Q3 2020 Colliers International Group Inc Earnings Call
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On your phone or here.
Hello, I was on the phone Colliers International third quarter Investor Conference call.
Today's call is being recorded.
Legal counsel requires us to advise that the discussion scheduled to take place today may contain forward looking statements that involve known and unknown risks and uncertainties.
Actual results may be materially different from any future results performance or achievements contemplated in the forward looking statements.
Additional information concerning factors that could use actual results to materially differ from those in the forward looking statements is contained in the company's annual information form as filed with the Canadian Securities administrators and in the company's annual report on form four.
Dash F as filed with the U.S. Securities.
And Exchange Commission.
As a reminder, today's call is being recorded today is October 27, 2020, and at this time for opening remarks, and introductions I would like to turn the call over to.
Global Chairman and Chief Executive Officer, Jay Hennick, Sir you may begin.
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Yes.
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Our web site.
A presentation slide.
Today's call.
Despite the impact.
The pandemic colliers and better than expected results third quarter with continued growth.
Services. These results are a testament to the resilience of our business model a business that is also diversified by geography by service and by asset class.
Revenues came in at $692 million down, 6% adjusted EBITDA was $92 million up 9%.
And adjusted earnings per share came into the dollar eight up 4% relative to the prior year.
Well uncertainties persist, we expect our full year results to come in stronger than anticipated as.
As a result, we have increased our operating assumptions for the balance of the year as you will hear.
In a few minutes I'll turn things over to Christian and John comment, but before I do I'd like to make four points today.
The first is culture counts are unique entrepreneurial culture at Colliers has always been a differentiator for us culture.
Culture takes years to create and discipline to sustain and that's why it's so difficult to coffee.
I'm extremely proud of our leadership teams around the world, who continue to execute execute the colliers way.
Our bias for action and propensity to make informed decisions quickly as always allowed us to respond better than most to contain costs to align resources, well always continuing to provide essential advice to our clients.
I'm also confident that coming out of this pandemic, we will have we will adapt to the new normal faster and better than the others with our unique entrepreneurial enterprising culture, leading the way.
Second like we've done in the past Colliers is programmed to capitalize on opportunities we.
We always maintain a strong balance sheet to capitalize on opportunities to strengthen our business, especially in times of change when others are either hitting the pause button or running for a cup of cover. This year was no exception, so far we've invested $240 million in acquisition.
It was up from 45 million last year.
During the quarter, we continue to integrate recently acquired Colliers mortgage and Mazer consulting consulting and also completed the acquisition of Colliers Nashville, a leader in one of the fastest growing markets in the United States.
Though still in the early days Im very excited about the potential for all of these additions this year and look forward to helping them accelerate their growth as part of our global platform.
We continue to see great opportunities out there to add talent to expand our services and to streamline our businesses. While also looking for incremental acquisition targets to strengthen and further diversify our business.
Number three.
Almost 60% of our earnings now come from high quality recurring services.
Having such a high percentage of our earnings coming from recurring revenues gives colliers more resilience than ever and clearly sets us apart not only in terms of the percentage of recurring revenues, but also in terms of the quality of the recurring revenues.
Today, the investment management property management project management Engineering, and design and mortgage services represent a growing majority of our business and we fully expect this growth to continue in the years to come.
Make no mistake theres, nothing wrong with traditional capital markets and leasing.
Transaction volumes may be down, but they will be back and they will be back strongly as the economy stabilizes because they're essential services that are needed and required by real estate owners and occupiers everywhere.
In fact, we're already seeing some signs of recovery in most of our markets as John will talk about.
Finally, it is time to a better to better appreciate the value of what we're creating at colliers the.
The Colliers leadership team has been creating value for shareholders for a long time.
Over the past 25 years, we delivered above 20% compound annual growth rate in share value.
This record of achievement is enviable to say the least but it also suggests that we know a thing or two about how to value and build high quality service businesses.
The way I see it colliers remains materially undervalued.
From an investment perspective, whether you value us on a standalone basis or on the basis of the some of the sum of the parts Colliers trades at a significant discount to other property more professional service companies with similar characteristics.
Where can you find a global highly diversified company with an institutional brand compelling growth prospects on a global basis with almost 60% of its earnings coming from resilient revenue streams training at the value that we trade at especially one with an.
Impressive track record of creating value for shareholders, where management has.
So much skin in the game almost 40% of the equity of our company.
With that said I'd like to now pass things over to Christian Christian. Thank you Jay as announced earlier today Colliers reported better than expected financial results for the third quarter.
My comments follow the flow the slides posted on the Investor Relations section of Colliers Dot com to accompany this call.
Please note that the non-GAAP measures referenced on this call are defined in the press release issued today.
All references to revenue growth are calculated based on local currency.
Third quarter revenues were 692 million down 7% relative to the prior year internal revenues were down 19%, primarily due to the impact of the COVID-19 endemic on or turn the trend.
And capital markets operations globally.
Our internal revenue variance showed significant improvement sequentially that is relative to Q2 2020.
As economies began to reopen after the initial phase of the pandemic.
Third quarter consolidated adjusted EBITDA was $92 million up 8% from 84 million last year with margins at 13.3% versus 11.4% in the prior year quarter.
Margins in each region were impacted by reduced revenues, but mitigated by continuing aggressive measures to manage expenses, including discretionary support admin costs as well as compensation.
In the case of the Americas margins were favorably impacted by acquisitions.
America's Q3 revenue totaled 423 million essentially flat versus the prior year period Overall America outsourcing and advisory revenues were up 25% as a result of engineering and loan servicing revenue from recent acquisitions.
Capital markets revenues were down 6%, but included the benefit of debt origination revenues from our recent acquisition.
Leasing revenues were down 18% a significant improvement from the 45% reduction experienced during Q2.
Adjusted EBITDA was 55 million up 41 stir up 41%.
Year with significant contribution from acquisitions as well as continuing cost savings implemented early to the pandemic.
In the EMEA region, Q3 revenues were $117 million down 19% overall capital markets was down 37% leasing was down 25% and sourcing advisory was down 4% all impacted by the ongoing pandemic.
Adjusted EBITDA for the region was $8 million compared to 13 million last year.
In the Asia Pacific Region, Q, Q3 revenues were $110 million down, 23% leasing and capital markets were down 45, and 35%, respectively with all markets and asset classes impacted.
Okay sourcing advisory revenues were down 5%.
Adjusted EBITDA was $13 million compared to $19 million last year.
Q3 investment management revenues were 42 million up 4% assets under management were 36.2 billion add that timber Thirtyth 2020 up modestly from June Thirtyth.
Harrison Street Democratic demographic investment strategy focuses on lower volatility alternative asset classes, including student and senior housing medical office storage and social infrastructure for the most part.
Ladies and gentlemen, please standby.
Yes.
Momentarily please standby.
Once again, ladies and gentlemen, please continue to standby the conference will be go momentarily.
Thank you for your basis.
Okay.
Yes connected.
Thank you.
Q3 investment management revenues were $42 million up 4% assets under management were 36.2 billion as timber Thirtyth 2020 up modestly from June Thirtyth 2020.
Harrison Street demographic investment strategy focuses on lower volatility alternative asset classes, including student in senior housing medical office storage and social infrastructure and for the most part the underlying value of these assets remained stable.
Adjusted EBITDA for the quarter was 15 million versus 16 million in the comparative period impacted by catch up fees on a new fund earned in the prior year quarter.
Our net debt to adjusted EBITDA leverage ratio was 1.5 times.
September Thirtyth 2020, which was the same as the prior quarter and well within our target range.
The full impact of the pandemic remains far reaching and uncertain. However, as Jay mentioned, we have updated our working assumption for the balance of the year to reflect better than expected operating results for the third quarter as well as to narrow the range for the balance of the year.
The updated revenue range for 2020 full year as a 10% to 15% decline relative to 2019.
The updated adjusted EBITDA range to the 10% to 15% decline relative to 2019.
Looking forward, we expect transactional leasing and capital markets revenues, both of which have a highly variable cost structure to remain below 2019 level for the fourth quarter.
Investment management and outsourcing and advisory revenues are expected to remain on track for the fourth quarter.
That concludes my prepared remarks, and I would now like to turn the call over to Tom.
Thank you Christian.
As reflected in our Q3 results and updated working assumption for the balance of the year the level of uncertainty related to recorded 19 and dynamic that negatively impacted our operations and those most of our clients abated somewhat during the last few months, although we are not out of the woods yet.
We saw positive change in sentiment and momentum during the last few months and we expect this trend to continue for the balance of the year and beyond supporting modest improvement in business activity.
As a global business and leading provider of professional services and investment management.
Property occupiers owners and investors Golar has continued to put clients first providing our diverse and relevant experience during this unprecedented period.
Based on our experience since the outset of the pandemic, we're confident that the time attention and value delivered today, we'll be rewarded by our clients in the future when the current level of uncertainty reduces and longer term decision, making resumes.
We're already seeing tangible examples of our advice leading to significant client engagements, most notably in our workplace advisory practices, which we anticipate will lead to future transaction advisory work.
Across our global business, our business leaders professionals in sports staff remain highly engaged despite the challenging operating conditions and the cost containment measures in place.
Just about 6% of our employee base still furloughed, primarily and transaction services, we continue to manage our business carefully and expect to bring back additional support capacity as activity levels warrant.
Despite the pandemic colors continues to strategically invest in talent across our global platform and take advantage of opportunities to close gaps and build capabilities.
Tracking leaders and professionals looking to be part of a global business, where the entrepreneurial spirit is alive and well.
We expect this to continue and accelerate going forward.
To complement this investment in people, we continue to invest in technology that helps improve our productivity and service to clients over the next couple of weeks you will hear about our latest innovation workplace expert mobile enabled app designed to serve as a user friendly diagnostic tool.
Will the visualize future workplace using a variety of inputs based on client preferences.
This technology was the first development of Colliers globally under our new updated IP platform and strategy development.
It focuses on our clients' most pressing needs.
The beta version of this technology with the input and movement of our global workplace practices team has been responsible for winning workplace advisory engagements with several hallmark clients in Europe and the us recently.
Well the cost management remains an operational priority across our business. Other areas of focus include the integration of colors mortgage into our us brokerage operations as well as more recently acquired Mazer consulting.
In both cases, we've accelerated the process and cross selling and leveraging our relationships across relevant advisory practices to drive value to our clients and brokerage professionals across our us platform.
Looking beyond the current crisis, we expect to see a significant uptick in leasing and capital markets transactions across our global markets largely related to deferred decision, making by occupiers and investors to reverse.
Driving a recovery in activity, which from an operational perspective, we intend to maximize by leveraging our recent investments in acquisitions talent and technology.
In emerging from the current crisis stronger than ever before.
That concludes our prepared remarks, and I would now like to turn the call back to our operator to facilitate questions. Thanks.
Thank you.
Ladies and gentlemen, ladies and gentlemen, as a reminder to ask the question Chris.
Chris Star then one on your telephone.
To withdraw your question first about again I want to ask the question.
Our first question comes from the line of George connect with Scotia Bank. Your line is open.
Im going and congrats on yet another strong quarter.
Thanks, George Thank you.
You guys raised your your 2020 working assumptions a Q4 is our big quarter.
You must have some visibility there can you maybe share what you're seeing.
In terms of pent up demand.
And second part to that question you guys feel comfortable that you baked in enough wiggle room, there are giving a pretty meaningful second waves that we're seeing in Europe and the Americas.
Hi, George.
When you look at the working assumption it is working assumption on there's a new number of.
Factors that play there and certainly we can't predict the future but.
But we can take a look at our pipeline of activity and as you are aware for sure at Q4, the very strong transactional activity quarter in particular in our EMEA business and our EMEA business typically in a normal year generates close to half EBITDA in Q4.
Because it has that high transactional activity waiting.
So we take a look at our pipelines I talked to our teams and we feel.
At this stage based on what we know today.
Confident.
In our working assumption for Q4 and that being said as.
New factors that come into play.
We'll have to.
Those are those are ones, we can dissipate.
Okay. Thanks, and maybe a question for John as to where we're trending on that $150 million in cost savings I think we're at 60 last quarter second part of that is how much do you guys plan on investing back into the business over the next.
Your next few quarters.
Look in terms of that number were pretty much right on where we were going to be so there has been no change to that that number that's been a consistent factor since we initially identified where we expect to those savings to be so we're running.
Right at that level and in terms of investment.
I am not going to quantify that George it is very selective and somewhat opportunistic around talent it depends on the availability and whether or not we can connect and make arrangements, which worked for those that were hopeful of joining colliers and for the company itself.
And then ongoing.
Spend around particular technology Weve already indicated our expected amount for Capex this year, which is down but roughly half of the capex relates to technology in some way and while we have deferred certain expenditures in that area. We're still focusing on those that will do.
I have the greatest return to colliers.
During the current period and beyond so we are still it still investing there definitely.
Okay. Thanks, and just one last one if I may.
Jay.
I'm just wondering if the pandemic as it all kind of made you rethink the investment management segment, maybe more particular.
What types of asset classes that you'd be interested in acquiring.
It's a good question, but I think the best way to do to answer it is to go back.
To the very.
Strategic decision, we made at the time, we entered investment management we.
We didnt want to go into the investment management business as a same as.
And we wanted to have a unique and differentiated.
Product or our service offering.
We spent a lot of time looking at virtually every type of platform and investment management around the world and concluded that alternative asset classes, where institutions, we're significantly expanding their allocations.
The place for us to be they also have a.
A moat and that business because it is a more complicated.
It's a more complicated.
Way of managing assets, which creates a differentiator keep most of the people out of the.
The space and so we concluded that Harrison Street was the was the ideal platform.
And on top of that they had an incredible management team with a great desire to grow really on all fours with what we look for in a partnership.
Relationship so.
The pandemic has not changed that at all in fact, where.
Good luck scale call. It what you want but we're very happy where we are.
We continue to look in alternative asset classes as a way to.
Grow that segment of our business, but also.
Assets or strategies that have clear differentiation.
They are not the same as same as they are clearly differentiated strategies. So I think we have a tremendous platform here and tremendous leadership team. It's obviously been growing as you can see despite the pandemic.
Most others have seen asset values fall were essentially flat and I would say were flat because.
Some of the investors of press the pause on it on making making further out locations had nothing to do.
The quality of the assets that we we administer so we're very happy with Harrison Street think it as a bright future looking at some interesting opportunities to continue to grow it we have an amazing management team that we've got great confidence in and and I think the future in that sense.
But of our business is very bright.
Okay, great. Thanks, your answers offline.
Thank you.
Our next question comes from the line of Bastien with Raymond James Your line is open.
Hi, good morning, everybody.
Was I was wondering if we are able I was wondering if you're able to quantify the contribution that both laser and deliver you made to the outsourcing and advisory and the capital markets.
Service lines, respectively.
Yes, Fred we we give the.
Internal growth rates on.
On a consolidated basis and not by region, but.
But as you are aware the Lowe's business.
As our concentrated in the Americas.
Segment.
And I will tell you that the EBITDA growth internally in Americas was positive.
Contributions from the acquisitions was.
Was significant.
Yes.
Okay.
On a related topic, our engineering and mortgage banking services that you plan on growing aggressively in the EMEA and Asia Pac regions or is there you something unique about these markets that would be that would keep you from doing that.
I think I think our goal in both segments is they were additional engines for growth that were very closely tied to our core business. So we.
We are looking at opportunities.
In both segments globally, we are obviously, taking advantage of our existing platforms as spending most of our time trying to leverage what we own it.
To bigger businesses bigger opportunities, but having these additional recurring earnings service lines within our family.
Provides great growth opportunities not just in the Americas, but.
Virtually around the world.
Thanks, Jay and the other service lines, if you'd like to add.
That you're not currently offering that some of your peers may maybe offering but that you're not.
Well you know its interesting question.
I'm not sure our peers, our peers as much as people think.
We have really.
Overall, our business as you would know Brad Youve, followed us for a lot of years, if you compare us to.
Some of the names that you mentioned I think we are closer to property service and.
And professional service lines and less so those other businesses, yes, a portion of our business overlaps with the others, but we are increasingly evolving differently. So that's what I would say to that comment and the second thing I would say is that.
We have we've been fortunate to add two great new engines for growth. Three if you include investment management, which we completed in early 18, it and the fact that had been on the books for even longer than that so we've got our Rob we've got.
So many opportunities to grow.
And our existing service lines, we have an incredible culture, which I've talked about you've seen in action for so many years means we could execute on transactions globally. Despite what's going on in it with travel as a variety of other things.
So we feel like we are in a very unique position.
And.
And I have a unique culture that is used to grow.
Growing internally and through acquisition and we will continue to pursue that over the next number of years.
Did we lose you. Thank you.
Thank you congrats.
Congrats and keep it going.
Okay.
Thank you.
Our next question comes from the line of Stephen Macleod with BMO capital. Your line is open.
Thank you good morning, guys and congratulations on another great quarter.
Thanks.
The outsourcing and advisory business were really really led the way. This this quarter in terms of the revenue contribution and the revenue resiliency.
Can you just you know notwithstanding obviously that the the mortgage and engineering services businesses were positive contributors can you just give a breakdown of how.
Segment within outsourcing and advisory trended in the quarter.
Yes.
Well I would say that.
Property management very.
Very very stable Steve.
Flat to perhaps even up in a couple of markets.
And then the project management business.
Was down slightly and it.
Particularly in India, and India has had some very challenging.
Situations.
Control of the Corona virus and.
We're watching that closely and that business has had.
As has seen delays in it is productivity in the in the project management.
Space So.
Evaluation at advisory continues to be resilient.
Resilient.
And business there.
Clearly in the US is very strong.
But also solid elsewhere around the world.
Okay and.
Well, the engineering does well mazer and and color as mortgage the the new platforms within outsourcing and advisory like will you be segmenting of revenue separately.
Different segments in different verticals.
They are component of a sourcing advisory for sure.
So loan servicing and engineering.
And.
We will not be explicitly segmenting those.
They will be part of the of that sourcing Advisory group just like the other components right.
Right, Okay. Okay thats great. Thank you.
And then when.
When you think about Q4, you talk a little bit about the pipelines that you have the visibility that you have how.
How would you characterize your visibility beyond Q4 into 2021 is that something that is it's beginning to.
Evolve reemerge in terms of your Sightlines.
Steve It's John look.
You know this is this is this is all bodes uncertainty and.
You know I think at this point, it's a little bit too early to tell what 21, we'll show for us, but one thing. We do know is that there has been an incredible deferral of activity, particularly in leasing where companies have opted to make short term decisions and ultimately thats.
Not really where they want to be they just need a bit more clarity and then we expect there to be a resumption of longer term that might adjust a little bit relative to the way. It was in the past most.
Most occupiers are going to want uncertainty in certain landlords do as well beyond just sort of a one year a roll forward. So that is coming and whether that is in 2021 or later, we don't know at this point, but it's significant and it will occur.
Either next year or the year. After so we certainly have that as sort of anecdotal evidence is what we expect.
Okay. That's that's helpful.
And then maybe just finally, you mentioned the entrepreneurial culture and you've made quick decisions around the cost adjustments that you need in the early days of the pandemic clearly that's benefited EBITDA over the last couple of quarters I am just curious as you see revenues recover.
Do you have to bring more costs back back into the platform to support the revenues or where are you now in a position where you can pursue other revenue growth opportunities without adding back the without adding the costs that you've taken out back in.
So Stephen we expect to take out a 150 million this year of cost and as we look forward. We think we can.
Become more efficient in a number of areas I mean, this has been a real.
A bit of it challenging, but yet rewarding experience in some ways with silver linings.
Peering through some of the things, we've seen and learn and so.
Certainly our hope is that when we start to reinstitute some of these costs.
And 2021 and going forward that we will not have to reinstitute.
All of these costs, we will be able to.
Make some pretty significant transformation in the way, we do business the way, we approach travel and discretionary expenses.
The way we approach some of our support staffing.
In our in our transactional business, particularly but also in the other businesses.
So our intention would be that.
Our cost structure will be different.
Going forward as we as we return to more normal conditions.
Okay. That's that's helpful. And then maybe just one final one.
Just maybe for Jay I was wondering if you could talk little bit about the colliers mortgage and mazer and how those businesses have trended relative to your expectations.
In the somewhat short period that you've owned them, but obviously very strategically important decisions just wondering how your experience has been so far.
Well.
So in terms of those businesses were very pleased with their performance to date, we've owned them for a very short period of time, but we spent obviously a lot of time in diligence with them. So we know them.
Well and and surety bond has been very.
Very successful so far with integration proceeding well as Jane Doe line.
And John also like to thank John has in his comments.
The color is mortgage business.
Is benefiting from.
Strong refinancing activity.
At the moment and that will continue for the next few quarters interest rates. As you know are at historic lows as an attractive time for multifamily property owners to refinance properties.
So it is benefiting from that and it's also taking market share and 19, a Fannie Mae origination, which is what we expected would happen.
And so those factors are combining to to.
Bring some very solid operating results.
The engineering business is performing well in all the sectors that it plays that.
And the margin performance.
Pharma there as well has been strong with with strong staff utilization.
And productivity from the mine or from the employee base.
Great. Thank you very much and transmissions.
Thank you.
Thank you.
Our next question comes from the line of Stephen Sheldon with William Blair.
Your line is open.
Hi, Thanks, and congrats on the continued strong execution.
Wanted to ask a little more directly.
About the visibility you have especially if you look into 2021 and the how your clients are thinking about their office, but frankly at this point and the adoption of remote working policies could it take.
An extended period for companies to think through work from home adoption, which continue to weigh on lease durations per period.
Steven Absolutely I think I think you hit the nail ahead, I think it's going to take a time I have been a time here to sort it out I mean, it's a perplexing issue when you think about it I mean and its dynamic because it's changing and.
Every company has got a different perspective on how important the workplaces and how you know.
It impacts our culture and all those kinds of things.
The I mean, the short answer is that in the immediate term it's difficult to change the dynamics and that's partly why there's been a deferral I think if somebody decisions around leasing.
But you know as I said in my remarks, our workplace advisory businesses really run off their feet counseling with you know the who's who of companies that are all going through a discovery process currently to evaluate what the best works for them going forward and that's going to I think unfold over the next.
Several months and well into next year, and then beyond that decisions will get made and will there'll be a little bit more certainty, but it certainly is a great time to be in the workplace advisory business as long as you've got 24 hours of the data and Spencer advice.
Got it makes sense.
And I think the thought out there has been leasing activity would likely come back and recover before investments held in particular and office.
Especially just given the impact that leasing dynamics when a property can have on our properties value. How do you think about that dynamic, especially it seems like investment sales activity is holding up as well arguably maybe a touch better than we've seen so far.
Yes, I mean, the leasing the impact on leasing is really around.
No deferrals, which many companies have opted to sort of roll forward in consultation with the landlords, who obviously want to retain their tenants roll forward a year forward. So the additional obligation and based on the way most industry is paid on fees the fees are.
Adjusted Accordingly, so this becomes a bit of a short term situation right now and that depresses overall leasing revenues, but certainly the activity will resume in revenues will again come back to where they were before once companies are more engaged to commit to longer periods of time.
Around the time when they have more certainty as to what their future occupancy requirements are likely to be so I think we'll start seeing a lot more of that once we get into say mid 2021, if the pen then make again kind of goes through the second wave here and then ultimately resolves and things come back to you know whatever the new normal.
Is 2021 or beyond.
Got it and then last one from me just curious what the M&A pipeline looks like right now and have you seen anything notable in terms of valuation expectations out there, especially for smaller players that may have less flexibility to ride out the volatility.
You know the short story is yes, I think there's a lot of people.
Lot of targets.
Yes.
Feel they missed.
The the optimum time to potentially sell their business I'm now talking about more traditional.
Capital markets and leasing we're being very very careful there.
You know, we're excited about buying significant business.
Like our affiliate in.
In Nashville, which is.
Something like 90 professionals fully balanced business property management valuation project management and expertise in health care, obviously in that segment of the market they happen to be the market leader also in Nashville, So from our perspective that is approach.
File type opportunity, we're seeing some of those around the world couple in the us several in Europe.
And a couple in Asia more Australia, New Zealand in particular, but generally speaking I think the.
It's it's burden I'll for acquisitions right now although valuations.
For acquisitions, particularly those that have were higher high recurring earnings.
Our.
Are up significantly and Thats because there is a lot of.
Private equity firms chasing these types of.
These types of assets in the hope of potentially consolidating and doing whatever they do and ultimately I think they're going to have more more.
More headwinds than normal given the maturity of the marketplace. It's it's very powerful for colliers mortgage to associate itself with colliers because there's so many different points of leverage both between Colliers and Harrison Street, and I'd say the.
Same.
For Mazer.
And we're seeing that in a variety of different M&A opportunities. So we've got a nice pipeline, whether we'll be able to bring some of the home or not is that is a different question, but the beauty is.
When we make a deal it's for the right reason, it's because the leadership teams aligned with our unique culture. They want to stay it continue to grow and leverage their business and that's been a great differentiator for us.
Over not just the last few years, but the last 25 years as we've executed on our growth strategy.
Great appreciate the color.
Thanks, Thank you.
Our next question comes from the line of narrow young with TD Securities. Your line is open.
Morning, guys.
First question is on these on the Colliers mortgage business and just a point of clarification.
How much of the the mortgage origination and loan portfolio would have been.
Stemming from recommendations from Colliers, originally or is it all going to be net new and therefore rendered revenue synergy upside.
Okay.
It's early days.
And that's.
Thats that is the fact, it's early days.
We have within the Colliers platform a number of mortgage professionals, that's that that work hard to find a debt for our clients around the country. They never had the ability to leverage and access.
An entity like Colliers mortgage that has the power of the pen and that particular group of asset class areas. So the early days have been how do we leverage that how do we connect.
Hey, the flow of business, but it's still early days.
The other thing Thats very interesting is that colliers mortgage and Harrison Street I have a lot of alignment as well because colliers mortgage has that power the pen to provide lending.
Capacity to the types of assets that Harrison Street acquirers as well so and this acquisition we were.
Went in with.
With two potential leverage opportunities.
We've already been successful in both.
Originating in funding Colliers deals not a lot yet and Harrison Street deals won deals so far but it's still early days days that the average the average period between signing a letter of intent and closing a transaction is.
Several months. So we did start a few of them earlier than closing.
I think.
It will be interesting to see how we develop both over the course of the next six months and beyond.
Okay great.
And then just the second question in terms of the brokerage business.
Seems pretty clear that you're taking significant market share through this environment. Some.
Some of which is like the enterprising culture.
Is there also an element in the Americas, specifically the secondary markets are outperforming some of the gateway cities or is that.
Maybe just a little color there.
So I would say two things I would say.
Given our legacy we are in a relative to the top two players in commercial real estate.
We've been around the least so I would say we have the momentum I would say that.
The whole industry is watching every move just take a look at their press releases and the way they articulate their strategies when compared to ours.
But I would say that colliers has been consistently market leaders in secondary markets for a lot of years places like Salt Lake City Nashville, Kansas City. The list goes on Detroit.
These are all Pittsburgh. These are markets that are evolving and changing as a result of covance and.
We're seeing we're.
We're seeing new activity in these markets that we wouldn't have seen historically, so I think that is.
That is.
Had been a very very positive for us and and the other the other the other area is that.
Colliers is as really adding lots of technology and a variety of differentiating it differentiated services to clients in a way that's allowed us to win greater share business and that has translated as you can see into.
Additional revenue streams, we hope that it continues and.
Lastly, we are the place of choice for many of the top flight professionals, especially ones that are on platforms that are in distress right now and there's two or three that are in distress and so thats opening up.
Opportunities for us not just for professionals, but also for leadership, which as those that have followed us for a long period of time, no. We always try and start with leaders and and have them operate the colliers way and we buy.
Aleem said that is is.
As a differentiator for us as well.
Okay excellent thats it Thats all from me, thanks, very much and congrats guys.
Thank you thank.
Thank you.
Our next question comes from the line of Matt Logan with RBC capital markets. Your line is open.
Thank you and good morning.
Good morning, just following up on some of the questioning.
Previously in terms of your capital markets and lease brokerage businesses. Those are both tracking well ahead of industry figures.
Can you talk a little bit about what is driving the gains in market share is it simply the differentiation between secondary cities is it couple of years entrepreneurial culture or are there other factors in terms of technology, that's driving that gap.
Matt you know Theres, a few things and I think there's one single thing, but there's a.
Focus obviously on trying to improve our share.
Jay already outlined kind of are set up in a lot of the us.
Secondary cities, which I think has been a good factor during his current pandemic. We all know what's happened Unfortunately to New York, where we also have an operation, but not nearly as significant as some of our other competitors.
We have also been a company that has been you know overtime focus very much again thinking about the U.S., primarily in suburban markets and suburban markets that gained a bit of a new life and a lot of interest.
As a result of the pandemic. So we're very very well positioned we've also always been a pretty significant player in industrial which again various parts of the industrial.
Built environment, and then actually growing during this period of time is one of those properties or reposition for supply chain uses and other things going forward. So that's a lot of it.
In addition, we have been focused on building, our corporate solutions business and in our industry, leading nicollier Threesixty technology, which is actually allowed us to generate a lot of business along with the competencies of our team and that has led to additional transaction work. There is a long term build and we're getting incremental compounding in.
Back to the App and its actually generating a lot of additional activity. So when you put that all together, it's not surprising to see us make the gains we have made.
That's great color and maybe turning to the recurring piece of your business.
Putting a number on it would be would it be fair to characterize it as stable to modest growth.
Yes, I'd say on an overall basis. That's that's that's true certainly in with obviously a couple of.
Pain points.
In.
I described earlier in project management with delays on some on some transactions, but generally yes.
It's been flat too.
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And then we look at the 2021.
You're approaching the 60% Mark in terms of your recurring EBITDA and obviously with a view to growth some of your recent platform acquisitions.
How could we see that trending well the rebound in brokerage largely offset continued growth.
And.
The recurring EBITDA or could we see that 60% figure trend toward say 65.
You know it's fits.
Making a couple of interesting observations based on.
The flow of our business I would say.
That for the most part were nicely balanced here you know would look recurring moved to 65% of our EBITDA over time, maybe maybe 70% you know looking out two or three years, but.
But.
Our transactional services capital markets and and leasing are critical important essential services.
And so they will always be part of our mix and there the front.
Colliers they call on clients every single day, one of the one of the great benefits that I don't think gets enough airtime is we have 5000 professionals, calling on clients around the world every day offering a variety of colliers services of any size.
Sure whatever the client might be and that army of professionals is very valuable and.
And is is a critical part of our long term strategy. So I don't know how it balances out long term, but I would say that we're now getting to the point where.
We feel that the balance is give or take.
Give or take the right balance for colliers as we see it.
I appreciate that maybe taking that one step further when you think about investments in talent and technology.
How would you compare that to the opportunity for just traditional M&A or tuck under acquisitions like how big or is there an uptick in the opportunity to invest in talent and technology in the current environment.
Well.
Yes, absolutely.
We're spending.
I'm very focused time.
Our business leaders, who ultimately have responsibility for bit building our capabilities, our people capabilities and as Jay has indicated earlier I mean, there's there's there's lots of uncertainty generally in the market right now on top of that some of the other platforms.
Variety reasons, whether it's potentially perceived instability or maybe you know places that are maybe too crowded relative to the amount of business its available and in the complement of people pursuing that within those businesses. There's a lot of white space as we say at Colliers and we're having success.
Attractiveness talent, we're focused on that.
We're not going to do things that don't make sense for us, but we're going to continue to try and attract.
Professionals, who can be highly successful within the colors mobile platform and that goes well that's really across the world. So we're absolutely on that.
Of course during a time of uncertainty there is lots of emotions that.
Good good.
Have to be processed by those that were talking to and we've already had some really good success were kind of a little bit behind where we wanted to be because of the pandemic, but.
We were all over this and think there's a tremendous opportunity for colors to build our bench over the coming months and then 2021.
I appreciate the color Thats all from me. Thank you very much.
Thank you.
I'm showing no further questions at this time I would now turn the call back over to management for closing comments.
Thank you very much operator, thanks, everyone for participating in todays call.
The fourth quarter is an important quarter for colliers, let's hope that we have a strong one and look forward to speaking again in early February.
Have a good day.
Ladies and gentlemen, this concludes today's conference call. Thank you for your participation you may now disconnect.
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