Editor's Choice: Ripples in the pond

The booming real estate investment market is spurring big and smaller fish to tap the public capital markets to expand their platforms.

Earlier this week Swiss asset manager Corestate announced it is preparing an initial public offering on the Prime Standard segment of the Frankfurt stock exchange. The Zug-based company intends to issue €100 mln of new shares from a capital increase as well as to offer shares held by existing shareholders.

Since the founding of the company in 2006, Corestate has executed real estate transactions with a total volume of €5 bn, Sascha Wilhelm, CEO of Corestate Capital Holding said earlier this week. 'Going public will allow us to build upon what we have achieved so far. It is the next logical step for us in driving our continued growth.'

Wilhelm said the company would pump the proceeds of the IPO into more higher-volume deals which would enable it to offer investment products for institutional clients. ‘We’d like to participate more in retail portfolio deals of between €350 mln and €500 mln, or even more. We’re mainly looking at German retail portfolios, although we’d also consider office portfolios if they were a good fit. We’d also consider Spain, as we have a joint venture there.’

At present, the company manages around €1.4 bn of assets, including developments.

Even bigger ambitions
Europe's listed real estate sector can certainly do with more emerging champions like Zug-based Corestate. But with funds from operations totalling just €15 mln in 2014, Corestate is a relatively small fish and its IPO will cause merely a ripple in the listed real estate pond. The same can probably said for Italian companies Idea Real Estate and Coima Sgr, which both plan to go public in the next few months.

Idea Real Estate said at end-September that it has applied for a listing of its shares on Milan's MTA junior stock exchange in a bid to raise €500 mln. Coima sgr (previously Hines Italia sgr) also announced last month that it had won backing from the Qatar Investment Authority (QIA) to spin off its income-generating assets into a real estate investment trust (REIT or SIIQ in Italian). How much of the total €5 bn in assets will be listed is not known.

By contrast, the new combine recently created from the merger between Cushman & Wakefield and DTZ is a big fish with even bigger aspirations. At the same time, everything is relative. Cushman & Wakefield has ‘just’ $12 bn (€10.5 bn) of assets under management, far less than its larger competitors CBRE (€79 bn) and JLL (€51 bn).

With those figures in mind, it does not require a great stretch of the imagination to see there might be some truth to the rumours that Cushman & Wakefield’s European management has sets its sights on BNP Paribas Real Estate. With AUM of roughly €21 bn, the Paris-based company is certainly an attractive prey.

The rumours stem from a recent interview with The Wall Street Journal in which Cushman & Wakefield’s CEO Brett White said he aimed to boost recurring annual turnover, primarily by focussing more on investment management for institutional investors and other big players in addition to transaction advisory services.

'To do' list
The 55-year old American CEO was appointed to his new position earlier this year after Cushman’s $2 bn takeover of DTZ. He has a long ‘to do’ list, according to The Wall Street Journal. In addition to the integration of the two companies, he is seeking to slash the company's debt burden, and increase turnover and profit margins. This with a view to an expected flotation which US media have suggested could take place as early as 2017.

An IPO would certainly make sense as an exit for the trio of capital backers behind the new combine. Together Texas-based TPG, PAG Asia Capital and Ontario Teachers’ Pension Plan have over the past two years strung together Cushman & Wakefield, DTZ and US advisor Cassidy Turley.

And Brett White is used to working fast. As CEO of CBRE, a position he held until 2012, White took the company private in 2001, subsequently bought Isignia in 2003 and refloated the new combine in 2004.

Under White’s leadership, CBRE has grown into the world’s largest advisory concern. No doubt he is now planning to turn Cushman & Wakefield into a worthy competitor of his former employer and its nearest rival JLL.

If Cushman & Wakefield were to go public, that would certainly create quite a splash in the global real estate advisory pond. In any case, there is definitely room for a third big fish.

Judi Seebus
Editor in chief