CB Richard Ellis Group Inc. (CBG), the world’s largest commercial real estate services company (on the basis of 2010 revenues), has recently obtained $800 million of new term loans under its credit facility to fund the acquisition of the majority stake in the real estate division of ING Groep NV (ING), a leading financial services company.
The company has also modified the existing credit agreement to enjoy an additional flexibility and capitalize on other potential acquisition opportunities stemming from a recovery in commercial real estate market fundamentals.
CB Richard Ellis had earlier acquired the lion’s share of ING Real Estate Investment Management operations in Europe and Asia, and Clarion Real Estate Securities – the U.S.-based global real estate listed securities business of ING, for $940 million in cash, leaving behind rival bidders such as Vornado Realty Trust (VNO). The company also expects to incur additional costs of approximately $150 million relating to the transaction.
Over the past year, ING Real Estate Investment Management had been scurrying for potential bidders to raise funds by divesting its non-core business. The company offers a broad range of funds and separate accounts across private equity and listed shares (including hedge funds).
ING Real Estate’s investment policy is based on an indigenous in-depth study provided by its global research team through top-down research that develops portfolio strategy and identifies target markets, and bottom-up research that integrates local market analysis into each investment decision. With a global portfolio of $59.8 billion (as of December 31, 2010), the company has been consistently ranked as one of the largest real estate managers of the world.
The real estate management business has recovered significantly in 2010 with a strong growth in assets under management after a testing time during the global downturn in 2008 and 2009. Consequently, with the acquisition, CB Richard Ellis has transformed itself as the largest investment manager and adviser in the world, creating a behemoth of sorts in the financial industry with nearly $100 billion of assets under management.
Post-acquisition, CB Richard Ellis’ net debt is expected to be less than 2.25x EBITDA (earnings before interest, tax, depreciation and amortization), which is well within the maximum allowable covenant leverage ratio of 3.75x. ING Real Estate Investment Management would be merged with its existing fund management division, called CBRE Investors, which had over $37.6 billion assets under management as of December 31, 2010.
CBRE Investors is an independently operated affiliate of CB Richard Ellis and harnesses the research, investment sourcing and resources of the parent company for the benefit of its investors. The acquisition is a strategic fit for CBRE Investors as stable fee income from the property fund management segment of ING Real Estate is expected to complement its advisory business.
CB Richard Ellis is the global market leader in commercial real estate brokerage and advisory services for property leasing and sales, forecasting, valuations, origination and servicing of commercial mortgage loans, as well as project and real estate investment management.
The company has a broad range of real estate products and services, and an extensive knowledge of domestic and international real estate markets that enables it to operate as a single-source provider of real estate solutions.
CB Richard Ellis offers a range of services to occupiers, owners, lenders and investors in office, retail, industrial, multi-family and other types of commercial real estate assets globally under the CB Richard Ellis brand, and provides development services under the Trammell Crow brand.
We maintain our Outperform rating on CB Richard Ellis, which presently has a Zacks #2 Rank translating to a short-term Buy recommendation and indicates that the stock holds the potential to outperform the overall U.S. equity market in the next 1−3 months.
CB RICHARD ELLS (CBG): Free Stock Analysis Report
ING GROEP-ADR (ING): Free Stock Analysis Report
VORNADO RLTY TR (VNO): Free Stock Analysis Report
Zacks Investment Research
