CB, Insignia Merger Would Spark Change

By DANNY KING
Staff Reporter

The potential merger of CB Richard Ellis and Insignia Financial Group could give L.A.-based CB a much-desired foothold in the New York market, but is likely to result in a shakeup of the local brokerage community.

A merger with New York-based Insignia's real estate brokerage arm, Insignia/ESG Inc., would create the largest brokerage in Los Angeles County. Together, CB and Insignia brokered more than $3.2 billion in lease and purchase deals in 2001 (the last full year available), about $300 million more than market leader Grubb & Ellis Co.

On Feb. 7, Insignia confirmed in a statement that it was "in discussion with CB Richard Ellis with respect to a proposed combination of the two organizations." The proposed merger is valued at $400 million, according to a report by Web site GlobeSt.com.

Insignia officials declined comment last week. CB Richard Ellis officials did not return calls. Similar discussions occurred between the two companies three years ago.

Further adding to the flux is financier Carl Icahn's announced play for Insignia. Icahn's High River LP is a 7.55 percent stakeholder and on Feb. 10 it filed a statement with the Securities and Exchange Commission stating that the two companies were discussing "the possibility of a merger without a tender offer."

Local industry executives believe the CB deal is the more likely of the two to go through. The synergies provided by the respective firms, said Gary Weiss, senior vice president at developer J.H. Snyder Co., make it a better bet. "The whole thing behind this is (Insignia's) strength in New York and London," Weiss said.

Merging CB and Insignia's L.A. operations would create extensive redundancies, particularly in the office brokerage sector, resulting in defections of some of the area's most active office brokers.

"CB is not merging with Insignia because of what's going on in Los Angeles this is a New York play," said Chris DuMont, who spent 14 years at CB before joining Grubb & Ellis as senior vice president in November. "You're going to see guys jump ship."

Meanwhile, the less successful brokers could see their jobs eliminated due to the sluggish leasing environment, said Weiss, a Julien J. Studley Inc. broker from 1987 to 1999.

"A lot of guys on the lower end are essentially going to be let go," he said. "The market's not exactly on fire."

In an industry known to be cutthroat when it comes to pursuing top talent, some CB and Insignia competitors welcome the shakeout a merger would generate.

"It only accentuates the uniqueness of a privately-held, single-platform company," said Bruce Schuman, senior vice president at Studley.

"People are going to look long and hard at whether they want to be a part of this merged entity," added DuMont. "I'd love to see some of those guys come over here."

The likely merger between CB and Insignia would continue a steady churn of brokers within the past year, and could create the largest shake-up in local real estate since Insignia recruited some of the area's top brokers between 1998 and 2000 as it opened its local offices. Some brokers were lured with seven-figure bonuses.

Insignia's Westside brokers were culled from CB Richard Ellis and Colliers Seeley, while the downtown brokers were largely hired away from Cushman Realty Corp. and Studley.

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