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Executive Hails Sale of Merrill Lynch Division : Expects Commercial Real Estate Arm Under Australian Firm to Provide More Services

December 14, 1986|RUTH RYON | Times Staff Writer

As the investment house of Merrill Lynch & Co. prepared to announce last week that it had sold its commercial real estate division, Kenneth Kneale Sr., a senior vice president in the firm's Los Angeles office, spoke of the transaction with enthusiasm.

That wasn't surprising, considering Kneale will continue as a senior vice president with the new company, L. J. Hooker International.

But Kneale sounded genuinely excited as he talked about the changes that will come with the purchase.

"It's really going to be a good thing for us," he said, speaking of the 250 specialists, including himself, who work in the 14 offices of the 10-year-old division. "Now we can do some real estate syndications and other things we couldn't do before. We'll have more flexibility."

Expanded Services

A prepared announcement states that the company "will enter into asset-driven activities," such as property and asset management, underwriting and real estate investment trusts. And high on a list of priorities is expansion of the firm's investment services to encompass pension funds, institutional and international business.

"We'll have the ability to expand internationally," Kneale continued. The company that acquired the Merrill Lynch division, the 58-year-old Hooker Corp. Ltd., is the largest publicly held real estate company in Australia.

It operates 400 real estate offices there, providing sales, valuations, property management and auction services for commercial, industrial and residential properties. It also has offices in Japan, Hong Kong, Singapore and Malaysia.

It owns a land bank in Australia worth more than $140 million, and recently acquired the 11-store San Francisco-based Merksamer jewelry chain to complement its Australian-based retail holdings.

Built Homes and Malls

It already has a real estate development subsidiary in the United States, which this year built, on a speculative basis, and sold 1,429 homes in the southeastern part of the country. It is also building three malls valued at $750 million and totaling 4.5 million square feet in Cincinnati, Denver and Tampa, Fla.

Known as Hooker/Barnes, the development company is headquartered in Atlanta, near its current activities. However, Kneale anticipates that the operation, which has a goal of producing 5,000 homes a year during the next two or three years, may start developing in the west.

"They have indicated that they will have offices close to the offices of the real estate group," he noted.

New Offices Planned

Those offices also will increase in numbers, he said, "by an additional 20 offices over the next three to four years." The Stamford, Conn.-based realty company's current offices, all formerly operated by Merrill Lynch, are in Atlanta, San Diego, San Francisco, Beverly Hills, Los Angeles, Dallas, Miami, Orlando, Fla. Tampa, New York City, Phoenix, Tucson and Washington.

Orange County is already targeted for a new office, and Kneale expects his firm to acquire one there in 1987.

Like the other offices, it would focus on commercial real estate. Hooker had no need to acquire residential services, a spokeswoman for the company said, "because, through Hooker/Barnes, a residential network was already in place."

Merrill Lynch announced in September that it planned to sell its Merrill Lynch Realty Associates (the umbrella name for its residential mortgage, relocation and real estate brokerage activities and Fine Homes Magazine) to raise capital for its core securities businesses.

Residential Division

A spokeswoman for the Los Angeles-area residential division said that the commercial arm was "put up for sale about six months before" the residential one.

Two days after it announced that it would get out of the residential real estate and home mortgage business, Merrill Lynch said it would sell its $3.1-billion residential mortgage portfolio and its loan servicing facility in La Jolla to a subsidiary of Glendale Federal Savings & Loan for about $52 million.

Merrill Lynch still expects to get about $500 million for its remaining residential real estate businesses, which include an estimated 450 sales offices with a total of 15,000 sales associates nationwide. The residential arm had a sales volume, from January to September, of $14.7 billion.

Terms of the commercial arm's sale were not announced, but the commercial operation generated an estimated $2.4-billion in volume during 1985. Kneale expects that to grow under Hooker, which increased its own assets from $568.3 million in 1985, to $1 billion in 1986.

Firm's Leadership

Why the surge? Kneale attributes it to Hooker's new executive chairman, George Herscu, whom Kneale described as a "mover and shaker who likes to get things done."

The president and chief executive officer of L. J. Hooker International (formerly Merrill Lynch Commercial Real Estate) is Edward F. Kincade, who was president of the Merrill Lynch subsidiary since it was established in 1976.

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