Leading global commercial real estate services firm Colliers International Group Inc. has agreed to make a strategic investment in Harrison Street Real Estate Capital LLC, one of the largest real estate investment firms dedicated to the education, healthcare and storage sectors with approximately $14.6 billion in assets under management. The transaction, which is fully financed and subject to customary closing conditions, is expected to close by the third quarter of 2018.
Headquartered in Chicago and with an office in London, Harrison Street is a pioneer in demographic-based real estate investing. Since inception in 2005, 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. Harrison Street investors include many of the world’s most respected sovereign wealth funds, public and corporate pension funds, endowments, insurance companies, foundations and family offices.
Under the terms of the transaction, Colliers will acquire 75 percent of Harrison Street from its founders for $450 million, with an additional $100 million payable in 2022, based on the company achieving certain accelerated performance targets. The senior management team of Harrison Street will hold the balance of the equity. Colliers expects the annual run rate of management fee revenue to be between $100 and 115 million. Harrison Street’s co-founder and chief executive officer, Christopher Merrill, will serve as CEO, lead the operations and remains the largest individual shareholder. Harrison Street’s senior management team will continue to operate the firm’s day-to-day business as it always has, providing long-term stability for all the firms’ stakeholders.
“The investment in Harrison Street is transformational and the most significant in our history,” said Jay Hennick, chairman and CEO of Colliers International. “The transaction establishes us as one of the major players in global real estate investment management, providing an important new growth platform that also facilitates the integration of our existing operations in Europe. Our entrepreneurial operating and partnership philosophy aligns perfectly with Harrison Street, which brings an exceptional group of leaders to our organization and a company recognized by Pension & Investments as a best place to work in money management for the past four consecutive years.”
“In addition to its best-in-class returns, we were particularly attracted to Harrison Street’s focus on attractive real estate asset class strategies; massive segments offering significant, demographically-driven growth opportunities with defensive cycle characteristics,” said John Friedrichsen, chief financial officer of Colliers International. “The recurring management fees and institutional quality reporting and governance offers Colliers another stable and recurring source of revenue and a tremendous opportunity to create value in the future.”
“As we began to explore the idea of partnering with an outside investor to position us for the future, it became clear Colliers was a perfect choice,” said Merrill. “Colliers provides long-term stability and increased alignment among our team and limited partners. The relationship strengthens our global capability and offers unique market knowledge and deep relationships with owners and occupiers of real estate around the world. Colliers’ entrepreneurial culture, decentralized management style, significant insider ownership and proven investment record was another significant difference. On behalf of our entire team, we look forward to leveraging these advantages for the benefit of our partners, employees and investors while further differentiating Harrison Street in the future.”
In connection with this transaction, Berkshire Capital acted as financial advisor and DLA Piper acted as legal advisor to Harrison Street and the management team, while Three Ocean Partners acted as financial advisor and Winston & Strawn acted as legal advisor to certain of Harrison Street’s shareholders. Sidley Austin acted as legal advisor to Colliers.