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Property Manager Koll Returning to Wall Street

Stocks: Newport firm that went private in 1994 files for $86.3-million initial public offering to expand, retire debt.

August 20, 1996|DEBORA VRANA | TIMES STAFF WRITER

NEWPORT BEACH — Koll, the Newport Beach-based national property manager, is planning to raise $86.3 million through an initial public offering, according to a filing Monday with the Securities and Exchange Commission.

The firm, one of the more financially solid pieces of a business empire founded by local developer Donald M. Koll, has grown rapidly in recent years through acquisitions to become one of the nation's 10 largest property managers.

The company is unrelated to a separate Koll venture that has controversial plans to develop thousands of homes at Bolsa Chica in Huntington Beach, an environmentally sensitive area.

Cash from the Koll stock offering would be used to expand the property management firm and pay off debt. If the offering is completed, Koll will become Koll Real Estate Services.

"We're always looking at ways of increasing our capital base," said William S. Rothe, president and chief operating officer at Koll. "Right now the cost of capital is attractive in the public markets."

The privately held firm has 2,600 employees nationwide and manages a 149-million-square-foot portfolio of commercial buildings in more than 25 states and Asia. Its investment portfolio is worth $1.75 billion.

Koll is no stranger to Wall Street. Once known as Koll Management Services, the company went public at $10 a share in 1991 on the Nasdaq market.

As the appetite in the public markets for real estate firms waned during the 1990s, the company decided to go private in 1994, paying investors about $16 a share, and became simply Koll.

"They've been there, done that and now they are going to do it again. My question is 'Why?' " said Louis H. Masotti, director of the real estate management program at UC Irvine. "They do a lot of things, but it's hard to sort out which of their companies you're talking about. It confuses investors."

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Company founder Donald Koll also holds stakes in several other companies that bear his name, including the Koll Co., a holding company; Koll Construction; Koll International; and Koll Real Estate Group, a developer.

Koll has two major divisions. The property and corporate services side markets leases and maintains buildings. The investment management division manages property for pension and institutional funds that own real estate.

While real estate companies can fare poorly in the public markets because the focus is typically long-term and earnings can fluctuate, Alfred Gobar, a real estate consultant in Brea, said Koll could do well because of its rapid growth.

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In the past four years, Koll has bought 21 companies for a total of $43 million. The company is in negotiations to buy six more companies including a Newport Beach property manager and an Irvine leasing firm, the filing stated.

Revenue has increased at a compound rate of 42% per year, to $119.7 million in fiscal year 1996 from $29.1 million in 1992. The company's net profits, before interest on funds used to finance acquisitions and depreciation, grew to $17.1 million from $4.8 million during the same time.

Based on outstanding shares, Los Angeles investment bank Freeman Spogli & Co. holds a 62% stake and Apollo Real Estate Advisors in New York owns a 16% stake. Founder Donald Koll and other managers currently own the rest of the stock, according to a banker at Freeman.

If the public offering is completed, this will be the second public company in Donald Koll's empire.

Another he founded, Koll Real Estate Group, which owns the wetlands in Bolsa Chica and purchased Orange County home builder Kathryn Thompson Co. several years ago, is already public. That company's stock has stayed relatively flat and is currently priced at 21.8 cents per share.

The company did not say what the per-share price would be for the initial public offering for Koll, which it expects to complete in October or November.

Merrill Lynch & Co. and BT Securities Corp. will underwrite the offering.

(BEGIN TEXT OF INFOBOX / INFOGRAPHIC)

The Koll Network

The Koll Co. consists of five real estate service companies operating in the United States, Mexico and Asia. The individual firms:

* Koll Co.: The parent holding company; majority owner is Donald M. Koll.

* Koll Real Estate Group: Publicly traded real estate development and development services company. Major asset is Bolsa Chica wetlands--1,600 acres in Huntington Beach where it plans to build as many as 3,300 homes. Recently moved into home building by acquiring and forming joint ventures with two companies. Also has projects in Mexico. Employees: 120.

* Koll (also called Koll Real Estate Services): Recently filed for initial public offering. Is a full-service real estate company providing property management, corporate facilities and investment advice for such firms as Hughes Aircraft, AT&T, Delta Airlines and Fleet Bank. Manages 149 million square feet of space and a real estate investment portfolio worth nearly $2 billion. Has 279 offices in the United States and Asia.

Employees: 2,600.

* Koll Construction: Wholly owned subsidiary of Koll Co. Specializes in building health care, entertainment and telecommunications industries facilities. Recent projects include MGM Grand Hotel in Las Vegas, medical buildings in Orange County and telecommunications facilities in Maryland. Employees: 100.

* Koll International: Wholly owned subsidiary of Koll Co. Develops real estate in Mexico, including two resorts--1,800-acre Cabo del Sol and 900-acre Palmilla resort in Los Cabos area at tip of Baja California. Employees: 50.

Source: Koll

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