JLL’s $2 billion acquisition of HFF, a move that further consolidates the commercial-brokerage industry and creates the country’s largest debt platform, is barely a day old. But competing firms have already begun efforts to scoop up brokers who may be displaced by the merger.
“With this merger, there’s definitely going to be opportunities for leading brokers to explore other options,” said Eric Anton, who moved over from HFF to Marcus & Millichap in 2017. “And we’re going to keep our eyes open.” His colleague J.D. Parker, who oversees the Northeast division for Marcus & Millichap, said he felt that several agents who firms would look to target have likely already been targeted for some time.
“I don’t think that this merger or acquisition would change anybody’s solicitation or business practices,” Parker said.
Any merger at this scale will upend the pecking order at the two firms, leaving even top brokers nervous about where they stand and leading to a fair bit of consolidation of staff. The industry saw a wave of broker hops after DTZ’s acquisition of Cushman & Wakefield in 2015, for example, and there was significant upheavel at both Newmark Knight Frank and Cushman when the firms were gearing up to go public.
One senior HFF broker said he received several calls Tuesday from competing firms looking to lure talent amid the shakeup.
The general consensus among industry veterans was that the merger made sense for both companies on a macro level and will help JLL in particular boost its status. But opinions varied on how smooth the process would be, with some sources predicting more conflict than others.
Paul Massey, a former principal at Massey Knakal Realty Services who sold his firm to Cushman and now heads up the brokerage B6 Real Estate Advisors, described the deal as “fantastic.”
“It just catapults JLL to the number one position in terms of debt brokerages,” he said. According to data from Mortgage Bankers’ Association cited by the Commercial Observer, HFF worked nationally on debt deals worth $61 billion in 2017, while JLL did about $24.1 billion.
Massey noted that both firms weren’t doing as much business in New York as they could be, and thinks the opportunities for more deals will overshadow any teething pains about overlapping roles and clients.
“It’s so much of a market-share opportunity for them that they won’t have any issues around the few mutual clients that they might have,” he said.
A Moody’s analysis of the merger echoed this perspective, saying it would up JLL’s revenue from annual capital-markets fees by about 68 percent to roughly $1.8 billion annually. The general integration risk is “minimal,” it added.
“They’ve done these types of transactions before,” said Philip Kibel, an associate managing director in the real estate finance division at Moody’s, referring to JLL’s acquisitions of Staubach in 2008, King Sturge in 2011 and Oak Grove Capital in 2015. They all went smoothly, Kibel added.
HFF, which is headquartered in Dallas, came in fourth in The Real Deal’s most recent ranking of New York’s top investment-sales firms, with $3.34 billion worth of sales across 15 deals last year. That was well ahead of Chicago-based JLL, which took seventh place with $1.54 billion worth of sales across nine deals. HFF’s rainmakers in that division include Andrew Scandalios, while JLL has the likes of Bob Knakal, Glenn Tolchin and Anthony Ledesma. On the debt side, HFF has Chris Peck, while JLL has Aaron Appel.
HFF specializes in investment sales and debt, while JLL also has a serious leasing practice, coming in third in Manhattan, according to TRD’s most recent ranking.
One New York-based broker who requested anonymity to speak about the merger said it could cause conflict between the two firms, as brokers at HFF may chafe at doing things the way brokers at JLL do them given that they are already seeing more dollar volume in the city.
“It’s about production, not who buys who,” he said. “At the end of the day, whoever is the top producer or the top few production teams, those guys are usually going to be the ones that get the special treatment no matter what firm.”
He characterized layoffs as a definite possibility and said that several investment-sales brokers who JLL recently hired might not have been as eager to come on board if they knew a merger was in the works.
Mark Gibson, the current CEO of HFF, will serve as the CEO of capital markets in the Americas at JLL following the merger. JLL CEO Christian Ulbrich will lead the combined firm.
One broker who also requested anonymity to discuss the merger predicted that it would work out very well for people at the top of both firms, but there would be a lot of clashes lower on the totem pole. Brokers would quickly come to understand that there might not be a place for them anymore.
“I don’t think they’ll call it layoffs,” he said. “The way it works in my experience is that within a period of time, whether it’s hours or months, the guys that don’t make it will get the message, and they’ll just leave because they won’t be the top guy.”
“All of a sudden, they’re not getting invited to meetings. They’re not getting invited to pitches,” he continued. “It becomes clear very fast that you’re not the guy, and so there’s no reason to stay.”