LONDON - Both New York-based Insignia Financial Group and Northbrook, Ill.-based Grubb & Ellis have significantly increased their European presence with one fell swoop. Insignia has acquired Amsterdam-based Colliers BDR, while Grubb & Ellis has formed an alliance with U.K.-based Knight Frank in athat allows the two companies to share business on a trans-national level without the hassles and questions associated with the typical merger.
Grubb & Ellis chairman and CEO Neil Young was quick to point out that the alliance is by no means a merger or acquisition but instead what the two companies feel is the best way to seamlessly integrate technology, research and business standards without incurring debt or going through the usual merger hassles. Grubb & Ellis and Knight Frank will combine client lists and begin a global cross marketing effort that will be driven by both companies' corporate and institutional services groups. Within hours of the alliance's announcement, Knight Frank was using Grubb & Ellis' research and valuation affiliate, Landauer, for property valuations on three U.S. properties, Young says.
"The largest part is that, without creating debt, we immediately will market to each other's client list - to people who already have confidence in one or the other," says Young. "The only three things that are important in a merger are the combination of human capital; the combination of technology, business practices and services to the client; and the combination of the client list. We both agreed that we could get those things and spend our money on combining those three things without having to spend all of our focus on an acquisition or a merger that has nothing beneficial to offer the client.
"We had both observed how everybody else had tried to go international," Young continues, "which was, in my mind, doing acquisitions, changing one of the player's cultures, spending a lot of time trying to figure out how to run things as one company and do things that, in my mind, are not germane to the client. Today, the story is still not completely told as far as what's the best structure to run a service company, so we respected [Knight Frank] enough that we didn't take the typical attitude of, 'We'll merge with you. We'll buy you, and then we'll show you how to do your business.' "
Banc of America Securities managing director Will Marks looked favorably on the Grubb & Ellis/Knight Frank deal but expressed skepticism about' reaction considering their proprietary nature.
"Given what Grubb & Ellis' competitors have experienced with major acquisitions, I can understand the more cautious approach of creating an alliance," says Marks. "There's no concern about overpaying - about how this is going to look a year from now as costs are trimmed - because it's just an alliance. They can keep a clean balance sheet and use their capital for other things that are more accretive, maybe investing in technology or Internet companies."
Marks viewed the Insignia/Colliers BDR deal as a stepping stone for Insignia in Europe. While the cost of the acquisition was undisclosed, Marks pointed to Insignia's prudent history.
"Insignia has a track record of being very careful about not overpaying for acquisitions, in fact passing on many acquisitions because of cost rather than buying something just because it's strategic," says Marks. "This [acquisition] will just help fill in a gap in Europe. There are many markets where Insignia lacks a presence where there's growth potential.
"I expect in the next few years that they'll fill in the rest of those gaps," Marks adds.
With the Colliers BDR acquisition, Insignia has continental offices in Frankfurt, Milan, Brussels and Amsterdam. Upon closing, Colliers BDR will change its name to Insignia BDR. The firm was founded by Peter Driessen and Peter Paul Buijs in 1991, and joined the Colliers International network in 1994. Insignia expects the acquisition to be accretive to earnings immediately.
"Developing the European network into Amsterdam allows for further cross-border flow of investment funds," says Alan Froggatt, CEO of Insignia's European services group, Insignia Richard Ellis. "In effect, we've brought in an established team with existing market share, an ongoing client base and strong reputation. They can start work for us immediately, and all the infrastructure is in place rather than having to set this up for ourselves."
- When The Counselors of Real Estate (CRE) asked survey participants in its 1999 fourth-quarter report to characterize the most dramatic changes they have witnessed in the past 25 years in real estate, answers ranged from "turbulent" to "nothing short of a revolution." Other respondents cited demographic trends such as migration to the South and West; tax policies in the 1980s; technological and informational developments; and real estate's movement into the public areas. Survey results indicated that the industry has transformed itself from "a private backroom investment club to a more accessible industry governed by information and performance."
As for how the past 25 years will differ from the next quarter century, the survey participants predicted that the following trends will continue to unfold in the 21st Century:
* The real estate industry will see longer, less dramatic cycles compared with previous boom-to-bust cycles.
* Public markets, with their shareholders watching, will continue to influence real estate, and the expansion of themarket will lead to further standardization of investment structures.
* Experts are predicting a demographic resurgence of downtown areas due to corporations relocating to urban cores and aging Boomers leading the move back to the cities.
Another factor in the future of real estate is the competition between older buildings and more modern facilities. Some older properties may be threatened because of design barriers that prohibit them from conforming with technology and an inability to meet corporate and individual space needs. Thanks to the Internet, the workplace is becoming more flexible as computers, fax machines and cell phones make employees more mobile.
When all is said and done, real estate success still relies on the old adage - location, location, location. As one respondent says, "Public markets will play an even greater role than today. What will not change, however, is the importance of location!"