Sitting on a grimy bench in Hanover Square on Tuesday morning before entering Number 22 for a chat with Andrew Gould of Jones Lang LaSalle and Richard Batten, no longer of King Sturge, it was hard not to link the Crossrail-induced upheaval in what was Property Central with the upheaval in the agency world over the past dozen years.
But enough old fart rumination. Why did King Sturge sell? Why did JLL splash out £197m? Can the Hanover Square smoothies and those more rumpled types down near Piccadilly Circus get on? Can the combined business usurp CBRE in Europe? The answer to the last question will depend on how CBRE reacts, after refusing to go anywhere near paying £197m for King Sturge.
Why sell? At Stoke Park golf club in Buckinghamshire last September, a King Sturge inner circle of 20 partners mulled the question. They concluded that flat income and rising costs were likely to erode profits. So PwC was asked to convert the partnership accounts into plc accounts to give a profit figure buyers could then multiply to figure out how much to pay.
Batten won’t say what multiple JLL paid, but he bridled at the idea the answer was 10, which would indicate profits of £20m. A figure around 7-8 times is normal. In the year to April, turnover at King Sturge was £158m, says Batten. So, in plc terms, the partnership probably made around £25m profit. Gould says he “is comfortable that the price represents a reasonable multiplier”.
The 80-odd King Sturge partners who will be made millionaires are very comfortable in one sense, slightly regretful in another. The vote to sell was unanimous when put at the offices of lawyers Addleshaw Goddard. But the room “was emotionally charged”, says Batten. “We realised this was the right direction. But we were sad to see the end of a great name.”
OK, how will they all get on? Batten and Gould got on unfakeably well on Tuesday, with no trace of the false bonhomie usually displayed on these occasions. Batten is a tough-minded but always fair former army officer who is likely to do well at JLL: but how about the other ranks at King Sturge?
Jealous that their bosses have cashed in – of course: flattered it is JLL, mostly. There were certainly smiles among the KS staff milling around in JLL’s reception before being whooshed up in the lifts to meet their counterparts. Will their somewhat smoother, somewhat better groomed counterparts feel the same after the honeymoon is over is a question for another day.
Tuesday’s final question was: what’s the plan now? “We want to double the value of the business over the next five years,” says Gould – a quote that that might set CBRE on the hunt for a fresh deal.
Asian-facing DTZ?
Meanwhile, how about that other merger, the one between DTZ and BNP Paribas Real Estate, engineered by the French Mathy family, who are selling their 54% stake in DTZ to BNP? No doubt a great deal is going on behind the scenes. But here are three scenarios painted by a DTZ man now off the scene.
One, an Anglo-Asian global business tagged DTZ will emerge from a surprise MBO organised by those in London: possible, but unlikely. Two, a Francophile global business tagged BNP DTZ or some such will come together: probably, and still the most likely outcome. But neither scenario quite accounts for the main player in the East, CY Leung, the immensely influential Asia-Pacific boss who is a step away from running the government of Hong Kong. Our man says the chances of Leung submitting to French rule are remote. So, final scenario: before going off to run Hong Kong, Leung finds a friendly Chinese billionaire to make an offer the French can’t refuse and DTZ gradually becomes a huge Asian-centric force with a European offshoot. Worth a thought, at least
Former EG editor Peter Bill contributes to estatesgazette.com/blogs
