Jones Lang LaSalle Inc.'s proposed $613 million acquisition of Addison, Texas-based real estate advisory firm the Staubach Co., which would create the second largest commercial real estatefirm in the world, won't boost the Chicago-based global real estate giant's retail division.
The, which had long been rumored, was finally announced last month. But the planned merger does not include Staubach Retail or Cypress Equities, Staubach's retail development division.
“It's not going to impact us at all,” says Greg Maloney, CEO and president of Jones Lang LaSalle Retail, its Atlanta-based third-party property manager.
Jones Lang LaSalle had considered buying both Staubach Retail and Cypress Equities, which are independently owned and operate under licensing agreements with Staubach, but decided that their existing structures would make the deal more difficult, Maloney says. Staubach Retail and Cypress Equities will continue to operate under long-term licensing agreements with Staubach and Roger Staubach will remain on the board of directors of both firms.
The deal will result in Jones Lang LaSalle commanding a combined $186 billion in investment sales and leasing volume, second only to New York-based CB Richard Ellis, with $264.2 billion, according to National Real Estate Investor.
According to the terms of the deal, Jones Lang LaSalle has agreed to pay $613 million for Staubach, plus $114 million in earn-out payments over the next four-and-a-half-years if certain performance measures are met. The deal will give Jones Lang LaSalle a stronger tenant representation platform and raise the U.S. share of the company's overall business to 37 percent from 29 percent, according to Vance Edelson, an analyst with Morgan Stanley.
Also, as a result of the acquisition, Staubach will end its eight-year alliance with DTZ, a global real estate advisor. The London-based firm partnered with Staubach to bolster its North American presence, but in recent years has built a direct base through acquisitions of U.S.-based firms such as DTZ Rockwood, DTZ Barnicke and DTZ FHO Partners. Following the announcement of the Jones Lang/Staubach deal, DTZ said it had served Staubach with a notice of termination of partnership. It is also cutting ties with Staubach Retail, despite it not being part of the acquisition. However, Clay Smith, president of Staubach Retail, says losing the alliance with DTZ won't affect the firm too much since the brokerage was largely focused on providing corporate real estate services to multinational corporations.
“We are a retail company run by retail people,” Smith says. “We are not focused on corporate users of real estate.”
Jones Lang LaSalle wouldn't rule out pursuing Staubach Retail in the future, Maloney says. However, being part of Jones Lang LaSalle would interfere with Staubach's core business model, which is focused on tenant representation, according to Smith.
The departure from its exclusive focus on tenants, which has been a legacy for the Staubach brand, is among the challenges facing the Jones Lang LaSalle Staubach union, Edelson notes. In a June report, he wrote that Staubach's “‘No conflicts of interest approach’ could be jeopardized as part of a larger organization serving both sides.”
Jones Lang LaSalle's stock closed at $66.19 per share, up 1.56 percent on the day after the announcement.