LOS ANGELES--(BUSINESS WIRE)--CBRE Group, Inc. (NYSE:CBRE) today reported financial results for the third quarter ended September 30, 2019.

Bob Sulentic, CBRE’s president and chief executive officer, said, “We are pleased to report another solid quarter with continued strong growth in our real estate services business segments – Global Workplace Solutions and Advisory Services. Our global occupier outsourcing, U.S. property sales and commercial mortgage origination business lines were especially strong this quarter. Growth on the bottom line was restrained by a light quarter of development asset sales – which can fluctuate significantly quarter-to-quarter – compared with record earnings from such sales in last year’s third quarter.

As we enter the final months of 2019, we are looking ahead to 2020 with cautious optimism. Commercial real estate and macro-economic fundamentals remain favorable, particularly in the Americas, our largest region. Our diversified business and geographic mix positions CBRE to continue thriving, despite ongoing trade and geopolitical uncertainties.”

Despite a delay in the expected timing of certain development deals, CBRE maintained its outlook for full-year 2019 adjusted earnings per share of $3.70 to $3.80. The mid-point of this range reflects a 14% increase over full-year 2018, which would extend to a decade the company’s track record of delivering double-digit adjusted earnings growth.

Global capital markets revenue, which includes both advisory property sales and commercial mortgage origination, set the pace for growth, rising 11% (13% local currency).

• Commercial mortgage origination revenue rose 24% (same local currency), fueled by an increased number of larger transactions with private entities, including life insurers, conduits and credit funds.
• Advisory property sales revenue increased 8% (9% local currency). Americas advisory property sales surged 16% (17% local currency), led by 19% growth in the U.S., where CBRE continued to make meaningful market share gains. Outside the Americas, property sales declined 6% (2% local currency). Weak residential sales in the Pacific region and parts of Asia contributed to this decline. Excluding Asia Pacific residential properties, property sales revenue outside the Americas was flat in local currency. Overall, Japan was a particular bright spot with robust growth in sales revenue.

Advisory leasing revenue rose 4% (5% local currency), a healthy increase against 17% growth in the prior year’s quarter. Leasing was notably strong in Australia (up 29% local currency), Brazil (up 68% local currency), India (up 40% local currency) Poland (up 80% local currency), and the United Kingdom (up 20% local currency). In the U.S., leasing rose 4%, driven by clients in the technology, financial services and manufacturing sectors, which accounted for nearly 60% of U.S. leasing revenue from CBRE’s largest clients.

Loan servicing revenue continued to grow briskly, rising 22% (same local currency). The loan servicing portfolio rose 19% to more than $223 billion, reflecting both higher origination volume and increased third-party servicing contracts.

Valuation revenue rose 8% (10% local currency), while property and advisory project management saw a solid increase in revenue, up 12% (14% local currency), and fee revenue, up 6% (8% local currency).

Global Workplace Solutions again registered robust top- and bottom-line growth. Revenue and fee revenue grew at a double-digit clip in all three global regions. Adjusted EBITDA increased 15% (16% local currency) with strength across the three lines of business: facilities management, project management and transactions. Slightly negative operating leverage reflected a couple of challenging accounts in Europe, which are expected to be remediated in 2020, and certain other expense items and non-cash accounting adjustments, which totaled approximately $12 million in the third quarter of 2019.

Strong growth is being sustained by CBRE’s ability to deliver integrated outsourcing solutions, often encompassing multiple business lines, on a global basis. As evidence of this, during the third quarter, CBRE was appointed by Novartis International AG to provide facilities and project management and transaction and advisory services on a worldwide basis. The 70 million square foot portfolio represents one of CBRE’s largest-ever new contracts in the Global Workplace Solutions segme

This segment’s adjusted EBITDA performance was well below the prior-year quarter due to the timing of large asset dispositions in the development business as well as increased investment in the company’s flexible workspace offering, Hana. Development dispositions were exceptionally strong in third-quarter 2018, and some development assets that were expected to transact in third-quarter 2019 have moved to 2020. Investment management performance improved markedly compared with third-quarter 2018, fueled by higher asset management fees and significant carried interest realization.

• Investment management: Assets under management (AUM) totaled $106.2 billion, down $0.5 billion from second-quarter 2019, mostly due to foreign currency movement. In local currency, AUM was up $1.7 billion for the quarter. Over the past 12 months, AUM has increased $1.7 billion ($5.1 billion local currency), reflecting the weighting of the portfolio denominated in Euros and pound sterling.
• Development: The in-process portfolio increased to a record $10.9 billion, up $0.3 billion from second-quarter 2019. The pipeline increased by $1.0 billion during the third quarter to $3.5 billion, with more than 60% of the increase attributable to fee-development and built-to-suit projects.

Adjustments to GAAP Net Income and Earnings Per Share

Third-quarter 2019 adjustments to GAAP net income had a net positive impact of $13.2 million, including pre-tax adjustments of:

• $19.3 million of non-cash acquisition-related depreciation and amortization; and
• $4.5 million of integration and other costs related to acquisitions;
• Offset by the following items:
  • a $3.4 million reversal of net carried interest incentive compensation to align with the timing of associated carried-interest revenue; and
  • a $7.2 million net tax adjustment associated with the aforementioned pre-tax adjustments and other tax adjustments.

Adjusted Net Income and Adjusted Earnings Per Share were relatively flat compared to the prior year period at $269.8 million and $0.79, respectively. This was primarily a result of a lower Adjusted EBITDA contribution from the Real Estate Investments segment driven by the delayed timing of development sales, which was partially offset by the benefit of a lower effective tax rate realized in the current year period.

Capital Allocation Overview

• Stock Repurchase Program –During the third quarter of 2019, the company repurchased a total of 0.9 million shares of its common stock for $49.0 million at an average price of $52.50. During the month of October, the company repurchased an additional 1.0 million shares of common stock for $51.0 million at an average price of $50.85. As of November 6, 2019, the company had $300.0 million of capacity remaining under its stock repurchase program.
• Capital Expenditures – During the third quarter of 2019, net capital expenditures totaled $54.5 million(6), which were primarily deployed for technology-related investments.
• Acquisitions – During the third quarter of 2019, the company spent $20.3 million on acquisitions, primarily related to its Advisory Services business. On October 1, 2019, as previously disclosed, the company completed its acquisition of Telford Homes Plc, a London-based developer of for-rent multifamily properties (which will be reported in the company’s Real Estate Investments segment), for a total of $432.0 million (£350.7 million), including $329.0 million (£267.1 million) of cash consideration and $103.0 million (£83.6 million) of assumed net debt that was subsequently repaid after closing. This transaction was funded through a combination of cash on hand and borrowings under the company’s revolving credit facility.

About CBRE Group, Inc.

• CBRE Group, Inc. (NYSE:CBRE), a Fortune 500 and S&P 500 company headquartered in Los Angeles, is the world’s largest commercial real estate services and investment firm (based on 2018 revenue). The company has more than 90,000 employees (excluding affiliates) and serves real estate investors and occupiers through more than 480 offices (excluding affiliates) worldwide. CBRE offers a broad range of integrated services, including facilities, transaction and project management; property management; investment management; appraisal and valuation; property leasing; strategic consulting; property sales; mortgage services and development services. Please visit our website at www.cbre.com. We routinely post important information on our website, including corporate and investor presentations and financial information. We intend to use our website as a means of disclosing material, non-public information and for complying with our disclosure obligations under Regulation FD. Such disclosures will be included in the Investor Relations section of our website at https://ir.cbre.com. Accordingly, investors should monitor such portion of our website, in addition to following our press releases, Securities and Exchange filings and public conference calls and webcasts.