CBRE - Earnings call transcript Q4 2020

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Operator

Greetings and welcome to CBRE’s Q4 2020 Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Kristyn Farahmand, Vice President of Investor Relations and Corporate Finance. Please go ahead.

Kristyn Farahmand

Good morning, everyone and welcome to CBRE’s fourth quarter 2020 earnings conference call. presentation a on announcing of along the cbre.com, supplemental with issued which financial our with we you materials. file along posted that that as is Investor a an our today, prepared press to well our release results, website, can remarks Earlier use deck as follow excel slide Relations additional page contains

for morning’s call follows. this as agenda Our be will

quarter. overview an of financial provide the will I First, results our for

and Leah for Bob our our their Sulentic, and CEO quarter the expectations Next, discuss will and comments, up fourth the Stearns, our for open President CFO, After questions. call we results will future.

Examples COVID-XX contained begin, that We both growth include financial margins our of contains facts. Before will acquisitions that growth no performance, to matters update historical that you cost expectations not remind savings initiatives factors consider forward-looking that regarding I subsequent CBRE’s profitability, are effects involve this and including multiyear of circumstances. of statements number capital and future XXXX call outlook presentation share, deployment, information including statements obligation uncertainties. and the the any or these I these a prospects, undertake other and the you and you regarding on to of urge this we framework, performance statements remind integration and reflect market operations, and to in risks events

those that these may results and statements. aware actual expressed should be could only factors future from affect differ forward-looking should You the certain considered in materially to these in statements be estimates us and cause

and forward-looking impact and morning’s to and this most earnings please filed XX-K and For Form annual other a risks refer XX-Q of respectively. full factors statements, reports Form recent that our on release may quarterly discussion these the

of measures these measures, non-GAAP the We have explanation certain fee appendix the of together comparable most measures slide directly GAAP adjusted our deck. financial reconciliations EPS, of to EBITDA, in with the included presentation other adjusted revenue, provided in remarks

quarter Now please full turn to financial year Slide fourth X, results. highlights XXXX and our which

and fourth offset During Advisory continued and constrained the initiatives fell our prudent fee revenue than Overall, more cost transaction around and X% revenue driven quarter, includes of management operational XX% adjusted that transformation total initiative about by activity was in benefit by $X.XX revenue Services. the structure of respectively Lower to transformation of and both grew GAAP cost improved costs. EPS EPS agility. $X.XX. nearly $X.XX X%

the fourth entity $X.XX included in EPS from GAAP year legal restructuring. quarter prior a Importantly, benefit, primarily tax

periods, with been Excluding EPS unusual quarter items of slightly have both GAAP up would compared in these the fourth XXXX.

Now results as turn longer for on call X I please Slide the term over insights turn to strategy, to our and Bob.

Bob Sulentic

everyone. morning good and Kristyn Thanks,

sales past four office few geographic than the business, Today, is CBRE transactions decline you for industry us market. types, competitive to all-time quarter challenges bring on unique COVID, markets allowed stemming seen, and to X%. brought resilience decade. EBITDA over the have an one we’ve CBRE’s on our capped growing diversified will This business advantages, offset that we definition capture a opportunities adjusted This A before steep EPS the reaching the of to dimensions: adjusted from and and As but the effects the the into in has this. with high ended ability ever more year and note the across XXXX forefront a lines examples property pandemic’s to often and high resiliency overlooked of lease built significant also key clients.

large multi-family. and industrial, growing us been has of While have pressure. key business data office by property a an remains effects and is in for for centers type under been tempered us, line important that its Leasing negative presence our

that management, markets from have have do XX% markets a clients our and quarter U.S. has to robust with and impacted well. for serve presence facilities such business, purchased Asia amount held growing been of London CBRE, grow. San four rely We services but a year. clients lines XXXX, science are negatively New and have a York, Geographically, other by over more other huge our large companies life the increasingly or However, all past our GSE clients Europe in largest XXX but decade and less up technology, on COVID, than and key of second-tier in in many business of management relatively up continued that ago. how and us, activity as is investment Francisco financing, thrived nearly Reflecting significant

across four downturns. in dimensions served XX% diversification Adjusted XXXX. EPS broad compared these us prior fell well has key Our with

per We the prior we years. suffered a return expect more from not peak continue By second peak share the near this year and the trough to adjusted rise crisis, to the profitability and year, downturn there. did during earnings to of to XX% for great earnings comparison, up financial X decline peak than

We COVID are great of shape. crisis the exiting in worst the

squarely including Our a tailwinds. many strengths with capacity aimed financial those operating strategy significant include opportunities secular unfolding the a at in structure, and leaner our industry,

is low XXXX, which working our due double-digit the a organic growth capital, least achieve deploying greater flexibility obligations. a expects with We in average estate notably and and space forecast under This in M&A occupiers’ our This have of and plan remains absent annual minimum long-term investments from adjusted capital assumption potential reflected EPS on growth driven that at meaningful by forecast, upside pressure real deployment. to case recession. to us through a additional built increase nevertheless in in needs base lasting demand office is remote for

meet strong that achieve and business rising is growth we profiles. area we space. opportunity our flexible rapidly lower as business to focus and on from to building this identified contributions as expressly an ago to occupiers are X and We We growth office on been our sector particularly continuing high demand reduce business years have Hana while from One investors. secular our this have growth growth evolve secular expect increase higher lines areas

units strategy. Our with investment enables than in contribute exceptional scale aligns With more to and and Industrious opportunity in meaningfully great flex operator executing Industrious team now an XXX at in Industrious’ expansion. us to that leadership XX participate the outstanding markets, a this space is

and for the Leah discuss XXXX. Now, our quarter outlook will

Leah Stearns

Thanks Bob.

expanded to advisory which partially are by X, and cost in Slide grew This in nearly sales our continued Advisory Turning management and weakness about Services revenue attributable fee revenue EBITDA and by combination segment year’s declined XXX benefited compared declines strong adjusted points year to a to businesses. businesses, efforts disciplined of our the defer XX%. about points due leasing high-margin the respectively. about leasing basis cost continue gains and optimization higher revenue advisory was Global offset nearly pandemic. basis rest ago. margin to XX% decisions substantially These performance and quarter. This leasing X% mostly to than our margin from fourth occupiers last world declined Overall, XX%, EBITDA as around in OMSR from adjusted the XXX

leasing strong continued quarter, subdued and of Americas. U.S., global XX% which demand The increases particularly in together XX% space. XX% for the the The from growth leasing, respectively. which again of Continental revenue UK, For XX% about UK industrial helped revenue comprise activity globally benefited Europe XX%, offset e-commerce the and drove industrial office and in of decreased X%, the

versus million those U.S. Americas XX% by and down in the less XXXX sales the improvement, The in than XX% sequential over decline XX% saw of sales U.S. resilience but industrial and remained revenue, seeing fell multi-family basis greater transactions also share below U.S., activity. are paced from $X reflected million. XX% gains improved generating Strength regions XX% QX. which were of levels. XX just leasing and revenue strong $X Advisory of notably over in transactional X% just APAC with where a nearly among We relatively for compared QX Americas to nearly both advisory points market QX QX,

with office origination declines also benefits XX% the refinancing loan in and the Looking of more rose at at revenue Commercial our around GSE In diversification. for This targeted leasing of in quarter, sales for reflects particularly XX% continued in of reflecting strong sales XX% leasing XX% and lending, underscores and geographic affordable compared revenue housing. office surge XX% a activity. activity for over our mortgage in closely benefit to APAC. EMEA the the Americas, fell sales each assets and activity

grew As of and result a to $XXX nearly X%, originations, portfolio reflecting while investor our Pacific. XX% strong North billion, XX%. servicing Asia the revenue grew servicing increased for loan Continental clients, pace grew Europe, of loan about particularly in assignments revenue Valuation

fewer U.S. Management clients over improved. margin year’s steep the while X%, Advisory project completed projects together, demand partially fourth grew on office. revenue management XX%, as decline and and a quarter, Property just public Project in Property declined the Notably, we fee XX% sector projects than Management X%. in these declined Finally, advisory industrial last offset from about while

economies demand We expect activity Project as normalizes. reopen pent-up Management and to benefit from business

to our Turning Solutions transactional quarter GWS fourth over benefit profitability. segment both quarter Global Despite continued revenue marking posted of our consecutive basis transaction GWS in to expanded growth Project our to a record the revenue increase margins in structural base. third Slide Management decline as X% in changes GWS XXX and cost fee from a adjusted and discretionary to EBITDA spending lower X, the revenue. Facilities X% steep offset Workplace limited margin points XX%, nearly

restrictions continue to pipeline new While client remains our business COVID hamper new onboarding. solid, GWS

sectors to growth as in GWS momentum Despite greater part we gain operational year our continue benefiting the expect the GWS middle across from client challenges, these this continues types. We economy to recent expect reopen. to of diversification property and business

specialized these services in in basis a For in and for XXXX. these sectors revenue healthcare assets example, sciences in from life contribution on focus point our XXX increase clients resulted

in delivered our revenue notably services XXXX. strong center addition, data growth In business

EBITDA XXX% Turning growth of growth a driving to adjusted fees. at nearly reached billion, QX. under Investment which the over $XXX asset EBITDA, achieved million million management, strong our estate prior management real This management assets from million. XX, reflected nearly rose in XX% new record increase continued investment adjusted in $XX $XXX Slide $XX year a to segment

logistics total just largest of investment. invested industrial office, comprise Importantly, while is XX% our AUM in and

interest Development quarter. surged just quarter over in Additionally, portfolio the EBITDA to million, a of adjusted a million retail property year industrial million South to the sales result versus as $X.X in disposition an in asset rose the of carried Korea. primarily level reflecting prior $XX elevated $XX.X of

demand portfolio driven strong Our to by reaching $XX.X at in-process new development a industrial clients, record continued billion. from grow

future of in-process portfolio, development greater and and than projects build-to-suit more fee this our Importantly, visibility predictability comprise half into development earnings. offering

over units. Lastly, and building EBITDA results new of out of the more impacted slightly by cost Hana’s loss was Hana’s QX. than were adjusted that in $XX the million pandemic

demand on in recedes and for pandemic we the up expect As act their flexible Bob detailed optionality portfolios. for real occupiers estate as desire to ramp earlier, solutions their

to us positions on Industrious Our investment with and capitalize this partnership opportunity.

XX, Slide we record sheet XXXX to Turning generation, capacity. considerable cash with a healthy balance flow and free have ended financial

partially business During increased required strong This capital working cash lower our pace XXXX, new a client XX% flow nearly onboarding as to billion. slowed particularly XXXX. driven free by from in by was GWS $X.X

from client reversal over benefit this our processes to XXXX, savings onboarding expect in will with Nevertheless, heading which improved enhance flow modestly accounting preserving cash We cost around We sheet optimization position actions $X.X are with us downturn. of nature. coupled cash to even changes incremental will OpEx net were in cash profitability. deliver of the we efforts, Structural generated end management for accelerates. us that XXXX. enabled investments enable of to liquidity. of a to balance into in $XXX $XXX reverse billion This, million generation, strong pursue certain prudently and the XXXX as the to our savings cost changes after These strong million expected managed while and growth, temporary

the we mitigating Turning business’ in XX, benefit uncertainty resiliency considerable pandemic progress to to while XXXX Slide our results. the world’s and continued remains, expect our

better we downturn weak, much than the in both prior been has due to and types. of revenue transaction property broad While fared diversification deal sizes have

particularly QX the year be origination the leasing continued revenue Americas. year of From leading similar full rebound relative with transactional the basis for since Across single-digit mid During continued then, market. rebound revenue pandemic’s retail we to we comparing saw the combined expect to advisory, the pressure we growth single-digits growth will mortgage and rest first sales expect as office, of the QX, offset month. Overall, in against leasing levels industrial revenue office should outside property and a as the to a management high on in to the XXXX, The begin in be we anticipate we and the in to QX prior we sequential well pullback Within gains. modest expect standpoint, leasing of expect improvement in of XXXX. quicker transactional multi-family the revenue decline we to a by in in depressed transactions XXXX. high growth,

this cost savings during We expect the the cost effects improvement this and in optimization advisory the reversal the margin of by year some as full temporary offset revenue as partially modest measures investments. year, of crisis reflecting depth select we imposed of well growth

can the double-digits of be Because to expect with EBITDA. sequential we better by XXXX, in expect GWS The our range and we slightly and a accelerate end. rise COVID multiyear believe through this, sustainable management we basis. faster expected to in GWS should year We enable in improvement as high this rate revenue onboarding move this low GWS, single-digit adjusted year, to with management. growth facilities relaxation on Moving growth rate to project catalyze growth of restrictions client growth across the

expect in development Looking In record-breaking recurring we lower we $XXX for on being contribution investment expect increases level, its both to XXXX, continued performance. EBITDA build revenue compelling this with at poised by million to approximate offset interest. carried management with XXXX’s segment investment revenue in adjusted REI, and management,

$XXX million from the some U.S. adjusted adjusted the in incremental year. with reflects as growth. future compared rise expense to EBITDA $XXX single-digit This to in project range range operating expect rise some enhance single-digit We this mid leverage in generated as well high EBITDA to XXXX. the to investments operating mid the We million development contributed

reflecting warehouse and for increased space. grow, portfolio appetite distribution continues to in-process Our

position growth, development Continental We also logistics our future Europe. to investments growth reach, this and initiative expand accelerate envision capability new our deepen targeted in launch to a year sectors, in industrial geographic including and an

team tremendous seeing meet demand. are for Trammell to Europe capital are experienced based highly regarded across Crow under brand assembling logistics demand this an facilities the We from and partners U.S. Company and exploding occupiers

restrictions For to pickup our construction as business, lift. multi-family pace UK of COVID we development expect the

it from As business a in more this the XXXX, some our our approach around contribution EBITDA produce adjusted in with peak All-in, forecasting XXXX. our potential generated adjusted $XX to than activity. capital million result, to we are upside pre-pandemic expect XXXX million in we EPS achieved $X allocation

foundation XX, low with enduring Slide business over last track the decade over the proven at to of CBRE’s months, annual from growth upside additional about and Turning through average XX potential resiliency provides notably record last meaningful has and the our XXXX, the minimum capital double-digits for earnings allocation. least a

growth to expect combination returns We to a of capital through further enhance and our organic shareholders. earnings investments

we result activity technology sponsorship Given our mix, lower area recruiting, in with expect which more and smaller principal which is to investment, example good developing can our We jumpstart tailwinds. offset work an than organic strong space the models like growth CBRE’s is secular for platform parts as we the SPAC growth of A Initiatives will CBRE and private see office capabilities. segment. footprint. with broker through our Global in while us key partners through Industrious offering REI into opportunities of leader Investors and digital our business expect an companies extensive diversified demand workspaces, from in industry benefit programs, growth aligning infrastructure further co-investment flexible younger, growth increasing benefit investment corporate hybrid and co-investment our this business of in

valuation acquisition shares to Finally, seek returns our we financial view deliver unable programmatic To to for we repurchase to to while identify shares our intend at as will credit preserving intend We our shareholders. opportunities we to the allows. are valuations. dynamically this investment capacity as investment program repurchase strategic we our allocate risk-adjusted attractive if attractive end, and and our an resume grade capital, our ratings enough best

XX updates progress turn provide closing will over Bob we that, please to Slide We and back turn growth annually multiyear for I With framework. remarks. as pursue the will this call to some

Bob Sulentic

Thank you, Leah.

to and people. approach briefly is well We with Before governance you that to from extremely our year. measurable my and top. CBRE’s pace our on interactions one we CBRE determined particularly touch progress is personal commitment want ESG objectives the for is begins your to it comes our our I When at as CBRE’s social and of clients sector to issues, questions, sustainability Making our important environmental, as the diversity, to diversity. on set know shareholders performance for the take ESG issues.

Tim X XX-person XX include Our is of Dismond, includes who are year. direct and reports men. Directors X Board diverse report to These X me, women Officer the who last named executives Chief Diversity Of diverse.

supply environmental public women-owned Officer and as role ESG, use We to the have safety members developing our and and expanded with leadership. minority remains are advance annually his progress workplace together bringing Accelerating all $X Tim’s diversity is our as focus. and well-being, of commitment and of diversity sustainability, and spending Chief with by One XXXX. billion Responsibility well team businesses under just chain core a inclusion massive by aspects to recruiting diverse affairs notable philanthropy

are a reflected Human place Index Corporate making as the Index the on Campaign’s and steady Rights our Equality Gender-Equality late in We January. progress in earning Bloomberg both

We have leadership for sustainability. also been recognized in our

Sustainability on real provider only For Dow is Index. World the Jones CBRE services example, to commercial land estate the

by We with greenhouse science-based more of two-thirds we gas committed targets further XXXX. last than are the the Late make by reduction cutting determined gains. year, goal our to emissions

We we in reductions the facilities to clients. also pledged ambitious make properties for manage similarly and

open business practice. our is for only not questions. With temperatures, and benefiting play world’s the planet building outsized the an services. is that, it commercial shareholders lines in for while largest the in good sustainability of for can limit rise good manager operations, heightened to of improve please efficiency global sustainability As role operator, CBRE This the helping demand simply given properties, the the

Operator

Evercore Steve from [Operator is question Please you. ISI. go from Instructions] ahead. first The Sakwa Thank

Steve Sakwa

code Leah it’s Thanks. if get you to about Good a and little Bob, should talk wondering bit was morning. and talk sort of Are sort things guess you as more business maybe leasing like growing? is as you rebalancing I second the understanding, point bullet am down that on sales on be of and come I trying future Slide and just just where overall could we there I growth accelerating it’s should percentages for sort other XX, GWS the touch portfolio. of of of REI about things rebalancing? the and sort thinking about be should

Bob Sulentic

notion industry and gets operating where This across flexibility adjust of huge of having to dimensions our team. in Steve. allocate Yes, the back and management a we energies us our the four to focus capital

So to and of instance, line for spread management industrial versus versus client dimensions, it’s office, type. product repeat of those business, leasing It’s management. versus four for It’s instance, course, it’s etcetera. geographic type, project facilities

We focused circumstance over the accelerated parts be be to next ton done caused parts year years response in few and the strategic COVID of get has on to the are under work the going have given over to and and pressure. last circumstance are likely business our of the us really what what a going crisis to current

that. as using want it have can way relates our capacity and And management dimensions And resilient. you sheet that got us that really it adjust doubled Leah, of that’s more in we with focus. help that? We billion capacity in and across adjustment at of lots Leah moving to of those to But a yes, very sheet relates to or neutral be to being we $X a you down team balance will have elements believe our have thinking the least about that have. we drive add well direction the we business four advantage of to as that balance to secular got we our equipped to talk focus to

Leah Stearns

deployment from continue I better this than achieve the stock returns the ensuring strategy along or by my ensuring about simply lines make. is the total that, that are just return of No, at that Steve, back. would we add, are buying we as perspective, from our those we evaluate capital that will really seek we investments about presented we to think that our that to And best seeking the

in the just well secular So, we outlined, diversification areas dimensions And investing ensuring areas our tailwinds. that of accelerate for four are growth where of around aligned we as as Bob certainly business. that will is as

Steve Sakwa

question statement your would you comments last because Okay. of I the you also piggybacks buyback maybe in sort And quarter. second deployment, to but then the buyback, the you that just stock think more programmatic maybe that I know look in on said share guess fourth reinstitute about a didn’t I capital

So, right the share obviously, weighing clearly in the price, given guess are the how opportunities kind are surge you versus direction. in I earnings trending the just the buyback? of but stock investment

Leah Stearns

Absolutely.

program. programmatic We have a

We have under existing $XXX about our remaining authorization. million

look repurchases that in programmatic our And valuation as quarter share back pursue we to ample resume cash pipeline returning currently program. will the liquidity we net M&A shareholders both we and are to fact as through to We in subject capital a at well first that our position begin the believe as meeting we targets. repurchase have our

a in feel view long-term given an we that to position of And we good we it’s today. be able growth to do to that believe do time business, the appropriate our are so. our So, on very

Steve Sakwa

That’s me. Great. for Thanks. it

Operator

JPMorgan. from of next is go ahead. question The Anthony Please Paolone

Anthony Paolone

their business a on on can or and in like Industrious, currently question about My CBRE is is losing morning. state money specific or be in thanks will model that near-term? impact you talk good profitable first what Yes, state it whether the

Bob Sulentic

with there client on XXX beat to to Hana’s and They service. service with very, that only service well – they long-term over riveted to a with service regard that space We was one-off Hana provide the not that as do a occupiers. have we this you as leases financials and a in some have to our Yes, leases expect that that relates from business in year, will And as turning to way in. broad operator that an client us had units. It taking XXX tell so they the relations But the Hodari, then They then be talk were with world. scale client their things Tony, the for operator occupier landlord, be that They space growing are of of across to model, excited service. very Hana. to model They to service around They what will from doing It we clients. us. as tenants. footprint the he if were there. major us. are their you to marketplace topped the grow short-term and accretive nicely a it it one a he perfect flex Industrious’ we was to so asset-light not offer to been have super of invest to that occupiers CEO, Jamie flex better They would there be and deep will with ability and is overlapping bring about is the around means were trying proud say table acquisition our

come have So, for that from the place. headquarters, cases to are is in occupiers, want CBDs CBD their we with are we cannot that over and and in nice they to rethink some to want is all think years, their company invest be a dynamics be the right their space people They going to as strategically so because are into spaces able going going or away out in sector isn’t. able us into in going headquarter quickly. other several over relatively to believe space get to to next Industrious utilization, really these come to take flexibility where of They to areas the the of to partner have smaller want the

partner we you perfect we we they where ended think would were And up So, and think love if the the similarly I situation. have Jamie comment team, there. their and to us on they for talk

Anthony Paolone

CBRE’s achieve that investment, enough I million the time or works? [indiscernible] a does provide larger how don’t if that that CapEx model if business capital as much And Okay. or to $XXX scale know over for

Bob Sulentic

lot a them on Tony, They not some will are provide most Yes. it’s long-term that it leases. in them spending put They not the model. to putting they They capital-light of not taking business. capital, – are a but expand are tenant finish. with

the to that they business. So, very have feel We about that. good capacity expand

Anthony Paolone

the types given had on you’re Can of M&A you that mentioned have? there. few transactions financial the or the then capacity larger bit just whether broadly, you specifically more just you talk a And on pipeline Okay. not, side, more seeing a times

Bob Sulentic

Yes.

remind our the me think think clearly investments about the for and – elsewhere. M&A clients, way, ability foremost, to core serve our to the three we strategy We, and instance, which clients get bringing we We outcomes our is Let across the that to our you before M&A. wasn’t they because how first of couldn’t something at table that didn’t We our and look investment, have make, about delivering all business, M&A. segments. with Industrious by start we improving

and So REI, for out our buy we outsourcing set. places fill can businesses we where or GWS to and look advisory, capability

very course, there we so achieve not hurdle opportunities going the that out don’t make on deals do to sense that good some forth. there. now, are we’re and so establish, Right Of think don’t we rates

We’re where about very we thoughtful being go.

talked parts Tony, certain of much about business, know, our it have we’ve year. There so You are than the better we over others. growth think, profiles

the an in. realized being area model. So UK Telford when real we of to and there and to multifamily We will we to a opportunity that sectors. consistent institutional was opportunities all there opportunities the in we’re infill fulfilled. That the We and three But acquisition development do the on had our that M&A some that more we Europe buy came in But larger. That be segments, with there am I across and ago three for and be organic did years an the expansion. everybody business, when more need that wasn’t the some can into across business. was where housing UK. – industrial all quality, now think Homes using commented are in that London think we of And Leah to M&A. very we our to oriented going one there a we long-term presence highlight surprised little X.X love profile find We we of expand this, going is

Anthony Paolone

so Okay, it I you’ve last question offset? the margins to or explicitly assessment then XXXX that forth, year margins seems the thanks. anything fair mentioned and to business is you an And saying maybe numbers. for – may versus and it. lines don’t pointing missed brackets Leah, XXXX margins higher that there But Is in provided being for it’s on know from like full be I all XXXX. EBITDA ‘XX have if could a

Leah Stearns

We specifically speak did we correct, to – margins. not

said have do we in slight that as However, growth well slightly GWS some in that improvement EBITDA margin to of advisory. outpace revenue as expect we

So fair That slightly are in for – and REI of is expect do nature, REI. say pass-through But expect the that think leverage related to year. our pressure margin to operating we bit positive to in business will a are Telford. higher we revenues we it’s net-net, I create little flat that

Anthony Paolone

help. for Thanks the Great.

Operator

is Goldman Skidmore go Rick Sachs. ahead. Please The from from next question

Rick Skidmore

morning. Good

in it, can mix about double-digit what to organic growth on you rate talk inorganic maybe the that of Bob, be Just follow-up versus, a that call expectation? just XXXX that’s growth embedded might framework, bit low little

Bob Sulentic

then I’m that I’m to will some a now that, investment and XXXX, capital broad specifically. is and double-digit to Rick, REI growth about there speak Leah beyond available to organic that, rate But between threshold and on co-investment, to in let some going growth. our let going M&A. more etcetera, will average Leah get But Yes. that be comment make It other capacity dominated to comment that. businesses, include and by I’m going

Leah Stearns

Thanks Bob.

effectively is our adding existing turns, one potentially a have think way through we but strategic sits leverage, that M&A. the the our it net case the there So a today we if And leverage can we benefit cash current of substantial to base about saw portion our about where around that with relates respect we’re have flow. down. We investment quickly from and we think organic think transaction, a we both would we to capital the we take back still cash business capacity, sheet two position growth as cycle, we are would from with de-lever the balance And turn position. deploying to the operate given free of our

the as to as base investments relates So that’s capital deployment how it thinking additional the opportunity return for about case, to as well we’re shareholders. capital

Rick Skidmore

projected you. business? changes a office, time just on the about over comment on office the the thank And how follow-up the the impact demand what’s Great, that, then base case for decline assumption and of

Leah Stearns

the So decline. and double-digit we certainly believe Today, basis a business. expect the taken at a achieve what across decline be – headwind a create low for to to And that from look our able still impact of case some our hard are XXX even assumes headwind. able base we point we’ve to We to rate to offset XXX that secular a our office. that EPS we EPS CAGR growth achieve as result to decline in that expect given be office

Rick Skidmore

you much. very Thank

Operator

Please KBW. is The ahead. Rahmani from go next Jade question from

Jade Rahmani

much. you Thank very

seeing you that you’re consider further services opportunities might laid the in you business to in diversify the characterize or you infrastructure would logistics, areas there out your side, as M&A silos those the are company? X potentially within outlook On

Bob Sulentic

better where adjacent. to the for think be But at. Yes. to are at Jade, part, already We because the do preferred growth our to are. M&A look will of going we would in business, have want areas think that that good the most much capital. that adjacent we things again but success to we I’m odds the UK stay we that to And we the ago. so business. multifamily for could the are that’s years headroom near our adjacent But that’s within always Telford highest things open deploy X.X highlight We we’re not far to in deal place adjacent but our be

to I stay with. our – think expansion. footprint in our within X think for that or an we’re for infrastructure we business, very I try happy you investment an the opportunity so M&A. part But that remember ago, investment do management us acquisition we we most we did when years did And gives

Jade Rahmani

strategies as you opportunities would that capital-intensive businesses the would such And are considered include asset-light businesses speaking, the more balance to thematically type Telford? majority looking be or sheet of

Bob Sulentic

business. an Well, not asset-heavy is Telford Yes. particularly

small we rest like will co-investments development in of the do have that, in business. We our

Leah, process. we We do development And have in $XX or in so how of that? billion capital much invested have

Leah Stearns

Into Telford?

Bob Sulentic

$XXX development, roughly. total million our in No,

model not capital-intensive development is a Jade, So that deploy. we that

returns I our generated such However, that business, across strong will REI say co-investments. we our on

over X our development last compounded IRRs For on over instance, the business in XX% years or so, invested. capital

We the into will business. look to more put money a little development

growth, where the will REI buy outsourcing buy part, of asset-light. returns. to as little remarks, one in like very investors, when asset the to business will a said prepared And some need both we when client But to into we fund but more for her about put generated services much things capital you be it light, strong going we’ve we’re most We businesses that so I’m in GWS mostly money co-investments those relationships, pretty of the say Leah you again, individual our look businesses, asset-light. or working

Jade Rahmani

thus much And the far? how is investment Okay. Hana cumulative in

Leah Stearns

Hana, number, have So get terms you number. in $XX have a to And about related had Jade, million to invested Hana. of of we the the we I’ll I’ll sheet exact balance but in of to loss the terms current approximately get – year,

Jade Rahmani

industrial you respect any broker sales to leasing strategy? the Do from anticipate with team? the force for sales What Okay. implications the you reaction the think do are internal

Bob Sulentic

right? their areas Well, multi-tenant two space, flex that you’re in fill you’re talking that get group – the talking about leasing about? help we operators team or buildings either the the have space would space Is

Jade Rahmani

Yes. Yes.

Bob Sulentic

Okay.

us them And out have space. going impact be is find fill that their and some on will Industrious continue line creative very not bottom really business. the them nature do to will flex at just others. we much there, with all. don’t broker’s very It’s do do the of help space it the to We They for We So to space provide help that. our look a and we’re course, with It’s a that partnership. serve of that this anxious to big think will have good with still to operators ways think do the Industrious impact stuff relationship services we on occupiers large opportunity. some

Jade Rahmani

much. you very Thank

and to On transaction would high a mid in what of anticipating curious why capital blend at in markets, I single-digit growth? end outlook, Is the be you or high the you’re revenue. mid range. would or expect that probably growth the at to high that I’m only single-digit be probably that’s leasing, would above lower transaction which end which why below assume as perhaps that, you are to saying

Leah Stearns

just sales. mentioned markets, but that’s transactions is also and That – that I would capital is the you correct. note Yes. leasing exactly

do we grow expect be sales do be expect above to we debt healthy a include So our level, at do not that business, to and below. and clip. which we expect to leasing finance does That structured

Jade Rahmani

you expenses, And thank was? in group Can And of very spend that. number the transformational to? categories initiatives full possible $XXX is have lastly, much that we million. Okay, what understanding year just specific for you those more the to so relate give a what that it

Leah Stearns

absolutely. Yes,

of So or our this had our of to related costs in we really two types – optimization XXXX structure. year cost

about to spent address was year. that more changing into are presented structure early those initiatives. workforce We was to positing the to million on the on be going effectively the that were demand of sights agile $XX immediate transformation really $XXX our First turned as parts us and was in million We was We transformation the our That It optimization. COVID. that meant specifically shape needs targeted about forward. at by the then optimization. to respond workforce business initiatives of environment invested changing

net-net, the total think in cut in this come in about will the from and our full savings estimate resumption will cost with will REI is from rate and we being spread to that GWS we XXXX around had some We that we management. our work $XXX was XX% $XXX expect offset million the across of XX% benefit was million $XXX the or all there of – cost That’s temporary be about did be takeout segments. that corporate that our of related costs about Advisory three XXXX run in million advisory, And functions. in rest XXXX largest. incremental from the the investment of of by We ‘XX cost. in were back. But

Jade Rahmani

Thank you much. very

Operator

is question from from next The William Blair. Sheldon go Stephen ahead. Please

Stephen Sheldon

about to guess purchasing trend solid And customers large there your Good hear for relationships is with continue much large expanding morning. the into profit from factor continued CBRE services Thanks. how confidence and much how to customers? opportunity these CBRE, Great that multiyear I in outlook? the more does

Bob Sulentic

few we services we And prepared commented don’t But real XXX for for at some do some most quarter do confidence. is our estate I companies. we for, those comparably work Fortune years, into It our for of companies companies the all all remarks, of we of factors all. – large handful the only for the as back a massively work small do if of services. in there And the multiple world. you of clients, in my We nature were any doing went around a virtually of very more

from on money on we them we work Now we prove to been can some of those or We for plenty them or XX%. getting a a gone grow basis continue. we It’s take door. providers, dramatically. have powerful And tend been better save driver is and us, it’s and trend And can of on get when for myriad it’s than to there execute them generally they these a growth that’s that for for their the up clients. in relationships. headroom We own to

Stephen Sheldon

as do into I and slimming into any Is could continue to it And years? that that – next list? it. and their what view few of vendor the that, the COVID create Got playing could related customers have has trend issues how guess, acceleration in maybe your last you the being benefit influenced year this, have the of

Bob Sulentic

it’s and it And one make their COVID has I is them. thing, they for would front cost can benefiting with on fewer going center by benefit but and accelerated been the simpler, do regard, business, to working done That’s say by COVID. speaking, streamline from to vendors that we’re is for everybody I been generally been in anything cut is way, years, think that. a

Stephen Sheldon

announcement, companies next the with then workspace me. real I so, do just – during high strategies with And helpful. last envision estate over or one broader year Industrious utilizing having with guess, the Just in the investments and detail for how I uncertainty you there, flexible wanted longer of That’s demand it. client are their to flexible considering, I in what recent guess, any trends on and conversations been term? you them Are seeing? frequently workspace? that you including period working months? have remote And seeing this the Got then you more

Bob Sulentic

– these of the Yes. during expectations we’ve Well, going back out interfacing clients office. to COVID one a occupier with we of huge just about about things amount is the had their worn that what are

clients XX%. the all, of we that to believe In be their a office general. basis, average with back weighted words, kind where down first XX% what we of So of go maybe weighted to they headcount other In at before. general, think will in I average on start want about will were

in COVID. of all course, of the there making is not that learn lot Of decisions we’re overhang going whole psychological and those that a about more of once is to COVID while kind midst we’re over

are that doing We into are but A remote of that lot office. are make come they formal most to occupiers the the have of to portfolio. also part going to of want now, a their that some people know their to capability for want going to them

cycle. They had So get started types historically, flex space space toward with their long-term to and the the lease in we that’s a of last be of forward. they traditional third when saying of are a now a space these they their way. portfolio. big they space to work going of clients, as the had to pronounced two own They end option components And into more they part portfolio going

ones. work piece into right offering big that companies do. that very be that will means providers oriented other good that strategy. data Industrious to the that portfolio the in occupier a we users towards regard, Industrious, of of these too. going corporate that like for not the think we they has They can that’s security be in permanent demand clients, of is going heart do a and particular, only serve to There there But for way a the in high-quality, Industrious, this who what is will So be think bigger are

Stephen Sheldon

guidance. the Very the Great. all helpful. color Appreciate and

Bob Sulentic

Thank you.

Operator

is from Please Bank Funk from go The America. question next ahead. of Michael

Michael Funk

Hi, for Yes. morning. Thank the good questions. you

to First, share into revenue what about of estimates? question market an maybe XXXX gains gains, type earlier are your baked share market related

Leah Stearns

our when performance at each it forecast share. recent as Michael, look we do relates factor we as our So, to well recruiting year, in market as

allocate focus capital one, and So in from in on we two towards in positions continue the continue XXXX. we’ll we to perspective, to operate, number taking across recruiting our number which key markets those initiatives really key

Michael Funk

I into And you you to remarks, the in in from XXXX are going can think OpEx your that then of that mentioned us? I be investment for think prepared you XXXX, quantify savings reinvesting some

Leah Stearns

Sure.

preserve costs certain see coming we invest that maintain a result tailwinds we I’m – the principle to presenting and of and were of but that initiative as our into we themselves not ensure not key going would say out too quantitative ‘XX, that We’re to we’re I industry-leading part was a to transformation ability in that reducing opportunities we as guidance margins get granular would behind however, the the areas, because our COVID. for not secular of were giving that –

So making, that we we’re that takeout with the cost believe in preserve allow margins. investments even executed those the XXXX will us we to that

segments. three all across really it’s So

course intense us response in today. We strategy are long-term ‘XX the really the on market the feel across out. capture good across opportunities how the the to about really we dimensions to throughout throughout that presented took those Bob going to And It’s investing position in all business. of that we work year. investments laid are the It’s key the

Michael Funk

a then types? industrial, reopening is greater of hope in XXXX. appears other property you a some sale falling Are property as in there very now data seeing be a interest types strong multifamily though there And glimmer clearly, to is property center in throughout for our or

Leah Stearns

glimmer hope. We’re a certainly seeing of

investment catalyst late sales. property off I come for begin news vaccine think a XXXX back certainly to for was sidelines in to the investors the

asset or but continue the classes terms real continue are industrial today, think the around to asset to in be monitor classes will in of I market winners However, and we other seeing ‘XX. we multifamily property that in liquidity and types

Michael Funk

activity you you property think that additive capital be moves types property the think to do as on other cannibalize the do or And standard that activity types? to somewhat would that would

Leah Stearns

being cannibalistic. don’t it I see as

liquidity the our will given of for currently and expectations. the level in and in powder hands reflected think provide uplift a in XXXX, dry think I available investors, that’s it that’s I nice of available that sales

Michael Funk

much. very Great. Thank you

Operator

from is Patrick from James. The ahead. Please Raymond go question O’Shaughnessy next

Patrick O’Shaughnessy

the CBRE’s good commentary any sponsoring Hey, thought regarding you for provide SPAC? morning. process Can

Bob Sulentic

simply broad We when see that awful and we out across those very base and Patrick, the of aren’t our we can another in lot we of it’s tied business companies much one help M&A the fact do do that dimensions there to an do they four we to type company we whole. with and that business buying reason that work or can for opportunity us, should help of be can, but

I helpful with to think an operating So a those companies, ability that reasons to etcetera, maybe but brand that’s in doing that’s has very to etcetera; articulated. to be we wouldn’t it’s those We contemplated we be investment and we would had in super a needs make We company formula outright well. a that’s of really our type them best work an companies. When is kind to them. the mind. what helpful buy SPAC, and alliance some of serve just establish that, we entrepreneur And of would of independent, independent, we going because can us, kind can the that’s competitors really culture have but us best they

think construction buildings. We’re candidates the all in things seeing a of serve bunch of companies buildings, good smart centers, data be could that that arena, we kinds services

to target there confident we’re going behind for specs quite will We’re and follow-on a find it. be that SPAC, good

differently sponsors. situated very than We’re most SPAC

not as of really a financial thought We sponsor. have

strategic help structured business. de-SPAC we target find as those only quote our is We’re way the – we thought grows their of that where upside a a SPAC grow comes to sponsor. our speaks the would value the when confidence them and And partner that financially company can in

Patrick O’Shaughnessy

And on extent near-term office what fee posing footprints management to is for a follow-up, then you. commentary. helpful That’s headwind existing clients reducing Thank my revenue? GWS their facilities segment Great.

Leah Stearns

in So a is pause concern. us really looking near-term, significant how to Patrick, They of nature, What for workplace our their estate outsourcing footprint will in a their that’s have decision-making not design make over they are because for understanding long-term is real decisions needs clients. clear created certainly it’s GWS of are to them our that need a are We around the and time. solutions. to expertise to staying evolve close

a And in delay have across so, not we that revenue. GWS. our significant more appreciate diversification we reduction it’s existing about our serve what’s important It’s clients diminution within And a to is or of the that pipeline. about

So their serving footprint. we not are office just

We’re also their serving data center needs.

their facility life We for sciences needs. their serving clients, serving we’re research are

opportunity of through lot And so client across types is there significant for there opportunities see well. our other as growth where property a out and other diversification we

doing share about the a mid-single-digit market about have think business which trillion that overall needs. I still tremendous $X.X the a asset market, there is a and in integrated that it we given of our we So market we is grow to size $XXX are market, think clients’ billion currently trillion, total of opportunity ensure outsourcing, aligned market $X.X I think with

Patrick O’Shaughnessy

Very helpful. Thank you.

Operator

Bob gentlemen, Sulentic back the like session, and remarks. the closing for and I turn of end reached to Ladies question-and-answer the to call would we have

Bob Sulentic

us Thanks the end I’m and sorry. you end first the of quarter everyone at the of we’ll to for talk the – joining again at quarter, second

Operator

conference. This concludes today’s

you your You lines may this for at disconnect participation. Thank your time.

CBRE (CBRE) 23 Feb 212020 Q4 Earnings call transcript