Tackling the Real Estate Market in Tokyo: The Roller Coaster Continues
Editor’s note: Kenneth Arbour, President of Century 21 SKY Realty, has more than 20 years in the Tokyo real estate and relocation business. In part one of this series, Mr. Arbour writes about what it was like getting his business off the ground in the bubble years. This is part two in the series and was written in 2007.
In the first of this series I described how, at an economic low point just after my partners and I had begun our business, we suddenly and to a large part inexplicably had a tremendous burst of sales not only in expat residential leasing (our intended main business) but also in the sale of a phenomenally expensive (albeit small) piece of Kyobashi, plus overseas investment in Guam beachfront. In one brilliant month it looked like all our travails were behind us, and our future, as the song says, was so bright we’ d have to wear shades.
The Bursting of the Bubble
This view, unfortunately, did not take into account the fact that the Japanese real estate market bubble was about to burst, and with it a good deal of the rosiness in our future. Neither did our own exuberance help. With our success we had started adding more staff, far too many in fact, and advertising a great deal.
It is one of the unfortunate aspects of business in Japan that when money comes in you need to try to spend it as wisely as possible for corporate benefit or the taxman takes half. Not only that, but if you don’ t spend it and your business looks too profitable, you risk the taxman assuming there must be more you are not hiding well and coming in to audit you. Thus, within a year, things had gone very sour indeed: I wasn’ t being paid again, and relations with my partners were less than warm.
Into this rode a white knight, but not to save me. This white knight was the owner of a large restaurant chain who was looking to start an overseas hotel business to give his 18-year-old son something to do (company rules forbade the son entering the same company as his dad). My partners claimed this gentleman and his war chest of some US$700 million as their contribution to our company’ s future.
Clashing With Partners
And me? All I had was a still struggling expat-oriented leasing business, which still required the injection of cash every now and then to make ends meet. Cash my partners were increasingly loathe to commit. But the fact of the matter was that I owned 40% of the company and it is difficult to kick out a partner who has a major share of a business.
Regardless of how poorly my sector was performing, the ownership of the business remained. My partners saw this as unfair and told me so. Their solution was for me now to voluntarily relinquish my share of the company to a level more akin to the anticipated value of my sector versus theirs. Needless to say this became a rather contentious issue. A war, in fact. But who wants an antagonistic partner who owns 40% when there are zillions on the table. Certainly not my partners.
So we came to a deal brokered to a certain extent, strangely enough, by my wife. They would take Mr. Deep Pockets and the overseas hotel chain, and I would take the expat rental business, which meant virtually everything else: the crummy little office, the old run down company cars, the company name, and the phone number. Boy, did I drive a hard bargain, eh? Ah, but perhaps you remember that beanstalk fairy tale?
Going it Alone
Okay, comparing what happened next to a fairy tale is a bit of an overstatement. But nevertheless from the time I separated from my partners, things started to improve significantly. Our expat leasing business just kind of went up and up.
First, however, I need to explain something. Since my partners wanted to retain control of the original company, I started a separate company— Arbour Realty. Imaginative, yes? I knew this would be temporary, so I didn’ t really care about the name. Then, after spending half a year getting my real estate license and a new Century 21 franchise agreement organized, in the space of a week we had changed Arbour Realty back to Sky Realty, just after my former partners had gone from Sky Realty to something else. As a result, the company name, phone number, address, main personnel, crummy office, and cars all remained the same.
To my clients nothing had changed, although the company was completely different, owned by me and my wife Noriko. And to our surprise, we proved almost as good at running a company as we did at making children. During this time, even in those few moments when my wife wasn’ t pregnant, sales rose fairly consistently.
There are other, non-conjugal, reasons for this.
A fairy tale ending and the secrets of success
>> The Century 21 name was definitely an important part.
>> Also critical, in my view, was the fact that we were a pretty tight little sales organization concentrating on one thing—the expatriate leasing business. Certainly we dabbled in a few other things, but at this second beginning, or rebirth as it were, our focus was on leasing. And lease we did. The first year with just Noriko and I in command, our sales doubled. How neat was that!
>> We could now pay people decently, and we gave everybody a raise. I believe, even if I do say so myself, that I have the reputation for treating my employees the best in this expat rental business in Tokyo. A fact that helps me get along tremendously well with my two Commie brothers in Canada, who because I run a business, are always on guard for any anti-labour drift in my weltanshaung. In the second year, as well, the growth continued, our sales going up another 40%! This meant our sales more than tripled in two years! Okay, we weren’ t Microsoft, but as far as I was concerned there was not a great deal to complain about.
It was increasingly clear to me that all those Our Fathers and Hail Marys I had said as a kid, not to mention playing guitar at mass, were finally beginning to pay dividends.
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Photo credit: Smiley.toerist via Wikimedia Commons