CB Richard Ellis Group Inc.’s pending purchase of real estate management company Trammell Crow Co. has rivals of the commercial real estate giant talking.
And they aren’t saying the nicest things.
In the $2.2 billion deal, Los Angeles-based CB Richard Ellis gains Trammell’s corporate outsourcing and integrated account management expertise. But some real estate industry experts say that CB Richard Ellis, the largest commercial real estate firm in the world, could funnel extra business to Trammell’s development arm.
“Trammell is schooled in equity they are a developer that became a broker, so they will combine that capability with CB and just run with it,” said Bill Lee, president of Newport Beach-based Lee & Associates Commercial Real Estate Services. “Instead of taking their deals to (other development groups) they will go in house and have a paper wall between Trammell and CB and the salesmen will go right in the door and say, ‘Can you make it work?’ We all know how business is done. Everyone has their favorite customer.”
But Lew Horne, CB Richard Ellis executive managing director for greater Los Angeles, said that the company will have fiduciary responsibilities that would make the scenario Lee described impossible.
“The development company will be completely separate,” Horne said. “It will be at arms length. The deal doesn’t represent a major shift in strategy.”
A source at CB Richard Ellis said that the deal does represent a shift in the company’s acquisition strategy in the past the company concerned itself with dominating top markets, but now that it has accomplished this, it is moving on to niche services. So, the development and corporate service skills of Trammell were attractive to CB Richard Ellis, the source said.
“If you are trying to become a monopoly and control the market and have a huge market share this provides you with the ability to continue that growth and capture that market share,” said Michael Arnold, managing principal of Newmark Knight Frank. “CB has been very responsible there is always a reason for CB doing things.”
The deal had been rumored for some time, and a source said that Trammell had been trying to buy rival Cushman & Wakefield Inc., but explored other avenues when that deal did not work out.
“In this case the two firms had very distinct assets and they complement each other well,” said Lisa St. John, managing director at Jones Lang LaSalle Inc.
Lee said that competitors like his company could stand to benefit from the deal, as there will be the “inevitable fallout from some unhappy sales people at both companies.”
But at the same time, the purchase makes CB Richard Ellis even larger, and possibly more dominant, at least in its own eyes, Lee said.
The deal will be finalized later this year or early 2007, pending approval by Trammell’s shareholders and regulatory agencies.
State Housing Sale
The California Housing Financing Agency, a state agency that acts as its affordable housing bank, has sold four properties for $52 million in the first deal of its kind for the agency.
This is the first time in the 30-year history of the agency that it has sold properties it obtained through foreclosures, said Margaret Alvarez, director of asset management for the California Housing Financing Agency.
The four apartment properties are located in Los Angeles, San Bernardino, Lancaster, and North Hollywood. The agency acquired them through foreclosures in the 1990s, but waited to sell until the time was right.
“Ten years ago they would have sold for half the price,” said Robin Ossenbeck, partner at Hendricks & Partners Inc., who represented the agency in the sales.
StarPoint Properties LLC purchased an 80-unit building in the mid-Wilshire area for $11.3 million and a 73-unit building in San Bernardino for $7.3 million.
“(The mid-Wilshire building) is in a very strong location and we are going to renovate the property to a Class A property,” said Rob Budman, a partner at StarPoint.
All of the buildings in the sale have affordable housing components that will remain in place. The state will invest the $52 million in future affordable housing.
Karoline Sauls also represented the agency in the transactions.
San Fernando Valley Portfolio
StarPoint Properties and The Praedium Group LLC have partnered to purchase an eight-property apartment portfolio that includes complexes in the San Fernando Valley.
The complexes in the $48.4 million sale are located in Canoga Park, Van Nuys and North Hollywood. The seller was Jeff Greene.
“It was a market-rate price,” said Darin Beebower, partner with Madison Partners, who represented both sides of the deal. “It’s unique to have a diverse multi-property portfolio in today’s market.”
The properties range in size from 30 to 88 units and there are a total of 400 units in the deal.
StarPoint chief executive Paul Daneshrad said that the buildings will be rehabilitated and upgraded. StarPoint is based in Los Angeles, and Praedium Group is based in New York.
Staff reporter Daniel Miller can be reached at (323) 549-5225, ext. 263, or
[email protected]
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