Though its parent company came close to insolvency only a few short months ago, Canadian commercial real estate firm DTZ Barnicke has a new lease on life.
In December, the ailing British-based real estate services firm DTZ Holdings was bought by Australian engineering and property services giant UGL Ltd. for $119-million (U.S.). DTZ had previously been put into administration and delisted because of spiralling debt problems.
Since the buy, UGL chief Richard Leupen has made it known that he wants to see his company overtake its competitors and emerge as the global leader.
The acquisition has made UGL the third-largest property services company in the world, says Robert Shibuya, group president of UGL Services (only CBRE and Jones Lang LaSalle are larger).
Mr. Shibuya, who is based in Los Angeles, met with DTZ Barnicke executives in Toronto last week to discuss UGL's plans for the country's 19 offices and 300 employees.
Though Mr. Shibuya is no stranger to DTZ – he was the chief operating officer of the Americas for DTZ until his move to UGL in 2011 – this was his first trip to Canada since the acquisition.
Property Report caught up with Mr. Shibuya to discuss UGL's plans.
What made DTZ an appealing acquisition for UGL?
We decided that in order to compete with the other global property service firms and to ultimately provide the level of service that our clients were asking for, we needed to become a much larger and more capable company. That meant having capabilities in parts of the world where we did not have an operation, like Europe, for example. And although we had a small operation in China, a few hundred people, it wasn't anything close to the size and magnitude of DTZ, which had been known as the market leader. So we decided that instead of being happy where we were, we really wanted to step it up significantly and play on a global level, and the best, most efficient way to accomplish that was to acquire a firm that had a very good platform to add to our existing platform, and that was DTZ.
The DTZ name has a long history – will the company be rebranded?
One of the reasons for investing in DTZ is the value of the brand. It's very well known in Asia as, literally, the top brand. It's top four in Europe and it's definitely known in North America. So it is our plan to retain the brand.
How will the UGL acquisition change the way DTZ Barnicke does business in Canada?
DTZ Barnicke could have a client that had a requirement in the United States, and prior to the combination of the two firms, the only option was to refer the business to a firm outside the company. And from the value proposition, that is considered not as competitive as a firm that has a North American or a global capability. So day one, that changes. Given the UGL strength from a financial perspective, there is capital that is available to invest in the business. For example, we're currently spending more than $40-million upgrading technology in the firm, and this is just on the UGL services side. That upgrade of technology – systems around accounting and client portals, CRM [customer relations management]tools – all of that infrastructure is immediately available to DTZ Barnicke.
What's your take on the Canadian real estate market – is it an oasis of stability compared with what has happened in other parts of the world?
I'm down in the United States in southern California, so obviously their challenges [after]the great financial crisis have been well documented. I've always kept my eye on the Canadian market and been quite envious of the fact that even through there was a correction in the residential market, the correction was much less severe …. So kudos to Canada for not over-leveraging … And from our research and from our experience in terms of the psychology of what's going on in the North American economy, we appear to be in the early stages of a cyclical recovery, and the psychology is clearly there relative to our clients, who are making plans to extend and expand their lease accommodation. We see hiring taking place, it seems to be loosening up. And the capital spend is evidenced by the fact that we're spending $40-million on technology. Given the fact that Canada is the U.S.'s largest trading partner and the U.S. economy seems to be picking back up again, we're quite bullish on Canada and bullish on creating a synergy between the U.S. and Canada.
Will there be any restructuring of DTZ Barnicke in Canada?
I wouldn't call it a restructure, I would call it an integration, because there really is no overlap, the UGL business in Canada was facilities management, with negligible transaction capability, whereas the DTZ Barnicke business was really transaction and advisory with no FM, so we're really going to be combining the two together… We're going to co-locate, because DTZ Barnicke had nicer accommodation, we're moving the UGL people in to the DTZ Barnicke space.
Some predict that Canada can't avoid a real estate crash forever.
We do not anticipate any kind of a double dip. We are anticipating growth. And as a result, we aren't battening down the hatches, we are beginning to position to take advantage of the expanding economic environment and that includes investing in the business and hiring more people.
So is UGL focused on growth within the Canadian market?
I would say we are looking to make strategic investments in all our businesses in the markets that show there is opportunity. As it relates to Canada, it's a very big market, we could be significantly larger in size, and in fact, we should be to take advantage of the full opportunities in the market, and relative to other parts of the world that aren't as well-positioned as Canada. We view that this is a good time in the cycle to be investing in growing our business here.
This interview has been edited and condensed
– DTZ's history stretches back more than 225 years, when its founding predecessor firm Cheshire Gibson started business in 1784 in Birmingham, England.
– A second predecessor firm, Debenham and Tewson, was founded in London in 1853.
– The DTZ brand was created in 1993 after a joint venture with the Zadelhoff Group in Germany and Jean Thouard of France.
– In 2007, DTZ acquired Canadian commercial real estate company J.J. Barnicke and became DTZ Barnicke.
– UGL started as a small engineering construction firm based in Perth, Australia, called United Construction. It listed on the Australian stock exchange in 1994 and has acquired several international companies over the past decade, changing its name to UGL in 2009.
– With the acquisition of DTZ, UGL now has 27,000 permanent employees and operates 217 offices in 45 countries.
Source: DTZ.com and UGLLimited.com