CBRE Acquires 35% Stake in Flexible Workspace Firm Industrious
CBRE Acquires 35% Stake in Flexible Workspace Firm Industrious
(Bloomberg) -- CBRE Group Inc. has acquired a 35% stake in Industrious ahead of the flexible workspace provider’s potential initial public offering this year.
“We are big believers in the flexible workspace arena and see a tremendous opportunity -- we have a huge global occupier business and know that more than 80% of them want to be in multi-tenant offices with flex space,” CBRE Group Chief Executive Officer Bob Sulentic said in an interview.
Dallas-based CBRE paid about $200 million in cash for primary and secondary shares, and is transferring its own flexible workspace brand Hana -- which operates 10 locations in the U.S. and U.K. -- to Industrious as part of the transaction, the companies said.
“Hana was small, so it would have been a long slog for us to get to critical mass on our own,” Sulentic said, adding that the Industrious investment will be “significantly accretive” over time. He also noted that CBRE expects to be a link between Industrious and its corporate clients that are seeking agile workspaces.
The investment makes CBRE the largest shareholder of New York-based Industrious. The real estate giant plans to buy another 5% stake in the company in the next few weeks, lifting its stake to 40%, Sulentic said.
Sulentic and Emma Giamartino, CBRE’s global chief investment officer, are joining Industrious’ board. The deal values Industrious at more than $600 million, according to a person with knowledge of the matter.
Industrious co-founder and CEO Jamie Hodari said the firm’s focus on customer service and being asset-light -- leaning on management agreements rather than being burdened by leases the way hotel brands do -- has been validated.
“It’s partly why we’ve been able to spend the last year planting while others were pruning,” said Hodari, noting that the firm added 1 million square feet of new space last year.
‘Judicious’ Approach
Industrious, which entered Singapore last year, will take a “judicious” approach to global expansion and expects ample opportunities as tenants seek to deploy employees across multiple spaces instead of one location in a post-pandemic world. The company will use fresh funds to fuel growth by hiring and for capital pledges linked to new management agreements.
CBRE’s investment in Industrious values the company at more than it was worth in 2019, when it raised capital from Brookfield Properties and Canada Pension Plan Investment Board, among others.
That contrasts with the fate of other co-working companies including WeWork, which saw its valuation dramatically slashed after an aborted IPO. Knotel this month filed for bankruptcy and IWG recently acquired a majority stake in The Wing as it looks to take advantage of the pandemic fallout to snap up smaller rivals.
Conversations began in the fall when Industrious -- to its surprise -- fielded acquisition offers from so-called strategics and investment term sheets from private equity firms. Factoring in different state quarantine restrictions, Sulentic and Hodari met for the first time in November over dinner at the Saloon Restaurant in Philadelphia.
“We did the elbow thing, we didn’t shake hands,” said Sulentic, describing the meal as a Covid-safe experience with the two CEOs alone on the second floor of the restaurant. “It was my first restaurant meal in eight months,” a smiling Hodari added. “We never expected to actually be Cinderella, but life has a way of rewarding patience.”
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