Broker CB Commercial to buy investment manager Westmark.

Ending months of speculation, commercial property brokerage CB Commercial Real Estate Group Inc. and Westmark Realty Advisors announced last week that CB will buy Westmark from its 37 principals.

Westmark is the managing entity - in partnership with big money manager Trust Company of the West - of TCW Realty Advisors, a prominent manager of institutional real estate investments with nearly $3 billion in assets under management.

Through the pending deal, CB Commercial will acquire 14-year-old Westmark from its current principals, including a quintet of the firm's "founding partners" led by Managing Partner Vincent F. Martin Jr. CB in turn will merge its smaller CB Commercial Realty Advisors operation into Westmark, sending the former's employees a few blocks south from CB's downtown L.A. corporate headquarters to TCW's.

Martin will become Westmark's chief managing officer under the new structure. CB Commercial Realty Advisors' managing director, Scott Tracy, will become an executive managing director of Westmark.

The merged operation will retain the Westmark name, operate independently as a CB affiliate and remain the managing partner of TCW Realty. Trust Company of the West will remain a partner in TCW Realty, and will continue to market TCW Realty's current and to-be-developed investment products and services.

As both TCW Realty and CB Commercial Realty Advisors are in "growth modes," Martin noted, no layoffs are expected as a result of the merger. However, two of Westmark's founding partners - Roger Schultz and Sol Rabin - will likely retire within a year or so, Martin added.

The merger entails substantial benefits for CB, TCW Realty Advisors and the Westmark team, parties to the deal noted.

The acquisition will substantially expand CB's institutional investment advisory capabilities, and likely generate additional business for the real estate giant's brokerage, property management and related operations.

In place of CB's current advisory division - CB Commercial Realty Advisors, considered a "boutique" operation tied to a huge firm dominated by property brokerage and management service functions - CB picks up a "name" institutional investment management outfit along with a bevy of experienced advisory personnel.

Besides the cash Westmark's principals receive from the sale, the overall TCW Realty Advisors operation will be linked with the nation's biggest provider of commercial real estate services - particularly the "core" leasing/sales brokerage and property management disciplines.

The ties will "enhance" TCW Realty's investment management capabilities through "greater access" to the local real estate services the CB office network provides nationwide, noted Martin.

The principal parties declined to reveal financial details of the deal.

TCW Realty currently has just under $3 billion in assets under management through so-called "commingled funds" and "separate accounts." CB's own 23-year-old Realty Advisors outfit has about $1 billion under management.

As has been the case with nearly all local commercial properties, L.A. area real estate held by the funds TCW Realty manages have generated disappointing results as the recession dug in during the early 1990s, Martin said.

Always in the black

However, he noted, TCW Realty has never experienced an unprofitable period despite rumors to the contrary - nor lost a client. He added that TCW Realty is currently raising capital for the advisory firm's seventh and eighth funds.

CB Chairman James J. Didion down-played questions of conflict of interest and client reaction to the merger in a memo to the CB troops and in an interview.

Didion stressed that CB has already effectively mitigated the conflict issue while competing in the advisory business for two decades. He and Martin acknowledged that CB gained substantial TCW Realty brokerage and property management assignments as TCW consolidated its vendor roster over the last two years.

And while both executives said they expect CB to continue competing successfully for TCW Realty business, they also stressed a "guiding rule," i.e., that vendor decisions must be in the best interests of the investor clients.

Regarding the issue of the two entities competing against each other, Didion noted that CB management has discussed the issue with most of the concerned parties and stressed Westmark's operating independence, leadership continuity and "the fact that its is merging with our existing (advisory) business." He said many of the concerns dissipated immediately, and predicted that "the issue will disappear" as CB demonstrates that conflict can be managed.