CB, Insignia Big in OC; Irvine Co.’s a Wild Card
By DANIEL D. WILLIAMS
CB Richard Ellis Services Inc.’s pending $415 million buy of Insignia Financial Group Inc. is set to have a big impact on Orange County.
The deal combines the county’s top-two commercial real estate managers. Together, the two are set to manage nearly 50 million square feet of real estate here, according to their rankings on last year’s Business Journal list of commercial property managers.
Insignia/ESG topped last year’s list with 26.6 million square feet of managed real estate. The New York-based company overtook CB Richard Ellis for the top spot last year, thanks in large part to added work for The Irvine Company.
In late 2001, Insignia/ESG got a big boost when the Irvine Co. handed it about 3 million square feet of space previously managed by Houston-based PM Realty Group. In all, Insignia manages more than 15 million square feet for the Irvine Co.
CB Richard Ellis manages about 22 million square feet of OC real estate.
CB and Insignia together would have four times the amount of square footage managed by the next biggest player here, Irvine-based Sares-Regis Group.
In fact, CB Richard Ellis and Insignia would be bigger than the next six players here combined, including big names such as Dallas-based Trammell Crow Co. and Chi-cago’s Equity Office Properties Trust.
The Irvine Co. is a variable for CB and Insignia, which expect to conclude their deal by June. For now, Newport Beach-based Irvine Co. isn’t saying whether it will stick with the combined company.
“There are no details on how the new company will be structured, so it’s too early for us to comment on how it might affect us,” Irvine Co. spokeswoman Jennifer Heiger said.
For the past year, industry sources say the Irvine Co. has looked at taking over management of all its commercial properties.
Another variable: the combination’s impact on the brokerage industry.
With its Anaheim and Newport Beach offices, CB is OC’s largest brokerage with more than 100 brokers. Insignia/ESG is smaller with about 10 brokers here.
Even so, industry insiders here say there could be cuts at the newly combined company.
“Even though brokers might be doing quite well, from the corporate level it will look at some as marginal producers and reduce the headcount,” said Larry Scher, vice president of the OC division of Los Angeles-based Charles Dunn Co.
Royce Sharf, senior vice president of the OC office of New York-based Julien J. Studley Inc., sees the deal as being good for brokerages such as his, which represents tenants.
As part of CB, Insignia is likely to expand beyond just representing tenants, he contended.
“That leaves only us and The Staubach Company working as 100% tenant reps,” Sharf said.
The local offices of CB and Insignia/ESG declined to talk for this story, referring questions to the corporate offices of both companies, which released a joint press release on the deal.
“Insignia is the perfect, hand-in-glove complement for our global platform,” said Ray Wirta, CB’s chief executive.
For Los Angeles-based CB, buying Insignia would boost its presence in the lucrative Manhattan market, where Insignia is big.
The challenge for CB: melding two different corporate cultures.
“These are two very good, very successful companies, but history shows us that 70% of mergers are unsuccessful,” said David Frosh, president of Irvine-based Sperry Van Ness.
