LOS ANGELES - Slow spring sales attributed to last year's capital markets crunch have accelerated CB Richard Ellis' plans to reorganize from nine lines of business into three, a move the company says will save $11 million annually. The company's three core businesses will be: transaction services, which includes buying, selling and leasing; management services, which includes property and facilities management; and financial services, which includes valuation, investment-banking, realty advisory and capital-market services. CB Richard Ellis also has realigned its regional reporting structure in North and South America, creating a single Americas region, and has cut 70 middle management positions.
The reorganization of our North American operations is essential if we are to remain competitive," says CEO Ray Wirta. "The lower than expected sales and leasing revenue in April and May underscored our need to move swiftly on these changes. While we are cautious about predicting the timing of this improvement, we are encouraged by stronger sales and leasing revenues recorded in June and by the strength of our sales backlog, which is well ahead of last year."
CB Richard Ellis has reported lower sales and leasing revenue in April and May, which will reduce total second-quarter revenue and EBITDA. As a result, second-quarter earnings estimates were reduced to $0.16 per share, compared with First Call's current estimate of $0.33 per share. The company attributed the lower first-half sales revenue to a capital-markets crash hangover, as well as a lengthening buyer cycle. The company believes the leasing revenue decline is tied to a temporary gap in leasing commitments created by Corporate America's less-than-rosy economic outlook at the end of 1998.
After doubling in size over the past two years through a number of acquisitions, CB Richard Ellis is working to streamline bureaucracy, according to company spokesperson Christy Ingle.