Frank Garrison's team at Insignia Financial Services Inc. covers many bases for Insignia Financial Group. Outside of overseeing mergers and acquisitions, Insignia Financial Services acquires existing assets with partners or outright; develops properties with partners or outright; and, through the Insignia Opportunity Trust fund, acquires real estate debt, primarily CMBS and some second mortgage and mezzanine debt.
On the M&A side, Insignia Financial Services has completed due diligence and negotiations for the acquisition of more than 20 companies in the past four years, including New York-based Edward S. Gordon in 1996 and the United Kingdom's Richard Ellis Group Ltd. in 1998.
"We've always maintained a small, dedicated staff to conduct our own M&As and grow our service lines," says Garrison, who has been president of Insignia Financial Services for five years. "We've used that strategy to establish a beachhead in major markets, and what we've tried to do is go in and buy one of the top three players in a market and then add infrastructure and resources, as well as a conduit of prospects and customer flow from other markets. We will [continue] to do acquisitions on a select basis of operating companies."
Because real estate services are Insignia Financial Group's primary emphasis and development is not, Insignia Financial Services has some self-imposed limits. Clearly, the company does not want to step on the toes of its chief clients. Of Insignia Financial Service's five development projects, only one - a 225,967 sq. ft. office building in suburban Dallas - is purely an Insignia product. Similarly, in order to build strong repeat business, Insignia Financial Services prefers to work with a group of about eight clients such as Blackacre and Praedium on co-investment opportunities. Still, Insignia Financial Services has partnered in about 30 co-investments worth more than $1 billion, generally at returns greater than 20% - strong results from the services-side of the business.
"Because of our network of professionals, we like to get things that are off-market - special situations that we hear about first," Garrison says. "We're not just trying to get in front of a wave and ride rising rents in a market. We're looking more for a micro, special situation."
Although Insignia was more active in securitized markets when it held a large multifamily portfolio (Insignia created some of the first conduits in the early-1990s) the company still has a slice of the CMBS pie and expects to close on several pieces this fall. The company also has a number of off-balance sheet funds that provide direct investment in development as well existing assets. Through the Insignia Opportunity Trust, Insignia and four partners have $180 million at their disposal to purchase CMBS, second mortgages and mezzanine debt, but, generally, Insignia steers clear of new issues.
"We tend to buy unrated pieces of those types of securitizations that have been seasoned, that have been out there for an extended period of time in an asset class in which we have some degree of expertise," says Andrew Farkas, Insignia Financial Group chairman and CEO. "We understand that business very well. We know where the paper is and how to buy it."