PropertyEU takes a look at the names behind the pending merger of DTZ and Cushman & Wakefield which will challenge JLL's number 2 ranking within the international real estate services sector.

PropertyEU takes a look at the names behind the pending merger of DTZ and Cushman & Wakefield which will challenge JLL's number 2 ranking within the international real estate services sector.

The merger is the latest and most important pillar in the strategy of an international private equity and pension combination to profit from the recovering real estate sector by providing brokerage and management services rather than betting everything on the highly competitive investment market for bricks-and-mortar.

TPG
The lead player in the consortium is US-based global private equity firm TPG which has $67 bn (€60 bn) of assets under management across a wide range of sectors and strategies. Since the credit crisis TPG has invested some €2.9 bn in direct real estate.

The firm, led by Texan billionaire David Bonderman, added a string to its bow by forming a consortium with Asian investment manager PAG and Canada’s Ontario Teachers’ Pension Plan to acquire DTZ for $1.22 bn in June 2014.

A few months later the consortium agreed to buy US real estate services firm Cassidy Turley for an estimated $600 mln in order to bolt it onto the DTZ platform. The addition of Cassidy Turley gave DTZ, which was strongest in Europe and Asia, a firmer foothold in the crucial US market.

The Cushman & Wakefield merger creates a new powerhouse with $5.5 bn (€4.9 bn) in revenues and 43,000 employees who will manage 371 million m2 globally on behalf of institutional, corporate and private clients.

This directly challenges JLL which reported global revenues of €5.4 bn in 2014, and had almost 53,000 employees in 200 offices across 73 countries. CBRE remains the market leader with revenues of $9 bn last year.

The TPG consortium plans further acquisitions for its platform. Cushman & Wakefield has also been playing its part, even though it was itself put up for sale by majority shareholder, Italy's Agneilli family, in 2014. Cushman & Wakefield announced on 5 May that it had completed the acquisition of J.F. McKinney + Associates, a leasing firm in Chicago, currently representing over 16 million square feet of Metropolitan Chicago office space.

OTPP
The Ontario Teachers' Pension Plan (OTPP) claims to be the largest single-profession pension plans in Canada. It operates on behalf of 310,000 active and retired teachers and has some CA$154 bn of assets under management.

OTPP is no stranger to property investment and development, which it delegates to Cadillac Fairview, a wholly owned subsidiary which manages a $26 bn portfolio of standing assets, developments and investments in property companies.

Cadillac Fairview is active in the UK; back in 2007 it acquired a 50% stake in its Thomas More Square Estate in London for about €184 mln and in 2012 it cashed its 3% stake in UK REIT Hammerson. However, most of its assets and CA$4 bn in development projects is located in North America. The DTZ-C&W investment affords access to very different revenue streams from global property.

PAG
PAG is one of the largest Asian-based alternative investment managers. It manages some $12 bn in capital across the region in three core strategies: private equity, real estate and absolute return. Aside from its private equity dealings, PAG has a solid track record in real estate in Asia; since the company was founded in 202 it has completed 500 real estate-related transactions with a total investment volume in excess of $20 bn. Buying into DTZ represented its debut on the global real estate stage.

Another crucial ingredient in this platform-building exercise is Brett White, a 30-year industry veteran and formerly chief executive officer of CBRE. He stepped down from CBRE in 2012 and worked alongside TPG as the property services expert for the DTZ acquisition.

White is an investor in the Cushman & Wakefield takeover and will become chairman and chief Executive Officer of the combined company. 'The companies have remarkably complementary skills and reach in different geographies – whether in New York, London or Shanghai, this will be a formidable combination,' White said.

'While breadth and depth are important to serve clients, it’s not just about size. It’s also about local expertise and deep customer service, which are strong traits of Cushman & Wakefield and DTZ, and ultimately what will differentiate us going forward.'