Q1 2024 Colliers International Group Inc Earnings Call
Operator: Welcome to the Colliers International First Quarter Investors Conference Call. This call is being recorded. Legal counsel requires us to advise you that the discussions scheduled to take place today may contain forward-looking statements that involve known and unknown risks and uncertainties. The actual results may be materially different from any future results, performance, or achievements contemplated in the forward-looking statement. Additional information concerning factors that could cause 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 40-F, as filed with the U.S. Securities and Exchange Commission.
Welcome to the Colliers International first quarter Investors Conference call today's call is being recorded.
Operator: Legal counsel requires us to advice that the discussion scheduled to take place today may contain forward looking statements that involve known and unknown risks and uncertainties.
Operator: 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 cause 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.
Operator: And in the company's annual report on form 40 F as filed with the U S Securities and Exchange Commission.
Operator: As a reminder, today's call is being recorded. Today is Thursday, May 2nd, 2024. And at this time, for opening remarks and introductions, I would like to turn the call over to Global Chairman and Chief Executive Officer, Mr. Jay Hennick. Please go ahead, sir.
Operator: As a reminder, today's call is being recorded today Thursday may seven 2024 and at this time for opening remarks, and introductions I would like to turn the call over to global Chairman and Chief Executive Officer, Mr. Jay Hennick. Please go ahead Sir.
Jay Stewart Hennick: Thank you, operator. Good morning, and thanks for joining us on our first quarter conference call. As the operator mentioned, I'm Jay Hennick, Chairman and Chief Executive Officer of the company. And with me today is Chris McLaren, CEO of our Real Estate Services business, and Christian Mayer, our Chief Financial Officer. As always, this call is being webcast and is available in the Investor Relations section of our website, along with a presentation slide deck. During the quarter, revenue, EBITDA, outsourcing and advisory, investment management, and leasing all demonstrated improvement over the prior year. Despite ongoing interest rate uncertainty and geopolitical tensions that are affecting everyone, they have also affected our capital market.
Operator: Thank you operator, good morning, and thanks for joining us on our first quarter conference call as the operator mentioned I'm, Jay Hennick, Chairman and Chief Executive Officer of the company and with me today is Chris Mclaren Mcclarnon, Chief Executive Officer of our real estate services business.
Jay Stewart Hennick: <unk> and Chris John Mayer, our Chief Financial Officer.
Jay Stewart Hennick: As always this call is being webcast and is available in the Investor Relations section of our website.
Jay Stewart Hennick: Along with a presentation slide deck.
Jay Stewart Hennick: During the quarter revenue EBIT.
Jay Stewart Hennick: Outsourcing and advisory and investment management and leasing all demonstrated improvement over the prior year.
Jay Stewart Hennick: Despite ongoing interest rate uncertainty and geo geopolitical tensions that are affecting everyone. It also affected our capital markets. Our strategic focus however, being on expanding high value recurring service lines that continue to yield positive results for us.
Jay Stewart Hennick: Our strategic focus, however, is on expanding high-value recurring service lines that continue to yield positive results for us, positioning us extremely well for the future. We remain committed to the Colliers way, emphasizing solid internal growth and strategic acquisitions that enhance our business and create value for our shareholders. In the most recent quarter, we successfully added $300 million in new equity to support our further expansion.
Jay Stewart Hennick: Positioning us extremely well for the future.
Jay Stewart Hennick: We remain committed to the colliers way, emphasizing solid internal growth and strategic acquisitions that enhance our business and create value for our shareholders.
Jay Stewart Hennick: And the most recent quarter, we successfully added $300 million in new equity to support our further expansion.
Jay Stewart Hennick: Furthermore, our acquisition of Colliers Philadelphia has expanded our presence in the Mid-Atlantic region, solidifying our position as a key player in the United States. Over the years, Colliers has established a highly respected global brand and growth platform with broad diversification across revenue sources, service lines, and geography. With more than 70% of our earnings generated from recurring revenue streams, we have a very robust business model with three distinct growth engines that can continue to allow us to capitalize on growth opportunities while maintaining resilience in the face of economic fluctuation.
Jay Stewart Hennick: Furthermore, our acquisition of Colliers Philadelphia's has expanded our presence in the mid Atlantic region solidifying our position as a key player in the United States.
Jay Stewart Hennick: Over the years Colliers has established a highly respected global brands and growth platform with broad diversification across revenue sources service lines and geography.
Jay Stewart Hennick: With more than 70% of our earnings generated from recurring revenue streams, we have a very robust business model with three distinct growth engines that can continue to allow us to capitalize on growth opportunities, while maintaining resilience in the face of economic fluctuations.
Jay Stewart Hennick: Most importantly, Colliers has a seasoned leadership team with a substantial equity stake in our company and an impressive 29-year record of delivering nearly 20% compound annual returns for shareholders. And now, let me ask Chris McLaren to discuss some highlights from our service business, and once he's finished, Christian will provide his usual financial report. Then we'll open things up for questions.
Jay Stewart Hennick: Most importantly, colliers is a seasoned leadership team with a substantial equity stake in our company and an impressive 29 year record of delivering nearly 20% compound annual returns for shareholders.
Jay Stewart Hennick: And now let me ask Chris Mclaren and to discuss some highlights from our service business and once he has completed Kristian will provide as usual financial report then we'll open things up for questions Chris.
Chris McLaren: Thank you, Jay, and good morning, everyone. Collier's first quarter 2024 results reflect the strength of our resilience and highly diversified professional services platform. Our outsourcing and advisory business delivered robust revenue growth with broad-based increases across all services, led by engineering and project management. We expect this momentum to continue through the remainder of the year, providing growth, balance, and stability to our platform. This growth helped offset expected soft transaction volumes in capital markets, which although down, were above market activity levels. Nevertheless, we remain cautiously optimistic about improving transaction velocity in the late second half of 2024, contingent on softening interest rates, the Narrowing of the Price Gap Between Buyers and Sellers and Improved Lending Availability.
Chris McLaren: Thank you Jay and good morning, everyone <unk> first quarter 2024, our results reflect the strength of our resilience and finally diversified professional services platform.
Chris McLaren: Our outsourcing and advisory business delivered robust revenue growth with broad based increases across all services led by engineering and project management we.
Chris McLaren: We expect this momentum to continue through the remainder of the year, providing growth balance and stability to our platform.
Chris McLaren: This growth helped offset expected soft transaction volumes and capital markets, which although down for above market activity levels.
Chris McLaren: We remain cautiously optimistic about improving transaction velocity in the late second half of 2020 for contingent on softening interest rates.
Chris McLaren: The narrowing of the price gap between buyers and sellers and improved lending availability.
Chris McLaren: Leasing globally achieved modest growth year over year, with several markets increasing activity in the office sector as occupiers make longer-term lease commitments, coupled with the return to office continuing the trend upward. Shortly after the quarter ended, we completed the acquisition of our affiliate in Philadelphia. From its five offices, the company's 130 professionals provide leasing and sales brokerage and property management services. As a vibrant and influential market, our ownership now allows us to significantly increase our presence in the Mid-Atlantic and expand our capabilities in the eighth largest metropolitan area in the U.S.
Speaker Change: Leasing globally achieved modest growth year over year with several markets increasing activity in the office sector as occupiers make longer term lease commitments, coupled with the return to office continuing the trend upwards.
Chris McLaren: Shortly after the quarter end, we completed the acquisition of our affiliate in Philadelphia.
Chris McLaren: From its five offices, the company's 130 professionals provide leasing and sales brokerage and property management services.
Chris McLaren: As a vibrant and influential market our ownership now allows us to significantly increase our presence in the mid Atlantic and expand our capabilities in the eighth largest metropolitan area in the U S.
Chris McLaren: Among our many accolades in February, we were named to the IAOP's list of the top 100 global professional services firms, testament to our track record of success in delivering exceptional results for our clients wherever they do business. We have also been recognized as one of the best workplaces in Canada this year out of more than 900 companies competing for a spot. The steps we are taking to strategically invest in our people and business, fill gaps, and take market share will continue to strengthen our platform and drive long-term shareholder value. Now, I'll turn things over to Christian, who will provide more details on our financing.
Chris McLaren: Among our many accolades in February we were named to the Ihop's list of top 100 global professional services firms.
Christian: Estimate to our track record of success in delivering exceptional results.
Christian: For our clients wherever they do business.
Christian: We have also been recognized as one of the best workplaces in Canada, this year and up more than 900 companies competing for a spot.
Christian: The steps, we are taking to strategically invest in our people and business fill gaps and take market share. We will continue to strengthen our platform and drive long term shareholder value.
Chris McLaren: Now I'll turn things over to Christian who will provide more details on our financials.
Christian Mayer: Thank you, Chris. Good morning. As usual, I will provide some additional commentary on our consolidated results, our financial outlook, and our balance sheet. Please note that all references to revenue growth made on this call are expressed in local currency and that the non-GAAP measures discussed here today are as defined in the materials accompanying this call. For the seasonally slow first quarter, revenues were $1 billion, up 4% relative to Q1 2023. Internal growth was 2%, with strength in our diversified recurring services outpacing a decline in capital markets activity.
Christian: Thank you Chris good morning.
Christian Mayer: As usual I'll provide some additional commentary on our consolidated results.
Christian Mayer: Financial outlook at our balance sheet.
Christian Mayer: Note that all references to revenue growth made on this call are expressed in local currency and that the non-GAAP measures discussed here today are as defined in the materials accompanying this call.
Christian Mayer: For the seasonally slow first quarter revenues were $1 billion up 4% relative to Q1 2023.
Christian Mayer: Internal growth was 2% with strength in our diversified recurring services outpacing a decline in capital markets activity.
Christian Mayer: Our outsourcing and advisory service line generated strong 9% revenue growth, mostly from internal sources; investment management, excluding past through period interest, was essentially flat with a prior year. Leasing revenues were up 2% for the quarter, led by modest growth in office leases.
Christian Mayer: Our outsourcing and advisory service line generated strong 9% revenue growth mostly from internal sources.
Christian Mayer: Investment management, excluding pass through carried interest was essentially flat with the prior year.
Christian Mayer: Leasing revenues were up 2% for the quarter led by modest growth in office leasing.
Christian Mayer: First quarter consolidated adjusted earnings even though it was 109 million, up 4% relative to the prior year, with margins holding flat at 10.8%. We continue to closely manage our costs to match the expected pace of revenues, especially in our capital markets. We also remain focused on improving productivity and on selective strategic recruiting. In our investment management segment, AUM declined modestly during the quarter, mostly attributable to unrealized market value adjustments and our alternative and traditional real estate funds, despite growing net operating income at the asset level. These adjustments totaled 1.5%, which outperformed the benchmark Odyssey Index.
Christian Mayer: First quarter consolidated adjusted EBITDA was $109 million up 4% relative to the prior year with margins holding flat at 10, 8%.
Christian Mayer: We continue to closely manage our costs to match the expected pace of revenues, especially in our capital markets business.
Christian Mayer: We also remain focused on improving productivity and on selective strategic recruiting.
Christian Mayer: And our investment management segment AUM.
Christian Mayer: AUM declined modestly during the quarter, mostly attributable to unrealized market value adjustments in our alternative and traditional real estate funds. Despite growing net operating income at the asset level.
Christian Mayer: These adjustments totaled one, 5%, which outperformed the benchmark Odyssey index.
Christian Mayer: In addition, some funds disposed of long-held assets during the quarter, realizing gains and recycling the proceeds back to investors. This positions us well for future fundraising. Our first quarter fundraising totaled $450 million.
Christian Mayer: In addition, some funds disposed of long held assets during the quarter, realizing gains and recycling the proceeds back to investors.
Christian Mayer: This positions us well for future fundraising.
Christian Mayer: Our first quarter fund raising totaled $450 million.
Christian Mayer: We continue to see strong interest in our alternative infrastructure and credit strategy, and we anticipate an acceleration in fundraising momentum as we progress through the year. We are maintaining our financial outlook for 2024, while interest rate volatility and geopolitical tensions continue to weigh on transaction volume. We expect a rebound in activity in the third and fourth quarters, although there is a risk that this could be delayed to later in the year or to early 2025 for our recurring service lines, both outsourcing and advisory and investment management.
Christian Mayer: We continue to see strong interest in our alternative infrastructure and credit strategies, and we anticipate an acceleration in fund raising momentum as we progress through the year.
Christian Mayer: We are maintaining our financial outlook for 2024.
Christian Mayer: While interest rate volatility and geopolitical tensions continue to weigh on transaction volumes, we expect a rebound in activity in the third and fourth quarters.
Christian Mayer: Although there is a risk that this could be delayed to later in the year or into early 2025.
Christian Mayer: And our recurring service lines, both outsourcing and advisory and investment management.
Christian Mayer: We continue to expect mid to high single-digit revenue growth for the balance of the year. Turning to our balance sheet, our financial leverage ratio, defined as net debt to perform adjusted EBITDA, was two times at March 31st. We expect leverage to rise modestly in Q2 due to seasonal working capital use, then to decline to approximately 1.5 times by the end of the year, assuming no significant acquisition.
Christian Mayer: We continue to expect mid to high single digit revenue growth for the balance of the year.
Christian Mayer: Turning to our balance sheet.
Christian Mayer: Our financial leverage ratio defined as net debt to pro forma adjusted EBITDA was two times at March 31.
Christian Mayer: We expect leverage to rise modestly in Q2 due to seasonal working capital usage, then to decline to approximately one five times by the end of the year.
Christian Mayer: No significant acquisitions.
Christian Mayer: Okay.
Christian Mayer: With the $300 million equity offering we completed during the first quarter, we are well positioned with more than $1 billion in available liquidity to execute on acquisition opportunities as the year unfolds. This concludes my prepared remarks. Operator, can you please open the line?
Christian Mayer: With the $300 million equity offering we completed during the first quarter, we are well positioned with more than 1 billion in available liquidity to execute on acquisition opportunities as the year unfolds.
Christian Mayer: This concludes my prepared remarks.
Speaker Change: I'd now like to open the call for questions. Operator can you. Please open the line.
Speaker Change: Thank you.
Operator: Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press the star followed by the number on your touch-tone phone. You will hear a three-tone prompt acknowledging your request. Should you wish to decline from the polling process, please press star followed by 2. If you are using a speakerphone, please lift the handset before pressing any key. The first question comes from Stephen MacLeod at BMO Capital Markets. Please go ahead.
Speaker Change: Ladies and gentlemen, we will now begin the question and answer session should you have a question. Please press the star followed by the one on your Touchtone phone you will hear with Telecom technology you have a question.
Stephen MacLeod: Should you wish to decline from the polling question. Please press star followed by Tim.
Operator: We are using a speaker phone please lift the handset before pressing any keith.
Stephen MacLeod: First question comes from Stephen Macleod at BMO capital markets. Please go ahead.
Stephen MacLeod: Thank you. Good morning, morning, guys.
Stephen MacLeod: Thank you and good morning, good morning, guys.
Stephen MacLeod: I just wanted to just dial in on the outlook for 2024. You know, I just wanted to confirm or just kind of get your thoughts on the components, specifically around outsourcing advisory up mid single digits to high single digits, just thinking about capital markets and leasing, you're still expecting things to be sort of flattish in the first half with some growth in the back half. And then on investment management, do you still kind of expect the same level of fundraising in 2024 in that, I think it was, the five to eight billion dollar range as you expected in Q4?
Stephen MacLeod: I just wanted to.
Stephen MacLeod: Just dial in on the on the outlook for 2024.
Stephen MacLeod: I just wanted to confirm or just kind of get your thoughts on the components specifically around I mean, you mentioned outsourcing advisory up mid single digits to high single digit just thinking about capital markets and leasing you're still expecting things to be sort of flattish in the first half with some growth in the back half and then on investment management.
Stephen MacLeod: Are you still kind of expect the same level of fund raising in 2024 and that I think it was $5 to $8 billion range as you expected with Q4.
Stephen MacLeod: Yes.
Christian Mayer: Let me start with that one. You know, I think you've laid out some of the component pieces here. I think, you know, growth will come from each of those components. About a third from our outsourcing and advisory business, which we have a high degree of visibility on, as Chris mentioned, with backlogs of work in process and to be completed. One third of the growth will come from investment management, and that's going to be rolled out through the year. We think it'll be weighted more towards the back half of the year. But we have, you know, strong activity levels.
Speaker Change: Steve Let me start with that one.
Christian Mayer: I think you laid out some of the component pieces here.
Christian Mayer: I think.
Christian Mayer: The growth will come from each of those components.
Christian Mayer: About a third from outsourcing and advisory business.
Christian Mayer: What should we have high degree of visibility on as Chris mentioned.
Christian Mayer: With backlogs of work in process and to be completed.
Christian Mayer: One third of the growth will come from investment management, and that's going to rollout through the year.
Christian Mayer: We think it will be weighted more towards the back half of the year.
Christian Mayer: But we have.
Christian Mayer: Strong activity levels and we expect.
Christian Mayer: Hopefully to secure new capital coming from investors as the year progresses.
Christian Mayer: And we expect, hopefully, to secure new capital payments from investors as the year progresses. And finally, a third of the growth expected in capital markets. This is going to be weighed, as I mentioned, to the third and fourth quarters. So not really expecting anything really in terms of growth in the second quarter in capital markets but a modest rebound in the third and, more likely, the fourth quarter.
Christian Mayer: And finally third of the growth expected in capital markets. This is going to be weighed as I mentioned to the third and fourth quarters, so not expecting anything.
Christian Mayer: Really in terms of growth in the second quarter in capital markets.
Christian Mayer: But.
Christian Mayer: A modest rebound in the.
Christian Mayer: The third and.
Christian Mayer: More likely the fourth quarters.
Jay Stewart Hennick: Okay, Steve, let me add something to what Christian is saying.
Christian Mayer: Okay.
Speaker Change: Steve Steve Let me add let me add something to what Christian to say.
Jay Stewart Hennick: You know, from my perspective, the outlook is really quite straightforward. All of our businesses are doing extremely well, with the exception of capital markets, which everybody knows. And that's very interest rate driven. So, your guess is as good as mine as to when that's going to change. But when it does, it will have a material positive impact not only on Colliers but any other similar business in the industry; it really will have a significant impact.
Jay Stewart Hennick: Yes.
Steve: From my perspective, the the.
Jay Stewart Hennick: <unk> is really quite straightforward.
Jay Stewart Hennick: All of our businesses are doing extremely well.
Jay Stewart Hennick: With the exception of capital markets, which everybody knows.
Jay Stewart Hennick: And thats very interest rate driven.
Jay Stewart Hennick: So your guess is as good as mine as to when that's going to change, but when it does it has a material positive impact not only on colliers, but any other like business in the industry.
Jay Stewart Hennick: It really will have a significant impact.
Jay Stewart Hennick: The balance of our businesses, as I said, are doing extremely well. Fundraising is a touch soft, getting stronger in investment management. So, we think we're going to do nicely as the year progresses. But the forecast is really quite simple, at least from my perspective, and I think we're all managing, the key is to manage the business as closely as possible, and as you know, we've done this for many years, and I think we've got our eye on the prize, but it really is going to come down to capital markets, when it changes, when investor, and Chris said this just a minute ago, and I'm going on a little bit too long here, but there's also decisioning on the part of sellers, when are they going to sell those assets?
Jay Stewart Hennick: The balance of our businesses as I said are doing extremely well fund raising is a touch soft getting stronger in investment management. So we think we're going to do nicely as the year progresses.
Jay Stewart Hennick: But the forecast is really quite simple.
Jay Stewart Hennick: At least from my perspective and.
Jay Stewart Hennick: And I think.
Jay Stewart Hennick: We're all managing the key is to manage the business as closely as possible and as you know we've done this for many years and we think we've got our eye on on the on the price but.
Jay Stewart Hennick: It really is going to come down to capital markets when it changes when investor and Chris said. This is just a minute ago and im going on a little bit too long here, but.
Jay Stewart Hennick: Theres also decisioning.
Jay Stewart Hennick: On the part of sellers when are they going to sell those assets.
Jay Stewart Hennick: And there's a lot of pressure on a lot of sellers right now from a financing standpoint to take action. So, interest rates will impact it, of course, but there are also other factors that could accelerate capital markets a little bit quicker than just interest rates alone. I offer that only as a means of trying to get a sense of what the balance of the year looks like for us.
Jay Stewart Hennick: And there is a lot of pressure on a lot of sellers right now from a financing standpoint to take action. So.
Jay Stewart Hennick: Interest rates will impact that of course, but there's also other factors that could accelerate capital market's a little bit quicker.
Jay Stewart Hennick: And then that just interest rates are low I offer that only us as a means of trying to get a sense of.
Jay Stewart Hennick: Of what what the balance of the year it looks like to us.
Chris McLaren: and Stephen and Chris here. Stephen, it's Chris here.
Speaker Change: Yes, Steve Chris.
Chris McLaren: Just a couple more comments from the field. You know, there was a bright spot this quarter in Asia Pacific in capital markets. We're up 19% year over year. And so we've got, you know, some good activity in Japan, Hong Kong, Taiwan, and a little bit of Australia. So that's a bright spot.
Chris McLaren: Thank you it's Chris here, just a couple more comments from the field.
Chris McLaren: There was a bright spot this quarter in Asia Pacific and capital markets, we were up 19% year over year and so we've got.
Chris McLaren: So some good activity in Japan, Hong Kong, Taiwan little bit Australia, So that's a bright spot.
Chris McLaren: We are starting to see, you know, over the last 18 months, obviously low transaction volumes, and really below $50 million. But as Jay was saying, you know, the pressure is starting to build. And the market is starting to test some, you know, bigger ticket items, so 200 plus level. And, you know, in Q1, Colliers brokered three deals, I can give you examples of more than 200, one in Oslo, Norway, one in Korea, and one in Australia.
Chris McLaren: We are starting to see over the last 18 months.
Chris McLaren: There is obviously low transaction volumes and really below the $50 million, but as Jay was saying the pressure starting to build.
Chris McLaren: The market is starting to test some bigger ticket items, so 200 plus.
Chris McLaren: Level and in Q1 Colliers brokerage three three deals I can give you examples of more than 201 in Oslo, Norway, One in Korea and one in.
Chris McLaren: So, you know, we're starting to see more activity, more, you know, pitches and mandates, but I think it'll be, you know, incremental activity. And as Christian said, you know, towards the back half of the year, which will start to accelerate it.
Chris McLaren: Australia so.
Chris McLaren: We're starting to see more and more activity more.
Chris McLaren: Pitches and mandates, but I think it will be incremental.
Chris McLaren: Activity and as Christian said towards the back half of the year, but we'll start to accelerate it.
Stephen MacLeod: Okay, that's great. That's great color from all three of you. Thank you. I just wanted to shift gears a little bit and just talk a little bit about the acquisition pipeline, just sort of what you're seeing out there. You have lots of strong liquidity right now, and you have strong leverage. And so just wondering kind of what you're seeing out there and where your interests lie currently.
Speaker Change: Okay. That's great that's great color from all three of you. Thank you.
Stephen MacLeod: I just wanted to just shift gears, a little bit and just talk a little about the acquisition pipeline.
Stephen MacLeod: Just sort of what youre seeing out there.
Stephen MacLeod: We have strong liquidity right now strong leverage and so just wondering kind of what youre seeing there and where your interests lie currently.
Jay Stewart Hennick: You know, I'll take that. We have a very interesting pipeline of acquisitions, some larger and several smaller, virtually across the board. But, you know, having three growth engines gives us lots of places to grow. And having a global platform with strong management teams that have been around a long time and have operated the Colliers way for a long time gives us the confidence that we can execute wherever the opportunities are. So we're quite excited. You know, obviously, we've got to take one step at a time. But the pipeline is solid.
Speaker Change: And I'll take that.
Jay Stewart Hennick: Okay, we have a very interesting pipeline of acquisitions.
Jay Stewart Hennick: Some larger.
Jay Stewart Hennick: And several smaller.
Jay Stewart Hennick: Virtually across the board.
Jay Stewart Hennick: But.
Jay Stewart Hennick: Having three growth engines.
Jay Stewart Hennick: Gives us.
Jay Stewart Hennick: Lots of places to grow.
Jay Stewart Hennick: Having a global platform with strong management teams that have been around a long time, and then operated the colliers way for a long time gives us the confidence that we can execute.
Jay Stewart Hennick: Wherever the opportunities are so.
Jay Stewart Hennick: We're quite excited.
Jay Stewart Hennick: Obviously, we've got to take one step at a time, but the pipeline is.
Jay Stewart Hennick: Is solid I would say.
Stephen MacLeod: That's great. Thank you, Jay. I appreciate the progress.
Speaker Change: That's great. Thank you Jay I appreciate the color guys.
Operator: Thank you. The next question comes from Daryl Young at Stifle. Please go ahead.
Stephen MacLeod: Thank you. The next question comes from Daryl Young of Stifel. Please go ahead.
Daryl Young: Hey, good morning, everyone.
Daryl Young: My first question is around the investment management business and maybe a little bit of color, if you can provide a little bit of color on some of the costs you're adding for fundraising and you called out capability distribution capabilities in the Middle East, you've just peaked my interest there.
Daryl Young: First question just around the investment management business.
Daryl Young: Maybe a little bit of color you can provide a little bit of color on on some of the costs, you're adding for fund raising and you've called out capability distribution capabilities in the middle East.
Daryl Young: Berkeley interest there.
Christian Mayer: Yeah, Daryl, we've been building our fundraising capabilities, and in particular, the Middle East. And that's an area that we have in Asia, too. But in the Middle East, our share of LPs is quite low. So the opportunity set for us in the Middle East is great. Asia is an area we've been active in for longer, and we have more LPs there, but there is still room for growth as well in terms of attracting new investors and new sources of capital for our fundraising.
Daryl Young: Yes.
Daryl Young: So we've been building our fundraising capabilities and in particular in the middle East and Thats an area that we have in Asia, two in Asia, but in the middle East our share of Lp's is quite low so the opportunity set for us in the middle East is as big.
Christian Mayer: Asia is an area we've been active in for.
Christian Mayer: For longer and we have more Lps, there, but still room for growth as well.
Christian Mayer: In terms of attracting new investors and new sources of capital for our fundraising the other part that we're focusing effort on it and which is taking some.
Christian Mayer: The other part that we're focusing our efforts on, and which is adding some expense, is building out our capabilities to launch new strategies and new funds. We've got a few things in the works that are going to launch this year, and we've had to staff up and incur some costs to make that come to reality.
Christian Mayer: Some adding some expense.
Christian Mayer: Building out our capabilities too.
Christian Mayer: Watch new strategies, and new funds and we've got a few things.
Christian Mayer: In the works.
Christian Mayer: That are going to launch this year and we've had to staff up and incur some costs to make that come to reality.
Christian Mayer: Got it. Okay. And then it sounds like you're targeting sort of net new LPs, but what kind of receptivity have you seen from existing LPs re-upping on funds and then also cross-selling LPs between the various boutiques that you acquired across the last couple years?
Speaker Change: Got it Okay, and then it sounds like you're targeting sort of net new LPG, but what kind of receptivity of <unk> have you seen from existing Lps re upping on funds and that also cross sell of Lps between the various boutiques that you acquired across the last couple of years.
Christian Mayer: In terms of re-ups, we're seeing the same percentages as prior years or prior fund re-ups. What we are seeing is that we're seeing adjustments in the allocation. So some of them, if they're tight or they're not balanced properly, will increase or reduce the amount of commitment to the next fund. But virtually 92% or 93% of re-ups has been sort of a consistent theme for us for
Christian Mayer: In terms of re ups.
Christian Mayer: We're seeing.
Christian Mayer: At the same percentages as prior years or prior fund re ups.
Christian Mayer: What we are seeing is we're seeing.
Christian Mayer: Adjustments in the allocations. So some of them. If they are if they are tight or theyre not balanced properly will increase or reduce the amount of commitment to the next fund, but virtually 92% or 93%.
Christian Mayer: Re ups has been sort of a consistent theme for us for many years and then introducing and that's one of the great things about this business. It's so recurring as long as your investors are happy with with their with the results and the way in which their investments are being managed.
Jay Stewart Hennick: And then introducing new investors, and that's one of the great things about this business, it's so recurring, as long as your investors are happy with the results and the way in which their investments are being managed. And then we're introducing new investors, especially during these times, and especially to the types of assets that we focus on, which are alternative asset classes, which are very much in demand. And so... You know, I would say there's a softness in fundraising generally; it's changing, but it's changing for the better.
Jay Stewart Hennick: And then we're introducing new investors.
Jay Stewart Hennick: Especially during these times and especially to the types of assets that we focus on which our alternative asset classes, which are very much in demand.
Jay Stewart Hennick: And so.
Speaker Change: I would say.
Jay Stewart Hennick: There is a softness in fund raising generally it's changing but.
Jay Stewart Hennick: But in terms of re-ups, we're where we need to be. The other thing that we've invested in is the RIA channel. Through one of our platforms that has a very significant presence, we've doubled our investment around raising capital through the RIA channel. And so we're quite excited about the asset management component of our business and think that all these investments, particularly in times like this, will pay dividends down the line.
Jay Stewart Hennick: It's changing for the better but in terms of re ups.
Jay Stewart Hennick: Where we need to be the other the other thing that we've invested in is the RIAA channel through one of our bra platforms that has a very significant presence we've doubled our investment around raising capital up through the RIAA channel and.
Jay Stewart Hennick: So we're quite excited about the the.
Jay Stewart Hennick: The asset management component of our business and think that.
Jay Stewart Hennick: All these investments, particularly in times like this.
Jay Stewart Hennick: And it's not just going to be this year; it's going to be next year and beyond. So new products in the marketplace, more investment in distribution capabilities. You know, all of those types of things are the things that you do to build a great platform, which we're doing. We're also investing in, I should say, I should have said this at the outset, top-grading our people. We've got some exceptional people, but there are opportunities to add different asset classes, which means you need to bring in different expertise around data centers and a variety of other things that we're working on that just make our platform that much better.
Jay Stewart Hennick: We will pay dividends down the line and it's not just going to be this year, it's going to be next year and beyond.
Jay Stewart Hennick: So new products in the marketplace.
Jay Stewart Hennick: More investment in.
Jay Stewart Hennick: In the distribution capabilities.
Jay Stewart Hennick: All of those types of things are the things that you do to build a great platform.
Jay Stewart Hennick: Which is which we're doing we're also investing it I should say it should have said this at the outset.
Jay Stewart Hennick: <unk> grading our people, we've got some exceptional people but.
Jay Stewart Hennick: There's opportunities to add different asset classes, which means you need to bring in.
Jay Stewart Hennick: Different expertise around data centers and variety of other things that we're working on that just make our platform that much better.
Daryl Young: That is a great color. I'll jump back in the queue. Thanks very much, guys.
Jay Stewart Hennick: That's great color.
Daryl Young: Jump back in the queue. Thanks, very much guys.
Operator: Thank you. The next question comes from Stephen Sheldon at William Blair. Please go ahead.
Stephen Hardy Sheldon: Thank you. The next question comes from Stephen Sheldon William Blair. Please go ahead.
Stephen Hardy Sheldon: Hey, thanks for taking my questions. I want to start with Chris.
Stephen Hardy Sheldon: Hey, Thanks for taking my questions I want to start with Chris curious, what Youre seeing in terms of industrial leasing activity. It sounded like the 2% overall leasing growth in the quarter was driven by uptake.
Stephen Hardy Sheldon: I'm curious what you're seeing in terms of industrial leasing activity. It sounds like the 2% overall leasing growth in the quarter was driven by a pickup in office. So it would just be great to get some color on what you're seeing on the industrial side and whether things are weakening there, just kind of how the trajectory is looking on the industrial side for leasing.
Stephen Hardy Sheldon: A pickup in office. So it would just be great to get some color on what youre seeing on the industrial side and whether things are weakening there just kind of how the trajectory is looking on the industrial side, where we can.
Stephen Hardy Sheldon: Sure.
Stephen Hardy Sheldon: Yes.
Chris McLaren: Sure. So I think, you know, in industrial leasing, there's been a natural cooling after the record-breaking run-up after the COVID boom in e-commerce from 21 to 23. You know, occupiers today are generally concerned about economic conditions and geopolitical concerns. And they're also focused on looking at efficiencies and looking at their existing locations and what automation can do to their facilities. There's also been an increase in vacancy in a number of markets, and so there are more options for occupiers to look at.
Stephen Hardy Sheldon: So I think it.
Stephen Hardy Sheldon: In the industrial leasing there has been a natural cooling after the record breaking.
Chris McLaren: Run up after the Covid booming e-commerce in 'twenty, one to 'twenty three.
Chris McLaren: Occupiers today are generally concerned about economic conditions and the geopolitical concerns.
Chris McLaren: And they're also focused on looking at efficiencies and looking at their existing locations and what can automation due to their facilities.
Chris McLaren: There's also been an increase in vacancy.
Chris McLaren: In a number of markets. So there's more options for occupiers to look at and so they're taking some more time to analyze what that footprint should look like going forward. So I think it's a natural pause in the cycle the market is still.
Chris McLaren: And so they're taking some more time to analyze, you know, what their footprint should look like going forward. So I think it's a natural pause in the cycle. The market is still, you know, a good market. But I guess the level of velocity of leasing transaction industrial is not the same as it was in the, you know, record-breaking times just after COVID. You know, the one outlier is that in Canada, we had, you know, considerable leasing growth, and industrial was up 41% year over year.
Chris McLaren: Good market, but.
Chris McLaren: The level of velocity of leasing transaction in industrial is not the same as it was in the.
Chris McLaren: The record breaking times just after COVID-19.
Chris McLaren: The one outlier.
Chris McLaren: Here is that in Canada, we had.
Chris McLaren: Considerable.
Chris McLaren: So that was the one bright spot in most places around the world; industrial leasing was down. In talking to our operators in the field, I think there's also a little bit of delay from quarter to quarter. So some slippage. I've heard of some larger deals in Australia, Poland, and the US, notably, that could show up in Q2.
Chris McLaren: Leasing growth in industrial up 41% year over year.
Chris McLaren: So that was the one bright spot most of the places around the world industrial leasing was down.
Chris McLaren: In topic in talking to our operators in the field I think theres also a little bit of a delay from quarter to quarter. So some slippage.
Chris McLaren: <unk> heard of some some larger deals in Australia, Poland, and the U S, notably that.
Chris McLaren: Could show up in Q2.
Stephen Hardy Sheldon: Got it. That's really helpful. I appreciate that.
Speaker Change: Got it that's really helpful. I appreciate that.
Chris McLaren: And maybe just thinking about the U.S. How are you thinking about your producer capacity and positioning for when capital markets activity picks up? I think you talked last quarter about record recruiting in the U.S. during 2023. You now also have some more scale with the Philadelphia acquisition. So are you getting closer to the scale that you'd like in the US? And how important is it to continue adding scale, I guess, through acquisitions, specifically in the US?
Stephen Hardy Sheldon: And maybe just thinking about the U S.
Chris McLaren: How are you thinking about your producer capacity and positioning for when capital markets activity picks up I think you talked last quarter over quarter about record recruiting in the U S. During 2023 now I'll also have some more scale with the Philadelphia acquisition.
Chris McLaren: So are you getting closer to the scale that you'd like in the U S and how important is it to continue adding scale through acquisitions, specifically in the U S.
Chris McLaren: So I think, you know, we continue to recruit top talent, and we've got lots of white space in the US. But our market share is still quite low compared to our major competitors.
Chris McLaren: So I think we continue to recruit top talent.
Chris McLaren: And we've got lots of white space in the U S.
Chris McLaren: Our market share is still quite low compared to our major competitors. So this is a priority focus of management to continue to bolster our team and we'll do that through either acquisitions like our affiliate in Philadelphia or teams or individuals. So it is still very much a priority.
Chris McLaren: So this is a priority focus of management to continue to bolster our teams, and we'll do that through either acquisitions like our affiliate in Philadelphia or through teams or individuals. So it is still very much a priority. In addition, we're looking at, you know, productivity. How do we get more production out of our existing talent? You know, and make sure that if there are any non-performers, we're moving them out, and then with our high potentials, we're investing in those people to make sure that they can perform when the market comes back. So this is still a major initiative of ours to continue to push into capital markets in the US.
Chris McLaren: In addition, we're looking at productivity, how do we get more production out of our existing.
Chris McLaren: Talent.
Chris McLaren: And making sure that if there is any non performers that.
Chris McLaren: We're moving them out and then are our high potentials, we're investing in those people to make sure that they can.
Chris McLaren: When the market comes back. So this is still a major initiative of ours to continue to push into into capital markets in the U S.
Stephen Hardy Sheldon: Got it. Makes sense. And then just one last one for Christian. As we think about our models, tax rates were a little elevated relative to at least what we had modeled for the quarter. So just curious if you have any framework for how we should think about the tax rate over the rest of the year and what you've assumed in the guidance.
Speaker Change: Got it makes sense.
Chris McLaren: And then just one last one for Christian if you think about our models tax rates were a little elevated relative to what we had modeled for the quarter. So.
Stephen Hardy Sheldon: Just curious if you have any framework for how we should think about the tax rate over the rest of the year.
Speaker Change: Assumed in the guidance.
Christian Mayer: Yeah, Stephen, there was a one-time item in Q1 for a couple million dollars. So absent that, the rate would have been 30% in a quarter, and we expect the rate to be 30% on a full year basis as well.
Speaker Change: Yes, Stephen there was a onetime item in Q1.
Christian Mayer: For a couple of million dollars, so absent that the rate would have been 30% in the quarter and.
Christian Mayer: And we expect the rate to be 30% on a full year basis as well.
Stephen Hardy Sheldon: Perfect, thank you.
Speaker Change: Perfect. Thank you.
Operator: The next question comes from Himanshu Gupta at Scotiabank. Please go ahead. Thank you.
Stephen Hardy Sheldon: Thank you. The next question comes from Himanshu Gupta with Scotiabank. Please go ahead.
Himanshu Gupta: Thank you and good morning. So just on the 2024 guidance, just clarifying, do you have M&A built into this guidance? I mean, I know, you have done the equity offering now, which was previously not there at the time of the original guidance.
Himanshu Gupta: Thank you and good morning.
Himanshu Gupta: So just on the 2020 for guidance.
Himanshu Gupta: Do you have M&A baked into this guidance and then I know you have done the equity offering now which was previously nordea at the time of guidance.
Christian Mayer: Himanshu, I think you're asking about acquisitions and the guidance. The answer is no. The answer is no because there are no acquisitions built into the guidance, and the guidance does include the impact of the recent equity office.
Himanshu Gupta: He mentioned I think you were asking about acquisitions in the guidance.
Christian Mayer: No.
Christian Mayer: The answer is no there's no acquisitions built into the guidance and the guidance does include the impact of the recent equity offering.
Christian Mayer: Okay, thank you. And then, given that the guidance is unchanged, has the outlook changed within the segment? I mean, are you still expecting one third of the growth from IM and one third of the growth from the capital markets business last quarter as well? Yeah, Himanshu, I think so.
Speaker Change: Okay. Okay. Thank you.
Speaker Change: And then given that the guidance is unchanged.
Himanshu Gupta: The outlook changed the segment.
Christian Mayer: And then are you.
Himanshu Gupta: But you're still expecting one total downloads from Ey and one put up the road from capital markets business last quarter as well.
Christian Mayer: Yeah, Himanshu, I think the components of that outlook are the same, you know, one third from outsourcing and advisory, one third for investment management, and one third from the transactional business.
Himanshu Gupta: Yes, I mentioned I think the.
Himanshu Gupta: The components of that outlook are the same.
Christian Mayer: One third from outsourcing and advisory one third for investment management and one third from.
Speaker Change: The transactional business, that's consistent with what we thought.
Christian Mayer: In February.
Christian Mayer: Got it. And any incremental weakness baked into the capital markets business? I mean, it looks like, you know, the leasing looks to be performing better than, you know, expectation, and maybe the capital markets, given the interest rate, could be a bit softer. So within the two segments, any change in direction? Uh, I mean...
Christian Mayer: Got it and any incremental weakness baked into the capital markets business I mean, it looks like the leasing looks to be performing better than.
Christian Mayer: Our expectation then maybe capital market given the deficit could be a bit softer so, but then two segments any change in direction.
Christian Mayer: I mean, not meaningfully, Himanshu, I mean, this is, you know, I think we do the best we can, and we look at our various components, you know, every time we update our forecast and look at our results, but there's nothing meaningful to call out at this time.
Christian Mayer: I mean, not meaningfully advance you I mean this is.
Christian Mayer: I think we do the best we can and then we look at our.
Christian Mayer: Various components.
Christian Mayer: Every time, we update our.
Christian Mayer: And look at our.
Christian Mayer: Forecast for it.
Christian Mayer: Nothing meaningful to call out at this time.
Himanshu Gupta: Got it. Okay. Then, just looking at the valuation on IM, investment management, the valuation adjustment in Q1, was it mostly related to the office? I mean, can you elaborate a bit there?
Speaker Change: Got it okay.
Himanshu Gupta: Then.
Himanshu Gupta: Just looking at the valuation on.
Himanshu Gupta: Management and the valuation adjustment in Q1.
Himanshu Gupta: Was it mostly related to office.
Speaker Change: I will elaborate a bit.
Christian Mayer: Himanshu, it was primarily related to our, sorry, our alternative portfolio, and that is not related to the actual portfolio performance itself. I mean, the income coming off these assets is the same or better than it was previously. What's happened is the cap rates have gapped out and have driven a reduction in the sort of values that outside appraisers attach to these assets. As it relates to our office portfolio, it's quite small; it's one third or one quarter of our traditional portfolio, which is a small piece overall, and we've taken cumulatively over the last year and a half, 27%, I believe, mark to market adjustment on that office portfolio already So that is not a driver in the quarter, but certainly it's been something that's been weighing on AUM over the past year and a half.
Speaker Change: Answer it was primarily.
Christian Mayer: Related to our.
Christian Mayer: And sorry to our alternative portfolio.
Christian Mayer: And that.
Christian Mayer: That is not related to the actual portfolio performance itself.
Christian Mayer: Income coming off these assets is the same or better than it was previously what's happened is that cap rates have gapped out and have driven a reduction in the.
Christian Mayer: The values that the outside of appraisers attached to these assets.
Christian Mayer: As it relates to our office portfolio, it's quite small.
Christian Mayer: It's one one third or one quarter of our traditional portfolio, which is a small piece overall.
Christian Mayer: And we've taken cumulatively over the last year and a half.
Christian Mayer: 27% I believe.
Christian Mayer: Mark to market adjustment.
Christian Mayer: On that office portfolio already so that is not a driver in the quarter, but certainly it has been something thats been weighing.
Christian Mayer: On AUM over the past year and a half.
Himanshu Gupta: Thank you. Maybe just a last question on MNA outlook or opportunities. So how close are you on the capital deployment? and anything you want to elaborate on.
Speaker Change: Alright, thank you.
Speaker Change: Maybe just a last question on M&A.
Speaker Change: Our global opportunities. So how close are you on the capital deployment.
Himanshu Gupta: <unk>.
Himanshu Gupta: And anything you want to elaborate on that.
Jay Stewart Hennick: So the question is, how close are we to capital deployment in terms of acquisitions or other opportunities?
Speaker Change: So the question is how close are we on capital deployment in terms of acquisitions or other opportunities.
Jay Stewart Hennick: Okay.
Himanshu Gupta: I'm not sure that that's not something that we would normally talk about. Number one, number two, we're actively involved in many transactions right now, and they close when they close. And I can't really give you any further color than that. They're all opportunistic and, you know, they happen when they happen, but we have a track record of completing multiple transactions over many years. Fair enough.
Speaker Change: Not yet no.
Speaker Change: Not something that we would normally talk about.
Himanshu Gupta: Number one number two we are actively involved in many transactions right now.
Himanshu Gupta: And.
Himanshu Gupta: A big close when they close and I can't really give you any further color.
Himanshu Gupta: Than that.
Himanshu Gupta: They're all opportunistic.
Himanshu Gupta: They happen when they happen, but we have a track record of of.
Himanshu Gupta: Of completing multiple transactions over many years.
Himanshu Gupta: Fair enough. Thank you, Jay, for that. I'll turn it back. Thank you.
Speaker Change: Fair enough. Thank you for that I'll turn it back thank you.
Operator: Thank you. The next question comes from Jimmy Shen at RBC. Please go ahead.
Speaker Change: Thank you. The next question comes from Jimmy Chen at RBC. Please go ahead.
Jimmy Shen: Thanks. Maybe just a follow-up on the M&A. I know it's not so much you could share, but can you give us a sense of deal sizes that you may be looking at across. You mentioned looking at small and big deals. And also, I think we talked about pricing last quarter. Has there been any change in that given the continuously changing rate environment? Have you seen any changing sort of pricing expectations?
Jimmy Shen: Thanks, maybe just a follow up on the M&A.
Jimmy Shen: I know, it's not so much you could share, but can you give us a sense of the deal sizes that you may be looking at across you mentioned looking at small and big deals.
Jimmy Shen: And also I think we talked about pricing last quarter.
Jimmy Shen: Is that has there been any change in that given the changing continuously changing rate environment.
Jimmy Shen: Have you seen any changing sort of pricing expectations.
Jay Stewart Hennick: Yeah, that's a good question. As I mentioned earlier, there are large transactions, and there are smaller transactions. I would say that the large transaction pricing is high, and that's just the nature of the beast. And what's also happening is, especially in the large transaction environment, these are businesses that are extremely well managed and have great long-term prospects, and that's getting reflected in valuation. When it comes to smaller deals, and of course, smaller is always relative, the pricing is materially lower than it is on the larger transactions, and it also depends on what segment you're talking about, whether it's our more traditional service lines.
Speaker Change: Yes, that's a good question.
Jay Stewart Hennick: I mentioned earlier, there are large transactions and there are smaller transactions.
Jay Stewart Hennick: I'd say that the large transaction pricing is high.
Jay Stewart Hennick: And it's just the nature of the Beast.
Jay Stewart Hennick: And.
Jay Stewart Hennick: And.
Jay Stewart Hennick: What's also happening is especially in the large transaction.
Jay Stewart Hennick: Environment.
Jay Stewart Hennick: These are businesses that are extremely well managed and have great long term prospects and thats getting reflected in evaluation. When it comes to smaller deals and of course smaller is always relative.
Jay Stewart Hennick: The pricing is materially lower than it is on the larger transactions.
Jay Stewart Hennick: And it also depends on.
Jay Stewart Hennick: What segment, you're talking about whether it's.
Jay Stewart Hennick: Whether it's our more traditional service lines.
Jay Stewart Hennick: Right now, you can buy more traditional real estate service businesses at relatively low valuations for obvious reasons, capital markets as an example. But in the other two areas, the valuations, I think, are fair values, give or take, on the smaller transactions. And the beauty that we have is that we can integrate those acquisitions in different parts of the world, in different segments of the country, that add different capabilities and service capabilities to us.
Jay Stewart Hennick: Right now you can you can buy more traditional real estate service businesses at relatively low valuations for obvious reasons capital markets as an example.
Jay Stewart Hennick: But in the other two areas.
Jay Stewart Hennick: The evaluations I think are fair valuations give or take on the smaller transactions.
Jay Stewart Hennick: The beauty that we have is that we.
Jay Stewart Hennick: We can we can integrate those acquisitions in different parts of the world.
Jay Stewart Hennick: In different segments of the country that add different.
Jay Stewart Hennick: Our capability service capabilities to US for example in engineering.
Jay Stewart Hennick: For example, in engineering, we might want to reinforce one or two components of our business in a particular region. So there's a nice opportunity for us to just strengthen our business and widen our capabilities. I'm probably giving you too much detail here, but having three distinct growth engines, being able to execute on a global basis, having a strong balance sheet, and having a management team that's done this for a number of years, all puts us in an excellent position to capitalize.
Jay Stewart Hennick: Might want to augment one or two components of our business.
Jay Stewart Hennick: In a particular region. So there's a nice opportunity for us to just strengthen our business and widen our capabilities I'm, probably giving you too much detail here, but.
Jay Stewart Hennick: Having.
Jay Stewart Hennick: Three distinct growth engines being able to execute on a global basis, having a strong balance sheet, having a management team thats done this for a number of years.
Jay Stewart Hennick: And in markets like this, there are pockets of areas to capitalize on. So, you know, we're very excited about some of the opportunities we have. If we can bring them home, I think that it just takes us to an entirely new level as a company.
Jay Stewart Hennick: Paul.
Jay Stewart Hennick: It puts us in an excellent position to capitalize.
Jay Stewart Hennick: And in markets like this there are pockets.
Jay Stewart Hennick: Of areas to capitalize on so.
Jay Stewart Hennick: We're very excited about some of the opportunities we have if we can bring them home.
Jay Stewart Hennick: I think that.
Jay Stewart Hennick: Just takes us to an entirely new level as a company.
Jay Stewart Hennick: Okay.
Jay Stewart Hennick: Okay.
Jimmy Shen: Okay, thanks. And then maybe just Christian, a quick follow-up or clarification, the AUM growth on the investment management business, the five to eight billion, I think I heard you correctly. In Q1, you had $450 million in fundraising. And so if I just look at the annual number for 2024, SimpleMath 1% on 5-8, the thinking is that the additional revenue on an annualized basis would be $50 to $80 million, but weighted towards the second half of the year. I wish everything was better.
Speaker Change: Okay. Thanks, and then maybe just Christian.
Speaker Change: A quick follow up or clarification, the AUM growth on the investment management business to $5 8 billion I think I heard you correctly, you Q1, yet.
Speaker Change: $450 million of fundraising.
Speaker Change: Until if I just look at the annual number for 2024.
Christian Mayer: Simple math, 1% on five to eight.
Christian Mayer: The thinking is that.
Christian Mayer: The additional revenue on an annualized basis will be $50 million to $80 million.
Christian Mayer: But weighted towards the second half of the year.
Jimmy Shen: Right.
Christian Mayer: Is that how we should think about it.
Christian Mayer: Yeah, I think that's right. Generally, I mean, there are a few strategies like credit, where the capital does not generate fees until it gets put to work. But generally, in the, you know, traditional alternative infrastructure categories, when that capital is raised, there's a fee clock to start.
Christian Mayer: Yes, I think thats right generally I mean, there's a few strategies like credit.
Christian Mayer: The capital does not generate fees until it gets put to work.
Christian Mayer: But generally in the traditional alternative infrastructure categories when that capital is raised theirs.
Christian Mayer: The clock starts running immediately.
Christian Mayer: Yeah, and then sorry, and then some of the new capabilities that you talked about, you know, fundraising, new capabilities, and then RIA China. Those expenses are already running through. Yeah, there are charges against you in the first quarter, and some costs were incurred late last year as well on the additional, you know, mostly staffing costs.
Speaker Change: Okay, and then sorry, and then some of the new capabilities that you talked about fundraising.
Christian Mayer: Abilities in the Middle East.
Christian Mayer: And then the raw China those expenses are already running through.
Christian Mayer: In the current quarter, yes. There are there are charged against EBITDA in the first quarter and some costs were incurred late last year as well.
Christian Mayer: On these on an additional most.
Christian Mayer: Mostly staffing.
Christian Mayer: Cost.
Speaker Change: Okay, great. Thank you.
Operator: Thank you. The next question comes from Frederic Bastien at Raymond James. Please go ahead.
Christian Mayer: Thank you. The next question comes from Bastian at Raymond James. Please go ahead.
Frederic Bastien: Good morning, guys. You just added the Colliers affiliate in Philadelphia. But I was wondering if there are other non-owned affiliates or regions that are of interest to you, whether that's in the US or globally.
Frederic Bastien: Good morning, guys. You just added the colors affiliate in Philadelphia, but I was wondering if there are other non owned affiliates or regions that are of interest to you whether that's in.
Frederic Bastien: In the U S or globally.
Chris McLaren: Yeah, it's Chris here. To answer your question, there are a couple potentials in the future. So Houston, Denver, South Carolina. Those are kind of in Columbus, maybe. So just a couple. And internationally, there's not really any affiliates. The markets aren't really big enough. Okay, and maybe
Frederic Bastien: Yes.
Frederic Bastien: It's Chris here to answer your question, there's a couple potentials in the future So Houston Denver.
Chris McLaren: South Carolina.
Chris McLaren: Those are kind of in Columbus, maybe so just a couple and internationally, there's not really any affiliates.
Chris McLaren: The markets aren't really big enough.
Frederic Bastien: Okay, and maybe switching gears, still on M&A, but on the engineering side, you've been up to now pretty much active in the U.S. and started, and established a footprint in Australia. Are these sort of the regions you're going to continue to focus on in the short term?
Chris McLaren: Okay.
Chris McLaren: And maybe switching gears still on M&A, but on the engineering side, you've been up to now pretty much active in the U S and started.
Frederic Bastien: <unk> established a footprint in Australia are these sort of the regions youre going to continue to focus on in the short term.
Chris McLaren: We were open to other regions as well, Fred. You know, there are several markets that are, you know, Western type markets that are conducive to growth. There are better than, you know, most other analysts on this call. So yes, there's a number of opportunities in a number of different areas that we're pursuing. Okay, thank you.
Frederic Bastien: We are open to other regions as well Fred.
Chris McLaren: There is there are several markets that that are.
Chris McLaren: Western type markets that are conducive for growth you know this better than me.
Chris McLaren: Most other analysts on this on this call.
Chris McLaren: So yes, there is a number of opportunities differ.
Chris McLaren: Different areas.
Chris McLaren: That we're pursuing.
Kevin: Kevin Thank you.
Fred: Thanks Bruce.
Frederic Bastien: Thank you.
Speaker Change: Ladies and gentlemen, as a reminder, should you have any questions. Please press star one.
Operator: Ladies and gentlemen, as a reminder, should you have any questions, please press star 1. The next question is a follow-up from Daryl Young at Stifle. Please go ahead.
Frederic Bastien: Next question is a follow up from Daryl Young of Stifel. Please go ahead.
Daryl Young: Yeah, thanks, guys. Just on the engineering and the project management, can you remind us the high-level mix of public versus private and the context of the question just being some of the slowdowns we've seen in construction activity and commercial real estate and markets, multifamily, industrial, all those areas, and just anything we should be aware of or considering on that front?
Daryl Young: Yes, thanks, guys.
Daryl Young: Just on the engineering and the project management can you remind us the high level mix of public versus private in the context of the question does being some of the slowdowns, we have seen in construction activity in the commercial real estate end markets multifamily industrial all of those those areas.
Daryl Young: Just any anything we should be aware of or considering on that front.
Chris McLaren: Yeah, Daryl. Good question. You know, across our business, the mix is roughly 50-50 public sector and private sector. And we target that for precisely the reason that you're mentioning, because the public sector stuff is extremely stable and tends to be longer-term in nature. The private sector stuff is great work, has long-term contracts, but can be a bit more sensitive to economic conditions.
Speaker Change: Yes Darryl.
Speaker Change: Good question across our business.
Chris McLaren: Mix is roughly 50 50 public.
Chris McLaren: Public sector and private sector.
Chris McLaren: And we target that for precisely that reason that youre mentioning because the public sector stuff is extremely stable tends to be longer term in nature. The private sector stuff is great work.
Chris McLaren: So we try to balance it on that basis, but genuinely a little more profitable and more profitable. Yeah. Yeah. Yeah. So, we like that balance, and that's what we try to work towards across the business and to keep those backlogs of work at sort of levels that give us great confidence in terms of our next 12 to 18 months out.
Chris McLaren: <unk> has long term contracts, but can be a bit.
Chris McLaren: More sensitive to economic conditions, so we try to balance it.
Chris McLaren: On that basis, but genuinely a little more profit and more profitable yeah, yeah, yeah. So so we like it.
Chris McLaren: We like that balance and that's what we try to work towards.
Chris McLaren: Across across the business and to keep those backlogs of work.
Chris McLaren: At that sort of.
Chris McLaren: Level that give us great confidence.
Chris McLaren: In terms of our.
Chris McLaren: Next 12 to 18 months out.
Chris McLaren: Got it. Okay, so things are still sort of motoring along, and you're not seeing sort of any major impacts from some of these headlines we're reading?
Speaker Change: Got it okay. So things are still sort of a motor and a long introduction youre not seeing sort of any major impacts from some of these headlines we're reading.
Daryl Young: No, but if you have any business you'd like to refer our way, please give us the name, phone number, and we will be all over it. Perfect. Thanks, guys.
Chris McLaren: No, but if you have any business you would like to refer our way. Please give us the name bulk number and we will be all over it.
Daryl Young: Perfect. Thanks, guys.
Speaker Change: Okay. Thanks.
Daryl Young: Yes.
Operator: Thank you. There are no further questions. You may proceed with your closing comments.
Speaker Change: Thank you there are no further questions you may proceed with closing comments.
Jay Stewart Hennick: Thanks, everyone, for participating in the first quarter conference call. Very interesting year, great opportunities we have in front of us. But, as always, we'll have to continue to deliver one step at a time. So we look forward to speaking to you again during the second quarter conference call, and thanks for participating.
Speaker Change: Thanks, everyone for participating in the first quarter conference call.
Jay Stewart Hennick: Very interesting year, great opportunities, we have in front of us.
Jay Stewart Hennick: As always we will have to continue to deliver one step at a time. So we look forward to speaking.
Jay Stewart Hennick: Speaking to you again during the second quarter conference call and thanks for participating.
Operator: Ladies and gentlemen, this concludes the conference call. Thank you for your participation, and have a nice day.
Speaker Change: Ladies and gentlemen, this concludes the conference call. Thank you for your participation and have a nice day.
Operator: [noise].