Southern California is recovering from a series of wildfires while its housing market is in a dive and a credit crisis threatens to deepen the crater. You might think that’s a recipe for disaster for a startup real estate brokerage company.
But the high-end luxury market is a unique beast. And Lou Piatt, an industry veteran who is co-founder and CEO of a new real estate brokerage firm, Teles Properties, said he believes this new company will thrive despite the slowdown.
“We think it’s a perfect time to start a real estate company,” said Piatt, a former president of Jon Douglas Co., a real estate company that he managed for 15 years. Jon Douglas Co. merged with Prudential California Realty in the mid-1990s.
“We want to build a company around confident and productive agents. We think that they tend to shine and tend to be even more important in a difficult market,” Piatt said. “A lot of the older, more traditional (business) models have been built on the massive size of offices, not particularly the productivity of individual agents. We are not interested in an office with 150 people in it.” The company is shooting for a maximum of 55-60 agents per office, he said.
Piatt has teamed with Peter Hernandez, a former Jon Douglas Co. agent who served as president and chief operating officer for Coldwell Banker in Orange County, and Steve Shull, president of Performance Coaching, a business that offers sales training to real estate professionals, in launching Teles.
The company’s first office is in Beverly Hills, and the founders plan to open a second office in Brentwood. Also, Teles services may expand to include mortgage, escrow, homeowners insurance and title insurance services for clients.
“The most robust market in the country has been at the real high-end … not to say that the high-end is growing as fast as it was two years or a year ago, but it is probably the most healthy of the markets,” he said.
Coldwell Banker Real Estate reported in September that Beverly Hills ranked as the most expensive among a list of 317 U.S. real estate markets, based on a comparison of similarly sized homes.
Real estate research company DataQuick Information Systems reported that median new and resale home prices rose 18.2 percent in Los Angeles from September 2006 to September 2007 and 0.8 percent in Los Angeles County, while the resale median home price fell 5.9 percent for the entire Los Angeles region and sales of previously owned homes slipped 38.4 percent in September compared to the same month last year.
There are several luxury real estate companies in Teles’ core market area, which includes the communities of Beverly Hills, Brentwood, Malibu, Pasadena and Pacific Palisades, though Piatt said, “We’re not really worried about or focused on one particular competitor.”
Instead, he said the company seeks to build up a unique and recognizable brand identity through its marketing efforts, citing Nike and Apple among the brand examples that the company seeks to follow.
A missing link for some high-end agents is solid support from their brokerage companies, Piatt said. Teles offers profit-sharing and other administrative support for its agents. “We’re going to set aside a percentage of our profits into a pool,” he said. “Those people who contribute to profits will receive a share of the pool. Highly productive people will flourish in this environment.”
Piatt said the concept for Teles was born out of research that he conducted for a book about the real estate business and conversations with colleagues. “We started talking about the ‘what-ifs’ — what would we do in our next life if we could pick out all the good things we’d done in the past … and avoid some of the mistakes that we made in the past.” That led to more serious discussions during weekends and evenings, he said, and to the questions: “Why not us? Why not now?”
Ernie Carswell, a luxury agent who has left Coldwell Banker to join Teles, has previously worked with the company’s founders.
After working in Dallas and New York City, Carswell was recruited to work at Jon Douglas Co. in Los Angeles in 1991. He received training from Shull, who he said assisted him in boosting production. Carswell is the leader of a real estate team — most of his team members have accompanied him from the brokerage company where he formerly worked, he said.
While these are challenging times in the real estate industry, Carswell said, “I’m not afraid of down markets. They’ve served me well.” He embarked on his real estate career in Dallas during the Texas oil crisis, he said, and he was a successful agent during his first year in New York City. And clients will especially remember an agent who helped them in a transaction during a difficult market, he said. “If you help them now, they’ll never forget it.”
“All great real estate companies that have grown deep roots have been founded really in down market cycles, sort of at the bottom of the trough,” he said. “I think our timing is perfect.” He noted that the “shock effect” from problems in the mortgage and credit markets has already hit. “Reality has struck and now we’re all dealing with it.”
Carswell said he was drawn to Teles because of its selectivity in choosing agents. “I don’t want to work as the masses,” he said, adding that he wants agents who he is affiliated with to share the same standards and practices. “I want agents who are focused like that to be at my left and at my right hand.
“Unfortunately, most of the real estate industry is built upon recruitment: get as many bodies as you can, sell a house as quickly as you can and let’s get through this. There is always someone left behind from the bus ride and usually it’s the client.”
The luxury real estate community, by contrast, is a very small world, he noted, “like a clamshell.”
It was sad to part with his former brokerage company, he said, and joining a brand-new company is both chaotic and exhilarating. But he is not looking back. “We’re committed, and it shows,” he said.
Teles announced last week that it has brought aboard another real estate agent, Melissa Alt, who has worked in a market area spanning from Santa Monica to the Hollywood Hills.
While some new real estate business models have sought to differentiate themselves in the marketplace by offering low prices to consumers, Piatt said that “high-end service” is the goal at Teles. “I think there is room in the marketplace for lower cost, probably lower service brokers. That’s not necessarily a bad model. We’d rather be a Goldman Sachs. We think the most important thing is customizing the marketing for high-end properties.”
Along those lines, the founders chose the name Teles — a Greek word for “perfect.”