Updated: NGKF Acquisition Underscores Efforts by CRE Services Firms to Grow Revenue and Market Share By Bringing Local and Regional Partners Under the Corporate Umbrella
BGC Partners Inc. (Nasdaq: BGCP
) announced today that its NGKF division acquired full-service CRE firm Steffner Commercial Real Estate, operating as Newmark Grubb Memphis. Financial terms for the acquisition were not disclosed.
The deal is seen as the latest move by top CRE services providers to press their competition at the local level, buying up formerly independent affiliates and other local and regional practices to increase market share as the real estate cycle moves deeper into its second half. NGKF's acquisition matches a move by CBRE Group, Inc. (NYSE:CBG
), which last week closed on the acquisition of affiliate CBRE Memphis,
adding more than 100 staffers in the strategic distribution market.
Newmark Grubb Memphis represents more than 3.5 million square feet of managed and leased property in the Memphis metropolitan area. Founded in 2004 by Joe Steffner, the company partnered with Grubb & Ellis two years later and joined Newmark Grubb Knight Frank in 2013 as Newmark Grubb Memphis. Grubb & Ellis sought bankruptcy protection in 2012 and was subsequently acquired by New York-based investment firm BGC Partners.
"The acquisition of Newmark Grubb Memphis solidifies the foundation from which NGKF plans to build a dominant presence in the Mid-South, as part of our continued strategy to expand across major markets nationwide," NGKF CEO Barry Gosin said in a statement.
Also last week, Colliers International Group Inc. (NASDAQ:CIGI
) acquired its Central Florida affiliate, adding 165 professionals in offices in Tampa, Clearwater, Orlando and Ft. Myers.
Those moves follow Newmark Grubb Knight Frank's acquisition of Cincinnati Commercial Real Estate, Inc. (CCR), establishing NGKF's first office in Cincinnati and expanding its presence in Ohio and the Midwest.
Cushman & Wakefield has acquired several affiliates across the country while letting other Alliance agreements expire and acquiring other firms within the same market as the firm digests its mega merger with DTZ.
Advancing the football analogy, publicly traded real estate services companies only gain yardage (or credit for square feet brokered/under management, revenues and headcount) among Wall Street investors and analysts if the corporation owns at least 51% of an office or affiliated business. When an affiliate is acquired, the business's revenues and expenses are added to the corporate balance sheet. In exchange, the new corporate owned office gains scale and access to the corporation's technology and operations platform, allowing local brokers and managers to more efficiently transact business across U.S. jurisdictions, or even international borders.
"I expect you’ll see Colliers and Cushman & Wakefield do what CBRE has done over the past decade - buy up affiliates to create a truly national and international platform," said Brandon Dobell, an analyst with William Blair & Associates who tracks the CRE services industry. "Colliers raves about its Colliers UK and Colliers Germany segments for good reason - they were subscale as affiliates, but when combined with the rest of Colliers and put on the same tech platform, revenues and margins really improved quickly."
With the purchase of its Memphis affiliate, CBRE has now acquired six longtime affiliates in the South and South-Central U.S. since late 2013, including three South Carolina affiliates and affiliate offices in Louisville and Oklahoma. The company still has approximately a dozen affiliates scattered primarily in Upstate New York, Maine, Virginia, North Carolina, Michigan, Iowa, Nebraska and Indiana.
CBRE chief executive Bob Sulentic confirmed during a recent earnings call that the company is refocusing its M&A growth on such acquisitions of smaller local, regional and niche businesses.
"We’ll continue to work on infill acquisitions," stated Chief Financial Officer Jim Groch during an earnings call with analysts last year. "We are seeing tangible benefits from our broker recruiting and in-fill M&A, along with increased productivity from our existing producers."