Highlights of CBRE Q1 2020 earnings

Q1 2020 results featuring comment from CEO Bob Sultenic and CFO Leah Stearns

Here are highlights of CBRE’s Q1 2020 earnings call, featuring comments from Bob Sulentic, President and CEO, Leah Stearns, CFO and Kristyn Farahmand, VP Corporate Finance.

For the quarter, CBRE reported combined services revenue growth of 13%, primarily driven by a rise in advisory services, which mitigated losses from its real estate investment business suffered as a result of the global Covid-19 pandemic

“Adjusted EBITDA in our Real Estate investment segment fell 56% year-over-year, largely due to a $27 million decline in co-investments in our Public Securities business, driven by the equity market sell-off at the end of the quarter.”
- Kristyn Farahmand, VP Corporate Finance

A global heavyweight with a diverse portfolio of global holdings and value-add services, CBRE is perhaps better positioned to rebound from Covid-19 sooner and stronger than many competitors.

“Compared with the global financial crisis, we have a stronger market position across our business lines, a more diversified and contractual revenue base. A significantly stronger balance sheet with markedly more liquidity.”
- Bob Sulentic, President and CEO

CBRE did report the elimination of some roles but most Covid-19 related moves have thus far consisted of ‘furloughs and reduced work schedules,’ which provides the option to bring back staff and scale quickly again as the need arises.

In discussing evolving opportunities in the wake of the pandemic, CBRE President and CEO Bob Suletnic immediately zeroed-in on the need for American retailers to develop new supply chains, including warehouses and other industrial space. 

“We have a very big industrial business. We develop it, we sell it, we manage it, we finance it. Everything about COVID-19 that's driving e-commerce will drive the use of industrial space, and that will be an opportunity.” 
- Bob Sulentic, President and CEO

While the industrial side of the business is set for growth in the future though, it’s clearly CBRE’s Advisory Services that are the company’s engine for growth.

“Our Advisory Services segment grew fee revenue about 5%. Advisory adjusted EBITDA margin on fee revenue increased 100 basis points to 17.5% -- The segment's sixth consecutive quarter of year-over-year margin expansion."
- Leah Stearns, CFO

That growth in margin on services is particularly salient given the current and foreseeable chaos that is commercial leasing revenue. In April, leasing revenue slipped 2% in both the U.S. and globally.  Does that sound minor? Consider Q1 2019’s numbers were a rise of 28% in the U.S., and more than 20% globally.

This, in turn, has had a ripple effect on the aforementioned advisory services business where revenue has dropped ‘significantly’ according to the company.

This begs the question: How will CBRE maintain near-term growth on the back of advisory services when its two largest advisory lines of business - leasing and property sales - will likely be in a state of decline, recovery and reformation for the long term?

Scott Valentine, Editor

Scott is a prolific editor specializing in B2B tech. His work has appeared with Forbes, the WSJ, Thomson Reuters, the Guardian, VentureBeat, the CBC and many more. Scott's clients include top retailers, analytics companies and investors. As a marketing and communications executive, Scott has been part of $1.5 billion in exits, and counting.