CBG
#Thank you, <UNK>
As <UNK> noted, CBRE continued to produce great results in Q3. Let me start with a few highlights on Slide 5. First, adjusted EBITDA growth was broad based, up in all 5 business segments and up 17% in total versus last year
Second, leasing revenue in the Americas increased 13%, led by the U.S
, which is up 16%, as we continued to take market share
Third, adjusted EBITDA margin on fee revenue in our regional businesses was up 20 basis points to 15.9% despite a year-over-year decline in gains from mortgage servicing rights related to GSE lending
Excluding this impact, the margin on fee revenue in our regional businesses increased by 70 basis points
Margin on fee revenue for our entire business increased by 120 basis points overall to 17.7%
Fourth, we continued to deploy capital into attractive M&A opportunities
We have closed 9 acquisitions thus far this year and maintain an active pipeline
These investments enhance our core strategy and reflect our continued underwriting discipline
Slide 6 summarizes our financial results
CBRE produced strong top line growth in Q3. Gross revenue and fee revenue increased by 10% and 9%, respectively, with virtually all growth being organic
Adjusted EBITDA for the quarter grew 18% in U.S
dollars to $412 million, reflecting positive operating leverage
Adjusted earnings per share increased 28% in U.S
dollars to $0.64 for the quarter
Our adjusted tax rate improved to 28.3% in Q3 '17 versus 33% in the prior year third quarter, and we continue to take steps to enhance our tax efficiency
The benefit of our lower tax rate in the quarter was mostly offset by increased depreciation and amortization when compared to prior year
You'll notice that we enhanced our segment-level and income statement reconciliation disclosures
We are also including a detailed history of revenue and EBITDA by segment as a supplemental disclosure posted on our website
These enhanced disclosures should further improve the overall financial transparency of our business for our investors
Slide 7 summarizes our three regional services businesses, which, as Bob mentioned, are all at record levels for adjusted EBITDA in the trailing 12 months
Adjusted EBITDA for the quarter was up 8% in the Americas, 12% in EMEA and 31% in Asia Pacific, excluding all currency effects
The regions together produced fee revenue growth of 10%
Asia Pacific was a notable performer in the quarter, posting an 18% fee revenue increase, supported by outsized growth in Greater China, India, Japan and Singapore
In the Americas, fee revenue increased 9%, with double-digit growth in occupier outsourcing and leasing
Brazil, Canada and the United States all exhibited strong overall growth
Growth of 8% in adjusted EBITDA in the Americas would have been 18%, excluding the gains from mortgage servicing rights
EMEA fee revenue rose 8%, paced by strong gains in the United Kingdom
Slide 8 reviews the performance of our major global lines of business in Q3. Revenue growth across these lines of business was almost entirely organic
As mentioned, leasing revenue rose 13% in the Americas and 16% in the U.S
, paced by strong performance in New York City
Leasing increased by 4% in EMEA and 17% in Asia Pacific, where growth was especially strong in Australia, Greater China, India and Japan
Property sales revenue rose 9%, reflecting market share gains in an environment where global market volumes were relatively flat year-over-year
Our performance in property sales was paced by robust growth in Asia Pacific, which increased 33%, led by Australia, Greater China and Japan
Americas sales revenue improved 7% as robust gains in Brazil and Canada offset relatively flat revenue in the United States
CBRE extended its leading position in U.S
investment sales, with market share increasing by approximately 190 basis points versus last year's third quarter, according to Real Capital Analytics
EMEA sales revenue declined 2%, reflecting fewer, large transactions in Continental Europe, although growth remained strong in the U.K
Commercial mortgage origination revenue declined 12%, driven almost entirely by lower gains on mortgage servicing rights related to our GSE businesses, which more than doubled in Q3 of the prior year
Notably, our loan servicing business saw a 24% increase in recurring revenue from our portfolio, which now totals $165 billion
We have begun to separately disclose our loan servicing revenue, which has more than doubled over the last 3 years and now represents nearly 30% of our year-to-date revenue from commercial mortgage services
Our supplemental disclosure includes a 3-year quarterly history of our loan servicing revenue, providing an enhanced view of this recurring revenue stream for our investors
Property management services produced solid fee revenue growth of 10% for the quarter
Revenue from our valuation business increased 4%
Slide 9 summarizes results for our occupier outsourcing business, where we continued to see strong growth, with fee revenue up 13% for the quarter
To illustrate our value proposition, let's look at a contract expansion we signed this quarter
Our client, CSC, was merging with a large division of Hewlett Packard Enterprise to create DXC Technology
CBRE provided key support during the premerger period and subsequently expanded the relationship to include their entire 32-million-square-foot global portfolio for facilities management, transactions, project management and strategic consulting
In the most basic sense, for clients like DXC, we could be providing services that include managing the day-to-day operations of thousands of facilities and related capital improvement projects, advising on leasing new facilities and identifying and disposing of facilities that no longer meet the client's needs
In summary, we dedicate an experienced leadership team to the client, supported by a global platform that includes market-leading technology, data analytics and the expertise of over 75,000 CBRE employees on the ground in over 100 countries
This is what we mean when we talk about our competitive advantages of scale, service scope and sector expertise
Slide 10 summarizes our Global Investment Management segment, where adjusted EBITDA increased 21% in Q3 and is up 10% year-to-date
Our Investment Management business continues to attract significant equity capital
Total commitments reached $9.4 billion over the past 12 months
AUM rose in the third quarter to $98.3 billion, up $10.4 billion from a year ago in U.S
dollars or $2.6 billion, excluding the Caledon Capital acquisition, which was completed in August 2017. Positive FX movements added $2.2 billion to total AUM versus the prior year
Please turn to Slide 11 summarizing our Development Services segment
This business continues to produce outstanding results
Adjusted EBITDA contributions increased to $35.9 million from $15.7 million in Q3 2016. Year-to-date, adjusted EBITDA is up 29% versus the prior year
I'll remind you that the timing of realizing incentive income can vary quarter-to-quarter
Our in-process and pipeline portfolios remain healthy, and we expect to realize meaningful income in the fourth quarter, though less than last year's fourth quarter
Our development pipeline stands at $5.4 billion, with fee-only and build-to-suit projects representing more than half of our pipeline
Please turn to Slide 12. This quarter represents the 2-year anniversary of our closing on the Global Workplace Solutions acquisition and is a good time to reflect on our performance since then
Over this period, growth in employment and GDP has been slow and steady but not great, and property sales volumes have declined
Against this backdrop, I'd like to highlight 2 metrics
First, our trailing 12-month adjusted EPS has increased by 38% over the last 2 years compared to 5% growth in EPS for the S&P 500 over this period
Second, our leverage over this period has declined even after making a $1.5 billion acquisition
As of Q3, our leverage ratio is only 1x net debt-to-adjusted EBITDA versus the 1.2x level we had immediately prior to our acquisition of Global Workplace Solutions
This reflects our strong cash flow and earnings growth over the past 2 years
We believe this performance highlights the strength of our company and our strategy
One housekeeping item before I turn the call back to <UNK>
We are moving our Annual Investor Day to early March of 2018. This will give us the benefit of having full year 2017 results when providing our outlook for 2018. We look forward to speaking with you again in early 2018. With that, please turn to Slide 13 as I turn the call over to <UNK>
<UNK>, this is <UNK>
I don't think we're going to give any forecast at this point
But we'll come back to that at year-end
We haven't broken down that detail
Yes, our origination business is heavily weighted to multifamily
Not all GSE but definitely heavily weighted to multifamily
I don't think we said that volumes doubled
But volumes are up, so the ---+ but you do get ---+ depending on the mix of the type of origination, where it's coming from, factors relating to that, fees can be quite different from one origination to another
So revenues don't always follow level of origination
So the ---+ we have hit a ---+ if you look at the overall impact, if you try and assess the overall impact on our numbers from GSE, it was a $21 million negative impact to pretax earnings
And the way you can ---+ the details of that are, we had $35 million of gains in Q3, we had $26 million of amortization
But if you're comparing, the gains are down by $13 million, the amortization is up by $8 million
The net impact is negative $21 million
Volumes are up
Like I said, they're up
So you ---+ but you can have time for ---+ where volumes and revenue just are different just by the nature of the size of the deals, the types of deals, fee structures in different deals
Yes, we have taken a look at the bill that came out yesterday
Our initial take is positive
Obviously, we're going to be cautious and waiting
There could be a lot of twists and turns between now and when legislation is finalized
But net-net, we see it as positive for the industry
