Adding 20 new acquisitions in the last five years has put Insignia Commercial Group in the servicing Big Leagues
Their clients made them do it. That is the simple but rather dramatic sea-change that in the last two years has seen real estate service powerhouses like Edward S. Gordon, Frain Camins & Swartchild and Barnes, Morris, Pardoe & Foster become acquired by Insignia Financial Group, based in Greenville, S.C.
"We could not grow our business and continue to serve our clients based on the sophisticated level of needs and the multi-market needs our clients have without having access to a larger organization," says Harvey Camins, former vice chairman of Frain Camins & Swartchild (FC&S) and now president of Insignia Commercial Group's Midwest region. "It's not just the capital, it's all the resources that a national company brings to the table. But what was important for us is to be affiliated with and be part of a company that's in the same business that we're in and that understands our business. So it wasn't just about doing something bigger and better, but with an organization where we had a shared culture."
Barnes Morris Chairman Robert Cohen agrees. "Large regional firms, I believe, are becoming endangered species. You get picked at by the boutiques and you get picked at by the nationals because you can't provide service everywhere to satisfy your clients' needs and then you have to make all the investments that all of the national guys do and you can only spread them over one market. It comes to a point where you just can't compete effectively."
Much of the vision for this new company has come from Andrew Farkas, president, chairman and CEO of Insignia Financial Group. For three years running, IFG has led the National Multi Housing Council's list of top national apartment managers (today it manages some 290,000 units nationwide). But Farkas saw that his institutional clients could use more than just an apartment/financial firm in the future.
"We want to be the premier commercial real estate services and merchant banking company," says Farkas. "It's good from a risk profile to be in many different segments because real estate markets are by definition cyclical and they don't necessarily go hand in hand. No. 2, it's relatively unusual to find institutions who are owners of whole assets, other than REITs, that own only a single asset class. Generally they'll own apartments and commercial. We want to be able to be a single stop for the institutions, to be able to provide all of their real estate servicing requirements. In order to do that we had to have a very high-quality residential operation and the same in commercial."
First he snagged one of New York's most venerable firms, the Edward S. Gordon Co. With it obviously came Ed Gordon himself with his many years of proven track record, And so too came Stephen Siegel. Today, Siegel is the president and CEO of Insignia Commercial Group, leading the charge of a fast-growing empire of plum national service firms. Then came the Chicago purchase of FC&S in July 1997, followed by the acquisition of Barnes Morris last October. Siegel also snapped up Rostenberg-Doern Co., a leadingand management firm in the northern suburbs of New York City, and HMB Property Services, a major management firm based in Denver. Last April, Insignia beefed up its Phoenix operations, and in September it acquired Forum Properties, a leading services firm in the greater Portland, Ore., market. Most recently, Insignia launched a major Atlanta operation with two of the city's top brokers, John Shlesinger and Sam Holmes. Insignia also made a big international play recently, acquiring Richard Ellis Group Limited in the U.K.
"The result of our acquisition/marriage has created such a tremendous amount of synergy in the doing of business that it's just mind-boggling," says Siegel. "We've picked up millions of feet already in agencies, tenant rep assignments in seven months. This is the way it's supposed to work! It's pretty exciting."
Siegel had wanted to pursue a national strategy for years at ESG, but it was difficult as a single-entity, self-funded independent brokerage firm. That precipitated the acquisition by Insignia. "It gave the firm the intellectual and financial resources to create a full-service international real estate firm."
Mitchell Rudin, executive managing director of national brokerage services for Insignia/ESG, echoes that sentiment. "This industry is littered with those who reached the dominant position in New York and had nowhere else to go and that was the fear here. This gives us a platform to leap to the next level of the mountain, and we did it full speed, no waiting around."
According to Rudin, client demands forced the change in direction. "You've had substantial change in the demands of clients. Only 18 months after the acquisition (by Insignia), not only are we always mentioned as one of the two or three leading national/international powers, but usually we're mentioned first. We've been able to look at the strengths and weaknesses of the different components of this company, and help create the model going forward as we grow the company."
With every transaction, Insignia has chosen to partner with top-quality people. And vice versa. Part of the reason may be that word -- "culture" -- you hear a lot around everyone from Farkas on down.
"This business is nothing if it's not people," says Farkas. "You can't do this in a mediocre way in a highly competitive environment. In this industry, the winning companies are going to be the companies that learn how to attract, retain, incentivize, train and support the highest quality individuals in the various different segments in which we operate. Generally the better companies are companies that have historically been successful at doing that and those are the companies that I wanted to target. Every one of these companies has very substantial numbers of different alternatives. And at the end of the day, they chose us. Everybody has money today. I derive more personal credibility from people of their caliber choosing to be with this organization than just about anything else."
Robert Cohen agrees. "The company and the principals are very entrepreneurial, so I felt that my entrepreneurial contributions would be listened to and heard and considered."
Siegel says that local market culture is paramount. "If you try to export a culture I believe you're writing a prescription for failure."
Insignia Commercial Group COO Henry Horowitz has been instrumental in the group's growth after his own firm, First Resource Realty, was acquired on Jan. 1, 1993 and became the start of ICG. "Part of the overall culture for Insignia is that we are not arrogant. We don't pretend that we have all the answers. We acquire companies that are successful in their own right. We keep the infrastructure and the processes, the systems and the relationships that existed when we bought them. We give people a lot of authority and we continually seek their input." To date, ICG has made some 20 acquisitions.
With that level offlow, branding has become important as the five-year-old Insignia Commercial Group drives both nationally and internationally. "We are moving to brand the entire commercial operation as an Insignia operation," says Farkas. "That's an important objective for the next several years, to try and build the awareness of Insignia and its capabilities."
Is Insignia's appetite for deals whetted yet? Farkas says not, and the acquisition pipeline is still "very active." So, look for more deals ahead.