Insignia/ESG, which has its Boston office at 111 Huntington Ave., is reportedly in talks to merge with CB Richard Ellis. The two commercial real estate firms are both major players in the Boston market.
CB Richard Ellis/Whitter Partners Insignia/ESG? Or how about Insignia/ESG CB Richard Ellis/Whittier Partners?
Whatever the implications might be on the nomenclature, it appears the two national commercial real estate firms have agreed to merge, offering the prospect of continued consolidation in the real estate services industry and what one local real estate official termed a potential “train wreck” for professionals in the local market. While officials at both companies declined to discuss the report when contacted by Banker & Tradesman late last week, sources both inside and out of CB Richard Ellis’ and Insignia/ESG’s Boston offices flamed the reports that the two leading companies are considering a union.
Rumors of a merger were rampant throughout the week in both Boston offices. “It’s looking quite possible,” a local broker at one of the two firms told Banker & Tradesman last Wednesday. While acknowledging that company management has not responded to internal inquiries about the rumors, the source claimed that Insignia/ESG and CB Richard Ellis had been well along in merger negotiations prior to the Sept. 11 terrorist attacks in 2001, and said it appears those discussions have now returned with a vengeance and turned into reality.
The source noted that CB Richard Ellis had come close to acquiring Grubb & Ellis last year, but that effort collapsed when the target reportedly declined to accept the buyout offer. That failure may have provided the impetus for CB Richard Ellis to again turn to Insignia/ESG, the source opined.
Other sources contacted at the two firms indicated the rumors were being taken seriously by company staffers, although most provided little detail about the breadth of the reports or their own predictions about the outcome. “I know nothing,” said one principal. “I hear the rumors, too,” said another high-ranking principal, “but I can’t say anything right now.”
Timothy Halloran, head of Insignia/ESG’s Boston office at 111 Huntington Ave., declined comment on the matter, while Andrew W. Hoar, President of CB Richard Ellis/Whittier Partners, which occupies 600 Atlantic Ave. in the Hub, did not return phone calls by Banker & Tradesman’s press deadline on Friday. One key issue going forward is how the top management of the local team will be handled, with both Halloran and Hoar well regarded in the local industry. Each is credited with helping bolster the strength of their respective Boston teams.
Efforts to extract information from the two national headquarters were unsuccessful. “I am not able to comment on that rumor,” was all Insignia/ESG spokeswoman Melanie Keenan would offer from the company’s New York City office. CB Richard Ellis spokesman Victor Dominguez was equally mum, stating on Thursday that he had “nothing substantial or factual to report.” Dominguez did note that such rumors have surfaced in the past and not come to fruition, but refused to dismiss the latest reports outright.
“I have no comment for you,” he said. James Reid, president of the eastern division of CB Richard Ellis, did not return a call made to his office in Washington, D.C.
‘Heartache and Angst’
According to one internal source, CB Richard Ellis felt it necessary to merge with Insignia/ESG largely to bolster its New York City operations. Based in Los Angeles, CB Richard Ellis has struggled to break into the Big Apple market, the source maintained, with Cushman & Wakefield and Insignia/ESG currently the two leading players in that area. The source added that CB Richard Ellis has previously tried to break into the market by hiring competing brokers individually, but said it has not proven as successful as the company had hoped it would. Ironically, CB just recently lured a top New York City producer from Insignia to their team.
Although New York City may be the prime motivation in any discussions, sources said a merger could have major impacts on the Boston real estate market if it is, in fact, consummated. Whereas CB Richard Ellis might be looking to solidify its New York presence, both companies are leading players in the Hub. That situation could lead to both an overflow of talent and a culture clash that might prove to be “a train wreck” locally, a principal at another Boston real estate firm envisioned.
“You’ve got people who have competed against each other for 15 years, and now one is going to be reporting to the other?” said the source, adding, “There will be tremendous upheaval, not to mention a lot of heartache and angst.”
Both CB and Insignia solidified their grasp on the Hub by buying into existing operations, with CB becoming a 50/50 partner with Whittier Partners in 1997. Insignia/ESG then acquired Lynch Murphy Walsh & Partners in 1999, grabbing a stable of top brokers who covered the entire Bay State market. Unlike other mergers, a large number of the existing professionals have remained on board at CB and Insignia/ESG in Boston, creating a potential logjam of talent should another merger take place.
Robert DeLaney of Trammell Crow Co.’s Boston office said Friday that the merger should have an impact in Boston, but added it is too soon to determine exactly what the fallout will be if it is completed. “It should be interesting to see what happens,” said DeLaney.
