Johnson Controls And Brookfield Team Up Down Under In Property And Facility Services

JCI: Johnson Controls logo
Johnson Controls

The market for outsourced property management services in Australia and New Zealand is estimated at A$18 billion, with a projected annual growth rate of 5%. [1] Global Workplace Solutions (GWS), a division of Johnson Controls (NYSE:JCI), and Brookfield Asset Management (NYSE:BAM) are combining their property and facility management businesses in these two countries to accelerate growth in this market.

Both governments and corporates are increasingly looking to outsource their real estate management which includes maintenance, comfort, landscaping, management of sub-contractors for cleanliness, etc., in order to achieve better efficiencies and save costs.

GWS, which provides facility and energy management services on nearly 168 million square meters of real estate in over 75 countries, constitutes nearly 6% of Johnson Controls’s total value, according to Trefis estimates. [1] We currently have a stock price estimate of near $28 for the company, marginally above its current market price.

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Brookfield Johnson Controls, the merged entity in Australia and New Zealand

Brookfield provides real estate infrastructure, facility and property management services. It has 3 million square meters spread over 8,900 properties in Australia and New Zealand under its management. [1] Its merger with GWS to form Brookfield Johnson Controls will create one of the few companies in this market capable of offering services ranging from real estate infrastructure to facility management services. Both Johnson Controls and Brookfield will benefit from synergies that will arise out of this integration, and in total, the merged entity will likely grow at a faster rate than the existing independent businesses of both companies.

The combined entity will manage more than 3.9 million square meters of property in more than 9,200 locations in Australia and New Zealand. Its revenues will be $250 million with a target to double by 2017. [1] Its existing clients include corporates such as Agilent Technologies, GlaxoSmithKline and Cisco, and several government agencies.

Existing partnership in Canada

Johnson Controls GWS and Brookfield have an existing joint venture in Canada where they provide facility and energy management services on more than 12.5 million square meters in 11,500 locations. [1] This JV has an especially strong presence and expertise in serving the financial services industry. The JV in Australia and New Zealand plans to utilize this existing brand and expertise to target the financial services industry in these countries. However, the merged entity will not limit itself to this industry.

All in all, the merger will add to growth at Johnson Controls GWS and thereby help the company offset the impact of slowing global economic growth on its automobile battery and interior businesses.

Understand How a Company’s Products Impact its Stock Price at Trefis

  1. Brookfield and Johnson Controls to merge Australian and New Zealand property and facility services operations to create Brookfield Johnson Controls, November 22 2012, [] [] [] [] []