CBRE (CBRE) 27 Apr 232023 Q1 Earnings call transcript

Greetings, and welcome to CBRE's First Quarter 2023 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Brad Burke, Senior Vice President of Investor Relations and Strategic Finance. Thank you, Brad.

You may begin.

welcome First and Conference XXXX everyone, Call. morning, to Quarter CBRE's Earnings Good posted on remarks presentation you today, supplemental a Earlier we deck file contains all with materials. Excel can along our our an prepared and that additional use that website

kick remind that Before contains off today's concerning statements call, without including, statements, limitation, today's our presentation I'll we you forward-looking earnings outlook.

and differ results projections or events. from involve risks future and projected. other These actual cause to about predictions, uncertainties statements are may statements materially Forward-looking those trends that statements

full discussion may release a this please of For other the earnings factors impact refer risks that and morning's statements, filings. and our SEC these forward-looking to

explanations reconciliations Chief appendix. Sulentic, our the most Emma our GAAP today's the joined of have financial measures and Giamartino, in our with Financial on Bob comparable of our Officer. presentation these call provided I'm call measures deck to President discussed on by directly CEO; We together and non-GAAP measures,

I please turn Now X over to turn call the to Slide as Bob.

and Brad, good everyone. you, Thank morning,

first expected but going better from into than quarter. quarter we last year, down significantly still slightly the results Our strong year's first were

management segment for year, leasing. There business, our With diversification, difficulties. resilient, are performance revenue servicing, than management for of are conditions Our reasons our these led and was the is these our from quarter our more efforts, but loan high. XX% valuations getting resilient difficult that and are expected profit this difficult investment sales. increase to capital the the business fees for business saw business asset to our more nearly for than markets our our major first record are three increased more businesses for elements and account decline business of GWS our property which include current a expectations during XX% cyclically operating more in greater-than-expected entire offset of elements management a by business. property relative cost The and resilient Combined, cyclically management,

First, interest and likelihood rates of the a elevated recession. inflation,

the return system these. Second, banking stress utilization. office and and address of office I'll to specific to issue third, each

are spur have will moderate easing make We into XXXX. activity be rebound will a and that a in will the this in bank comments a it recession an be view view. economy the that The the regional year. aligned further and and economic that lending. The by tip We to constrained responses Fed's will last Emma monetary eventual high-profile recession month with questions shaped failures I our of today believe policy later consensus

all but global However, are not a contracted debt in we basis. selective still crisis financial is simultaneously. Regional more on real to lending commercial estate another when are much capital banks source

pullback be sources. and debt expect partly capital We the the to bank private other offset including funds GSEs, sources, capital regional by

earlier down stages of real pattern and a during investors GWS, is million are their typical Looking performance. To cycle. sectors. at take occupiers, anticipation reflects business. overly Ultimately, our as did and the resilience will that on improve this driving to we significantly my the turnaround twice be single of aftermath starting and become other asset class that This billion and believe we by later sentiment regarding smaller office recover prior formidable we over underpin likely fundamentals shrink concerns legitimate XX dependent expand This with our but estate impact them cap will large digits of the our operating line, a XXXX property important less view than in business, that segment these accounted than grow deteriorated grow in office segment, which by crisis. in of in $X.X challenges this to properties, slow should we as facing note to past lines, near driven meaningfully produced pandemic, approximately resilient asset remarks offices this operating in year. It's resilient. that by from making employees large will rates estimate long segment is the office peak is office lost cost office including early sales the tech Solutions both a gradually will on generated to the It U.S. where progress has that of portfolios asset shedding months, value have where it year, in high real jobs profit it with growing for they expected we XX% return $XXX this cyclically our were much in to believe class. Even past In profit of still Workplace global XX expect Global just the have Other market, commercial business estate financial classes double debt the and assets, and the the bearish over the becoming and of year. more our more which businesses more digits very we aggregate the also months commercial revenue to total, XXXX.

coming expect industrial and financial crisis. multifamily less out of valuations for to years, X we fully half time than X the to instance, the it recover For in took global

this for our year, will earnings Emma? outlook transactional pressure we full Although XXXX. Emma during detail intensify businesses this on to are maintaining her further discuss in year our remarks. we anticipate

Bob. you, Thank

market quarter As despite I'll to lines by flat Bob Services valuations, results and servicing to discipline X. Results the that Slide starting for than business rigorous challenging. loan late first on Advisory were each of better of environment review of property diversification stability the were we in supported more revenue producing set segments financial with management becoming our prior with mentioned, relatively in the year. segment expectations QX forth business, our now, and key slightly February, were each some our in compared

by operating cost benefited advisory X.X%. from last year also expenses We decreased we initiated mitigation efforts, that

especially Capital than benefits decline revenue XX%, So expectations. than our all sales, sales decline declined decline combined slightly were markets, greater greater origination first in activity and against loan costs expect with Leasing in relatively of better in a last by these for APAC a decline local improved. major line utilization sales saw property XX% regional borrowing offset levels. down outlooks reasons property in declined up and increase property until XX%, XX% the down with but Within expected. performing diverged, office in business than to and ready all sales Across with industrial be market activity with do not the improve drawing to geographies, capital [indiscernible] X%, Pacific and deployed, Most the today improved Asia to This with falling involves little pricing Americas non-U.S. is clarity is APAC, economic XX%. leasing X% the and perform light more performance markets, EMEA year. currency. understandably consistent XX%, and capital our expectations revenue and quarter the down nearly multifamily office expectations we best, Americas activity. Significant

X. Now please turn Slide to

grow by Our management year both business double growth project expectations. and up continues facilities within GWS management several driven large last strong revenue driven the wins by management with facilities organic large management, digits, to of by contract net impressively achieved mandates. our Growth and project was project exceeding

increasingly asset the meet results in turn cost of net outsourcers record to revenue improve margin to which level year the discussed what reduction sales, to Our focused first expectations REI expect efforts Overall, cost a XX.X% were to year January, both large continue at we was in. Please clients and we met in our full QX line X. results guidance. and consistent last on as results as our quarter. GWS's phase and Slide quarter business throughout our the development our on by occurred expectations, existing supported with of reached pipeline original end are with of reduction. new will first-generation

the monetized to asset we balance of For weighted in quarter. fourth heavily such be expect industrial to year, the as projects the sales our

on back construction in pulled most in markets, starts for will that come anticipate notably We slightly XXXX. for have online do well-conceived supply-constrained got we planned We environment current industrial. projects the only

we carefully a same the are historically of downturn, can has on ] that For position position out a advantage [ rewards. we from first-mover benefit the so provided focused building coming land that our reason, significant

our U.K. expect improvement tracking XXXX with development we our results. and continue business from is to Additionally, in line Telford expectations,

Management, prior year. the versus on prior impact flat co-investment mark-to-market excluding positive roughly significant was our Investment the in year, a profit portfolio, Within which was

foreign For XX gains trailing than this made of market context, months. AUM offset co-investment loss and the of value. of effects fourth the less most from currency business up X% net line's inflows in capital profit modestly quarter as the declined operating

believe X. is Turning current deploy We to the to capital. time attractive an environment Slide

levels. the unable pursuits and leverage. we transform larger appropriately prior quarter drive multiple these pipeline our Our QX M&A than we some opportunities. attractive to existing accelerate our next level the share repurchases more XX deploy we In above reduced will any we with in value. opportunities, are of repurchase well to conservative maintaining large CBRE's event, months months expect continue shareholder convert We an If meaningful offerings evaluate strong that as in could share XX the capital in to while activity is

flow levered balance generate below turns. I'll as year. expected $X while our outlook. with X billion When to of flow much in $X.X lightly our free this invest maintaining cash combining sheet, this could expect free billion this excess year, cash We of with as we leverage conclude

back the delayed of recovery liquidity outlook contemplated heightened year. half a XXXX uncertainties. expect market due We current in and the downturn more recovery from original Our to now constrained debt our the

now which impacted more would levels. leasing and the decline a from sales XXXX by we peak XX% nearly sales result, represent property Our by environment. businesses fall are economic to changed a XX%, And than most as anticipate

be also down year. We to activity this single expect high by digits leasing

core expected to our this full mid-double share earnings digits by low- outlook, we are year indicated, Bob year. As with per to decline maintaining

originally largely markets the we reduction weaker resilient earlier our our cost anticipated outlook capital efforts incremental for of leasing described transactions. will of than growth impact and and Stronger business lines in offset

this However, than there outlook more in uncertainty there presented it we was first late February. is in when

exceed by year, expect line outlook Fed the be And followed we'll that, questions. a a interest to reminder, will EPS in as in by open a our rebound as our for that rates. With XXXX activity view informed operator, continue to recession economic peak reduces the in there prior XXXX. the this We moderate core is

from first Instructions] Our Sachs. [Operator Chandni Luthra question with is Goldman

first. to allocation like I capital would about talk

one most the are an that to M&A So segments respect of one transactions. recent Bob, transformative deal, help to looking was are multiples it to in large and of biggest at done what if be which you standpoint. a perhaps cocktail deals size attractive say, deal? us Townsend, smaller a us sense the give of going you could understand you've Turner the M&A & past. is Emma, Or And are with from of

can enhance multiple currently we so offerings are Chandni, looking are we where that And opportunities for larger looking the typically we done. deals across we've what at Yes, we are that segments our have. than

on on, such resilient both within segments Townsend. the and of the we're as terms facilities it's of management, advisory of And it's So it's & larger Turner that our investment in focused management, business valuation. side lines

X transformational, looking and across that segments, can the are we moving needle businesses. So all aren't looking of completely are CBRE. something existing we it's when our that we're new profile to say for, These businesses change

have [rating] We extremely standards.

reminder, move imagine, you As least intend with just a that I value large segments. that we alone. multiple as as And for want in hopeful we deals above convert buybacks much and could next but deploy share multiple at pipeline. in we capital we'll are returns can to three our multiples asked different, underscore And we our across my said can if we that But looking the I are will to don't was that, months last as of months. shareholder -- over and And The deployed. billion about M&A can do do a as we accelerate highly directions, we deal we generate $X what capital repurchases. well you in in the accretive did XX XX are in remarks, as do those that

follow-up quick a that. And to

this of guidance? XXXX As there part unchanged about you is think guidance, M&A

not. buybacks what about impact and end have done M&A And a It XXXX. towards results. year into impact the That It is I'd flow meaningful not will not. both to of will that the is is XXXX say

for you your for and question, sort leasing, also set and guidance Got it. XXXX EPS guidance And cut XXXX. you then of my but second for maintained obviously transactions

perhaps EPS you're little bit. weren't unchanged cost the was So noncyclical thought when that comfort, And the you your those that us process guidance this leaning results how versus this incremental better behind efforts into cost XQ now contemplating like a give more you of cuts components and from is in you reduction what much performing world are business? printed

question. important reduction the a to revenue So X% cost actually revised and a Chandni, that's having avoidance [ far [indiscernible] our is from offset advisory. growth I'd GWS outlook and ] for efforts or impact our level, by sales EPS a combination that full leasing of ground in high being the mitigation for is about and and efforts say, really higher year, in REI cost

Now with ISI. our Evercore question is from Sakwa Steve

for guess, you Emma, talk the little that's availability I'm the Bob, could issue just Bob, credit a X% costs creating that's in the a market. borrowing plus you about business. that's it's putting an in is you being it? more creating absolute the bit it in curious, And spread do I think do the transaction just Or of today rates is -- transaction think

those helpful the of uncertainty of those pricing, things things. thing, of two to that things transactions go. three this We more debt capital is capital available. a about it's both will think start become to but later a will create on third think in absolute around the side. year, come our direction of the It's are and start And down rates, more again market where all to combination And credit, that business. we it's things those think the availability that's the more equity stabilize, move it's and going will Steve, to happen will possibly certainty and we rates will

out I it maybe know from quarter sort figure? $X $X had years, in 'XX longer And of if that think, quarter you or range EPS just X talked to about believe or the the that to remember been last say, time look frame of of is sort 'XX before. do $X that the pushed range. don't a I realistic? maybe the you still I'm target, next, 'XX, was out the I you originally that about 'XX $X And Okay. to curious, like over more maybe I was 'XX. X how frame And think time as had

We talked days only this what that was is not far by by seen the long-term ago, of roughly. And about the view that at year. end XX which, our year, altered way, the we've so

-- sense, we belief more where challenged short the view in are address next of we term, the say Of the sense, part we're course, than other interesting year prospects for long historically. the full one for the resilient have is -- of a is these also seeing And enthusiasm in the course, when become these seen to in And but our good. a M&A particularly benefit we'll what I term that again number of we year in term we're But GWS. of and long-term what companies will view. in the the space businesses, transactions, have business of the those we've good the what been our short buyer calling have

our in that that's our having in than the companies believe you that now sponsorship there part on will this And perform way own. becoming or in a to sector. help of financial We perform heard going of they future, not there. or in believe certainly by is our material same have our our more out them other on the sector sector to business a think distinct us companies business our part could be are And advantage we we a better There from from that's with going circumstance directly have adjacent their would past.

from is question Paolone with JPMorgan. next Anthony Our

guess look is for X that revenue out or how where for about point, biggest and line? Do all? business where the or on years, geography think on the going M&A capital do Just you you business one it's first just Bob, this property if X think I just is to you And shift the in you, mix by to you that? type, thoughts think any allocation,

across shifts be of those. all there'll Well,

second business definitively in U.K. advisory is business wasn't Pacific, been than there I'll Asia specifically our States, relative give close. larger an the geography, a anything forever, you was the on historically. example. our the and has United by biggest behind So business, it becoming In Asia basis

roughly our business in Our is U.K. business the the now Japan size in as same

sure, not that's only related For and definitive the our part of industrial classes. that, ones growing we're businesses a asset multifamily We're to doing we're doing. but the what

have think outsourcing And on zero working then facilities of saving increasingly that a ago the acquirer work, and enduring and portfolio corporates focused them lot my in their there's assets And We opportunity big mid-double about that net their on in be double-digit mostly shedding I initiatives, an be business, business which management when digits. minute in us grower us double for includes be project and money, interested made will probably being segment. cases. an them, providing That to management some having happens comments low that companies a or investing not digits. us in services

that's shift where our we happening businesses. across kind see the So of

the unfolding Okay. just leasing then that's just side, you step noted on down And the there.

as think do I that's property but a by pretty in understands retail it, color out note, it you any see I Europe, well. either like even strong, of office good. you has of I think of the think probably bit And think industrial called been everybody little or having other leasing type I cracking But geographically parts and like been there. your side more release pretty pretty maybe

thing retail. and world across because little a the and retailers hot stay Yes, causing of business there's rates indefinitely. years, up of just types, retail the hot retail big well, helping U.S. way, are a And been and quite various doing around it's white leasing including experience in over going been is here That's going our beverage. and by that the is rental the growing good. bit food But couple that anomalistic. obviously, not to the that's high-end Industrial's last retailers leasing on

little on of very logistics world pressure dynamics driving this term, But the And industrial will leasing. the But we seeing industrial strong. that will the leasing some are pressure over are we And for in around on longer so very, year. downward sure be downward space seeing bit a place. we think remain

next with Rahmani Our KBW. Jade question from is

same estate and the to an commercial remember, scale. is real as commercial with ground I've asset at hard as shifting we're decreasing. and space, first allocation as year, scaled Otherwise, continually time where I it's time, has an increased, On long for to as to very institutional real way get represents at because historically the class, And the covered the capital buying clearly the estate space. It's the interesting this is office, you're very small assets. a office in deploy to

So of institutionalization the the commercial overall. class in dynamics view real trend the in your those do of attractiveness long-term secular and of affect any estate asset

think And you don't In tell I'll I so. aggregate, say I Jade, that. why

And going First go is largely denominator of the driven in is continue. the now world around space other biggest It's rebound, of seeing that's direction. driven of real sense being effect. driven quality growing. in we not to the the favor. around by around by cetera. prices think we world denominator the will estate The institutional growing. base being being stock base growing, of effect isn't multifamily when And all, industrial favor. think office by et The the is what The of out the of you're commercial out It's buildings being assets even world base

that when to going The turn I a they're other big disappear. tendency for space, capital, to turn and there's a office you has would thing think home been about tell things which

a enormous still drive enormous We XX%, be portfolios But it space unknown. not in the a will the the large have and class. very materially. are today. asset on an And in being that institutional class. huge get classes or retail good office hotels. but whatever it's ultimately than out. be down will asset an certainly, room right big be will office asset space, companies can't with rational now use in will and other an XX% look But office just we settles space shrink classes investment future may for rate going in is do but I it future, If that is That's in sorted there's that office the in home future the the it XX% the down, and pre-COVID all still of to or industrial, class. multifamily, be you investors still hotels, it. the asset more back anywhere be view office will it hotel a asset will that very a try and that That mean companies Our the what's just [in] space, hotel capital a that at

importance think all as is decline going don't so And the future. asset I commercial an at real estate in class in to

mitigation ask know in I the leg about new I and to a large infrastructure where don't the provide broaden dream opportunity. pipe and could Again, really of have, strategic a wanted a in direction segment I you new client a but extremely going I governments, it's services an this. agencies envision essentially to if stand-alone to stool, suite becomes CBRE becomes really you

less it since that cyclical lot So do being transformational see resiliency overall those also and one accretive sector of of infrastructure deals, type potential. we've a secular to having CBRE's probably as enhanced be multiples would you potential growth

business areas our in Jade, meaningful of where work do now there's infrastructure. two we

to investment and business an long-term our the significant do very large continued subject have areas. energy contracts We by Turner and they we green do invests the exposure that What of a but expectations. to about circumstance those incremental point, both prepared acquisition us which world. They to at positive would of outperform that infrastructure. the way, we're have run with long has around that expect And XX% might have in beyond do businesses grow not a really Townsend, significant long business, management to projects infrastructure the is this and to We we those in in provide opportunity talk run. &

with Griffin is Citi. question Michael Our from next

to you about in grow remarks, how GWS digits. I expect you talked the high think in Bob, prepared single your

at this, I that's would sort low why [pegged] last quarter, was more lines. are if think it I these case, Maybe double resilient digits. business that I stickier, but the presume about of misheard that be?

So that would be could anything you add great. on

resilient single that digits. the of our Yes, Michael. was expect in business we to What is total I grow high said the cyclically

be the GWS the fee well property So of valuations, we management investment grow that portion our GWS to digits. expect double business, would into our management business

Got due. and one you. helpful. potential office, particularly coming just That's And maybe debt then on on refinancings

think the seeing seen might I the that some I I trophy debt class data [ you about some mean And recently we've office suggest debt be news to not least out need availability Are ] [top for finance. that the side? point maybe buildings that might financing, but properties. office stuff at to expectation less asset some I absolute is particularly think library of the than there a this harder have there. of] I maybe trophy for saw market think is on

less I -- great the to our is, overreaction to had these been the buildings things. doing these them. more of an B so buildings about matter We're in The own clients they our and of going there to capitalized more and And to are buildings to But C quite It's office previously. U.S. current many much for in offices the well. historically, circumstance, office trophy all are and Yes. going been so in for financial the in Because on that's our do there's buildings for the think return out with going environments something is companies for it and available the headquarters term be than crisis, Well, own there looking than fact Virtually, the do great [indiscernible] how challenged, world. the press are [indiscernible] the when both office capital that going it of like their around great is gets in well it's talk story -- a buildings to our coming employees. conservatively doing environment equity all had around long are are on, circumstance. were view. it.

not like office banking system X.X% circumstance. It's or portfolio If buildings. you threatening look in is at something asset commercial banks the today, huge commercial of a

go assets back problem will the the of to Some bank.

Some restructured is of them out and case will the as troubled assets. worked with always get

be an headlines those to going going overwhelming hard of might assets are some circumstance suggest those the would going it be and it's not some be. back. refinance certain to become and it's But assets So way to go to troubled of

helpful. just And then That's one. Great. last

think Emma tracking I here with U.K., there very The business have that some could just maybe and mentioned it's the it any might states, in front over is Obviously, acquisition believe the I in single-family regulatory in business. around worries seen Telford single-family the expectations. a we've down companies. worry the Is model. regulations kind a similar come Or U.K.? pipe the of different line

multifamily business, towards build-to-rent just multifamily. I Michael, business it's a want to clarify, is shifting our Telford

some regulation stuff around we've the Okay. it's on And any I seen companies, that, like way any regulation, of mean whether apartment that? there rent is concerns?

tailwind that don't we no. we we initially in the concerns. U.K. any secular saw continues exist. have No, actually And investment, when see made that We -- in [builder] to a

continue to going grow And to business so that expect forward. we

next Stephen Blair. with from William is Sheldon question Our

quarter has like Really GWS growth point In estate double-digit there. reduced. continued that GWS a is sounds growth their to get it there if been headwind impressive I in some become scopes reducing office this some trends. at think could footprint context, with confidence concern at companies contract that that there real least in

guess about is business not so think at by I asset still about all? how worried curious the trajectory early GWS concerned at industry and So classes different growth term. and the diversified over fragmented that so that Or about medium you're be in if you're so the do the that? you outsourcing adoption

And their per person The has for years. has that a XX business is footprint ] and office the [ And way, average by that last going been foot headwind Stephen, corporates use for a business. square headwind down corporates the for that the reducing and kind been down been down employees helping we've their reconfigure to do project need We've helping the project in that. work been really is them portfolios. for We've trying now helping important. them that. space they're with they work deliver and their of of with been them support

that be So manage do will of yes, space we amount headwind corporates. of offset might that. But that for we will the in would them a terms other for work individual

certainly But the us circumstance bringing both Turner them them with bringing move create to of of operation that is to help on the footprint, are of us toward size corporates the place & their their us better them to help that facilities kind a that. employees Townsend, are to on in do for more a that environment clients now in terms thing of new save energy-efficient and puts environments help their money, more overwhelms

-- partly net a more for the of us be growing it, the those that but all used of acquisition this we're do us to are prominent more becoming finding dynamics is business. before because because that might companies some seeing And to that because interesting opportunities partly double-digit again, So are us that that's going is they combine we with want to. than

then And just helpful. a follow-up. Very

that, M&A expect planned the which XXXX commentary. ramp still good core or XXXX. some on big accretive in But repurchase XXXX prior capital on is would XXXX big of prior Is activity? given peak, detail a surpass in you the Or capital a the factor in You've share whether deployment it's deployment? kind peak without EPS to surpassing

getting allocation in to that rebound and and buybacks levels to XXXX. even plan to capital level, in very peak get is -- have direct believe XXXX EPS extent. M&A to businesses takes both greater to would lines, our our do surpass conservative to prior that We within assumptions and advisory record to then there I And back help advisory. both little a us achievable. get EPS Any don't to emphasize that REI getting EPS. in to in want deployment for It a And XXXX transactional it those GWS. business to in that capital relatively XXXX exceed in very we get There's the

that very we that's that without the If get you still range, allocation. double-digit are meaningful And EPS record to level. in low capital again, can all

James. Patrick Raymond O'Shaughnessy from next Our question with is

now in right going see private estate. challenging financing obviously, So real commercial forward? What real credit sort for in role is really commercial of debt estate do financing you

to the Patrick, can who say a opportunities to that happen other areas, real them. folks from customers and area, might and equity opportunity hear this this. in we for and to be view be that is we in create come is the that going of that's that I it are there's you ours Well, for people won't themselves participants surprising And in be estate with to you, backfill think interface of going tell a lot private in a coming lack commercial me big supply here. When

that spoke you market for pricing then about capital catalyst a improved earlier serving And clarity it. But what's the Got for market pricing clarity actually markets transactions. as catalyst happen? to

that's down there, biggest later Interest rates come the year. factor this and are and going stabilize we to happen think to

There no at hand to would floor I any to comments. Sulentic are the over back further questions like closing Bob for this time.

you to look now and results. we we forward quarter again a quarter when us, everyone, our talking report for second to Thanks, joining from

This conference. concludes today's

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