Wrangling Opportunity

Despite economic woes, this CCIM ropes in a sound investment.

By Jennifer Norbut

Just as the golden leaves of the Aspen trees blanketed Colorado’s Rocky Mountains last fall, the U.S. financial markets began a historically rapid descent into dormancy. Why then would John Meltzer, CCIM, CRE, president of Meltzer Properties in Ouray, Colo., agree to buy a faltering real estate brokerage in the remote mountain community of Ridgway, Colo., population 718? To sum it up in a word: “Opportunity,” he says.

Commercial Investment Real Estate talked with Meltzer about the strategy behind his decision to partner with a group of investors to buy Ridgway Real Estate Corp. in this economic climate, including the timing — and risks — associated with his brokerage expansion plan.

CIRE: What prompted you to buy a struggling brokerage in a small market in this economy?

Meltzer: If the opportunity is there, considerations will fall into place. I have always invested in real estate or businesses based upon long-term strategies. A failing real estate market and high operational costs were forcing this well-recognized firm to close, but its 20-year reputation was impeccable. And its Web site consistently garnered first-page returns on search engines when browsers were looking for opportunities in the area. So there was fundamental value: The price was opportunistic, there were operational and marketing improvement opportunities, there was built-in equity in its goodwill value, and my partners are all strong, ethical professionals.

CIRE: So what types of investors or clients are looking to do business in the region?

Meltzer: Buyers come for the romance and beauty of the mountains looking for homes. Then they seek out land, ranches, farms, and commercial projects to invest in once they have learned about the area. They look for contract structures that include conservation easements, tax implications, pride of ownership, long-term estate planning strategies, and returns that meet criteria.

CIRE: And what draws them to this particular area of Colorado?

Meltzer: Investors are typically drawn to the long-term stability and past and projected growth in the area. Telluride, Colo., has a successful and continually expanding resort and ski area, and Montrose, Colo., has rapidly growing retirement, micro-manufacturing, and small-business expansion communities. Ridgway’s growth is centered between the two.

CIRE: You mentioned the company’s Web site. How do you plan to leverage technology to build the business?

Meltzer: Since a high percentage of all transactions begin with Web searches, we decided to move away from print marketing and focus almost exclusively on the site. The rebuilt www.ridgwayco.com, which we will re-launch in late March, has easier visitor accessibility, broader placement on search engines, and more pertinent information. As the Web becomes our most valuable tool for marketing, information access, and the central location for entire transactions, we plan to make it an integral part of our business without losing that human touch.

CIRE: What other obstacles do you have to overcome to make the new business model successful?

Meltzer: Customer education — getting clients to understand the benefits, value, and depth of knowledge that our office holds. The brokerage itself has new intrinsic value through its six new owners. They’re all experienced, successful brokers with different specialties, including all types of commercial real estate, land, residential, farms and ranches, consulting, construction, and development. Each of them has a vested interest in concluding each transaction.

We also created a number of operational efficiencies right away. The office layout was redesigned and substantially reduced. Responsibilities were redistributed amongst the owners. And, due to the economic picture and what we saw coming, budgeted losses to break even were projected for two years.

CIRE: Can you offer any words of advice for CCIMs who may be looking to expand their business in this economic climate?
Meltzer: First and foremost, educate your clients. Prepare for a drawn-out recession and look within to rebuild stability. And expand only with opportunity — and no debt.

Jennifer Norbut is senior editor of Commercial Investment Real Estate. Do you have a story worth sharing in CCIM Q&A? Send ideas to jnorbut@ccim.com.