John Folsom, President of Colliers Keenan

MidlandsBiz:
Where were you born and raised?  What is your educational background?

John Folsom:
I was born in Columbia, but moved to Greenville when I was six weeks old.  My dad, John R. Folsom, was with Liberty Life Insurance Company, later Liberty Corporation, an insurance company that also owned TV and radio stations (including WIS).  We moved back to Columbia when I was ten and other than the four years I spent at Washington and Lee University in Virginia majoring in economics, I have been in Columbia ever since. Three weeks after graduating from college, I married English Johnson, a Columbia girl, and entered the graduate school of business at the University of South Carolina (The Moore School).  From there, I went to straight to my first job at South Carolina Federal Savings Bank. 

MidlandsBiz:
What was your role there?

John Folsom:
I began my career at South Carolina Federal in 1974 as a management trainee and ultimately served as President and CEO of the company. In January of 1993, First Union acquired South Carolina Federal. They offered me the job as President and COO of the South Carolina division of First Union – with the condition that I move to Greenville. At that time, our children were 13 and 11 and it just didn’t make a lot of sense to move.  Through Neel Keenan, an opportunity came up to become the President of the Keenan Company, which seemed like a great opportunity and a real good fit for me.

MidlandsBiz:
From banking to commercial real estate, was it a hard transition?

John Folsom:
Commercial real estate was a primary lending focus at SC Federal so in that way, it was not a huge stretch.  I had been a lender on numerous commercial real estate transactions, so I had at least an appreciation and interest in this industry. Regardless of the industry, people are the common factor.  The Keenan Company had recruited and retained an outstanding group of people on the brokerage and property management side, so that made my transition to a new industry much easier.

Although it was not the storm that it is today, 1989-1991 were difficult years in real estate. The Keenan Company was well positioned coming out of that recession, so by the time I took the reins in 1993, we were ready to take advantage of growth opportunities.  Timing is everything. I was lucky to arrive when I did and have a chance to work with so many competent people, including Walter Keenan and my other partners.

MidlandsBiz:
How does that recession compare the current one? What happened?

John Folsom:
The economic downturn of 1989-1991 was focused primarily on real estate; in this economic downturn, no sector has been left unaffected. 

Among others, I think one of the major reasons for this downturn is the government policy promoted under the Clinton administration that everybody deserves the right to own a home.  Credit became too easy to obtain. We went through a cycle from 2004-2007 where you could get a residential mortgage underwritten in a day.  When I first started out in 1974, it would take four or five weeks to underwrite a residential mortgage and we diligently checked income and employment to be certain a borrower could meet their obligation. Compounding this issue was the fact that many of the banks and mortgage brokers who made these loans sold them in large pools to Freddie Mac and Fannie Mae. They did not hold these assets in their portfolios, thus these lenders were less concerned about the quality of these assets.  They were just after volume and the fee income.

MidlandsBiz:
So the problems started with residential real estate.  Has it spread to commercial real estate?

John Folsom:
It has, but in varying degrees.  Access to credit was also too easy to obtain in the commercial real estate sector as well. The investment and income producing properties side such as retail, office, industrial and multi-family have had their challenges but not nearly as severely as the residential side.  However, the banks that made loans on the more speculative projects, land deals, acquisition and development and residential subdivisions have experienced significant problems.  But a bigger problem is potentially on the horizon. 

MidlandsBiz:
What problem are you referring to?

John Folsom:
There is a significant potential problem brewing with commercial real estate loans that were made 4-5 years ago.  Borrowers frequently obtained loans with five to seven year terms based on a 20 year amortization schedule. Many of these loans are well collateralized and the properties have tenants who are paying their rent. These loans, for the most part, are current and from the banks’ perspectives, are performing loans.

However, the maturities on many of these loans are fast approaching and therefore, need to be renewed or refinanced. But now, the appraised value of the collateralized property may not be as high as it was five years ago because of the recession which has produced higher capitalization rates, lower rents, etc. In order to protect their investment and to appease the FDIC, many banks are requiring borrowers to reduce the loan amounts by demanding an additional infusion of equity.  Most borrowers do not have as much equity available as they did five years ago and in those cases, a loan that was performing as agreed under its original terms could end up in default.…

MidlandsBiz:
What are the origins of Colliers Keenan?

John Folsom:
The Keenan Company was started in Columbia by Walter Keenan’s dad in 1906. Nobody knows for sure what the exact business model was back then, but we do know that Walter’s dad was leasing properties for others (similar to what is done today) and serving as a broker representing buyers and sellers in the acquisition of commercial real estate, and that activity was centered mostly in downtown Columbia.  Walter began his career with the company in the early 50’s and was active and continued to come into the office until his death in 2008.

In the 1980’s, The Keenan Company became a member/shareholder of Colliers International, which is one of the largest real estate organizations in the world.  Our affiliation with Colliers International provides our brokers access to the knowledge and resources of more than 12,000 real estate professionals in 61 countries. 

We dedicated the fountain outside the Columbia Museum of Art to commemorate our 100th anniversary in 2006. In our 100 plus year history, I am just the 4th CEO.  We are all proud of our longevity and in our ability to operate successfully in a cyclical business

MidlandsBiz:
What are your memories of Walter Keenan?

John Folsom:
They are still very vivid.  One will not find a warmer, kinder, gentler man than Walter Keenan; he was truly a grand gentleman. Deals may have been worked out on the back of an envelope, but Walter Keenan possessed an incredible, innate business savvy when it came to commercial real estate.  Walter and his wife, Harriett, were generous with their resources and their time. The Keenan Chapel at Trinity Cathedral is just one of the many places around town that bear witness to their philanthropy. 

But I think Walter would say that he was most proud of his weekly volunteer work with the Salvation Army and in particular, the one-on-one mentoring that he did with the homeless. You are not going to find many people of Walter Keenan’s stature in the business community with that kind of direct involvement with those less fortunate.

MidlandsBiz:
You, too, are involved with the homeless issu
e in Columbia, are you not?

John Folsom:
I am on the Board of the Midlands Housing Alliance (MHA), an organization that came together as a result of the community’s inability to deal with the homeless issue. Several of us had been on a mayoral site selection committee tasked with finding a location for a homeless shelter.  We met for eleven months and came up with a series of recommendations that were promptly voted down by City Council on a 7-0 vote.  The Midlands Business Leadership Group (MBLG) of which I am also a member, had targeted the needs of the homeless. Their impact on our community was established as a major issue.  When the site selection committee’s recommendation was turned down, the MBLG created a coalition of business people, health care and service providers, as well as members of the faith based community and proposed the homeless service center at the current site of the Salvation Army at Main and Elmwood Streets. The purchase of the site is imminent.

MidlandsBiz:
Why was this effort more successful than others in the past?

John Folsom:
Perhaps the one primary reason it was successful is that we were able to find a site that already had the proper zoning to house the homeless, the Salvation Army property at the corner of Main and Elmwood.

In all of my years of civic involvement, I have never seen our community rally around and make financial commitments as quickly as it has for this project. We’ve raised about $11.5M ($5M of which came from the Knight Foundation) for the acquisition of the land and the construction of the buildings. 

The facility will be in an attractive campus setting and it is our goal that it will have a positive impact on the neighborhood.  It will also allow the MHA to provide the kinds of services that will encourage and enable the homeless to make a transition to become productive members of our community.  Acknowledging that we are not going to solve the homeless problem, borrowing ideas from other successful programs, we will create a process that will radically reduce the numbers of homeless in the Midlands and the concerns that some have with that issue.

MidlandsBiz:
What is the ownership structure of Colliers Keenan?

John Folsom:
We have 19 stockholders, including members of the Keenan family, located in Columbia, Charleston, and Greenville. It is not just management that owns stock in the company.  We are very proud to have a number of our brokers who are shareholders. It is an earned privilege to be offered an ownership position in the company and it is a system that has worked well for us.

MidlandsBiz:
What is your business model?

John Folsom:
We are a third-party service provider engaged in four core businesses: sales, leasing, property/facilities management and construction management.  While other commercial real estate companies may be directly involved in development, that is not part of our business model.

In sales we represent both buyers and sellers and in leasing, we represent both landlords and tenants.  We manage over eight million square feet of space making Colliers Keenan the largest third party property management company in South Carolina. We also have a construction management company, LCK Construction Services, which provides project management for institutional, corporate, governmental, non-profit and medical clients.

An important component of our business model is that we are focused exclusively on commercial real estate. The closest we get to residential is selling land for residential development and managing apartments and condominium regimes.

MidlandsBiz:
Who are your customers at LCK Construction Services and why did you start it?

John Folsom:
LCK serves as an owner’s representative through the entire construction process. It was born out of our property management division and we rolled it out as a free-standing company 8 years ago.  . As we assisted our clients over the years with renovations to their buildings, we developed an expertise in the area of construction management.  One of our partners who ran that division of Colliers Keenan, Mickey Layden, came to me one day and said she was convinced that there was a profitable business there – the concept just needed to be developed more thoroughly.  The Bose Wave Radio Plant was the first significant construction project that really got us started.  Since then we have been engaged in projects such as EdVenture Children’s Museum, the parking garage at the Charleston Aquarium, numerous churches including Lexington Baptist and the Trinity Cathedral Family Life Building, the Municipal Association of SC and the City of West Columbia town hall, etc.  We’ve completed over $250 million of projects for our clients.  Among other projects, we have just begun working on the new Greek Church Sanctuary. So Mickey was correct.  It has been a good line of business for us and she has demonstrated outstanding leadership. 

MidlandsBiz:
How is Colliers Keenan different from other commercial real estate firms?

John Folsom:
There are several things that differentiate Colliers Keenan beginning with the fact that we are the only commercial real estate firm with offices in all three of South Carolina’s largest cities of Columbia, Charleston and Greenville. 

Perhaps a feature that you would find interesting is that unlike other commercial real estate firms, the brokerage management of our company seldom executes transactions.  Our platform requires that transactions are completed by our agents.

Walter’s dad recognized that real estate was a cyclical business that is prone to capital calls at times when your transactional revenues would be down. Although we operate in entrepreneurial environment, as an entity Colliers Keenan, does not place its own capital at risk. We have been fiscally conservative over the years to ensure that in tough times we have the financial resources to maintain stability.  We have been questioned about that strategy over the years, but the events of the past year have confirmed that our conservative philosophy is well founded. 

Another key differentiator for Colliers Keenan is that each of our brokers specializes in one of the following product areas: office, industrial, retail, investment or land.   We encourage our brokers to pick a major, so to speak, and to become an expert in that discipline.  The result is that we often have the recognized experts in each of these areas in all three of our cities.

MidlandsBiz:
How have you been affected by the down economy?

John Folsom:
The shear number and flow of sales deals in 2009 has slowed, although ironically we completed three of the largest transactions in the firm’s history in 2009.  There are still deals being done out there, but the trend that we have seen is towards larger deals done by institutions with access capital and “owner occupied” sales. On the bright side, leasing activity has held its own and property management and LCK revenue is up in 2009.

MidlandsBiz:
Are buyers coming to you and asking for lower commission rates?

John Folsom:
No, we have not seen that.  In fact, there is even more of a value put on professional representation when doing real estate deals in a challenging economy.  Clients are faced with more complicated issues and it is possibly more important than ever to have a seasoned professional working on their behalf. 

MidlandsBiz:
How has the delivery of commercial real estate changed over the past decade?

John Folsom:
Typically, commercial real est
ate had been a local business, but over the past decade or so, in order to be competitive in this industry, you have to have talent at the local level yet be global in your reach. .  Colliers International gives us access to competent, qualified professionals across the country and in fact the world, to help meet the national and global real estate needs of our South Carolina clients.

Another change that we’ve seen is that corporate solutions has become so very important and is a real growth area for us.  Most of our clients own or lease real estate purely as a vehicle to deliver their product or service, yet real estate is one their biggest expenses. We will continue to look for ways to assist our clients with their real estate needs so that they can focus on their core businesses.

Commercial real estate has become more sophisticated and institutional since the times of Walter Keenan and his dad, or even since I started in this business.  It becomes more numbers driven and solution oriented every day. 

MidlandsBiz:
What metrics do you use to measure success?

John Folsom:
As every company does, we are always managing to our bottom line.   But the philosophy that Walter Keenan and his dad had for this company is that we are not just here simply to make money for the stockholders, but also to create an environment where employees can be happy and experience financial success. We are in tough times right now.  So a key metric for us will be to insure that our brokers and staff continue to be successful through this cycle.

MidlandsBiz:
What is your leadership style?

John Folsom:
I guess the best way to determine that would be for you to ask my partners and our staff!  But what I hope they would say is that I am an advocate for participatory management.  I like to foster an environment where there is plenty of discussion among the decision makers of the company as we work towards a consensus.

I think some around the company would say that I have a high sense of urgency.  And I do believe leaders need to have a healthy dose of impatience.
I have a tendency to throw ideas up against the wall with the expectation that I will get a thoughtful response and I am never disappointed.
.  
MidlandsBiz:
What advice would you give to young people wanting to start out in this industry?

John Folsom:
My advice to young people is to obtain some experience before considering a career in commercial real estate. We have found that banking, lending or sales experience is very useful when it comes to success in this industry, but nothing seems as important as the right mix of personality traits and a little seasoning in a related field.

The training programs for this industry do not measure up to those that might be offered for banking or accounting, for example, so when one is considering a career in commercial real estate, I think it is essential that one associates with a firm that offers a mentoring program . Working side by side with an experienced, competent broker is the quickest path to success in this business.