CBRE GROUP, INC. REPORTS SOLID REVENUE AND EARNINGS GROWTH FOR THE SECOND QUARTER OF 2013
CBRE GROUP, INC. REPORTS SOLID REVENUE AND EARNINGS GROWTH FOR THE SECOND QUARTER OF 2013
25 July 2013
Los Angeles, CA – July 25, 2013 — CBRE Group, Inc. (NYSE:CBG) today reported solid growth in revenue and earnings for the second quarter ended June 30, 2013.
Second-Quarter 2013 Results
Revenue for the quarter totaled $1.74 billion, an increase of 9% from $1.6 billion in the second quarter of 2012.
Excluding selected charges1, net income2 increased 16% to $101.8 million from $88.0 million in the second quarter of 2012, and earnings per diluted share increased 15% to $0.31 from
$0.27 in the prior-year period. For the second quarter, selected charges (net of income taxes), which primarily related to costs associated with the Company’s recent corporate debt refinancing, totaled $31.9 million. For the same period in 2012, selected charges totaled $12.2 million, and were primarily related to the ING REIM businesses acquired in 2011.
On a U.S. GAAP basis, net income totaled $69.9 million, compared with $75.9 million for the second quarter of 2012. GAAP earnings per diluted share totaled $0.21, compared with $0.23 in last year’s second quarter. The costs associated with the Company’s corporate debt refinancing reduced GAAP earnings per diluted share by $0.08 for the quarter.
Excluding selected charges, Earnings Before Interest Taxes Depreciation and Amortization (EBITDA) 3 increased 10% to $243.1 million from $220.9 million in the second quarter of 2012. EBITDA3 (including selected charges) rose 14% to $240.5 million for the second quarter of 2013, from $211.8 million for the same period a year earlier. Selected charges in 2013 related to carried interest incentive compensation expense while selected charges in 2012 related to the integration of the acquired ING REIM businesses.
CBRE completed its 2013 corporate debt refinancing program in June, when it paid down all of its 11.625% senior subordinated notes ($450 million aggregate principal amount), due in 2017. As a result of all of its 2013 refinancing actions, the Company has meaningfully extended debt maturities, lowered annual interest expense by approximately $50 million and markedly increased its financial flexibility.
“During the quarter, CBRE benefited from our balanced business mix and focus on serving our clients,” said Robert Sulentic, the Company’s president and chief executive officer. “Revenue grew solidly overall with meaningful improvement in all three geographic regions and continued strength in our global capital markets and occupier outsourcing businesses. This performance is especially noteworthy in light of continued weak global economic growth and heightened financial market volatility late in the quarter. In addition, as previously discussed, we also made significant incremental investments in our platform, which are designed to support future growth and better serve our clients.”
Performance continued to rebound in Asia Pacific, which led the regions with a 16% rise in revenue. Despite slowing economic activity, Greater China saw a significant revenue increase across business lines while property sales drove strong revenue gains in Australia and Singapore. Growth in the Americas remained strong as well, with revenue increasing by 10%. Higher revenue in France and the United Kingdom contributed to a 9% overall revenue rise in EMEA.
Capital Markets businesses continued to help drive CBRE’s growth. Global property sales revenue was up 20%, led by Asia Pacific and the Americas. In EMEA, weakness in continental Europe was offset by solid growth in the United Kingdom, where CBRE held the number one market position in investment sales in the second quarter. Demonstrating the continued strong interest in premier assets in gateway cities, CBRE’s New York operations negotiated the sale of a 40% interest in the iconic General Motors Building and Coach’s purchase of a 740,000 square foot condominium interest in an office tower to be built at the Hudson Yards development site.
Commercial mortgage brokerage revenue improved 22% as investor appetite for debt financing remained strong throughout the quarter, despite the onset of financial market volatility. Loan origination activity in the U.S. rose 28% during the quarter to $5.4 billion, with a broad spectrum of capital sources markedly increasing their lending activity. The appraisal and valuation business also stayed strong with global revenue improving 10%, led by Asia Pacific.
Revenue from property, facilities and project management services rose 11% globally. Growth was notably strong in EMEA, where revenue increased 22%. The Company’s Global Corporate Services (GCS or occupier outsourcing) business remained a strong growth catalyst, as revenue (generally including commissions on sales and lease transactions associated with GCS accounts) rose 11% globally. CBRE signed a total of 55 GCS contracts during the quarter. Among these were 22 contracts with new clients, including an agreement to manage J.C. Penney’s 112 million sq. ft. U.S. real estate portfolio, and 20 expansions of existing contracts, including those with AT&T, Citigroup, Dell and Oracle.
Global leasing revenue rose 4% amid soft market conditions in much of the world. The leasing business continued to be challenged by a high degree of occupier caution and weak economic activity globally. Nevertheless, revenue improved 5% in the Americas and 3% in EMEA while edging down 1% in Asia Pacific. A major contributor to the decline in Asia Pacific was the yen’s continued depreciation against the dollar. In local currency, Asia Pacific leasing revenue increased 3%.
Second-Quarter 2013 Segment Results
Americas Region(U.S.,Canada andLatin America)
•Revenue rose 10% to $1.1 billion, compared with$1.0 billionfor the second quarter of2012.
•EBITDAtotaled $163.3 million, up 9% from$149.3millionin last year’s second quarter.
•Operatingincome rose 3% to $132.0 million, compared with $127.9million for the prior-year second quarter.
EMEA Region (primarily Europe)
•Revenue rose 9% to $270.3million,compared with $248.2 million for thesecond quarter of 2012.The increase was primarily driven by improved performance in France and the United Kingdom,most notably in property, facilities andproject management.
•EBITDAtotaled $11.7 million, compared with $15.7millionfor last year’s second quarter.
•Operatingincome totaled $8.3million compared with $12.6million for the same period in 2012.
•Business performance in the second quarter reflected a shift inrevenue mix toward lower- margin property, facilities and project management servicesas well as approximately $5 million ofseverancein continental Europe and other expenses.
Asia Pacific Region (Asia, Australiaand New Zealand)
•Revenue was $233.1 million, anincrease of16% from$201.2million forthe secondquarter of 2012.The increase reflects improved overall performance in nearlyallcountries within the region, particularly Australia, Greater China andSingapore.
•EBITDAimproved to $26.0million,up 12% from$23.3million for lastyear’ssecond quarter.
•Operatingincome rose 12% to $23.2 million, compared with $20.7millionfor the second quarter of2012.
Global Investment Management (investmentmanagement operations inthe U.S., Europe and Asia)
•Revenue totaled $115.1 million compared with $119.7million in the second quarter of2012.
•Excluding selected charges, EBITDAincreased16% to $34.6million from$29.8million inthe prior-year second quarter.EBITDA(including selected charges) rose 55% to $32.0 million compared with $20.7 millionin the second quarter of2012.
•Operatingincome totaled $23.1million, up 79% from$12.9million for the second quarter of 2012.The prior-period operating income was impacted by $9.1million ofexpenses relatedto the acquisition ofthe ING REIM businesses.
•EBITDAand operating income in the second quarter benefited fromimproved co-investment results as well aslower provisions for bad debt and legal matters, as compared withthe prior- year period.
•Assets under management (AUM) totaled $88.2billion attheend ofthe second quarter, a 4% decrease fromyear-end2012. The decrease wasprimarily due to propertydispositions(net of acquisitions)and negative foreign currency effects, which reduced AUM by $2.3 billion and
$1.8 billion,respectively.This was partly offset by gains of$0.3 billion in the valueofthe investment portfolio.
Development Services(real estate development and investment activitiesprimarily inthe U.S.)
•Revenue totaled $9.9 million,compared with $17.8million for the secondquarter of2012.The revenue decline was attributableto lower rental revenue resulting fromproperty dispositions.
•EBITDAimproved to $7.4million, compared with $2.8million reported in the prior-year period. Theincrease waslargely driven by highergains on thesale ofproperties (reflected in both gain ondispositionofreal estateand equityincomefromunconsolidated subsidiaries) partially offset by non-controllinginterests activity.
•Operatingincome totaled $1.0million compared with an operating lossof$1.4million for the same period in 2012.
•Development projectsinprocesstotaled $4.7 billion, up 12% fromyear-end 2012, and the inventory ofpipeline deals totaled $1.7 billion, down 19% fromyear-end2012.
•Revenue for the six months ended June 30, 2013 totaled $3.2billion, an increase of9% from $3.0 billionin the six months endedJune 30, 2012.
•Excluding selected charges, netincome increased 14% to $153.3millionfor the sixmonths ended June30, 2013 from$133.9millionin the six months ended June 30, 2012, and earnings per diluted share increased 12% to $0.46 compared with $0.41 for the prior-year period. For the six months ended June 30, 2013, selected charges(net ofincome taxes), which primarily related tocosts associated with the Company’s recent corporate debtrefinancing andthe ING REIM businesses acquired in 2011, totaled $45.9 million. Forthe same period in 2012, selected chargestotaled $31.1 million, and were primarilyrelated tothe acquired ING REIM businesses.
•On a U.S. GAAPbasis, net income rose 4% to $107.4million for the sixmonths ended June 30, 2013 from$102.8million forthesame period of2012.GAAPearnings per diluted share totaled $0.32 in both periods. The aforementioned costs associated with the Company’s corporate debt refinancing reduced GAAPearnings per diluted share by $0.10 for the six months of2013.
•Excluding selected charges, EBITDAincreased9% to $404.4millioninthe current six-month period from$371.4million in the first six months of2012. EBITDA(including selected charges) rose 14% to $400.2millionfor the firstsix months of2013, from$352.3million for the same period a year earlier. Selected chargesin2013 relatedto theintegration ofthe acquired ING REIM businessesandcarried interest incentivecompensation expense.For the same period in 2012, selected chargesrelated tothe integrationofthe acquired ING REIM businesses.
“CBRE’s strengths – ourbrand, people, financial flexibility, and balancedservice offering – leaveus well positioned for continued success amid this slowand uneven market recovery,”said Mr. Sulentic. “We remainhighly focused on continuing to improve margins while making operational investments that will help us to better serve our clients and execute our growth strategy.”
CBREcontinues to believe thatit will meet its previously-announced expectations for full-year 2013 earnings pershare, asadjusted,in the range of$1.40 to $1.45.However, in light of the current strong sales environment and the opportunity thisaffords for realizing gains inits investment management portfolio,the Company nowbelieves earnings could modestly exceeditsoriginal expectations forthe full year.
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About CBRE Group, Inc.
CBRE Group, Inc. (NYSE:CBG), a Fortune 500 and S&P 500 company headquartered in Los Angeles, is the world’s largest commercial real estate services and investment firm (in terms of 2012 revenue). The Company has approximately 37,000 employees (excluding affiliates), and serves real estate owners, investors and occupiers through more than 300 offices (excluding affiliates) worldwide. CBRE offers strategic advice and execution for property sales and leasing; corporate services; property, facilities and project management; mortgage banking; appraisal and valuation; development services; investment management; and research and consulting. Please visit our website atwww.cbre.com.au.