The real estate capital markets landscape was shaken up Tuesday with the news that commercial real estate services brokerage JLL (NYSE: JLL) announced a definitive agreement to buy Dallas-based capital markets provider HFF (NYSE: HF) in a cash and stock transaction valued at $2 billion.
Both firms are active players in senior housing and generated recent news with personnel announcements. HFF made headlines last month when its senior housing advisory team of Chad Lavender, Ryan Machonachy, Dave Fasano, Ross Sanders and Sarah Anderson were hired by Newmark Knight Frank (NKF). The team placed $4.5 billion in deals at HFF between August 1, 2018 and January 1, 2019.
JLL beefed up its senior housing platform last week with the hiring of Mike Garbers and Cody Tremper as managing directors. Garbers, who will work out of Orlando, and Tremper, who will be based in Dallas, will focus on advising owners, investors and operators in the senior housing and skilled nursing industry. Both were previously at Greystone Real Estate Advisors.
For the moment, JLL is not commenting specifically on the senior housing implications of the HFF acquisition, a spokesperson told Senior Housing News.
The boards of directors for both companies unanimously approved the deal, which will close in Q3 2019, subject to approval from HFF shareholders and regulatory review. HFF stock closed trading up 5.38% Tuesday, to $49.01 per share.
The merger establishes Chicago-based JLL as a major capital markets intermediary. It will allow the firm to ramp up the growth of its U.S. and global capital markets practice, enhance client capabilities and strengthen its talent platform, JLL Global CEO Christian Ulbrich said in a video announcing the merger. The company launched Beyond, a strategy to drive long-term sustainable growth and profitability, in 2017.
“Growing capital markets has always been a key element of our strategy, with a particular focus on the U.S.,” he said.
In HFF, JLL is getting one of the best-performing capital markets firms in commercial real estate. HFF closed 2,587 transactions in 2018 and generated a record $650 million in revenue. Its service lines include debt and equity placements, mergers and acquisitions and corporate advisory services, loan sales and servicing, investment advisory services and funds marketing.
Under the terms of the deal, HFF shareholders will receive $24.63 in cash and 0.1505 JLL shares for each HFF share. When the deal is completed, HFF shareholders will control 13% of JLL stock.
Based on the closing price of JLL stock of $163.02 on March 18, the cash and stock consideration to be received by HFF shareholders at closing is valued at $49.16 per HFF share. The share price represents a premium of approximately 22% and 25% compared to the volume weighted average price of HFF over 60 and 90 trading days, respectively, and a premium of approximately 6% over the closing stock price on March 18.
HFF CEO Mark GIbson will join JLL as CEO, Capital Markets Americas and co-chair of its global capital markets board. Additionally, key HFF personnel have entered into 3-4 year commitments related to employment, non-competition and/or retention.
“We believe the combination with JLL will create a superior platform for our shareholders, clients and employees than either company would have independent of the other and will significantly accelerate our firm’s strategic plan,” Gibson said in a statement.