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Strategy MattersAvison Young’s different approach is helping

the firm grow into a global powerhouse

Chair and CEO Mark Rose (left), and Earl Webb, President of US Operations

®

October 2013

A pArtnership model thAt tAkes “A deep dive” to solve clients’ long-term issues hAs won the firm, which begAn As A regionAl powerhouse in cAnAdA, mAny new friends on both sides of the border

Strategy MatterS:Avison Young’s Different Approach

Beginning as a union between regional Canadian firms, Avison Young is now arguably the fastest-growing services company in the United States. AY opened its first US

office with a Chicago-based industrial team in 2009 and today operates in more than three dozen cities across the country, including two markets (Philadelphia and Greenville, SC) that have come into the fold since Labor Day. Rapid though that growth trajectory may be—the company now numbers 1,700 employees including 240 shareholders, accompanied by an increase in revenue base that’s approached $250 million faster than anticipated—it has been anything but willy-nilly.

“What sometimes is missed in our industry, and in other service verticals, is that strategy does matter,” AY chairman and CEO Mark Rose tells Real Estate Forum. “The best strategies are only the ones on which you can actually execute. And I have

By Paul Bubny

Photos: Jasmin Shah

The Avison Young management team (front row, from left):Sherry Quan, National Director of Communications & Media Relations; Kim Krugman, EVP, Chief Legal Counsel and Director of Human Resources; Tod Hughes, Principal; Mark Rose, Chair and CEO; Jayne McColl, National Operations Director; Amy Erixon, Principal; Hiren Thakar, Senior Vice President, Corporate Strategy(Back row, from left): Bob Levine, Principal; John Linderman, Principal; Robert Slaughter, Chief Legal Officer; Earl Webb, President, US Operations; Frances Lewis, Marketing Consultant

Cover Story

found that over the past 10 to 15 years in our industry, there has been an awful lot of execution, but not a whole lot of strategy.”

There’s been a whole lot of strategy at AY, starting with nine months of work that culminated in 2008 with a template for what Rose calls “a differentiated company.” The foundation of that new company: “First and foremost, it needed to be principal-led and, more importantly, it needed to be collaborative. We looked for alignment between our principal owners, our soon-to-be new shareholders, our young guns and junior staff—all to be aligned and accountable to the ultimate stakeholder, which is the client.”

In contrast to the multinational public companies that offer what Earl Webb, president of US operations, calls “a supermarket approach to the business,” AY goes for “a more strategic focus. We take the deep dive and work with the clients to really solve a problem, and because we’re a partnership, we hold our partners accountable for the results.”

Those results are based on playing to the company’s strengths rather than seeking to be all things to all people. “We don’t try to do everything” for clients, Webb says. “We will do what we do really well. We will help them organize and devise a strategy and implement that strategy, but if we’re not the best-in-class service provider in a certain market for a certain property, we have no qualms about bringing on a competitor who is best-in-class to help execute that assignment.” It’s a differentiated approach, he adds, to which clients have begun warming.

Now headquartered in Toronto, AY got its start in 1978 as Graeme Young & Associates, based in Edmonton, Alberta, which in 1996 merged with Toronto-based Avison & Associates. Its entry into the US was spearheaded by Rose, who had revamped Grubb & Elllis as its CEO a couple of years earlier, and who then took time off to map out the type of company he’d like to build.

He saw Canada, which remained strong as other markets began to wane in early 2008, as “the absolute best and most

proper place to headquarter this truly global organization,” and AY—a Grubb affiliate—as the ideal launching pad for a growth strategy. The US debut in 2009 was preceded by the September 2008 merger of AY’s three regions into Avison Young (Canada) Inc., which Rose agreed to lead as chief executive officer.

To lead the expansion into the US, Rose tapped Webb, a one-time Jones Lang LaSalle colleague with whom he’d worked on the 1999 merger of what was then Jones Lang Wooton and LaSalle Partners. Coming aboard at AY shortly after the Chicago office opened, Webb says the US entry followed “a relatively straightforward plan” in three phases.

In phase one, “we identified eight core strategic markets where we knew we were going to put all of the services,” says Webb. In addition to Chicago, those markets included Boston, New York City, Atlanta, Houston, San Francisco, Los Angeles and Washington, DC. The first phase was completed in April 2012, with the opening of offices in San Francisco and New York City and the hiring of industry veterans Nick Slonek and Arthur J. Mirante II, respectively, to run them.

Phase two entailed populating the core markets around what AY refers to as “the two-by-five-by-four service matrix:” two client types, five service lines and four asset classes. “And then phase three involves going to those next-level peer markets where you need a physical presence at a high level,” while not necessarily offering the entire service matrix from those offices, Webb says. In a market such as Philadelphia, where the company opened an office last month, “maybe we don’t need a multifamily group; we can provide that from one of the other markets. There’s probably 20 of those next-level markets that we’ve been putting people in now for the past several years. So far we’ve found great receptivity out there—not only for talented professionals to join us, but also for clients that see the value proposition of the company and enjoy doing

business with us.”Timing is everything, the saying

goes, and Webb concurs that AY made its US debut at a time when potential clients welcomed a fresh approach. “In the prior business cycle, the capital flow was enormous and the transaction volume was enormous,” he says. “The whole wave was so strong that you could take a volume-based approach to client service, because if something slipped or if a deal didn’t get done properly, it didn’t matter as much because there was another buyer, another lender, another tenant and, in fact in many cases, the deal would improve if something fell apart.”

Fast forward to the current cycle, and “we’re finding that everything is more difficult,” says Webb. “The capital flow is not as free. Lenders are more

“It’s the structure that keeps it together. And it’s the structure that determines that we don’t just say what we’re going to do, but we’re actually going to execute on it.”

Mark roseChairman of the Board and Chief Executive Officer

careful. Buyers are much more careful. Tenants are trying to gain more flexibility because their business may be up and down more rapidly than in the last business cycle.” As a result, clients are looking for a real estate solutions partner with hands-on involvement by senior people who will “help you navigate around the industry’s icebergs that tend to pop up in an uncertain environment.”

That level of involvement by the senior principals at AY encourages clients to seek them out for long-term solutions, he adds.

The hiring of Mirante, a four-decade veteran of Cushman & Wakefield who arranged the sales of 200 Park Ave. and 666 Fifth Ave.—each for more than $1.5 billion—is an especially telling illustration of the firm’s attraction to both clients and industry talent. “I was very attracted to the partnership culture,” Mirante tells Forum. “I was very attracted to the mission statement” which he found strikingly reminiscent of one he’d helped draft for C&W 30 years earlier.

Last but not least, Mirante says, he relished “the opportunity to build something from scratch. So I wasn’t going to be coming into a situation where we would have to eliminate people who either weren’t doing well or who didn’t ‘fit’ in my judgment. Instead, I was going to have an opportunity to bring people here who wanted to collaborate and wanted that to be their business model, people who were committed to succeeding and doing better.”

Partly on the strength of some “very experienced professionals” among the New York office’s early hires as principals—such as John Ryan III from JLL and Martin Conningham from Grubb—“we got some very interesting reactions” when talking up the new operation, Mirante recalls. The combination of AY’s newness to the market coupled with the professionals’ longtime presence there provoked one such positive response. “And another reaction was, ‘you know, we could use a new player in this marketplace.’ That shocked me because although we have so many good commercial real estate service providers and brokers in New York City, here was a sophisticated client saying we could use a breath of fresh air and a new way of doing things.”

Accordingly, Mirante says, the reception among would-be clients “wasn’t ‘come back in two years when you’re double the size.’ It was ‘tell me your story.’ And in many cases, clients were very receptive. They’ve demonstrated that receptivity by giving us some pretty meaningful assignments.”

These have included the pre-leasing assignment for the Moinian Group’s planned office tower at 3 Hudson Boulevard on Manhattan’s Far West Side, the repositioning of the 800,000-square-foot 1501 Broadway and the management of Winthrop Hospital’s considerable real estate assets on Long Island.

“No piece of business, no client opportunity for us these days, is insignificant,” Mirante says. “We have to earn our stripes in this very competitive marketplace client by client, and by producing results one by one. The big shops can afford to lose a deal now and then; we cannot.”

That sense of making each assignment count is one of the aspects of AY’s work ethic that most impresses David Atencio, the Englewood, CO-based director of global transaction management for Western Union. On the real estate assignments that AY handles for the multinational firm, “The company doesn’t transfer our portfolio and our projects to a junior-level associate,” he says. “Our projects are managed by senior-level employees, who give it the time and attention that I expect.” Past that, Atencio continues, “It’s a solid real estate partner in all of our strategic transactions,” with a strong attention to detail.

Along with building individual markets and cultivating client relationships, AY is also filling out service lines. On the capital markets side, Amy Erixon, whose three-decade career includes 12 years as international director with LaSalle Investment Management, joined AY in 2010 as principal and managing director to develop a cross-border program, “to provide for our established Canadian clients access to investment opportunities that they can’t get at home.”

Its first product in this arena was a US apartment fund, so chosen both because of multifamily’s resilience in this country and because Canadians see few opportunities to buy assets in this property class. “In Canada, they trade very infrequently, the units themselves tend to be much older and there’s also rent control in most of the major markets in Canada,” Erixon explains. “So the opportunity to get into new, state-of-the-art multifamily units in growing areas of the United States, at below replacement cost, was very attractive to our institutional clients in Canada.”

Since then, AY has added a few separate accounts for those Canadian institutions who want to invest in the US and in Europe directly as opposed to participating in a fund. “That

“In the prior business cycle, the transaction volume was enormous. The whole wave was so strong that you could take a volume-based approach to client service.”

earl WebbPresident, US Operations

is particularly attractive to the midsized plans that already have a very robust Canadian property portfolio, and are looking at the US and other developed markets to augment that,” says Erixon. “They’re not really looking to take a lot of extra risk. What they want is access to property types like apartments that are not readily accessible in Canada and to take advantage of the better pricing that’s a result of the deep recession in the United States. So we’re doing that on behalf of a couple of Canadian pension plans at present,” while in discussions with other, non-Canadian investors to assist them in North America.

Erixon’s longstanding reputation in Canada as “the American in the room” helped pave the way for many of these assignments at AY. “The first thing that institutional investors look for is expertise,” she says. “I’ve done a lot of transactions and have a lot of relationships in both markets. The second piece is that here in Canada, Avison Young is a known commodity. The keystone of the organization is honesty and integrity and our byline is intelligent solutions. And so we really pride ourselves on bringing solutions to the clients as opposed to pitching deals or throwing things against the wall and seeing what sticks, which sometimes brokers get accused of doing. That’s not the way this organization works.”

In the near term, Webb says “we’ve got a lot of growing to do” in terms of filling out the service matrix. “We haven’t even begun to build our multifamily capability here,” he says. “We’ve got a strong start to our retail platform, but there’s still a lot of growth that can occur there across the country.”

When AY’s expansion outside Canada was in its formative

stages, branching out into Europe rather than the US was a possibility. There is now a UK office, and Rose says a heavier push overseas will follow in due course, driven by the same principles that have governed the company thus far.

“It will be identical, because your strategy and your execution doesn’t change,” he says. “What does change is your adherence to subcultures.” That goes both for the beliefs and customs of individual countries, or provinces within those countries, and for the acquisition and integration of service providers.

AY’s movement into Europe and, ultimately, Asia will be based on “a global set of belief systems, taking into account the cultures and the subgeographies underneath,” says Rose. “But outside of that it’s the same plan: target the right clients with the right people who want to be collaborative and who want to be partners. There are so few, if any, options out there, other

than Avison Young, to accomplish this.” Underpinning it all, Rose concludes, is AY’s structure.

“It’s the structure that keeps it together,” he says. “It’s the structure that drives the success. It’s the structure that risk manages. And it’s the structure that determines that we don’t just say what we’re going to do, but we’re actually going to execute on what we set out to do.

“I’m asked all the time: how is this possible?” he relates. “How could a company in Canada, that really only Canadians knew about five years ago, open up in 39 offices throughout the US? How could you double and triple in size and move your market share up to the top three in Canada in such a short order? And it’s not about any one individual. It’s about a group of incredible individuals adhering to a strategy and a structure that allows you to collaborate with clients. And that, in and of itself, has provided the execution and the success.” ◆

“We really pride ourselves on bringing

solutions to the clients as opposed to pitching

deals or throwing things against the wall and seeing what sticks.”

aMy erixonPrincipal and

Managing Director, Investments

“Clients have been very receptive. They’ve demonstrated that receptivity by giving us some pretty meaningful assignments.”

arthur J. Mirante iiPrincipal and Tri-State President, Office Leasing

Reprinted with permission from the October 2013 edition of REAL ESTATE FORUM © 2013 ALM Media Properties, LLC. All rights reserved. Further duplication without permission is prohibited. For information, contact 877-257-3382 or reprints@alm.com. # 097-10-13-03