CRE firm closes on acquisition of 75 percent niche investor Harrison Street
By Murray W. Wolf
Just in case you missed the news because it happened the day after the Fourth of July, global commercial real estate services firm Colliers International Group Inc. (NASDAQ and TSX: CIGI) completed its previously announced strategic investment in Harrison Street Real Estate Capital (HSRE) LLC. Colliers acquired 75 percent of the firm, with the senior management team of Harrison Street retaining ownership of the rest.
Harrison Street has become a household name in the healthcare real estate (HRE) space during the past 13 years or so. During that time, it has become one of the largest real estate investment firms dedicated to the healthcare, education and storage sectors with about $14.6 billion in assets under management.
Headquartered in Chicago, with an office in London, Harrison Street has been “a pioneer in demographic-based real estate investing,” according to a July 5 Colliers news release.
“Since inception in 2005,” the news release continued, “the firm has established a series of disciplined and highly differentiated investment products across multiple risk/return strategies, originating and managing a series of open and closed-end real estate investment funds and liquid securities, counting among its investors many of the world’s most respected sovereign wealth funds, public & corporate pension funds, endowments, insurance companies, foundations and family offices.”
Harrison Street’s co-founder and CEO, Christopher Merrill, is continuing on in that role and remains the largest individual shareholder.
Harrison Street’s senior management team will continue to operate the firm’s day-to-day business, Colliers said, “providing long-term stability for all the firms’ stakeholders.” Colliers expects the annual run rate of management fee revenue to be between $100 million and $115 million and to be materially accretive to its adjusted EBITDA, adjusted net earnings and adjusted earnings per share for the balance of 2018 and annually thereafter.”
“Closing of the Harrison Street transaction establishes Colliers International as one of the major players in global real estate investment management, provides an important new platform for growth and facilitates the integration of our existing real estate investment management operations in Europe,” Jay Hennick, chairman and CEO of Colliers International, said in the news release. (The firm’s European investments are focused on student housing.)
“Our enterprising culture and partnership driven business model aligns perfectly with Harrison Street, which brings an exceptional group of leaders to our organization and a company with a proven track record of success spanning a broad spectrum of significant accomplishments,” Mr. Hennick added.
“The addition of Harrison Street will not only provide an attractive business for future growth and capital deployment, it will also strengthen our cash flow and earnings,” John Friedrichsen, CFO of Colliers International said in the news release. “Beginning with the third quarter, we will update our segmented reporting to separately disclose our new Investment Management Services platform comprising the results of Harrison Street as well as our existing European investment management business. Together, this new segment will have more than $20 billion in assets under management from the world’s most respected institutional real estate investors.”
“We are excited to hit the ground running with Colliers, leveraging our respective track records of success, enterprising cultures, and focus on client service,” Mr. Merrill said. “As part of Colliers’ global platform, we will provide our investors and employees greater stability and significant growth opportunities in the future.”
Colliers International is a global real estate services and investment management company operating in 69 countries with a workforce of more than 12,000 professionals and 2017 corporate revenues of $2.3 billion – $2.7 billion including affiliates.
According to its website, Harrison Street has raised six closed-end opportunistic funds – in 2007, 2008, 2011, 2013, 2014, and 2016 – focused on investing in the education, healthcare and storage segments of the U.S. real estate market. To date, the opportunistic fund series have sold more than 360 assets representing more than $6.5 billion in real estate (based on cost).
It also has a core fund, launched in 2011, that is says was the first of its to kind to target stabilized assets exclusively invested in the education, healthcare and storage segments. The core fund focuses on income-producing assets to be held for long periods, typically 10 or more years.
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