Chicago's LaSalle Partners Ltd. is in merger talks with Alex. Brown Kleinwort Benson, Baltimore.
The merger would create the country's third-largest real estate money manager with a $7.5 billion real estate investment advisory and management firm.
The two firms entered talks this summer, and could reach a deal as early as this month, according to sources close to the transaction.
LaSalle Partners is a full-service real estate firm with 550 professionals and offices in the United States, Europe and Mexico. Dai-Ichi Mutual Life, a large Japanese insurer, holds a minority stake in LaSalle.
Alex. Brown Kleinwort Benson, with 104 professionals, is owned by U.S. investment bank Alex. Brown & Sons and U.K. merchant bank Kleinwort Benson PLC.
Details of the transaction were scarce, especially concerning financing of the merger and ownership of the combined firms.
LaSalle is the larger of the two, however, and it appears LaSalle Chairman Stuart Scott also would serve as chairman of the combined entity, according to real estate sources. ABKB Chief Executive Officer Lynn Thurber would become a principal and senior executive in the merged entity.
"We do not, as a policy, make comment on any transaction until it closes," said a spokeswoman for LaSalle. "We regularly have exploratory conversations with a number of firms in our industry."
Executives of ABKB were unavailable for comment.
The LaSalle-ABKB merger would create the third-largest U.S. real estate pension adviser, after Equitable Real Estate Investment Management Inc., Atlanta, with $10.88 billion and JMB Institutional Realty Corp., Chicago, with $8.06 billion, according to Pensions & Investments' 1993 real estate managers' survey (P&I, Sept. 20, 1993).
The merger would fit with the trend toward consolidation among firms specializing in institutional real estate investments and management. The goal behind the mergers is to broaden client services and generate economies of scale.
"To a certain extent, consolidation should not be a surprise," said Charles Wurtzebach, president of JMB Institutional Realty. "If you just look at service industries in general, excluding real estate pension fund advisers for the moment, there have been more than a few (mergers)."
Added Scott Tracy, managing director of CB Commercial Realty Advisors Inc., Los Angeles: "This is just another indication of a continuing consolidation that's occurring in the pension advisory field; it really highlights the fluidity of the industry right now."
For example, Chicago's Heitman Financial Ltd., with $6.85 billion in real estate assets under management, was acquired last year by publicly held United Asset Management Corp. in a stock swap valued at $92.6 million.
It is unclear what prompted LaSalle and ABKB to discuss a merger. One obvious link between the two firms is a shared client, the $78 billion California Public Employees' Retirement System, the nation's largest defined benefit plan.
Another possible motivation is LaSalle's desire to raise money from pension fund clients and invest in publicly traded real estate investment trusts and mortgage-backed securities.
ABKB already is a significant investor in real estate securities.