sharing. You can't just share information if it is not timely or adequate in terms of its content."
Twenty-seven years later, they contend their plan has been very successful. Their first office had a few agents and a chalkboard, which was used to inform those agents of new listings or any changes to existing listings. It was easy then.
As Marcus says, "If you have one office and 10 salesmen you can sit Monday morning and share information. You could have it on a chalkboard during the week. That's what we had, we had little chalkboards in our offices."
But today it has 500 agents, so a computerized property inventory tracking and buyer matching program, called the M.Net, with 1.5 million clients in its database, is required. This system connects all 30 offices across the nation and gives agents up-to-date information, virtually on a "real time" basis.
Millichap says, "Our ability to access this database of owners and then bring together the exchange of information relative to buyer and seller enables us to create a much more efficient market place."
It also has an extensive Website (www.mmreibc.com). Although, the Website got off to a slow start, it is also bringing in clients from as far away as Hawaii, who are making $3 million deals in Atlanta. These are clients they would not otherwise be able to reach.
With Marcus & Millichap's plans to open or add additional offices in major metropolitan cities such as New York; Chicago; Minneapolis; Kansas City, Mo.; Pittsburgh; Baltimore; Boston; San Antonio; and possibly Walnut Creek, Calif.; and New Orleans, there won't be many places to go where the Marcus & Millichap technology is not available.
Steve Ekovich, vice president/regional manager, of the just opened Tampa office, says that this type of technology not only has helped get his office off the ground but has also helped in recruiting salespeople. "It (the computer technology) has been an advantage in a number of areas. It's an advantage in recruiting since we are the only company in the United States that has an open sharing of inventory in commercial real estate. So when I talk to other agents out in the industry, they are actually blown away because they are just not use to an environment of sharing."
But what of this technology and the Year 2000 problem (Y2K)? Both Marcus and Millichap admit they are very dependent on their computerized system and they are very concerned about the Y2K and a possible computer glitches.
"I've become concerned because we are so dependent. You don't really appreciate something until it doesn't work," Millichap says. "It's unbelievable, it's unbelievable (how much we depend on it). Everything runs through it. It's a very big concern, a very big concern."
Because it is a very big concern, nothing is being left to chance. Plans are being made to run a Y2K compliant, redundant system, which was supposed to be up and running in December 1998, and which will run parallel to the original system until 2000. In mid-1999 the system will be tested by changing it's internal clock to Jan. 1, 2000, to see what happens. If the original system goes down, it is anticipated that the new system will automatically switch over and pick up where the old system left off.
Although, Marcus is also concerned about the vulnerability of the system, he feels confident that adequate steps have been taken.
"We have an extraordinarily capable head of Information Services, and we have been assured and reassured that we have done everything possible," Marcus says.
And what about their competition? With this information culture in place, Millichap feels it has no competition because no one does what it does or has the information at hand like it does.
"In terms of local investors, the local investor just doesn't have the infrastructure and a system to offer clients in terms of exposing the property to the largest segment of buyers. With our ability to import and export capital from various markets, it gives people that we do business with the opportunity of benefiting from a regional and also a national market," Millichap says.
But why, when it is so successful, and when many other companies are going public, selling shares or merging, have they chosen to remain a privately held company.
Millichap says; "Right now it just gives us more flexibility. We're on a fairly aggressive expansion program and, in the processof expanding, it is very difficult to maintain a positive growth trend on the net income. So we're making major infrastructure and expansion investments and as a public company the public would frown upon any kind of dilution of income, which is what you almost have to experience when you're growing as aggressively as we are."
And this aggressive expansion program is leading it into some major metropolitan cities where it sees untapped investment communities. Itsgoal, according to Millichap, is to be the market maker for investment real estate throughout the United States for private and institutional businesses. To get this business, he says you have to be located in the city.
"The business is still a local business. I can't access owners in Kansas City if I don't have an office in Kansas City. So it is something we just have to do," Millichap says.
An added bonus to the expansion is that it has increased the capability of the local office to help other local offices. On a trip to the Chicago office recently Millichap says he was thanked by some of the agents for opening up the Detroit office because they were able to put together a couple of deals that they wouldn't have been able to put together had it not been for the fact that they "had access to money coming out of Detroit."
Though some may feel Marcus & Millichap's expansion is chancy with the stock market the way it has been, Millichap is confident in its expansion plan.
"It is a very favorable period of time. The only thing is that everyone has to remember '96, '97 and '98 were three of the most favorable years in the investment brokerage and the real estate business, so we remember the down cycles also." Marcus says. "We are expanding prudently. Although it's (adding) 21 offices in the next three years, with the base of business that we've got, we feel it's a little-or-no-risk expansion plan."
After 27 years in the business, Marcus & Millichap have been very successful and innovative. But there is something Marcus would like the public to remember about his company.
"If you think of us as professionalizing the industry, that is what I would like to be noted for. We're not trying to do things different for different's sake," Marcus says. "We want to have better information for our clients, better analytical information. We want our brokers to trust one another with information, to work for the client. Those kinds of things are very important and that's what drives me."