Weeks, months, and years from now, economists and historians will be writing about 2020 and the Coronavirus Pandemic that shook the global economy, much as we now reflect on the Financial Crisis that struck in 2008. While we may not have the foresight to know the economic future for our country, we do have the benefit of historical context that we can use to shape our actions in the months to come.
Encouragingly, each of our companies discovered immense opportunity within the challenges that occurred twelve years ago, and our current state proves no different.
Geordy Johnson says, “While these are extraordinary times, challenges of this magnitude always result in extraordinary opportunity. As family owned, privately held companies, we are uniquely positioned to not only weather this storm but to come out of this downturn stronger than ever.”
In reflecting on the last time we experienced a downturn, we can glean many lessons and recognize many opportunities.
In the four years prior to the 2008 financial crisis, OTO had built its business using a scalable, repeatable model, developing hotels under the Hilton, Hyatt, and Marriott flags in strong suburban markets. When the financial crisis occurred, it highlighted an opportunity for OTO to evolve. The suburban areas in which OTO had traditionally developed hotels were markets where other developers had few challenges in building either, therefore resulting in a lack of pricing power and vulnerability to oversupply. However, the OTO team recognized that their collective skills, talent, and experience, coupled with the patient capital supporting the company, created a unique opportunity to develop in urban, gateway markets, with high barriers to entry for all developers. While building in markets like Manhattan, Santa Monica, and Washington, DC, requires a higher risk appetite, it has also proven to result in greater reward, with the hotel portfolio developed just following the financial crisis resulting in the best returns the company has ever seen.
American Credit Acceptance was a young company in 2008, having been recently purchased from Sonic Automotive in August 2007. The Financial Crisis provided a multitude of lessons learned, while opening doors for new ways of thinking. Though the business was impacted financially by the economic climate at the beginning of the Financial Crisis, those loans ultimately provided the foundation for ACA to begin growing the business profitably. This time allowed ACA to re-examine their processes and create improvements and automation in many areas. Risk models were developed that enabled ACA to make real-time loan decisions that were profitable for the company and in the best interest of the customer, allowing them to fulfill their vision statement of empowering the emerging credit consumer to purchase reliable and affordable transportation. Additionally, ACA put added focus on reducing operating expenses significantly to improve their business model and become a more competitive lender. As a result of the recession, many new laws were put into place, such as the inception of the Consumer Financial Protection Bureau (CFPB). The CFPB provided guidelines for consumer protections that continued to refine ACA’s processes and align them effectively with the Guiding Principle of Integrity.
In its more than 30 years of business, Johnson Development has evolved tremendously, from primarily focusing on developing local commercial properties in and around Spartanburg to growing into a multi-division real estate development company building in multiple asset classes across the country. Much of that progression can be attributed to proactive growth and change during times of economic unrest. Following the last downturn, JDA’s team recognized and capitalized on a number of opportunities across each of its platforms. Our multifamily and industrial businesses expanded significantly, and the self-storage platform was completely revamped. As a result of the recession, we have been able to acquire land at cheaper rates, originate deals with higher returns, search for opportunities and explore new strategies.
There is no more opportune time for The Johnson Group teams to vigorously exercise our Guiding Principles of Principled Entrepreneurship and Initiative, as out of challenge is born great opportunity. While we may not have full visibility into the future, we do have the capability of shaping our next steps and setting ourselves up for optimal success. Together, we will emerge from today’s challenges much stronger tomorrow.