CBRE Group Inc. (CBG) is boosting its business in San Francisco with the purchase of commercial real estate services firm, The CAC Group. The move is expected to considerably enhance CBRE’s service offerings in the region.
CAC acts as an agent for approximately 18 million square foot while it manages about 11 million square foot of office properties in downtown San Francisco, the greater Bay area and Seattle (including Bellevue). Since 2000, the company has accomplished nearly 3,000 sales and lease transactions.
We believe the acquisition to be a strategic one, given the opportunity to leverage on the San Francisco market – one of the strong and growing office markets of the country. Moreover, CAC has an increasing presence in the Seattle/Bellevue area, thereby providing CBRE sufficient growth prospects.
Notably, in recent times, to aim for expansion of business in the U.S. and UK, CBRE opted for a number of acquisitions including CB Richard Ellis Carmody, KLMK Group, Alan Selby & Partners.
The company is also in a deal to acquire UK-based commercial building technical engineering services provider, Norland Managed Services Ltd. for increasing its capabilities and expanding its corporate outsourcing platform in Europe.
We believe that such opportunistic acquisitions would serve as growth drivers, supplementing the company’s organic growth. Moreover, the company's investments in people and systems augur well.
Apart from this, CBRE has a flourishing outsourcing business, backed by an increasing clientele. In third-quarter 2013, the company inked a total of 54 contracts in Global Corporate Services, including 20 with new customers such as Heinz, Tesla Motors Inc. (TSLA) and EMG, a Japan-based petroleum and petrochemical company.
Gradual stabilization and a recovery of the commercial real estate market have aided CBRE to drive its growth engine and this is expected to continue, thereby providing strong upside potential for the company.
CBRE currently has a Zacks Rank #3 (Hold). Investors interested in the real estate operations industry may consider stocks like E-House (China) Holdings Limited (EJ) and Kennedy-Wilson Holdings, Inc. (KW). Both these stocks carry a Zacks Rank #1 (Strong Buy).
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