CBRE Buys Johnson Controls Unit

By Gail Kalinoski, Contributing Editor

Bill Concannon, CBRE Global 

Ending weeks of speculation, CBRE Group Inc. has made it official. It is purchasing the Global WorkPlace Solutions business of Johnson Controls, Inc. for $1.48 billion in cash, giving the international commercial real estate services firm expertise from the market leader in facilities management solutions to add to its toolbox.

In a presentation to investors, CBRE said the acquisition “significantly augments a business line that is already our fastest-growing and most stable and leverages our full-service platform to drive transaction rates.”

CBRE and GWS will manage nearly 5 billion square feet of real estate and corporate facilities globally, including 2.3 billion square feet in the Americas, 1.2 billion square feet in Europe, the Middle East and Africa and 1.4 billion square feet in Asia Pacific.

“Clients are increasingly asking us for fully integrated real estate and facilities solutions, which includes self-performing building technical services across their global portfolios,” Bill Concannon, CEO of CBRE’s Global Corporate Services business, said in a news release announcing the definitive agreement. “GWS will further improve our ability to serve clients in more than 50 countries with a market-leading capability in all services, industry sectors and property types.”

Reuters and The Wall Street Journal reported in early March that CBRE won the auction for Milwaukee-based Johnson Controls’ GWS business. Johnson Controls announced in September that it was putting the GWS portion of its company up for sale so it could focus on its core businesses.

GWS will operate as part of CBRE’s Global Corporate Services business, which has increased revenue by at least 10 percent a year over the last decade as more companies outsource their real estate needs, according to CBRE.

Analysts have said outsourcing has been a big source of growth for large CRE property services firms like CBRE and JLL. So it is not surprising that CBRE would be looking to grow that platform in its business.

When the deal closes later this year, the full range of combined occupier services will be available to clients of both companies, including CBRE’s leasing expertise and GWS’s engineering strength.

“With GWS, we further our ability to create advantages for occupier clients by aligning every aspect of how they lease, own, use and operate real estate to enhance their competitive position,” CBRE president & CEO Bob Sulentic said in the release.

John Murphy, GWS president, will join CBRE as global COO, GCS, once the deal closes. GWS has 16,000 employees worldwide.

Murphy said the fit between the two companies was “outstanding” and would help create new value for clients and shareholders.

“Together we will assure clients of high-quality, reliable, cost-efficient, comfortable and safe working environments no matter their core business mission,” Murphy added.

GWS currently has global clients in the industrial/manufacturing, life sciences and technology sectors. Clients typically purchase services in five-year contracts. GWS’ 50 largest clients have an average tenure of 12 years. Last year, the GWS business brought in approximately $3.4 billion in revenues.

In addition to the definitive agreement for the GWS acquisition, CBRE and Johnson Controls announced a 10-year strategic relationship. CBRE will provide Johnson Controls with corporate real estate services, including facilities management, project management and transaction services on more than 50 million square feet. Johnson Controls will offer a factory-direct relationship on HVAC equipment, building automation systems and related services to CBRE for its managed properties. The two companies will also fund an innovation lab to develop solutions to lower energy costs.

“This is more than just a transaction. This is a deal that marries CB Richard Ellis and Johnson Controls for the next 10 years. It creates a brand-new channel for us and gives us a much larger reach,” Alex Molinaroli, Johnson Controls CEO, said during a morning conference call with analysts.

Simpson Thacher & Bartlett L.L.P. acted as CBRE’s legal advisor.

The GWS acquisition is one of several M&A deals CBRE has recently announced. In January, it acquired United Commercial Realty, a Dallas firm that specializes in retail services and manages about 8 million square feet of retail properties for institutional investors. A month earlier, CBRE acquired IVI International, Inc. of White Plains, N.Y., and its related companies. IVI provides construction, property condition and environmental consulting, due diligence and advisory services and will join CBRE’s existing Valuation and Advisory Services team.