Updated: Global CRE Company Rolling Up 10 NorthMarq Offices; Also Acquires Toronto-Based Advisory Firm
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Cushman & Wakefield is buying out its joint-venture partner to take full ownership of its branded operations in Minneapolis, Seattle, Salt Lake City and Las Vegas from NorthMarq Cos., a private holding company owned by the Minneapolis-based Pohlad family.
In a separate transaction announced Tuesday, Chicago-based Cushman said that it has acquired Toronto-based 20 VIC Management Inc., one of Canada’s leading commercial real estate advisory and management firms.
In the U.S., Cushman will acquire 10 offices with 750 employees which in aggregate, manage almost 50 million square feet of property. The acquisition will bring Cushman & Wakefield NorthMarq (CWN) in Minnesota, one of the Twin Cities’ largest commercial brokerage and property management companies, fully under the corporate umbrella. Cushman will also buy out NorthMarq’s interest in Cushman & Wakefield Commerce (CWC) operations and offices in the Las Vegas, Salt Lake City and Seattle markets.
Cushman & Wakefield did not disclose terms of the U.S. acquisitions but said the sale, subject to customary closing conditions, is expected to close within the next three weeks. Leadership teams in the four markets will remain in place, the company said in a statement.
Cushman & Wakefield East Region President Shawn Mobley tells CoStar that the NorthMarq acquisitions will help Cushman shore up service lines and geographic coverage identified as part of a “gap analysis” following the company’s $2 billion acquisition by the group led by private-equity firm TPG from Italy’s Exor SpA and merger with DTZ in September 2015.
“We did our homework and found some white space and areas in which to grow, which eventually led us to transactions where we currently have alliance or JV relationships, but believe we should maintain owned offices,” Mobley said.
Mobley noted that both the NorthMarq and 20 VIC transactions include a significant property management component, a lucrative and coveted business that helps insulate brokerages against cyclical volatility in the transaction market, he added.
Eduardo Padilla, CEO of NorthMarq Cos. (formerly Marquette Real Estate Group), said NorthMarq believes there’s “a logical and compelling reason to sell our operations to Cushman & Wakefield at this time.”
“The industry is consolidating, with sophisticated clients needing a seamless platform, irrespective of geography or service,” Padilla said. NorthMarq Companies and NorthMarq Capital are not included in the transaction.
Cushman & Wakefield, among the largest global CRE services firms with revenues of $6 billion, is widely speculated in the industry to be exploring an initial public offering that could be launched as early as the current quarter. Mobley and others in the company have declined to comment on the speculation, citing internal and SEC regulations.
“The industry is defragmenting, becoming bigger, with fewer players that can do more. I’m laser focused on growing the company and filling the gaps,” Mobley said, adding that Cushman has a “handful or two” of additional acquisition opportunities that are similar in size and scale to the NorthMarq and 20 VIC transactions, some of which could close before year end.
Even before the TPG/DTZ combination, which occurred two years ago next month, industry mergers and acquisition activity was trending away from blockbuster deals between national and large regional firms to focus on acquiring single-market and smaller-scale regional players. Many recent acquisitions involve buyouts and roll ups of locally owned offices that had operated for many years under affiliation or franchise agreements.
Cushman, Newmark Knight Frank (NKF) and Colliers International have been particularly active in acquiring local and regional shops, which is also a ripple effect of the huge consolidations over the last 15-20 years as CRE firms seek size, scale, full-serve capabilities and global reach.
The TPG-led private-equity group that owns Cushman is believed to be exploring an IPO following the DTZ-Cushman combination, and in February, NKF parent BGC Partners, Inc. announced plans to spin off Newmark as a publicly traded company.
The company, marking its 100-year anniversary as a brand, has 45,000 employees in more than 70 countries with business operations that include leasing, asset services, capital markets, facility services, global occupier services, investment and asset management, project and development services, and valuation and advisory services.
Jeff Eaton, president of Cushman & Wakefield NorthMarq, which includes Cushman & Wakefield NorthMarq (CWN) and Cushman & Wakefield Commerce (CWC) operations, will expand his leadership role to include Cushman’s North Central Region, which includes oversight of Chicago, Minneapolis, and Detroit operations. Eaton will report to Mobley.
Eaton has led NorthMarq through several organizational changes since becoming president of NorthMarq Real Estate Services in 2008, including the 2009 acquisition of the property management division of Opus Corp.; the 2011 launch of NorthMarq’s joint venture with Cushman & Wakefield, and the acquisition of CWC in 2013.
Cushman also did not release terms of its closed acquisition of 20 VIC Management, a boutique firm that advises an exclusive group of pension funds, private equity firms and high-net-worth investors. The move significantly expands Cushman’s Canadian presence, including its entry into the Canadian property management business, with 20 VIC managing more than 21 million square feet on behalf of some of the country’s leading institutional and private investors.
George Buckles and Randy Scharf, who co-founded the company in 1995, will join Cushman as executive managing directors of asset services.
The 20 VIC acquisition is the first foray into Canadian property management services for Cushman. Like other large CRE service providers, Cushman aims to grow its global property and facilities management business to augment more volatile sales and leasing revenue with a steady and durable source of recurring income.
“Property management holds up well throughout the real estate cycle. It’s a strong performer during good times and bad,” Mobley noted.
Editor’s note: This update adds details on the transactions and other potential deals in Cushman’s acquisition pipeline.
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