Strathmore Development Co., an East Lansing-based commercial and residential developer, was named to the “Michigan 50 Companies to Watch” list in 2006.
Times were good, but Strathmore and many other promising companies on that list were about to experience the challenge of their young lives as the U.S. economy nosedived just a year later.
“The Great Recession was probably the most difficult period for real estate I have seen in my life,” Strathmore President Scott Chappelle said in an email. “The contraction, illiquidity and destruction of wealth were something not many people contemplated.”
Strathmore experienced “a significant drop-off in activity” between 2007 and 2010, Chappelle said, declining to cite specific employment and revenue numbers.
Three of its five major lenders, two title insurance companies it utilized and several major tenants became insolvent during that period, Chappelle said.
But Strathmore survived the brutal economic downturn, as did the vast majority of the class of 2006 of the small business awareness program started in 2005.
Administered by the Edward Lowe Foundation, the program selects companies that employ between six and 99 employees, have between $750,000 and $50 million in annual revenue and demonstrate an ability to grow.
Businesses in that class of 2006 produced revenue growth of 36.6 percent between 2004 and 2005 and projected employment growth of nearly 30 percent in 2006.
While the Lowe Foundation doesn’t do a comprehensive follow-up of how companies on its annual list performed, Bridge research determined 48 of the 50 companies are still operating in Michigan. Six of them were sold or merged with larger companies.
Bridge could find no information for just two of the businesses: a specialty building contractor in Ann Arbor and an engineering services firm in Troy. (Six companies contacted by Bridge to discuss their progress since 2006 did not respond to inquiries.)
That 96 percent survival rate is particularly impressive, considering that only about a third of new companies are in business 10 years after they’re started, according to the U.S. Small Business Administration.
But businesses in the 2006 class of Michigan 50 Companies to Watch already had been in business an average of nine years when they were named to the list.
Mark Lange, executive director of the Lowe Foundation, said the companies were selected for their various strengths, including management and market opportunities. That may help explain why most of them are still in business, he said.
“It’s the first five years that are the most precarious,” Lange said. “The more companies learn about themselves and how to grow, the better they do.”
Chappelle said his company is growing again, but has adapted its business strategy to a changing development climate.
“We are focusing more on projects with predictable cash flow models and less on speculative development,” he said.
Strathmore also is concentrating on developing urban and environmentally challenged sites, Chappelle said. One of those is the $105 million City Center II project in downtown East Lansing.
“We are fortunate to have a number of excellent projects in the pipeline,” Chappelle said, adding that company revenues are budgeted this year to exceed 2006’s level.
Rick Haglund has had a distinguished career covering Michigan business, economics and government at newspapers throughout the state. Most recently, at Booth Newspapers he wrote a statewide business column and was one of only three such columnists in Michigan. He also covered the auto industry and Michigan’s economy extensively.