Brookfield Waves Goodbye to Cushman & Wakefield
Plus: A deep dive into Alpaca's foray into real estate private equity aiming to take OpCo-PropCo models into the mainstream
Brookfield Waves Goodbye to Cushman & Wakefield From Handling Its US Listings
Brookfield Asset Management has decided to part ways with Cushman & Wakefield as its broker for U.S. office and logistics listings, a move that could reshape the brokerage landscape for some of NYC’s most high-profile properties.
The breakup: Cushman & Wakefield's responsibilities for marketing some of Brookfield's prime Manhattan real estate, such as 660 Fifth Avenue and Manhattan West, have been terminated. Although specifics on the number of affected listings are not disclosed, the brokerage's own search for a new office space — and a reportedly botched deal at 660 Fifth Avenue — may have influenced Brookfield's decision.
Financial troubles: Amid a stagnation in property transactions, Cushman & Wakefield have found themselves in a financial bind, necessitating a pivot to cost-cutting measures. The brokerage's financial health has come under the spotlight following a 9% dip in revenue in the third quarter, raising questions about its operational resilience.
Market reaction: Brookfield has seen its share price climb by over 5% following the news, suggesting investor confidence in its strategic decision-making. Conversely, Cushman & Wakefield have faced a tumultuous stock performance, with a 40% drop in stock value signaling investor concern over its current trajectory and recent management shake-ups.
Talent shift: This split is underscored by a talent exodus at Cushman, with a key sales team departing for competitor Newmark just as the firm reels from the departure of star brokers Doug Harmon and Adam Spies. Such moves reflect a broader trend of shifting alliances in the brokerage world and may hint at further industry consolidation or realignment as firms adapt and reset.
➥ THE TAKEAWAY
Big picture: Cushman & Wakefield is going through tough times. After losing some of NYC’s most high-profile property listings for Brookfield, they're also losing some of their key salespeople to a rival company, Newmark. At the same time, they're trying to save money after losing nearly $34 million in Q3. The company is navigating turbulent waters with strategic decision-making in a bid to remain relevant and competitive, underlining the turbulence in CRE.
Alpaca Trailblazes PropCo Real Estate Revolution
In late September, nearly a hundred real estate investors, tech entrepreneurs, and innovative developers gathered at a private event in the Catskill Mountains of New York. There, they explored the future of financing pioneering brick-and-mortar businesses, with a spotlight on new kinds of OpCo-PropCo models.
This week’s Thesis Driven dives into the real estate firm behind this gathering: Alpaca Real Estate, a new private equity group making bets on technology’s power to enhance real estate returns. With an experienced team, considerable capital, and expansive ambitions, Alpaca plans to expand the OpCo-PropCo structure beyond its hospitality beginnings to provide alternate financing for innovative brick-and-mortar concepts.
Daniel Carr, co-founder of Alpaca Real Estate, shed light on their new business model in a discussion that highlighted Alpaca’s journey, methodology, investment interests, and the role they play in the wider landscape of real estate finance.
Why PropCo and Why Now? Alpaca is no stranger to innovation. The firm’s venture capital arm has funded notable proptech companies such as Compass and Point, but there’s a growing consensus that conventional venture funding doesn't suit innovative real estate businesses. New financing models are being developed, and Alpaca’s blend of real estate and tech experience gave them the confidence to launch a new fund backing novel brick-and-mortar concepts.
“Real Estate First” Approach: Alpaca Real Estate approaches investments with a real estate-centric strategy. Carr emphasizes that core returns are driven by investing in real estate sectors with good fundamentals, with innovation providing additional value. Alpaca’s real estate and venture funds operate independently, with the real estate arm identifying its own themes and deals, running “reverse RFPs” to invite proposals from operators. In many cases, Alpaca’s real estate returns are augmented by equity interests in the operating companies.
Targeted Sectors of Interest
Alpaca’s interests span various sectors, with specific focus areas:
Single-Family Rental: Addressing the U.S. housing crisis, Alpaca invests in single-family rental homes in high-demand markets. They aim to purchase homes, particularly in Tampa, Atlanta, and Dallas, leveraging strong market fundamentals.
Urban Industrial: Focusing on urban infill industrial spaces, Alpaca targets real estate for logistics or light manufacturing, catering to the surging e-commerce sector and the gradual return of U.S. manufacturing.
EV Charging Stations: Alpaca is investing in electric vehicle charging infrastructure, a sector bolstered by increasing EV sales and supportive legislation.
➥ THE TAKEAWAY
For entrepreneurs and real estate professionals, firms like Alpaca Real Estate represent a novel source of capital for projects that might be too avant-garde for traditional real estate financing but still require substantial investment. Alpaca Real Estate’s blend of traditional real estate investment with strategic innovation is carving a new niche in the investment landscape, potentially redefining how brick-and-mortar business concepts are financed.
You can read more about Alpaca’s approach and others tackling the OpCo-PropCo opportunity on Thesis Driven here.
Meet the attorney: Missouri attorney Michael Ketchmark has made waves in real estate by winning a $1.8B case against the National Association of Realtors and promptly filing suits against other brokers.
Restart rent hikes: The LA City Council committee has chosen not to extend the pandemic-related rent freeze, enabling a rent rise of nearly 4% for rent-stabilized units—which comprise about three-quarters of the city's rental properties—based on recent Consumer Price Index growth.
Google’s gut check: Google and Lendlease Group have terminated their partnership on four San Francisco Bay Area developments after reassessing the projects' mutual benefits against current market conditions, though Google intends to fulfill its housing goals.
Electrifying growth: Siemens AG is injecting $510 million into its U.S. operations to scale manufacturing, enhancing data center capabilities to meet the growing demand driven by artificial intelligence advancements.
Filling the void: Regent Properties has launched a $500 million lending platform targeting the undersupplied Sun Belt real estate market, providing a mix of mortgage, mezzanine, and equity financing.
Banned in Israel: Yoel Goldman, a Brooklyn developer, has been barred for five years from Israel's capital markets and must pay $2 million in fines following a settlement for misleading investors.
Profit pit: Marcus & Millichap reported a $9.2 million loss in Q3, citing reduced sales activity caused by economic headwinds and investment in growth, with brokerage commissions falling 52% year-over-year.
Real estate stocks in the S&P 500 soared, with homebuilders and REITs outperforming after the Federal Reserve held interest rates steady, fueling investor optimism and indicating a possible pause in rate hikes.
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