What a Cushman & Wakefield IPO Really Means

NEW YORK CITY—Bloomberg News had reported that Cushman & Wakefield, which a private equity investor group of TPG, PAG and Ontario Teachers’ Pension Plan owns, was interviewing advisors for an initial public offering. A source told Bloomberg the IPO could be as early as this year.

In a GlobeSt.com interview, real estate attorney Doug Ulene explains what an IPO would mean both for Cushman and the brokerage community.

Ulene, now has his own legal practice, Ulene PLLC. Formerly he was a partner at Willke Farr & Gallagher LLP for eight years, and subsequently served as general counsel for the Paramount Group, Inc. and Ogden CAP Properties, LLC.

A Cushman IPO, “may seem like a big deal but may prove to be a non-event,” he says.

Two of its biggest competitors worldwide CBRE and Jones Lang LaSalle are already public. Newmark went public in December 2017. Savills Studley is traded on the London Stock Exchange, and Colliers International is traded on the Toronto Stock Exchange and Nasdaq.

“An IPO is frankly the best exit strategy for Cushman & Wakefield’s private equity backers,” says Ulene. “There is really no other exit strategy that you could think about.”

Looking for a strategic buyer poses an interesting question. CBRE would make a lot of sense. But Ulene points out, this would trigger antitrust concerns.

Cushman has global headquarters located in Chicago at 225 W. Wacker, and its New York office at 1290 Sixth Ave. It earned $6.9 billion in revenue in 2017, and has 48,000 people working in 400 offices in 70 countries, according to its website.

Ulene does not anticipate going public will substantially affect Cushman’s individual brokers. But with senior management, individuals might receive a portion of compensation in stock. His sense is brokers would continue to receive all of their commission-based compensation in cash.

“There’s an argument that stock-based compensation provides employees with an incentive to work cooperatively and to cross-sell the firm’s other services,” says Ulene, “But a broker who’s being compensated in stock today has the option to jump to other firms. That fact will probably deter many companies from shifting their compensation from all cash to a mix of cash and stock.”

To learn whether the IPO would lead to an influx of cash for perqs, new office expansions or other business expenses, Cushman watchers will have to wait until the SEC Form S-1, initial registration form is filed. This requires the company to provide information on the planned use of capital proceeds, and to set forth its business model.

Ulene says large, multinational companies want to work with people whom they know and trust in multiple markets instead of having to pick a different broker in every market. “So a smaller locally based brokerage company simply can’t compete with the scope of services, the scope of coverage and the continuity of personnel that a multi-national brokerage company can provide,” he states.

Savills was strong in Europe and Asia but lacked a presence in the US. Its merger with the New York City-based CRE brokerage Studley that had four offices in Southern California created a larger global footprint. Cushman is a combination of several companies, including, its acquisition of Massey Knakal. Commercial real estate firm DTZ acquired Washington, DC-based Cassidy Turley, then DTZ merged with Cushman & Wakefield.

“The other thing that you’re seeing is that these brokerage companies are no longer just brokerage companies.” says Ulene. He describes how they now provide services including leasing, sales, mortgage origination, mortgage servicing, appraisals and evaluations. Several have also started investment funds, from which they collect management fees. “These companies are really becoming full-service across the entire real estate spectrum.”

IPOs, mergers and combinations of different companies coming together are ways brokerage firms can expand. Ulene also adds, “and all of these firms will plug holes through good, old-fashioned poaching.”