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Friday, Jan 27, 2023
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Calabasas Brokerage Timed IPO Perfectly in 2013

In the real estate market, timing is everything. And apartment brokerage Marcus and Millichap Inc. has proven the same logic works in the stock market. The Calabasas brokerage has been listed on the New York Stock Exchange for more than 18 months since its initial public offering and its investors have done quite well. How well? The stock price has increased nearly 300 percent from its $12 opening in October 2013 to more than $47 this month. That has given it a market capitalization of about $1.79 billion to rank No. 16 on the Business Journal’s directory of largest public companies in the greater Valley, as of June 10. And as a bonus, it is the most profitable company in the Valley with a return on equity of 53 percent. (See article page 12.) Marcus & Millichap specializes in selling apartment buildings priced from $1 million to $10 million. And it just so happens that the multifamily sector has boomed in the last few years, which explains the company’s great performance. “The multifamily market has been in good shape and if you look back to 1971 (when the firm was founded) that has always been our bread and butter,” said Chief Executive John Kerin, who joined the company as an Encino sales agent in 1981 and rose through the ranks to earn the top spot in 2010. Contributing to the strong market for apartment deals has been the foreclosure crisis, low interest rates, a gradually recovering economy and a consumer preference for apartment living. In the first nine months of last year, investment in U.S. multifamily properties reached $73.1 billion and was on pace to break the $100 billion mark for the full year, according to research from CBRE Group Inc. in Los Angeles. Marcus & Millichap’s performance reflects that. Last year, it closed 7,667 transactions but it’s doing even better this year. In the most recent quarter ended March 31, the firm reported a 14.9 percent increase in transactions compared to the same quarter a year earlier. Revenue increased 28 percent to $147 million. Brandon Dobell, a partner in the Chicago investment bank William Blair & Co., said that a strong commercial real estate market also is lifting other publicly traded real estate brokerages, including the larger CBRE and Jones Lang LaSalle Inc. “There is more money in commercial real estate whether from overseas, REITs (real estate investment trusts) or life insurance companies,” Dobell said. “A lot of people are looking at the asset class as a good place to invest.” Private clients The brokerage was founded in 1971 by George M. Marcus and William A. Millichap, two commercial brokers in Palo Alto. They represented private clients – often moms and pops who owned small apartment buildings – which the pair thought was severely underserved. The firm moved its headquarters to Encino in the early 1990s and to Calabasas in 2012. The founders currently serve as chairmen of the company and also of Essex Property Trust, a Palo Alto real estate investment trust focused on the West Coast multifamily market. Currently, Marcus & Millichap has more than 1,500 brokers in 78 offices nationally. Its long-term growth strategy includes expansion into the office, retail, medical office, student and senior housing and self-storage markets. But so far, growth has centered on increasing its multifamily market share by hiring more brokers and expanding geographically into smaller cities. Also, the company has moved into financing multifamily deals through its Marcus & Millichap Capital Corp., which last year closed more than $3.4 billion in debt and equity transactions. Senior Executive Vice President Hessam Nadji said there is a long-term view to grow the company’s 7.7 percent market share in the multifamily sector. “The three-pronged approach is showing great results,” said Nadji, who has been with the firm since 1996, starting as vice president of research. The company has enlarged its geographic footprint by going into smaller markets outside major metropolitan cities such as Los Angeles, Chicago and New York. Kerin said the firm offers those clients national exposure in looking for buyers. Marcus does have a division, Institutional Property Advisors, specializing in larger institutional transactions of $25 million and higher. But about 90 percent of the firm’s transactions are for apartment, retail, office and industrial properties worth less than $10 million, Kerin said. And it does have its challenges, mainly vulnerability to competition from larger rivals, such as CBRE, JLL, Cushman & Wakefield Inc., and Colliers International Group Inc. “If one of those wanted to go after Marcus & Millichap, they would pose a decent challenge,” said Dobell at William Blair.

Mark Madler
Mark Madler
Mark R. Madler covers aviation & aerospace, manufacturing, technology, automotive & transportation, media & entertainment and the Antelope Valley. He joined the company in February 2006. Madler previously worked as a reporter for the Burbank Leader. Before that, he was a reporter for the City News Bureau of Chicago and several daily newspapers in the suburban Chicago area. He has a bachelor’s of science degree in journalism from the University of Illinois, Urbana-Champaign.
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