BOSTON - The parent of Copley Real Estate Advisors is negotiating to buy Aldrich Eastman Waltch, sources said.
The two firms would be merged, under the AEW name, industry sources said.
The merged firm would have $9.3 billion in real estate assets, based on 1995 data each submitted to Pensions & Investments. It then would be the nation's third largest real estate money manager, behind Equitable Real Estate Investment Management, Atlanta, and Heitman Capital Corp., Chicago.
Joseph O'Connor, Copley's chief executive officer, and Peter Aldrich, AEW's CEO, would serve as co-chairmen of the new company; Joseph Azrack, AEW president, would be president, the sources said.
United Asset Management Corp., Boston, owns a 15% to 20% stake in AEW; New England Investment Cos., Copley's publicly traded parent, would buy that stake, as well as the interest of principals Mr. Aldrich and Thomas Eastman and other current and former AEW executives.
Principals with Copley, AEW and UAM declined to comment on the negotiations, citing Securities and Exchange Commission rules on disclosure by public companies. But principals have acknowledged privately there have been lengthy discussions, sources said.
Pension fund clients interviewed by P&I said they've received no formal notice about the deal.
This impending merger is the most recent in a fast-consolidating real estate industry. Other megamergers include Heitman Real Estate Advisers and JMB Institutional Realty in 1994; LaSalle Advisors and Alex. Brown Kleinwort Benson in 1995; and TCW/Westmark Realty Advisors and CB Commercial in 1995.
The merger discussions come as the fortunes of Copley and AEW are moving in opposite directions. AEW has had a string of recent successes; Copley is hampered by some missteps.
Both were big success stories in the previous decade; Copley, for much of the 1980s, was the largest pension fund real estate money manager.
Each firm landed a 1980s high profile real estate deal.
AEW put pension funds in the partnership that refinanced the Sears Tower in 1989. Copley was the asset manager to the New England Life Insurance Co. partnership that acquired the U.S. properties from Canadian real estate developer Cadillac Fairview in 1988.
Both deals were failures to the firms' investor clients. The real estate crash of the early 1990s hit both companies like a Mike Tyson one-two combination.
But AEW appears to have shaken off the effects. The firm recently closed a $300 million opportunistic fund; the $58 billion California State Teachers' Retirement System, Sacramento, in one of the most-watched searches of the year, selected AEW to oversee the securitization of the fund's real estate portfolio; and Frank Russell Investment Management Co., Tacoma, Wash., selected AEW as an adviser to its real estate investment trust mutual fund.
Copley's troubles have persisted. An opportunistic fund made an unsuccessful run at the company's Developmental Property Account in 1994, trying to tap into investor discontent with the open-end commingled fund's miserable performance. And New England Life, Copley's holding company, recently settled a lawsuit with the $25 billion Washington State Investment Board concerning the partnership that invested in the U.S. Cadillac Fairview properties, to which Copley served as adviser; and the Department of Labor is investigating Copley concerning property valuations within CPA.
