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CBRE Taps UK's Rising Renting Demand With Telford Homes Buyout

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CBRE Group, Inc. (CBRE - Free Report) recently wrapped up the acquisition of Telford Homes Plc — a developer of multi-family residential properties in London. The acquisition, announced this July, will help the company capitalize on the thriving market for rental housing in the U.K.

Telford is focused on development of middle-market build-to-rent properties in London. The company will now operate as part of Trammell Crow Company, which is a wholly-owned real estate development subsidiary of CBRE Group. Telford will continue to be led by Jon Di-Stefano, chief executive officer of Telford Homes.

The move is a strategic fit for CBRE Group owing to the shifting inclination from home ownership to renting amid increased affordability relative to for-sale housing properties and limited supply. This is fueling the rental housing market’s growth in Britain, which is in its nascent stage compared with the renter-housing market in the United States that has flourished over the decades.

Therefore, this acquisition will enable CBRE to expand its highly successful Trammell Crow Company real estate development business in the U.K. market. Notably, Trammell Crow Company has garnered reputation in development and investment of commercial real estate. The company had $10.6 billion of projects in process and another $2.5 billion in its pipeline, as of Jun 30, 2019.

Bob Sulentic, president and CEO of CBRE stated, “The UK is in the early stages of a secular shift toward institutionally owned urban rental housing and Telford Homes’ talented team positions us to lead this trend.”

Our Take

CBRE Group has banked on strategic in-fill acquisitions to widen its geographic coverage, as well as expand and reinforce service offerings. The company focuses on acquiring regional or specialty firms which complement its existing platform as well as independent affiliates in which, at times, it holds small stakes. Furthermore, the company opts for larger, transformational deals driven by macro policies.

Apart from this buyout, in July, CBRE had also long-time affiliate, CBRE | MEGA, operating in the greater Omaha, NE area. CBRE | MEGA is one of the largest full service commercial real estate services firms in the city, and has more than 100 client-service professionals who offer sales, leasing and project management services.

Moreover, during the first half of 2019, the company acquired assets of an advanced analytics software company based in the U.K., which provides technology and consulting services for large global data-center operators, and a commercial and residential real estate appraisal firm headquartered in Florida. These acquisitions and investments will likely serve as growth drivers, supplementing its organic growth.

CBRE Group’s shares have gained 23.5% so far this year compared with the industry’s rise of 24.2%.

Additionally, its current-year earnings estimate has been revised nearly 2% upward over the past 30 days. Currently, the company carries a Zacks Rank #3 (Hold).

Key Picks

PennyMac Mortgage Investment Trust (PMT - Free Report) has witnessed 3.2% upward revision in its earnings estimate for 2019 over the past 60 days. Moreover, this Zacks Rank #2 (Buy) stock has rallied 24.3% year to date. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Jones Lang LaSalle Incorporated’s (JLL - Free Report) current-year earnings estimate moved 4.2% north over the past 60 days. The company’s shares have gained 3% in the year-to-date period. At present, it holds a Zacks Rank of 2.

Newmark Group, Inc.’s (NMRK - Free Report) ongoing-year earnings estimate has been revised marginally upward over the past 60 days. The stock has appreciated 8.1% so far this year. It currently carries a Zacks Rank #2.

Note: Anything related to earnings presented in this write-up represent funds from operations (FFO) — a widely used metric to gauge the performance of REITs.

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