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JLL merger shakes things up

<i>Other tenant rep firms rattle cages in response to $613M deal with Staubach<br></i>

After last month’s $613 million acquisition of the Staubach Company by Jones Lang LaSalle, industry observers predicted that a bigger Jones Lang LaSalle would be better equipped to duke it out with the other larger players.

The deal shook up the tenant rep industry, with some firms rattling their cages to draw attention to their strengths and others, like GVA Williams, a full-service firm, pledging to announce its own partnership by the end of the year.

“The merger will give strength to JLL in some geographic and user areas,” Barry Hersh, associate professor at New York University’s Real Estate Institute, said. “JLL will focus on marketing its breadth of services.”

In response to the deal between Jones Lang LaSalle, a publicly traded global commercial real estate services firm headquartered in Chicago, and the smaller, Texas-based tenant rep firm Staubach, competing tenant rep firms are flexing their muscles.

“Studley is already licking its chops. It will pick up some brokers it wants, and is already out marketing, emphasizing its tenant rep/no conflict status to customers, such as law firms,” Hersh said.

Cresa Partners, a tenant rep firm based in Boston with business in New York City, asserts that it will remain purist.

“We will remain independent despite the industry trend,” said Marcus Rayner, a Cresa principal. “The merger is not advantageous for the corporate real estate consumer or the tenant because it means there’s one less tenant advisory in the marketplace. One of the reasons to be a tenant rep firm is you’re trying to avoid the conflict of representing landlords and tenants in the same market.”

The Jones Lang LaSalle-Staubach deal, to be completed in the third quarter, does not include Staubach’s retail services or investment development business, which will operate under license agreements. The new firm will have the Jones Lang LaSalle name.

“The culture and core values of collaboration, team work and an almost obsessive focus on client services couldn’t be more aligned,” said Peter Hennessy, president of Staubach’s New York region corporate services. “We all view this as the proper evolution of our companies and the next step to provide the best for our people, clients and partners.”

NYU’s Hersh said the cultures of the two companies were a good fit. “On one level, they both wear dark suits and white shirts,” Hersh said. “The corporate culture seems a little bit similar in that regard. They’re button-down, corporate-type firms.”

Julien Studley, who established the tenant rep model with the founding of Studley in 1954, said, “I think it’s probably a good merger. I think that Jones Lang wants to grow.”

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Former Dallas Cowboys star quarterback Roger Staubach, who founded the Staubach firm in 1977 and was the company’s executive chairman, will be on Jones Lang LaSalle’s board of directors and serve as executive chairman of the Americas.

In fiscal year 2007, Staubach completed 7,280 transactions totaling $28 billion. Jones Lang LaSalle had global revenue of $2.7 billion in 2007, and its investment management business has about $50 billion of assets under management.

With the addition of more than 1,000 Staubach employees, the two firms will have 33,700 employees worldwide and 11,500 in the U.S. Staubach has 14 corporate offices, giving the new company a total of 68 corporate offices in the U.S. and 184 globally.

The sale could be seen as a barometer for the slow commercial real estate market.

“In tougher times, often bigger firms gobble up smaller firms,” Hersh said.

Some more consolidation is expected.

“I think what Jones Lang LaSalle did was very smart,” said Mark Jaccom, president of GVA Williams. “It proves that a tenant rep firm will be able to survive and better service their clients being part of an organization that has multiple disciplines.”

Jaccom, who left tenant rep firm Studley two years ago, said he foresees in the not so distant future that the landlord-tenant business will end up being in the hands of the bigger generalists: CB Richard Ellis, Colliers International, Cushman & Wakefield and Jones Lang LaSalle.

“I think you are going to see these four titans fighting it out there,” Jaccom said.

GVA Williams is looking to spread its wings.

The company has been looking for a partner “that will give [GVA Williams] more global reach and growth opportunities and will have deeper financial pockets,” said Jaccom, who directly runs GVA’s tenant rep division.
He said a deal like this could be closed by year’s end.

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