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Cushman & Wakefield, the largest privately owned commercial real estate agency in the world, has been put up for sale and could sell for a record price, according to those who track the market.

C&W's owner, the Italian Agnelli family, has appointed Goldman Sachs and Morgan Stanley to find a buyer, with a view to keeping the business private and avoiding a merger with one of its listed peers or a sale to a rival agency.

‘I don’t think they will want to sell to a competitor,’ an analyst, who asked not to be identified, told PropertyEU.

‘If a rival doesn’t buy it, I think a US private equity buyer will snap it up,’ said Joe Valente, head of research and strategy for the European real estate group at JP Morgan. ‘It’s a strong possibility, given Cushman’s strong presence in the US.’

However, huge interest in global real estate markets makes it hard to predict just how much C&W could fetch. ‘Nothing would surprise me on the price,’ said Valente. ‘If Exor paid around $500 mln for its initial stake and manages to sell it for $2 bn, that represents a massive nest egg.’

Valente estimates that the sale could take around 6 months to complete. ‘It’s a good business, particularly in the US but the big ‘hole’ is Asia. I think whoever buys C&W is likely to tack on an Asian component.’

Time is ripe for a sale
C&W could indeed sell for as much as €1.8 bn, according to those who track the market, largely on the back of a raft of mergers and acquisitions in the real estate sector in recent years that has seen prices for some firms rocket to more than 10 times EBITDA.

C&W would not be the first global real estate advisory firm to trade hands in the past 12 months. Just last month, DTZ merged with rival Cassidy Turley in the US, backed by a consortium comprising global private investment firm TPG Capital, Asian alternative investment management firm PAG Asia Capital and the Ontario Teachers’ Pension Plan. The merger creates a global top-three CRE services company with $2.9 bn in annual revenues.

News of C&W's possible sale comes as rival Colliers braces itself for a spin-off by its Toronto-based parent group. FirstService Corporation unveiled plans earlier this month to list Colliers International as an independent, publicly traded unit.

Given the strong interest in the real estate sector, the price fetched for C&W is expected to reflect a sharp uptick on the $565.4 mln that the Agnellis' holding company Exor paid for a 67.5% stake in 2008. It has since increased its stake to 81%. The firm’s employees hold the 19% of Cushman not owned by the Agnellis.

Time is ripe for the sale. Commercial real estate globally has rebounded strongly in the past two years, fuelled by the low-interest rate environment, coupled with low bond yields, thereby driving more investors into real estate in search of better returns. The increase in global deal volumes has therefore helped to bolster the share price of such advisory firms. CBRE shares were trading at $34.67 on Wednesday, close to their 52-week peak of $35.37. JLL was trading at $163.20, down just slightly from its 52-week peak of $164.48.

Real estate investment globally surged 18% to $700 bn (€594 bn) last year, and is expected to rise further in 2015, replenishing brokers' capital positions. C&W posted earnings before interest, taxes, depreciation and amortisation (EBITDA) of $77 mln in the first nine months last year, a 37% surge from $56 mln in the same period in 2013.

Exor said in a statement that the possible divestment is in line with its strategy. 'Exor clarifies that the evaluation, from time to time, of potential options for its portfolio companies - including business divestments, combinations, acquisitions and other financial and strategic alternatives - is entirely consistent with its investment activity,' it said.

'There is currently no transaction to disclose, nor guarantee that such a review may result in any transaction involving Cushman & Wakefield,' a Cushman & Wakefield spokesperson said.

'As is the normal course of business, both Cushman & Wakefield and Exor continually seek ways to further enhance the businesses, create value and further accelerate their plans.'

Headquartered in New York, C&W was founded in 1917 and currently has around 250 offices in 60 countries and more than 16,000 employees. In the nine months ended September 30, 2014, C&W reported an increase in gross revenues of nearly 20% to $1.98 bn from $1.66 bn a year earlier. Although C&W is the largest privately-owned real estate agency globally, it remains the third largest overall, behind CBRE and JLL.

Morgan Stanley declined to comment for this story. Goldman Sachs could not be reached for comment.