Commercial Real Estate Blog

Jones Lang LaSalle (JLL) has completed the acquisition of Staubach. The terms of the agreement were covered previously in this post.

Faced with low single digit vacancy rates, sky-high rental rates, and rapid growth, Facebook is looking to leave downtown Palo Alto. Kara Swisher, who also revealed Facebook’s revenue numbers, is reporting that Facebook’s migration will begin as soon as the first quarter of 2009.

This isn’t new news at all since Facebook had been in the market looking at sites outside of downtown months ago, but it does signify the commitment of Facebook to move. The director of facilities for Facebook, Jim Merryman, has likely brought the decision-making powers at Facebook in touch with reality, which is staying in downtown simply is not realistic for a company such as Facebook. Operationally, it doesn’t make a lot of sense either to have a company sprawled out in so many little chunks of space.

Facebook is spread out in about a dozen locations downtown, with one of its most recent being the upstairs of the Magnolia Hi-Fi building and a small office at 101 University.

Facebook is rumored to be considering sites in Mountain View, Sunnyvale, the old HP buildings on Page Mill, as well as taking down space for a site in San Francisco. Facebook was previously represented by Staubach, but is now using Cornish & Carey. It’s likely they will stay as close as possible to Downtown Palo Alto, where until recently Facebook was subsidizing workers who lived in Palo Alto to the tune of $600/month. Rumor is that it was revoked because employees were taking advantage of the rent subsidy by grouping together to rent a place, and then pocketing the balance, meanwhile living elsewhere defeating the purpose of Facebook’s rent subsidy to keep employees close.

We previously reported that the deal was essentially done, but Jones Lang LaSalle (JLL) confirmed today that it is in fact buying Staubach. Jones Lang LaSalle is paying $613M for Staubach over 5 years, with $100M in stock and $123M in cash up front at the closing. An additional $114M in earnouts will be paid to Staubach depending on whether it meets certain performance goals, bringing the total acquisition price potentially to $727M.

The deal is expected to close by the third quarter. The acquisition caps on and off rumours of an acquisition. We indicated on June 9th that it was a done deal, and more details trickled in over the following week.

Globe Street is reporting that the Staubach and Jones Lang LaSalle (JLL) merger will be announced as early as today. They are also reporting that the acquisition price (of Staubach) is $835M, a $100M more than was previously reported.

Update (6/16): Forbes is also reporting that the merger will be announced as early as today, except they are reporting a that Jones Lang LaSalle is buying Staubach for $735m.

A little less than a week ago we reported that the rumours of Jones Lang LaSalle (NYSE: JLL) merging with Staubach were true, or so we had heard. Today, Property Week News out of the UK is providing additional credence by publishing a price for the acquisition, $735M.

Property Week’s article indicates that the acquisition price represents a 10x multiple on Staubach’s EBITDA, and a 1.8x multiple on revenues.

No formal announcement has been made, but it seems imminent from what we heard. And from what Property Week is publishing, it will be announced as early as next week. Jones Lang LaSalle and Staubach have refused to provide any comment on the merger rumours.

The deal would represent a smaller acquisition for JLL than the Trammell Crow deal it had chased, but lost to lose it to CBRE.

It seems that the rumors swirling around a possible merger between Jones Lang LaSalle (NYSE: JLL) and Staubach are true. We’ve heard from a reputable source that the deal is essentially done.

The transaction would create a corporate real estate giant to better take on CBRE, the largest corporate real estate provider. The merger however could be potentially difficult to reconcile as Staubach has most of its business on the tenant side, and JLL, while strong on the tenant side, has a lot of its business on the landlord side of the equation.