<03StandfirstNewsBlacknorule>Property consultants have enjoyed record revenues and profits as the demand for property keeps rising. Most of the money they make comes from advising investors. For the first time, EuroProperty has profiled 10 European property consultancy firms, describing their culture and strategy.<03StandfirstNewsBlacknorule><03StandfirstNewsBlacknorule>CB Richard Ellis, the largest firm in the world, is also the largest in Europe by turnover, although Jones Lang LaSalle has more staff. All the companies profiled have pan-European operations. Both Catella and Savills focus on the major markets, while Cushman & Wakefield and CBRE have a presence in most markets. CBRE, JLL, DTZ and Savills are publicly listed groups, others remain partnerships. Colliers International is not a single company but a network of independent affiliates.<03StandfirstNewsBlacknorule><03StandfirstNewsBlacknorule>There are cultural differences as well: Catella says it will use MIPIM to sit down with investors over a quiet cup of coffee, while this year’s Savills yacht is too large to fit in the harbour at Cannes. The method of each approach reflects the firm’s culture, as is the way a firm rewards its staff. Catella doesn’t mind much if its heavily incentivised people are seen as greedy: it achieves the highest revenues per employee (see table, p36).
Being part of a bank that also owns a developer is not easy for Atisreal. The property consultancy is constantly thrown on the defensive about potential conflicts of interests between its parent, BNP Paribas, and developer Meunier Immobilier, which BNP also owns. “If a developer wants to develop a building, we can swear that confidence remains and that Meunier would know nothing about it,” says Alain Béchade, vice-chairman of Atisreal. “We are also a subsidiary of a bank and therefore compliance is the most important thing for us.”
Atisreal was formed in the 1990s by putting together French-based Vendôme Rome Group, Auguste-Thouard, Müller in Germany and UK-based Weatherhall Green & Smith. The firm was bought by BNP Paribas in 2004. Since then, Atisreal has been on a buying spree. At the end of last year, Atisreal bought UK property agent Fuller Peiser and renamed it Atisreal UK. It also bought Grupo Gesinar in Spain.
But Atisreal is considered to be too small by many in the industry. Last year, there were rumours that the firm would merge with DTZ.
It also wants to expand into the US, although banks are not allowed by US regulator SEC to acquire broking licences. According to Béchade: “That is something we are working on, but Atisreal is a consultancy, not a brokerage. Maybe
next year we will have worked around
that one.”
Compared with its competitors, Atisreal pays low salaries. Outside the UK, the company’s consultants earn fixed fees of 10-20% plus bonuses, which Atisreal grudgingly pays, realising that are they are the only way to attract top talent. One Paris agent was said to have taken home €900,000 in commission last year.
DTZ recently poached many Atisreal agents. Béchade says: “We are looking for people all the time. Everywhere in Europe there is a lot of movement, to DTZ or otherwise. But we recently we attracted a lot of CB Richard Ellis guys. You see, there is a lack of good professionals.”
Atisreal operates in eight countries throughout Europe, and raked in €290m in European revenues last year. It is the market leader in France, where total turnover stood at €130m in 2006, beating CBRE by €20m and up 20% on 2005.
After France, the UK and Germany are the firm’s strongest markets. The operations in Spain and Benelux are lagging behind the rest. Béchade admits that Atisreal’s Spanish residential operations were “flat”, adding: “We must increase our share of the commercial and residential markets in Spain and have decided to look into the Spanish operation.”
Atisreal’s Spanish chairman, Jorge Zanalotty, recently left, but Béchade refused to comment on his departure.
Meanwhile, Atisreal’s Brussels office has been losing money for 18 years. Béchade’s explanation: “In Brussels, they speak French but they are not French. That’s why we are not leading.”
Greg Cooke, who is chairman of Atisreal UK and who orchestrated the Weatherall Green & Smith takeover by Vendome Rôme, will take over from Béchade as head of northern Europe, allowing Béchade to keep an eye on southern Europe before he retires next year.
Looking ahead, according to Béchade:
“We need to focus on Northern and Eastern Europe. Because that’s where we are weakest.”
<02Headline36ptProfilesOrange>Catella
New words invented by companies often sound clunky. Property consultancy Catella, looking for a word that best described itself, has added the word “dealability” to its lexicon.
The word may be clunky but the thinking behind it is clear. Catella’s approach is different from other firms: its focus is on transactions. In Sweden, Catella’s home market, the firm is advising only people who want to sell property. “We’ve got more of an investment banking profile,” says chief executive Johan Ericcson. In fact, Swedish bank SEB, which also has an investment banking arm, hired Catella to sell a portfolio of Baltic assets.
Catella was born during the property crisis at the end of the 1980s, when ailing or bankrupt companies needed to be bailed out. The investment bankers at the time had conflicts of interest: they were working for the same banks that had lent money to these firms. But it was another 10 years before Catella did its first international property transaction, selling a €300m portfolio for construction company NCC to Morgan Stanley and GE.
Ericsson started the property business of Catella, Catella Corporate Finance, with Lennart Schuss. Today, Catella has 280 employees in 24 offices across 12 countries, with Russia and Luxembourg being the latest additions.
In Russia it has already secured €1bn worth of deals. But Germany is Catella’s fastest-growing market. Last year, turnover there rose by 70% to €14m. In May it appointed Ernst & Young Real Estate’s Andreas Quint chief executive in Germany, having hired Jörn Brinkhoff from Difa a few months earlier. Before Difa, Brinkhoff had been working with Arnold de Haan at fund manager CGI.
Last year, Catella handled €11.3bn worth of property transactions, generating revenues of €96m. Ericsson doesn’t want to say how much profit the private firm makes, but he does say that half of the profits are paid to its staff as bonuses.
Catella derives 35% of its revenue from its home market. Last year, it handled the sale of the Co-op portfolio, which went to ING Real Estate for SKr4.1bn. The firm markets deals in order to attract the highest possible number of bidders. Where other firms throw big cocktail parties at MIPIM, Catella’s people sit down with potential investors in a quiet hotel room and take them through the latest offerings.
Ericsson doesn’t regard Cushman & Wakefield or CB Richard Ellis as competition, because their business strengths differ from Catella’s. Jones Lang LaSalle is probably the most similar international firm, although it has a wider range of activities and a smaller Swedish presence. Swedish firm Leimdörfer resembles Catella the most, but that too is much smaller. “We’ll wait for Ericsson and Schuss to retire,” jokes CBRE’s Sweden managing director, Magnus Ungmark.
<02Headline36ptProfilesOrange>CB Richard Ellis
“When you want to sell at a very high price, you always go to CB Richard Ellis. They are very aggressive. I go to CBRE to sell and Jones Lang LaSalle to buy.”
This opinion, shared by two international investors, helps to understand how the market perceives the two consultancies. Jones Lang LaSalle is seen as the consultant, rated for its excellent market information and its low profile. But CBRE is seen as the real broker. One of the investors quoted above said he persistently received faxes or e-mails from CB Richard Ellis urging potential investors to buy.
Jonathan Hull, CBRE’s executive director of capital markets in London, dismisses the view, saying: “We simply have a platform that delivers equally in all markets because we have a big, indigenous business.”
Whatever the case, CBRE is the biggest. It employs 4,000 people, 100 fewer than Jones Lang LaSalle, but between them they generated €709.4m of revenues for CBRE last year. Germany was the strongest market, followed by France, Spain, the Netherlands and Belgium.
CB Richard Ellis has also made a host of acquisitions recently. It bought global US-based real estate group Trammell Crow, French property management company CPMS, Dutch building consultancy Rietmeijer & Partners, UK retail specialist Dalgleish and industrial specialist Holley Blake, to name but a few.
Last year, CBRE won the mandate from German fund manager MPC to sell a portfolio of 99 Dutch offices for more than €1bn. The portfolio triggered a lot of interest from such investors as Goldman Sachs, Lehman Brothers, RREEF and Babcock & Brown. Eventually, the portfolio went to Dutch investor Breevast and American insurer AIG.
“Our head of UK, our Dutch head and our Australian head flew in together,” says Hull. “Three of us led the pitch and the transaction. We brought in our Australian head because we are seeing more Australian capital in the market. So we put them together, basically making sure we represented potential sources of new capital. We had some strong bids from Australia. But this time the Australians didn’t win.”
During the bidding, it helped that Marco Hekman, the company’s managing director for the Netherlands, bumped into some bankers from Credit Suisse, who wanted more Netherlands exposure in their loan book. As a result of this chance meeting, Hekman was able to provide an overall package for the MPC portfolio, complete with finance.
One of CBRE’s strongest selling points is its dedicated pan-EMEA network of 100 researchers. Forecasts, analysis and local research is provided monthly, quarterly and yearly for in-house agents and clients on all related topics.
But some investors say that CBRE may be too dominant. It’s impossible to ignore the consultancy, some clients say, and they sometimes shy away from it because they consider the firm to be too aggressive and because it insists too much on doing its own valuations.
CB Richard Ellis motivates its staff well, paying commission on all deals, unlike
its two closest competitors, Jones Lang LaSalle and Cushman & Wakefield. The average director’s salary is around £80,000, yet a senior director can expect to take home around £350,000 pa including bonus.
“We would like to think we are the better payers in the market and we try to recruit the best. But our pay levels are intended to reflect performance,” Hull said.
<02Headline36ptProfilesOrange>Colliers International
Colliers International is a very different animal to its rivals. Unlike the others, it is not a single business, but a collection of independently owned businesses operating under the Colliers brand.
The European network covers 30 countries, often with more than one independent company operating in each in Germany there are six. The largest European business is Colliers CRE, the UK arm, which also set up and co-owns the Colliers International business in Spain, and owns a majority stake in Colliers International in Ireland. Colliers International turned over €458m in 2005, with Colliers CRE accounting for €120m of that. It employs 2,734 people across Europe and is represented in such emerging markets as Serbia & Montenegro and the Ukraine. There are plans to extend the franchise to another eight countries.
Chief executive David Izett, who is also co-chairman of the Colliers International board, says: “It would be no surprise if there were more consolidation in the Colliers network in the future. Now, we [Colliers CRE] control Ireland and Spain as well as the UK and other countries are under the same ownership. Colliers CRE would like to be involved more in Europe.
“Colliers International investment teams across Europe talk to each other a lot. When Colliers CRE has a client interested in something in Europe, we usually, unless the client specifies for confidentiality reasons, get in touch with the international office in that country and either work with them or pass the work over to the local office, on a fee-sharing basis.”
A network of independent affiliates means that it can be hard for service standards to be maintained across Europe, but Colliers Europe does have a small London-based team, led by Rob Pearman, which co-ordinates pan-European strategies. The group has a number of specialist business lines that operate across Europe as a whole, although in practice many of these are dominated by Colliers CRE and located in the UK. There is a hotel business, Colliers Robert Barry, based in London but working across Europe.
Investment management subsidiary Colliers Capital, also UK-based, is a subsidiary of Colliers CRE. Services include creating property funds and private portfolios, arranging private equity and debt finance for property owners and occupiers and creating joint venture vehicles.
Staff salaries and bonus agreements are set independently by individual companies. Izett earned just under £400,000 in 2005.
Colliers International has a strong operation in Russia, with offices in St Petersburg and Moscow. Its Moscow office has closed office and retail deals on more than 700,000m2 and turned over $1bn of investment deals since its establishment in 1994.
<02Headline36ptProfilesOrange>Cushman & Wakefield
Cushman & Wakefield is known for its retail specialisation both in capital markets and leasing.
Paul Bacon, a Cushman & Wakefield man for 22 years, took over as EMEA chief executive at the start of this year after building the Italian business during the 1990s.
Turnover for the firm’s EMEA operations rose by 29.4% in 2006 to €314.8m and profits rose by 52.2% over 2005 figures. The firm’s strongest-performing offices include those in Germany and Poland, which increased revenues by 60%, as well as the Russian operation, which saw revenue growth of 70% last year.
All 34 C&W offices throughout Europe form a single partnership of 1,521 staff. “That the European business has been a single entity since 1992 is a big strength,” says Bacon. “We’ve been sharing information for a long time and it is a huge benefit to clients. C&W holds twice-yearly conferences for all European staff and quarterly meetings in London for 300 European partners and some of the younger guys.”
Bacon is a capital markets specialist, and as European partner of the company’s global capital markets group, heads the 250-strong pan-European team that last year completed deals totalling €14.5bn.
C&W also has specialist cross-border teams for all sectors including retail, industrial, offices and valuations plus TMT, banking, legal and pharmaceutical clients. Research is also an important
part of the company’s service and the European research group employs 83 professionals who operate across all regions and sectors.
Top fee-earners are rewarded with a combination of high salaries and bonuses. Potential high flyers are identified and nurtured through special programmes and are invited to attend a global achievement conference each year in the US.
Last year was C&W’s best ever in Europe: capital markets deals totalled €17bn; in office agency, 929,000m m2 of space was transacted; and over 3,000 deals for 350 different retailers were completed, including Sony’s sale and leaseback of eight office and logistics properties for €121.1m to Macquarie Global Property Advisers.
C&W grows through acquisitions and organically. Major markets are the UK the largest at 45% of turnover Germany, France, Italy, CEE, Russia and Iberia. In 2006, Italian investment group Ifil, part of the Agnelli Group, bought a 67.5% stake in C&W from the Rockefeller Group.
<02Headline36ptProfilesOrange>DTZ
Although DTZ’s first-half figures last year were good, they did not put the company on a footing with CB Richard Ellis, Cushman & Wakefield or Jones Lang LaSalle. All three boasted bigger turnovers than DTZ’s £125m (€185.6m), a 31.2% increase on the same period in 2005.
But DTZ’s managing director of Europe, Middle East and Africa, Killian O’Higgins, says that reimbursed management fees are not included as revenue on DTZ’s balance sheet, which makes it impossible to compare DTZ’s performance with its rivals.
“We’re twice the size of C&W and I suppose our main competitors are CBRE and JLL,” says O’ Higgins. “And if you take residential out of consideration, then we are way bigger than Savills residential is not our major focus.”
Despite an increase in staff costs of nearly 30% to £77.2m, O’Higgins admits that DTZ needs more staff for its European operations. Overall operating costs went up by 35.2% to £36.4m.
To expand, the firm likes to take minority holdings and build them up slowly last year it completed the 100% acquisition of its Portuguese partner.
But O’Higgins denies that the company’s arrangements in the Netherlands hinder growth. In the Netherlands, property adviser Zadelhoff is the only Dutch subsidiary not 100% under DTZ’s control, with its holding at 70%.
“We have no issues with our circumstances in the Netherlands,” says O’Higgins. “The Dutch are very adaptable. Why change a winning formula? Holland is one of our best performers and the arrangement suits both sides.”
DTZ’s approach is based on flexibility and avoiding country- or sector-specific teams. Rather than increasing the amount of dedicated personnel, O’Higgins wants staff to be flexible. “Geography used to rule the roost, but now it’s about having skills across the board. Our staff aren’t simply country-specific.”
But despite this preference for generalists, DTZ formed a specialised hotel investment team late last year, hiring Cushman & Wakefield’s former head of hotel property development, Martin Armitstead, as head of the new team, alongside former C&W colleague Sabine Balzer.
“We’ve moved people around and some people have moved on,” says O’Higgins. “We probably have the best spread of offices around Europe, but with more demand for services, we now need
to expand what they are offering.”
<02Headline36ptProfilesOrange>King Sturge
King Sturge is still seen as an old English outfit that specialises in industrial and logistics. But the firm, which dates back to 1760, wants to shake off this image. Today, King Sturge is as big in offices as in industrial and logistics, with retail and UK residential set to gain in importance.
On the Continent, the firm is expanding, but not on the same scale as, say, CB Richard Ellis or Jones Lang LaSalle. King Sturge has moved into Europe with its UK customers as they look for property there.
King Sturge’s top clients include Morley Fund Management, ING Real Estate, Hermes, Slough Estates, Legal & General, Prudential, Royal Bank of Scotland and UBS. In Europe it works for Immoeast, SachsenFonds, Kenmore and Heitman.
Some investors wonder how King Sturge can work for so many fund managers without any conflicts of interest. How, for example, does the firm decide which property to offer to which fund? “We have a clear and open dialogue with our clients,” says Richard Fiddes, managing partner and responsible for King Sturge’s Continental business. “When they say ‘no’ to a property, they do it quickly, enabling us to move the opportunity to the next person.” He also points out that firm doesn’t act on both sides of a transaction and that it knows clients’ various demands. What’s more, the firm is not dependent on one single client the biggest client does not provide more than 2% of fee income.
King Sturge’s business is run by 67 equity partners. Graduates work alongside the partners and are not shifted to a backroom. “For the clients, this means that staff is interested,” says Fiddes. “People take responsibility and want to succeed.”
King Sturge’s employees are paid a fixed salary and a discretionary bonus. Five years ago, the firm was underpaying and people left. But now the salaries are more in line with market rates, according to Fiddes.
Although King Sturge is expanding across Europe, the UK is still its most important market. The firm has 25 offices and employs 1,472 staff in the UK compared with 22 offices and 383 staff on the Continent, where the firm earned only €50m in revenues. It is set to report £200m (€298.8m) profit for the year to April.
Growth in itself is not a strategy. The firm wants to do it at a sustainable pace. “We recognise that we cannot do things as quickly or on the same scale as our competitors, but that has not held us back,” says Fiddes.
In Paris, for example, King Sturge’s office, which employees around 50 staff, is dwarfed by Jones Lang LaSalle, CBRE and Atisreal, but in Central and Eastern Europe the firm is on a par with its rivals. The firm has offices in Spain and Germany. Last year, it opened an office in Italy and it plans to open one in Russia this year. The Netherlands is the firm’s next obvious target for expansion.
Owing to its size, King Sturge doesn’t get involved with many large portfolios. But it did advise on ING Real Estate’s purchase of Abbey’s €1.3bn UK mixed-use portfolio. The firm also introduced investor CIT to Germany and helped it buy a €104m retail portfolio. And it helped German fund manager Bankhaus Wölbern with its UK investment debut: the €140m purchase of 3 Minster Court in London.
<02Headline36ptProfilesOrange>Knight Frank
There’s a certain something about the atmosphere at Knight Frank, something the firm’s management is proud of but finds hard to define.
“We find the Knight Frank culture a major positive factor when recruiting,” says head of the commercial division Alistair Elliott. “We remain independent, and are not a big corporate machine like CBRE. We have a different sort of people. We’ll never be the biggest but we strive to be the best.”
Anecdotal evidence suggests Elliott may be right. His own promotion could be seen as an example of that. One of the most highly regarded senior agency staff members in the UK, the charming and sincere 45-year-old, who was promoted to his current role last year, is both liked and respected by his colleagues.
“You expect someone who’s come so far so quickly to have some sort of edge to him,” says one staff member. “But it’s not so.”
Knight Frank is one of the few large firms to remain a partnership, now a limited liability partnership. However, like some of its more corporate rivals, it is consolidating to large new offices at London & Regional’s 55 Baker Street, W1.
The firm has just 32 full partners, who took an average profit of £752,000 each in 2006, an increase of 34% on the previous year. The highest-paid partner’s profit share rose by 40%, from £861,000 to £1.2m. Although the firm is “not the most generous payer”, says Elliott, staff can earn “unconstrained” bonuses and the firm is regarded as rewarding its salaried partners well especially those in high-margin investment work.
Elliott says the firm has not been as aggressive in the past as it might have been, but that is changing. He says that Knight Frank makes a virtue of recruiting from its competitors. It has doubled staff numbers over the past five years and Elliott says it will double them again over the next five years, if market conditions allow.
Compared to some of its peers, Knight Frank’s business is very heavily weighted towards the UK. Total European revenues for 2006 to 30 April were £181m, but the UK accounted for £147m of that. The UK arm is also much more profitable than the international business, which accounts for only 7% of profits.
The firm has significant expansion plans for the Continent: Chris Bell, managing director for Europe, says the firm plans to boost numbers there from 501 to 639 this year a 28% increase. The firm is set to open offices in Dusseldorf, Hamburg and Berlin. Stockholm is also a target. It also has a presence in Spain, Russia where the firm has almost 250 staff and Poland.
Even in the crowded UK market Knight Frank is keen to expand: staff numbers are set to rise by 15% this year. Total European turnover is set to rise to £225m in the year to April 30 2007.
Residential is a major part of the Knight Frank business, accounting for around half of the UK turnover and for 100 people working in the group’s continental offices.
The agent has a pan-European investment team led by Andrew Sim, which now accounts for around 30% of continental European turnover. Knight Frank is also very strong in valuation on the Continent, where it is valuer for 10 funds.
In 2005, Knight Frank set up a financial services business, Rutley Capital Partners, which created a pan-European fund, Rutley Capital Partners. The fund listed on the Channel Islands and UK stock exchanges, but raised only £87.3m of its £200m target.
<02Headline36ptProfilesOrange>Savills
Savills’ basic salaries are lower than most of its competitors. But the bonuses that it pays are higher.
Take the executive board. Last year, group chief executive Aubrey Adams was paid £119,000 basic and received a cash bonus of £383,863. Chairman of Savills Europe Jeremy Helsby was paid £101,000 basic with a cash bonus of £474,000. Simon Hope, head of commercial investment, illustrated the pay-bonus gap best his £92,000 salary was eclipsed by his £568,000 bonus last year. John Rigg, head of international investment, and the head of City investment, James Crawford, receive the biggest bonuses.
“We encourage people to do their best,” says Helsby. “The day you push down the personalities is the day you squash the Savills spirit.”
The management buyout of Weatherall, Green & Smith’s continental operations in 1997 heralded Savills’ arrival on the European market. Starting with offices in Frankfurt, Madrid and Paris, it has since opened offices in Barcelona, Amsterdam, Rome, Milan, Stockholm, Warsaw, Dublin, Cork, Belfast, Budapest Munich, Berlin and, most recently, Hamburg. Associates in Lisbon, Athens, Istanbul and Limerick round off the firm’s European presence.
“Before 1998 we had half a dog in Paris and half a dog in Amsterdam,” says Helsby. “The Weatherall acquisition opened a little acorn and from there
we grew.”
Despite the Weatherall deal and the recent Hamilton Osborne King acquisition in Ireland, Helsby insists that the company has grown organically. Instead of buying companies, it has bought people. Last September, for example, the Amsterdam office poached Jones Lang LaSalle’s evaluation and investment teams. In Germany, it hired a team of valuers from Aareal Bank and in Madrid it recruited a specialist industrial team from DTZ.
Savills’ cross-border team has five people and is due to expand soon. It helped secure Sweden’s largest single-asset transaction last year, a €440m mixed-use complex for a private client of AXA REIM. Other recent major deals include advising St Martins Property on the purchase of the €750m Cevahir shopping centre in Istanbul, Europe’s largest; and closing €904m worth of deals in the Netherlands last year, including a €250m office acquisition for German fund Oppenheim.
In March, Savills is starting up a pan-European evaluation team. DTZ has had one for a while, and Savills is responding to demand from its clients in Europe for a travelling troupe of surveyors. Germany is Savills’ most profitable country in Europe and, with 90 staff, its second-largest office after Ireland. The most lucrative area of business is investment. “We always open our offices on investment,” says Helsby. “If it’s not strong, we’re not interested.”
Lack of brand recognition is Savills’ main weakness; many people in Europe simply haven’t heard of them. Not that it deters them. “The competition is constantly looking over its shoulder at us,” says Helsby. “It’s easier to chase the market share than to maintain it.”
