The Long & Foster Companies, Inc.

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The Long & Foster Companies, Inc.

11351 Random Hills Road
Fairfax, Virginia 22030
U.S.A.
Telephone: (703) 359-1500
Fax: (703) 359-1680
Web site: http://www.longandfoster.com

Private Company
Incorporated: 1968
Employees: 2,450
Sales: $1.2 billion (2005 est.)
NAIC: 531210 Offices of Real Estate Agents and Brokers

The largest residential real estate company in the Mid-Atlantic, as well as the nation's largest privately owned real estate company, Fairfax, Virginia-based The Long & Foster Companies, Inc., does most of its business in the Washington, D.C., and Baltimore markets, but also operates in Delaware, New Jersey, North Carolina, Pennsylvania, Virginia, and West Virginia. The company maintains some 240 offices and employs 16,000 sales associates. Long & Foster bills itself as a one-stop operation. More than just selling homes, it provides mortgage financing, title and homeowner insurance, assistance connecting to utilities, relocation and settlement services, and links to local providers who can perform renovations, repairs, and property maintenance. The company also rents residential properties and vacation homes, and offers property management services to owners who wish to lease their properties. Furthermore, Long & Foster operates a commercial real estate unit that operates in Washington, D.C. One of the company's cofounders, Paul Wesley Foster, Jr., serves as chief executive officer and chairman.

FOSTER, GEORGIA-BORN: 1933

Foster was born in McDonough, Georgia, in 1933, the eldest of four boys, and grew up under difficult circumstances during the Great Depression. His father supported the family by working in a Sears, Roebuck and Co. warehouse, and later ran a produce stand. His mother suffered from persistent migraines and chronic depression, eventually leading to a nervous breakdown around 1945. Foster would also suffer from migraines in his life, a condition that often hindered his work. Nevertheless, Foster was ambitious, even as a child. He told the Washington Post that he always "wanted to be somebody. I wanted to go to college. Even though we didn't have anything, I had uncles who were successful. And that's want I wanted."

Foster's ability to play football earned him a partial scholarship to the Virginia Military Institute in 1951, and he supplemented his income by waiting tables at the mess hall. After earning a degree in English in 1956 he worked briefly for Kaiser Aluminum, then served in the Army in Germany until 1959. He returned to Kaiser as an aluminum siding salesman, the job taking him to Washington as well as bringing him in contact with home developers and spurring his interest in real estate. In 1963 he left Kaiser, becoming a sales manager for new homes with a Fairfax builder, Minchew Corp. After three years he became vice-president of sales for Nelson Realty in Annandale, Virginia.

Foster met his future partner, Henry A. Long, in the mid-1960s, when Foster was selling a house to one of Long's neighbors. Four years younger and a Virginia native, Long, recently discharged from the Air Force, was an independent commercial broker in Virginia and Washington. Long looked over the house with Foster, who not only sold the property but made a friend in Long. They occasionally met for lunch and discussed their career plans; after about two years, in 1968, they decided to form a real estate agency together, with Foster handling residential sales and Long commercial properties. The flip of a coin determined whose name went first, and the company became known as Long & Foster.

The new partners rented a small office about 700 square feet in size, set up shop, and endured the struggles of establishing a real estate business. In an interview with the Washington Post in 1988, Foster admitted that they had "no grand plan." Instead, he said "It was incremental. As we could make something work, we have moved on to something else. Just make it work and look for something else, make it work and look for something else." Once Long and Foster had secured a foothold, they opened a second office in Reston, Virginia, a 300-square-foot hole in the wall run by one of Long's friends, an airline flight engineer who manned the office in between flights. Founded in 1964 Reston was a planned community in the Washington metropolitan orbit, and its success was far from certain when Long & Foster established itself there. However, the move panned out, the first in a number of shrewd expansions.

Long and Foster also took advantage of good luck. When looking to open an office in Manassas, Virginia, they were unable to find office space and were forced to set up the operation in a Holiday Inn. Because the hotel was located close to an IBM facility it turned out to be the natural place for transferees to stay, and because they were generally looking for a house they turned to the Long & Foster office at the hotel for help.

Long & Foster tried to duplicate the trick when the company entered the Maryland market in 1974. Unknown in the state, Long and Foster established an office in Gaithersburg because, as Foster explained to the Post, "everyone there is so new they won't know how new we are." They again tried to establish an office at the area Holiday Inn, but this time the operators were not as accommodating, not believing the firm had the kind of financial backing necessary to lease an office from them. Instead, Long and Foster rented the room that was closest to the lobby on a monthly basis, paying $900 a month in rent, had the beds removed, brought in six desks, and turned the bathroom into a storeroom. Once again the tactic worked, and Long & Foster had established itself in Maryland.

SEPARATION: 1979

By 1976 Long & Foster was also doing business in Washington, D.C., and despite some tough economic times that put a crimp in housing sales, the company turned a profit and continued to grow. It caught the eye of Merrill Lynch & Co, which in the 1970s had become involved in real estate sales and was especially interested in entering the Washington market. The firm made a bid for Long & Foster, but while Long was eager to accept and use the money to go into commercial development, Foster was not and the offer was turned down. Foster enjoyed his work and had no particular interest in development. To accommodate his friend, however, he offered to buy out Long at about the same amount he would have received if they had sold out to Merrill. In July 1979 the deal was completed. Foster kept the Long & Foster name, which he believed had developed a great deal of value in the marketplace, and went solo. His erstwhile partner then formed Henry A. Long Co., a Fairfax commercial development firm. Although the two men went their separate ways, they remained friends.

With real estate booming in Washington and Maryland, Long & Foster cracked the $1 billion in annual sales volume by 1981, and used the momentum to move into Virginia Beach and Richmond, Virginia. In 1982 Long & Foster entered the Baltimore market. Over the next few years the company expanded northward into Pennsylvania and to the West in West Virginia, and began filling in markets in between. By 1987 Long & Foster was operating more than 100 offices and sales volume exceeded $5 billion. A year later it entered the Hampton Roads, Virginia, market.

COMPANY PERSPECTIVES

At Long and Foster, helping you find your home is just the beginning. From financing to connecting with utilities to remodeling and beyond, we can help. We're here for the entire life of your home, so you can enjoying living—at home.

Much of Long & Foster's growth was the result of acquisitions, increasing the pace of the company's expansion at the start of the 1990s despite a real estate slump that accompanied a downturn in the economy. In May 1990 Long & Foster beefed up its Washington metropolitan business by adding the six offices and 175 brokers of NVRealty, a subsidiary of NVR L.P., the third largest homebuilder in the United States, which was short on cash and desperate to cut expenses. As a result Long & Foster paid no cash to add the unit to its operations. Later in 1990 Long & Foster entered the Delaware market by acquiring Rehoboth Beach, Delaware-based Anderson-Stokes Inc. In addition to four offices in Delaware, Anderson-Stokes maintained four offices in Maryland, which Long & Foster subsequently closed. The agency focused on the leasing of summer homes and condominiums to vacationers on beach property on the Delmarva peninsula. A large percentage of those beachgoers came from the Washington-Baltimore area, and Long & Foster was able to take advantage of its name recognition with those residents in growing the former Anderson-Stokes business. Long & Foster closed the year by acquiring ERA Homestead Properties Inc. in Burke and opening a new office in Vienna to expand its presence in northern Virginia. All told, the company maintained 175 offices and employed 5,600 sales associates.

The acquisition spree continued in the early 1990s. The company's commercial real estate division was expanded through the 1991 acquisition of a 50 percent interest in Barnes, Morris & Pardoe, the second largest commercial broker in the Washington area. Long & Foster ranked eighth, and their combination made them the area's largest broker. A year later, Long & Foster picked up the five office of Bethesda, Maryland-based Lewis & Silverman, making the firm the largest seller of new homes in the Washington area.

Long & Foster maintained the pace in the mid-1990s, a necessity given the consolidation going on in the real estate industry, as smaller companies were forced to team up with larger firms in order to survive. When Prudential Preferred Properties was sold in 1995, Long & Foster picked up more than 100 Prudential sales associates, which were then dispersed to offices throughout Washington, Maryland, and northern Virginia. In 1997 Long & Foster increased its presence in York County, Pennsylvania, located north of Baltimore, by acquiring Eisenhart Real Estate Inc. and Colton & Associates Inc. As a result, Long & Foster had a 30 percent market share in York county. The new business helped to boost sales volume to $9 billion. That number would top $12 billion in 1998, due in large part to the acquisition of Richmond's largest residential real estate company, Bowers Nelms & Fonville Inc., which employed 450 sales associates at 15 offices and generated annual sales of more than $1 billion. Long & Foster was now the largest real estate firm in the mid-Atlantic and the third largest in the country.

Long & Foster turned to the Internet to boost sales in the late 1990s, making virtual tours of its property listings available online. Much of the company's growth into the new century, though, resulted from the acquisition of smaller competitors and the influx of new agents. In 2000, 1,500 agents joined the firm from other brokerages, as the company sold more than 79,000 properties worth $15 billion. A year later another 900 agents were added. Furthermore, Long & Foster picked up Richmond, Virginia-based Prudential Savage & Co., greatly adding to its Richmond business. In a matter of just three years, Long & Foster had assembled 19 offices in the area and achieved a 50 percent market share.

NORTH CAROLINA ACQUISITION: 2006

As was the case nearly 40 years earlier, Long & Foster remained on the lookout for new opportunities in the 2000s. One area it emphasized was the corporate relocation business, and beefed up its technology to support it. The company also looked to new markets. In 2006 Long & Foster moved into the Triangle area of North Carolina by acquiring the area's largest residential real estate brokerage, Fonville Morisey Realty. With sales volume of $42.8 billion in 2005, Long & Foster was set to build on that number by doing business in the thriving communities of the Triangle, but the residential real estate market softened in 2006, forcing the company to cut costs.

KEY DATES

1968:: Henry A. Long and Paul Wesley Foster form company.
1974:: Company enters Maryland.
1979:: Foster buys out Long.
1981:: A landmark $1 billion in sales volume is reached.
1998:: Company enters the Richmond market.
2006:: Long & Foster enters the North Carolina market.

Long & Foster was believed to be diversified enough to contend with further erosions in the housing market, but it faced other challenges going forward. The company's mortgage and home insurance subsidiaries were not doing as well as competitors in cross-selling to home buyers, and all traditional brokers had to contend with the challenge of web-based real estate agents who were making steady inroads. Most importantly, Long & Foster had to prepare for succession. Foster was 73 years old and remained very much in charge, but whether he was yet willing to groom someone to one day take his place remained uncertain.

Ed Dinger