O'Conor, Piper, Flynn unit joins with MacKenzie

MERGER IS 'A NATURAL'

October 09, 1992|By Timothy J. Mullaney | Timothy J. Mullaney,Staff Writer

MacKenzie & Associates, one of the area's biggest commercial development companies, will merge with the small commercial division of O'Conor, Piper & Flynn, the state's biggest real estate brokerage, officials of the two firms said yesterday.

The new firm, to be called MacKenzie/O'Conor, Piper & Flynn Commercial Real Estate Services, LLC, will blend the development and asset management skills of MacKenzie with the marketing muscle the new partners hope they can capture from O'Conor, Piper & Flynn's 1,300 residential real estate agents. The residential realty operation of O'Conor, Piper & Flynn will not be affected by the merger.

"It's such a natural," said James P. O'Conor, chairman of O'Conor, Piper & Flynn. "It has been sitting there waiting to be done because of the talents and expertise of the two firms."

The deal also represents needed diversification for MacKenzie.

"These are tough times for developers," company chairman Clark MacKenzie said. "Many development companies are looking at [diversifying into] full service."

No cash would change hands in the merger, which becomes effective Oct. 16. Instead, each side would get stock in the combined company. The officials declined to say how much of the stock each side would own.

The new company would be headed by Mr. MacKenzie as chairman and Gary T. Gill, now MacKenzie & Associates president, as president and chief executive. The top O'Conor Piper & Flynn executive will be Ramsey W. J. Flynn, vice chairman of the combined company.

Two other O'Conor Piper & Flynn managers, Timothy Hearn and Frederick W. Hearn, will be senior vice presidents.

Neither company expects any layoffs, and the combined company would have about 75 employees.

Mr. MacKenzie conceded that there were a number of problem properties in the 38 commercial projects that he built through different partnerships and still owns.

"There probably isn't a developer out there who doesn't have projects he wishes he hadn't done," Mr. MacKenzie said. "On certain projects -- several -- we're talking to the lenders to see if we can restructure the debt."

Mr. MacKenzie said about 18 of the projects were fully leased and that the company's portfolio is 91 percent occupied. That rate is betterthan the 80 percent occupancy rate for office space in metropolitan Baltimore, but suggests that vacancy in the less-than-full projects is in line with the 20 percent average.

"There are two or three projects that skew it," he said. "Take those two or three out and it's under 5 percent."

Among the more problem-plagued properties for MacKenzie, whose projects are concentrated in the Towson area, are buildings at 110 West Road in Towson, which recently lost a large tenant when Maryland National Mortgage Corp. agreed to move downtown and is about 20 percent vacant; Commercentre C at 1777 Reisterstown Road, which is almost half-empty; 21 Crossroads Drive in Owings Mills, which is 35 percent to 40 percent vacant; and the Susquehanna Building in Towson, which is 17 percent vacant.

Unlike many developers, however, MacKenzie partnerships have not been forced to turn over any projects to their lenders, Mr. MacKenzie said. He said O'Conor Piper & Flynn won't become equity owners in any of the projects, or assume any risk for development debts, because the buildings belong to limited partnerships led by Mr. MacKenzie, not by MacKenzie & Associates Inc.

The new company will have the brokerage listings on the existing MacKenzie buildings, MacKenzie & Associates spokeswoman Patricia Farrell said. It would not be involved in residential brokerage, which is the specialty of O'Conor Piper & Flynn's larger residential business.

The MacKenzie listings will boost O'Conor, Piper & Flynn's place in commercial brokerage, where it has not been a major player outside the York Road corridor in and north of Towson.

"When you put the two together, it will be right there" among the biggest brokerage firms in the region, Mr. Gill said. "In every recession there is opportunity. . . . The strategic plan is to build a statewide network."

The two companies hope their new venture will also be able to generate referrals from contacts made by O'Conor, Piper & Flynn's residential sales force. "Not only would there be family ties and a good feeling, there could be a referral fee," Mr. MacKenzie said.

The company will be based at MacKenzie's Lutherville offices, but will have locations in Baltimore and Annapolis.

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