Savills agrees to buy Eastdil Secured in US$1.1 billion deal

[LONDON] Savills has agreed to acquire New York-based Eastdil Secured Holdings in a deal that values the real estate advisory business at US$1.1 billion, including debt.

The deal, which significantly expands the UK broker’s presence in the US real estate market, will be funded with debt and the issue of new shares, according to a statement on Thursday (Mar 12). Eastdil’s shareholders will own about 16 per cent of the enlarged group.

Eastdil has positioned itself as a real estate investment bank, carving out a role advising some of the world’s biggest investors on the sale, acquisition and financing of complex transactions.

While the firm has long boasted a track record of working on some landmark New York deals, the retreat of many Wall Street banks from real estate advisory in the aftermath of the global financial crisis allowed it to create a niche globally, working as both broker and financial adviser.

For London-based Savills, which is one of the largest real estate brokers in Europe and Asia, the deal will help it break into the business of buying and selling US properties and help it compete with American peers CBRE Group and Jones Lang LaSalle. The firm previously acquired US broker Studley in 2014, which gave it a foothold in leasing advisory in the country.

The addition of Eastdil will also help Savills to enhance its debt advisory business, a major growth area for real estate brokerages in recent years.

The ability to expand in the US is “one of the attractions of the acquisition”, Savills chief executive officer Simon Shaw said in a telephone interview on Thursday.

“It is a transaction that I personally wanted to do for a long time because it accelerates our push into investment banking,” he added.

Eastdil generated revenue of about US$633 million last year and underlying earnings of US$113 million. The group employs 650 people across 20 offices globally and employees with equity in the business will be subject to lock-up provisions.

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Savills plans to retain the Eastdil brand and will not change the firm’s compensation structure or pursue redundancies, Shaw said.

It is targeting revenue savings of at least £60 million (S$102.4 million) from the deal. The US$1.1 billion enterprise value represents a multiple of 9.9 times Eastdil’s underlying earnings last year.

“As part of Savills, Eastdil Secured will continue to serve as a trusted advisor and provide clients with unmatched capital markets and commercial real estate expertise, now with more resources as part of a larger organisation with complementary geographic reach and advisory capabilities,” Eastdil executive chairman Roy March said in the statement.

Eastdil is owned by Temasek Holdings, clients of Guggenheim Partners Investments and Wells Fargo. The firm’s 85 senior employees will hold a 6.3 per cent interest in Savills on completion of the deal, which is expected in the second or third quarter of this year after regulatory approvals. BLOOMBERG