As many real estate pros know, mergers and acquisitions are part of the game.
So when one of the world’s largest real-estate services firms, Jones Lang LaSalle Inc., acquires HFF, Inc., another giant company with 26 offices in the U.S. and London, the ripple effects are felt just about everywhere — and talked about too.
The $2 billion deal first made headlines early last week when JLL announced plans to acquire rival HFF, adding what brokers call a supercharge to JLL’s debt platform and boosting its U.S. capital markets presence.
James Mitchell, an executive vice president at CBRE Orlando, said in a sense the companies are better together than apart.
“In regard to debt capital markets, the merger is a good fit,” Mitchell said. “It’s the puzzle piece JLL was missing.”
Using data from Mortgage Bankers’ Association, the Commercial Observer reported HFF organized debt deals worth $61 billion in 2017, while JLL worked on about $24.1 billion.
The merger — which still requires approval from HFF shareholders — would position JLL as the largest commercial real estate debt practice in the country.
Revenue wise, JLL is more dominant. According to 2018 annual reports for both companies, JLL’s consolidated revenues hit record levels of $4.9 billion, while HFF reported revenues of $662 million, a 9-percent increase year over year.
In Orlando, HFF is behind a number of notable CRE transactions. So far this year, the firm has orchestrated the sales of Marketplace at Seminole Towne Center for $58 million and Millenia Plaza for $56.4 million.
The firm also arranged debt equity for two high-profile multifamily projects which recently broke ground in downtown Orlando: Radius Apartments and Lake House Apartments on Lake Ivanhoe.
The JLL Orlando team is also known to work on multi-million dollar deals and lease transactions, and while sources do acknowledge JLL’s CRE deals, they also underline JLL’s presence in Central Florida’s leasing market — a realm of real estate of which HFF does not operate.
“[The companies] don’t do a lot of the same things,” Mitchell said, adding to his point about the puzzle piece. “That’s why I don’t believe there’s going to be much fallout.”
That being said, “when consolidation happens there’s almost always a little bit of an uncertainty,” Mitchell added. He draws from his own experience circa 2006, when he was a senior associate at Trammell Crow Company and CBRE had just announced it planned to acquire TCC for $2.2 billion.
“Cream rises to the top,” he said. “Consolidation creates great opportunities and creates leading-edge companies. Both [JLL and HFF] have fantastic players, respectable clients and operate at a very high level.”
Notable lease transactions include newly inked deals with CFE Credit Union, Dunkin Donuts, Subway and Qdoba at Creative Village, and the Taco Bell Cantina at 100 South Orange. The firm also handles retail leasing at Orlando Magic’s Sports and Entertainment District.
Prior to the HFF acquisition, the JLL Orlando team had indulged its appetite for market share in December when the company absorbed local boutique real estate firm Cite Partners and all 20 of its employees, including Wilson McDowell, Matt Sullivan and Jamie Barati.
The HFF team locally is headed by senior managing directors H. Brad Peterson and Michael Weinberg. The office consists of six team members, seven analytical supporters and a three-member support staff.
The company opened its Orlando office in 2012, and often works with HFF's Miami and Tampa offices.
A spokesperson at JLL confirmed the company has three offices in the Orlando area that currently employ a total of 85 people. Considering JLL would bring in the entire HFF Orlando team, its operations in the region would oversee a staff of 103 employees.
It's not yet clear what is to happen with HFF’s Park Avenue office in Winter Park. Principals at HFF and JLL declined to comment further on the story due to the sensitivity of the deal.
The nature of a merger often lends itself to the chance of layoffs, office closures and company culture clashes. To address the concerns, a fair share of team building exercises is to be expected.
Mitchell said that should shake out in the next six months.
Kyle Wood, an executive at local real estate firm Bishop Beale Duncan, is familiar with the ebb and flow of a company expanding and rebranding.
Since principal William D. Bishop III first opened the doors to Bishop Realty & Development in 1999, the firm has expanded and rebranded to add principals Michael F. Beale, and more recently, Whit Duncan.
A former president at Charlotte, North Carolina-based Crescent Communities, Duncan joined the firm (previously doing business as BishopBeale) last fall, shortly after Crescent Communities was bought by Sumitomo Forestry America, a wholly-owned subsidiary of Tokyo-based Sumitomo Forestry Group.
“We’re in the era of acquisitions and consolidations in the brokerage community,” Wood said. “[The JLL-HFF] deal, in particular, was surprising due to the sheer scale of it.”
For Wood, it’s a sign that investors are willing to park more of their cash in commercial real estate.
“We take the news of a merger pretty positively,” Wood said. “It’s reinforcing that the economy is good, and that we’re not the only ones that still continue to be strong.”
The deal is expected to close in the third quarter of 2019. HFF’s CEO Mark Gibson will head JLL’s capital markets business in the Americas and co-chair its global capital markets board. JLL’s Christian Ulbrich will remain the global CEO.
Ironically enough, both HFF and JLL have long established three-initial acronym brand names that have been in play for more than two decades.
The JLL name was formed in 1999 after Europe-based Jones Lang Wootton (JLW) & Sons merged with LaSalle Partners, a then fast-growing Texas-based public real estate company.
Just a year prior in 1998, bank subsidiary Amresco acquired Fowler, Goedecke, Ellis & O'Connor Inc., and merged the company with Holliday Fenoglio Dockerty & Gibson to form Holliday Fenoglio Fowler L.P. The company went public in 2007 under the symbol HFF.
Robert McEwan, a senior vice president at CBRE Orlando, said he believes the most recent acquisition is aimed at establishing a larger platform, serving both HFF and JLL.
He’s probably closer to the deal than most of his colleagues. His son, Robbie McEwan, is a senior director at HFF’s Orlando office.
In an email response asking for comment he responded: “After 30 years with CBRE, the largest commercial real estate company in the world, I will be looking over my shoulder.”