Tuesday, June 09, 2015

Commercial real estate mergers bring changes to local market

A megamerger in the commercial real estate sector will change the landscape of the North Texas property market.
Cushman & Wakefield, which has operated as a top commercial real estate service firm in the Dallas area since the mid-1970s, is being sold to Chicago-based DTZ in a deal estimated at $2 billion.
DTZ just bought another big real estate firm, Cassidy Turley, in a $1.2 billion transaction.
Together these companies will have an estimated $5 billion in annual revenues.
And those are not the only combinations.
Locally, CBRE just bought one of Texas’ largest retail property firms, United Commercial Realty.
And Seattle-based Colliers International bought CASE Commercial Real Estate Partners LLC, a local boutique brokerage firm, early this month.
While mergers are nothing new for the commercial real estate business, the pace of consolidation has definitely picked up.
“This industry is just following what has happened with all the other large corporations,” said Jeff Swope, one of the founders of Dallas-based Champion Partners, a commercial builder and investor. “All these companies are realizing that to grow they have to have a bigger footprint.
“There is going to be a more consolidation and mergers. It’s inevitable.”
Besides the potential for greater market share and, of course, profits, the primary impetus for these companies to merge is coming from their customers.
Most major companies don’t like having to work with multiple real estate service providers when they can deal with a single, more diversified firm.
“We are in business because of our customers,” said Roger Staubach, an executive chairman of commercial property firm JLL. “Our clients dictate where we as an industry are going.
“Our customers are asking us to do more for them, and they are asking us to bundle services,” Staubach said. “You are seeing more consolidation because the companies want to be able to respond to everything.”
Staubach knows a lot about real estate company mergers.
In 2008, he and his partners sold their Dallas-based Staubach Co. to JLL in a deal valued at more than $700 million.
Just two years before, Dallas’ Trammell Crow Co. was purchased by CBRE for $2.2 billion.
“We could have stayed Staubach,” he said. “But I wanted to make sure we could show our customers we could do the business they needed all over the world.”
‘Strong competitor’
Staubach said that to be competitive commercial real estate service firms have to show they can operate internationally while still doing the smallest local deals.
“We do a lot of 2,000-square-foot deals,” he said. “We are not too big to compete with the niche firms.
“There is a lot of really good competition in our industry, and I think that will continue.”
Look for Fort Worth-based TPG, which has funded the mergers of DTZ and Cassidy Turley and Cushman & Wakefield, to arrange a public offering of the combined companies at some point.
TPG officials declined to talk about their plans.
After the merger, the Cushman & Wakefield name, which dates to 1917, will be used to identify the new firm.
“Cushman is a solid brand, and they will be a strong competitor,” Staubach said. “It’s the culture of the company and talent of your people that’s important.”
Steve Brown/Dallas Morning News