LOS ANGELES–CBRE Group, Inc. announced that it intends to acquire all the issued and to-be-issued shares of Telford Homes Plc (AIM:TEF). Telford is a leading developer of multifamily residential properties in London, with a development in-process portfolio (total project cost) of $1.66 billion (£1.32 billion).
The acquisition represents a strategic expansion of CBRE’s highly successful Trammell Crow Company real estate development business, which has achieved robust earnings growth over the past five years, while producing very strong returns for its capital partners.
Telford is focused on opportunities to develop middle-market build-to-rent properties, a fast-growing component of the London housing sector. The growth of rental housing is being fueled by changing attitudes about renting versus ownership, greater affordability relative to for-sale housing and limited supply.
Telford generated approximately $446 million (£354 million) of revenue and $50 million (£40 million) of pre-tax profit for the 12 months ended March 31, 2019. Under the terms of the planned transaction, Telford shareholders will receive $4.41 (£3.50) per share in cash, valuing Telford at $336.9 million (£267.4 million). CBRE has put in place a bridge acquisition facility for purposes of confirming that resources are available to fully satisfy the offer to Telford shareholders, as required by applicable UK takeover rules, but intends to fund the acquisition through a combination of cash on hand and availability within its revolving credit facility.
“Telford gives us a compelling opportunity to build on the success of Trammell Crow Company,” said Bob Sulentic, president and chief executive officer of CBRE. “The UK is in the early stages of a secular shift toward institutionally owned urban rental housing, similar to what we have seen in the US over the last two decades. Telford is well positioned to lead this trend, and their more than 300 talented professionals operating in London are a great addition to our company.”
The acquisition of Telford also positions Trammell Crow Company to opportunistically expand its development platform over time in the UK and Europe.
“Being part of Trammell Crow Company will allow Telford to enhance its growth in the build-to-rent / multifamily market in London,” said Jon Di-Stefano, chief executive officer of Telford Homes Plc. “Our management team have found that Trammell Crow Company is aligned with both our culture and our current strategy and its platform will give Telford access to far greater resources, improved technology and wide-ranging expertise.”
Upon completion of the acquisition, which is expected in the third quarter of 2019, Telford will operate as part of the Trammell Crow Company and its financial results will be reported within CBRE’s Real Estate Investments business segment. Mr. Di-Stefano will continue to run the Telford business after the acquisition closes.
The transaction is subject to customary regulatory approvals. It also requires approval by a majority of Telford shareholders voting on the transaction and who represent at least 75% in value of the votes cast. The proposal has received the recommendation of the Board of Directors of Telford, and each member of the Telford Board has committed to voting their shares in favor of the proposal.
J.P. Morgan Securities LLC, together with its affiliate, J.P. Morgan Securities plc, which conducts its UK investment banking business as J.P. Morgan Cazenove, is acting as financial advisor to CBRE Group, Inc. and Simpson Thacher is serving as legal advisor to CBRE and Trammell Crow Company in this transaction.