Even as the commercial real estate market continues to be dogged by economic downturn, one firm is seizing the moment to gain some serious momentum in the market. In the second quarter, CB Richard Ellis Group (CBRE) (CBG) reported $54.8m in earnings (net income), or $0.17 per diluted share, compared with a net loss of $6.6m, or $0.02 loss per diluted share, in the Q209. The results were well ahead of analysts estimates, who expected $0.09 per share, and as a result Barclays Capital has upgrade the company’s forward prospects – from Equal Weight to Overweight. CBRE showed strong revenue growth and margin expansion across nearly all business lines and regions. Barclays said the transaction-based leasing and investment sales businesses were notable standouts, as revenues increased 29% and 61%, respectively, versus estimates of 18% and 44%. “Specifically, leasing is improving as tenants seek to lock in current rates, investment sales are increasing as owners test current pricing, and plan sponsor demand for real estate is robust, ultimately supporting the investment management business,” said the REIT analysts in a research note today. “As a result, we are increasing our earnings estimates and price target (to $21 from $18) for CBRE, which informs our rating upgrade.” The CBRE earnings before interest taxes depreciation and amortization (EBITDA) more than doubled to $161.6m in Q210 from $68.4m a year earlier. Excluding selected charges, EBITDA rose 82% to $165.2m in the current period from $90.9m in the Q209. Revenue for the quarter totaled $1.2bn, an increase of 23% from $955.7m in the second quarter of 2009. “Our financial performance continued to strengthen across most business lines globally, and we have good momentum entering the year’s second half,” said Brett White, CEO of CBRE. “In the US, we saw a very strong pick up in property sales and leasing, reflecting recovering market conditions. Europe produced robust growth, fueled by the recovery of the property sales market in the larger economies, such as the UK, Germany and France.” Although the market for distressed asset dispositions has developed more slowly than originally expected, CBRE has continued to capture substantial opportunities in this sector, the earnings report states. In the US, it is now marketing more than $7.5bn of distressed assets and successfully sold more than $1.3bn of such assets since the beginning of the year. CBRE also has a sizeable distressed asset specialty services business in Europe. In the UK, the company arranged for the sale of seven properties on behalf of the borrowers, administrators and receivers of the defaulted White Tower 2006-3 portfolio of CMBS loans, for aggregate gross proceeds of approximately $1.1bn. Write to Jacob Gaffney.
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