Cbre Group Inc · NYSE:CBRE
Cbre — CB Richard Ellis Group — Q2 2008 Earnings Presentation
30 slides from Cbre's earnings presentation, Jul 30, 2008
Slide 1: Second Quarter 2008 Earnings Conference Call
Second Quarter 2008 Earnings Conference Call July 30, 2008 CB Richard Ellis Group, Inc.
Slide 2: Forward Looking Statements
CB Richard Ellis | Page 2 Forward Looking Statements This presentation contains statements that are forward looking within the meaning of the Private Securities Litigation Reform Act of 1995, including statements regarding our momentum in and possible scenarios for 2008 and 2009, future operations,
Slide 3: Conference Call Participants
CB Richard Ellis | Page 3 Conference Call Participants Brett White President & Chief Executive Officer Kenneth J. Kay Senior Executive Vice President & Chief Financial Officer Ray Torto Global Chief Economist Nick Kormeluk Senior Vice President, Investor Relations
Slide 4: Business Overview
CB Richard Ellis | Page 4 Business Overview Second quarter significantly impacted by credit crisis and economic decline What’s the same • Outsourcing continues to perform very well • We continue to gain market share • We remained aggressive in M&A • Continued growth in assets under management to $43
Slide 5: Q2 CBRE Wins
CB Richard Ellis | Page 5 Q2 CBRE Wins DENMARK Højhuset Mørkhøj A/S CBRE leased a landmark 258,000 SF office tower in TV-Byen in Soborg to Ernst &Young (E&Y.) E&Y w ill relocate its Denmark HQ to all 15 floors. ROMANIA Deutsche Gesellschafschaft Für Immobilienfonds mbH (DEGI) CBRE adv ised DEGI on t
Slide 6: In-fill acquisitions 2005 - present
CB Richard Ellis | Page 6 In-fill acquisitions 2005 - present Groupe Axiv al, Inc. CBRE Alberta Tempest Advocate Consulting Group CBRE Charlotte Columbus Commercial Realty Project Advantage The Polacheck Company CBRE Hawaii Marshall & Stevens’ Cost Segregation Businesses Krombach Partners CBRE Techn
Slide 7: U.S. Market Stats
CB Richard Ellis | Page 7 U.S. Market Stats 8.5% 9.4% 12.6% 4Q06 10.6 208.0 79.8 2006 13.7 0.1 13.3 9.9% 10.3% 9.6% Retail -31.8 -33.0 160.7 10.9% 10.3% 9.4% Industrial 0.6 5.0 56.1 14.3% 13.2% 12.6% Office 2008 F 2Q08 2007 4Q08 F 2Q08 4Q07 US Absorption Trends (in millions of square feet) US Vacanc
Slide 8: Sales and Leasing Revenue - Americas
CB Richard Ellis | Page 8 Sales and Leasing Revenue - Americas $512.4 $289.4 YTD Q2 $273.9 $140.5 Second Quarter $538.4 $525.2 $313.1 $262.9 ($ in millions) Sales Leasing (44%) (2%) (49%) (16%) 2007 2008
Slide 9: Sales and Leasing Revenue - EMEA
CB Richard Ellis | Page 9 Sales and Leasing Revenue - EMEA $192.9 $129.6 YTD Q2 $121.4 $81.4 Second Quarter $175.4 $194.4 $105.3 $111.7 ($ in millions) Sales Leasing (33%) (33%) 11% 6% 2007 2008
Slide 10: Sales and Leasing Revenue – Asia Pacific
CB Richard Ellis | Page 10 $79.9 $110.9 Sales and Leasing Revenue – Asia Pacific $65.0 $58.6 YTD Q2 $36.3 $28.1 Second Quarter $47.0 $61.4 ($ in millions) Sales Leasing (10%) 39% (23%) 31% 2007 2008
Slide 11: Every Region is Slowing: GDP Growth by Region
CB Richard Ellis | Page 11 Real GDP Growth -4 -2 0 2 4 6 8 10 12 14 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 Official Recession Asia ex Japan United States Europe Source: CBRE Global Research, EIU, Jun
Slide 12: Job Losses Not as Sharp as 1990s
CB Richard Ellis | Page 12 Job Losses Not as Sharp as 1990s -300 -200 -100 0 100 200 300 400 -3 6-3 2-2 8-2 4-2 0-1 6-1 2 -8 -4 0 4 8 12 16 2 0 2 4 2 8 3 2 36 40 44 48 52 56 1990s Today Net # of Jobs Created per Month in 000's # of Months Out From Start of Job Losses July 1990 Source: CBRE/Torto Whe
Slide 13: Fundamentals Well Aligned, So Far
CB Richard Ellis | Page 13 Fundamentals Well Aligned, So Far 5 to 6 4.8 5.6 Multifamily 9 to 10 9.9 10.3 Retail 9 to 10 9.3 10.3 Industrial 13 to 15 12.5 13.2 Office “Natural Rate” 2007 Q2 2008 Q2 Vacancy Rates (%) The Natural Rate is the vacancy rate where rents are in equilibrium, i.e. they are ne
Slide 14: Historic Comparisons: Office Economic Rent
CB Richard Ellis | Page 14 Historic Comparisons: Office Economic Rent -1.2 -23.4 -6.1 % Loss in Economic Rent 2008 Q3 (3 Quarters After Job Loss Start) 2001 Q2 (1 Quarter After Recession Start) 1990 Q4 (2 Quarters After Recession Start) Quarter Economic Rent Peaked 6 2008F 12 2001 18 1990 # Quarters
Slide 15: Quarterly Sales Volume
CB Richard Ellis | Page 15 Quarterly Sales Volume 40 50 128 131 146 149 97 108 83 81 65 51 39 55 65 82 53 41 0 20 40 60 80 100 120 140 160 Q1 '07 Q2 '07 Q3 '07 Q4 '07 Q1 '08 Q2 '08 Americas Europe Asia Source: Real Capital Analytics, Preliminary July 2008 $ Billions
Slide 16: Q2 2008 Performance Highlights
CB Richard Ellis | Page 16 Q2 2008 Performance Highlights $153.1 million or 57% lower than prior year quarter $114.5 million Normalized EBITDA2 $153.2 million or 61% lower than prior year quarter $99.0 million EBITDA Decreased 86% as compared to $0.59 EPS for prior year quarter Decreased 76% as comp
Slide 17: Q2 2008 Financial Results
CB Richard Ellis | Page 17 Q2 2008 Financial Results ($ in millions) 2008 2007 % Change Revenue 1,314.9 1,490.4 (12) Cost of Services 737.2 791.6 (7) Operating, Administrative & Other 468.8 469.8 - Merger-Related Charges - 2.9 n/a Equity (Loss) Income from Unconsolidated Subsidiaries (11.8) 25.9 n/a
Slide 18: YTD 2008 Financial Results
CB Richard Ellis | Page 18 YTD 2008 Financial Results ($ in millions) 2008 2007 % Change Revenue 2,545.8 2,704.3 (6) Cost of Services 1,441.6 1,441.3 - Operating, Administrative & Other 901.2 881.7 2 Merger-Related Charges - 34.7 n/a Equity (Loss) Income from Unconsolidated Subsidiaries (22.5) 30.1
Slide 19: Revenue Breakdown
CB Richard Ellis | Page 19 32% 19% 7% 3% 2% 2% 33% 2% Leasing Property & Facilities Management Sales Appraisal & Valuation Investment Management Development Services Commercial Mortgage Brokerage Other Revenue Breakdown 2nd Quarter 2008 ($ in millions) 2008 2007 % Change 2008 2007 % Change 436.2 465
Slide 20: GCS Strength in Q2 2008
CB Richard Ellis | Page 20 GCS Strength in Q2 2008 8 account renewals 6 account expansions 5 new accounts Transaction management client added project management. Piedmont Health: Transaction management client added facilities management. General Electric: Cross Selling Examples Global Square Footage
Slide 21: Development Services Balance Sheet Participation
CB Richard Ellis | Page 21 Development Services Balance Sheet Participation $147 million co-invested in development services at quarter end. $2 million in recourse debt to CBRE. ($ in millions) 6/30/2008 6/30/2007 Revenue 31.2 19.9 EBITDA (3.0) 4.4 Add Back: Purchase accounting adjustments for the T
Slide 22: Global Investment Management
CB Richard Ellis | Page 22 Global Investment Management Annual Revenue 57.1 68.4 94.0 99.3 126.3 259.2 - - - 28.0 101.7 88.7 57.1 68.4 94.0 127.3 228.0 347.9 2002 2003 2004 2005 2006 2007 Assets Under Management 11.4 14.4 15.1 17.3 28.6 37.8 43.7 2002 2003 2004 2005 2006 2007 Q2 2008 Q2 Revenue 59.3
Slide 23: Global Investment Management Carried Interest
CB Richard Ellis | Page 23 Global Investment Management Carried interest pertains to certain real estate investment funds from which CBRE earns an additional share of the profits, once its performance meets certain financial hurdles. Dedicated fund team leaders and executives in our investment manag
Slide 24: Capitalization
CB Richard Ellis | Page 24 Capitalization 1. Represents notes pay able on real estate in Development Services that are recourse to the company. Excludes non-recourse notes pay able on real estate of $584.4 million and $459.4 million at June 30, 2008 and December 31, 2007, respectively. 2. Excludes $
Slide 25: Internal Cash Flow
CB Richard Ellis | Page 25 Internal Cash Flow Integration & merger related costs Development net gains impacted by purchase accounting Cap Ex D&A Net Income, as adjusted ($ millions) Q2 2008 TTM Normalized Internal Cash Flow Strong cash flow generator Low capital intensity Utilization of internal ca
Slide 26: Summary: Business Outlook
CB Richard Ellis | Page 26 Summary Deteriorating market conditions make it impossible to provide guidance Our current view has changed reflecting weaker market factors Outsourcing strength is expected to continue Variable cost structure and expense reductions partially offset margin decline We will
Slide 27: GAAP Reconciliation Tables
CB Richard Ellis | Page 27 GAAP Reconciliation Tables
Slide 28: Reconciliation of Net Income to Net Income, As Adjusted
CB Richard Ellis | Page 28 Reconciliation of Net Income to Net Income, As Adjusted ($ in millions) 2008 2007 Net income 16.6 $ 141.1 $ Amortization expense related to net revenue backlog, incentive fees, and customer relationships acquired, net of tax 2.5 6.1 Integration costs related to acquisition
Slide 29: Reconciliation of Normalized EBITDA to EBITDA to Net Income
CB Richard Ellis | Page 29 Reconciliation of Normalized EBITDA to EBITDA to Net Income ($ in millions) 2008 2007 2008 2007 Normalized EBITDA 114.5 $ 267.6 $ 219.2 $ 429.6 $ Adjustments: Integration costs related to acquisitions 3.6 12.5 9.2 24.7 Write down of impaired investment 11.9 - 22.5 - Loss o
Slide 30: Net Income, As Adjusted
CB Richard Ellis | Page 30 Net Income, As Adjusted (d) (c) (b) (a) Reported Net Income Reconciliation of Net Income to Net Income, As Adjusted TTM Q2 2008 Results 274 16 18 13 18 339 (a) Amortization expense related to net revenue backlog, incentive fees and customer relationships acquired1 (b) Inte
CB Richard Ellis Group — Q2 2008 Earnings Presentation on 6ix