Mornginstar Research is maintaining their $21 fair value estimate for CBRE Group following the commercial real estate services firm’s acquisition of SOGESMAINT-CBRE in Belgium.
Terms were not disclosed, but we don’t think the deal is large enough to move the needle on our analysis; SOGESMAINTCBRE manages less than 15 million square feet of space, relative to CBRE’s roughly 3 billion-square-foot global portfolio. The acquisition follows prior deals to expand CBRE’s capabilities in this area in Europe, including IMPACTCORTI, Euro Mall Center Management, and SCM, and we like the property management business in general.
Analysts like the stability of the largely recurring cash flows that property and facilities management provides relative to the more cyclical leasing and sales businesses, which rely on transaction volume that tends to ebb and flow with the commercial real estate cycle. The deal also supports our thesis that large global commercial real estate services firms such as CBRE Group will expand their presence in the industry through a combination of organic growth and occasional acquisitions of smaller competitors, contributing to further scale advantages and supporting our narrow moat rating, which we will maintain for CBRE.
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