Developer Extraordinaire: Measuring Success by Profits, Not Revenue
By: John Carroll | 4,625 Reads | 2 Shares
For more than 20 years Rick Huffman and his two partners--Sam Catanese and Marc Williams--have been building things. They've developed shopping centers, hotels, apartment complexes, a large stock of affordable housing units, and Branson Landing, a $400 million mixed-use project in Branson, Mo.
Now, they're building a hotel franchise as well. The trio's portfolio includes Hampton Inn and Hilton properties along with four Value Place locations--an extended-stay concept that has continued to thrive in a down economy by promising hotel convenience and apartment essentials.
"It just made a lot of sense," says Huffman. "If we could build something of apartment grade, at the bottom of the extended-stay market from an affordability/price point, we thought the model would be good." Fine-tuning their business strategy, Huffman and his partners have been focusing on areas with military bases, like Ft. Leonard Wood in Missouri and Junction City in Kansas, minutes from Fort Riley.
"The military has a lot of travel and a lot of extended stay involved with it," says Huffman. "There are a lot of moving parts around a military base. The first Value Place we built was in Junction City, a huge military area with a lot of travel and a lot of construction going on. Construction workers also use extended stay places, and it worked quite well."
Huffman feels right at home doing this kind of development work. The 53-year-old helped put himself through college working construction, "pounding nails and bidding a little plumbing and doing a little electrical work." So when it's time to break ground on a new Value Place, he knows how to bring a project like that in on time and on budget.
"I spend a tremendous amount of time reading reports and keeping in tune with our projects," says Huffman. "My biggest strength has always been in the development side. I've kept in tune with construction and costs and means and methods."
He's also kept in touch with his own values, which he likes to see reflected in the people who work for his company. "If I find people who are family-oriented and honest and can admit their faults, those are pretty strong core values," he says. "That's what makes everything work."
Like so many others involved in real estate development, Huffman has felt the chill winds of the economic downturn. But if you stick to your values and recruit a good team of people who share them, he says, you can get through anything. It also hasn't hurt that the sour economy has cut labor and land costs to the bone, trimming the cost of building a Value Place to less than $4 million.
To get ahead in Huffman's company, there are some ground rules, though. Being on time for meetings is essential for a manager who keeps Vince Lombardi time: "If you're five minutes early, you're late." And despite every new advance in technology, Huffman still believes that the best way to communicate with anyone is face to face. It's all part of a down-to-earth game plan that depends on keeping things simple and straightforward.
"There's nothing special," he says about his success. "I think it's just getting up every morning, looking for deals, treating people like human beings, just being honest. A friend of mine once said that we spend a tremendous amount of money trying to keep the dishonest from taking our money. But at the end of the day there's only that one percent of people who are bad who will steal from you. Don't worry about that one percent, because they're going to hell and you're not."
Name: Rick Huffman
Company: HCW LLC
No. of units: 4 Value Places, 2 Hampton Inns, and a Hilton Convention Center, Hilton Promenade, and Hilton Garden Inn
Family: Married 29 years, 5 kids
Years in current position: 20
Years in franchising: 18
Key accomplishments:
As a company we have developed more than 5,000 multi-family and condo units, and recently we won first place in the world for a project that we did in Branson, Missouri: Branson Landing. It's a 2 million-square-foot project with two Hilton Hotels, 500,000 square feet of shopping, and 200 condos. We opened it in 2006 and won the International Council of Shopping Centers' best project for the world. We still own and manage it.
Biggest mistake:
I don't think we've really made any mistakes in the franchise area as a company. We went into the single-family housing market in 2005 and that was a mistake. The timing was horrible.
Smartest mistake:
Branson Landing. When we started that project we had a lot of reservations. It was $400 million total and now that we've completed it, that's turned out to be a good decision.
How do you spend a typical day?
I have a home in Phoenix and in Branson. My partner Sam lives down the road from me in Phoenix. We've been looking at this market out here since it's been so distressed. We believe this market will rebound. We'll also continue to look for the smaller communities for franchising, where the cost of land is reasonable. The Value Places cost under $4.5 million, and you can do that in smaller, mid-tier markets. It's a good time to buy land right now, and we're out there looking.
Work week:
I like to get up in the morning and take a walk. We own a lot of different companies and different partnership interests. Most of my day is looking for new deals and managing the partnerships. I'm sitting in front of the computer 5 to 6 hours a day and financing is a huge part of the business. If you don't have good financing, it just doesn't work. I think financing has loosened up a little for businesses, with new lines of credit, inventory loans. But the federal government has kept its thumb on real estate loans.
Favorite fun activities:
I walk, golf. We have a houseboat on a lake nearby that we enjoy, and we spend time at sporting activities with our kids.
Exercise/workout:
Favorite stuff/tech toys:
I'm a little bit tech-challenged. I do pretty well with my computer, and my wife has an iPad and she loves it. I'm not a tech guy. With technology you can sometimes screw up business. I like to meet people, shake hands, and talk face to face.
I just started a new book. The One Thing You Need to Know... About Great Managing, Great Leading, and Sustained Individual Success, by Marcus Buckingham.
Do you have a favorite quote or advice you give?
Not really. I guess people who know me know I'm a little bit of a stickler on time. I'm on Lombardi time: If you're five minutes early, you're late.
Best advice you ever got:
My very first boss, when I was 21 years old, noticed that I would hang out with all my buddies and we were all broke, like everyone is when they're 21. He took me down to a very influential restaurant and set up a charge account for me. He said if you want to make money, you've got to surround yourself with the right individuals.
Formative influences/events:
The thing that influenced me the most was having five kids. I realized I had better work my ass off and that's what I've done. They've all attended college, are successful, and scattered around the country now. Family is the most important thing.
How do you balance life and work?
It's easier nowadays since the banks aren't lending money, so I can't do as many projects. I'd like to be busier. Having good people around you helps, and we do we have great people.
Business philosophy:
We're doing a lot more third-party management and have been phasing out of day-to-day management activities. I'm the youngest of the three partners, (they are 65 and 61), and we're all kind of wanting to maybe not burn the candle at both ends any more.
Would you say you are in the franchising, real estate, or customer service business? Why?
It's customer service. If you don't have great customer service and a good product you won't survive. Consumers are being a lot more conscious about how they're spending dollars but still demanding the same service.
I just enjoy life and getting up, and I love working. Work is probably the most fun that I have and that motivates me. I also enjoy spending time with my wife every day--that's more important.
What's your passion in business?
I guess I'm a driver. I'm not a patient person with details.
Management method or style:
I just look at the big picture. I don't like to micromanage. I like for the people around me to tell me in 30 words or less what's going on, because there are so many things we do.
Greatest challenge:
The greatest challenge today is making sure that you're picking the right locations and making sure you don't over-leverage yourself.
How close are you to operations?
Very.
Have you changed your marketing strategy in response to the economy? How?
Yes we have. We have eliminated a lot of print material and are using more Internet. We also are having our sales reps follow up more with the consumer.
How do others describe you? Probably they'd say not too serious, but a workaholic.
How do you hire and fire? I usually don't. Our management team does that.
How do you train and retain? That's the management team and they do a great job.
How do you deal with problem employees? As I said, the management team is in charge of that.
Annual revenue:
I couldn't tell you.
To complete all the construction projects and make sure they're open on time. We're working on a very large project in the Phoenix area and that's a goal of mine.
Growth meter: How do you measure your growth?
Profits. Not revenue. I don't care about revenue.
Vision meter: Where do you want to be in 5 years? 10 years?
I would like to be maintaining the same pace I am today, continuing to do business deals, continuing to grow, maybe to work a little less.
How has the most recent economic cycle affected you, your employees, your customers?
Are you experiencing economic growth/recovery in your market? We've reduced staff by 25 percent, reduced costs by 40 percent. We took a look at ourselves and realized that there are some things out there we don't need. We looked under very rock to find a dollar, and I would say we're a much better company now having gone through this.
What did you change/do differently during the recent tough economic times that you plan to continue doing into the future?
Business in America has learned how to do more with less people. I'm not looking at hiring anybody soon. We can do the same work with less people. And I learned to be more conservative, even in my personal life, making sure I don't lose what I've worked so hard for. Through this recession my net worth has gone down about 40 percent.
How do you forecast for your business during trying times?
Can you even forecast at all? No. Not until we know we can borrow money. I think it's too difficult to forecast. You have to take one day at a time.
Where do you find capital for expansion?
We've used smaller banks, where it has been easier to find capital. What works for Value Place is $3.5 million, so that does make the Value Place model more attractive for developers. If you put equity in, then you can go to a community bank. But for any sizable projects ($8 million, $10 million, $100 million), financing for new construction is nonexistent.
Is capital getting easier to access? Why/why not?
A little, not much.
Have you used private equity, local banks, national banks, other institutions? Why/why not?
Community banks, over the last six or seven months. They're willing to lend more than the larger banks, although they have their restraints
What kind of exit strategy do you have in place for your business?
I don't have one. My exit strategy is to continue what I do. I have one son in the business. I'm hoping he'll step up to the plate and take some of the business.
What kinds of things are you doing to take care of your employees?
Treat them great. The best way is to tell them when they accomplish things. Obviously we make sure they're compensated, but they like to be recognized and told they're doing a great job. We're a small company, a pat on the back is important.
How are you handling rising employee costs (payroll, healthcare, etc.)?
Health care is the biggest problem. The rest of payroll costs we can handle fine. But health care is an unknown. It goes up every year. Until Congress decides to get along with each other, I have no idea where we're going.
How do you reward/recognize top-performing employees?
We are too small to single out one person. We try to reward everyone as a team.
How is social media affecting your business operations?
We are using social media in our marketing, but have not felt the effects of it yet. It's still a learning process for us.
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