Developing a building is one of the riskiest of business activities. Anyone who has been involved with a large construction project knows how many opportunities there are for budget overruns and delays. Combine this with the stringent financing terms that come with construction loans and it becomes very easy to face insolvency.
For that reason early commercial real estate developers were closer to general contractors than real estate speculators. They would find a company that needed a building, they would build it (oftentimes using the company’s money), and then would sell it to them. This arrangement allowed developers to only assume the liability of the construction and not have to deal with the fluctuations in the market. This is, until one intrepid accountant learned that the electric tube manufacturer Ray-o-Vac was looking for a large warehouse in his hometown of Dallas.
Trammel Crow was not your average accountant. He grew up poor, plucking chickens and washing bricks until his father forced him to go back to school. A college career was not in the cards as the Great Depression hit just as he was graduating highschool. Instead he worked as a runner for a bank by day and took classes in accounting at night. In 1938, he earned his CPA and became the youngest certified accountant in the state of Texas at twenty four. He went into the Navy during the war and then bounced around the financial world until he took up a career in commercial development.
Unlike most accountants, Trammell was not risk averse. So when the Ray-o-Vac building came across his desk he decided to build a facility bigger than the company wanted and then lease the space out as his own. It worked, he was able to sign a lease with now defunct Decca Records and used that to scale his concept with shocking speed. By the 1970’s he was considered the largest landlord in the U.S. At one point Mr. Crow had interests in nearly 300 million square feet of developed real estate, comprising 8,000 properties in more than 100 cities.
In order to achieve this kind of portfolio growth, Crow knew he needed the right people and the right motivation. He actively recruited right out of college, even though going into commercial real estate was not a popular path at the time. He preached the power of hustle as a way to reduce the industry’s inherent risk and would make his young hires walk door-to-door to talk to business owners and get a feel for the market. Proving yourself to Crow could turn out to be very lucrative, he brought most of his business partners in as equity partners because he wanted them to be as committed as possible.
Trammell Crow the man passed away in 2009 but Trammell Crow the company lives on. After going public in 1997 and being acquired by CBRE in 2006 it is still the largest commercial real estate developer in the U.S. with $18.5 billion in active projects and an additional $9.3 billion in the pipeline as of December 31, 2021. By taking risks, hiring the best talent, and bringing them in as partners Trammell Crow was able to change many of our city’s skylines and the very nature of how we build buildings.
