After Rebranding as DTZ, Property Services Firm Aims to Expand In the U.S. and Globally
Some industry observers had likened Australia-based conglomerate UGL Limited’s property services business to a sleeping giant. Although still relatively new to U.S. markets, the firm's global corporate framework is considered to have the potential to compete with CBRE, Jones Lang LaSalle, Cushman & Wakefield and other international players.
And that was before UGL added to its stature with the Dec. 5, 2011 acquisition of the ailing London-based DTZ Holdings plc. in a transaction valued at $125.9 million (U.S.), forming one of the world's largest integrated property services companies with annual revenues of $2 billion. As of Sept. 5, Sydney-based company UGL
has united the two names under a single global brand as DTZ, the better recognized name in much of the world, including Europe, Asia, Africa and the Middle East.
In addition to DTZ, the property division of UGL Limited includes the Unicco, Equis and Premas operations. The rebranded company will continue to be headquartered in Los Angeles under the leadership of group president Robert Shibuya, a nearly 30-year real estate veteran who has served in senior executive capacities with CBRE, Trammell Crow and Cushman & Wakefield, among others.
The DTZ acquisition has transformed UGL's property services business into one of the world's largest integrated providers of property services, with annual revenue of over $2 billion, 208 offices in 52 countries, and 47,000 direct employees and contract workers.
Retaining the DTZ name acknowledges the firm's brand equity, an icon in property services with a legacy extending back to 1784, and capitalizes on the broad market recognition of the specialist capabilities of DTZ, said UGL Managing Director and CEO Richard Leupen.
CoStar connected last week with Robert Shibuya, who served as chief operating officer with DTZ before joining UGL in 2011 as group president. Shibuya, who will continue as group president with DTZ, discussed the rebranding and the progress of the integration of the firms, and how DTZ, with 72% of its fiscal year 2012 revenues coming from facilities management and 28% from
commercial real estate, plans to compete with the industry’s largest full-service players in the U.S. and abroad.
CoStar: What kind of thinking went into the decision to brand the combined companies under the DTZ flag?
Robert Shibuya: We didn’t make the decision on day one. We took a measured view and spent time talking to clients and our staffs. I went around the world several times to get a sense of it, because you never know until you spend time in country what the power of one brand is versus another. UGL in general previously had kind of a dual personality. There was UGL in Australia, which was more widely known as an engineering firm, and there was UGL Services, which was the global property company.
Our branding strategy until recently was to consolidate the entire company under one UGL brand. That was good because we had the benefit of leveraging off the engineering and property platform and we were able to take advantage of the strength of the overall balance sheet. But when we made the DTZ acquisition, we needed to go down one of two logical paths and have either UGL or DTZ as the one brand around the world.
Quite simply, it became obvious to us that the brand that was distinctly coveted and viewed as a very strong property company globally was DTZ.
UGL just wasn’t known as a brand in certain parts of the world. And in others, namely Australia, it was widely known as an engineering firm with a property service business. So the thinking was to call it DTZ and add the tagline "A UGL Company" to draw attention to the parent. I think that’s a pretty eloquent solution.
DTZ was in pretty rough financial shape when you took over in December. What was the appeal of the acquisition and what were the challenges?
Before we put UGL Services and DTZ together, we were not a global company. UGL didn’t have coverage in Europe and we weren’t as large as we are now in Asia. So this really gives us the ability to immediately compete with our global peer group. We saw DTZ as a great brand, a company with very strong people, many of whom have spent almost their entire careers with the firm and are highly respected in their markets and in their skill lines and disciplines. And incredibly loyal clients that have been with the firm year-in and year-out. Fortunately, the challenges primarily had nothing to do with the brand, people or clients. It had almost entirely to do with the balance sheet, with the fact that it had so much debt, and the cost of that debt was burdensome and did not allow the company to invest in its infrastructure and people.
We were able to immediately on day one take care of the singular problem and address the balance sheet issues. All the key staff has stayed, all our clients are still with us. The financial results we published for the end of our fiscal year through June, which included seven months of owning DTZ, show that the DTZ business was profitable and contributed to the overall positive performance of our property business. We believe that is a good early indication that the integration and value proposition of bringing the two companies together is working.
We’ve announced $650 million of new contract wins since the acquisition. That’s new business. There were a lot of clients that wanted to give DTZ their business or renew their contracts but were holding off because they wanted to understand what the long-term direction of the firm would be. When we provided that certainty last December, a lot of that pent-up interest in awarding more business to DTZ was released. Resolving any uncertainty about the firm created an immediate lift.
Do you see more acquisitions ahead? Where are you in terms of size and where do you need to be?
UGL is publicly listed on the Australian Securities Exchange (ASX) and we’ve got close to $5 billion in revenues and close to a $2 billion market cap. You need to have that financial strength to be able to play. We’re committed to continuing to develop and grow our global property services platform. We have not only the aspiration but also the financial capacity to be one of the leaders in the sector.
Are there are additional opportunities for us to expand and grow to be of greater service to our clients? The answer is yes. We’re very interested in entering new markets like South America and Latin America. We have an affiliate relationship with a very good firm in South Africa, but we’re not as penetrated in the African continent as we’d like to be. We’re going to look at growth opportunities either by geography or by service or skill lines. Some of that growth may be organic, and some may be through acquisition.
Will the company grow its footprint and headcount in the U.S.? How will the business be organized here?
It’s our number one priority. We have 27 transaction offices through the legacy UGL business in the U.S., and those transaction offices have been rebranded as of Sept. 5 as DTZ. So the DTZ brand in the U.S. is not only covering the facilities management business, but it’s also covering our brokerage. The goal is clearly to build on the platform, to have more scale, reach and coverage. As a corporate strategy, our objective in the U.S. is to own a high percentage of our businesses. It will be an owned structure along the lines of CBRE, JLL, and Cushman & Wakefield.
With CBRE and JLL as dominant players and many other firm trying to expand, what are the key challenges in growing your U.S. transaction business?
Globally, we view CBRE and JLL as peers. In the facilities management side of the business, we are as big as either one, but we are not as big in the brokerage and transaction side. We aim to compete with them globally and in the U.S and Americas, so clearly we want to elevate our brokerage platform.
The opportunity is that there are a lot of professionals or teams that represent companies nationally or regionally that do not have the global reach that we now have. They are finding it more difficult to compete with global full-service companies. We will provide those companies or people a very compelling platform to allow them to provide better service to their clients, and ultimately be more competitive.