NEW YORK CITY—BGC Partners is acquiring multifamily broker network Apartment Realty Advisors for $110 million in cash. Additional cash and equity based earn-outs may be paid to the companies within the ARA network if certain performance targets are met. In general, the ARA companies are expected to generate annual revenues of $100 million or more and pre-tax distributable earnings in excess of $20 million. A majority of the closings for these companies are expected to close during the fourth quarter of 2014.
ARA's acquisition is another sign that the commercial real estate brokerage community views consolidation as a key growth strategy. In this case, bringing ARA under BGC's corporate umbrella will give Newmark Grubb Knight Frank a sizeable leg up in the market. BGC acquired NGKF in 2011.
"Acquiring ARA and its members represents an attractive opportunity for NGKF and will substantially add to the revenues and earnings of our real estate capital markets business," said Howard W. Lutnick, Chairman and CEO of BGC Partners, in a prepared statement. The acquisition, he continued, will also add value to BGC's overall business, which services the financial and real estate markets with a range of products including fixed income securities, interest rate swaps, commercial real estate, commodities, futures, and structured products.
With its focus on multifamily, it is quite clear the value ARA brings to the table. Any number of metrics shows that apartments are a top asset class in commercial real estate and the pipeline only continues to grow.
Apartment construction has grown at more than three times the rate of single family housing over the past five years, James D. Kuhn, president of NGKF and head of the NGKF Capital Markets platform, noted. Accordingly ARA's recent volume growth has outpaced the overall commercial sales market.
There are approximately 100 brokers in the ARA network. The Atlanta-headquartered company closed more than $3.3 billion in multi-family sales in the first six months of 2014, for a 42% year-on-year growth rate, according to Real Estate Alert.
Rarely a quarter goes by without some sign of consolidation in the broker industry now. Notable examples include Savills PLC acquiring Studley for $260 million cash and Avison Young, which has been steadily picking up companies in the US to expand its footprint. Then there is, of course, the TPG consortium, consisting of PAG Asia Capital and the Ontario Teachers' Pension Plan, which is acquiring DTZ Investment Holdings. In turn, DTZ is acquiring Cassidy Turley, a company that has its own series of acquisitions to thank for its current status.
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Erika Morphy
Erika Morphy has been writing about commercial real estate at GlobeSt.com for more than ten years, covering the capital markets, the Mid-Atlantic region and national topics. She's a nerd so favorite examples of the former include accounting standards, Basel III and what Congress is brewing.
