TPG's Broker Deal Is at Best Time, Cushman CEO White SaysBy
Private equity firm completes $2 billion purchase from Exor
Low cost of capital helps create third-biggest brokerage
Turmoil in global markets has made it an opportune time for TPG to buy property brokerage Cushman & Wakefield Inc. and combine it with the private equity firm’s DTZ unit, the new company’s chief executive officer said.
“In my business career, there’s never been a better moment than right now to complete this transaction because the cost of the capital we’re using is so extremely inexpensive,” said Brett White, who engineered the purchase of Cushman, the largest closely held commercial real estate services firm, on behalf of TPG. “That gives us enormous latitude.”
TPG and its partners on Tuesday completed their $2 billion acquisition of New York-based Cushman from Italy’s Exor SpA, creating the third-biggest global property brokerage. It will have about $5 billion of annual revenue, behind CBRE Group Inc. and Jones Lang LaSalle Inc. The deal closed on a day the Standard & Poor’s 500 Index slid 3 percent, the latest in two weeks of steep losses.
The market slid amid concern of slowing economic growth in China, where DTZ had a market share for commercial-property sales of more than 50 percent, according to company information released in January. Part of the rationale for the merger, announced in May, was that DTZ’s strength in Asia would fit well with Cushman’s almost 100 years as a well-known brand in the U.S.
The benefit of the combined company’s global scale is that “if one region slows down, it’s actually quite likely other regions, other countries, will be speeding up,” said White, a former CEO of CBRE. “China is a very important business to us, but in the grand scheme of things, we can weather any downturn in China quite nicely, thank you, because we have very large businesses in many other places around the world.”
White declined to say what portion of the $2 billion acquisition price was borrowed. Brad Kreiger, a DTZ spokesman, said in an e-mailed statement that a recent debt offering was “oversubscribed, leading to favorable transaction terms.”
The company also unveiled a new logo, a set of vertical lines mimicking a building. Cushman’s old logo had the same vertical lines, but with half of a stylized globe underneath.
The combined company will retain the Cushman name, except in China, where it is DTZ/Cushman & Wakefield. DTZ’s Tod Lickerman will become Cushman’s global president. John Santora, Cushman’s North American CEO before the deal, will be the combined company’s global chief operating officer and chief integration officer.
Edward Forst, formerly Cushman’s president and CEO, “has decided to move on,” White said.
TPG, the Fort Worth, Texas-based firm led by David Bonderman and James Coulter, made the purchase in partnership with Hong Kong investment firm Pacific Alliance Group and Ontario Teachers’ Pension Plan, according to a statement.
Commercial real estate brokers have been consolidating in an effort to build scale and offer more services to clients. In the past few years, New York-based Newmark Knight Frank bought Grubb & Ellis Co. and London-based Savills Plc purchased tenant-representation firm Studley Inc. CBRE on Tuesday completed its $1.48 billion takeover of Global Workplace Solutions, a building-management unit of Johnson Controls Inc., as part of an effort to decrease its reliance on more volatile transaction revenue in favor of recurring business such as property management.
Cushman last year acquired Massey Knakal Realty Services, a New York-based firm that dominated the market in the area for small and midsized commercial-property sales. DTZ, which bought brokerage Cassidy Turley in January, also “looked at Massey Knakal very, very hard” before losing out to Cushman, White said.
Cushman was incorporated in New York in 1917 by brokers J. Clydesdale Cushman and Bernard Wakefield. The company was sold in 1969 to RCA Corp., which sold its stake seven years later to the Rockefeller Group. In 1989, Japanese real estate giant Mitsubishi Estate Co. gained a majority stake in Rockefeller Group. A group including Italy’s Agnelli family bought Cushman in 2007, and their holding company, Exor, sold it to DTZ Tuesday.
(An earlier version of this story removed a reference to Netherlands branding.)
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