Staff Cuts, Publicity Add to Brokerage’s Woes : Coldwell Banker: Commercial real estate firm consolidating offices, withdrawing from management of 25% of properties.
Managing change is never easy--especially when it involves cutting staff.
Just ask Coldwell Banker Commercial.
Much of the real estate market is already a bit unsettled. Coldwell Banker’s firing of 90 property management staffers has only helped fuel speculation that a shakeout is near for overextended and undercapitalized real estate brokers and managers.
Whether that actually happens has yet to be seen, but in the meantime, Coldwell Banker is reeling from bad publicity. The company’s biggest problem was a false report that ran in the Daily News last month asserting that Coldwell Banker would shutter three Los Angeles offices.
In fact, Coldwell Banker is in the process of consolidating only its property management services from 26 offices to 10 regions and four districts nationally.
When the story broke, Coldwell Banker’s phones starting ringing off the hook with clients asking for an explanation of the impending disaster.
“It was a failure to communicate,” lamented Coldwell Banker executive Jesse Harrill. “One of our executives talked about closing offices, when he meant property management operations.”
The story was subsequently corrected by the Daily News and an alternative perspective on the “restructuring” was also written to placate Coldwell Banker executives.
This public relations nightmare has yet to run its course, though. Several pink-slipped Coldwell Banker employees are telling the real estate community that the company is in trouble. And competitors have been quick to comment about how even the mighty can fall.
In fact, only 90 of Coldwell Banker’s 390 property management staffers are getting the ax nationally. Most of the company’s 5,000 employees work in brokerage and their jobs are not in jeopardy, Harrill said..
He also denied rumors that the company is suffering because of $237.7 million in debt taken on last year when management led a buyout of the company from Sears.
Employees have a 40% equity stake in the re-created company, but interest payments on the debt can be especially onerous as the real estate industry faces tighter times.
Nationally, Coldwell Banker plans to give up managing about 20 million square feet of commercial space, or about 25% of the space it’s been servicing.
Locally, the company expects to hand other property management companies 3 million square feet, leaving a management portfolio of about 9 million square feet.
The purpose of this reorganization, say Coldwell Banker executives, is to concentrate on institutional-grade properties, rather than bother with smaller and less high-profile projects.
“Property management is still an integral part of Coldwell Banker management,” maintained Charles McBride, executive vice president and chief operating officer. “As part of the company’s overall strategic plan we’re concentrating on larger properties.”
But, just as Coldwell Banker strives to build a bigger portfolio of institutional buildings under its purview, the company suffered a disappointing setback in Burbank recently.
Homart Development Co. picked Cushman & Wakefield of California over Coldwell Banker to handle leasing for the first phase of a 1-million-square-foot office and retail complex planned for the heart of Burbank’s Media District.
As a member of the Sears Financial Network, Homart has longtime ties with Coldwell Banker and utilizes Coldwell Banker Commercial’s brokerage services nationwide. Coldwell Banker Commercial Realty Advisors is also providing pension fund financing for Homart’s $150-million Glendale City Center office complex under construction on Brand Boulevard.
That’s why Homart’s decision last month to award Cushman & Wakefield the opportunity to earn as much as $1 million in lease commissions at Burbank came as such a surprise to Coldwell Banker brokers.
They’ve been working with Homart for more than a year on market projections and business development that is usually a prelude to being named exclusive agent for a building.
Rumor has it that Homart’s Chairman Michael Gregoire was less than pleased to hear that one of Coldwell’s recent firing casualties was brother Tim Gregoire. The brothers Gregoire and Coldwell Banker deny any connection between Tim’s firing and Homart’s untimely split with Coldwell Banker at Burbank, but speculation persists.
DEVELOPMENT 469-Room Hotel Rising on Bunker Hill Site Bunker Hill in downtown Los Angeles is soon to be home to a new $100-million Inter-Continental Hotel at 251 S. Olive St. Work on the 17-story, 469-room hotel started this month and completion is expected in the fall of 1992.
The hotel is being developed by California Plaza Hotel L.P., a limited partnership consisting of Bunker Hill Associates and Toboshima Development Co. as general partners and Nippon Landic USA Inc. and Seiyo Corp. as limited partners, in collaboration with the city’s Community Redevelopment Agency.
Bunker Hill Associates is backed by Metropolitan Structures West Inc., developers of California Plaza, which covers 11.5 acres, and when completed in the mid-1990s, will include three office towers in addition to 750 residential units and the Museum of Contemporary Art.
Bridgeport Development Co. has completed the first phase of Irvine Oaks Executive Park--a $50-million office and retail project within the Irvine Spectrum. The developer plans a total of 20 buildings at Irvine Oaks, ranging in size from 6,250 to 40,325 square feet.
Construction is under way on the third and final phase of College Business Park, a 26-acre office and industrial complex near the Claremont Colleges. The $23-million project is being built by Hazama/Mat West Investment Group, a joint venture between the Mat West Co. of Van Nuys and Hazama Inc. of Tokyo. The final phase at College Business Park will add 129,600 square feet to the center’s current 184,700 square feet; completion is set for January, 1991.
Fremont Development Co. will soon begin construction on the 35-acre Rancho Business Center industrial development within the Rancho Los Amigos Medical Complex. The $22-million project will include 640,000 square feet of commercial space, including a facility leased by Kirk Paper through leasing agent the Charles Dunn Co.
Fremont has leased the land for this development from Los Angeles County for 66 years. Officials estimate that this project will generate between $600 million and $800 million in public revenues over the term of Fremont’s lease.
Other projects in the news include:
--The 24-acre La Mirada Commercecentre, a $20-million project just completed by Overton, Moore & Associates and Copley Real Estate Advisors, in cooperation with Cox Broadcasting Co. and the city of La Mirada.
--The completion of 4100 Newport Place, a nine-story, $19-million office building in Newport Beach by McLachlan Investment Co.
--Ground breaking at 1919 Santa Monica Blvd. in Santa Monica for a $13-million, four-story office building designed by Rossetti Associates and developed by Dominion Property Co.
--The start of 444,000 square feet of speculative distribution space near the intersection of Interstates 10 and 15 in Fontana; a $13-million project by Pasadena-based Colavin Group Inc. principal Sam Longo, on 19.5 acres within the 238-acre Fontana Commerce Center.
--And, a new look for downtown L.A.’s 40-floor Union Bank Building, which is getting a $7-million addition that will feature 11 new retailers when completed in the spring of 1991.
The Fashion Institute of Design and Merchandising is moving into its new building this month at 9th Street and Grand Avenue on the grounds of a park designed to anchor the slowly emerging South Park district of downtown Los Angeles. The 180,000-square-foot building stands alongside a planned housing project and across the street from the Federal Reserve Bank’s local branch.
R&T; Development Corp. has broken ground for a 24-story office project at 8th and Figueroa streets in downtown Los Angeles. The $160-million 801 Tower will total 432,000 square feet and be sheathed in pink and green granite. R&T; is a collaboration of construction company Takenaka Corp. and developer Ryoshin Fudosan Co. Ltd., both of Japan.
Mitsui & Co. of Japan has agreed to acquire half of Laguna Niguel-based developer Birtcher for more than $100 million. Mitsui and Birtcher have built four projects together over the past three years. Not included in the deal is Birtcher real estate worth up to $3 billion.
Galperin is a Los Angeles-based free-lance writer who has covered the commercial real estate scene for several years. News releases and column inquiries should be mailed to 8306 Wilshire Blvd., No. 7078, Beverly Hills, Calif. 90211.
