CHICAGO - LaSalle Partners' agreement to buy London-based CIN Property Management Ltd. and merge it with LaSalle Advisors puts LaSalle at the top of Pensions & Investments' real estate manager rankings. (The rankings, which begin on page 22, were compiled before the deal was announced.)
It also gives the Chicago-based real estate firm the ability to invest in the United Kingdom for both U.S. and foreign clients. And it complements LaSalle's global real estate investment strategy.
CINProp, as it is known in the United Kingdom, is the real estate advisory and property management arm of the $28 billion British Coal Pension Plans. The unit managed 170 properties worth about $2.4 billion.
Upon completion of the purchase, LaSalle would have $14 billion of tax-exempt assets under management.
Terms of the deal weren't disclosed.
As part of the deal, CINProp's management team - which oversees the property investments of the $28 billion British Coal Pension Plans - agreed to remain for five years. The contracts to manage the pension assets are for five years, said Daniel Cummings, co-president of LaSalle Advisors.
Telephone calls to the pension fund and to HSBC Samuel Montagu, the investment bank in the deal, were not returned.
By acquiring CINProp, LaSalle Advisors gains a large pension fund separate account client and a U.K.-based property management team with which to market to existing and potential clients.
"Our goal is to maintain the relationship with British Coal indefinitely," said Mr. Cummings. "We also intend to build a business with other clients using those skills.
"We believe that by having an extensive presence in the U.K., and operating 170 assets, we will have a level of knowledge and be the dominant firm," said Mr. Cummings.
"We don't believe today there is substantial demand on the part of U.S. investors to invest in the U.K." said Mr. Cummings. "But we believe there will be.
"Our first priority is to deliver performance to our new client."
CINProp has consistently outperformed the U.K. real estate industry average for investment returns during the past 15 years, said Mr. Cummings.
The U.K. property division will be known as CIN/LaSalle Investment Management. It will be led by Ivan Yeatman, now head of CIN Property. The company's entire 69-person corporate staff and 70 property management staff will be retained.
LaSalle's existing six-person U.K. staff and a research person will be added to the new company, said Mr. Cummings.
According to published reports in the United Kingdom, Friends Provident, a suitor, passed on the transaction, in part, because of the staffing level. Investors there question whether revenue from managing a $2.4 billion property portfolio covers the cost of carrying 139 people.
"The existing management wished to look after the welfare of the employees on the property management side," said Richard Plummer, chief executive officer of London-based PRICOA Property Investment Management Ltd., which briefly examined the deal. "They couldn't agree on staff level, among other things.
"No doubt, they (LaSalle and the British Coal trustees) have reached an accord on those issues," he said.
Mr. Cummings said the division is appropriately staffed.
"We've made no guarantees that they will (all) be employed during the contract period," he said. "We've told the seller that we value their staff. It is our intent to retain them."
With its recent acquisition, LaSalle's global expansion is coming together piece by piece, like an international puzzle map. The company has offices in Paris and Mexico City, and is evaluating Germany and Spain.
In June, LaSalle Partners established a joint venture with China International Economic Consultants Co. Ltd. to provide comprehensive consulting and real estate services throughout China.
Investment programs or commitments with U.S. pension funds also have been started in France and the United Kingdom.
The $159 billion Teachers Insurance & Annuity Association - College Retirement Equities Fund, New York, retained LaSalle Partners to invest between $50 million and $100 million in direct property in France.
LaSalle Partners has a joint venture with Societe General, France's largest private bank, to make real estate investments. The venture manages a portfolio of more than 1 million square feet of commercial real estate and more than 200 property loans.
Last year, LaSalle Partners, in partnership with Cargill Financial Services Corp. and Lehman Brothers Holdings PLC, invested in the French loan portfolio of Barclays Bank PLC.
In 1994, LaSalle Advisors closed U.K. Realty Partners, a $200 million partnership with the $13 billion Connecticut Trust Funds, Hartford; the $8 billion Illinois Municipal Retirement System, Oak Brook; and Grosvenor Estates, a London property company, to invest in London property.
"It (the recent acquisition) makes a degree of sense for LaSalle," said PRICOA's Mr. Plummer. "Acquisitions make sense from a strategic point of view."