Altus Group, Integra Realty Resources Disclose Merger, Plan $1B Firm


Altus, Integra Disclose Merger, Plan $1B Firm

April 28, 2008

By Connie Gore – GlobeSt.com

Altus Group Income Fund and Integra Realty Resources Inc. have aired a plan to merge, thwarting all market speculation in the early stages of due diligence. The financials have yet to be firmed up, but Toronto-based Altus has vowed it will be accretive to shareholders regardless of the final deal size.

The merger tentatively is slated to close in early October. The outcome will create one of, if not the, largest independent valuation and consulting companies in the world for the real estate industry. Ben Loughry, a founding stockholder and managing partner of Integra’s Fort Worth and Dallas offices, tells GlobeSt.com that the goal is to be a $1-billion company in two to three years. Loughry and Integra’s other 10 directors on its executive board initially will get two-year terms on Altus’ board of trustees.

During Altus’ conference call yesterday to discuss the merger, CEO Gary Yeoman told analysts that the Integra merger would be much like its others in recent years, with the seller taking a stake in the company to show its commitment. Both boards unanimously approved the merger plan in recent weeks, clearing the deck for a non-binding letter of intent and the airing of as many details as possible at this stage. Altus’ stock shot up 8.96% to $18.25 per unit by the time the Toronto Stock Exchange closed for the day. The acquisition will be bundled with cash, equity and bank financing.

Altus and Integra have been doing business together since 1999. “We know each other. We work well with each other. We like each other and we have similar interests,” Loughry says. “We are taking a significant interest in their company.” Integra has 125 shareholders.

Loughry, as verified by Yeoman during the call, says Integra’s management team sized up several opportunities to expand. The Altus acquisition catapults Integra into a global positioning, which has been a top priority for awhile as the New York City-based seller strategically positioned its team through the Royal Institution of Chartered Surveyors. As for the buyer, it’s an opportunity to plant its flag in the US and capture market share at the same time, seizing leverage from changes in lending rules and tougher underwriting requirements.

Altus and Integra are jockeying to be ahead of the curve as more lenders, institutional investors and the industry move toward valuations from independents rather than brokerage house-affiliated appraisers. “There’s been recent corporate scrutiny in the US regarding reporting of values,” Loughry says. “There’s a growing preference to use firms like Altus and Integra where there’s a commitment to delivering independent and unbiased analyses.”

The firms’ largest competitors are brokerage house-affiliated valuation groups. “The issue of independence is paramount. Anyone who has anything to do with the financing or ownership of the real estate can’t participate in any valuation because of conflict,” Yeoman told analysts. “The finance community and auditors need to know that it’s just not that the independent valuation is good, but there has to be a perception of independence and we think we are well positioned to increase our market share through that. There is no perception at all as far as conflict for us and we think our competitors have some real tall orders to clear that issue.”

Loughry says the Altus-Integra marriage, with the name still to be determined, will enable the company to add 200 to 400 people to its ranks. “We expect the staff to grow by 25% in two to three years,” he says. Integra has 850 employees in 55 US cities and one office in Mexico. Altus has 1,300 employees in Canada, where it maintains 31 offices in 23 cities and 130 employees in six cities in the UK. Altus also plans to gain inroads this year into Australia and South America and add more European cities to its itinerary.

Altus went public in 2005, growing ever since through company acquisitions. It’s been no secret that Integra has been eyeing all opportunities to expand. “We just know the fit is right,” Yeoman said during the call. “The beauty about this deal is it’s a core business.”

Yeoman didn’t disclose even tentative pricing during the call, but did promise to return with some hard numbers after Ebitda’s been fully determined and audits are completed, which he estimates will take a couple months. “This price is going to be accretive for Altus, but it’s certainly not going to be like a small mom-and-pop that we’ve acquired. We’re going to give Integra the respect it deserves. We have nothing but upside. They are a significant business–and they’re wildly known by all the financial institutions throughout the country.”

In fact, Yeoman intimated that if the two companies didn’t merge now that they were predestined to meet in the future due to their parallel business lines and growth plans. “It made so much more sense to do it now,” he said.


This is very exciting for us, and I look forward to sharing more details as the deal is finalized. With the pooled resources, we will have an incredible amount of data and expertise to offer to clients. With stock options and other benefits, we feel that we can attract the top real estate appraisers and analysts in every market. Learn more about the services provided by Altus here
More to come……………..
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