Cushman Testing Aging Real Estate Bull Market With Big IPO

Real-estate-services firm Cushman & Wakefield aims to raise about $750 million from an initial public offering that would value the firm at around $6 billion, including debt, according to people familiar with the offering. Cushman is expected to set its pricing range Monday and kick off its roadshow, the people said. The price range is expected to set the company’s market cap between $3 billion and $4 billion, according to the people familiar with the offering. Cushman’s owners are looking to cash in at a time when shares of its largest global rivals,CBRE Group Inc. CBRE -0.66% and JLL, have been trading near record highs. Those firms are enjoying rising commissions and property-management fees, thanks to expanding economies around the world. But Cushman faces challenges, too. The firm has reported losses in recent quarters, and some investors are concerned that the bull market in commercial real estate—now in its ninth year—doesn’t have much longer left to run. The real-estate firm is owned by an investment group led by private-equity firm TPG, which purchased Cushman in 2015 and combined it with two other large commercial real-estate-services firms to form a global giant. The ownership group paid about $3.5 billion for the three firms, which also included DTZ and Cassidy Turley. Shares of Cushman are expected to start trading in early August, the people said. Cushman filed preliminary plans for an IPO in June but didn’t release pricing or valuation details at that time. Most of the proceeds of the deal are slated to pay down debt, according to Cushman’s filing. Other proceeds will be used for general corporate purposes, the filing said. The 101-year-old firm has about 48,000 employees and operates about 400 offices in 70 countries. It manages about 3.5 billion square feet of commercial property for corporations, institutions and others. Cushman is led by industry veteran Brett White who worked at CBRE for close to two decades, the last seven years as chief executive. He stepped down from CBRE in 2012, eight years after he played a major role in that firm’s IPO. Shares of CBRE and JLL both trade at roughly 10 times their forward earnings before interest, taxes, depreciation and amortization. Cushman expects a similar multiple when it prices its IPO, a person familiar with the process said. Cushman’s 2017 revenue of $6.92 billion in 2017 was smaller than the $14.2 billion of CBRE and $7.9 billion of JLL. But company executives and its underwriting team, led by Morgan Stanley and JPMorgan Chase & Co., are expected to say during the coming roadshow that Cushman’s smaller size gives it more room for growth. Still, the Cushman IPO is by no means a slam dunk. In Early December investor appetite was weak for an IPO by Cushman rival Newmark Group Inc., whose chairman is Howard Lutnick of Cantor Fitzgerald LP fame. Some investors and analysts were wary, partly due to adjustments in the firm’s earnings that made it difficult to compare Newmark with its peers. Cushman’s debt of more than $3 billion as of March 31 also exceeds debt levels at JLL and CBRE. The firm recorded a net loss of $221 million in 2017 and a loss of $92 million in the first three months of 2018, according to the firm’s June filing with the Securities and Exchange Commission. Cushman has been spending heavily on integrating the three firms, expansion and new technology. TPG’s partners in its Cushman investment include PAG Asia Capital and Ontario Teachers’ Pension Plan. This group will retain voting control after the IPO, the filing says. Founded in New York in 1917, Cushman moved its headquarters to Chicago, the home of DTZ, after being acquired by the TPG group. Cassidy Turley was based in Washington, D.C.