The paragraph details the introduction to the CBRE First Quarter 2025 Earnings Call. The operator greets participants and notes that the session will include a listen-only mode followed by a Q&A segment. Chandni Luthra, the Global Head of FP&A and Investor Relations, starts the call by welcoming everyone. She mentions that a presentation and supplemental materials have been posted online. The presentation includes forward-looking statements regarding the macro environment, business outlook, and strategies, with a disclaimer about associated risks and uncertainties. She also notes that reconciliations of non-GAAP measures to GAAP measures are available. Joining her on the call are Bob Sulentic, the Chair and CEO, and Emma Giamartino, the CFO. Financial performance discussions will reference expectations based on prior outlooks from February 2024.

The paragraph outlines the performance and strategic positioning of CBRE's business divisions in early 2025. It highlights that both resilient businesses, like facilities and project management, and transactional businesses, such as property sales and leasing, had strong starts to the year, with promising business pipelines despite uncertainties from tariff situations. Specifically, new segments like Project Management and Building Operations & Experience performed well, contributing to operational and strategic growth. These changes have enabled CBRE to enhance client access, identify product development opportunities, improve M&A strategies, and elevate strong leaders within the company, all supporting CBRE's comprehensive strategy across various commercial real estate dimensions.

The company reports strong financial performance, highlighting a 27% increase in core EBITDA and a 10% rise in core EPS for the first quarter, despite a 2% to 3% currency headwind. Without a large one-time tax benefit from the previous year, core EPS actually grew 39% year-on-year. The company's resilient and transactional businesses both experienced significant net revenue growth, with resilient businesses contributing to over 60% of total SOP. Particularly strong results were seen in Advisory Services, with net revenue growth of 16%, bolstered by strong leasing and capital markets activity. In the U.S., leasing revenue rose 24%, including a 38% increase in office leasing, with notable growth across key gateway markets.

The paragraph discusses strong growth in various real estate and leasing markets. Non-gateway U.S. markets like Atlanta and Dallas saw significant growth, with retail and industrial leasing increasing by 34% and 12%, respectively. Internationally, Southeast Asia and parts of Europe experienced strong leasing trends, especially in office spaces in India. Global property sales revenue rose by 13%, driven by a 26% increase in the U.S. and notable strength in Continental Europe. The mortgage origination business saw a 53% growth in origination fees and a 69% rise in U.S. loan origination volume, fueled by refinancing growth and demand for acquisition financing. Overall, advisory SOP increased by 31%, with improved operating leverage. The BOE segment's net revenue grew by 22%, with strong performances in facilities and property management, bolstered by the acquisition of Industrious and demand in sectors such as technology and health care. This performance reflected enhanced operating leverage from prior cost efficiency measures, leading to 38% SOP growth and a 100 basis point net margin expansion.

In the Project Management segment, CBRE experienced a 9% revenue growth following the integration of its legacy project management business with Turner & Townsend. The legacy Turner & Townsend business showed strong infrastructure wins in the U.K. and Middle East, with a solid project pipeline. Year-on-year project management SOP margins improved, resulting in a 14% SOP growth, though synergy benefits from the merger are yet to be realized. The REI segment saw a 43% increase in investment management operating profit, attributed to higher net promotes and recurring asset management fees, while AUM increased to $149 billion. Development operating profit met expectations, and the U.S. in-process portfolio expanded with 12 new projects. The trailing 12-month free cash flow reached nearly $1.5 billion with a 93% conversion rate, surpassing the target range. The company repurchased $600 million in shares to demonstrate its commitment to shareholders and perceived under-valuation of CBRE stock.

The company deployed approximately $1 billion of capital year-to-date in mergers and acquisitions (M&A), share repurchases, and co-investments, ending the quarter with net leverage below 1.5 turns. The capital deployment strategy focuses on M&A and principal investments, balancing with share repurchases if the share price is attractive. The company expects to maintain net leverage under 1 turn by year-end unless large-scale M&A or a recession occurs and is open to increasing leverage to 2 turns for valuable acquisitions. Despite strong Q1 performance and pipelines, the company is maintaining its 2025 core EPS guidance due to market uncertainty related to tariffs, interest rate volatility, or recession risks. The company is confident in its ability to handle a recession and capitalize on downturn opportunities due to its strong balance sheet. The operator then opens the line for questions, beginning with Anthony Paolone from JPMorgan, who asks for more details on recent changes in the company's pipeline. Bob Sulentic responds positively, indicating he is willing to provide more information.

The paragraph discusses how the company's financial performance shifted from being exceptionally strong to not as strong due to impacts from tariffs. In the first quarter, significant capital was raised, exceeding expectations, but enthusiasm diminished as capital investments from global sources slowed. Despite a lot of project management activity, including infrastructure programs, uncertainty from tariffs and potential recession slowed down corporate investments in bigger projects. In leasing, industrial performance remained strong and office space also outperformed expectations, although future office space performance is uncertain due to scarcity issues, not limited to just prime locations like Park Avenue.

In the paragraph, the discussion revolves around the high demand for office space in both major and smaller city markets, despite limited new construction in recent years. This demand remains strong regardless of economic uncertainty. As a result, there are opportunities for development deals, although some large leases are experiencing slight pullbacks. The conversation shifts to project management, emphasizing the need for effective project replacement to maintain growth. The inquiry focuses on whether the existing pipeline is sufficient to achieve the anticipated double-digit growth, acknowledging potential challenges.

The paragraph discusses the current status and future potential of CBRE's project management business, emphasizing its improved positioning due to the merger with Turner & Townsend. This combination has enhanced their capabilities, particularly in handling large, complex projects in the United States, where Turner & Townsend previously lacked a strong presence. With 15,000 professionals in project management, program management, and cost consultancy, the business is better equipped to exploit opportunities despite market uncertainties like tariffs or a possible recession. The speaker anticipates significant growth and change in their project management operations over the next few years.

The paragraph discusses a financial outlook, noting that current guidance is being maintained despite potential economic uncertainties like interest rate volatility or a recession. Emma Giamartino explains that the range of outcomes is wider than initially thought in February, but they are optimistic due to strong Q1 performance and Q2 momentum. She mentions that guidance could have been increased without tariff uncertainties, and the company could reach the higher end of its range if Q1 success continues. If leasing and capital markets slow in the year's second half, they might end up at the midpoint. She struggles to precisely predict the impact of a recession due to its unpredictable nature but emphasizes that the company is more resilient now than in previous economic downturns, including the Global Financial Crisis, with 60% of its operations deemed resilient.

In 2011, the company's business resilience was at 11%, but it has since grown significantly, with resilient profit now increasing at a double-digit rate. If a recession like the Global Financial Crisis (GFC) were to occur today, the company expects its decline to be less than half of the 85% decline experienced during the GFC. In terms of capital markets activity, while activity slowed down slightly in March, it remained strong in April despite uncertainty. Investment sales activity has accelerated, and there was an increase in rate locks when the 10-year yield briefly fell below 4%. The outlook remains positive as long as the 10-year yield stays below 5%.

The paragraph discusses the project management business and its current margin profile. Emma Giamartino explains that the long-term margin goal for the project management segment is to align with the mid- to high-teens range seen in the legacy Turner & Townsend project management margins. The current margin is slightly below 15%, but improvements are expected through cost synergies and back-office integration. Ronald Kamdem inquires about capital allocation and mergers and acquisitions (M&A) strategy. Bob Sulentic confirms that the company has refined its M&A strategy and is focused on acquiring companies that would benefit from their platform, especially in a turbulent market environment.

The paragraph discusses an organization’s perspective on leveraging choppy market conditions to enhance their M&A strategy. The speaker believes that despite the challenges of a downturn, their company is well-positioned to benefit from it due to a strong balance sheet and prior successes in acquisitions. The conversation then shifts to Stephen Sheldon from William Blair, who questions Bob Sulentic about the industrial leasing outlook. Bob admits it’s difficult to provide additional clarity but suggests that the initial outperformance in industrial leasing is expected to stabilize. He also mentions that much of the momentum comes from third-party logistics providers (3PLs).

The paragraph discusses how companies are opting for more flexible leasing arrangements by using third-party logistics providers (3PLs) due to economic uncertainties. This trend has led to a slowdown in large lease agreements, though there is still momentum in smaller leases, which is expected to remain steady into 2024. Stephen Sheldon asks Emma Giamartino about managing costs if macroeconomic conditions worsen. Emma responds that the company is prepared to adjust its cost structure flexibly, as expenses like commissions and bonuses are variable and can be reduced as needed. Additionally, discretionary expenses and hiring can be tightened quickly to support profitability.

The paragraph discusses CBRE's handling of currency headwinds and capital usage. Emma Giamartino notes that while predicting currency movements is challenging, current trends suggest that earlier headwinds could become tailwinds in the second quarter. The company's capital deployment strategy has remained consistent, focusing on mergers and acquisitions (M&A) and real estate investment (REI) co-investments, despite changes in the macro environment. The strategy of prioritizing these investments over share buybacks, which have amounted to around $600 million, remains unchanged.

The paragraph discusses the priorities and strategies regarding capital allocation, particularly in relation to share repurchases and capital markets activities. Emma Giamartino mentions that as long as the 10-year interest rate remains below 5%, the company can maintain its pace in capital markets, including loan originations, which are primarily driven by refinancing. She emphasizes the importance of stable interest rates for the continuation of these activities, noting a potential slowdown if rates exceed 5%. Additionally, she clarifies that recent activity initially slowed at the start of the month but has since accelerated, affecting both loan origination and advisory sales.

The paragraph features a conversation where Emma Giamartino mentions that March sales slowed, but quickly picked up in April. Peter Abramowitz shifts the topic to political risks, specifically the uncertainty around ongoing tariff negotiations by the current administration, and asks Bob Sulentic for his perspective on how to manage this uncertainty for future business planning. Bob Sulentic acknowledges the unique and uncertain situation, noting that they lack specific insights beyond what big banks and other experts have reported, which has already led them to anticipate a higher risk of recession. This risk results in a more cautious business outlook for the year. The paragraph ends with a transition to the next caller, Patrick O'Shaughnessy, who asks about a business wind-down within Real Estate Investments mentioned in non-GAAP reconciliations.

The paragraph is a transcript of a Q&A session involving Emma Giamartino, Patrick O'Shaughnessy, Jade Rahmani, and Bob Sulentic. Emma discusses the closure of the Industrious deal in mid-January, noting that its financial contributions are as expected, though specific revenue details were not provided. Jade Rahmani asks about margin gains in Advisory and BOE, and Emma attributes these to higher-margin activities in leasing, investment sales, and loan origination, along with cost-saving initiatives. Jade further inquires about market activities, particularly in data centers and REI. Bob Sulentic clarifies that their company provides services but does not own data centers.

The paragraph discusses a strong quarter for the company's data center services business, highlighting a successful acquisition, Direct Line, which is surpassing expectations. Turner & Townsend, a major project manager for new data centers, is busy despite some decline in hyperscaler projects. Trammell Crow Company plays a unique role by acquiring land and making improvements to increase its value, and the company anticipates meeting its goals for the year despite some industry slowdowns. The conversation shifts to how Trammell Crow is handling uncertainties around construction costs, specifically in relation to potential tariff impacts on their ongoing projects.

The paragraph discusses the impact of tariffs on a portfolio of construction projects. Completed or nearly completed projects, as well as those protected by Guaranteed Maximum Price (GMP) contracts and budget contingencies, are largely shielded from tariff-related costs. Many construction costs involve land, engineering, local labor, and materials sourced domestically, which are not affected by tariffs. Future projects might experience cost increases due to tariffs and inflation, but these are expected to be offset by rental increases. Overall, the risk from tariffs is minimal for their current portfolio.

During the conference call, Seth Bergey from Citi asked about leasing trends among different tenant sizes and regions. Emma Giamartino provided insights, noting that in the office sector, metrics such as square footage, term, and rent have increased slightly. In the industrial sector, square footage and term have also increased slightly, although rent has remained steady. The call concluded with Bob Sulentic thanking participants and mentioning that they would reconnect during the next earnings report.

This summary was generated with AI and may contain some inaccuracies.