CBRE have just issued its Q2 results which show a marked improvement on last year. James Brounger, Managing Director for CBRE’s South Central Region, comments: “Across the South Central region, transaction activity during the first half of the year remained subdued, although there were pockets of activity along the M27 and in Portsmouth. However, many of our other service areas have experienced increased activity and our geographical reach has extended both East and West.
“The second half of the year has started well and there is evidence of increased activity across the region with, most recently, Standard Life acquiring 1 Dorset Street in Southampton at a net initial yield of 7.9%.”
· Revenue for the quarter totaled $1.4 billion, an increase of 21% from $1.2 billion in the second quarter of 2010.
· Net income on a U.S. GAAP basis improved to $61.2 million, or $0.19 per diluted share, for the second quarter of 2011, an increase of 12% from $54.8 million, or $0.17 per diluted share, for the second quarter of 2010.
· Excluding selected charges1, net income2 totaled $67.0 million, or $0.21 per diluted share, for the current-year quarter, up 14% and 17%, respectively, from $58.8 million, or $0.18 per diluted share, in the second quarter of 2010.
· Earnings Before Interest Taxes Depreciation and Amortization (EBITDA)3 rose 3% to $166.1 million for the second quarter of 2011 from $161.6 million a year earlier. Excluding selected charges, EBITDA3 rose 4% to $172.4 million in the current period from $165.2 million in the second quarter of 2010.
Last year’s second-quarter Development Services EBITDA was $19 million greater than in this year’s second quarter, predominately resulting from outsized gains from property sales. In addition, this year’s second-quarter Global Investment Management EBITDA included an increase of approximately $6 million of carried interest incentive compensation expense. These factors significantly tempered overall EBITDA growth compared with the prior-year period, and without their impact, overall EBITDA would have grown 22%.
Management Commentary
“We are very pleased with the strong revenue gains we recorded across the Company during the second quarter,” said Brett White, chief executive officer of CB Richard Ellis. “Despite continued uncertainty in the macro environment, revenue rose by double digits in nearly every service line in all three geographic regions. This performance illustrates the ability of our people and platform to drive continued business gains in a global economy that is still marked by slow, uneven growth.”
Revenue growth was significant in the Company’s transactional businesses – property leasing and sales. Global leasing revenue rose 22% and was up strongly across every geographic region. Of note, year-over-year second-quarter Americas leasing performance was significantly better than in the first quarter.
Reflecting the strengthening of the real estate capital markets, sales revenue grew 44% globally, paced by a 68% rise in the Americas. Mortgage brokerage revenue also improved robustly, increasing 47% in the second quarter, as loan origination and sales activity more than doubled across a broader group of lenders.
Outsourcing revenue improved 13% in the second quarter, with all three geographic regions contributing double-digit growth. The Company signed a record 47 long-term outsourcing contracts during the quarter, including 15 with new clients and 32 expansions or renewals of existing relationships. During the quarter, CB Richard Ellis was awarded contracts to provide transaction management services for the United States Postal Service’s 300 million square foot portfolio — underscoring the ongoing success of the Company’s public-sector outsourcing initiative. In addition, the Company announced an agreement with Walgreens to provide facilities management and project management services for more than 7,500 locations across the U.S., totaling more than 115 million square feet.
Geographically, the Americas was the Company’s fastest growing region with a 24% revenue increase. Asia Pacific revenue rose by 19%, due primarily to strong performance in Australia, China and India. Notwithstanding continued sovereign-debt concerns, EMEA revenue rose 16%, driven by leasing and outsourcing growth.
Revenue in the Company’s Global Investment Management business increased 23%. Following the end of the second quarter of 2011, the Company completed its acquisition of substantially all of ING Group’s global listed real estate securities business, now known as CBRE Clarion Securities, and remains on schedule to close the acquisition of ING Group’s real estate investment management businesses in Europe and Asia later this year.
During the second quarter, the Company also completed three in-fill acquisitions designed to bolster its services platform: a valuation business in Australia; a retail property management business in central and eastern Europe and its former affiliate company in Switzerland.
Commenting on the business outlook, Mr. White said: “While we continue to be mindful of the risks to the current recovery, commercial real estate markets generally remain in the early stages of a cyclical upturn. This recovery is not unfolding consistently as macro-economic and market-specific factors cause pockets of strength and weakness. Despite this uneven recovery, our combination of depth, breadth, people and brand put us in a unique position to capture opportunity and enhance our market leadership. As the recovery advances, we expect to see continued strong revenue increases along with operating leverage improvement and profit growth.”
