HFF acquisition continues JLL’s expansion march

The Chicago-based firm, which has been growing out its equity placement capabilities organically, has gone for a corporate acquisition to bolster its capital markets operation and take the fight to bigger rival CBRE.

Downtown city skyline of Chicago, Illinois

JLL continued the expansion of its global financial services arm this week by acquiring HFF, another advisory business that specializes in capital markets and debt placement, for $2 billion in cash and stock.

Although Dallas-based HFF primarily focuses on the Americas, the merger positions JLL to better compete in a brokerage landscape that increasingly favors international operators. It also comes as the Chicago-based firm looks to broaden its exposure to private capital markets.

Last year, JLL closed almost $90 billion in sale-side transactions worldwide, according to Real Capital Analytics, second only to CBRE’s nearly $150 billion total. Together, JLL and HFF would have accounted for roughly $130 billion in sales-side deals. Together, the two firms also would have taken second place to CBRE in the Americas in terms of 2018 transaction volume. Separately, HFF ranked fourth and JLL sixth.

Global exposure has become increasing important for brokerages in recent years, according to RCA. Firms with at least 10 percent exposure in the three major regions held a 60 percent market share in 2018, up from 48 percent in 2014. While the top five firms – JLL, CBRE, Cushman & Wakefield, Newmark Knight Frank and Colliers International – have thrived, the broader brokerage market has consolidated from 801 organizations in 2011 to 662 organizations in 2018, a 17 percent reduction, per RCA.

JLL executives pointed to financial efficiencies and complementary services – such as equity placement, fund marketing and investment advisory – as strengths in the deal.

When the acquisition closes later this year, JLL stands to add 392 capital markets advisors that generated more than $662 million in revenue last year. That team includes HFF chief executive Mark Gibson, who will join JLL as chief executive of capital markets in the Americas and co-chair of its global capital markets board.

JLL, however, is no stranger to expansion through acquisition. This is the firm that purchased US competitor Staubach in 2008, UK rival King Sturge in 2011 and US contemporary Oak Grove Capital in 2015. Citing JLL’s previous successes, the financial services firm Moody’s rates the firm’s integration efforts a low risk.

With the added manpower, JLL’s capital market fee revenue is projected to increase by 68 percent in the near term, according to Moody’s. The brokerage hopes to double that income stream by 2025, though its expanded debt platform could prove the most impactful component of the transaction, one market expert tells PERE.

The acquisition comes as JLL works to grow its presence in the private capital raising space. Earlier this month, it finalized the leadership team for its nascent fund advisory business by hiring two new directors.

One placement agent told PERE he does not consider JLL a threat to his business, though he noted that the firm’s recent moves highlight the convergence of the brokerage and capital placement disciplines. Firms on either side of the divide are increasingly dabbling in the other’s business, he said.

For its fund advisory team, which launched in 2017, JLL has favored an organic growth strategy. It first combined its regional fund advisory and placement teams into a unified group then brought on veteran capital raisers Matilde Attolico and Zeynep Fetvaci in leadership roles.

In 2018, Jerry Cain was named head of JLL’s funds advisory business in the US and, earlier this month, the brokerage appointed Lazard Private Capital Advisory’s Zaahir Syed and Shelter Rock Capital Advisors’ Molly Mahoney to director roles. JLL plans to add three more advisors to its current roster of 24 later this year in a bid to take the fight to its more established private real estate placement rivals. Whether it supplements these organic efforts with a corporate outlay remains to be seen but would be hard to bet against.