Koll, Tishman Agree on Merger Plan : Real estate: Combining portfolios will make the new property management unit a formidable force, analysts say.
Two of Southern California’s most prominent property management firms said Monday they plan to merge their portfolios, bringing 60 million square feet of office and industrial space under one roof.
The tentative agreement calls for Koll Management Services Inc. in Newport Beach, a unit of Orange County developer Koll Co., to acquire all of Tishman West Management Corp.’s management contracts. Tishman is the general partner of developer Tishman West Cos., based in Los Angeles.
“With so many developers today going into the property management business, the market has become increasingly competitive,” said Alan D. Levy, president of Tishman West Cos. “We feel that, by combining forces, we can provide better services at less cost.”
Financial terms of the agreement were not disclosed. The merger is contingent on Tishman’s purchase of the interest of its partner, Balcor Co., a developer and property manager based in Chicago.
Levy said that the deal with Koll Management should be completed by fall. “We are hopeful that (Balcor) will sell its interest to us,” he said.
Koll Management has focused on industrial and mid-rise office buildings in suburban areas, while Tishman has specialized in high-profile urban office towers. Among the more prestigious buildings that Tishman manages are the two 52-story Arco Plaza skyscrapers and the 55-story Security Pacific Plaza in downtown Los Angeles.
“Our portfolios will complement each other nicely,” said William Rothe, president of Koll Management.
Tishman West Cos. developed and manages The City, a 2.8-million-square-foot office and retail park in Orange. Metropolitan Life Insurance Co. and Tishman own some of the buildings in the center, including the three occupied by the credit-reporting division of TRW Inc. In May, those buildings became part of an unusual lease pact in which the city of Orange agreed to pick up part of TRW’s rent to keep the company from leaving the state.
The new division of Koll Management, to be called Koll/Tishman, would oversee the 20 million square feet of office space now managed by Tishman, as well as two-thirds of Koll Management’s current portfolio of 60 million square feet.
All of Koll/Tishman’s properties would be in California, Washington, Oregon, Arizona, New Mexico and Colorado. Koll Management would continue to manage its 20 million square feet of property in states east of the Mississippi River.
Together, Koll Management and Tishman would manage about 17 million square feet in Orange County, 14 million of which would be contributed by Koll.
Levy said that Tishman West Management’s melding with Koll Management would not affect its current staffing level of 325 employees. “This isn’t like a classic merger, where there are a lot of cuts,” he said. “Since the two companies have specialized in separate areas, we do not have a lot of redundant personnel. It will be business as unusual for our personnel and clients.”
However, Rothe of Koll Management, which has 560 employees, said it is too early to tell whether there will be an “excess of personnel.”
“But given the fact that we’ve been growing so rapidly, it’s unlikely we will have a surplus of people,” he said.
Last July, the privately held Koll Co. took its property management division public. Koll Management is the only public company on Wall Street that is strictly a commercial real estate property manager.
If the agreement with Tishman goes through, Koll Management will have doubled its portfolio of properties in a little more than a year, from 40 million square feet to 80 million square feet.
Michael Meyer, managing partner of the Newport Beach office of real estate consultant Kenneth Leventhal & Co., said the marriage of portfolios would make Koll Management and Tishman a formidable force.
“Every real estate company wants to go into property management these days because it doesn’t make sense to develop new properties,” Meyer said. “There is a lot of demand for professional management because so many properties are moving out of the hands of developers and into the hands of lenders” after foreclosure proceedings. Those lenders, he said, do not necessarily have management expertise.
“The trend will be to go with the property managers that have the edge in terms of top people and qualifications.”
Tishman West’s O.C. Portfolio
Tishman West now manages these properties in Orange County. Under the merger agreement announced Monday with Koll Management Services, they would be under the new Koll/Tishman umbrella:
Property Location Rentable Square Feet Brea Plaza Brea 139,013 Century Centre Irvine 600,576 Oakbrook Plaza Laguna Hills 119,847 Alpha Microsystems Santa Ana 175,000 Centrum North Orange 168,234
In Orange (“The City”)
Property Rentable Square Feet Bank of America Building 329,000 500 Building 66,000 505 Building 181,628 600 Building 181,628 200 Building 146,300 3800 Building 146,300 Ground Floor Building 14,140 Entertainment Center 35,374 Financial Center 124,526 Shopping Center 614,935 Cal Fed Building & UCI Parking 20,500 T.G.I. Friday’s 9,900 Hof’s Hut 7,000 El Torito 10,000 Bergen Brunswig 175,000 The City Tower 410,200
Source: Koll Co.
At a Glance:
Koll Management Services Inc.
Headquarters: Newport Beach.
Founded: July, 1991, when the property management division of Koll Co. went public.
Number of properties managed: About 500 industrial and office buildings across the United States. The portfolio totals 62 million square feet, including 14 million square feet in Orange County.
Chief executive officer: Ray Wirta.
Nature of business: Commercial property management.
Employees: 560.
At a Glance:
Tishman West Management Services
Headquarters: Los Angeles.
Founded: 1977.
Number of properties managed: 100 office buildings in California, Washington, New Mexico and Arizona. Portfolio, which totals more than 20 million square feet, includes more than 3 million square feet in Orange County.
Chief executive officer: Perry S. Hearst Jr.
Nature of business: Commercial property management.
Employees: 325.
