Strong Quarter For Global Real Estate Services Firms

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Earlier this week, the world’s largest commercial real estate services firm announced another positive quarter. But analysts fear that CB Richard Ellis’ (NYSE: CBG) thriving business will face headwinds from the credit crunch in 2008.

CBRE’s third quarter net income of .55 cents per share was lower than the .57 cents per share forecast by seven analysts, reports Bloomberg.

Despite trailing average analysts’ forecast, the bellwether firm’s third quarter performance was strong. CBRE reported a 54.2% third quarter revenue increase combined with a 37.5% jump in earnings per share (EPS) over the third quarter of 2006.

“Third quarter results clearly showed the economic and strategic benefits of our highly diversified business line and revenue base,” says Brett White, president and CEO of CBRE. “During a period of extremes in the global credit markets, as well as uneasiness about the U.S. economy generally, CBRE posted very impressive year over year gains in both revenue and profitability,” adds White.

CBRE continues to benefit from its $2.2 billion acquisition of corporate services giant Trammell Crow Co. According to White, revenues associated with outsourcing increased to 23% of total revenues in the third quarter from 14% in the year-ago quarter. Since the start of this year, CBRE has added 24 new corporate outsourcing accounts.

In its global investment platform, CBRE also generated strong gains during the third quarter. Revenue from investment management operations in the U.S., Europe and Asia registered $99.1 million for the third quarter, up 139.5% from $41.4 million recorded in the third quarter of 2006.

A slew of analyst reports issued this week, however, suggest that the ongoing credit crunch could affect the service firm’s business in 2008. Analysts are chiefly concerned about U.S. sales and leasing activity.

During the company’s conference call this week, management acknowledged that ripple effects from the credit crunch may have a larger impact on their investment sales business in the fourth quarter than in the third quarter.

“U.S. leasing results were affected by uncertainty surrounding economic growth and slower activity in select markets,” writes Citigroup analyst Patrick Burton in a CBRE research note this week. “While we had expected the impact on investment sales, the softer U.S. leasing market was incremental.”

CBRE’s stock traded in the low-$40s in early July. On Nov. 1, company shares were trading around $23.42.


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