CBRE Group Inc. (



Q3 2011 Earnings Call

October 27, 2011 5:00 PM ET


Nick Kormeluk – SVP, IR

Brett White – President and CEO

Gil Borok – EVP and CFO


Anthony Paolone – JP Morgan

Brandon Dobell – William Blair

Kemp Sloan Bohlen – Goldman Sachs

Will Marks – JMP Securities

David Ridley Lane – Merrill Lynch



Compare to:
Previous Statements by CBG
» CB Richard Ellis Group CEO Discusses Q2 2011 Results - Earnings Call Transcript
» CB Richard Ellis Group's CEO Discusses Q1 2011 Results - Earnings Call Transcript
» CB Richard Ellis Group CEO Discusses Q4 2010 Results - Earnings Call Transcript

Ladies and gentlemen, thank you for standing by and welcome to the CBRE Third Quarter Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session with instructions being given at that time. (Operator Instructions) As a reminder, this call is being recorded.

I would now like to turn the conference over to your host, Nick Kormeluk. Please go ahead.

Nick Kormeluk

(Inaudible) CBRE’s third quarter 2011 earnings conference call.

About an hour ago, we issued a press release announcing our financial results. This release is available on the homepage of our website at This conference call is being webcast and is available on the Investor Relations section of our website. Also available is a presentation slide deck, which you can use to follow along with our prepared remarks. An archive audio of the webcast and a PDF version of the slide presentation will be posted to the website later today and a transcript of our call will be posted tomorrow.

Please turn to the slide labeled Forward Looking Statements. This presentation contains statements that are forward-looking within the meaning of the Private Securities Litigation Reform Act of 1995, including statements regarding our future growth momentum, operations, financial performance, business outlook, ability to compete and integrate our announced acquisition of the ING REIM business in Europe, and the ability to complete a new incremental senior secured sterling denominated term A-1 loan facility. These statements should be considered as estimates only and actual results may ultimately differ from these estimates. Except to the extent required by applicable securities laws, we undertake no obligation to update or publicly revise any of the forward-looking statements that you may hear today.

Please refer to our third quarter earnings report filed on Form 8-K, our current annual report on Form 10-K and our current quarterly report on Form 10-Q, in particular any discussion of risk factors or forward-looking statements, which are filed with the SEC and available at the SEC’s website, for a full discussion of the risks and other factors that may impact any estimates that you may hear today.

We may make certain statements during the course of this presentation, which include references to non-GAAP financial measures, as defined by SEC regulations. As required by these regulations, we have provided reconciliations of these measures to what we believe are the most directly comparable GAAP measures, which are attached hereto within the appendix.

Our management team members participating with me today are Brett White, our Chief Executive Officer; and Gil Borok, our Chief Financial Officer.

I’ll now turn the call over to Brett.

Brett White

Good morning and good afternoon, and thank you, Nick. Please turn to slide four. This quarter, our strong performance in evidence of the continued commercial real estate recovery comes against the backdrop of persistent sovereign debt concerns in Europe and tepid economic unemployment growth in the U.S.

Revenue growth for CBRE was strong in the third quarter. Total company revenue was over $1.5 billion, representing a 21% increase over the third quarter of 2010. This growth was balanced across all geographies in most service lines. Leasing revenue increased 19% in the third quarter of 2011 with all regions increasing by double digits in the quarter. The largest percentage gains in Leasing were in Asia Pacific and EMEA.

Outsourcing revenue accelerated significantly in the third quarter of 2011 with growth of 19%. All geographies had double-digit growth with EMEA leading the other two regions.

Investment Sales growth was 23% for the total company entirely driven by the Americas as EMEA and Asia Pacific were essentially flat. Investment Management revenue showed a significant increase from higher asset management fees primarily driven by CBRE Clarion Securities, which we acquired on July 1st, as well as higher incentive fees.

Normalized EBITDA increased to $194.8 million from $175.5 million. Our normalized EBITDA margin was 12.7% versus 13.9% in the third quarter of 2010. This margin comparison is impacted by an unfavorable variance of 60 basis points resulting from an increase in net carried interest compensation expense in our Investment Management business this year versus last. Another 60 basis point unfavorable variance was due to increased legal reserves associated with two unrelated cases and insurance reserves on claims within our Appraisal & Valuation business, which date back to the downturn.

Despite these variances as well as higher Outsourcing business mix and increased staffing in EMEA, which also contributed to lower operating leverage in the quarter, we are still not satisfied with the overall EBITDA margin result and fully expect our cost production measures to show greater impact in the fourth quarter of 2011. Because of this, we reiterate our expectation that full year 2011 normalized EBITDA margin will exceed full year 2010 normalized EBITDA margin.

Some of the most significant transactions we completed during or immediately following the quarter are shown here on slide five. As usual, I will not go through them individually but we have included them for your review.

I will now turn the call over to Gil to go over financial results in detail.

Read the rest of this transcript for free on