Mega-merger Brett White will preside over the world’s biggest agency, once the merger of CB Richard Ellis and Insignia is finalised later this month. Alex Catalano spoke to him
Brett White is the affable Californian who is going to head the world’s biggest real estate agency. When the Insignia-CB Richard Ellis merger goes through, he will be the great panjandrum of an empire that currently takes in 16,300 employees in 343 offices across five continents – three times bigger than Jones Lang LaSalle.
It goes without saying that part of White’s job will be to oversee the rationalisation of this network – cutting out the overlaps. He won’t talk about that: in fact any discussion of the mechanics of the merger is ruled out until the deal gets rubberstamped by the shareholders and regulatory authorities.
Anxiety of competitors
In the US, the $415m merger – billed as combining “Goliath and Goliath’s younger brother”- has provoked anxiety and sniping from competitors in equal measure. Will the laid-back West Coasters of CBRE be able to get along with the driven East Coasters of Insignia? Will the new giant be dragged down by a millstone of debt?
White pooh-poohs the possibility of a turf war between the two gangs of agents. “In our view, the integration of our two companies will be quite a bit simpler than it may have been portrayed.”
The top guns, at least, seem to be sharing out the jobs smoothly enough. CB Richard Ellis’s Ray Wirta and Brett White will retain their respective positions as chief executive and president in the merged group, while Insignia chairman Stephen Siegel will take over as chairman of the global brokerage.
A CB West Coaster through and through, White joined Coldwell Banker, as the firm was then, right after college. “In 1984, the view in the States was if you were going into property services, you went to Coldwell Banker. There wasn’t much question about it. After about 16 interviews over eight months, I tricked them into hiring me.”
White started in the San Diego office as an industrial property broker (“very dirty shoes”), and after seven years of shifting sheds and parks moved into the “lowest conceivable” rung of management.
In Europe, CB Richard Ellis’s European operations will come under Insignia’s chiefs, Allan Froggatt and Mike Strong. Moreover, Insignia and CBRE fee-earners in the UK can also rest easy that the merger is unlikely to impose US-style commission-based pay systems on them.
“We don’t intend to standardise – indeed, we operate different compensation systems in San Francisco and New York, and I believe that’s the best way to approach it. The idea that one can impose a single view on 100 markets in the world is not a good one,” says White.
The merger is being financed with $145m of equity from CBRE’s owners, Blum Capital Partners, and debt. It might be wishful thinking on rivals’ part that this gearing will be a problem, but the firm’s own stock exchange filing describes it as highly leveraged. And rating agency Moodys – which is generally positive about the benefits of the merger – has warned about the debt that the group will be taking on, noting the “challenging operating environment”.
Here a hint of steel enters White’s tone. “The facts are that if you look ed at the financial performance of CBRE each quarter from the start of 2002 to the first quarter in 2003, you would find that we have significantly outperformed our competition. Our company is doing very well right now, and in a difficult environment,” he says.
“We were the only global property firm in 2002 to improve EBITDA – it was up 17% and the average of our global competition was down 27%. These are not minor differences. We’re diversified – we have businesses that do quite well in a hot economy – leasing, consulting. But we also have businesses that provide important services in markets that are slow,” he says.
Indeed, CBRE did move from a pretax loss into profit in 2002, and the first quarter of this year has also been good, with EBITDA 62% up, to $17m.
Global recovery on the way
“We are looking at the slow emergence of global recovery. For the past six months, we’ve seen signs of improvement in demand.”
If the combined company can hang onto all its clients, it will have a revenue of £1.2bn, well ahead of its rivals. “We believe that Europe and Asia offer significant growth opportunities. There is more services business outside the US than within – not all of which is being recognised.
“In Europe, service providers and clients seek long-term relationships. That’s something we like,” says White.
White believes that the agency world is going to polarise between a handful of “truly excellent” global firms, working with the largest clients on a long-term basis, and a lot of local “highly successful” niche firms. The in-between firms “are going away”.
The other part of the CBRE vision is that the property services business will evolve from brokerage to advisory. For now, transactional work is a large part of the firm’s business, and White concedes it will remain so for a very long time. “But we believe that an advisory opportunity lies with the larger clients. The ability to bring advisory service is what will set us apart,” he says.
Age 43, born and raised in La Jolla, California, BA in Biology from the University of California, Santa Barbara
1994 Joined CBRE as a sales trainee in San Diego and worked as a salesman
1991 Promoted to sales manager in San Diego down town office, subsequently becoming Los Angeles regional manager, president of the brokerage services and chairman, Americas
2001 Made president CB Richard Ellis
Lifestyle Lives in Malibu, California. Has four-year-old son and two-year-old daughter, plus one on the way. Plays golf and supports Museum of Contemporary Art in Los Angeles
