CBRE in pole position to buy ING

A deal costing CB Richard Ellis approximately €1bn could be finalised “within the next few weeks”. If successful, it would result in the creation of the world’s largest real estate investment management business.

Los Angeles-based CB Richard Ellis, the world’s largest property services firm is poised to become the world’s largest real estate investment management business as well after emerging as the frontrunner to buy the majority of ING Real Estate Investment Management.

According to reports by Dutch website Vastgoedmarkt and the Financial Times, a tie-up between the two businesses could result in a platform with approximately $122 billion in real estate investments under management, combining CBRE’s approximately $36 billion of assets with ING REIM’s more than €65 billion of assets.

The reports said a deal could be finalised within ‘the next few weeks’ reflecting an acquisition cost of approximately €1 billion. UK commercial property magazine, Property Week, however said ‘a deal is far from assured’ and that an ‘unsuitable’ price might stall the sale.

In response to the news coverage of the sale, ING said in a statement: “As previously announced, ING is conducting an evaluation of the position of ING Real Estate Investment Management within the banking business. Within the context of this evaluation, ING today confirms that it is in discussions with several parties on a possible sale of parts of the ING Real Estate Investment Management businesses.”
“These contacts may or may not lead to one or more transactions. Any speculation on scope, pricing and conditions of possible transactions would be premature. Any further announcement on this matter will be made if and when appropriate.”

A successful bid by CBRE would see it pip its closest rival Jones Lang LaSalle, which currently runs a larger real estate investment management arm, and is also thought to have bid. Other bidders are thought to have included Vornado Realty Trust, the US investment trust and private equity firms Ares and TPG Capital.

Should it proceed, CBRE would combine ING REIM with its own investment management business, CBRE Investors which predominantly invests in core to value-added strategies worldwide. ING REIM also predominantly invests its capital via lower risk strategies although it does have a sizable presence in Asia where it runs opportunity funds as well. CBRE’s Asia funds exposure is more limited.

Brett White, chief executive of CBRE told the FT in an interview last summer the firm was in a more bullish mood about the prospects for global real estate and that a rebound in many markets was ‘progressing at pace’.

He said: “We are a good proxy for the global property market. Virtually all global economies are in early stages of recovery and others such as China are in full-blown expansion phase, and [so] the majority of property markets are either flat or slightly improved.”

The sale process of all or parts of ING REIM has been going on for more than a year. It began when parent company ING Group announced in October 2009 that ING REIM was to be divested by the end of 2013 as part of a wider strategy to divest its insurance and investment management businesses. The strategy followed a decision to concentrate on its core banking operations following pressure from the European Commission over the €10 billion of state aid it had received in the aftermath of global economic downturn. ING REIM was since made a separately-managed global entity within ING Commercial Banking but remained on its list of ‘non-core’ businesses.

CBRE, which has 29,000 staff across more than 300 offices worldwide, is being advised by Bank of America Merrill Lynch while ING is being advised by Morgan Stanley.