Q3 2019 Earnings Call

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Thank you and welcome to see <unk> third quarter 2019 earnings conference call earlier today, we issued a press release announcing our financial results and it is posted on the Investor Relations page our website <unk> dot com along with a presentation slide deck that you can use to follow along with our prepared remarks as well as an excel file the contains a dish.

Supplemental materials.

Our agenda for this morning's call will be asphalt first I'll provide an overview of our financial results for the quarter next Bob <unk>, our president and CEO and Leah Stearns, our CFO will discuss our third quarter results in more detail. After these comments well open up the call for your questions before I begin I'll remind you did this presentation contains forward looking.

Statements that involve a number of risks and uncertainties. Examples of these statements include our expectations regarding series future growth momentum operations Marketshare business outlook capital deployment acquisition integration and financial performance, including our 2019 outlook and any other statements regarding matters that are not historical fact, we urge you to consider.

These factors are bearing in mind, you that we undertake no obligation to update the information contained on this call. It reflects subsequent events or circumstances, you should be aware that these statements should be considered estimates only and certain factors may affect both in the theater that could cause actual results to differ materially from those expressed in these forward looking statements worry for discussion of risks and other factors that may have.

Pack. These forward looking statements. Please refer to this morning.

We have provided reconciliations of adjusted EPS, adjusted EBITDA and fee revenue and certain other non-GAAP financial measures included on our remarks to the most directly comparable GAAP measures together with explanations of these matters in the appendix of the presentation slide deck.

Now please turn to slide four of our presentation, which highlights our financial results for the third quarter of 2019.

Third quarter adjusted earnings per share was flat at 79 cents strong top and bottom line growth within our two services segments Advisory services and global workplace solutions was offset by decline in adjusted EBITDA in our real estate investment segment. The 85 million of adjusted EBITDA I realize in real estate investments and.

Last year's third quarter represented an all time record for the segment on a combined basis, our two services segments generated fee revenue growth in adjusted EBITDA growth of over 11% and 16% respectively. In addition, the combined adjusted EBIDTA margin for our advisory and global workplace solutions segments.

Expanded approximately 70 basis points.

Finally, our consolidated results also reflect negative foreign exchange translation impacts of 2% and 1% to fee revenue and adjusted EBITDA growth respectively. Now for an update on our business fundamentals I will turn the call over to Bob.

Thank you Brad and good morning, everyone as you've seen we reported another strong quarter and our services business driven by double digit revenue growth in global occupier outsourcing U.S. advisory property sales and commercial mortgage origination.

We continue to benefit from strong organic growth and operating leverage in our combined services businesses.

Additionally in early October we completed the acquisition of Telford homes, expanding our development capabilities into the UK, where the multifamily rental market is poised for long term secular growth.

We were able to acquire Telford at an attractive valuation, reflecting market concerns due to Brexit without materially altering our capital structure or engaging in a lengthy integration process.

We believe the very successful Telford team will be able to accomplish more on CB Aries platform then they could on their own.

Strategic M&A is core to our strategy and Telford represents the type of acquisition you should expect from sea Barry.

Sourcing underwriting and integrating acquisitions is a competitive advantage for our company.

Both our M&A and our senior business leadership teams are deeply experienced at targeting underwriting closing and integrating acquisition opportunities.

2014, we have deployed nearly 2.6 billion for acquisitions that have bolstered our growth our ability to serve our clients and our strategic position in the marketplace.

I will discuss our approach to M&A and capital allocation after she reviews the corner in more detail Liam.

Thanks, Bob.

Turning to slide five our advisory services segment generated 8% fee revenue growth during the quarter strong operating leverage drove margin expansion of about 840 basis points and 17% growth and adjusted EBITDA.

Over half the margin expansion resulted from commercial mortgage origination gain the remainder is attributable to well disciplined operating expense management against a healthy revenue growth.

We saw double digit adjusted EBITDA growth in local currency from both our Americas and non Americas region.

Our North Asia Division saw the strongest adjusted EBITDA growth of any geographical region in the quarter as outstanding capital markets activity in Japan, more than offset soft market conditions and Hong Kong in China. These two markets make up our greater greater try not region and represent less than approximately 1% FCB.

Aries total adjusted EBITDA.

Global capital markets, which includes both property sales and commercial mortgage origination set the pace for revenue growth accelerating to 11%.

Significantly from 1% in the first half beer.

This acceleration with led by our commercial mortgage origination revenue growth of nearly 24%, which was fueled by an increasing number of larger transactions and market share gain with private entities, including life insurer conduit in credit fund.

Property sales revenue growth was led by the United States, which increased by 19% on meaningful market share gain.

This is primarily driven by a sizable number of larger transaction and notable strength in the northeast region of the United States.

Outside the Americas property sales declined 6%, which includes a negative FX impact of 3% and continued weakness in residential sales in the Pacific region and parts of Asia.

Excluding Asia Pacific residential property sales growth outside the Americas was flat in local currency.

Capital markets activity, particularly in the Americas continues to be bolstered by the ample supply of capital focused on investing in commercial real estate strong occupancy rate and measured supply growth.

Advisory leasing revenue rose, 4% or five person in local currency terms, a healthy increase I guess, 17% growth in the prior years quarter.

U.S. leasing revenue grew by 4% and was driven by clients and technology financial services and manufacturing sector, which accounted for nearly 60% of U.S. leasing revenue.

We also saw a notable acceleration and account based deals in the quarter.

Inclusive of activity now recorded and our global workplace solutions segment.

Americas leasing revenue rose, 7% for the quarter.

Leasing with co working companies drove less than 4% of our trailing 12 month leasing revenue in the U.S. and less than 3% of U.S. leasing revenue in the third quarter. These figures include both negotiating leases for co working companies as tenant rep or landlord agent and placing occupiers in co working space.

Demand for co working remains a relatively small component of the overall U.S. market with no single aisle, operator, representing more than one half of 1% of the total.

I'll flexible office based solutions will continue to grow this sector is not large enough to swing overall commercial real estate market fundamentals in any meaningful way.

Turning to our global workplace solutions segment on slide six we produced 15% adjusted EBITDA growth with strength across our three lines of business.

Phillies management project management and transaction.

Importantly, our customer base also continues to be compose a large high quality companies with approximately 85% of our GW s. revenues generated from investment grade rated client.

The revenue growth of 21% reflects continued strong momentum for occupier outsourcing services boosted by managing large new enterprise client engagement and expanding existing relationship.

In addition fee revenue growth outpaced total revenue growth due to a greater waiting a fixed price contract.

Slightly negative operating leverage reflected a couple of challenging accounts in Europe , which we expect to remediate next year and a handful of choppier expense items, and noncash accounting adjustment, which totaled $12 million in the quarter.

Our business has a distinct competitive advantages securing large integrated global account. One. Recent example is novartis, which as I pointed us to provide facilities project management and transaction that advisory services on a worldwide basis.

70 million square foot portfolio represents one of our largest ever new contracts for our global workplace solutions team.

Our pipeline for the outsourcing business remains robust and we're seeing more clients contracting for a bigger bundle of services.

On a year to date basis, nearly 40% at the adjusted EBITDA associated with new contract with derived from customers purchasing the full suite of services offered by our outsourcing business, which is up significantly both sequentially and from the prior year period.

Turning to slide seven and our real estate investment segment, adjusted EBITDA fell by over $70 million compared with the prior year period, primarily due to the timing of development transaction.

Beyond development strong growth in our investment management business.

So that are incremental investments and our new flexible office space, but no huh.

Development adjusted EBITDA was slightly below our expectations for the third quarter as a couple of smaller deals are now expected to transact in 2020.

We also now expect one larger 20 million dollar adjusted EBIT ideal previously anticipated in the fourth quarter to transact and 2020.

Our development business its financial performance does natural variability from quarter to quarter. The market overall remains very healthy and our combined in process and pipeline portfolio reached a record level rising 1.3 billion sequentially.

Investor enthusiasm for development projects remains high and cap rates for class eight projects remain tight.

Well, our timing expectations have shifted for a few specific development or pricing expectations have not changed.

Performance and our investment management business continued to improve contributing just over 20 million of adjusted EBITDA during the quarter.

Assets under management would have reached a new record level, but for a 1.7 billion headwind from foreign foreign currency translation.

Capital raising also remains elevated with more than 12 billion raised over the past 12 month.

Finally, our new co working concept Honda opened its first location in Dallas in the quarter with units planned in Southern California, and London by early next year.

We believe demand for flexible workspace is here to stay and landlords and occupiers are increasingly gravitating to high quality, operator with strong financial sponsorship our pipeline for future Honda locations focuses on major CBD and includes a variety of structure, including management partnership agreements as well.

Yes.

Turning to slide eight we're very focused on pursuing a disciplined approach to allocating capital at seabury over the last five years, we've strengthened our balance sheet, which is evidenced by a reduction in net leverage and are more than 3 billion of liquidity. The capital structure provides us a solid foundation to execute our capital allocation.

Strategy.

Our priorities for capital allocation are focused on investing in growth through tack enablement, capex accretive M&A and returning excess capital to shareholders year to date, we've deployed approximately 770 million of capital, including our research Telford acquisition and share repurchases in October .

We have also invested over 142 million on capital expenditures net of concession.

With well over half of this deployed for technology focused investments that enable our professionals to bring higher levels of service to our clients with greater efficiency.

In addition, as of today theory has repurchased over 145 million of shares in 2019, including our recently initiated Tenbfive, one program, which executed the repurchase of 100 million shares at an average price a 51 64.

Since the beginning of the third quarter.

Given our current and forecasted levels of leverage as well as our significant financial capacity you can expect it to utilize share repurchases in a more programmatic way both maintain flexibility around capital allocation and to provide more consistent approach to returning capital to shareholders.

Finally, with respect to our expectations for full year 2019 outlook due to the delayed timing of development deals. We now expect adjusted EBITDA in our real estate investment segment.

Were slightly below the low end of the 200 million to 220 million range. We set in March inclusive of a modest benefit from Telford in the fourth quarter. Nonetheless, we are maintaining our guidance range, a $3 and 77 to $3.80 for full year adjusted EPS as we expect strengthen our services.

Businesses to offset the impact of these delayed development deal.

There's some 514% growth at the midpoint of our guidance range for 2019.

Turning to slide nine I'll turn the call back to Bob for his brief closing remarks. Thank you live as we enter the final months of 2019, we were looking ahead to 2020 with cautious optimism.

Commercial real estate and macroeconomic fundamentals remain favorable, particularly in the Americas, our largest region.

Our diversified business and geographic mix position Seabury to continue driving despite ongoing trade and geopolitical uncertainties.

We also believed that our industry, leading service offering scale and ongoing platform investments give us distinct competitive advantages our people are energized and their engagement levels have never been higher.

With that operator, we'll open the lines for questions.

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Your first question comes from Anthony how life with JP Morgan. Please go ahead.

Hi, Thank you and good morning, now that Telford is is closed can you spend a minute or giving us a few details around how you thought about the no.

EBITDA multiple if you will that you paid where are we should see that coming in to the financials, Oh excuse me the mortality that business Portugal.

Sure Anthony its Leann I would say from a valuation perspective, we looked at Telford on a cash flow basis. A we believe we paid about 10 times cash flow for that does not.

And given the recognition of revenue under GAAP, you may see that come in and more of a similar fashion to what you see within our development business today.

So we would expect about a portion about 50% of what you would see in cash come through in gap at least for the first year of our ownership. The Telford. So we'll see a modest uptick in the fourth quarter, but we'll provide more guidance around the 2020 expectations for Telford on February call.

Okay.

And then Oh in terms of the guidance your fourth quarter leasing called looks like it's actually a tougher one then the third quarter, how should we think about.

Oh, you know how bad that worked out for the rest of this year.

So we've provided guidance out to E P S, which implies a.

Double digit low teens growth in the fourth quarter, we're not going to speak specifically to expectations around leasing, but we do expect you know obviously there was a much tougher comp in Q3 and that that trend will not go away in Q4.

Okay and then my last question. There's one GW ask you mentioned a couple of accounts in Europe acting as a drag on on margins. There can you describe what scenarios you actually cause that's sort of a drag just it it seems like a recurring fee.

Kind of business and so what happens actually it up.

Great that variability.

So when we underwrite transactions and GW S., we have expectations of a glide path in terms of reduction in costs and we account for that and how we think about pricing within those agreements in some cases in Europe in a few cases in their isolated we've actually gone in and we're bringing in new talent to run those accounts given.

The fact that we haven't been able to achieve the cost savings that we had expected and so we expect to remediate that in the fourth quarter, a and well into 2025.

So that that means so when you say cost saves call shapes that you anticipate for the client. So if you don't achieve those you get watch examining the problem is that.

Correct.

Okay. Thank you.

Thank you.

Thank you. Your next question comes from Jason Green with Evercore ISI. Please go ahead.

Good morning on the share buyback from previously you guys bought back stock at the high Thirtys cannot be used appeared unwilling to buying the forties and now you're buying into low fiftys I'm curious whether this is a function more viewing the stock is sitting at a discount or if it's a lack of opportunity in the marketplace from an acquisition perspective.

Hi, Jason I would say, it's it's actually neither of those two it's really about thinking about capital <unk> capital allocation in a broader context.

Given where we are with respect to our leverage the fact that we are migrating down to the very low end of our overall leverage range I think it's prudent for us to approach it in a more programmatic fashion, we still have a nice bucket of the authorization that we can use in an opportunistic fashion to the extent, we do see dislocation in the market.

We do believe that we're buying shares back had at an attractive value, but it's more about offsetting the equity dilution for example from our stock compensation program and we'll use that remaining authorization for opportunistic periods of time or we do see the shares under pressure, but I think you'll see us be more programmatic.

Leased at a minimum level within the buyback.

In the future.

Okay, and then switching over to the commercial mortgage origination side originations were up significantly and you mentioned it was fueled in part by larger transactions with private entities. What's this at all driven by new initiatives at the G.S. use <unk> Fay and if so should we expect this business to be less of an agency business moving forward.

I'd say, there's two pieces that one we did see a credit really from all sources. So as banks life coast that fund and the G.S. either so I would say it was a balanced mix. We clearly have been watching reform and do you see side and so part of our growth is your husband to further diversify that business.

Not necessarily away from that he has he said to add additional quality contract and client accounts to that so.

So from our perspective, it wasn't specifically because the GRC is were down it was just a a concerted effort across our commercial mortgage origination team.

To go out and further diversify that client base.

Got it and I guess, just my last night, while we're on the topic as it pertains to the housing reform plan I guess I read was you know all else being equal the proposals for.

Specifically residential reform are probably reflect positively on c. berries business, but just curious what your thoughts are on their fandstan that's out there right now.

I agree with that I mean, we've certainly been monitoring this process since the beginning of the year multifamily is really where we play with the G.S. season. So that is a very profitable pursuit for them, we'd expect that to continue to be in place supposed to any future reform measures, but we certainly I do believe that there has been positive movement.

With respect to the.

Publish caps.

And so you know were positively support we're pleased with how that's come out year to date and again. We are also looking at expanding what the work that we do with private operator. So we think that that's also positive.

Got it thank you very much.

Thank you.

Next question comes from Josh <unk> with William Blair. Please go ahead.

Great. Thanks, good morning, everyone.

Just wanted to double back on Telford and on the U.S. development business in General seems the U.S. development does this is getting a boost from opportunities zones.

Throughout the course of the fear and I'm wondering if you think.

That is the case and does that continue into 2020.

How does the pipeline look for UK multifamily I think Telford pipeline and process at the end of Q1 was about 1.7 billion.

[noise], Joe we we are not being impacted a in a major way by opportunity zones, I think they'll continue to be out there. There continue to be an opportunity you know there's a lot of political pressure around those of different kinds, but that it has not had a major impact our business. We don't think it will going forward.

Our development business isn't very good shape in terms of the pipelines. We have in terms of the exit cap rates, we expect rental rates et cetera Telford.

Early signs are that their ability to secure new opportunities is going to be at least as good as we thought it was when we underwrote that went when we underwrote that acquisition. Our teams are over there now just getting going with Telford and a lot to be learned on that business, we're quite encouraged about it.

Great. Thanks.

And then one to touch on GW S. I was hoping you could unpack the growth in the quarter certainly stronger than we expected, which is good to see maybe break down the contribution to grow from new versus existing clients and whether you have a stronghold on certain industries, that's helping wins and maybe lastly, our you're reaching any type of employment capacity.

Study or they could sort of happened growth in the future. Thanks.

Sure I'll touch on that I mean from a GDP GW S. perspective, we saw really nice growth across our facilities management and that transaction advisory component of that segment.

We are seeing accounts in terms of those that are signing up for the full suite. So facilities project management and transactions pick up and that was certainly helped by the novartis signing a in a third quarter.

So in terms of other areas for growth I mean, we did have strong growth across from a geographic perspective across the U.S. EMEA and APAC, but I would say from a margin perspective, we are seeing really nice performance in the Americas.

With respect to different sectors, we do have and I think this is a unique differentiation differentiation for CBR. He we do have a very strong position as it relates to the data center services that we provided we are building out capabilities that are specialized for sectors like health care and now pharmaceutical, which you see and the pursuit with Novartis.

Playing out to our favor. So I think there's certainly a lot of differentiation that comes along with the approach that see various taken as it relates to our GW I segment.

And Oh, we think that we ultimately can provide really outstanding results for our clients that are unmatched and other by others. In this space and those are for very high quality clients as well large enterprise investment grade <unk>, <unk> and no employment capacity constraints to speak up there.

And I think that they're not necessarily mean, certainly we continue to watch the growth for that segment, we've had tremendous growth and I think that yeah that certainly bringing on the Novartis was another very large one for us I don't see that employment as are the labor availability necessarily as being a limitation because most of that is.

Really rebadging of employees, it's not necessarily is going out and finding folks to cover that.

Okay. That's for me thank you.

Thank you once again, if you wish to ask a question. Please press star one on your telephone and wait for <unk>.

Your next question comes from Jade Rahmani with KBW. Please go ahead.

Good morning. This is Ryan Thomas follow on for Jade today. Thanks for taking the question just on the topic of co working appreciate your commentary in the repair in the prepared remarks, but did you said co working representing around 3% of your leasing in Threeq. You. Just wondering if you can give us a comparison to how that what that represented a year.

In the year ago period.

And then overall you know do you view that the unlikely pull back from when we were.

As an as more of a headwind for the leasing business or.

Maybe you said the opposite do you view it as more of an opportunity by way of releasing space that we work is backing away from as well as presenting some you know an opportunity for the heart of business.

And then just on high if you can provide us your updated thoughts on the amount of capital you expect to deploy there.

Sure.

I'll start with the first piece now have Bob pickup in terms of the broader strategic opportunity. So in terms of the impact from co working and a third quarter that was about 3%. We also mentioned there was a trailing 12 month a contribution was about 4% to growth. So a slight deceleration in terms the contribution and leasing for the quarter, but certainly.

Not a trend that's going away you know, we think that we see co working as a a trend that is really being driven by needs in the market and so we continue to believe that there'll be demand not just in terms of find for future locations for co working companies, but also for Phil which makes up about half of that number.

So I think that just shows that there's a continues to be a tremendous amount of need in the market for activity around co working.

And then Bob on that strategy, So Ryan I would say that what's happened with we work has had.

An impact on our Honda strategy that I would characterize is tactical but is not had an impact on the overall strategy. So in the short run we're seeing some incremental inquiries from occupiers of Honda, we're seeing some minimal incremental inquiries from landlords.

That are considering going in our direction that maybe weren't before but in the long run as we said we see a this co working or flexible space.

Market opportunity the way, we saw before it's a roughly 2% of the multi tenant space around the world. Today. We continue to think it will go to as much as 10% our belief in that direction is driven by the work we've done with our occupiers around the world.

We know that they expect to pursue a percentage of their occupancy in the future to be in this type of space and we think thats. Good our strategy for Honda is to start to carefully build a footprint with a bit more capital intensive model I, even more investment more leases in overtime likely move to a model where we manage.

Base.

Co working space, that's owned by the landlords themselves. Our hypothesis is that over time landlords are good are going to want a co working space in their buildings because they believe their tenants are gonna wanted there likely going to want to control because they want to control the tenancy.

They view themselves is owning a lot of the downside so they want to own the upside and we are positioning who wanted to move in that direction. If that's the direction the market move [laughter] nothing about our results with high in the short run have been impact in any meaningful way relative to what we thought they would be.

That's very helpful. Thanks, and then just on the broader leasing environment setting aside that four key role will clearly be a tougher comp like you mentioned just hoping to get your broader thoughts on the outlook for that business. You know what do you. What are you seeing in terms of demand for space overall do you expect that demand.

And we'll continue to be driven by some of these industries you called out like technology financial services and I guess, you know still co working considering notch a trend that you thought you believing.

You know just curious overall, what you're hearing from occupiers and the leasing environment.

Leasing is strong the it's only not strong when you compare to what happened last year. So when you look at our combined GW Es business and our.

Agency business in the U.S.

7% growth this year on top of almost 20% growth a year ago, that's a healthy leasing market, but the grow we set a year ago. When we're talking about that kind of growth and we were asked will sustain well we never thought we were going to be able to sustain 20% growth, but it's a healthy leasing market.

A lot of it is being driven by tech companies, but it's very balance is being driven by.

Distribution space users, it's being driven by financial services companies manufacturing companies et cetera, we expect leasing to be strong in the fourth quarter. We don't expect it to grow the way it did a year ago odd and we expect next year the economy be a little slower than it is this year, but some de.

Recent growth and we expect our leasing business to continue to be solved.

And then just one last one if I could.

Just on 2020 guidance I believe.

Last year for 29 chain you gave guidance at your Investor Day in and please correct me if I'm remembering correctly just wondering if you can say when you plan to give guidance.

Guidance for 2020 this year.

Well address that in February when we release yearend.

Great. Thanks for taking the questions.

Thank you. Thank you.

Next question comes from Mitch Germain JMP Securities. Please go ahead.

Good morning.

Bob on Honda, how is that how do you differentiate Honda from the other products that's out there.

A few ways Mitch it's more oriented towards enterprise users than.

Some of the other alternatives out there I am.

Teams of people rather than a membership format.

It's as a result, more institutional quality better build out.

Better data security, except for its got similar amenities in terms of food and beverage and so forth.

Again, I want I can't stress enough, we were in the door working for a high percentage of the big occupiers around the world doing all kinds of flexible space work for them inside their spaces. We know what they want we know they want a portion of their portfolio in this flex space.

Format. If you look at what would what went on with occupiers. Historically, they basically said, we're going to own somewhere space, we're going to at least some of our space on a traditional basis and will on the very margin will do a little bit of co working well that's changed there. They think that co working is going to be a material piece of the.

All the old occupancy going forward and weve oriented our Honda concept.

To be consistent with that.

And what went through your mind with regards to selecting these initial markets Dallas and I think you mentioned.

Southern California in London.

Why those markets and.

Others.

Well again, our everything we've done in the in the co working arena with Honda has been driven by our direct work with our clients on the occupier side and our clients on in the Investor side, and we won Weve triangulated around the opportunities that were available looking at those two groups.

Those are the markets we've ended up in <unk>, but by the way they will be by the end of next year they'll be a number of other markets that we have Honda is up and running in.

Theres some of them that we're very close on that we're just we're not in a position to talk about.

You mentioned.

Previously and I apologize, but the Telford transaction.

Does that bake off or was it a relationship that.

The discussions too.

It was neither when we had done a bunch of strategy work around our real estate investment business.

The same kind of strategy work, we did several years ago that ended up taking causing bill concannon NRG Ws team to target Norland, we had some things we wanted to get done with that real estate investment business strategic land one of them wants to grow our development opportunity and position ourselves to do some things outside the U.S. or.

Our trammell Crow companies leadership team targeted a those kinds of businesses and after a search of the companies that might be a good fit for us in after some opportunistic pricing movement driven by Brexit They zeroed in on Telford built a relationship with the Telford.

Team and we thought that team was exceptional we also thought that team was very much in the way of a secular trend and that effort led to the acquisition that Telford.

Got you I think my last question, maybe Leah with regards to the outlook.

Obviously you reaffirmed.

Looks like real estate investments.

Absolutely.

Kinda sitting in your sheet.

When you last spoke to us and the second quarter and you raised your outlook just sitting there today.

My mind, it seems like real estate investments coming in a little bit lighter than you expected and then you had that additional expenses or.

Some disruption and in Europe on GW S is that's the way to think about you know kind of how things shook out from from Twoq to Threeq yours or anything else we're missing.

No I I would say that's fair I would just stay at a lot of the real estate investment.

Change is driven by timing. This is not market changes that were seeing around the development portfolio that we have in place for example, one industrial project that we have it's fully leased but the triggering event for the recognition isn't until the tenants move in and that won't happen until next year and then we have a multifamily project that is scheduled to come.

Lows and the buyer had a 30 day option extension they they exercise that but we fully expect that will close in Q4. So these aren't you know fundamental drivers of change in terms of how we view cap rates are these assets transacting with respect to their cap rate. So I am I feel good about.

The real estate investments business.

And I'd say leasing and certainly the benefit from Telford and ER, our capital markets business and GW S. altogether will make up for that shift really in timing for those development projects.

Thank you.

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Fine and white field names.

Your next question is a follow up question from Jade Rahmani with KBW. Please go ahead.

Hi, everyone Ryan again, thanks for taking the follow up.

Your peers have made some recent announcements with respect to their technology strategies.

So so Bob I was just hoping you can provide us with your updated thoughts on series Tech initiatives as it relates to both internal investment in an eminent M&A and there was wondering if you had any.

Civic metrics, you can potentially share with respect to perhaps margin benefit or.

<unk> percentage of clients are producers that are utilizing series proprietary technology or or in the amount of revenue and that you're generating from some of these you know specific initiatives that you've called out in the past.

Yeah Ryan.

Let me first tell you exactly what we're trying to get done with technology and our business now weve.

Everything we're doing with our what we call our digital and technology strategy.

Has emanated from building a strong team that can first create an excellent infrastructure based force data security all of our the basic things we used to run our business chartered onto upon and her team came in and they've gotten that done.

They've turned their attention along with our market facing business leaders to what we call enablement technology tools at our professionals used to secure business and deliver business to our clients.

There is a large suite of tools spread across all our lines of business. They're working on we have very specific adoption metrics for all the key tools reusing on we're tracking adoption against those metrics.

In many many cases were satisfied with adoption in other cases were trying to push adoption up but there is a ton of focus on that in our business and.

They'll continue to be a ton of focus on that we don't talk externally about what those.

Terrific metrics are et cetera, we consider that to be proprietary, but that's where our focus is now we're shifting more and more of our spend two enablement tools and.

You should expect that trend to continue and we're in the budgeting process now going through all kinds of efforts jointly between our DMT team and our field people to figure out exactly which tools, we're going to invest in in 2020 and leave you may want to comment on financial aspects of that well I'd just say you know about half of the.

Capital expenditures that we've spent in 2019 or wealth Bennett 2019 is really focused on that enablement spend and we really drive investments through that part of our capital expenditure program to ensure that we are maximizing both the the utility that we get from a a technology for our.

Our clients and our producers, but also drive efficiency through the business. So there are things like robotics and workflow automation that are also benefiting the business. We also have solutions like host that we're investing in to enhance the experienced services that we provide for our occupier clients an investor.

And then I would just say we've also invested from a M&A perspective into companies like facility stores that are enhancing our ability to win large GW s. transactions and pursuit. So I think yeah. It's it's hard to rapid and her metric around that but we certainly internally do track the attachment that we have.

Thanks to all the different components, whether its post sunny experienced a server site services side facility stores for GW S. Four the usage of technology and adoption of it throughout the business.

Thanks for that commentary appreciate you taking a follow up.

Thank you. Your next question comes from Patrick O'shaughnessy with Raymond James. Please go ahead.

Good morning, I'm curious about your recent wins within GW S is the merchant profile of those companies given that you seem to be selling kind of more holistic solutions is the margin profile any different than your existing client base within GW S.

It really depends on the types of products or services that they're signing up for a we do have slightly higher margin profiles on for example, and some of the transaction activity that we manage within GW s. than say, one off transactions and advisory and it really again depends on the contract type or that were.

Agreeing to with the client, but I believe is if we all do as we increased the number of services that we provide there's a greater.

Connectivity and and sticking out of that client as we serve them on a broader basis. So I certainly think that there's a benefit not just on the margin side, but certainly also on the relationship side.

Great. Thanks, and then advisory sales revenue and a meal looks like is tracking down around 5% to 10% and 20 not change on a local currency basis do you get the sunset. There's additional downside risk to advisory sales in EMEA, where do you kind of feel like this is a sustainable level that we're at currently.

In terms of advisory sales in EMEA.

That is something that you know there there has been softness around we began to see that I'd say a quarter or two ago, but.

I think overall performance in terms of seabury relative to the broader market I think we've actually done fairly well and we had a reasonable.

Reasonably okay quarter, given the uncertainty that the market saw with Brexit.

The continents also been down slightly about down 5% I think in local currency.

The strength on the continent has been really in France, and Italy with other markets being a bit softer.

Great. Thank you.

Thank you.

We have reached the end to that question answer session and outside of the cold that quite a bit to mr., Bob Sulentic for closing remarks.

Thanks, everyone and we look forward to talking to you in a about three months when we review our year end result.

Thank you. This concludes today's conference and you May now disconnect. Your lines at this time. Thank you for your participation [noise].

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