The main draw to JLL of buying rival property consultancy HFF is undoubtedly the prospect of rapidly scaling its presence in the US capital advisory space. However, the firm also stands to benefit from the added weight the purchase will give it in the European debt advisory market.
Announcing the $2 billion deal on 19 March, JLL argued the acquisition would “significantly bolster” its full-service capital markets business and mentioned accelerating growth in its debt advisory business in Europe.
Compared with JLL, which has a longstanding London-based debt advisory team under UK head of debt Chris Holmes, HFF is a relative newcomer to the European real estate credit scene. Although it has an extensive network of offices across the US and a track record of debt and equity financing there, its first foray outside its home country only took place in January 2017 with the opening of a London office.
Speaking to Real Estate Capital in August of that year, Michael Kavanau, who had relocated from Chicago to lead the debt business in the UK, was clear about HFF’s intentions: “We are aiming to be a disrupter.”
With its Rolodex of US contacts, HFF was heralded by some as a challenger to Eastdil Secured’s position in the UK and continental European markets. Although its volumes of annually arranged debt remain way behind Wells Fargo subsidiary Eastdil, it has certainly made a name for itself during its two years in London.
Its business model combines debt brokerage, investment advisory and corporate finance. It has advised on major UK financing deals, most recently the £108 million (€125 million) acquisition and refurbishment financing of 127 Kensington High Street in London, provided by an investment bank to Ashby Capital.
Landmark UK deals in 2018 included advising the buyer of upmarket serviced office operator London Executive Offices on the acquisition and financing in October, as well as advising on the refinancing of Blackstone’s mixed-use St Katharine Docks marina in London in August. On the latter, Allianz Real Estate and Brookfield joined forces for the first time in a debt deal to provide around £300 million.
Although its track-record in Europe remains limited, HFF has managed to cause some of the disruption in the debt advisory space that Kavanau promised. Last November, the firm told Real Estate Capital that so far that year the company had completed 18 debt and equity transactions with a total value of £1.7 billion.
Like several other advisors, HFF has also made efforts to expand into continental Europe, a far less-brokered market than the UK’s. By the end of last year, the firm said it was working on loans in six European jurisdictions. It is understood that the UK accounted for around 75 percent of HFF’s European business in 2018, but that the company’s mandated and existing business in continental European countries has grown since.
Debt advisory has long been part of JLL’s offer. The company’s hires over the past two years – including London specialist David Barry and hotels and hospitality specialist Chris Gow – demonstrate its intention of growing its debt capabilities.
Although debt advisory is a relatively small part of the overall picture for a full-service property consultancy such as JLL, HFF’s focus is squarely on selling and capitalising real estate. JLL’s late-cycle M&A deal will boost its standing in the capital advisory world and bolster its debt finance-raising capabilities in Europe.
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