CBRE Group Income Dives 88% In Q2

Source : The Business Times, July 31, 2008

Brokerage fees hit as sales dry up due to global credit market crunch

(NEW YORK) CB Richard Ellis Group Inc, the world's largest commercial real estate brokerage, said quarterly net income plunged 88 per cent, partly on lower brokerage fees from sales that have all but dried up due to the severely constrained global credit markets.

Hazy days: CBRE's two biggest markets, the US and Britain saw a dramatic fall-off in commercial real estate sales and a slowdown in demand for space leasing. A bright spot was the Asia-Pacific where revenue rose 27.8%

Second-quarter net income fell to US$16.6 million, or 8 cents per share, from US$141.1 million, or 59 cents per share, in the year-earlier quarter, the company said on Tuesday.

Excluding one-time charges Los Angeles-based CB Richard Ellis would have earned US$33.2 million, or 16 cents per share, compared with US$157.3 million, or 66 cents last year, still far from the 44 cents analysts on average had expected, according to Reuters Estimates.

'As we had anticipated, the leasing business turned down from the strong first quarter, especially in the Americas and the UK, reflecting weak economic activity and decreasing business confidence,' Brett White, chief executive, said in a statement.

'Investment sales activity remained quite soft due to a broadening of the credit market turmoil and a continuing gap between buyer and seller expectations of property values. Decreased investment volumes have now become evident in all parts of the world.'

Revenue fell to US$1.3 billion from US$1.5 billion and behind the US$1.42 billion analysts had expected, according to Reuters Estimates.

The commercial real estate market has been hampered by the broader tightness in the credit markets.

The company's two biggest markets, the United States and Britain have seen a dramatic fall-off in commercial real estate sales and a slowdown in demand for space.

One bright spot was the company's real estate outsourcing business, which overseas real estate needs for large global companies. That segment saw revenue rise 29 per cent, accounting for one third of the Los Angeles-based company's global revenue. Also the Asia-Pacific region saw revenue rise 27.8 per cent to US$155.7 million.

But the larger regions were gloomy. In the Americas region, which includes the United States, Canada and Latin America, revenue fell 16 per cent to US$785.5 million. In Europe, Middle East and Africa, revenue fell 9.4 per cent to US$299.7 million.

In the Global Investment Management segment, which consists of investment management operations in the United States, Europe and Asia, revenue fell 49 per cent to US$42.7 million, compared with the second-quarter last year, which included performance fees from funds.

In addition, the second quarter of 2008 included a writedown of US$11.9 million for two investments whose market value declined. -- Reuters