Jones Lang LaSalle 1Q17 Earnings Call Notes

Christian Ulbrich – Jones Lang LaSalle, Inc.

I would say we have an ideal environment to invest in real estate

“That’s a long question. I’ll try to answer that. I would say overall the market is still very healthy. I mean we have an almost ideal environment to invest into real estate. Interest rates are incredibly low. The outlook for interest rates continue to be low. I mean when you look what happened to oil price over the last couple of days, they’re coming in again very much. So the outlook for interest rates will continue to be attractive from that end.

Now we saw that there was a bit of a hesitation with some investors at this point of the cycle. So it takes longer now to close deals than it did a year ago, but we think that is a healthy development because we rather want a healthy development which continues to be there for a couple of more years in this cycle than that things are going over the top.”

Very happy with business in China and India

“We were obviously very, very happy with our business in China and India. There was a lot of debate around how China will do, and whether they will be able to continue their growth momentum, and I think they have probably surprised a lot of people in the world, how they were coming in the first three months in their overall GDP performance. And, we can see it in our business; our activities in China are really, really strong, people are upbeat. And the same applies to India. I don’t know how closely you follow India, but they are really taking some important actions from the political side, and again that plays really well for the real estate sector in India.”

UK strong too

“The other one which certainly was a bit of a positive surprise, not to me personally I have to say, but let’s say to the wider perception, was the performance in the UK, because with all what’s going on in the UK, and you could have thought that the UK would slowdown in the real estate performance, but they didn’t. I mean we had a really strong start to the year and we hope that continues. Now we have the election coming up, let’s see whether that will slow it a little bit down. But overall, that was a bit of a positive surprise.”

Jones Lang LaSalle 3Q16 Earnings Call Notes

Jones Lang LaSalle (JLL) Q3 2016 Results
Christian Ulbrich

New CEO

“First, I’m honored to have been asked to follow Colin Dyer and lead this great company. Colin served us as an exceptional leader throughout his 12 years as our CEO. He helped create a truly global company, led and nurtured our 2020 Strategy for focused growth and championed priorities ranging from data and technology to diversity and sustainability.”

Expect 2017 to rebound closer to the $700 billion level we saw in 2014, 2015

“In 2017, we anticipate that volumes will rebound closer to the $700 billion level we saw in 2014 and 2015. Our current projection for full year leasing volume shows them completing 2016 at about 430 million square feet, 5% lower than last year. In 2017, we see leasing volumes at level similar to this year. These market projections indicate continued robust market conditions for our transaction business into 2017.”

There’s concern from Europe about investing in the UK, but not as much from Asian investors

“Mitch, it’s a mixed picture. From a continental European perspective, there’s tremendous concern around what will happen to the UK. And as you know, I think the leadership in the – political leadership in the UK doesn’t really know themselves what they are aiming for, and they are still trying to get their picture together. The further you move away from the UK, and particularly to Asia, the Chinese, the Malaysians, the Indonesians who have been investing heavily in the UK, they are not too concerned about the UK breaking away from the EU. So their interest is still very, very strong, and I would put the Americas somewhere in the middle of the two with regards to their interest.”

Slightly lower interest with more emphasis on Asian investors money

“I think it’s fair to say that the overall interest is slightly less than we have seen in previous quarters, and that has been a trend during this year. We still have strong enough interest to get to – as we have mentioned, to new record levels, low yields in many places around the world, but the list of interest is slightly shorter. And as I mentioned before, you have, I would say, an even greater importance towards the Asian investors on big deals out there than we had before, particularly when we talk about UK investment. But also in some other places they play a more important role than they have played before.”

We’re in a fully healthy environment even if it’s not a record

“I mean, overall, we will see, going forward, an environment which I would call more of the same. We are in a fully healthy environment for the type of services we are delivering. Even if it’s not a record year from volumes in most markets around the globe, it is still on a very high level, and therefore I think we are pretty confident on our ability to continue to drive growth and to take market share.”

CBRE 3Q16 Earnings Call Notes

CBRE Group’s (CBG) CEO Bob Sulentic on Q3 2016 Results

There’s activity but compared to last year it’s muted

“I would say around the world, it’s kind of what I said earlier, Brandon. There is significant activity, but against the backdrop from last year where we and the market grew dramatically. It seems fairly muted. We expect there to continue to be solid activity. We expect there to be job growth, kind of like the job growth we had so far this year. But there is uncertainty in the marketplace which is putting pressure on the results relative to what they were a year ago.”

Jim Groch

Still seeing bids but seen number decline on largest deals

“Yes, Jade, this is Jim. We are seeing in our system where we track number of folks that are signing nondisclosure agreements per deal, that’s remained pretty steady and at a high number, kind of in the upper 50s per deal of people that have seen it, reviewed the teaser, and come in and signed a full nondisclosure agreement, so with a real interest. That’s held pretty steady. We have seen days on the market increase a bit, let’s say, maybe 10% or so. So we have seen a little more caution as the years played out…Still pretty strong in general, but on the largest deals you’re seeing the number decline, on very large transactions.

Our own capital raising has been very strong, but there has been some pressure for the industry

“Our own capital raising was a very, very strong quarter; a very strong trailing 12 months for our own business. But capital raising overall with the industry has been under some pressure. It still feels like there’s a fair amount of liquidity there on the market.”

UK team believes that activity could pick up now

“Yes, we think that our leaders in the UK tell us that they believe that there is a reasonable chance that activity will pick up now. Obviously, there is real uncertainty there over this issue of hard Brexit and will that happen or won’t it and what will the implications of that be. But we have some hope that there will be a pickup between now and the end of the year.”

CBRE 2Q16 Earnings Call Notes

Bob Sulentic

Global property sales volumes have pulled back

“CBRE posted another quarter of strong growth on the top and bottom lines, with a 24% increase in adjusted EPS. This growth came amid an uncertain macro environment, and notably, a time when global property sales volumes market wide have pulled back from a robust 2015. The diversity of CBRE’s service offering is especially important in the current market environment. ”

Hesitancy in UK may only be temporary

“CBRE expects continued near-term hesitancy among occupiers about space decisions in the UK, particularly London. We expect a modest increase in property yields reflecting the higher perceived risk of holding UK property. However, this increase may be temporary, especially for top-tier assets, due to the inherent attractiveness of the UK market. In addition, the decline in the value of sterling against the U.S. dollar should provide some incremental support for foreign investment into the UK over time. We also anticipate a delay in some office development activity, which should provide longer term support for property prices as well as rents, particularly in central London, where availability stands at just 3%. We are monitoring Brexit-related developments closely. There is a long road ahead, but the swift resolution of the political leadership in Britain is an encouraging sign.”

Fundamentals in CRE remain in good shape but lowering our guidance

” It is important to note that market fundamentals in commercial real estate remain in good shape, with the impact of Brexit largely limited to property transactions activity in the UK and we anticipate solid earnings growth for the year. Looking ahead, we are adjusting our outlook for the remainder of the year. This is due principally to the impact of Brexit on UK property transaction volumes and less visibility around the timing of the realization of certain incentives in our Global Investment Management business and Development Services business. These factors have caused us to reduce our earnings guidance by 3% at the top end of our range and by 5% at the bottom end. ”

The one place that we are seeing things meaningfully different is in the UK

“We expect to end up the year in the ranges that we gave at the beginning of the year. And the one place that we are seeing things meaningfully different is no big shocker. It’s the UK, which is a sizable market with London. But we’ve worked hard to get a handle on what our people around the world are working on, and we have done that again recently and feel pretty good about the ranges that we gave at the beginning of the year. So we are not changing anything in that regard.

Europe had been clawing back momentum after Brexit but then everyone went on vacation

“I talked to Martin Samworth, the CEO of EMEA for our business, two days ago, and I asked him that question. And he said that in fact, there was a distinct clawing back of the momentum that had been lost due to Brexit up until about a week ago when, as he put it, everybody in Europe started going on vacation. And he thinks that legitimately, that there has been a turnaround, but the whole vacation season there is causing that turnaround to slow for a while. But he’s encouraged that when September comes around that we’ll see things, the momentum reemerge.”

Jim Groch

M&A pipeline active but pulled back as pricing increased

Mitch, that’s a good question. Our M&A pipeline is quite active. But we did start to pull back on infill last year when we saw pricing in the marketplace increasing. So we’re, as always, we’re very active in the market. We are looking for great companies, a great cultural fit, companies that are going to truly add capabilities to what we offer. But we will, pricing matters. It does. And we will pull back from time to time and get back in when we see things be more in line with where we think they should be.”

CBRE 1Q16 Earnings Call Notes

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.”

Jones Lang LaSalle 1Q16 Earnings Call Notes

Colin Dyer

The first quarter has proven to be a pause not a trend

“We are particularly pleased with these results because they came in a market environment which earlier in the quarter was anxious and unsettled. Financial market volatility, depressed lower prices and concerns about both the Chinese economy and the approaching Brexit vote in the UK, caused investors to hesitate and corporate tenants to hold back expansion and relocation plans. But as we predicted on our February call, this to be a pause, not a trend.”

Institutions continue to view real estate as an attractive asset class

“Institutional investors continue to view real estate as an attractive asset class. So new equity capital continues to be allocated to real estate even while existing commitments remain unspent. Corporate tenants are more confident than they were at the start of the year and resulting demand against the constraints supply is forcing rents higher on a global scale as you will see from our slides.”

This has been a different sort of cycle

“with nearly seven years into this recovery cycle, it’s been an interestingly different one from previous ones in the sense that it has been slow and hesitant and it hasn’t been accompanied by the usual interest rate raises that you see as a cycle matures. Indeed in many countries, the interest rates have been going the other way and in the U.S. the increases have been very hesitant. ”

The usual bottlenecks are emerging in some areas

“So it’s been a seven year recovery process but it’s been slow and gentle. And if you look around, in our markets, and indeed more broadly across business markets, there’s been, there is very good sign of the usual bottlenecks that emerge in cycles, in production capacity or shipping capacity we need in our markets, a scarcity of space. And whilst we see a slow increase in the overall global levels of occupancy, it is very gradual indicating that supply and demand are remaining broadly in line.”

There’s nothing out there that says that this cycle is about to turn

“So there’s nothing really out there, which at this point says that even though we are in the fourth quarter here, there is anything imminent that suggests that this cycle is about to win. That’s partly why we were so clear in quarter one by saying that the quarter one developments, the first half of the first quarter if you like, were a pause and not a trend. Now I think the progress since that mid-February low point of markets as a whole, and indeed real estate markets, has been solid and sort of bears out that prediction.”

General level of corporate confidence is high

“the general level of corporate confidence as you can see from business surveys globally is high, corporates are well funded, they still retain a little cash in the balance sheet, they have adequate access to relatively cheap debt globally, and the general center of corporate CEOs may deal with and generally – the general corporate clients is positive. So there an expansion remote rather than contraction and rationalization, so that’s on the demand side broad brush that it’s the global situation. It’s not euphoric I said this earlier, which has been a steady, calm relatively conservative recovery certainly on the corporate side and people are investing – whether investing or doing it carefully.”

Don’t have a supply boom either

“On the supply side, particularly in offices there has been globally a restrained level of development, with the level of delivery if office stock is still below the 2007 and 2001 peak levels. And so you haven’t got a boom of supply hitting the markets and tending to depress pricing.”

Prices have been steady with some exceptions

“prices in general have been very steady across global investment sales markets I think we talked in the script about just a 10 to 20 basis point compression year-on-year. Where there has been declines, it’s been exceptional Russia, Sao Paulo and Rio in Brazil, and as you mentioned, some Tier 2 cities in China, what’s happening in China is that the growth in the service and retail sector which is the order of 12% is favoring of the larger Tier 1 cities so Shenzhen, Shanghai, Beijing, where we have seen good revenue growth. On the other hand places like Chongqing, Chengdu and Changyang, which are the more traditional industrial cities in the industry as you know not growing it’s even declining, they are having a harder time”

CB Richard Ellis 4Q15 Earnings Call Notes

CB Richard Ellis Group’s (CBG) CEO Bob Sulentic on Q4 2015

Fundamentals in our sector remain on solid footing

“While we are mindful of concerns about China’s slowing growth and the effect of lower oil prices, fundamentals in our sector remain on solid footing. We are positioned for another strong year in 2016, but are maintaining flexibility in case the economy weakens. Our outlook is based on economist consensus view that the global economy will maintain its modest rate of growth in 2016.”

It’s an active market place for what we do, you can’t draw conclusions from January

“outside of what the economists are talking about, what we are seeing with our clients is what you see in the guidance we gave by line of business. It’s an active market place for what we do. We are a month in to the year and it’s the slowest month of the year, so you can’t draw any conclusions. We’ve reflected what we believe kind of the collective view of our people and our people on the streets so to speak and our research people and our economist think and that’s all wound up in the guidance we gave by line of business.”

Jim Groch

Our business is a lot different than it was the last time we went into recession

“I think the business is just a different business than existed at that time. And the other comment I would make is our balance sheet is dramatically different balance sheet than existed at that time. We have enormous liquidity; we have very, very small amounts of maturities coming out for the next several years. So we are nicely poised to take advantage of opportunities. There are parts of our business that will be impacted if we go in to a recession, but overall I think we’ll see tremendous opportunities to take advantage of as well.”

Fairly optimistic about the strength of the sector

“we believe real estate offers compelling value today relative to other asset classes and capital flows in to real estate from enormously varied range of investment types and vehicles. And just the strength of the fundamentals in the sector and the value that’s embedded in that asset class and what we’ve seen in the market and performance in Q4 leaves us feeling fairly optimistic about the strength of the sector.”

Only comment is we expect Asia to be softer

“I think the only comment we make on a regional basis is that we expect Asia Pacific region to be softer, although let’s say in the rage of plus or minus flat, relative to the Americas and Europe where we expect it to be stronger.”