Bank Buys Costa Mesa Real Estate Brokerage in Unusual Acquisition
Security Pacific Corp. said Tuesday that it had bought Frost Trinen Partners, a small commercial real estate brokerage in Costa Mesa. The price was not disclosed.
The transaction surprised local brokers. It is unusual--one bank analyst said unique--for a bank to own a brokerage.
Richard N. Frost and Robert M. Trinen, founders of the 10-year-old firm, will stay on. That is significant because ordinarily a brokerage’s most valuable assets are its brokers and their connections to clients.
Frost and Trinen were out of town and said to be unavailable for comment.
Their firm, now a subsidiary of Security Pacific State Bank, will be called Security Pacific Frost Trinen Inc.
It was the first commercial brokerage bought by Los Angeles-based Security Pacific Corp., which is the nation’s fifth-largest bank holding company.
Compared to some other big banks, Security Pacific has been more aggressive in trying to enter every niche in the financial services industry, including some non-traditional ones for banks.
‘Not Farfetched Move’
“They tend to want to be all things to people, figuring that if a customer’s got a checking account he may also want a loan and now he may even want to lease office space,” said Dan B. Williams, a stock analyst who follows the bank for San Francisco’s Sutro & Co. “In that context this is not a farfetched move as it seems to be on the surface.”
Security Pacific State Bank is a state-chartered bank with a single branch in Irvine, and state law allows it to own a real estate brokerage.
The holding company also operates Security Pacific National Bank as a federally chartered bank with a large system of branches. But federal banking laws prohibit federally chartered banks from owning brokerages and most major banks are federally chartered. For that reason, few, if any, banks own their own brokerages, Security Pacific said.
Security Pacific Corp. said it saw a potentially profitable business in brokering commercial real estate in Southern California. But that market is slowing, and some brokers say smaller brokerages like Frost Trinen--that formed during the boom years--could face an eventual shakeout as tenants for office and factory space become scarcer.
Security Pacific Corp. is already a big lender to developers and has also developed commercial buildings in partnership with developers. If it hadn’t bought Frost Trinen or another small brokerage, the corporation was planning to start its own brokerage, said Ronald W. Lee, executive vice president of Security Pacific Real Estate Investment Bank.
“It’s a very competitive business, and we wanted to start in a small way,” he said.
Compared to Orange County’s two giants, Coldwell Banker and Grubb & Ellis, Frost Trinen is a very small one-office player with a niche in leasing offices around South Coast Plaza in Costa Mesa. Frost Trinen leases space for C.J. Segerstrom & Sons, that area’s largest developer and probably the brokerage’s biggest client.
Frost and Trinen released a statement that said being a subsidiary of the big corporation would let the brokerage “capitalize on Security Pacific’s market position in the real estate industry to further build our client base.”
The brokerage is thought to be profitable, though small, other brokers said. Those brokers said Security Pacific may have bought Frost Trinen because it might have a lot of space in its own buildings that it is anxious to lease.
But Security Pacific said it is serious about becoming a player in the brokerage business. The bank said it wants to eventually expand the brokerage’s operations into Los Angeles and elsewhere in California.
