Top of the Game

Top of the Game

COMMERCIAL REAL ESTATE by Janet Leiser | Senior Editor

While CB Richard Ellis Group is a public, multibillion global company, its Florida offices had gross revenue of more than $100 million in 2005 at the peak of the real estate boom.

CB Richard Ellis Group was the largest commercial brokerage in the Tampa Bay area before it acquired Trammell Crow late last year for $2.2 billion. Now it has behemoth status.

The company has about 10 million square feet under management in the Tampa Bay area, including the Bank of America Plaza, 100 N. Tampa St. and Fifth Third Center.

On the Gulf Coast, CB Richard Ellis has four offices from Naples to Tampa, with its two locations in Southwest Florida ran independently, at least for now.

Raymond Sandelli, senior director of the Tampa Bay area and former director of Florida operations from 2001 to 2006, says he has talked to the managing partner of the independent operation, Larry Foster, about becoming a company-owned operation.

But no decision has been made, and either way, the operation there will continue to represent the company.

"We have had some discussions about their interest in coming in as a company-owned shop as opposed to staying independent," Sandelli says. "They have done exactly what we hoped. They have taken it basically from two guys in the market by themselves to two offices, one in Naples and one in Fort Myers, to a very profitable operation."

Sandelli, a 23-year veteran of CB Richard Ellis, is in charge of the Tampa Bay area, which includes Pasco to Sarasota counties. He made the decision to narrow his focus to Florida's West Coast after the Trammell Crow acquisition last December.

"It has become quite a large enterprise since I took over the state six years ago," Sandelli says.

And he wants to work on expanding the Sarasota market and other areas along the Gulf Coast.

Orlando Managing Partner Bill Moss is now in charge of Florida for CB Richard Ellis.

"In the six years I ran the state of Florida we grew from $36 million to over $100 million," says Sandelli, senior managing director of Tampa/Sarasota.

In 1996, when the Fort Myers office opened, that area was considered a third-tier market.

Sandelli, 58, has been active in the community, including as chairman of the Tampa Bay Downtown Partnership.

After a recent luncheon with about 10 former chairmen of the Tampa Bay Downtown Partnership, Sandelli sat down with the Review to discuss the company and the region.

CB Richard Ellis Group was recently named the largest brokerage in the world by National Real Estate Investor for the fourth consecutive year. The company had $224.6 billion in sales and leasing transactions in 2006.

Last month, BusinessWeek named the company one of the top 50 performers in the S&P 500. Revenue has climbed more than 70% to $4 billion since the company went public in 2004.

The company leases, sells, operates and appraises commercial properties; manages real estate investment portfolios, supervises construction and originates and brokers mortgages.

When asked about the Tampa office's strategy, Sandelli says, the company doesn't have a strategy independent of the overall company. Then he adds, "We don't create markets, we respond to them."

He says "2005 was probably the hottest market of all time."

That year, the Florida region of CB Richard Ellis had more than $100 million in gross revenue and it received the company's president's award as the top performing large market area.

"I heard someone say the other day, if you were in multi-housing in 2005 and you didn't make money, you need to find a different profession," Sandelli says. "It wasn't a market that we created. The condo market was very hot."

Some of the apartments that converted to condominiums sold well, he says. But others are obviously languishing on the market for a variety of reasons.

Many of those might be reconverted to apartments, he says, adding, "Can we help position those properties better for those buyers now looking to reenter the apartment market?"

While the condo market is in a slump, he says, the apartment market is fundamentally sound with low vacancy rates driving up rents.

One of the biggest changes in the business over the past two decades, he says, is that it was once simply transactional driven.

"A developer would build a building and own it for a period of time and simply hire us to do the leasing," he says.

That changed in the 1980s when institutional buyers started acquiring real estate for their portfolios, he says.

"They are not only looking at appreciation value, but they are looking at it as an investable asset," he says. "They wanted to hold, maintain, sell and trade."

The key ingredient now is to be an asset manager, doing everything from caring for a facility from a maintenance standpoint, to leasing space, to having investment managers to track its value in the marketplace.

"It has become much more collaborative instead of simply doing transactions, now we have collaboration with the asset manager, the leasing agent and at times the investment teams," he adds.

Acquisition-driven

"What has been good about CB is we've always been willing to admit what we don't know," says Sandelli, who received the 2000 J. Frank Mahoney Award for Excellence, the firm's highest acknowledgement for management.

The 101-year-old company made numerous acquisitions prior to acquiring Trammell Crow Co. last December after a nearly two-year courtship.

"If you look at the history of some of our acquisitions, in 1996 we acquired L.J. Melody & Co.," he says. "As we were helping owners position properties, we understood there were debt and equity components of doing that, we did some of that work. But we worked a lot with L.J. Melody and said, 'Gee, these guys are really good at what they're doing.' We ended up acquiring them."

Being a real estate services company is about so much more than completing a transaction, he says.

"It's about how do you help a client with a long-term hold or positioning." He says. "If you look at the debt component and you can change or enhance the debt component, it helps in the value proposition."

When it comes to property management, CB Ellis did a pretty good job, he says, adding, "But the Koll company was known for that so we bought the Koll Co."

At another juncture in the company's history, it was primarily a West Coast organization (it's still based in El Segundo, Calif.) growing east, he says.

"We never really had the strength we wanted so we bought the Insignia organization four years ago to obtain a commanding presence in New York," he adds.

Whatever other companies CR Richard Ellis acquires regionally, nationally or globally, you can expect it to beef up its presence on Florida's West Coast. That's Sandelli's goal.

REVIEW SUMMARY

Company. CB Richard Ellis Group

Sector. Financials

Key. The company has grown by acquiring companies that were doing things in key markets better.

CB Richard Ellis Timeline

1906: Founded

1981: Acquired by Sears.

1988: Sears sold commercial division

1996: Acquired L.J. Melody

1997: Acquired Koll Co.

2001: Went private

2003: Acquired Insignia

2004: Went public

2005: Added to Fortune 1000 and Russell 100 index

2006: Acquired Trammell Crow Co.