Tuesday, July 17, 2018

Caisse Invests $250 Million In CRE Services?

The Canadian Press reports, Quebec's Caisse de depot pension fund investing $250 million in Avison Young:
The Caisse de depot et placement du Quebec pension fund has made a $250-million preferred equity investment in Avison Young, a commercial real estate services firm.

Avison Young says the money will help fund acquisitions and hiring as part of its global expansion, while a portion will also be used to buy back shares held by Parallel49 Equity and others.

The Caisse invested in a newly authorized class of non-voting preferred shares of the firm, though the terms of the transaction were not disclosed.

As part of the deal, the Caisse will be entitled to choose three of the nine members of Avison Young's board of directors.

Avison Young says the deal will help its international expansion as it gives it access to a wide network of expertise, deal flow and market intelligence.

The pension fund says it looks forward to supporting Avison Young's growth, which has already seen it expand to 84 offices across North America and Europe.
Don Wilcox of the Real Estate News Exchange also reports, Caisse de dépôt invests $250M in Avison Young:
Avison Young CEO Mark E. Rose says a $250-million preferred equity investment from the Caisse de dépôt et placement du Québec (CDPQ) provides his growing firm funds to accelerate its expansion plans, leaves decision-making entirely with its senior management group and allows it to remain a “disruptive force” in the industry.

The investment, announced Monday, creates a new class of non-voting Avison Young shares for the CDPQ. A portion of the proceeds will be used by the commercial real estate services firm to purchase outstanding common (voting) stock from its current private equity partner, Parallel49 Equity (formerly Tricor Pacific Capital) as well as other “non-management founders and principals,” the company said.

“The common shares, the (voting shares) of this company 100 per cent are back in the hands of only people who work at Avison Young,” Rose told RENX during an interview Monday following the announcement.

CDPQ will be entitled to designate three members of Avison Young’s nine-member board of directors.

Rose said to have a partner such as CDPQ, “to allow us to keep the culture and the structure we have built as a privately held, principal-led organization is exactly what we were looking for. To have a company with the brand elevation, and the gravitas, and the case to be that partner, and with the belief to the tune of $250 million, we are just beyond excited.”

Acquisitions and talent recruitment

In addition to the share purchases, proceeds will also be used for acquisitions and to help Toronto-based Avison Young recruit additional talent as it continues to execute its strategic plan.

Rose, who has been CEO of Avison Young for almost 10 years, has already managed its growth from $40M in annual revenues to about $650M in revenues. When he joined Avison Young after leaving JLL, the company had 11 offices in Canada. It now has 84 offices across North America and Europe and has expanded into investment management.

In fact, Avison Young bills itself as the world’s fastest growing private and principal-led, global CRE services firm.

Rose said the key to Avison Young’s rapid growth has been its status as a privately held firm.

“It is so important to the company that we have built, especially against a competitive set that’s all public and structured,” he said, speaking of Avison Young’s major competitors. “We set out nine-and-a-half years ago to build something very different and very special. We wanted it to be very disruptive and we wanted it to differentiate itself.

“(As a private company) we believe you can move quicker, you can outsource more, you don’t need to worry about what you are saying to anybody on a quarterly basis. You can spend your time solving the needs of clients because if a client pays us in Years One, Three, Five, Seven and Nine, that’s fine.”

CDPQ large-scale investor

Rose said bringing the CDPQ on board was necessary for another reason. A large-scale investor, the CDPQ can better accommodate Avison Young’s expanding needs. He lauded Parallel49 as “the greatest partner anybody could ask for” as the company expanded both its service lines and geographical reach.

Financial terms of the transaction have not been disclosed.

“Avison Young’s track record and experienced team speak for themselves: through a well-defined and executed business strategy, the company has grown considerably in recent years, particularly by entering international markets with strong potential,” said Stéphane Etroy, executive vice-president and head of private equity at CDPQ, in a prepared statement.

“With its unique corporate culture and its long-term vision, Avison Young is an ideal partner for CDPQ, and we look forward to supporting the company as it continues to grow over the coming years.”

As for where Avison Young intends to grow, Rose didn’t get into specifics but did offer a broad outline.

“More of the same . . .”

“What you are gonna see is more of the same. More North America, because we can. More Europe, because we can. And, you’ll see us in Asia,” he said. “And, by the way, more in investment management. We have an investment management group which we started from scratch and we have every intention of growing that business.”

Armed with the new funding, Rose said Avison Young plans to move quickly on the acquisition front.

“That’s why we’re doing this, and I think you will see many announcements over the next year or year-and-a-half.”

Rose said having Avison Young’s business backed by a major investor like the CDPQ is both gratifying and energizing.

“(For) this next very large leg up in growth, to have confirmation from an entity like the Caisse that this disruptive, differentiated approach is right and they believe in it with us, it just feels very good to all of our partners here at Avison Young.

“We’re going to go have some fun.”

About Caisse de dépôt et placement du Québec

CDPQ is a long-term institutional investor which manages funds primarily for public and parapublic pension and insurance plans. As of Dec. 31, 2017, it held $298.5 billion in net assets. As one of Canada’s leading institutional fund managers, CDPQ invests globally in major financial markets, private equity, infrastructure, real estate and private debt.

About Avison Young

Headquartered in Toronto, Avison Young is a collaborative, global firm owned and operated by its principals. Founded in 1978, the company comprises 2,600 real estate professionals in 84 offices, providing value-added, client-centric investment sales, leasing, advisory, management, financing and mortgage placement services to owners and occupiers of office, retail, industrial, multi-family and hospitality properties.
IPE also reports, Québec’s Caisse invests C$250m in Avison Young:
Caisse de dépôt et placement du Québec (CDPQ) has invested C$250m (€162.2m) in Avison Young to enable the commercial real estate services firm to buy back its shares from a current private equity partner and accelerate its growth plan.

CDPQ, an investor that manages C$298.5bn funds primarily from public and parapublic pension plans, has made the preferred equity investment in Avison Young.

As part of the investment, Avison Young said CDPQ will be entitled to designate three members of Avison Young’s nine-member Board of Directors. The full terms of the transaction were undisclosed.

Avison Young said it will use the proceeds to invest in acquisitions and the recruitment of key professionals, fuelling the company’s ongoing growth of its global footprint and service-line capabilities.

In addition, a portion of the proceeds will be used to repurchase the shares held by the firm’s current private equity partner, Parallel49 Equity, as well as shares of certain other non-management founders and former Principals of Avison Young. As a result, the principals of Avison Young will own 100% of the common shares of the company.

Mark Rose, the chair and CEO of Avison Young, said: “We look forward to a collaborative relationship with CDPQ and its large global network, and benefit from the ability to share expertise, deal flow, market intelligence and resources as we continue to grow our business across the spectrum of commercial real estate services in North America and other key markets globally.

“We are gratified by CDPQ’s support of our growth strategy, which we launched from a base of 11 offices in Canada and expanded to 84 offices across North America and Europe in just under 10 years – and growing revenue more than 15 times during that period.”

Stéphane Etroy, an executive vice-president and head of private equity at CDPQ, said: “Avison Young’s track record and experienced team speak for themselves: through a well defined and executed business strategy, the company has grown considerably in recent years, particularly by entering international markets with strong potential.”
You can read the Caisse's press release on this deal here.

It's worth noting this isn't a real estate deal, it's an equity stake through the Caisse's private equity group in a fast-growing commercial real estate services firm based in Toronto, Avison Young.

A profile of the company is available here. The image below captures its profile and focus (click on image):



And an  overview of the company is available here:

Avison Young is the world’s fastest-growing commercial real estate services firm. Headquartered in Toronto, Canada, Avison Young is a collaborative, global firm owned and operated by its principals. Founded in 1978, the company comprises 2,600 real estate professionals in 84 offices, providing value-added, client-centric investment sales, leasing, advisory, management, financing and mortgage placement services to owners and occupiers of office, retail, industrial, multi-family and hospitality properties.

Formed by the union of Graeme Young & Associates of Alberta (1978) and Avison & Associates of Ontario (1989) and British Columbia (1994), Avison Young was created in 1996 to provide clients with more comprehensive real estate services at the local, national and international level. Over the next decade, new offices opened in Toronto West (1997), Montreal (2002), Winnipeg and Regina (2004), Halifax (2006) and Ottawa (2007). 

In fall 2008, the shareholders merged the operations to create a single national entity: Avison Young (Canada) Inc. As a result, Avison Young became Canada’s largest independently-owned commercial real estate services company.

In early 2009, Avison Young opened its first office outside of Canada in Chicago, followed by new offices in Washington DC, Lethbridge AB, Toronto North (2009); Atlanta, Houston, Tysons VA, Boston, Waterloo Region (2010); Dallas, Los Angeles, Las Vegas (2011); Reno, Suburban Maryland, San Francisco, New York City, Charleston, Pittsburgh, New Jersey, Fort Lauderdale, Boca Raton, Miami, Detroit, Raleigh-Durham, Orange County, Denver (2012); San Diego, Charlotte, Sacramento, West Palm Beach, San Mateo, Long Island, Greenville, Tampa, Philadelphia (2013); Columbus OH, London U.K., Thames Valley U.K., Austin, Fairfield/Westchester, Oakland, Cleveland, Orlando, Frankfurt (2014); Munich, Moncton, Minneapolis, Indianapolis, Duesseldorf, Hamburg, Nashville, Knoxville, Hartford, San Antonio, Mexico City, Memphis (2015); Coventry, Jacksonville, Phoenix, Berlin, St. Louis (2016); Bucharest, Manchester, San Jose/Silicon Valley (2017); Inland Empire (2018).

The company also acquired Toronto-based Darton Property Advisors and Managers in 2008; Virginia-based Appian Realty Advisors, LLC, Atlanta-based Hodges Management and Leasing Company in 2010; Virginia-based Millennium Realty Advisors, LLC, Los Angeles-based Ramsey-Shilling Commercial Real Estate Services, Inc. in 2011; Maryland-based Realty Management Company, Las Vegas-based Landry & Associates, Los Angeles-based Starrpoint Commercial Partners, Inc., New Jersey-based The Walsh Company, LLC, Raleigh, NC-based Thomas Linderman Graham Inc. in 2012; Houston-based Mason Partners, Florida-based WG Compass Realty Companies, Torrance, CA-based R7 Real Estate Inc., Tampa, FL-based Lane Witherspoon & Carswell Commercial Real Estate Advisors, (partnered with) Greenville, SC-based Colonial Commercial, Dallas-based Dillon Corporate Services, Inc., Maryland-based McShea & Company, Inc. in 2013; Atlanta-based The Eidson Group, LLC, Columbus OH-based PSB Realty Advisors, LLC, London U.K.-based Haywards LLP, Austin-based Commercial Texas, LLC, Montreal-based Roy et Tremblay Inc., Sacramento-based Aguer Havelock Associates, Inc., New Jersey-based Kwartler Associates, Orlando-based MCRE, LLC, Miami-based Abood Wood-Fay Real Estate Group, LLC in 2014; Calgary-based Peregrin Inc., Chicago-based Mesa Development, LLC, Philadelphia-based Remington Group, Inc. in 2015; Toronto-based Metrix Realty Group (Ontario) Inc., U.K.-based North Rae Sanders, Phoenix-based The GPE Companies, Calgary-based Linnell Taylor Lipman and Associates Ltd. in 2016; Atlanta-based Hotel Assets Group, LLC, Atlanta-based Rich Real Estate Services, Inc., Rutherford, NJ-based Cresa NJ-North/Central, LLC, Raleigh-based Hunter & Associates, LLC, Manchester U.K.-based WHR Property Consultants LLP in 2017; Vancouver-based Alcor Commercial Realty Inc. in 2018.

In 2018, Avison Young achieved Platinum status with the Canada’s Best Managed Companies program by retaining its Best Managed designation for seven consecutive years. The program is sponsored by Deloitte, CIBC, Canadian Business, Smith School of Business, TMX Group and MacKay CEO Forums.

Today, Avison Young has offices in Toronto (HQ) (2), Atlanta, Austin, Berlin, Boca Raton, Boston, Bucharest, Calgary, Charleston, Charlotte, Chicago (2), Cleveland, Columbus OH, Coventry, Dallas, Denver, Detroit, Duesseldorf, Edmonton, Fairfield/Westchester, Fort Lauderdale, Frankfurt, Greenville, Halifax, Hamburg, Hartford,  Houston, Indianapolis, Inland Empire, Jacksonville, Knoxville, Las Vegas, Lethbridge, London U.K. (2), Long Island, Los Angeles (4), Manchester, Memphis, Mexico City, Miami, Minneapolis, Moncton, Montreal, Munich, Nashville, New Jersey (2), New York City, Oakland, Orange County, Orlando, Ottawa, Philadelphia (2), Phoenix, Pittsburgh, Raleigh-Durham (2), Regina, Reno, Sacramento, San Antonio, San Diego, San Francisco, San Jose/Silicon Valley, San Mateo, St. Louis, Suburban Maryland, Tampa, Thames Valley U.K., Toronto North, Toronto West, Tysons, Vancouver, Washington DC, Waterloo Region, West Palm Beach and Winnipeg. The company's advisory personnel, licensed brokers, commercial property managers, financial analysts, research professionals, marketing specialists and property accountants serve clients ranging from leading multinational investors and occupiers to smaller firms and sole proprietorships.
I must admit, I've never heard of this company before but commercial real estate services isn't my area of expertise.

Still, I do know some of the top commercial real estate services companies like the usual suspects:
1. Cushman & Wakefield

With 300 offices in over 70 countries, Cushman & Wakefield is a real force to be reckoned with. C & W is truly a comprehensive company, with brokerage services, leasing, sustainability enhancement, consulting for portfolios or properties, tax management and escrow, and more. Their reputation is equally strong among investors and tenants, and they are definitely here to stay as one of the largest commercial property management companies worldwide.

Link: http://www.cushmanwakefield.com/en/

2. Eastdil Secured

Since the 1960s, Eastdil Secured has been one of the most respected names in real estate investment banking. They have used their expertise in real estate fundamentals to become a leader in commercial real estate for private investors and institutions both. Their range of properties includes hospitality, multifamily, retail, and industrial holdings.

Link: https://www.eastdilsecured.com

3. Simon Property Group

With properties across 37 U.S. states, Asia and Europe, Simon Property Group is the premier name in retail properties and property management. Flagship locations like The Forum Shops at Caesars in Las Vegas, Sawgrass Mills in Sunrise, FL and Woodbury Common Premium Outlets in Central Valley, NY are all proud parts of the Simon family of properties. Simon is a S & P 100 company, formed in 1993, and owns or has part interest in more than 325 properties, including international properties, The Mills, Premium Outlet Centers, community/lifestyle centers, and regional malls.

Link: http://www.simon.com/

4. Colliers International

Based in Canada, Colliers International has a presence in 68 countries and provides services for investors, owners, developers, and tenants in the commercial real estate arena.

Serving the hotel, residential property, mixed-use, retail, and office sectors, Colliers International provides project management, investment services, landlord/tenant representation, asset management, valuation/advisory services, and property management.

With more than 40 years in the business, the firm’s 2015 revenues were over $2.6 billion. In recent years, Colliers International has acquired other commercial real estate firms in Cincinnati, Nashville, New York City, Grand Rapids, MI, Columbus, OH, and other markets.

Link: https://www2.colliers.com/en

5. CBRE Group

Based in Los Angeles, CBRE Group has been around for over a century and is the world’s largest firm specializing in commercial real estate services and investment. Their suite of services includes property management and facilities management for tenants of commercial real estate, appraisal, brokerage, and leasing. In addition, the company’s Global Investors division facilitates real estate investment through investment funds, direct investment, and other vehicles. CBRE Group’s Global Investors division has over $100 billion in assets currently under management. The company currently stands at #214 in Fortune 500 rankings – it has been included in the Fortune 500 every year, beginning in 2008.

Link: https://www.cbre.us

6. JLL

Founded as Jones Lang LaSalle, Inc., JLL’s roots go back to 1783, when it was founded as Jones Lang Wootton. Based in Chicago, JLL has about 70,000 employees and over 230 offices in 80 different countries. In 2014, JLL’s global revenue was $4 billion, with interests in investment, leasing, property management, and development. JLL’s in-depth knowledge of LEED compliance makes them a go-to consultant for energy and sustainability services, including smart building solutions, alternative energy designs, and energy-efficient retrofits for existing properties. JLL’s size and assets are second only to CBRE in the commercial real estate field.

Link: http://www.jll.com/

7. Newmark Knight Frank

Newmark Knight Frank (NKF) is a market leader among commercial real estate advisory firms. NKF is a fully integrated firm with services that include investment, consulting, property management, facilities management, valuation and appraisal, facilities and property management, and tenant/landlord representation. NKF’s portfolio includes industrial and retail properties that include landmarks like 666 Fifth Avenue and 34 W. 34th Street in NYC, The Wrigley Building in Chicago, The Confluence in Denver, and Thomas Place in Boston.

Link: http://www.ngkf.com/
As you can see, commercial real estate services are big business ranging from everything from leasing, property management, advising to asset management.

I know CBRE well because it partnered up with Caledon Capital in Toronto to create CBRE Caledon, a firm which offers customized private market solutions for institutional clients.

What do I think of the Caisse $250 equity investment in Avison Young? I think it's a great long-term investment in a fast-growing company which is already a global player and should be part of the list of top commercial real estate services firms.

One thing I noticed, the company really grew fast after the 2008 crisis, which tells me they know what they're doing and have executed well on their growth strategy.

And judging by its more recent tweets, it's already putting the Caisse's investment to good use, buying a European real estate services company:



I also noticed it inevitably wants to get into the asset management game, which is very lucrative but could present some conflicts of interests with clients or maybe not since CBRE and Simon Property Group also do it.

Anyway, this is a good private equity deal for the Caisse, one that will benefit both parties over the long run.

Below, Avison Young is a different kind of commercial real estate company, where principals own the company -- and drive results for clients. “Providing a full range of integrated services for real estate owners and occupiers around the globe, we are growing rapidly to help clients solve their most complex challenges.”

I also embedded a second clip, the Avison Young Elevator Speech with CEO Mark Rose, updated August 2015.

Quite an impressive company and I like the fact it's owned by its principals, tells me they have the right long-term focus and alignment of interests. As their website states: "And because of the value we deliver, our culture and our unique approach, clients and talent are joining us every day."


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