Two Real Estate Firms Discuss Merger

Two companies based here--O’Donnell Armstrong & Partners Inc. and Sammis Co.--are discussing a merger that would place the combined firm among the nation’s largest commercial real estate firms.

Don Grant, O’Donnell’s chief operating officer, and John Hagestad, Sammis’ executive vice president, said Tuesday that the two concerns have been studying the benefits of a merger since fall and might make a decision as soon as next month.

Officials of the two companies, which develop mostly industrial buildings, said the firms are financially viable and are not merging because one or both firms is troubled. A merger, they said, would allow the new firm to save money by combining some operations and broadening its geographic reach.

Sammis, for instance, has offices throughout the West Coast and as distant as Chicago, while most of O’Donnell’s work has been in Orange County, although about a quarter of its projects have been in the San Francisco area.

Sammis owns several thousand acres of land, company officials said, that would complement O’Donnell, which doesn’t own much land but owns or manages 16 million square feet of real estate compared to Sammis’ 9 million.

The commercial real estate market is troubled by a glut of space and a near absence of capital in the forms of loans or equity that are so important to real estate concerns, most of which carry heavy debt loads. Many developers have been left owning buildings or parts of buildings that, even when fully leased, produced rents so low the owners couldn’t meet the mortgage payments.

So many offices have been built that it is likely developers will build far less in the future, particularly so-called “speculative” buildings that are put up without a particular tenant in mind.