As Mipim, the global real estate conference got underway in Cannes last week, one story dominated discussions, American real estate advisory group Newmark's acquisition of United Kingdom brokerage Gerald Eve.
CoStar News caught up with Newmark CEO Barry Gosin and Gerald Eve senior partner Simon Prichard during the conference to discuss a transaction first revealed as likely by CoStar News in August 2022. It sees Newmark join the major league in the United Kingdom, alongside global peers CBRE, JLL, Cushman & Wakefield, Colliers, Avison Young, Savills and Knight Frank.
Talks have been ongoing between the companies for close to a year, at least since the spring of 2022. Gosin says the acquisition of the "top" United Kingdom-based real estate firm continues its commitment to "leaning in" and expanding the global platform, no matter the outside economic pressures.
"Gerald Eve offered us a significant amount of scale and professionalism and if you watch us in the United States "with transactions and hires, it is part of the way we have grown at more than 25% a year for 11 years straight."
Gosin expects the biggest "growth path" will be in capital markets. "We want to be number one globally in capital markets and we have the DNA around acquiring and hiring talent and providing the resources, data and metrics for our business to be able to advise clients even better."
The recent hires Gosin is referring to are those of Doug Harmon and Adam Spies, who in February joined Robert Griffin and Kevin Shannon as co-heads of Newmark’s capital markets business in the United States, positioning the capital markets business to expand internationally.
Recent important acquisitions included investment sales and leasing advisory firms BH2, in August, a City investment broker led by the "legendary" Tony Gibbon, as Gosin describes him. It also bought Harper Dennis Hobbs, a United Kingdom retail and leisure tenant representative adviser, as well as Paris-based flexible office subsidiary Deskeo.
Gerald Eve is the largest step so far in having more than 10% of Newmark’s revenue generated from outside of the United States by 2025, as laid out when the deal was announced two weeks ago.
Gerald Eve fit the strategy, Gosin says, because it has a unique set of skills in industrial, leasing appraisal, planning and zoning, and its ratings business. Gerald Even is a leading adviser on business rates, which are an obligatory real estate tax for most businesses in the United Kingdom. "We are now positioned to be a market leader in office, logistics and retail in the UK and Europe."
As for the name and structure of the new business, Prichard sent round a note to clients after the deal closed that confirmed he will remain on Gerald Eve’s executive board as senior partner, with a priority to "unite" its United Kingdom footprint "with Newmark’s industry-leading infrastructure, technology and sector expertise to deliver even greater value to you" and the business. Simon Rees continues as managing partner.
Prichard added that "beyond this, very little will change" with the company now branded as "Gerald Eve, a Newmark company" while the "local leadership structure will remain unchanged" — though he and Gosin would not provide more details.
There are three particularly important threads that led to the historic tie-up. The first was Newmark's decision to end a 15-year affiliation with Knight Frank in the United Kingdom in 2020 to focus on taking ownership of its own businesses in that region. The Nasdaq-listed company was the largest United States brokerage firm without an independent operation in the United Kingdom at that point.
There have now been Newmark acquisitions, hires and agreements across global markets including France, Germany, Poland, Hungary, Hong Kong and Dubai. It also owns global flex office provider Knotel.
Market sources have said the company has also indicated an interest in building a debt brokerage business in the United Kingdom and Europe.
Second, Gerald Eve was one of the last remaining independent partnership brokers in the United Kingdom and had batted away other approaches over the years, Prichard says. And finally, several market sources have indicated that the transaction was knocked off course by wider concerns in the United States about the United Kingdom following the Liz Truss government's mini-Budget in September.
Gosin will not be drawn on how far the United Kingdom's woes last summer held up the transaction but says: "Real estate is about cycles, and the one thing they have in common is they end. We are in it for the long-term and we are leaning in and building out a company for the future and that is about bringing in the very best people."
Gerald Eve operates from nine United Kingdom offices employing about 600 people across multiple business lines and property types, particularly capital markets, corporate real estate advisory, planning and development, tenant representation, landlord leasing and valuation, and it has a principal focus on the industrial, office and alternative sectors.
In the fiscal year 2022, it generated net revenues of £92.7 million, or around $111.4 million. Over half of 2022 net revenues were from management services businesses.
Prichard says joining a top global commercial real estate services company creates significant growth opportunities for Gerald Eve’s clients and its people.
Newmark generated revenues of approximately $2.7 billion for calendar year 2022. The company and its business partners operate from approximately 180 offices with nearly 6,700 professionals around the world.
Prichard said during his first decade as senior partner there had been a number of approaches to buy Gerald but the leadership team had kept the focus on what it did really well, for instance planning and ratings and growing a market-facing business.
"We were approached a number of times because we are a private independent business of some size and of a good reputation. Seven years ago we brought in around 60 people from Deloitte and that was the moment when we really started to become a more market-facing business. It took 80 years to get to a turnover of £30 million and then 10 years to get to just shy of £100 million, without taking on debt."
Prichard said that once the business had grown to a certain size, over 600 people and turnover of £100 million, than funding and operating it as a partnership changes the overall risk profile. It was at that stage that "Project Travolta" was born near the end of the pandemic lockdowns in June 2020.
"Yes, I was listening to Saturday Night Fever on the radio. The project was focused on how growth would look and feel as a business. Not surprisingly we wanted the best offices and best people, and the best capital backing and technology. So we looked at the chance to introduce third-party capital, we looked at an [initial public offering] too, and then Newmark came and approached us. After looking at that and talking to them we saw there was no overlap and no obstructions. BH2 and HDH are complementary businesses."
Prichard said Newmark as part of the wider Cantor Fitzgerald business also offered a number of "genuinely aligned" skills.
"I also took a lot of confidence from Barry Gosin and [chairman] Howard Lutnick's views that there is no need to be big for the sake of it. We need to be the best in class, if we do this, we do it very well as that will attract international and domestic capital," Prichard says.
Prichard and Gosin say the plans are to massively turbocharge growth in the turnover of the business but there are no timescales. "Newmark wants to help us achieve growth in profit and revenue and that is very attractive," Prichard says.
Prichard adds that in terms of the focus of that expansion capital markets is a priority as well as valuation and appraisal and corporate services where it sees the opportunity to disrupt immediately. "But these are just three areas."
Gosin says there is no limit on the group's ambition to grow Gerald Eve as well as its other businesses across the United Kingdom and Europe.
"We will go places where the opportunity is to bring on the best person. It is about bringing people together and making them more valued. It is all about bringing in the best people."