QV takeover makes govt top dog

Last updated 05:00 25/10/2009

Relevant offers

THE GOVERNMENT will become one of the biggest players in the commercial property services market following Quotable Value's (QV) takeover of DTZ.

QV has been in negotiations to buy the New Zealand arm of DTZ, a large publicly listed valuation and property management company based in the UK.

Neither company was responding to calls on the subject last week, but the Sunday Star-Times understands that DTZ's staff have been told the takeover will proceed and both sides have been putting the finishing touches to the deal.

QV is a state-owned enterprise and its takeover of DTZ will create a property services company with turnover of nearly $70 million, making its easily the biggest property services company operating in the commercial property market.

The current largest player is believed to be Colliers International which has annual revenue of more than $50m if the business of its franchised offices outside Auckland is included in its figures.

Another major player, Bayleys, is privately owned and does not publish its accounts. There are also significant regional players such as Simes in the South Island and Barfoot & Thompson in Auckland.

QV has been in expansion mode for several years, moving into the Australian market and acquiring Darroch Valuations in this country. It is likely to incorporate DTZ into Darrochs once the takeover is complete.

The takeover will also take QV into new territory.

DTZ has a large property services business which the Star-Times understands has contracts with both government departments and corporates which are major occupiers of commercial space, including BNZ, Transit NZ, Inland Revenue, Office of Treaty Settlements and Land Information NZ.

The merger will create a situation where one government agency is a major provider of services to other government agencies, in competition with private sector players, a prospect already raising eyebrows in the industry.

The move also comes at a time when the property downturn has had a major impact on property services providers, with many companies posting losses over the past year and others showing substantially reduced profits.

That is likely to lead to further rationalisation within the industry, which in turn is expected to increase the dominance of the major firms.

Colliers managing director Mark Synnott said although his company had grown its revenue over the past year, this had been achieved by acquisition and opening new offices. Even so, it barely stayed in the black.

Ad Feedback

On a like for like basis, Colliers suffered a 10% drop of revenue in 2008 (compared with 2007) and revenues would be flat this year, he said.

"There's no question that by maintaining revenue at 10% less than our best year ever in 2007, we have gained market share. In this pretty tough environment, if you can hold your own you are gaining market share because most other firms are contracting."

Synnott expected it would be the smaller firms that would be hardest hit. He did not expect any other major players to withdraw from the NZ market or be taken over as a result of the tougher economic conditions.

However, Colliers had been quick to capitalise on problems at DTZ, which had been losing money and closed some branches.

When DTZ closed its Dunedin office, Colliers opened its first office in the city and hired several former DTZ staffers.

"We would not have opened our Dunedin office if DTZ had not closed theirs," Synnott said.

Colliers had also hired several former DTZ valuers to set up a new industrial and suburban valuation arm.

And two weeks ago, DTZ's director of property services, Don Smith, also jumped ship to Colliers, where he will be setting up a new occupier services unit to compete against his former employer.

Synnott said it was the office leasing business which was struggling the most this year. Last year, it had been the sales side of the business which was hardest hit, but sales had bounced back this year.

The valuation and property management arms had held up pretty well, he said.

- Sunday Star Times