The newly announced merger of Colliers International and FirstService Real Estate Advisors will spawn a blockbuster full-service brokerage along the lines of industry behemoths CB Richard Ellis and Jones Lang LaSalle.
The new entity will operate as Colliers International based in Seattle with centralized operations and services. What’s more, it will provide some much-needed clarity in the marketplace. In 2008, the combined companies generated annual revenues of $1.9 billion.
The parent company, Toronto-based FirstService Corp. (Nasdaq: FSRV), owns 70% of Colliers International, which includes controlling stakes in several other companies under its subsidiary, FirstService Real Estate Advisors. There was no cash component to the integration.
“One of the reasons we’re doing this is to bring clarity to the business model,” says Doug Frye, architect of the restructuring and chairman and CEO of Colliers International, which employs 15,000 people in 480 offices in 61 countries around the world.
The myriad services provided by the company include appraisal and valuation, brokerage, landlord representation, tenant representation, corporate solutions, investment services, project management and real estate management services.
Although much of the work has already been completed, Frye projects that the firms will be fully integrated by the end of the second quarter. The process already has been aided by more than a $20 million investment in an information technology platform that fosters a collaborative environment among the firm’s many parts, according to Frye.
Changing the network
Colliers International was originally launched in Australia in 1976. For years the brokerage operated using a network model, in which affiliate brokerages were owned locally but included the Colliers name in their branding.
In 2004, Toronto-based FirstService Corp. bought controlling interest in Colliers International’s largest member, later named First Service Real Estate Advisors. Since then, First Service Real Estate Advisors has invested $250 million to acquire controlling stakes in FirstService PGP Property Valuation, PKF Hotel and Hospitality Consulting, MHPM Project Leaders and FirstService Williams, which is FirstService Real Estate Advisors’ New York Tri-State area brokerage hub.
Concurrently, FirstService Real Estate Advisors expanded globally acquiring significant equity interests in Colliers International operations in the United Kingdom, Ireland, Spain, Russia and several other countries in Western and Eastern Europe and Asia Pacific.
The acquisitions have typically ranged from 55% to 85% ownership, according to Frye, always leaving some equity at the local level.
“That’s what really creates the alignment. What differentiates the model is you have local people in a local market that have an interest in thinking long term and doing all of the things that an owner does,” Frye explains. At the same time, these equity partners have access to a global platform and services.
As for the remaining 30% of affiliate companies in the Colliers network in which the firm owns no equity, Frye says, “We will continue to look for partners and to purchase and merge with other Colliers firms that are now affiliates.”
Where does Colliers International see the most growth this year? “It is in managing troubled assets,” Frye says, “and working with our clients to help them maximize the value of the assets that they have or to dispose of assets if they have a need to liquidate.”
Meanwhile, as many real estate services companies continue cutting back and laying employees off, Colliers is playing the role of the contrarian. For instance, the merger has spawned no job losses. Instead, it has posed an opportunity for the company to invest “heavily” in training, asset management and corporate services, according to Frye.
One casualty of the restructuring, however, will be the loss of long recognized and stalwart names such as PKF Hotel and Hospitality Consulting, whose legacy extends back to 1911 when the old Pannell Kerr Forster CPA firm was started in the basement of the Ritz-Carlton Hotel in New York.
“PKF is a very well-known name, but we believe that Colliers is a very strong name,” Frye emphasizes. “We believe it’s in the best interest of everyone to go to the single brand so that the client has a better understanding of who we are and what services we offer.”