Marcus & Millichap Files for IPO
Citing improvement in the commercial real estate industry, Marcus & Millichap has filed plans for an initial public offering as much as $103.5 million with the U.S. Securities and Exchange Commission.
By Gail Kalinoski, Contributing Editor
Marcus & Millichap CEO & President John Kerin
Citing improvement in the commercial real estate industry, Marcus & Millichap, Inc. has filed plans for an initial public offering as much as $103.5 million with the U.S. Securities and Exchange Commission.
The company plans to list on the NYSE under the symbol MMI. The SEC filing said the number of shares or price range had not been determined. It also plans to spin off Marcus & Millichap Real Estate Investment Services as a wholly owned subsidiary of Marcus & Millichap, Inc., once the offering is completed. The filing notes that founders George Marcus and William Millichap would serve as co-chairmen of the Board of Directors and retain their positions as directors of Marcus & Millichap Co.
A spokesperson for CEO and President John Kerin declined comment today because the firm is in a quiet period due to the filing.
A leading national brokerage firm founded in 1971 and specializing in commercial real estate investment sales, financing, research and advisory services, the Calabasas, Calif.-based company said it intends to use net proceeds for general corporate purposes. The firm noted in its SEC filing that could include “capital expenditures and working capital to expand our markets and services and potential acquisition of real estate businesses or companies.” It stated there are no current agreements on any transactions.
But that might be what they have in mind, according to Dan Fasulo, managing director at Real Capital Analytics.
“This is an opportune time to bring a commercial brokerage public,” he told Commercial Property Executive. “Some of the other publicly listed brokerage companies on the corporate and residential side have seen significant increase in their stock prices over the last couple of years. It makes transactions like this more attractive.”
“They have competitors that are expanding and investing in their platforms and I’m sure they need capital to do the same,” Fasulo added. “Don’t underestimate how much staying competitive is a driver of something like this.”
He said Marcus & Millichap may look to buy “smaller infill companies.”
“I think they will look to invest in their strengths and fill in the gaps on their coverage,” Fasulo said.
Jahn Brodwin, senior managing director in the Real Estate Solutions practice at FTI Consulting in New York City, said the biggest factor in the firm’s decision to go public now could be the consolidation trend occurring in the industry, particularly for real estate advisory firms like Marcus & Millichap.
“Increasingly in the marketplace you need to be one of two things – you need to be very large or you need to be a boutique, highly specialized in a particular service or geography,” he said. “This will give them the ability to do a number of things. It will give them new currency, namely their stock, to incentivize employees as well as new currency they can use to be acquisitive, to acquire other companies to grow their platform.”
Brodwin said if Marcus & Millichap was looking to bring on new teams or acquire a specialty or boutique firm, being able to offer stock is another incentive.
“It gives them added firepower,” he told CPE.
In its SEC filing, Marcus & Millichap noted that the commercial real estate market has been coming back from the downturn of 2007. It said that CRE property sales priced at $1 million or more reached more than $340 billion, about 37,000 transactions, in 2012, a 41 percent increase in dollar volume and 32 percent increase in transaction volume over 2011.
“This cyclical upturn has been, and we believe it will continue to be, primarily driven by attractive yields, improving property fundamentals and the availability and cost of financing,” Marcus & Millichap said in the SEC filing.
“Property fundamentals have improved since 2009, with multi-family properties in particular experiencing a strong recovery. We expect further increases in occupancy and rental rates in all four primary commercial real estate sectors of multifamily, retail, office and industrial properties,” the filing stated.
Those comments were echoed by Fasulo.
“Transaction activity is up significantly from a low point, especially in multi-family, which is their historical strong spot,” he told CPE.
Marcus & Millichap said it closed 6,149 transactions with a total volume of approximately $22 billion in 2012, the highest of any commercial real estate brokerage firm. It added that based on the number of transactions, it had been the top CRE investment broker in the United States over the past 10 years. The firm has more than 1,100 investment sales and financing professionals in 73 offices. Marcus & Millichap said it focuses primarily on the private client segment, consisting of transactions under $10 million.
Citigroup Global Markets Inc. and Goldman, Sachs & co. will serve as joint book runners for the proposed offering. JMP Group Inc. and William Blair & Col will act as co-managers.
You must be logged in to post a comment.