CB Commercial Real Estate Services Group, Inc.
CB Commercial Real Estate Services Group, Inc.
Incorporated: 1906 as Tucker, Lynch & Cold well
Total Assets: $583.1 million (1996)
Stock Exchanges: NASDAQ (CBCG)
SICs: 6631 Real Estate Agents & Managers; 6162 Mortgage Bankers & Correspondents
With offices in most major cities in the United States, CB Commercial Real Estate Services Group, Inc. is the country’s largest vertically integrated commercial real estate company. The firm provides brokerage services, property and facilities management, mortgage banking and financial services, appraisal and property tax services, and real estate market research. CB Commercial’s history dates to 1906, when Colbert Coldwell established a commercial real estate company in San Francisco. The current entity, however, has operated only since 1989 when investors purchased the commercial real estate operations of the former Coldwell Banker Co. from Sears, Roebuck & Co.
Opportunity from the Ruins, Early 1900s
In August 1906, with San Francisco only beginning to recover from the devastating earthquake earlier that year, Colbert Coldwell, then 23, and Albert Nion Tucker, 36, left their jobs with the real estate firm of Davidson & Leigh. With the backing of John Conant Lynch, an attorney and socially prominent former California legislator, they formed their own firm, Tucker, Lynch & Coldwell. Lynch was president and Coldwell was vice-president. Tucker, the oldest of the partners at 55, was the least involved in running the business and served as secretary.
From the start, Coldwell insisted that the firm operate solely as a brokerage, acting as the agent for buyers and sellers rather than speculating in real estate itself. That policy was also extended to the firm’s partners and salesmen, who were not permitted to buy any real estate except for their personal homes. The firm quickly gained a reputation for honesty and attracted wealthy clients who were grateful for a broker who was not competing with them for the best deals.
By 1912, much of San Francisco had been rebuilt and the city was again flourishing, as was the firm of Tucker, Lynch & Coldwell. Tucker and Lynch decided to reduce their interest and essentially withdrew from the firm, leaving Coldwell to operate the business as a sole proprietorship. The following year, Benjamin Arthur Banker left the prominent San Francisco real estate firm of M. B. McGerry to become a salesman for Coldwell. In 1914, Banker became a partner in the firm.
War broke out in Europe the following year. When the United States entered the conflict in 1917, the firm, still known as Tucker, Lynch & Coldwell, embarked on its first non-real estate business venture—growing rice for the war effort on land it purchased in the Sacramento Valley. The rice farm was a failure, and in 1919, the partners, which then included Albert E. Kerns, vowed never again to invest in a venture outside real estate.
The firm also briefly changed its name to Coldwell, Kern & Banker. But by 1920, Kern had resigned and was replaced by Bruce Cornwall, the son of a respected San Francisco industrialist and financier, Pierre Barlow Cornwall. The younger Cornwall, then 43, was never active in the business, but Coldwell realized the value of having his name associated with the firm, which became known as Coldwell, Cornwall & Banker.
Coldwell was also becoming a prominent member of the San Francisco community himself, helping to found the Bureau of Government Research, a citizen’s group promoting good government. In 1921, he served as president of the San Francisco Real Estate Board, and in 1923, he was elected president of the San Francisco Chamber of Commerce. The San Francisco Chronicle was effusive in its praise: “A man whose activities for twenty years have given convincing evidence of his power to do things in a constructive way and translate vision and high purpose into programs of reality, Mr. Coldwell in the opinion of his associates possesses a touch of that genius which is indispensable to any community leader and city builder.” Coldwell and his wife, Johanna, were also members of the most exclusive clubs in San Francisco.
Expanding to Los Angeles, 1920s
In 1922, Marshall Hale, a San Francisco businessman, purchased the Spring Arcade Building in Los Angeles. He asked Coldwell, Corn well & Banker to manage the property and invited the firm to open an office in the building. According to Jo Ann Levy in Behind the Western Skyline, none of the partners was enthusiastic about property management, and they were even less impressed with Los Angeles. Rather than turn down Hale outright, the partners named what they felt was an excessive fee. Hale, however, accepted. Arthur Hastings, who had been with the firm since 1907, was sent to Los Angeles to open the first Coldwell, Cornwell & Banker office outside of San Francisco. By 1927, the Spring Arcade office was doing so well that Hastings, who had been Coldwell’s college fraternity brother at the University of California at Berkeley, was invited to buy into the partnership for $90,000.
By 1928, Coldwell, Cornwell & Banker had opened a second office in Los Angeles. The firm also continued to expand in the San Francisco Bay area, including the company’s first office in Oakland, which opened in 1925. The same year, the firm, which had focused almost exclusively on commercial property, opened its first residential sales office in San Francisco. Louis Pfau, another fraternity brother from UC-Berkeley who had joined the firm in 1915, was also made a partner, bringing the number to five. When the stock market crashed in 1929, plunging the nation into the Great Depression, three of the partners, Coldwell, Cornwall, and Banker, were wealthy men and relatively unaffected. The other partners and the firm’s salesmen were not as fortunate. The firm was often forced to accept barter in lieu of commissions and acquired several properties in the process. In 1933, Coldwell, Cornwall & Banker also formed a subsidiary, Home Properties Co., Inc., and purchased 60 acres in the Rancho Santa Anita area of Los Angeles County for $18,000. Home Properties subdivided the land, put in streets and utilities, and even built a few homes to stimulate sale of the lots.
Although not highly profitable, the venture kept the sales force busy during the lean years. Coldwell, Cornwall & Banker also reorganized its property management division to provide a broader range of services, including lease management, to the banks and life insurance companies that suddenly found themselves with an inventory of properties because of foreclosures.
By 1936, the worst of the Depression was over. The following year, Coldwell, Cornwall & Banker opened an office on Wilshire Boulevard, its first residential sales office in Los Angeles, and brokered the sale of Santa Cruz Island to Edwin L. Stanton. In 1939, Coldwell, Cornwall & Banker signed an exclusive agreement to originate and service mortgage loans in California for Aetna Life Insurance Company. The firm also added two more partners, George M. “Dick” Mott, another UC-Berkeley graduate who would become the first corporate president of Coldwell, Banker & Co., and Edward Willingham Arnold.
In 1940, Cornwall, then 63, sold his share of the company to the other partners and the name of the firm was shortened to Coldwell, Banker & Co. A few months later, Hastings died unexpectedly of a heart attack. It was the first death among the partners and began to raise questions about successor provisions of the partnership. Surprisingly, there was no written arrangement, only a verbal agreement that shares in the firm would be purchased by the surviving partners; no heirs or outsiders were allowed to inherit or purchase shares in the business. In 1942, Coldwell’s nephew, Charles Detroy, who had joined the firm in 1924, was made a partner in the business, restoring the balance of three partners in San Francisco and three in Los Angeles that was upset by Hastings’s death.
Coldwell, Banker continued to prosper during World War II, with Arthur Banker serving as a member of the Society of Industrial Realtors, formed to assist the federal government in finding wartime production facilities. When the war ended, the firm began to benefit from California’s explosive growth. More than 3.5 million people would move to California between 1940 and 1950, swelling the population by more than half to 10.6 million. By 1960, only seven states would be more populous than Los Angeles County alone. As the firm grew, so did the number of partners, to an even dozen by 1952, when one of the latest, Dan Duggan, finally convinced the others, who ranged in age from 38 to 70, that they needed a written partnership agreement.
In 1952, Coldwell, Banker also opened an office in Sacramento, its first new office in 15 years. Late that year, despite Coldwell’s reservations, the firm opened an office in Phoenix, its first location outside California. Revenues also topped $2 million for the first time.
Banker, then 75, suffered a heart attack in 1960. Although he recovered, he decided the time had come to retire and urged Coldwell, then 77, and Pfau, then 73, to do likewise. Both decided to stay on. Coldwell, who had no children and whose wife had died, told Banker, “I have nothing else in my life. I don’t know what I would do if I couldn’t come to the office every day.”
As America’s leading commercial real estate services company, CB Commercial is dedicated to providing responsive, results-oriented client service—through the delivery of integrated, strategic real estate solutions locally and around the world. Our success in delivery on this promise in large measure explains how we provide clients with an enduring advantage and how we have achieved our leadership position in the market.
The business, however, was changing. Coldwell, Banker then operated 14 offices and employed more than 500 people. Revenues were nearing $3 million. But the company had never reincorporated since Tucker and Lynch withdrew from the business in 1912. In 1961, the Los Angeles partners asked a long-time client, Al Steffey, of Butler Bros, stores, to review the firm’s books. His reply was, “Well, you’re idiots. You’re nice idiots, but you’re idiots.” Coldwell Banker was incorporated on July 1, 1963.
Banker died two years later, at the age of 80, followed by the passing of Pfau, also 80, and Coldwell, 84, in 1967. Under the articles of incorporation, their shares in Coldwell Banker were purchased by the firm and made available to the other partners and employees. In 1968, Coldwell Banker issued its first publicly traded stock, selling 503,000 shares (about 29 percent of the company) at $25 per share. Each of the former partners kept about 100,000 shares, making their holdings worth about $2.5 million each.
The general partners had continued to manage the business even after incorporation. After Coldwell’s death, the company formed its first executive committee, but it was not until 1969 that the committee’s powers were fully expanded to “manage the business and affairs of the corporation.” By then, Coldwell Banker had also expanded to Nevada and Texas. Wes Poulson, a graduate of the Harvard Business School who had joined Coldwell Banker in 1960, also introduced the company’s first-ever organizational chart, based on decentralized, regional management, a concept that would eventually develop into the Coldwell Banker companies.
There were other significant developments in 1969. For more than 40 years, the Coldwell Banker logo incorporated a skyline of whichever city an office represented. But with the firm now involved in residential as well as commercial real estate and offering nonbrokerage appraisal and consulting and financial services, the logo no longer reflected the company. Besides, designing a new logo every time an office opened in a new city was becoming costly, so the firm adopted a unified logo with the Coldwell Banker name surrounded by a blue arch above and below.
Growth Through Acquisitions, 1970s
In that summer of 1969, after the board of directors declared a first-ever dividend of 20 cents per share, Coldwell Banker also announced its first acquisitions, those of the Seattle-based, residential real estate firm of Henry Broderick, Inc. and Southern California giant Forest E. Olson, Inc. Olson’s strength was also in residential sales, especially medium- and low-priced housing, a market then virtually untouched by Coldwell Banker. The acquisitions nearly doubled the number of Coldwell Banker employees, from 800 to more than 1,500, and increased the number of sales offices from 25 to 63.
Coldwell Banker began trading on the New York Stock Exchange in 1971. In the firm’s annual report for the following year, Poulson, who was named president in 1970, staked out the company’s future: “To establish nationwide full-service real estate offices with some international representation.” In 1972, Poulson formed the Coldwell Banker Fund to provide real estate services to institutional investors. The company also authorized a limited partnership, Coldwell Banker Investment Properties, Ltd., as a way for its employees to invest in real estate without violating the long-standing rule against owning property.
By 1973, Coldwell Banker had offices in seven western states and in Atlanta, Georgia. The company formed Coldwell Banker Asset Management Services, later renamed Capital Management Services, to manage commingled real estate funds for institutional investors. In a significant reorganization, the company also split its residential and commercial services into separate divisions and introduced a decentralized management structure, giving greater autonomy to individual offices. Another logo was introduced: interlocking CB initials over each division’s name.
In 1975, the Coldwell Banker Commercial Brokerage Co. moved into Chicago, followed in 1977 by the Coldwell Banker Residential Brokerage Co. with the acquisition of Thorsen Realtors. As annual revenues surpassed $100 million, the company purchased Routh Robbins Companies, which operated 14 residential real estate and management services offices in the Maryland and Virginia suburbs of Washington, D.C.
Other acquisitions followed, including Hardin Stockton, the leading real estate brokerage in Kansas City, and Find-A-Home Service, Inc., an Illinois-based referral company with more than 600 affiliated brokers in the United States and Canada, in 1977, and a 50 percent interest in Executrans, Inc., which provided nationwide corporate relocation services, in 1978. In November, Forbes magazine took note: “Coldwell Banker has become the strongest force in America’s highly fragmented real estate market.” Ironically, Coldwell Banker purchased its interest in Executrans from Allstate Enterprises, Inc., a subsidiary of Sears, Roebuck & Co., establishing a relationship that would prove pivotal to the company’s future.
In early 1979, the board of directors approved a ten-year strategic plan that projected 1,000 Coldwell Banker offices nationwide by 1988. Two more acquisitions were approved by the end of the year: Barton & Ludwig, Inc., with 24 residential offices in the Atlanta area, and Spring Co., a leading residential brokerage and mortgage firm in Minneapolis. Coldwell Banker also opened offices in Boston, Philadelphia, Fort Lauderdale, and Colorado Springs. That was followed in 1980 with the acquisition of Previews, Inc., a residential marketing organization that published Homes International magazine, and two small insurance agencies, Jenson, Woodward & Lozier, Inc. in Seattle and Wachbrit Insurance Agency in Los Angeles. But the blockbuster announcement was that of the acquisition of Sutton & Towne, Inc., a major player in New York commercial real estate and office leasing. Revenues for fiscal 1980 topped $300 million.
In 1981, the company launched a nationwide advertising campaign to acquaint the general public with the Coldwell Banker name. As Poulson told the stockholders, “Since Coldwell Banker sells more than one percent of the resale homes in the country—and no other company can make that claim—it appears to be time to mass merchandise one of our best-kept secrets.” The campaign was accompanied by another new logo, this time emphasizing the full Coldwell Banker name in bold type and replacing the word “corporation” or “company” with the word “services” for its divisions—the Coldwell Banker Commercial Brokerage Company became Coldwell Banker Commercial Real Estate Services, and so on. But before the year ended, it was Coldwell Banker that was sold—to an even better known name, Sears, Roebuck & Co.
Sears, Roebuck & Co. and the 1980s
In the early 1980s, Sears had set out to become the largest consumer financial services company in the United States to shore up sagging sales of its traditional retail merchandise. In 1981, Sears paid $179 million for Coldwell Banker ($42 per share, or 80 percent over the market price) and the real estate company became part of a financial services division that also included Allstate Insurance and, by year’s end, the securities firm of Dean Witter Reynolds, Inc.
Sears opened real estate offices in its retail stores in communities that did not already have a Coldwell Banker presence and offered clients discounts on home furnishings and other financial services. With Sears’s marketing clout, Coldwell Banker’s share of the national residential resale market rocketed to nearly nine percent by 1987, and Esquire noted, “… it’s a rare stretch of American roadway that at some point fails to bear a blue-and-white Coldwell Banker sign.” Joe F. Hanauer, then president of the residential real estate group for Sears, whose own Chicago company had been acquired by Coldwell Banker, predicted the demise of the local real estate broker and told Forbes that Sears planned to control 20 percent of the market by the end of the decade.
Sears’s corporate strategy also appeared to be working. Surveys in 1987 indicated that 30 percent of the public purchased some sort of financial service from the retail giant, compared with 11 percent for American Express. Esquire gushed, “Sears, Roebuck has been reconstituted during the 1980s as a powerful, futuristic business machine: a carefully designed material and financial womb fit to supply, service, and protect the American middle class.” In 1988, Forbes reported “clear signs that Sears really has turned around.”
However, the board of directors at Sears stunned the financial world by voting unanimously to sell off its financial services companies. In one respect, the real estate and financial services strategy had been hugely successful, generating 90 percent of Sears’s earnings. But its core merchandise sales continued to fall. Time magazine noted, “Rather than help Sears’ growth, most analysts believe the financial units only subsidized its failure to compete during the retail revolution that produced such fierce, profit-taking rivals as Wal-Mart, Home Depot, the Gap and Circuit City.”
Sears sold its Coldwell Banker commercial real estate operations in 1989 to a management group and outside investors, led by the Washington, D.C.-based Carlyle Group, for $305 million, including the largest amount of cash—$44 million—ever raised from employees in a leveraged buyout. The group paid Sears another $100 million for a five-year noncompete agreement and the temporary use of the Coldwell Banker name. The reconstituted company became the Coldwell Banker Commercial Real Estate Group, with headquarters in Los Angeles. The name was changed to CB Commercial Real Estate Group in 1991, after Sears sold the residential real estate operations to the Fremont Group, a San Francisco-based investment firm, which took the name Coldwell Banker Corp.
The first few years were difficult for CB Commercial, which was forced to close more than a dozen offices because of a weak commercial real estate market. Although it was easily the country’s largest commercial broker, it had a negative net worth of $56 million in mid-1991. In 1992, the company was rocked further when a jury in Orlando, Florida awarded $8.5 million to the former owner of an office complex who accused CB Commercial, his leasing agent, of fraud for negotiating a lease for his largest tenant with another office complex. After the verdict, and before a final judgment could be entered, CB Commercial settled out of court in an effort to salvage the company’s reputation.
By 1994, CB Commercial had revenues of $452 million and a net profit of barely $4 million. The following year, the firm embarked on an aggressive expansion program, eventually acquiring the Langdon Rieder Corp., a tenant-representation firm, for $3.4 million. That acquisition was followed by additional acquisitions: Westmark Realty Advisors, a Los Angeles investment management firm, for $37.5 million (1995); the Houston-based mortgage banking firm of L. J. Melody & Co. for $15 million (1996); and Koll Real Estate Services (1997), a deal that nearly tripled the amount of property under management. In 1996, the company also formed CB Commercial Partners Inc., a subsidiary that licensed independent commercial real estate offices to use the CB Commercial name and resources.
CB Commercial also went public in 1996 in an $80 million initial stock offering. Chairman James J. Didion, who had joined the former Coldwell Banker in Sacramento in the early 1970s, told Commercial Property News that the move was to provide capital for even more aggressive expansion. In a vision statement adopted in 1997, Didion set forth the company’s goal: “To be the industry’s preeminent, globally capable, vertically integrated commercial real estate services firm.”
One strong challenge was expected to come from Coldwell Banker Corp., purchased in 1996 by HFS, Inc., which also owned Century 21 and several motel and car-rental chains. After the noncompete agreement it inherited from Sears expired, Coldwell Banker Corp. announced that it would enter the commercial market with a subsidiary to be named the Coldwell Banker Commercial Corp.
In an article entitled “Is This Town Big Enough for Both of Them?,” Today’s Realtor magazine noted the potential confusion and asked, “Does the commercial real estate industry have an identity crisis on its hands?” Thomas Smith, then executive vice-president at CB Commercial, answered: “They (Coldwell Banker) say they’re re-entering the commercial business. They’re actually entering the business. Their entire commercial business became CB Commercial. Fundamentally, they’re now a residential company trying to conduct commercial business. We welcome the competition, but don’t see them as a threat to our position in the marketplace.”
Langdon Rieder Corp.; Westmark Realty Advisors; L. J. Melody & Co.; CB Commercial Partners Inc.
Barnfarther, Maurice, “Paying the Piper A Lot,” Forbes, October 26, 1981.
Finkelstein, Alex, “CB Commercial Loses $8.5 Million Lawsuit,” The Orlando Business Journal, June 26, 1992, p. 1.
——, “Settlement ’Hell of a Hit’ for CB Commercial,” The Orlando Business Journal, September 11, 1992, p. 1.
Flynn, Julia, “Smaller But Wiser,” Business Week, October 12, 1992, p. 28.
Katz, Donald R., “Back from the Brink,” Esquire, October 1987, p. 177.
Levy, Jo Ann L., Behind the Western Skyline, Coldwell Banker: The First 75 Years, Coldwell Banker, 1981.
Merwin, John, “Go East, Young Man,” Forbes, November 13, 1978, p. 65.
Parent, Tawn, “Local CB Commercial Office Weathers National Storm,” The Indianapolis Business Journal, September 9, 1991, p. 1.
Rudnitsky, Howard, “Henry the Magician,” Forbes, September 9, 1996, p. 98.
——, “National or Bust,” Forbes, July 30, 1984, p. 136.
“Trimming Frills at the Big Store,” Time, October 12, 1992, p. 29.
Weiner, Steve, “They Buy Their Stocks Where They Buy Their Socks,” Forbes, March 7, 1988, p. 60.
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