The acquisition would represent a strategic expansion of its Trammell Crow Company real estate development business. The US developer wants to moves into the UK’s rental market.
CBRE intends to acquire all the issued and to-be-issued shares of Telford Homes plc, which has a current development portfolio with a total project cost of £1.32bn.
“Being part of Trammell Crow Company will allow Telford to enhance its growth in the build-to-rent / multi-family 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.”
CBRE sees build-to-rent properties as being a fast-growing component of the London housing sector, pointing to growth of rental housing being fuelled by changing attitudes about renting versus ownership, greater affordability and limited supply. Telford generated approximately £354m of revenue and £40m of pre-tax profit for the 12 months ended 31st March 2019.
Under the terms of the planned transaction, Telford shareholders would receive £3.50 per share in cash, valuing the company at £267.4m. CBRE has put in place a bridge acquisition facility for purposes of confirming that resources are available to satisfy the offer to Telford shareholders, as required by takeover rules, but intends to fund the acquisition through a combination of cash on hand and availability within its revolving credit facility.
Bob Sulentic, president and chief executive officer of CBRE, said: “Telford gives us a compelling opportunity to build on the success of Trammell Crow Company. 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 is also seen as giving Trammell Crow Company the opportunity to expand its development platform over time in the UK and Europe.
Completion of the acquisition is expected to take place in the third quarter of 2019, with Telford then operating as part of the Trammell Crow Company. The plan is for Di-Stefano to 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 favour of the proposal.