Commercial real estate services firm Colliers International said on Monday that it has agreed to make a 'transformational' investment in US-based investment firm Harrison Street Real Estate Capital with the purchase of a 75% stake for $550 mln (€460 mln).
Headquartered in Chicago, with an office in London, Harrison Street is one of the largest real estate investment firms dedicated to the education, healthcare and storage sectors with $14.6 bn in assets under management.
The transaction, which is fully financed and subject to customary closing conditions, is expected to close by the third quarter of 2018.
Under the terms of the transaction, Colliers will acquire 75% of Harrison Street from its founders for $450 mln, with an additional $100 mln payable in 2022, based on the company achieving certain accelerated performance targets. The senior management team of Harrison Street will hold the balance of the equity.
Colliers expects the annual run rate of management fee revenue to be between $100-115 mln. Harrison Street’s co-founder and chief executive officer, Christopher Merrill, will serve as CEO, lead the operations and remains the largest individual shareholder.
Harrison Street’s senior management team will continue to operate the firm’s day-to-day business.
'The investment in Harrison Street is transformational and the most significant in our history,' said Jay Hennick, chairman and CEO of Colliers International. 'The transaction establishes us as one of the major players in global real estate investment management, providing an important new growth platform that also facilitates the integration of our existing operations in Europe.'
'In addition to its best-in-class returns, we were particularly attracted to Harrison Street’s focus on attractive real estate asset class strategies; massive segments offering significant, demographically-driven growth opportunities with defensive cycle characteristics,' said John Friedrichsen, chief financial officer of Colliers International. 'The recurring management fees and institutional quality reporting and governance offers Colliers another stable and recurring source of revenue and a tremendous opportunity to create value in the future.'
'As we began to explore the idea of partnering with an outside investor to position us for the future, it became clear Colliers was a perfect choice,' said Harrison Street's Merrill. 'Colliers provides long-term stability and increased alignment among our team and limited partners. The relationship strengthens our global capability and offers unique market knowledge and deep relationships with owners and occupiers of real estate around the world. Colliers’ entrepreneurial culture, decentralised management style, significant insider ownership and proven investment record was another significant difference.'
In connection with this transaction, Berkshire Capital acted as financial advisor and DLA Piper acted as legal advisor to Harrison Street and the management team, while Three Ocean Partners acted as financial advisor and Winston & Strawn acted as legal advisor to certain of Harrison Street’s shareholders. Sidley Austin acted as legal advisor to Colliers.
