With client successes since its high-profile merger, Cushman & Wakefield has placed itself as a global Goliath. But, chief executive Brett White tells Damian Wild, it will continue to be the underdog, not top dog. Portrait by Louise Haywood-Schiefer
It is 12 months since Brett White announced the merger of DTZ and Cushman & Wakefield, a blockbuster deal that has put the combined business’s every move in the spotlight.
He has been relatively quiet since, preferring deed to word. Now, though, Cushmans is firmly established as a top-three global real estate adviser, able to brandish the sort of telephone-number credentials that the very biggest companies on the planet revel in: 43,000 employees, 250 offices, 60 countries and so on. And White is ready to shout – and surprise.
At the time of the deal there was an assumption that top three would never be enough for White. It was an irresistible narrative: the former CBRE chief executive would lead his new firm past his old one. It hasn’t happened yet and, he says emphatically, it won’t.
“I think CBRE will forever, at least in my career, be the largest firm,” he says. “I think that’s now unassailable, particularly given their
focus now on facility management, facility services businesses, which are big revenue and low margin. So that ship has sailed. I think that’s great, actually, for us because we are going to focus a little bit differently. And I think that whether we are two or three – my guess is that’s going to bounce around a lot – we like that position.”
That position is an interesting one. Despite being the newest Goliath on the block, White – and his chief lieutenant for Europe, John Forrester – is keen to hang on to its upstart, disruptor status. “We like being the underdog even though we are really not any more,” he says.
It will be a tough trick to pull off for much longer. A $5bn (£3.4bn) business at the time of merger, it is now, according to White, a $6bn concern. Some of that growth has been organic, some the result of acquisition: Gibson Realty Group, a commercial real estate management firm in Miami, and Wright Properties in Australia are among the post-merger deals done.
There have been headline instructions too: advising Thomson Reuters on consolidating six buildings into one Canary Wharf HQ, acting on the £335m sale of Birmingham’s Grand Central, achieving the largest-ever office investment transaction in Portugal, and further global occupier services work for the lies of G4S and Bayer.
White is more than satisfied with what the business has delivered. “The benefits of this merger have exceeded even our high ambitions,” he says. “We have had virtually no attrition of key people or key clients – quite the opposite has occurred. We are finding ourselves happy recipients of significant new client interest. We are now in every geography that we need to be in, and in a significant way. We are deep in most of the business slabs we want to be deep in.”
Nevertheless, not every gap is filled. “We would like to be bigger in investment management, and we are thinking about that. We would like to continue to build out our occupier services platform pan Europe, both in the facility management side and the facilities services side. But it’s a very competitive marketplace. Valuations are very high. You have to be very careful.”
Especially careful in a market where, perhaps, fewer stars are aligned than when the deal with DTZ was struck. Turmoil in the commodity and equity markets, political uncertainty and full pricing have all contributed to a more cautious outlook.
“Fundamentally the commercial property markets that we trade in and that matter to us most are quite healthy,” he counters. “The commercial property services industry is in a pretty good place right now. There are components of our business that I think are more stressed and certainly in the UK and in certain other large cities the train of high-end, class-A, core office assets is appreciably slowing, as we knew it would, because those properties have been heavily traded and yields are at historic lows.
“But if this cycle continues along the way cycles like this have before, so long as there isn’t a major shock to the economy, what’s going to happen is trading is going to begin moving away from the safest assets, which is where people go when they are very afraid, like they were in 2011, ‘12, ‘13, ‘14, into more value-add type assets – B-plus buildings, A-minus buildings, or secondary and tertiary markets. We are beginning to see that in many jurisdictions.”
And, says White, this is most acute here. “I think of all the world markets we would all agree that London probably looked the frothiest. I can’t think of any that looked more frothy than London, so it only makes sense that a cooling off will occur here a bit more severely than elsewhere. But London remains a very, very attractive market to global capital.”
Might politics risk that attraction? “On Brexit, I think the risk is if it is a down vote, if it goes through, then is the outcome clear and can people model around that outcome? I think that’s the issue because it may not be clear. If the vote is status quo, I think the market is full steam ahead. So what the market needs is not necessarily the outcome, it is clarity around what the implications of the outcome are.”
But this isn’t the end of major changes at Cushmans. Private equity group TPG holds 50% of the business, PAG Asia Capital 35% and Ontario Teachers’ Pension Plan 15%. And while it has always been clear that they will not be around forever, there are forces – positive and negative – that are affecting the timing of their exit. “The performance of the business has been to them far beyond their expectations and because of that I think they are quite sanguine around this investment and around exit timing. I suspect that some time in the next five years those investors will seek to, as they must, begin to get liquidity in their investment.
“Capital markets right now are not in a condition where we would want to do anything this year, and given the size of the company and the size of the investment, I suspect they are going to stay in for some time. Even if an IPO were to occur in 2017, 2018, or 2019, it will take time. The way we think about it in the company is that TVG, PAG, and Ontario Teachers are going to be our partners for a while. And I think both sides of ledger management and ownership are quite happy around that.”
The likely exit remains a listing. “Two of them are managing money for others and one is an investor, and that is likely to be an IPO of some sort but there’s no rush for that. We have a lot of work we are doing with the company right now, and we see a very, very good journey here. They are quite excited about the prospects for the firm. They are in no great rush to liquidate.”
For now the priority is to grow and make Cushmans stand out from the crowd.
“Differentiation is hard at the high end of this industry. We all do generally the same things. Look at our business lines, look at our revenue mix, look at our office footprints; you could take these three firms and there is a lot that looks alike. Differentiation matters because it helps us win business, it helps our clients understand how to make a choice.
“One of the areas where I think we are very focused is we do not feel we are entitled to any business, we really do feel that we have to earn every piece of business that we get because we are the upstart, we are the firm that wasn’t at this top table a year ago. And we have got something to prove.”
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