Three acquisitions within a month might signify that Transwestern Real Estate is snatching up smaller firms left and right despite a looming recession and slowdown in the market.
But Transwestern Real Estate Services President Tom Lawyer describes the series of purchases as a years-long, disciplined plan coming to fruition — though that plan doesn't rule out further acquisition news for the Houston-based firm in 2023, challenging climate or not. Courtesy of Transwestern Transwestern President Tom Lawyer "When times get a little tough, it does create opportunities," Lawyer said in an interview with Bisnow. "We feel like some of these times create better opportunities for us because the smaller firms are challenged with everything that all the larger firms are challenged with, without the capital."
Transwestern announced last week it had officially acquired Chicago's MB Real Estate, which adds 120 employees and 12M SF of real estate to its management portfolio in the region. Days later, it announced closing the acquisition of Washington, D.C.'s MGA Inc., and Lawyer said it hopes to finalize a third deal to acquire West, Lane & Schlager, also based in D.C., in the coming days.
The buys are in two of the more than 30 markets where Transwestern is already active, and came after the company decided to identify acquisition targets two years ago, engaging with an adviser to canvass the market.
Lawyer characterized Transwestern's current strategy as "acquisitive," allowing it is actively looking at adding new markets, mostly in the Sun Belt, and a number of other pickup opportunities that are "way, way early in the stages." But, he said, the company will be prudent and take its time, with nothing in its hip pocket to announce in the next week, at least.
'All three of these discussions, I mean, they didn't start two months ago,' he said. 'We've been working on these acquisitions for quite a long time, they just take a long time to do. I would even say the MBRE acquisition started long before this discussion of recession and difficult, challenging times ahead.'
Lawyer is frank that 2023 will be a tough year, especially from the transactional perspective. But he remains positive for a couple of reasons: He's done this long enough to know it will pass, and Transwestern can focus on the asset services and property management side of its business.
'That's a big piece of our revenue pie, which is not transactional-related,' Lawyer said. 'It's not having to lease a space, or sell a building or finance a building, you know, we're managing big buildings.'
The company has grown that part of the businesses rapidly over the last 18 months, he said, adding acquisitions, present and future, align with that mission. The firm is still "on the hunt" to acquire smaller firms to complement its strengths and fill in gaps where needed.
In describing how the most recent pickups fit into its strategy, Lawyer said MBRE was an attractive buy for its well-rounded, full-service business, with assets, services, property management and transactional leasing, both on the agency and occupier sides.
Those services enhance what Transwestern already does in the Chicago area, so the two firms do not have to compete, while MBRE also does construction and project management.
'So we thought that was a really good gap-filler for us,' Lawyer said. 'They just lined up perfectly with what we were doing in the Chicago market. And then it was adding very high quality people, but also a high-quality management portfolio of buildings.'
MBRE-managed properties include Michigan Plaza, 550 West Washington Blvd. and its home base of 181 West Madison St.
The targeting of WLS and MGA were largely relationship-based, but also eliminated competition to create a 'powerhouse' in the tenant rep and occupier solutions group, Lawyer said. Nashville, Tennessee, is a market Transwestern is seeking to enter in 2023. 'The JLLs and the CBREs, top 500 companies or the Fortune 100 companies … that's not really where we're competing,' Lawyer said. 'We're kind of competing with companies that look more like Transwestern looks.'
The consolidation with former competitors will allow Transwestern to capture a larger share of the middle market space in the D.C. area.
Larger companies have consolidated in the past decade to create powerhouses, a result of megamergers like JLL's $2B acquisition of HFF in 2019 and DTZ's $2B merger with Cushman & Wakefield in 2015. But those blockbuster mergers of real estate giants have likely halted for the foreseeable future.
Instead, there has been a new wave of larger companies scooping up smaller brokerage and management companies as global investors increasingly demand one-stop shop service providers.
Newmark, for one, has been making 'bolt-on' acquisitions of smaller firms and broker teams across the country, while last year, Colliers agreed to acquire a majority interest in Denver-based Versus Capital.
Transwestern does not expect to keep announcing acquisitions at the rate that it has this month. But the company continues to look for opportunities, Lawyer said. That could mean expanding into new markets, particularly Nashville, Tennessee, and Charlotte, North Carolina, he said. The company is also looking to enhance its presence in markets like Miami, Los Angeles, Phoenix and Denver.
As for the type of real estate Transwestern will focus on throughout what looks to be a tumultuous period, Lawyer said being a midsized company positions it well to help the struggling office market.
'If you're an office building owner, things are challenging for you right now, you're trying to figure out, how do you get your building back occupied?' Lawyer said. 'Our office building owners and occupiers … probably need tailored solutions, more now than ever. And so that's what I think is a great opportunity for us.'
That's where close relationships with clients pay off, and why Transwestern focuses on ensuring company cultures are aligned before making acquisition decisions, he said.
In Texas, Lawyer said they'll also focus on life sciences development, which has potential and could be 'recession resistant.'
But the focus will be on the asset services side of the business until the market is more favorable, he said.
'There's no question that our capital markets, selling buildings, financing buildings, that transactional business is going to be down. There's no question about that,' Lawyer said. 'We're prepared for it. And, you know, we've been through those times before.'