CBRE Group, Inc. (CBG)

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(CBG)

Q2 2013 Earnings Call

July 25, 2013 5:00 pm ET

Executives

Nick Kormeluk - Senior Vice President of Investor Relations

Robert E. Sulentic - Chief Executive Officer, President, Director, Chairman of Acquisition Committee and Member of Executive Committee

Gil Borok - Chief Financial Officer and Executive Vice President

Calvin W. Frese - Chief Executive Officer of Americas Business

Analysts

Brandon Burke Dobell - William Blair & Company L.L.C., Research Division

Joseph C. Dazio - JP Morgan Chase & Co, Research Division

William C. Marks - JMP Securities LLC, Research Division

David Ridley-Lane - BofA Merrill Lynch, Research Division

Presentation

Operator

Ladies and gentlemen, thank you for standing by, and welcome to CBRE Q2 Earnings Conference Call. [Operator Instructions] Also, as a reminder, this teleconference is being recorded. And at this time, I will turn the conference over to your host, Mr. Nick Kormeluk. Please go ahead, sir.

Nick Kormeluk

Thank you, and welcome to CBRE's Second Quarter 2013 Earnings Conference Call. About an hour ago, we issued a press release announcing our Q2 financial results. This release is available on the homepage of our website at www.cbre.com. This conference call is being webcast and is available on the Investor Relations section of our website. Also available is a presentation slide deck, which you can use to follow along with our prepared remarks. An archive audio of the webcast and a PDF version of the slide presentation will be posted on the website later today, and a transcript of our call will be posted tomorrow.

Please turn to the slide labeled forward-looking statements. This presentation contains statement that are forward-looking within the meaning of the Private Securities Litigation Reform Act of 1995, including statements regarding our future growth momentum, operations, financial performance and business outlook. These statements should be considered as estimates only, and actual results may ultimately differ from these estimates. Except to the extent required by applicable securities laws, we undertake no obligation to update or publicly revise any of the forward-looking statements that you may hear today.

Please refer to our second quarter earnings report filed on Form 8-K, our current annual report on Form 10-K and our current quarterly report on Form 10-Q, in particular, any discussion of risk factors or forward-looking statements which are filed with the SEC and available at the SEC's website, www.sec.gov for a full discussion of the risks and other factors that may impact any estimates that you may hear today.

We may make certain statements during the course of this presentation, which include references to non-GAAP financial measures as defined by SEC regulations. As required by these regulations, we have provided reconciliations of these measures to what we believe are the most directly comparable GAAP measures, which are attached hereto within the appendix.

Please turn to Slide 3. Participating with me today are Bob Sulentic, our President and Chief Executive Officer; Gil Borok, our Chief Financial Officer; and Cal Frese, Americas Chief Executive Officer.

I'll now turn the call over to Bob.

Robert E. Sulentic

Thank you, Nick. And please turn to Slide 4. CBRE achieved another quarter of solid growth in the second quarter of 2013. Our performance was especially noteworthy coming against the backdrop of continued weak global economic growth as well as heightened financial market volatility and rising U.S. interest rates following Fed Chairman Bernanke's remarks about the quantitative easing program in late May. Our improved performance amid this macro environment is a testament to our well-balanced service offering and our people's energy and creativity in collaborating across markets and disciplines to produce outstanding results for our clients. Nothing is more important to our company.

Overall, revenue growth of 9% was fueled by meaningful improvement in all 3 global regions. We also saw a continued strength in our capital markets and occupier outsourcing businesses. Asia Pacific led the global regions with 16% revenue growth, extending its healthy rebound from a relatively soft first half in 2012. It was particularly gratifying to see a very strong growth in Greater China for the second consecutive quarter. The Americas region achieved 10% revenue growth for the second quarter in a row. Cal Frese, CEO of our Americas business, will take you through these results later. More importantly, he will discuss our strategy for sustaining growth and improving market share through our focus on better serving clients. EMEA also continued to recover from a difficult 2012. Although higher revenue in France and the United Kingdom was tempered by the recessionary environment across most of Continental Europe, overall revenue in the region rose 9%.

Turning to our global service lines. The capital markets-based businesses continued to be growth engines for us. Global property sales revenue rose 20% and was driven by Asia Pacific and the Americas. Commercial Mortgage Brokerage revenue improved 22% as investor appetite for debt financing remained strong throughout the quarter despite the long-term interest rates spike later in the period. Appraisal & Valuation revenue, which is closely tied to investment activity, improved 10% led by Asia Pacific. Real estate outsourcing continues to be a growth catalyst as well. Overall, property, facilities and project management revenue rose 11% globally with notable strength in EMEA. Our Global Corporate Services or GCS business, which is our occupier outsourcing service lines saw revenues rise 11% globally. GCS revenue generally includes commissions from sales and lease transactions associated with GCS accounts in addition to facilities and project management fees. A high degree of occupier caution amid weak global economic growth continued to restrain global leasing performance. Despite generally soft market conditions, however, global leasing revenue rose 4% paced by the Americas. Achieving more robust growth in leasing -- in our leasing business despite the lackluster macro microenvironment is one of CBRE's strategic priorities.

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