MARCH 29, 2019|JOHN DOHERTY
JLL-HFF Deal Offers Hint at Size of Possible Eastdil Sale As Talks Pick Up, the $2 Billion JLL Agreed to Pay for HFF Could Make High-End Brokerage Eastdil More Valuable
Jones Lang LaSalle’s agreement to buy real estate investment services giant HFF last week for $2 billion may have given a boost to one of HFF’s longtime rivals: Eastdil Secured, the high-end brokerage seeking its own sale. Eastdil CEO Roy March has been negotiating for months with a Singapore sovereign wealth fund to sell his company’s real estate brokerage, and talks now appear to be heating up.
According to two people familiar with the matter, March hoped to have a deal with Temasek to buy out the brokerage from parent Wells Fargo by the end of 2018. The Wall Street Journal reported Friday that New York private equity shop Guggenheim Investments has now partnered with Temasek in a possible deal.
Given the similarities of the two brokerages, the HFF deal may bode well for Eastdil and up its value in a sale. Both HFF and Eastdil are pure capital markets platforms, providing only property sales and financing services – unlike full-service brokerages like JLL with leasing, management and other offerings. Now, Eastdil stands alone as the only national brokerage dedicated only to capital markets.
The high price offered for HFF by JLL may suggest to Wells Fargo that Eastdil may be worth more than originally thought.
Although Wells Fargo is a public company, it discloses little about Eastdil’s financial performance, so revenues are a mystery to most investors. Brokerage insiders had estimated Eastdil’s worth at about $500 million last year. But Eastdil routinely outpaces HFF in sales. A recent report from analyst Keefe Bruyette & Woods pegged Eastdil’s 2018 market share in the brokerage world at 12.2 percent, just behind market leaders CBRE and Cushman & Wakefield. HFF posted a 9.3 percent market share. Often the two firms compete for the same big listings.
So similar have Eastdil and HFF’s approach to capital markets been – chase the biggest deals, sell to the biggest institutional and international buyers – that HFF has sometimes been described as an “Eastdil Jr.” “Wells has got to be thinking their price just went up [with the HFF sale],” said one senior brokerage executive at a rival firm.
Sales and financing deals tend to be cyclical, with capital markets teams flush with business in the boom years and largely idle in downturns. Most economists expect sales volume to flatten or decline in the next year, meaning HFF and Eastdil may not be throwing off a lot of cash to their new owners. That too could affect what Temasek is willing to pay.
The trend in recent years among brokerages has been to go full service, as HFF effectively has done.
But Eastdil seems determined to stay the course. In December, Eastdil president Michael Van Konynenburg told CoStar: “We’re a pure capital markets platform, and we view that as providing the highest focus and expertise for our clients. We believe that particularly for larger more complex capital markets executions that single approach is the best.”
According to two people familiar with the matter, March hoped to have a deal with Temasek to buy out the brokerage from parent Wells Fargo by the end of 2018. The Wall Street Journal reported Friday that New York private equity shop Guggenheim Investments has now partnered with Temasek in a possible deal.
Given the similarities of the two brokerages, the HFF deal may bode well for Eastdil and up its value in a sale. Both HFF and Eastdil are pure capital markets platforms, providing only property sales and financing services – unlike full-service brokerages like JLL with leasing, management and other offerings. Now, Eastdil stands alone as the only national brokerage dedicated only to capital markets.
The high price offered for HFF by JLL may suggest to Wells Fargo that Eastdil may be worth more than originally thought.
Although Wells Fargo is a public company, it discloses little about Eastdil’s financial performance, so revenues are a mystery to most investors. Brokerage insiders had estimated Eastdil’s worth at about $500 million last year. But Eastdil routinely outpaces HFF in sales. A recent report from analyst Keefe Bruyette & Woods pegged Eastdil’s 2018 market share in the brokerage world at 12.2 percent, just behind market leaders CBRE and Cushman & Wakefield. HFF posted a 9.3 percent market share. Often the two firms compete for the same big listings.
So similar have Eastdil and HFF’s approach to capital markets been – chase the biggest deals, sell to the biggest institutional and international buyers – that HFF has sometimes been described as an “Eastdil Jr.” “Wells has got to be thinking their price just went up [with the HFF sale],” said one senior brokerage executive at a rival firm.
Sales and financing deals tend to be cyclical, with capital markets teams flush with business in the boom years and largely idle in downturns. Most economists expect sales volume to flatten or decline in the next year, meaning HFF and Eastdil may not be throwing off a lot of cash to their new owners. That too could affect what Temasek is willing to pay.
The trend in recent years among brokerages has been to go full service, as HFF effectively has done.
But Eastdil seems determined to stay the course. In December, Eastdil president Michael Van Konynenburg told CoStar: “We’re a pure capital markets platform, and we view that as providing the highest focus and expertise for our clients. We believe that particularly for larger more complex capital markets executions that single approach is the best.”