Sydney

CBRE Group, Inc. reports financial results for first-quarter 2018

CBRE produced strong revenue growth in its three global regions in the first quarter. APAC (Asia Pacific) saw revenue increase 23% (17% local currency) with outsized growth in India and Japan. EMEA (Europe, the Middle East & Africa) revenue also increased strongly, rising 31% (16% local currency), driven by France, Italy, the Netherlands and the United Kingdom. Americas revenue was up 8% (same local currency), supported by growth in Canada, Mexico and the United States.

08 May 2018

CBRE Group, Inc. (NYSE:CBRE) today reported strong financial results for the first quarter ended March 31, 2018.

“CBRE had an excellent start to 2018 with double-digit growth in revenue and a 20% increase in adjusted earnings per share,” said Bob Sulentic, CBRE’s president and chief executive officer. “Our performance for the quarter – paced by growth in global occupier outsourcing, capital markets and our Asia Pacific business – results from the execution of our strategy, which is centred on delivering differentiated client outcomes around the world, as well as the attractiveness of our sector.”

“While we caution against extrapolating first quarter results, we are tracking slightly ahead of our full- year 2018 guidance. First quarter results were ahead of our expectations across revenue, margins, and earnings and we continue to see solid momentum in our business. The first quarter is seasonally our slowest of the year and we will provide further commentary next quarter,” he continued.

Mr Sulentic concluded: “CBRE continues to benefit from the strong secular trends that support our industry. These trends include growing occupier appetite for outsourced real estate services, increasing institutional capital allocation to the commercial real estate asset class, and the continued consolidation in our sector around the leading globally capable service providers.”

“Our strategy is aimed squarely at making the most of these macro trends, and we are sustaining progress on many fronts – from digital technology investments to Client Care initiatives to enhancing our talent base and better connecting our people around the world.  The successful execution of our strategy will ensure that we continue to produce outcomes for our clients that others find difficult to replicate.”

First-Quarter 2018 Results

• Revenue for the first quarter totalled $4.7 billion, an increase of 15% (11% local currency). Fee revenue rose 18% (13% local currency) to $2.3 billion. Organic fee revenue growth was 16% (11% local currency). 

• On a GAAP basis, net income and earnings per diluted share increased 10% to $150.3 million and $0.44 per share, respectively. Adjusted net income for the first quarter of 2018 rose 22% to $186.2 million, while adjusted earnings per share improved 20% to $0.54 per share.

• The adjustments to GAAP net income for the first quarter of 2018 included $29.0 million (pre-tax) of non-cash acquisition-related amortisation and $28.0 million (pre-tax) write-off of financing costs related to the redemption in March 2018 of $800 million principal amount of the company’s 5% bonds due 2023. These costs were partially offset by $10.0 million (pre-tax) reversal of net carried interest incentive compensation and a net tax benefit of $11.5 million associated with the aforementioned pre-tax adjustments. The adjustments also include a $0.5 million net charge attributable to an update to the provisional estimated tax impact of the 2017 Tax Cuts and Jobs Act initially recorded in the fourth quarter of 2017.

• EBITDA6 increased 13% (11% local currency) to $357.8 million and adjusted EBITDA increased 11% (8% local currency) to $347.8 million. Adjusted EBITDA margin on fee revenue was 15.3% for the three months ended March 31, 2018.

First-Quarter 2018 Segment and Business Line Review
The following tables present highlights of CBRE segment performance during the first quarter of 2018 (dollars in thousands):


Americas EMEA APAC

% Change from Q1

2017

% Change from Q1

2017

% Change from Q1

2017

Q1 2018 USD LC Q1 2018 USD LC Q1 2018 USD LC
Revenue $ 2,850,224 8 % 8 % $ 1,181,254 31 % 16 % $ 495,459 23 % 17 %
Fee revenue 1,268,734 12 % 12 % 609,367 27 % 13 % 251,783 15 % 10 %
EBITDA 225,843 5 % 4 % 36,946 11 % -2 % 33,880 46 % 41 %
Adjusted EBITDA 225,843 0 % 0 % 36,946 4 % -8 % 33,880 46 % 40 %
Global Investment Management

Development Services(7)

% Change from Q1

2017

% Change from Q1

2017

Q1 2018 USD LC Q1 2018 USD LC
Revenue $ 123,690 38 % 30 % $ 23,325 64 % 64 %
EBITDA 39,721 -3 % -8 % 21,446 538 % 538 %
Adjusted EBITDA 29,692 15 % 8 % 21,446 538 % 538 %

CBRE produced strong revenue growth in its three global regions in the first quarter. APAC (Asia Pacific) saw revenue increase 23% (17% local currency) with outsized growth in India and Japan. EMEA (Europe, the Middle East & Africa) revenue also increased strongly, rising 31% (16% local currency), driven by France, Italy, the Netherlands and the United Kingdom. Americas revenue was up 8% (same local currency), supported by growth in Canada, Mexico and the United States.

Global occupier outsourcing once again achieved robust revenue growth, as the secular outsourcing trend continued to be a powerful growth catalyst. Revenue increased 16% (12% local currency) and fee revenue rose 26% (18% local currency). Growth was strong across geographies, notably in India, the United States and several continental European countries. Acquisitions contributed 2% (same local currency) to the revenue growth rate and 5% (same local currency) to the fee revenue growth rate in the current quarter.

CBRE’s capital markets businesses – property sales and commercial mortgage origination – achieved combined revenue growth of 17% (14% local currency). 

Global property sales revenue rose 15% (11% local currency), as CBRE continued to gain market share. Americas sales revenue rose 14% (same local currency), with double-digit growth in Canada and the United States. APAC sales revenue increased 14% (8% local currency), driven largely by Japan and EMEA sales revenue rose 16% (3% local currency), led by Germany. This growth followed a 16% (local currency) increase in EMEA sales revenue in the first quarter of 2017.

For the first quarter, CBRE’s U.S. investment sales market share rose more than 100 basis points to 14.9%, according to Real Capital Analytics (RCA).

Commercial mortgage origination revenue increased 27% (26% local currency), reflecting brisk growth with both government agencies and private sector lenders.

Strong mortgage origination activity supported the continued growth of the $184 billion loan servicing portfolio, which increased 23% from the first quarter of 2017. Recurring revenue from loan servicing increased 15% (14% local currency).

Leasing revenue rose 8% (5% local currency), with notable strength in international markets. EMEA and APAC achieved growth of 34% (19% local currency) and 18% (13% local currency), respectively. France, India and the United Kingdom were standouts during the quarter. Americas leasing revenue edged up 2% (1% local currency).

Property management services produced revenue and fee revenue growth of 11% (7% local currency) and 18% (13% local currency), respectively. Fee revenue rose by double digits in all three global regions and was supported in part by the continued strong growth in the investment fund administration business.

Valuation revenue rose 8% (3% local currency), paced by EMEA.

Adjusted EBITDA for CBRE’s real estate investment businesses rose significantly, increasing $21.9 million on a combined basis. Growth was driven by large asset sales in Development Services (which were reported in equity income from unconsolidated subsidiaries) and higher carried interest in Global Investment Management.

The in-process Development Services portfolio increased to a record $7.7 billion, up almost $900 million from year-end 2017, reflecting the significant conversion of pipeline deals. The pipeline increased $300 million during the first quarter.

Global Investment Management assets under management (AUM) totalled $104.2 billion, up $1.0 billion from year-end 2017. Currency movement increased AUM by approximately $1.7 billion during the quarter.
 
For Australian/international news or global stories, follow us on Twitter: @cbreaustralia

About CBRE Group, Inc.

CBRE Group, Inc. (NYSE:CBRE), a Fortune 500 and S&P 500 company headquartered in Los Angeles, is the world’s largest commercial real estate services and investment firm (based on 2017 revenue). The company has more than 80,000 employees (excluding affiliates), and serves real estate investors and occupiers through more than 450 offices (excluding affiliates) worldwide. CBRE offers a broad range of integrated services, including facilities, transaction and project management; property management; investment management; appraisal and valuation; property leasing; strategic consulting; property sales; mortgage services and development services. Please visit our website at www.cbre.com.

Disclaimer:

Neither CBRE nor its affiliated companies make any warranties or claims on the implied accuracy of the information contained herein.

About CBRE Group, Inc.
CBRE Group, Inc. (NYSE: CBRE), a Fortune 500 and S&P 500 company headquartered in Dallas, is the world’s largest commercial real estate services and investment firm (based on 2021 revenue). The company has more than 105,000 employees (excluding Turner & Townsend employees) serving clients in more than 100 countries. CBRE serves a diverse range of clients with an integrated suite of services, including facilities, transaction and project management; property management; investment management; appraisal and valuation; property leasing; strategic consulting; property sales; mortgage services and development services. Please visit our website at https://www.cbre.com.