Cbre Group Inc · NYSE:CBRE
Cbre — Investor Presentation (March 2018)
49 slides from Cbre's investor presentation, Mar 22, 2018
Slide 1: The Global Market Leader in Commercial Real Estate Services
CBRE group, inc. The Global market leader in commercial real estate services March 2018 Exhibit 99.1
Slide 2: Forward-Looking Statements
This presentation contains statements that are forward looking within the meaning of the Private Securities Litigation Reform Act of 1995. These include statements regarding CBRE’s future growth momentum, operations, market share, business outlook, and financial performance expectations. These state
Slide 3: Market Leadership: The Global Leader in an Expanding Industry
Market Leadership #1 Leasing #1 Property Sales #1 Outsourcing #1 Appraisal & Valuation $103 billion AUM3 Scale And Diversity 5.5 billion square feet under management1 450+ offices worldwide2 Serves clients in over 100 countries2 Serves over 90% of the Fortune 100 Over 85,000 transactions in 2017 The
Slide 4: CBRE is Positioned for Long-Term Growth
CBRE is Positioned for Long-Term Growth Services industry with strong structural tailwinds CBRE has: a commanding position with a strong competitive advantage realized significant earnings growth over two decades increased the resiliency of its business mix Adjusted EBITDA1 CAGR+16% Since 1997 1st y
Slide 5: CBRE Strategic Priorities
CBRE Strategic priorities Intense Focus on Client Outcomes Top Talent: Leadership and Production Premier Platform, Notably Digital & Technology Scale, Connectivity and Culture Strategic Investment, Notably M&A and Digital & Tech Thoughtful, Intensive Cost Management
Slide 6: Where Does CBRE Derive Its Revenue?
Where Does CBRE Derive Its Revenue? Global market leader across virtually all CBRE business lines Manage Properties (Over 5 billion square feet): - Outsourcing – manage facilities and projects for occupiers - Property Management – for investor owned property Investment Management – deploy institutio
Slide 7: Growing into a Better Balanced and More Resilient Business
74% of total fee revenue5 See slide 46 for footnotes Growing into a Better Balanced and More Resilient Business $ in millions (%) – share of total fee revenue6 Contractual revenues today are larger than the entire company in 2006
Slide 8: Client Size Has Grown as CBRE's Capabilities Expanded
Client Size Has Grown as CBRE’s Capabilities Expanded CBRE’s Number of Large Clients Has Increased Dramatically as Ability to Service these Clients Has Expanded $100 million or more $50 to $100 million $25 to $50 million 2012 2017 13 50 5 1 15 17 Figures in gross revenue.
Slide 9: CBRE's Financial Flexibility Has Improved Dramatically
CBRE’s Financial Flexibility Has Improved Dramatically ($ in millions) ($ in millions) Note: As of December 31, 2006 and 2017, respectively. Liquidity is defined as cash and cash equivalents plus unused amounts under the revolving credit facility.
Slide 10: Track Record – High-Quality Earnings Growth Outpaced the Market
Track Record – High-Quality Earnings Growth Materially Outpaced the Market Eight consecutive years of double digit adjusted EPS growth1 Leverage ratio2 declined to 0.8x in 2017 from 1.7x in 2012 Source: FactSet, Company filings Cumulative Adjusted EPS Growth – CBRE vs S&P 500 See slide 47 for footno
Slide 11: CBRE Has Increased Profit Margin While Improving Business Mix
CBRE Has Increased Profit Margin While Improving Business Mix Note: Profit margin defined as adjusted net income/fee revenue
Slide 12: Three Structural Tailwinds for Commercial Real Estate Services
Three Structural Tailwinds for Commercial Real Estate Services Outsourcing – Occupier Acceptance of Outsourced Commercial Real Estate Services Asset Allocation – by Institutional Investors to the Commercial Real Estate Asset Class Consolidation – Customers are Driving Consolidation to Global Industr
Slide 13: Tailwind 1 – Occupiers Increasingly Turn to Outsourcing
2006 TCC 2013 Norland 2015 JCI GWS 1990 First CRE Outsourcing Contract 500+ Major Accounts High Barriers to Entry 5 Year Contracts Typical Facilities Management Project Management Transactions Consulting Tailwind 1 – Occupiers of Real Estate Increasingly Turn to Outsourcing CBRE’s market leading pos
Slide 14: Tailwind – Increasing Institutional Ownership of CRE Drives Demand
Tailwind 2 – Increasing Institutional Ownership of CRE Drives Demand for Services Institutions are more frequent users of CRE services vs. legacy ownership Institutional Asset Allocation to Real Estate has Increased Strongly Over Time Source: NAIOP, Federal Reserve Board of Governors, The Conference
Slide 15: Tailwind – CBRE Holds Market Leading Position in a Consolidating Industry
Tailwind 3 – CBRE Holds the Market Leading Position in a Consolidating Industry Notes: Revenues of private companies are estimated; CBRE 2015 gross revenue includes four months of actual gross revenue from the acquired GWS business while under our ownership, annualized for illustrative purposes; oth
Slide 16: Digital Opportunities Significantly Exceed Disruption Risk
We Believe Digital Opportunities Significantly Exceed Disruption Risk We Have Conducted a Comprehensive Global Digital & Technology Strategy Review of Opportunities & Risks Breadth and depth of domain expertise, global collaboration Significant research on emerging trends, fact based approach Risk a
Slide 17: CBRE Vantage: Industry Leading Suite of Enablement Technology
CBRE Vantage: Industry Leading Suite of Enablement Technology Focused technology investments further differentiating CBRE and its professionals CBRE can make impactful investments at a smaller percentage of company spend vs others CBRE Floored SaaS Interactive Creation of 3D Floor Plans and Virtual
Slide 18: CBRE Cycle Radar – Markets in Balance
CBRE Cycle Radar – Markets in Balance Current measures of economic and CRE cycle suggest an extended cycle from here Q4 2006 (One Year Prior to Start of Downturn) CBRE proprietary Cycle Radar for Commercial Real Estate charts measure relative percentile for each metric at a point in time against the
Slide 19: CBRE is Positioned for Long-Term Growth
CBRE is Positioned for Long-Term Growth CBRE: Leads a services industry with strong structural tailwinds, Has a durable business model with significant free cash flow, and Has achieved long-term growth through business cycles, While continuing to significantly diversify its business mix Business Cyc
Slide 20: Business Line Slides
BUSINESS LINE SLIDES CBRE
Slide 21: Occupier Outsourcing
Q4 FY New 51 148 Expansions 54 193 Renewals 40 128 Historical Revenue1 Overview 2017 Total Contracts Full service offering Facilities Management – approximately 2.4 billion square feet globally as of 12/31/2017 Project Management Transaction Services Strategic Consulting Ranked among the top few out
Slide 22: Property Management
Historical Revenue1 Overview Selected Strategic Accounts Manages buildings for investors Highly synergistic with property leasing Manages approximately 3.1 billion square feet globally as of 12/31/172 See slide 47 for footnotes Property Management Optimizing Building Operating Performance for Invest
Slide 23: Investment Management
Capital Raised1 Assets under Management (AUM)3 $103.2B as of 12/31/2017 Overview ($ in billions) Performance-driven global real estate investment manager 45 year track record Global platform, 21 countries More than 500 institutional clients Equity to deploy: approx. $8,200 million1,2 Co-Investment:
Slide 24: Appraisal & Valuation
Premier Clients Euromoney Global Valuation Advisor of the Year for five consecutive years Clients include lenders, life insurance companies, special servicers and REITs Overview Historical Revenue Appraisal & Valuation Serving Clients Globally ($ in millions)
Slide 25: Leasing
Advise occupiers and investors in executing lease strategies 2017 US consideration 59% tenant rep/41% landlord rep1 Overview Historical Revenue Leasing Strategic Advisory and Execution Trammell Crow Company Acquisition See slide 47 for footnotes ($ in millions) Leasing commissions occur when leases
Slide 26: Property Sales
#1 global market share, based on Real Capital Analytics Increased Ownership by Active Portfolio Managers Drives Sales Velocity Overview Historical Revenue Source: NAREIT, NCREIF, Preqin, and Goldman Sachs Research ($ billions of equity value) 2007 – 2016 ▲160+% Property Sales Insight and Execution A
Slide 27: Commercial Mortgage Origination & Servicing
Recent Transactions A leading strategic advisor for debt and structured finance solutions Highly synergistic with property sales Key services: Loan origination / debt placement Portfolio loan sales Loan servicing $46.6 billion of global mortgage activity in 20171 Commercial loan origination with gov
Slide 28: Development Services
2 Projects In Process/Pipeline1 Overview Recent Projects A premier brand in U.S. development 65+ year record of excellence Partner with leading institutional capital sources Modest capital required from CBRE $110.7 million of co-investment at the end of 2017 $9.3 million in repayment guarantees on o
Slide 29: Appendix
APPENDIX CBRE
Slide 30: 2017 Revenue
Revenue ($ in millions) Contractual Revenue Sources Leasing Capital Markets Other Occupier Outsourcing2 Property Management2 Investment Management Valuation Loan Servicing Leasing Sales Commercial Mortgage Origination3 Development Services Other Total Gross Revenue 2017 $ 6,754 $ 1,140 $ 378 $ 528 $
Slide 31: CBRE Leverage Guideposts
3.0x 0.0x 1.0x Leverage Ratio Recession Recovery Above Target Leverage (>2.0x): Prioritize debt reduction absent compelling early-cycle investments Avoid leverage in this range later in the business cycle Plateau Expansion Lower Leverage (<1.0x): Comfortable with lower leverage later in the business
Slide 32: Mandatory Amortization and Maturity Schedule
Mandatory Amortization and Maturity Schedule $2,800 million revolving credit facility matures in October 2022. As of December 31, 2017, the revolving credit facility balance was $0 million. Global Cash Available Revolving Credit Facility ($ in millions) As of December 31, 20171
Slide 33: Broad Market Leadership Increases Client Value
Advisory & Transaction Capital Markets Facilities Management Project Management Property Management Valuation Client 1 ˜ ˜ ˜ ˜ ˜ ˜ ˜ ˜ ˜ ˜ Client 2 ˜ ˜ ˜ ˜ ˜ ˜ ˜ Client 3 ˜ ˜ ˜ ˜ ˜ ˜ ˜ ˜ ˜ ˜ ˜ Client 4 ˜ ˜ ˜ ˜ ˜ ˜ ˜ ˜ ˜ ˜ ˜ Client 5 ˜ ˜ ˜ ˜ ˜ ˜ Client 6 ˜ ˜ ˜ ˜ ˜ ˜ ˜ ˜ ˜ ˜ ˜ ˜ ˜ ˜ ˜ Client 7 ˜ ˜ ˜ ˜
Slide 34: Largest Clients Growing in Importance and Diversity
Largest Clients Growing in Importance and Diversity Large Clients Now Represent Larger Share of Total Revenue Industry Diversity of Top 50 Clients Has Increased Over Time Percentage of CBRE Total Revenue Figures in gross revenue. Client Diversity Has Increased as CBRE Has Enhanced its Client Service
Slide 35: CBRE Has Taken Share in Leasing and Property Sales
CBRE Has Taken Share in Leasing and Property Sales Sources: Global property sales is based on RCA (Real Capital Analytics), US average office rent is based on data from CBRE Econometric Advisors CBRE Americas Leasing Revenue Up 65% in 10 Years Against US Office Rents Up 7% Global Property Sales Shar
Slide 36: CBRE Attracts and Retains Top Talent in the Industry
CBRE Attracts and Retains Top Talent in the Industry 3-Year Summary: Hires and Losses from and to Competitors (U.S.) Boutique Competitors are Increasingly Less Competitive Note: Hires do not include hundreds of internal hires and hires from non-direct competitors 22% of producers lost to competitors
Slide 37: GWS Revenue is Balanced and Diversified
CONSULTING AND ANALYTICS GWS Revenue is Balanced and Diversified Typical 3-5 year contract terms 90%+ renewal rate on expiring contracts Many 20+ year clients in portfolio Growth in each phase of economic cycle Exploring software as a service Fees generally based on a percentage of capital project c
Slide 38: GWS Service Offering Focus
CAO Enterprise CEO CFO CPO CTO CHRO Head of Real Estate Real Estate Transaction Managers Construction & Project Managers Facilities Managers & Building Technical Engineering Services CBRE Account Manager GWS Service Offering Focus Janitorial & Mechanical Space Options
Slide 39: Significant Total Addressable Opportunity for Real Estate Outsourcing Services
Occupier Leasing Advisory2 Advisory services on transactions, leasing, labor analytics, etc. Significant Total Addressable Opportunity for Real Estate Outsourcing Services $ in Billions Market Size1 Market size is as of 2015. CBRE Occupier Leasing Advisory revenue reported in leasing. CBRE Integrate
Slide 40: Non-GAAP Financial Measures
Non-GAAP financial measures The following measures are considered “non-GAAP financial measures” under SEC guidelines: fee revenue contractual fee revenue net income attributable to CBRE Group, Inc., as adjusted (which we also refer to as “adjusted net income”) diluted income per share attributable t
Slide 41: Debt & Leverage
Debt & Leverage Excludes $23.8 million and $94.6 million of cash in consolidated funds and other entities not available for company use at December 31, 2017 and December 31, 2012, respectively. Outstanding amount is reflected net of unamortized debt issuance costs. Excludes $910.8 million and $1,026
Slide 42: Adjusted EBITDA Reconciliation
Twelve Months Ended December 31, ($ in millions) 2017 2016 20121 2006 1997 Adjusted EBITDA $ 1,709.5 $ 1,561.0 $ 918.4 $ 653.5 $ 90.1 Adjustments: Integration and other costs related to acquisitions 27.3 125.7 39.2 7.6 - Cost-elimination expenses - 78.5 17.6 - - Carried interest incentive compensati
Slide 43: Adjusted Net Income Reconciliation
Twelve Months Ended December 31, ($ in millions, except per share amounts) 2017 2016 2015 2014 20132 20122 Net income attributable to CBRE Group, Inc. $ 691.5 $ 572.0 $ 547.1 $ 484.5 $ 316.5 $ 315.6 Amortization expense related to certain intangible assets attributable to acquisitions 112.9 111.1 86
Slide 44: Reconciliation of Revenue to Fee Revenue and Contractual Fee Revenue
Twelve Months Ended December 31, ($ in millions) 2017 20161 20151 2014 20132 20122 2006 Consolidated revenue $ 14.209.6 $ 13,071.6 $ 10,855.8 $ 9,049.9 $ 7,194.2 $ 6,519.8 $ 4,032.0 Less: Client reimbursed costs largely associated with employees dedicated to client facilities and subcontracted vendo
Slide 45: Occupier Outsourcing and Property Management Fee Revenue Reconciliation
Twelve Months Ended December 31, ($ in millions) 2017 20162 Occupier Outsourcing revenue 1 $ 6,753.4 $ 6,078.5 Less: Client reimbursed costs largely associated with employees dedicated to client facilities and subcontracted vendor work performed for clients 4,230.1 3,805.3 Occupier Outsourcing fee r
Slide 46: Footnotes
Footnotes Slide 6 Other includes Development Services revenue (1%) and Other revenue (1%). Capital Markets includes Sales revenue (19%) and Commercial Mortgage Origination (excludes Loan Servicing) revenue (5%). Contractual Sources include Occupier Outsourcing and Property Management revenue (33%; e
Slide 47: Footnotes
Footnotes Slide 21 Historical revenue for Occupier Outsourcing line of business (formerly Global Corporate Services or GCS, now known as Global Workplace Solutions) excludes associated sales and leasing revenue, most of which is contractual. 2015 revenue includes four months of contribution from the
Slide 48: Footnotes
Footnotes Slide 28 As of December 31 for each year presented. In Process figures include Long-Term Operating Assets (LTOA) of $0.2 billion for Q4 2017, $0.2 billion for Q4 2016, $0.1 billion for Q4 2015, $0.3 billion for Q4 2014 and $0.9 billion for Q4 2013. LTOA are projects that have achieved a st
Slide 49: Footnotes – Cycle Radar Methodology
Footnotes Slide 18 – The metrics included in the CBRE Cycle Radar are derived as follows: Transaction Velocity – Total dollar value of US commercial real estate transactions per Real Capital Analytics divided by the Moody’s/RCA US National All-Property Composite Price Index per Real Capital Analytic