Eastdil Sale Discussions Underway
Wells Fargo & Co. is in advanced talks to sell Eastdil Secured to a Guggenheim Investments JV, according to the Wall Street Journal.
NEW YORK CITY—A Guggenheim Investments joint venture with a Singaporean sovereign wealth fund is in advanced talks to buy Wells Fargo & Co.’s brokerage firm, Eastdil Secured, as reported by the Wall Street Journal.
The newspaper stated Eastdil’s management team including CEO Roy March would have ownership interest in the company with Guggenheim and Singapore’s Temasek Holdings. The deal would be the sovereign wealth fund’s first direct investment in a US real estate advisory and brokerage firm. The WSJ noted the amount discussed is still unclear and that a possibility exists that a deal will not be reached.
The Sovereign Wealth Fund Institute newsletter also posted the news noting, “With demand for institutional real estate in the US not slowing down, sovereign wealth funds are trying to find channels to access more deal flow in America.” It further stated that in 1999, Wells Fargo acquired Eastdil for $150 million but has been in the process of shedding non-core assets.
How much can a potential injection of capital amplify Eastdil’s performance/?
In February 2019, The Real Deal reported that from 2010 to 2016, Eastdil had held the top position in the New York brokerage world.
However, in 2016 the firm took a major hit when its top-producing brokers Doug Harmon and Adam Spies left the firm and joined Cushman & Wakefield. Harmon spent 23 years at Eastdil building up its New York City reputation. Describing the strategy to lure Harmon from Eastdil, The New York Post called Harmon “the world’s no. 1 investment real estate sales broker.”
The paper stated he led Eastdil to a dominating $22.7 billion in revenue across 56 sales. Citing The Real Deal, the article also noted at the time in New York, Cushman & Wakefield was ranked third with $3.4 billion in revenue with more than 242 transactions. The article stated in 2014 to 2015, Harmon handled $50 billion in deals with approximately 20 of the deals exceeding $1 billion.
From 1997 to 1999, Harmon sold $5 billion of assets in Leona Helmsley’s real estate portfolio. Additional examples of Harmon and his team’s trophy deals while at Eastdil include the following sales: the General Motors Building for $1.4 million; 111 Eighth Ave. to Google for $1.8 billion, the second sale of Stuyvesant Town-Peter Cooper Village apartment for $5.45 billion and the $1.4 billion sale of the Sony Building.
The Real Deal article noted that with the team’s departure Eastdil “has struggled to fill the void as it works toward a management-backed buyout from its parent company, Wells Fargo.”
The trade publication’s Top 40 NYC Investment Sales Firms chart showed for 2017, after the Harmon team left, Eastdil’s total dollar volume in New York City fell to $2.73 billion, down 88% year-over-year from 2016.
The Real Deal’s New York City investment sales firms’ rankings for 2018, published in February 2019 listed Cushman & Wakefield at the number one spot with $16.49 billion in dollar volume, with CBRE in second place with $6.37 billion and Eastdil ranking third with $5.86 billion.
In May 2018, four veteran brokers from Eastdil’s hotel and financing team also left the firm to join Newark Knight Frank. In December 2018, Eastdil hired Gary Phillips from Allianz Real Estate of America, as a managing director focusing on equity sales and capital markets. At that time, the WSJ had reported that Wells Fargo had been in negotiations for more than a year to sell Eastdil and that March had taken over the efforts.
As New York is a large, dominant market, its performance can affect national figures as well. Bisnow reported in February 2018 that on the national level CBRE had bumped Eastdil from the top ranking spot, brokering the most commercial deals over $25 million. With the Real Estate Alert 2018 national brokerage deals of $25 million or more, CBRE ranked first with $59.1 billion in sales, followed by Eastdil with $44.9 billion, then Cushman & Wakefield at $31.6 billion.
The Eastdil talks come amidst large consolidations in the industry including JLL’s acquisition of HFF in a $2 billion deal, and Newmark Group’s acquisition of retail brokerage RKF.