CBRE Group, Inc. reports adjusted earnings per share increases of 22% for fourth quarter and 17% for full year 2013
CBRE Group, Inc. reports adjusted earnings per share increases of 22% for fourth quarter and 17% for full year 2013
5 February 2014
Los Angeles, CA – February 5, 2014 — CBRE Group, Inc. (NYSE:CBG) today reported continued strong revenue and adjusted earnings growth for the fourth quarter and year ended December 31, 2013.
Full-Year 2013 Results
Revenue for full-year 2013 totaled $7.2 billion, an increaseof10%(11%inlocalcurrency)from$6.5billionin 2012.
Excludingselected charges1, net income2for2013 rose 19% to $474.3 million from$399.4million in 2012, while earnings per diluted share improved 17% to $1.43 from$1.22 for theprioryear.Selectedcharges(netof income taxes) totaled $157.8million in 2013.For 2012,selectedcharges(net of income taxes) totaled $83.8million.
On a U.S. GAAP basis, net income was $316.5 million, or $0.95 per diluted share for 2013, ascompared to $315.6 million, or $0.97 per dilutedshare for 2012.Current-year resultsweresignificantlyimpacted by a $74.3 million ($0.22per share) non-cashintangible assetimpairment in one element of the Company’s Global InvestmentManagement business incontinentalEurope,asdescribed more fully below.In addition, costs associated with theCompany’s corporate debt refinancing reducedGAAP earnings per diluted share by $0.10 for2013.
Excluding selected charges, Earnings BeforeInterest Taxes Depreciationand Amortization(EBITDA) increased 11% to $1.0 billion in the currentyearfrom$918.4 million in the yearprior.EBITDA3(including selected charges)rose 14% to $982.9millionfor 2013 from $861.6million for 2012.
Fourth-Quarter 2013 Results
Revenueforthequartertotaled$2.2billion,an increase of11%(13%in local currency) from $2.0billioninthefourthquarterof2012.
Excluding selected charges,net income rose22% to $221.3 million from $181.9 million in thefourth quarter of 2012, while earnings per diluted share improved 22% to $0.67 from$0.55 inthe prior-year period. For the fourth quarter, selectedcharges(netof income taxes)totaled $106.6 million versus $8.9millionfor the same period in 2012.
On a U.S. GAAP basis, net incometotaled$114.6million,compared with$173.0 million forthefourthquarterof2012.GAAPearningsper diluted share totaled $0.34, compared with $0.53 in last year’s fourth quarter. These lowerresultsalsoreflect the $74.3million ($0.22pershare)chargeintheGlobal Investment Managementsegment, referenced above.
Excluding selected charges, EBITDA increased 12% to $392.7million from$351.7 million inthe fourth quarter of 2012. EBITDA(includingselected charges) rose 4% to$358.3 million forthe fourth quarter of 2013, from$345.7 million forthesameperioda year earlier.
“We ended 2013 on a high note,” said Bob Sulentic, president and chief executive officer of CBRE.“Despitelingering economic challenges and an uneven global recovery, CBREgenerateddouble-digitrevenueandadjustedearningsgrowthforthe fourth quarter and full year.We were especiallyencouragedtoseefurther market sharegainsinour leasing and salesbusinesses, supported byinvestments inrecruitingandinour platform. In addition,revenuecontinued toreboundstronglyinourEMEAregion,andourglobaloccupier outsourcing business maintaineddouble-digitgrowthinlocalcurrency.
“For2013overall,wereachednew milestones asrevenue exceeded $7billionand normalizedEBITDA surpassed $1 billionfor the firsttime. These are notable accomplishmentsthatreflectthediligentefforts ofour people to worktogether,leveragingour brand and ourglobalserviceoffering toproduce outstanding results for our clients.We alsohad tremendous successin attracting new talenttoCBRE, adding hundreds of top professionals to our brokerage ranks through strategic recruitingandin-fill acquisitions. This was a top priority for 2013, resulting inwhatwe believe wasour strongest yearof brokerage recruiting in the past decade.
“Weremain highly focused on sustaining our marketleadership position for the long termby makingimportantinvestments in platformenhancements, includingtechnology,researchandtalentdevelopment thatwill support ourpeoplein servingourclientsandopen new avenuesofgrowthforour Company.”
Among CBRE’s geographic regions, revenue growthduringthefourthquarterwasledbyanotherstrong performance inEurope,theMiddleEastand Africa (EMEA), whererevenueincreased21%(18%inlocalcurrency).TheUnited Kingdom, inparticular, generated exceptionalresultswitha28%(27%inlocalcurrency)revenueincrease.The Americas, CBRE’s largest business segment, alsopostedahealthyrevenuegainof9%(10%inlocal currency).The Americas leasing business continuedto revive strongly with revenue up 15% (16% in local currency) despite a sluggish macroenvironment.Meanwhile,currencyeffectscontinuedto temper otherwise stronggrowthinAsia Pacific. In localcurrency, this region’s revenue rose 14%, but only 3% in U.S. dollars.
Among businesslines,Global Investment Management figured prominently in the Company’s strongfourth-quarter performance.Revenue improved 36%(35%inlocalcurrency),largelyduetotherealization of carried-interest revenue.Carriedinterestis incremental revenue that CBRE earns when itsells assets within portfolios it manages for institutionalinvestorsatvalues thatexceed target returnthresholds.
Also reflecting the strength ofthe investmentmarket, global property salesincreased19%(21%inlocalcurrency)inthefourthquarterof2013.Salesactivitywas particularly vibrant in a number ofcountries around the world, includingAustralia, Brazil, Germany, Japan, the Netherlands and theUnited Kingdom.U.S.propertysales growthwasmoretemperatefollowing the tax-motivatedactivityin the fourth quarter of 2012. Nevertheless, Americas salesrevenue improved 8%(9%inlocalcurrency)during the quarter, and 15% (16% inlocalcurrency)forallof2013.Forthe 8thconsecutiveyear,CBRE claimed the#1 investment sales market sharein2013,withanincreaseof150basispoints.
Globalleasingrevenuerose10%(11%inlocalcurrency), marking the second consecutive quarter ofdouble-digitincreases.Growthinthisbusinesslinehadbeen hampered byaslow economic recovery.However, recent performance in leasing has improved markedly, particularlyinthe U.S., asCBREcontinuestogain market share.
The Company’s occupier outsourcingbusiness,GlobalCorporate Services (GCS),grewsteadily,asmorespaceusers globally recognizethe advantages ofturningover the management of their real estateto third-party service providers.During the fourth quarter, CBRE signed32outsourcingcontractswithnewcustomers,the most everforthe Company in a single quarter.CBRE also set a new Companyrecord by signing 96 outsourcing contractswithnewcustomersforallof2013.
Revenue from the GCS business (which comprises facilities management, project management,transaction managementand strategic consulting)rose9%globally(10%inlocalcurrency)duringthefourthquarter,pacedbyan11%increase (12% inlocalcurrency)inthe Americas.
During the quarter, CBRE completed a significant acquisition tobolster its GCS business in EMEA.London-basedNorlandManagedServices Ltd,which CBRE acquired onDecember 23, 2013, is aleading provider of commercial building technical engineering services. TheacquisitionofNorlandenables CBRE to self-performthese servicesfor its occupier clients in EMEA and to add substantialexpertiseinthe rapidly growing critical environmentsmarketsegment. Norland did not contribute toCBRE’s financial results in 2013.
CBRE also completed ten additional in-fill acquisitionsduringtheyear,includingfiveinthefourthquarter: Alan Selby & Partners, a leading firmserving the London prime residential real estate market;CAC Group, a leading regional commercial real estate services firmbased in San Francisco,California;CBRichardEllis Carmody, CBRE’s former affiliate in Charleston, South Carolina; KLMKGroup, a facility consulting and project advisory firmserving the healthcare industry and based in Richmond, Virginia; and WhitestoneResearch, aleadingproviderof facilities-related cost analyticsdata,toolsandservices,basedin Santa Barbara,California.
Commercialmortgage brokeragerevenue decreased 4%, with the declinewhollyattributabletoregulatorycurbsplacedontheU.S. Government-SponsoredEnterprises’(GSEs) multi-housing lendingactivity.Thesemandatorylimits put significantpressure on revenue and profits for the commercialmortgage brokerage business, whichotherwise remained quitehealthy.
Fourth-Quarter 2013 Segment Results
Americas Region(U.S.,CanadaandLatin America)
Revenuerose9%(10%inlocalcurrency)to$1.4billion,comparedwith$1.2 billion for the fourth quarter of 2012.
EBITDA, excluding selectedcharges, increased 2% to$202.4 million comparedwith $199.3million in lastyear’sfourthquarter.Includingselectedcharges,current-quarter EBITDA was $201.3 million.There were no selected charges inthe comparable period of2012.
Operating income totaled $165.3 million,compared with $169.8millionfor the prior-yearfourthquarter.
BothEBITDAandoperating income continuedtobe affected by increased investments in areasnecessary to drive long-termgrowth and client service, notably brokerage recruiting andtechnology.
Inaddition,thecurrent-yearresultswere impacted bythereductioninmortgageservicingworkforGSEsandhigherinsuranceandlegalcosts, allthree of which reduced both EBITDAmetrics by approximately $20 million.
EMEA Region (primarily Europe)
Revenue rose 21% (18% in local currency)to $432.7million,compared with $357.5 millionfor the fourth quarter of 2012.This revenue wasthe highest ever for the EMEA region in localcurrency.The increase was broad based, as everymajor business line showed growth, led bypropertysales.Notablestrengthwasevidentinthe U.K. as well as in theNetherlands andSpain.
EBITDA, excluding selectedcharges, increased 4% to$56.0 million comparedwith $53.8million in theprior-yearfourth quarter. Including selected charges, current-quarter EBITDAwas $42.3 million, whichwas impacted by $13.7 million of integration and other costs relatedtoacquisitions, primarily Norland,aswellascost containment expenses.Therewerenoselectedchargesinthe comparable period of 2012.
Like the Americas, EBITDA was affected by investments in areas necessary to drive long-termgrowthandclientservice,notablybrokeragerecruitingandtechnology.
Operating income totaled $35.2 millioncompared with $45.0 million for the same period in2012.Current-yearoperatingincomewas impacted bythe same selectedchargesandinvestments inrecruitingandother growth initiatives thataffected EBITDA.
Revenuewas$255.6 million, anincreaseof3%(14% in localcurrency) from$248.8 millionfor the fourth quarter of 2012.Performanceimproved in several countries, particularlyAustralia, India and Japan, but was largely offset by the negative effect of foreign currencymovement.
EBITDA, excluding selectedcharges,totaled$30.2millioncompared with$38.6 million forthe prior-year fourth quarter.Including selected charges, current-quarter EBITDA was $25.9million, which was impacted by $4.3million ofcost containment and acquisition-relatedintegrationexpenses.Therewerenoselectedchargesinthe comparable periodof2012.
Both EBITDA metrics were impacted by a concentration ofproperty sales commissionsamonghigher-producingprofessionalsandforeigncurrency movement.
Operating income totaled $22.1 millioncompared with $36.0 million for the fourth quarter of2012.Current-yearoperatingincomewasalso impacted bythe same factorsthataffectedEBITDA.
Global InvestmentManagement(investmentmanagement operationsintheU.S.,EuropeandAsia)
Revenue rose 36% (35% in local currency)to $168.0millionfrom$123.4 million in the fourthquarter of 2012. The increase was driven by theaforementionedcarried-interest revenue, whichtotaled $56.3million in the current quarter.
Excluding selected charges, EBITDA increased more than 230% to $82.2millionfrom $24.4million in the prior-yearfourth quarter.EBITDA (includingselected charges) rosemorethan260% to $66.9millioncompared with$18.4 million in the fourth quarter of 2012.
Operating loss totaled $45.3million as compared to operating income of $7.3 millionfor thefourthquarterof2012.Operating loss for the fourth quarter of 2013 included a $98.1 millionnon-cashwrite-offofintangibleassetsassociated with the European open-end fund business and $9.6 million of integration and other acquisition-related costs.The non-amortizableintangibleassetimpairment is included in the calculationofoperating loss but not in EBITDA.
The Global InvestmentManagement business continues to performwell overall. The non-cashimpairment chargeisrelatedtoadecreaseinvalue within one part oftheEuropeanbusiness--open-end funds. These funds have experienced adeclineinassetsunder management, asthebusiness mix shiftstowardseparateaccounts,consistent with marketmovements following theextendedfinancialcrisisinEurope,whichhas resulted in project sales and planned liquidationsof certain funds.
Assetsunder management (AUM)totaled$89.1 billion at year-end 2013, up 2% from the thirdquarter of 2013, but down 3% from year-end 2012. The increase during the quarter was drivenby $2.1 billion of acquisitions, favorablecurrency effects of $0.9 billion anda$0.9billionincrease in property values. These were partlyoffset by property dispositions, reflecting thestrategy to harvest portfoliogains, of $2.4 billion.
Development Services (real estate developmentand investment activities primarily intheU.S.)
Revenue totaled $18.4 million compared with $28.4millionfor the fourth quarter of 2012.Therevenue decline was attributable to decreased rental revenue resulting from propertydispositionsandlower incentivedevelopment fees.
EBITDAtotaled$21.8 million, comparedwith $35.6millionreported in the prior-year period.Thedeclinewas primarily dueto lower gainsonthe sale of properties(reflected in equityincome fromunconsolidatedsubsidiaries).
Operating loss narrowedto$8.0 million compared with $25.3 million for the same period in2012. Equity income from unconsolidated subsidiaries isincludedinthecalculationofEBITDA,butnotinoperatingloss.
Development projectsinprocesstotaled $4.9 billion, up 17% fromyear-end 2012, and theinventory of pipeline deals totaled $1.5 billion, down29%fromyear-end2012.Theshiftfrompipelinetoin-processreflects recovering demand for development services as the economyimproves.
“As we look ahead to 2014, we have good momentumin most of our businesses and marketsentimentispositive.Ouroutlookisfurther buoyed by signs of firmereconomic growth in the U.S. and Europe’semergence froma long slump,” said Mr. Sulentic.“Should a stronger market recovery develop, we expecttobenefit significantly duetothecontinued strengthening of our leading brandandplatform,which is enhancing our value proposition for ourclients,andinturn,ourshareholders.”
Inlooking forward to2014,CBREexpectsitsglobal real estate services businesstoproducedouble-digit normalized EBITDA growth even before contributionsfromNorland.This growth is expected tobe driven by double-digit revenue increases in both global property sales andoccupieroutsourcingaswell as continued growthin leasing revenue.The Company faces continued uncertaintyovertheregulatoryenvironmentofGSEmortgage origination activity, but currently assumes 2014 volumeswill be similar to 2013.Together, CBRE’sprincipal businesses, Global Investment Management andDevelopment Services, are expected to performinlinewith2013,excludingcarriedinterest.
$1.60 in 2014, implying a growth rate of 10% at the mid-point of the range.With the investmentsbeing made in recruitingand other initiatives, CBREbelievesitiswell positioned forlong-termgrowth.
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.