FirstService is Breaking Up

Separations can be good. Multi-billion-dollar real estate services firm FirstService Corp. is living proof of that notion.
Jay Hennick, FirstService  Colliers

Jay Hennick, FirstService 

Separations can be good. Multi-billion-dollar real estate services firm FirstService Corp. has just revealed plans to spin-off Colliers International, its commercial real estate services subsidiary, to create two independent entities. The end result will be two separate publicly-traded companies operating as a master of their respective universes; FirstService as a leader in residential property management and services, and Colliers as one of the top global commercial real estate services players.

The split comes roughly one decade after Toronto-based FirstService formed its commercial real estate services platform with the acquisition of Colliers Macaulay Nicolls, then the largest shareholder of Colliers, and five years after it gained total control of Colliers. Visions of a separation were brewing from the start.

“When we acquired the company 10 years ago, it was about a $200 million business; today it’s approaching $1.8 billion in corporate revenues,” Jay Hennick, founder & CEO of FirstService, told Commercial Property Executive. “Our plan was always to expand our geographic capabilities and we now feel that we have the scope, we have a global capability, to be a standalone public company, as opposed to a subsidiary and FirstService.”

When all is said and done, FirstService will consist of the existing FirstService Residential and FirstService Brands divisions. Colliers will continue on its own as the world’s fastest growing commercial real estate services firm, providing a comprehensive list of offerings. The goal of the separation is multi-faceted. The independent entities will be able to focus on core businesses, engage in separate value-creation and capital allocation strategies, and offer two distinct and coveted investment opportunities.

For FirstService, the plan is to continue to create shareholder value through its position as a leader in residential property management. The company will focus on recurring property services; take advantage of its scale, expertise and access to capital to create further shareholder value; refine its acquisition growth strategy; and generate substantial free cash flow.

As for Colliers, the objective is for the company, as a pure play commercial real estate services firm, to capitalize on internal growth opportunities and industry consolidation; pick up speed on acquisition growth and service line diversification while remaining open to potential large-scale mergers; and retain and attract employees with more appealing incentives.

“With Colliers, once it’s public, there will only be two other public global real estate companies–CBRE and JLL, and Colliers will become the third,” Hennick said. “It has a very strong brand. It’s known globally, much stronger, in fact, than FirstService. In many ways, taking Colliers out as a standalone public company will create additional profile for the company, and it now has the financial strength and the scope and capabilities to operate on a standalone basis.”

The foundation that is expected to make Colliers a success after the separation was built a long time ago. “This management team has been together for 10 years and they’e taken this business from $200 million in revenue to nearly $1.8 billion. It’s the same management team; they built it one step at a time. And they’ve managed through pretty choppy waters–the years 2009, 2010 2011–and they’ve come out the other side very strong. It’s a seasoned team and being out there as a standalone is going to create another great compelling investment.”

Once the companies separate, Hennick will take on the positions of executive chairman of Colliers and chairman of FirstService.