With its business changing every day, TCR has learned to capitalize on both its local and national strengths, to take on the REITs and come out ahead of the game.

Four years ago, Trammell Crow Residential (TCR) lost about a third of its divisions to the multifamily REIT business. Two groups of its regional divisions broke from the company to form public REITs and, while that kind of loss would be a serious blow to a lot of companies, TCR took it all in stride and kept on growing.

"In 1993, our businesses in the Northeast -- including the Washington, D.C., market -- joined together four different divisions to form a REIT called Avalon Properties. And Mr. Crow and myself sold our interest in the businesses into this public company. And virtually all the people in all the properties went with Avalon," says J. Ronald Terwilliger, national managing partner of Trammell Crow Residential. "The same thing happened about six months later with our Dallas, Houston, Nashville and Atlanta offices. They formed Gables Residential Trust."

The fact that the management of the company wasn't bothered by this move might seem strange to some organizations, but TCR's structure allows the company to be successful even when this kind of change occurs.

Atlanta-based Trammell Crow Residential was established in 1978 and functions as both a national and a local company, with local partners operating in each of the 50 U.S. cities where TCR has ongoing business. While they still adhere to the national company's business policies, the local partners are given free rein to run their divisions as they see fit.

"You reach a point in time where the partners wanted to monetize their wealth, and the Crow family and I were open to that -- and felt that we got very attractive pricing from these public companies, so we were just willing to sell off," Terwilliger says. "That was very attractive, and we gained some additional wealth and liquidity, and then we were able to open up opportunities for other partners within the company to move into the geography that was vacated and to start up new businesses."

This type of business climate is a strong selling point for TCR."I think it's a partnership culture that has people share in the risks and the rewards, and so we're trying to attract the best young people to come and work in an environment where, without any net-worth to begin with, they can work their way into a position of meaningful net-worth if they're smart about how they approach the business," says Leonard W. Wood, group managing partner.

Under the leadership of Terwilliger and CFO Randy Pace, the company has four group managing partners who oversee different areas of the country. Then in each of 12 regions, there are two partners: one in charge of development, acquisitions and construction, and one handling residential services.

Because the company felt that it was best to separate the property management and operating side of the business from the development and acquisition side, it has two separate divisions, TCR and Trammell Crow Residential Services (TCRS), that operate side-by-side in each part of the country, Wood says.

Trammell Crow Residential currently has $3 billion in assets and more than 90,000 apartment units under management. TCR's net cashflow from operations for 1997 is estimated to be $60 million, up from $45.2 million in 1996 and $34.8 million in 1995. In '97, the company plans to acquire 2,500 units, sell 2,700 and start work on 8,000 new units. TCRS is estimating revenues of $22 million in 1997.

The company's structure provides a unique advantage over the competition. As national and local companies battle for business, TCR can be all things to all clients.

"We have local operating companies that are bound together by a national philosophy of operations, and so what we hope we are getting, and I think we do, is the benefits of being local and the benefits of being a large-scale national company, being in many markets. And that's unique," Wood says. "Our local people are partners and decision-makers, and so they're able to take advantage of the business opportunity locally and act as if they've got all the authority of a much bigger organization -- and yet they're as nimble as the next local guy."

"We have the local market knowledge, because our partners live and work in their local market, but we have 12 companies, which makes us national," Terwilliger says. "So from an investment standpoint, we can invest wherever the opportunities are around the country. If the opportunities are to build, then we'll be building; if the opportunities are to buy, we'll be buying."

These days, TCR is facing some of its biggest competition from REITs, both the ones that formed from its own company and others.

"I would say that the advent of the REIT has changed the landscape that we're involved in, and we've reacted some to that. We had Avalon and Gables go out, and we've been rebuilding the company where they left," Wood says. "And then just day to day, the REITs are excellent operators with plenty of capital. And so we've had to become more competitive in buying land and properties when they have an interest as well."

"And on the capital side, I think the REITs have forced us to be much more strategic in our capital alliances," Wood says. "Projects are big today, and so we're using, in all of Trammell Crow Residential, about $500 million of new capital a year. And so we're planning ahead to have that money available at the earliest possible date so that we'll be able to effectively compete."

At least for now, the company doesn't feel it's likely that there will be anymore IPOs coming out of TCR. However, it isn't ruling out the possibility of other REITs acquiring some of its divisions in the future.

"It's more likely that REITs will acquire divisions from us than it is that we'll do an initial public offering," Terwilliger says. "The marketplace has more apartment REITs than they want right now, and so the opportunity is not to start a new company as much as to merge into an existing company. And I think we'll look at that."

But for now, Trammell Crow Residential plans to continue on its course, sticking to what has made it successful as it strengthens its business and considers future options.

"What we're planning to do at this point in time is stick to our knitting in the continental United States. We're basically building our presence back in the Mid-Atlantic and Northeast states, and we're taking advantage of the opportunities in the market to sell properties to REITs and take operating partnership units in REITs," Terwilliger says. "So we're doing some more pre-sales with REITs and just looking at the cycle."

"I just think we're working much harder on raising the bar -- the standard of excellence -- in operations. There's more and more public information because of REITs, and we want to make sure that we're doing the best job," Wood says. "We want to be the best, and we want to have better data and continue to measure ourselves more carefully and demand that we get great results."