Thursday, July 29, 2004

Commercial market
attracts new player

The entry of Encino, Calif.-based Marcus & Millichap Real Estate Investment Brokerage Co. into Honolulu's commercial real estate market is expected to draw national attention and spur investment opportunities in the booming market.

Making a splash

Here's some information about the new firm in town:

Name: Marcus & Millichap Real Estate Investment Brokerage Co.
Headquarters: Encino, Calif.
Offices: 39 including Hawaii
Staff: 850 investment professionals in the U.S.
Sales: $10.3 billion in investment property sales in 2003.
Hawaii deal: Handled the $50 million Maui Marketplace transaction in 2000

The firm announced yesterday that it will open its 39th office in Honolulu, with local commercial real estate player Douglas A. Pothul spearheading the effort. Pothul made a name for himself in the local industry serving as investment division manager and senior vice president of Honolulu-based Colliers Monroe Friedlander Inc., but left the company after 17 years to launch his own company, Pothul Realty Advisors LLC.

"Doug Pothul is an ideal candidate to direct the growth of our Hawaii operation," said Harvey E. Green, president and CEO of Marcus & Millichap. "He is known as a hard worker who brings a high level of creativity to the industry."

The firm will initially staff its Honolulu office with just Pothul, but has plans to grow the office dramatically in the next two to 10 years, Pothul said. The company's Hawaii operation has a goal of netting $300 million to $500 million in sales its first year with five-year projections just north of $1 billion.

The alliance will likely give Pothul the opportunity to better serve his Hawaii clients' national real-estate needs while giving Marcus & Millichap a foothold in Hawaii for local investment opportunities, said Scott Kuklish, senior vice president of PM Realty Group, a national firm that entered the Hawaii market in 1995 and has been rapidly expanding ever since.

The deal is also likely to create more mainland interest in Hawaii's commercial real estate, Kuklish said, adding that the agreement will probably be talked about as far away as Wall Street because it signifies that Hawaii's market has come back.

"It will create positive synergy that will be good for this market," he said. "I don't see them necessarily creating any concern for major companies, but it will create good healthy competition."

The opening of a Marcus & Millichap office in Honolulu will continue to build on the interest created in Hawaii's commercial real estate last year by the $480 million sale of Damon Estate lands to Massachusetts-based HRPT Properties Trust, said Jeffrey Hall, senior director of research at CB Richard Ellis Hawaii.

"We always had some interest in the market, but in the past a lot of investors would get cold feet," Hall said. "The Damon transaction changed things because people saw a way to make money in Hawaii."

While Marcus & Millichap's entry is not likely to cause a surge in real estate deals, it will give Pothul a broader range of opportunities, Hall said.

"It will give Doug an opportunity to get into deals that he probably wouldn't have before," he said.

Founded in 1971, Marcus & Millichap initially carved out a reputation for brokering deals involving small- to mid-sized apartment facilities. Last year, the firm closed on $10.3 billion in investment property sales.

The firm has become more of a national player in recent years, expanding operations into five markets between 1995 and 1997, including: Atlanta; Fort Lauderdale, Fla.; Washington, D.C.; Fort Lee, N.J.; and Detroit. In 1998, the company continued its expansion into the Eastern and Southeastern United States by opening offices in Tampa, Fla., Orlando and Philadelphia. In 1999, the firm opened offices in Manhattan, New Haven, Conn., and Columbus and Cincinnati, Ohio.

Because of the Marcus & Millichap's track record for going after the $30 million to $100 million transactions, they will probably not compete head-on with most of the locally-based commercial real estate firms, said Andrew Friedlander, chief executive and principal broker for Colliers Monroe Friedlander.

"They will try to compete more with what Secured Capital Corp. and Eastdill Realty is doing in this market," Friedlander said, adding that the firm will likely go after investment properties the size of Whaler's Village, Davies Pacific Center or Harbor Court.

While Marcus & Millichap , which is not going to handle leasing or property management, is not likely to put any kamaaina brokerages out of business, the opening could rob talent from other firms, said Jeff Nasrallah, director of research for Grubb & Ellis/CBI Inc.

"It'll be the talk of the town if he starts making big moves and bringing players from other companies or from the mainland," Nasrallah said.

Marcus & Millichap

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