First Eastdil, now HFF. The competition is about to get tougher in European real estate capital markets advisory.
It is a little unfair to describe US real estate capital markets advisor HFF as an arriviste. The word has connotations of unwelcome upstarts disliked by members of a community who have been there longer.
However, you can be sure that HFF’s announcement that its 24th office will be its first outside the US, and that it will be in London as a stepping stone to Europe, has not been greeted with glee by the big European capital markets firms.
They knew this new competitor was coming – headhunters have been in the market on HFF’s behalf for at least a year. After taking their time, HFF has found its core team – much to CBRE’s annoyance as it includes former CBRE rising star and managing director of London investment Jamie Pope and his colleague John Starkie.
By securing former Bank of America Merrill Lynch banker David Church, respected for his deal track-record and his rolodex, HFF has also ensured it will be invited into plenty of property boardrooms to discuss potential corporate finance mandates. Church, who left BAML last year and briefly operated at Leon Partners, brings his former BAML team to HFF, including Raj Somchand and four associates.
Crossing the pond to lead the new business and run debt and equity placement is Mike Kavanau, whose most recent success in a near 30-year career as a debt specialist at HFF is building a Chicago office from scratch to 60 people.
The model will be just like Eastdil’s: pure capital markets advice; no leasing. So that’s investment sales, debt advisory, corporate finance. More hires and moves by HFF associates are planned, in due course.
It is true that the timing for this expansion doesn’t look as clever as – with hindsight – rival Eastdil’s did. Eastdil snuck into Europe under the radar after the financial crisis and initially had two people at Canary Wharf. The London-based team went from nowhere in 2011 to 50 now, benefitting from a rewarding time in European real estate when there has been capital for the highest-quality buildings through to NPLs and everything in between. However, HFF is presumably committing for the long term.
Eastdil’s success must be particularly annoying for the biggest full-service firms like CBRE, JLL, Cushmans and Savills, who partly sell their businesses on the fact they have spent the last 20 years developing wide and deep pan-European networks and expertise in every sector.
Their US competitor does not have that level of local market knowledge. Privately, the established firms gripe that on joint investment instructions they do all the legwork while Eastdil shares the glory, and fee.
Yet clients keep hiring the US firm. You might have thought that this year would be the one when Eastdil wobbled, due to fewer pan-European or very large deals than in 2013-15, and with the slowdown in the UK, the region’s biggest property market.
But look at the mandates. It’s not just the relationship they have with Blackstone, which led to advising on the finance for acquiring Dublin regional mall Blanchardstown (for the second time and after also selling it to Blackstone for €950 million for Green Property) or the recent appointment alongside Goldman Sachs to advise on the exit strategy for €13 billion Logicor.
To name a few, there was: the €2.4 billion sale/€1.4 billion refinancing of pan-European logistics company P3; NAMA’s last very large NPL portfolio Project Gem; a €1 billion refinancing for Invesco Real Estate’s pan-European core property fund; selling Xanadu shopping centre, the biggest in Spain in 2016.
Does this suggest there’s still something that the firms here first are not doing right? Are they too siloed? Too slow? Is their message too complicated? Eastdil’s and HFF’s are very simple.
A new year’s resolution for management at their incumbent rivals might be to study what the two US firms are getting right. Before more of their clients welcome the latest ‘arriviste’, with open arms.
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