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12-11-2014, 11:02 PM
TPG war chest seeks real estate brokers
THE WALL STREET JOURNAL NOVEMBER 13, 2014 12:00AM
PRIVATE-equity firms are amassing growing piles of cash from investors looking to bet on rising commercial property prices around the globe.
TPG is taking the wager a step further by snapping up commercial real estate brokers that match buyers and sellers and landlords and renters.
A venture led by TPG last week closed on its $US1.05 billion ($1.21bn) acquisition of Chicago-based DTZ, a real estate services firm with 209 offices in 52 countries and more than $US1.9bn in annual revenue. TPG is planning to merge DTZ with Cassidy Turley, a Washington DC firm the venture is set to buy before the end of the year in a deal valued at up to $US600 million.
The TPG venture, whose investors also include PAG Asia Capital and Ontario Teachers’ Pension Plan, expects to make further acquisitions in coming months as part of a push to become the world’s third-largest commercial real estate services firm after CBRE and JLL, according to sources.
The lures for TPG are twofold. In the short term, it seeks commissions and other fees that are growing fatter. The industry generates more than $US100bn in annual revenue but is highly fragmented; CBRE and JLL dwarf their rivals yet account for a small fraction of the market, with CBRE bringing in $US7.18bn last year and JLL $US4.46bn.
In the longer term, TPG’s strategy is to cash out of its investment, likely through a sale or initial public offering. The industry is expected to keep growing as world economies recover, institutional investors vie for more property, and corporations increasingly outsource their real estate needs, industry analysts say.
“Things are really humming along right now and I don’t expect them to change any time soon,” says Mitch Germain, analyst at JMP Securities.
TPG’s effort comes as growing institutional demand for property worldwide is pushing prices to record highs in many cities, including London, New York and San Francisco. A DTZ research report in October titled “The Great Wall of Money” said capital targeting property acquisitions increased 15 per cent in the first half of this year to $US408bn, the most since the firm began publishing reports on the subject in 2009.
Private-equity firms, including TPG, have ridden this enthusiasm to raise $US65bn in property funds in the first three quarters of this year, up from $US56bn in the same period last year and the most raised in the first three-quarters of a year since 2008, according to data tracker Preqin.
TPG, which is run by founders David Bonderman and James Coulter and has $US66bn in assets under management, is known mainly as a leveraged buyout shop. But it has been investing in property for years out of its general funds, and earlier this year began raising money for its first real estate specific fund, with a goal of at least $US1bn.
The DTZ deal is being run from the firm’s Asia office and is being financed out of one of its corporate funds.
Once the TPG group combines DTZ with Cassidy Turley, the combined revenue of the two firms will be about $US2.9bn.
TPG plans to bring in Brett White, the chief executive of CBRE until he stepped down in 2012, to be its executive chairman when his non-compete agreement with CBRE expires next year.
THE WALL STREET JOURNAL NOVEMBER 13, 2014 12:00AM
PRIVATE-equity firms are amassing growing piles of cash from investors looking to bet on rising commercial property prices around the globe.
TPG is taking the wager a step further by snapping up commercial real estate brokers that match buyers and sellers and landlords and renters.
A venture led by TPG last week closed on its $US1.05 billion ($1.21bn) acquisition of Chicago-based DTZ, a real estate services firm with 209 offices in 52 countries and more than $US1.9bn in annual revenue. TPG is planning to merge DTZ with Cassidy Turley, a Washington DC firm the venture is set to buy before the end of the year in a deal valued at up to $US600 million.
The TPG venture, whose investors also include PAG Asia Capital and Ontario Teachers’ Pension Plan, expects to make further acquisitions in coming months as part of a push to become the world’s third-largest commercial real estate services firm after CBRE and JLL, according to sources.
The lures for TPG are twofold. In the short term, it seeks commissions and other fees that are growing fatter. The industry generates more than $US100bn in annual revenue but is highly fragmented; CBRE and JLL dwarf their rivals yet account for a small fraction of the market, with CBRE bringing in $US7.18bn last year and JLL $US4.46bn.
In the longer term, TPG’s strategy is to cash out of its investment, likely through a sale or initial public offering. The industry is expected to keep growing as world economies recover, institutional investors vie for more property, and corporations increasingly outsource their real estate needs, industry analysts say.
“Things are really humming along right now and I don’t expect them to change any time soon,” says Mitch Germain, analyst at JMP Securities.
TPG’s effort comes as growing institutional demand for property worldwide is pushing prices to record highs in many cities, including London, New York and San Francisco. A DTZ research report in October titled “The Great Wall of Money” said capital targeting property acquisitions increased 15 per cent in the first half of this year to $US408bn, the most since the firm began publishing reports on the subject in 2009.
Private-equity firms, including TPG, have ridden this enthusiasm to raise $US65bn in property funds in the first three quarters of this year, up from $US56bn in the same period last year and the most raised in the first three-quarters of a year since 2008, according to data tracker Preqin.
TPG, which is run by founders David Bonderman and James Coulter and has $US66bn in assets under management, is known mainly as a leveraged buyout shop. But it has been investing in property for years out of its general funds, and earlier this year began raising money for its first real estate specific fund, with a goal of at least $US1bn.
The DTZ deal is being run from the firm’s Asia office and is being financed out of one of its corporate funds.
Once the TPG group combines DTZ with Cassidy Turley, the combined revenue of the two firms will be about $US2.9bn.
TPG plans to bring in Brett White, the chief executive of CBRE until he stepped down in 2012, to be its executive chairman when his non-compete agreement with CBRE expires next year.