CBRE 1Q16 Earnings Call Notes

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CBRE Group’s (CBG) CEO Bob Sulentic on Q1 2016 Results

There’s a lot of capital looking to invest in real estate. Here’s a little pressure on trophy assets though

“. As it relates to capital markets, our outlook for the year really hasn’t changed. As I said, we saw that choppiness at the beginning of the first quarter. It abated as the quarter went on. There’s a lot of capital around the world that wants to go into real estate. There’s a little pressure on trophy assets, but we think that the year will play out as we had suggested at our year-end release three months ago.”

Hiring slowed down a lot in the first quarter

“I would say it definitively did slowdown in the first quarter. Now, we’re comparing it against three very, very strong years, in fact, we think probably the three strongest years in the history of our company. Because of all of the acquisitions we’ve made over the years, we don’t have perfect data going back. We were at about half the pace in the first quarter that we’ve been the last couple of years, still a lot of net hiring.”

Tightened underwriting standards because of where we are in the cycle

“We’ve tightened down our underwriting standards because of where we’re at, the seven years of growth. We’ve also seen some what we consider to be uneconomic and unsustainable deals made in the market and we just won’t play in that game. We’re staying very clear of that. And we really think it’s important for investors to understand how companies treat these incentives and signing bonuses that a broker is given.”

Trophy office assets are the most vulnerable. People are looking more like they did at the end of last year than in the first quarter right now though

“Look, we’re seeing less bidders in some case, but for the most part, we’re not seeing much of a change in pricing on assets, either industrial or trophy office. But particularly with regard to trophy office, we’re not seeing as many bidders in some cases. Again, I’m going to go back to something both Jim and I commented on earlier and that is that a little bit of the nervousness and choppiness that we saw the first couple months of the year, we saw start to abate a bit at the end of the quarter. And in general, we think the news — things in the capital markets have slowed down and the prospects are looking more now for the rest of the year like they did at the end of last year rather than as we got into the beginning of the first quarter. But we’re not seeing much impact on pricing. If we were going to circle some assets and say these are the ones that might be vulnerable, it clearly would be the trophy office assets.”