Lynch pin: Entrepreneur finds success in luxury home market | An entrepreneur turns his sights from Wall Street to Easy Street, finding a ripe market for Maine's luxury homes
Photo/David A. Rodgers
Chris Lynch, founder and CEO of Legacy Properties Sotheby's International Realty, sits in the living room of a condo for sale on Pine Point Beach in Scarborough.
Click the map for an interactive look at Legacy Properties Sotheby's International Realty's top 15 sales in 2008.
To the casual observer, Chris Lynch’s timing couldn’t have been worse. The 46-year-old Bates College graduate founded his luxury real estate brokerage in Portland in October 2005. At the time, the real estate market was strong and had experienced months of increasing sales, offering good opportunities for brokerages.
But it wouldn’t last. Lynch had found the apex of the market.
As it turns out, real estate experts in retrospect peg October 2005 as the beginning of the market’s ongoing downward spiral. Instead of cursing his bad timing, Lynch actually credits it — at least in part — for his success.
Last year, despite doomsday headlines about the subprime home loan fiasco, the recession and a tanking real estate market, Lynch’s company, Legacy Properties Sotheby’s International Realty, posted a 38% increase in gross revenues. In 2008, Lynch says Legacy Property’s gross revenues were between $3 million and $4 million. In three years, Lynch claims Legacy Properties captured 25% of the luxury home market — which is generally defined as homes worth over $1 million — between York and Waldo counties.
Legacy Properties isn’t your typical Maine real estate brokerage. Lynch operates as a CEO, not a broker/owner, managing nearly 50 Realtors in four offices. And while Maine’s average median sales price for a single-family home is under $200,000, Legacy Properties’ average list price is $900,000.
The company’s rapid expansion is part of the reason for its success, especially when compared with a slowdown in the luxury market: In 2007, homes listed in Maine for $1 million or more generated a sold volume of $660 million; in 2008, it was $373 million.
How did this former Wall Street bond broker with no real estate experience take his company from zero to 25% market share as the real estate market went further and further south?
On a recent afternoon, Lynch sits in his office’s conference room at 2 City Center in the middle of Portland’s downtown. He holds his arm out in front of him, parallel to the floor. In his hand is a pen, which is also level with the floor. He is explaining what choices a business faces in a recession. This is the equilibrium between revenue and expenses, he explains. When the market heads south and revenue falls, a business has two choices: cut expenses to balance out its books — he lowers the pen — or expand to build revenue, and in turn, increase market share — he raises the pen.
For Legacy, Lynch chose the latter, opening new offices, adding brokers and making outreach and marketing a priority over the past three years.
“There are tremendous opportunities to grow in a down market,” Lynch says. “If we were in the market that there was in October 2005, we wouldn’t be the size we are now. I think we would have been successful, but not at this pace.”
Lynch says he succeeds by focusing on being a CEO rather than a real estate broker and business owner, as is the norm in the real estate business. Bob Stevens, Lynch’s partner and the designated broker at Legacy Properties, calls Lynch “the orchestra leader.”
Switching hats
Chris Lynch has never brokered the sale of a home. But he is well versed in brokering sales of something else — bonds.
Before moving his family to Maine in 2002 for a lifestyle change, Lynch had a 17-year career as an investment banker on Wall Street, most recently as head of the global bond brokerage at Donaldson, Lufkin & Jenrette.
Lynch says working in the bond market on Wall Street prepared him well for working in real estate. Brokerage operations — whether selling and buying bonds or real estate — operate the same way, he says. Both industries are tied to interest rates and are impacted by economic and seasonal cycles. They both increasingly rely on technology to run their businesses and there’s continual pressure to deliver more products and services. The parallels go on and on between these two industries, he says.
However, when Lynch arrived in Maine, he didn’t have a plan to open a real estate brokerage. He had considered different business opportunities, from corporate advisory work to private fundraising. He also looked at getting involved in speculative real estate. This interest led to a serendipitous meeting with Stevens, a Realtor working for Town & Shore Associates in Portland. During the meeting, Stevens mentioned that Town & Shore was giving up its affiliation with Sotheby’s International Realty. It was the spring of 2005. For Lynch, that conversation hatched an idea.
Maine, Lynch says, is a “global lifestyle destination.” He thought about the untapped opportunity he saw for a luxury real estate brokerage in Portland — especially one with the instant rapport the Sotheby’s name lends — an operation that would market the crème de la crème of Maine homes and be able to attract an international clientele. There are two other Sotheby affiliates in Maine — Anne Erwin Sotheby’s International Realty in York and The Swan Agency Sotheby’s International Realty, with offices in Bar Harbor, Northeast Harbor and Blue Hill — but Town & Shore Associates was the only one based in Portland.
Lynch broached the subject of launching a Portland-based Sotheby’s affiliate with Stevens, who liked the idea. The two formally launched Legacy Properties Sotheby’s International Realty that October.
The business started with a strong stable of Realtors. In addition to Stevens, five of the 12 partners at Town & Shore, including the co-founder, left to join Legacy Properties. The business grew quickly. Within six months the number of Realtors had increased to 12. In April 2006, Lynch bought Brunswick Realty Group, another Sotheby’s affiliate, which expanded his reach as far up the coast as Bremen. In May 2007, Legacy Properties opened an office in Kennebunk. In January 2008, it opened an office in Camden. Legacy Properties now has nearly 50 Realtors in four offices covering Maine’s coast from York to Waldo counties. The growth has been “meteoric,” Stevens says.
Lynch credits the Sotheby brand, the team of experienced Realtors and the company’s geographic reach for its growth. He also says its geographic reach and the ability to cross-sell among its four offices means Legacy is able to hold on to more potential clients, rather than refer them to other Realtors, as is the norm with one-office real estate agencies. Another role as CEO gives him the opportunity to market the company to other Sotheby’s affiliates throughout the country. Lynch is planning a trip to Sotheby’s affiliates in Princeton, N.J., and Long Island, N.Y. “I put myself out there within the Sotheby’s network,” Lynch says. “When agents from other offices think of Maine, I want them to think of us.”
The business required a significant injection of cash, from the Sotheby’s affiliation fee to the purchase of two buildings for its offices in Kennebunk and Brunswick, and a 10-year lease at its current headquarters at 2 City Center. Lynch says he’s invested between $3.5 million and $4.5 million in the business.
Forecasting a prosperous future
Despite its success, Legacy is still not the top seller of luxury homes in Maine. While Lynch claims Legacy Properties has 25% of the luxury home market between York and Waldo counties, on a statewide basis Legacy Properties has roughly 20% of the luxury market, according to a search of the Maine Real Estate Information Systems’ database for all single-family homes that sold in Maine for $1 million or more in 2008. The luxury home market took a hit last year. In 2008, 116 single-family homes with list prices of $1 million or more were sold with a median sale price of nearly $1.3 million. In 2007, 187 units sold for a median sale price of $1.4 million, according to MREIS data.
Nationally, the luxury home market is also down. Walter Molony, a spokesman for the National Association of Realtors, says rather than being recession proof, the luxury market by some measures has been hit harder than the larger real estate market. Molony acknowledges the NAR doesn’t regularly track the luxury real estate market because it’s such a small portion of the national market, but last November it completed a study that showed while sales of homes listed at under $400,000 had dropped 3% from November 2007 to November 2008, sales of homes priced at $725,000 or higher fell a whopping 47% during the same period.
“We’re seeing a universal stalling of sales of homes in the higher price range across the county,” Molony says.
Contributing to Legacy Properties’ hedge against that drop-off has been the weak U.S. dollar, says Lynch, which has attracted foreign buyers. He estimates that last year 50% of the buyers Legacy represented were either foreign nationals or expats earning a salary in a foreign currency. Stevens estimates that 80% of Legacy Properties’ clients have some connection to Maine, whether it’s friends, family or an alma mater.
Lynch says Legacy Properties isn’t done growing. The company is looking to expand its geographic reach and hire another 18 brokers with expertise in the Rangeley area, the Belgrade Lakes area, the Lakes Region, Bethel, Sebago and around Sugarloaf and Sunday River.
In the long term, he also is thinking about adding new services and products, including property management, commercial real estate, an inn and B&B division and growing the rental business the company started last year (Legacy rented about 10 properties in 2008 and Lynch expects to rent about 25 this year.) He is even considering the travel business.
But the growth can only go so far. Lynch wants to focus on being “right-sized” and avoid a situation where his brokers are cannibalizing each other. “I don’t want to get ahead of my skis,” he says.
Above all, Lynch is focused on preparing his company to take advantage of the market come spring, when he expects $350 million worth of homes will be listed with his company. Add that to the $150 million in buying power he says the buyers Legacy Properties represents have and that’s about $500 million worth of potential business. “That’s a staggering big number,” he says.
Whit Richardson, Mainebiz staff writer, can be reached at wrichardson@mainebiz.biz.
Clarification: Our chart above of the top performers, by office, in the luxury real estate market could be misleading in that some of the companies on the list, including LandVest Inc. and Legacy Properties Sotheby's International Realty, operate from several locations as a single company.
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