CB Real Estate Agrees to Buy REI of London
In its quest to become the largest commercial real estate firm in the world, Los Angeles-based CB Commercial Real Estate Services Group said Tuesday that it has agreed to purchase REI Ltd., a London-based brokerage.
CB Commercial will pay just under $100 million in cash and stock for REI, a holding company that operates under the name Richard Ellis in 28 countries, according to CB Commercial Chairman James J. Didion. The combined company, which would be renamed to reflect both entities, would have 8,000 employees in 209 offices and combined revenue of more than $800 million.
“Our vision has been to create a global real estate company,” Didion said, noting that as companies expand, “we need to be able to provide cross-border service.”
Both companies buy and lease office buildings, warehouses and shopping centers for companies and major institutional investors. CB owns 152 offices in the United States, Canada, Mexico and elsewhere in the Pacific Rim. It conducts business in other countries by referring deals to other real estate companies.
Didion would keep his title as chairman. REI Chief Executive Barry White would be named vice chairman of international activities. Officials said no layoffs are expected.
The deal does not include the Richard Ellis real estate offices in Britain. Those operations are owned by Richard Ellis Group Ltd., which recently announced its intentions to merge with CB’s competitor, Insignia Financial Group of Greenville, S.C.
Didion said he still hopes to convince Ellis to merge with the CB/REI group. However, he said if Ellis does not, CB will open its own offices in the British market.
“It is our intent to have a major presence in the U.K. We’d be delighted if they are interested in doing something,” Didion said.
CB Commercial is the largest commercial real estate firm in the country, with approximately 6,400 employees and $662 million in revenue for the year ended Sept. 30. The REI purchase is expected to boost revenue by more than $110 million.
It’s a major purchase for CB, which has been expanding rapidly since its initial public offering last year. Four months ago, it completed its purchase of Koll Real Estate Services of Newport Beach, one of the country’s largest property managers, for $160 million.
Talks with REI began earlier this year after an official from one of CB’s corporate real estate clients, Eastman Kodak Co., suggested the two companies had similar operations but in different and complementary markets.
Although many industry watchers applauded CB on Tuesday for the huge presence the acquisition would give them around the globe, at least one analyst voiced concerns that the company might be paying too much for the higher profile.
“That seems to be as rich a multiple as I’ve seen for any property service acquisition,” said William C. Marks of NationsBanc Montgomery Securities Inc., pointing out that CB has traditionally paid no more than six times earnings for a purchase and that CB itself trades at just 7.5 times earnings. REI is expected to add earnings of $10 million to the company, according to CB officials, who declined to tie that figure to a calendar year.
CB’s stock lost 13 cents to $33.94 in New York Stock Exchange trading. The acquisition is expected to be completed in April, pending shareholder approval.
