The long-depressed shares of Los Angeles-based CB Richard Ellis Services Inc. rose sharply Monday after a group that includes top managers and San Francisco financier Richard Blum offered to buy the commercial real estate firm for about $340 million in cash.
The shares of some other commercial real estate brokerage and services firms--most notably Insignia Financial Group--also rose as speculation and takeover rumors swirled around industry stocks.
For the Record
Los Angeles Times Wednesday November 15, 2000 Home Edition Business Part C Page 2 Financial Desk 2 inches; 36 words Type of Material: Correction
Buyout offer--A story in Tuesday's Business section on the buyout offer for CB Richard Ellis Services Inc. incorrectly described the position and company affiliation of executive Brett White. White is chairman of the Americas for CB Richard Ellis Services.
CB Richard Ellis, which became a publicly owned company three years ago, formed a special committee of its board of directors to review the offer made by a group led by Blum Capital Partners and CB's chief executive, Ray Wirta, and other top managers. The company would not comment further.
The group offered to pay cash for each CB Richard Ellis share for $15.50--an 18% premium over its Friday closing price. In addition, the group--which includes the investment firm Freeman Spogli & Co. and Koll Holding Co.--would assume an estimated $400 million in CB Richard Ellis debt. Employees would also have the opportunity to join the group in purchasing the company.
On Monday, CB Richard Ellis shares closed at $15.13, up $2, on the New York Stock Exchange.
Despite the premium that Blum Capital is offering for CB Richard Ellis shares, the stock is still below its $20 initial offering price; its all-time high was about $40.
"It's a very fair offer, and I don't think CB's shares should trade any higher than $15, $16 a share in the near term," said Will Marks, an analyst with Banc of America Securities.
The CB Richard Ellis brokers in Los Angeles who were interviewed also expressed support for the buyout and a preference for private ownership. Many of the firm's brokers have been awarded bonuses in the form of CB Richard Ellis stock that has languished for years.
"Overall the sentiment is that we would rather be owned by people who know our business and know our industry," said Whitley Collins, a broker in the firm's downtown Los Angeles office.
Industrial property broker Darla Longo said investors never fully recognized the firm's true worth. "I think management has made a good, sound decision."
Services firms such as CB Richard Ellis, which has about 250 offices and 10,000 employees worldwide, have posted record revenue on commissions from office-space leasing and sales advisory work thanks to a booming real estate market. With vacancies beginning to rise in many major markets, including New York, cash flow for the services firms may slow, Marks said.
"It's a very seasonal and cyclical business," Marks said. "Brokerage revenues are arguably at a peak."
According to Crain's New York Business, Insignia Financial Group, a CB Richard competitor, is in preliminary talks to be acquired by Vornado Realty Trust. Insignia shares rose $1.25 to close at $11.63 on the New York Stock Exchange. Insignia spokesman Steve Iaco declined to comment.
The Blum Capital group includes CB Richard's Chief Executive Ray Wirta; Brett White, chairman of the private investment firm Freeman Spogli & Co.; and Koll Holding Co., run by Don Koll, a director of CB Richard Ellis.