CBRE at Barclays Conference Notes

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Jim Groch – CFO and Head, Corporate Development

It’s been a long cycle but don’t see anything that would suggest a recession coming

“Sure, well I guess first I think it’s perfectly rational that the sales cycle relates to business cycle, the last four cycles have been seven to 10 years, the last recession started in beginning of ’08, we’re a couple of months from beginning at 2018. So, it feels like we’ve been out there for a long time…the data they weren’t used to see, none of it really indicates is that a recession is coming in the foreseeable future. So how long that could go, it’s impossible to know, the people who will be better in predicting it from my own perspective being in the business through a number of cycles can easily run for three to four years. And that seems counter intuitive given how long the cycle has been. And we are running our balance sheet with the mindset that if a recession could hit tomorrow, so we’ll be prepared to invest into a downturn.”

I don’t think there’s a real estate cycle

“First thing is I always like to say there is no such thing as a real estate cycle. I think it’s just a business cycle and real estate can have more or less data to the business cycle depending on kind of supply and demand dynamics. So, I think for me personally there is a disconnect between stock market that shows no sign whatsoever of us being or no big sign that were late cycle and the anxiety around kind of the real estate cycle and that just. And then on the supply demand side, I think it’s in reasonable balance couple of the metrics that we provided on that.”

Spreads are wide, assets reasonably priced

“The same thing on the valuations. If you’ve been in real estate for a few decades, just go back 10, 15 years ago cap rates were sort of just 9% for office cap rates and then for a long time, at least sort of suburban office just didn’t have much connection in the interest rates. Clearly that’s not been the case for the last 15 years or so. And the fact that spreads are as wide as they are, I think is an indicator to me at least that assets are priced to perfection, I think they’re reasonably price…I’m afraid that people who are not controlling about the real estate business look at an absolute cap rate of 4.5 or [indiscernible] office building or whatever the number, it’s five and they think on my god that’s terrible, but they kind of forget that investment — required investment in terms of any other asset comes down followed by the same amount.”