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Something to Crow About

Cal Frese

Age: 50

Company: CB Richard Ellis Group Inc.

Title: President, Americas

Time in current role: Two years

Biggest accomplishment: 25 years of marriage to a wonderful wife; proud father of three great kids

Short-term goal: Complete the integration of Trammell Crow; look for more opportunities to serve our clients and build market share

Cal Frese knew that America's largest real estate services firm had a missing link — CB Richard Ellis Group needed a strong corporate services brand to back up its brokerage strength and enable it to offer more services to more customers. Finally, after years of false starts and incessant takeover rumors, CBRE finally consummated its $2.2 billion purchase of Dallas-based Trammell Crow Co. in December 2006.

Now Frese, as president of Los Angeles-based CB Richard Ellis' Americas unit, has a big job on his hands, not only to integrate Trammell Crow's 6,000-plus employees and culture into CBRE's, but also to harness Crow's legendary corporate connections to expand its service scope and grow market share.

The Americas unit accounted for some $2.5 billion of CBRE's $4 billion in total annual revenues at year-end 2006, and includes more than 16,600 employees. CBRE's revenues from the Americas operation alone are higher than the total revenues of each of its next biggest rivals, Chicago-based Jones Lang LaSalle and New York-based Cushman & Wakefield.

Since taking on his role in early 2005, Frese has made some bold moves. The brokerage giant went on a shopping spree in 2006, snapping up 23 smaller firms in deals totaling about $155 million. But the crown jewel was Trammell Crow, a deal that was literally years in the making.

“For the record, the conversations this time around began in earnest at the end of the summer of 2006,” says Frese. Once an agreement was struck, the closing took just seven weeks. CBRE financed the stock purchase (valued at $49.51 per share in cash) with two separate $1.1 billion loans, each with five- and seven-year terms.

“This merger gives us the opportunity to deliver services to clients across business lines and geographies in a new way,” says Frese. “We've been successful building focused segments within the industry, but really our great opportunity now is to integrate these businesses in a way to provide seamless service to our clients everywhere around the globe.”

Frese began his career at Arthur Andersen in 1979 as a CPA, then served as SVP at development firm Cabot Cabot & Forbes and as senior vice president of broker Whittier Partners, both based in Boston. In 1997, Whittier formed a joint venture with CBRE. Frese joined CBRE in 1998, moving to Chicago to run its central region. He then was tapped as CBRE's chief operations officer in 2003 and slotted into the president's role of the Americas in January 2005.

Integrating Trammell Crow into the corporate fold now sits atop Frese's to-do list. Recently, Trammell Crow's Boston-based management team — the original threesome of Joseph Fallon, Brian Hines and Charles O'Connor, who sold their former namesake brokerage firm Fallon Hines & O'Connor to Crow in 1998 — defected to reincarnate their old shop and rekindle their entrepreneurial roots.

While Frese works to retain key employees, he also must look to realize significant cost savings from the merger. According to analyst Patrick Burton with Citigroup in New York, investors have voiced concerns about CBRE's high debt load resulting from the Trammell Crow buy. “We believe the use of debt to finance this acquisition may magnify existing risk to the company based upon its prior levels of leverage should [CBRE] fail to capture the cost synergies from the merger that it is expecting,” says Burton.

But Morgan Stanley analyst Jennifer Pinnick points to CBRE's 20% cost savings when it purchased Insignia Financial Group in early 2003 for $256 million in cash. “In the near term, cost savings estimates from the Trammell Crow acquisition are achievable, if not beatable, having the potential to drive favorable earnings surprises in the next six to nine months.”

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