With all the major British firms claiming to be linked to “leading” US consultancies, Rachel Frampton assesses the reality behind the special relationships across the Atlantic.
UK agents were reportedly queuing at the door to talk to Colliers International after its UK partner, Stewart Newiss, went into receivership last October. While Erdman Lewis looks as though it will be the successful suitor, other leading names, including Hillier Parker, were known to be interested in tying the knot with one of the largest firms in the US.
Only two UK firms, Jones Lang Wootton and Richard Ellis, have established a significant presence across the Atlantic without joining forces with US firms. JLW has offices in New York, Los Angeles, San Francisco, Washington DC and Dallas, while Richard Ellis is in New York, Chicago and Minneapolis.
Healey & Baker, Hillier Parker, Drivers Jonas and DTZ Debenham Thorpe, among others, have gone down the joint venture or strategic alliance routes.
The past 12 months have seen renewed activity among UK firms to secure American partners. Chesterton announced in November that it was forming a joint company with Philadelphia-based Bingswanger, while in April last year Weatherall Green & Smith joined forces with the Staubach Co. Herring Baker Harris, through the sale of its New York office to California-based Marcus & Millichap in October, has also tied up an exclusive partnership arrangement with a very aggressive US firm.
US firms are deliberately vague about the structure of their translantic businesses and unwilling to provide details on the amount of trade being generated. Unlike most UK firms, however, US companies generally publish their annual gross revenues, which at least provide a crude ranking.
On this basis, DTZ appears to have scored a coup by joining forces with CB Commercial. While firms on both sides of the Atlantic are fond of calling themselves “the leading property consultancy”, CB Commercial has some justification in doing so. Its 1992 fee income of $361m was comfortably ahead of any other US firm and it has a greater number of professional staff than any other US consultancy.
DTZ signed an alliance with CB Commercial in August 1982 which, although it involved no equity, closely tied the companies.
Peter Marr, managing director of CB Commercial International, says the first 18 months have been very active: “We have been involved both on the occupational and the investment side. So far we have seen more US corporate requirements in Europe than European requirements in the US”.
Among its US clients looking for more space in Europe are retailers Blockbuster and Price Club, which recently merged with Costco.
On the other side of the equation, CB Commercial has picked up some work for BP through its DTZ link. Marr envisaged more investment interest from Europeans in the coming months. “Occupational requirements have been dominant, but we are starting to see an increasing number of European investors in America, led by the Germans.”
With headquarters in Los Angeles, CB Commercial has a strong leasing and investment bias. “Brokerage is our strongest suit. We have more than 2,000 brokers in the US,” says Marr. A future equity swap between the companies is a possibility. “We’re looking at taking things that way now,” he says. CB Commercial is privately owned, having bought itself out from Sears Roebuck in the late 1980s.
After CB Commercial, Cushman & Wakefield, Colliers and Grubb & Ellis are among the most high profile of the US firms.
Healey & Baker has nearly a four-year-old alliance with Cushman & Wakefield, which, according to John Coppedge, director of European operations at C&W, has been “very successful”.
When the transatlantic link was set up in 1990, Coppedge came to work in London for Healey & Baker, transferring from C&W’s office in Atlanta, Georgia. At the same time H&B’s John Greenwood moved to C&W’s New York office.
While there was no ownership involved, it was this swap of staff which Coppedge believed ensured the success of the relationship. “Any US client of Cushman & Wakefield wanting advice on Europe could have direct contact with John while in Europe any of Healey & Baker’s clients looking at the US could contact me.”
As an example, Coppedge points to last year’s Disney transaction, which saw H&B put C&W’s client into 80,000 sq ft at Kensington Village. Grubb & Ellis, a full-service firm with a 1992 turnover of $224m, has had a “loose affiliation” with Fletcher King since 1986. Most of the instructions resulting from the alliance have been consultancy work for US companies in the UK.
“We haven’t done so much in the area of acquisitions,” says Grubb & Ellis broker Gordon Hess, “and there really hasn’t been a lot of pure investment activity.” While few firms have taken an equity interest in their US partners, Drivers Jonas has owned about 30% of Los Angeles-based Economics Research Associates since 1988. ERA is heavily biased towards strategic planning, urban regeneration and large-scale project management, and has no brokerage arm.
With a 1992 turnover approaching $8m, its clients include public authorities in every US state, as well as corporations such asWarner Bros, American Express and Ford Motor Co.
Fee income through the London office, housed in Drivers Jonas’ Suffolk Street premises, was over $500,000 last year, according to senior vice-president Clive Jones. The first 10 months of the tie-up between WGS and Staubach Co have been profitable, according to Staubach executive vice-president Ka Cotter. Staubach specialises in corporate relocations and has a foot in the door of most of America’s top firms thanks to the chairman and CEO -former US football star Roger Staubach.
From Weatherall’s perspective, the Staubach link should bring a wealth of new contacts, many of whom are shedding or acquiring property in Europe. Staubach’s clients include IBM, AT&T and MCI Telecommunications. Cotter is reluctant to point to specific business that Staubachs has put through Weatheralls, but says there are deals in the pipeline: “We are working on a number of things now that we might not have been in on if we had not had Weatheralls in the picture.” The relationship between the two firms is exclusive in client representation, but it does not prevent Weatheralls from carrying out professional and investment work with other US firms.
Chesterton’s recent link-up with Binswanger could be more promising than it looks on the surface. Although Binswanger has a significantly smaller operation in the US than its competitors it has a very strong south American network and some of America’s top corporations on its client list, including AT&T, Chrysler Corporation and Pepsi-Cola Co.
Chesterton Binswanger International, based in London, became effective in December last year and has been strengthened in the past few weeks by the appointment of Etienne Chovet as managing director of its European operations. Chovet was formerly in the European division of August-Thouard.
Binswanger clients currently active in Europe include Colgate Palmolive, Eastman Kodak, 3M and Ditigal Equipment Corporation. Like Staubach, Binswanger’s strengths are in corporate relocation, although it does have an investment arm.
Frank G Binswanger III, president of Binswanger International, believes that his business model is more likely to succeed internationally than either CB Commercial or Cushman & Wakefield. “These firms are made up of metropolitan local brokers. We have been running our company for 60 years to do something completely different – take a company from one area and move it somewhere else. Our people are paid a salary to work together as a team; 80% of our market is outside our backyard.”
Herring Baker Harris director Peter Farrington agrees. The problem with most US brokerage houses, he contends, is that agents are not motivated to refer deals overseas. To be successful, the US/UK alliances have to be closely managed. “Sure, the opportunities are there provided they are worked at and the whole thing doesn’t just degenerate into `I’ll send someone a fax and if they don’t respond, so what’.”
Herring Baker Harris has had a rocky history in the US, but a strong strategic alliance has emerged from the failure last year of its CPC subsidiary. Baker Harris Saunders acquired CPC in 1991, a year before the merger with Herring Son & Daw, but the business lost $4m until it was wound up at the end of 1993. Farrington puts the failure down to the long-term problems in the American company. “The CPC directors enjoyed an extremely good quality of life – they never met a forecast.”
Last September, Herring Baker Harris sold its New York operation to West Coast-based Marcus & Millichap and an exclusive alliance agreement was drawn up between the European and US companies. Fee structures are likely to evolve to reflect that fact and to motivate commission-only US brokers to co-operate more with their European counterparts.
Peter Marr at CB Commercial says: “Over the next decade or so both systems will move towards a greater mix of commission and salary. The British will get incentivised while we will have more salaried jobs for requirements that need a broader approach.”
