Johnson Controls reached a definitive agreement for the sale of its Global WorkPlace Solutions (GWS) business to commercial real estate investment firm CBRE Group for $1.475 billion. The company announced its intentions to divest the GWS business in 2014.
Alex Molinaroli, chairman and CEO of Johnson Controls, said at that time “As we’ve focused on it this past year to understand what is needed to win long-term, it is clear that GWS is really an exclusively service-based business and not core to our manufacturing, engineering and product-based portfolio.”
The agreement with CBRE includes a 10-year strategic relationship between the two companies. Johnson Controls will be the preferred provider of HVAC equipment, building automation systems and related services to the 5-billion-square-foot portfolio of real estate and corporate facilities managed globally by CBRE and GWS. The agreement provides Johnson Controls with new channels for its offerings and when fully operational is expected to generate up to $500 million of annual incremental revenue for the Johnson Controls Building Efficiency business.
In connection with the agreement, CBRE will also provide Johnson Controls with a full suite of integrated corporate real estate services, including facilities management, project management and transaction services on more than 50 million square feet of Johnson Controls’ properties.
In addition, the companies will jointly provide $40 million over 10 years to fund an innovation lab that will develop energy management solutions. The joint innovation lab will evaluate, connect and leverage products, services and energy data to create value for occupiers and investors of real estate.
A spokesperson for Johnson Controls said the companies are not making any announcement on where this joint innovation lab will be located. In 2014, the Mid-West Energy Research Consortium (M-WERC) announced it was building a new Energy Innovation Center in Milwaukee, positioning the city as a national hub for energy, power and control industries. M-WERC members include four state engineering schools – Marquette, UW-Madison, UW-Milwaukee and the Milwaukee School of Engineering – along with large companies, including Milwaukee-based Johnson Controls, Rockwell Automation and Wisconsin Energy.
In regard to sale of GWS, Johnson Controls noted that it had recently completed the sale of its interests in two GWS-related joint ventures to Brookfield Asset Management. Including those joint venture transactions, aggregate proceeds from the GWS business divestitures are $1.675 billion.
Johnson Controls said it will treat GWS as a discontinued operation in the second quarter of fiscal 2015. The transaction is expected to close near the end of its 2015 fiscal year and is subject to regulatory clearance.
As a real estate conglomerate, CBRE has been active in promoting energy efficiency. In 2012, the company created the CBRE Real Green Challenge, awarding a total of $1 million over four years to fund independent research on ways to reduce energy and water consumption in commercial buildings.