Q2 2024 CBRE Group Inc Earnings Call
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Speaker Change: Greetings and welcome to the second quarter 2024 D. B R. E earnings Conference call. At this time, all participants are in a listen only mode.
Speaker Change: A brief question and answer session will follow the formal presentation, if anyone sure fire operator assistance during the conference. Please press star zero on your telephone keypad.
Chandni looser: As a reminder, this conference is being recorded it is now my pleasure to introduce your host Chandni looser Executive Vice President head of SG&A and Investor Relations.
Speaker Change: You may begin.
Good morning, everyone and welcome to Cbre's second quarter 'twenty to 'twenty four earnings conference call.
Chandni looser: Today, we posted a presentation deck on our website that you can use to follow along with our prepared remarks, and an excel file that contains additional supplemental materials before we kick off today's call I want to say how excited I am to have joined CBRE last month I know many of you will already and others.
Speaker Change: I'm looking forward to getting to know better in the weeks and months ahead now I'll remind you that today's presentation contains forward looking statements, including without limitation statements concerning expected benefits and synergies from the combination of Turner and Townsend and CBRE project management and other M&A transactions are busy.
This outlook, our business plan and capital allocation strategy, and our earnings and cash flow outlook forward.
Speaker Change: Forward looking statements are predictions projections or other statements about future events. These statements involve risks and uncertainties that may cause actual results and trends to differ materially from those projected for a full discussion of the risks and other factors that may impact. These forward looking statements.
Robert E. Sulentic: Please refer to this morning's earnings release, and our SEC filings behalf. So why did we considerations of the non-GAAP financial measures discussed on our call to the most directly comparable GAAP measures together with explanations of these measures in our presentation deck appendix I am joined on today's call by Bob cylinder.
Chairman and CEO and M O J O Mark do you know our Chief Financial Officer now please turn to slide five as I turn the call over to Bob.
Bob: Thanks, John and welcome to CBRE and good morning, everyone.
Bob: CBRE had a successful second quarter for three reasons first revenue profitability and cash flow exceeded our expectations second we made several sizable capital investments consistent with explicit elements of our strategy.
Speaker Change: Third we made quick material progress on the cost challenges, we identified last quarter.
Robert E. Sulentic: I'll briefly touch on all three.
Robert E. Sulentic: As a reminder.
Robert E. Sulentic: And then I reference our performance relative to expectations. We are comparing results to the outlook provided on our last quarterly call.
Robert E. Sulentic: With this in mind each of our three business segments outperformed expectations.
Robert E. Sulentic: For both net revenue and segment operating profit.
Robert E. Sulentic: Highlights included Turner, and Townsend has 18% net revenue increase and revenue growth of 13% in U S leasing and 20% in mortgage origination fees.
Robert E. Sulentic: We believe that our advisory segment is on the cusp of an inflection point.
Robert E. Sulentic: On capital deployment, we made significant commitments in the quarter in support of our strategy.
Speaker Change: Combining CBRE project management with Turner, and Townsend will create an exceptional operator, and an enormous space with significant secular tailwind given its scale. This combined business will have a profound impact on the future of CBRE.
Speaker Change: I'll discuss the implications of this move in more detail.
Speaker Change: Following <unk> remarks.
Speaker Change: We continue to make investments that take advantage of the lack of capital available for well positioned real estate opportunities by committing approximately $250 million in the second quarter. Two development projects. We believe can be harvested at favorable times in the cycle.
Speaker Change: Our investment management development and brokerage businesses enabled us to identify and execute these opportunities and our balance sheet gives us the capacity to act on them.
Speaker Change: Finally, our acquisition of direct line global enhances our capabilities and data Center management, a huge market that is growing rapidly.
Speaker Change: Regarding progress on cost actions taken in our Gws segment resulted in improved margin versus Q1.
Speaker Change: This coupled with new business wins has put us back on track to achieve full year margin expansion, along with mid teens top line growth and mid to high teens bottom line growth in this segment.
Speaker Change: Taking all of this into account.
Speaker Change: Along with our expectations of a strong second half we have increased our outlook for full year core EPS to a range of $4.70 to $4.90 up from $4.25 to.
Speaker Change: To $4.65 previously.
Speaker Change: Now Emma will discuss our second quarter results and outlook in greater detail.
Emma: Thanks, Bob and Hello, everyone.
Emma: I'll begin by highlighting the strong performance of our Brazilian.
Emma: Businesses and an improvement in transaction activity.
Emma: As a reminder, our resilient businesses include facilities management project management property management loan servicing valuation and investment management fees together. These businesses increased net revenue by 14%.
Emma: <unk> double digit organic growth and a strong contribution from M&A.
Emma: Notably, our Gws and advisory segments together delivered double digit net revenue growth for the first time in 18 months with combined leasing and capital markets revenue increasing for the second consecutive quarter.
Emma: Our Rei segment has also seen an upturn in activity contracting to sell multiple development assets at attractive valuation, which we expect to complete in the fourth quarter.
Emma: Now please turn to slide six for a review of the advisory segment.
Emma: Advisory net revenue rose, 9% with growth in every line of business except for property sales.
Emma: Globally leasing revenue exceeded our expectations led by a 13% growth in the U S, including a nearly 30% in jobs and office Robinson.
Emma: New York, a bellwether for CBRE was a key driver of the increase.
Emma: Retail, albeit relatively small also exhibited strength, while industrial activity declined.
Emma: Leasing momentum has continued in July supported by a pickup in demand in many large U S office market.
Emma: Turning to global property sales revenue began to stabilize declining only 2% on a local currency basis and 3% in U S dollar terms.
Emma: A 4% decline in the U S was somewhat offset by growth in the U K, where property values have largely agreed that.
Emma: While APAC was down in dollar terms sales revenue ticked up slightly in local currency.
Emma: Our mortgage origination business produced very strong growth supported by a 20% increase in origination fees.
Emma: Loan origination growth was driven by debt funds, which are offering short term refinancing to bridge the gap until interest rates decline.
Speaker Change: Pfizer isn't that revenue from resilient businesses rose 11% in aggregate.
Emma: And overall advisory S O P rose, 9% and net margin ticked up slightly compared with Q2 2023.
Emma: Please turn to slide seven for a discussion of the Gws segment.
Emma: The segment's net revenue rose, 16% above our expectations and we are pleased that organic growth also improved by double digits.
Emma: Gws delivered strong business win with a healthy balance of new clients and expansion.
Emma: In addition to robust sales conversion our pipeline is up more than 6% from the end of 2023, driven by technology and energy sectors.
Emma: Project management net revenue and delivered double digit growth Bob will go deeper on Turner and Townsend.
Speaker Change: But we do not believe is fully appreciated later in the call.
Speaker Change: Turning to facilities management net revenue rose, 18% and 11% on an organic basis, we committed nearly $300 million facilities management M&A in the quarter.
Speaker Change: Most of the capital went into the direct line acquisition, which positions us to accelerate our growth in datacenter management, an estimated $30 billion market that is growing rapidly.
Emma: We also acquired a small local facilities management business in Canada.
Emma: Local facilities management started as a U K focused business that had $630 million gross revenue in 2013 and is now a global business with $3 1 billion of gross revenue in 2023 eight.
Emma: A 17% compound annual growth rate.
Emma: This business has significant headroom, especially in North America.
Speaker Change: Gws isn't that S. O P margin improved by 20 basis points from the first quarter to 10, 1% better than expected, reflecting our decisive cost actions, we expect to see year over year margin expansion in our full year results as those cost actions take effect.
Speaker Change: Please turn to slide eight as I discuss the <unk> results.
Speaker Change: Segment operating profit was slightly better than expected, although significantly lower than prior year, driven by the absence of meaningful development project sale.
Speaker Change: This is consistent with our plans going into the year, but we now believe we are approaching a period when we again generated significant profits from the sale of development assets.
Speaker Change: Investment management operating profit was better than expected largely due to higher co investment return.
Speaker Change: AUM is now at more than $142 billion.
Speaker Change: The $3 $6 billion, we've raised thus far this year was offset primarily by lower asset values as well as adverse FX movement.
Emma: However, asset value declines have moderated and we have seen evidence of valuation stabilizing and certain preferred asset classes in the U S and Europe invest.
Emma: Investor sentiment continues to improve with increased appetite for both core and enhanced return strategy.
Emma: Now I will discuss cash flow and capital allocation on slide nine.
Emma: Free cash flow improved meaningfully to $220 million and conversion was nearly 90% for the quarter.
Emma: We are increasing our free cash flow outlook for the year to slightly over $1 billion and now expect to end the year with about one turn of net leverage even after deploying $1 $3 billion of capital thus far in 2024 across M&A and co investments.
Emma: Our year to date 2024 capital deployment brings our three year total to approximately $4 $8 billion.
Emma: $3 $7 billion, and M&A and over $1 billion and Rei coalescence.
Emma: M&A is integral to our strategy of enhancing our capabilities in parts of our business that are set clearly favor or cyclically resilient yeah.
Emma: Acquisitions, we executed in the quarter are clear examples of advancing the strategy.
Emma: Our investments in development have accelerated and put us in a position to harvest as much as $750 million in profits over the next four years.
Emma: Our combined in process portfolio and pipeline now stands at nearly $32 billion.
Emma: Over the last few years when many developers were on the sidelines. Our teams have taken advantage of this opportune time in the cycle to start with industrial multifamily and data center land sites and highly desirable location.
Emma: We anticipate strong growth in returns from M&A and co investments and expect to continue making highly accretive investments supported by our strong balance sheet.
Emma: Please turn to slide 10 for a discussion of our outlook.
Emma: As Bob mentioned, we are increasing our expectations for full year core EPS to the range of $4 70 to $4, 90% driven by higher revenue and S. O P. In each segment.
Bob: We anticipate a very strong fourth quarter, which should account for just over 45% of our full year EPS.
Speaker Change: Within advisory we now expect mid to high teens S. O P growth driven by stronger than expected transaction activity.
Speaker Change: For Gws, we anticipate mid teens net revenue growth and a full year op margin that is better than the 11, 3% we produced in 2023.
Speaker Change: Our improved outlook is driven by the facilities management acquisition in Q2, and the effects of our cost actions.
Emma: For Ori I, our improved S&P outlook is primarily due to the large development asset sales expected to be completed in Q4, which we believe portends an upturn in this business.
Emma: Before I conclude let me take a minute to update you on our longer term outlook.
Emma: We have increased confidence in achieving record EPS in 2025, assuming a continued supportive macroeconomic environment.
Speaker Change: A return to peak core EPS just two years following our earnings trough reflects how well he's improve the resiliency of our business compared with prior downturns, we expect even stronger resiliency in the next cycle as a result of the moves we are making.
Speaker Change: There are several reasons for our increased confidence in our outlook.
Speaker Change: First we expect continued double digit growth across our resilient businesses, which are on track to contribute $1 $8 billion of <unk> for full year 2024 up from nearly $1 $6 billion in 2023.
Speaker Change: Second while it's difficult to predict the cadence of the recovery, we can achieve record earnings without an accelerated rebound in transaction activity.
Speaker Change: Finally, we expect additional strong growth from our capital deployment plans I described earlier.
Speaker Change: Taking all of this into account, we have great confidence in sustaining a double digit long term growth trajectory.
Speaker Change: With that I'll hand, the call back to Bob Thanks, Timna I'll close with some thoughts about Turner and Townsend.
Bob: While Turner and Townsend has some similarities to traditional commercial real estate project management businesses. Its differences are significant and compelling.
Speaker Change: Beyond traditional corporate real estate project management Turner, and Townsend manages large complex programs and the infrastructure natural resources and Green energy sectors.
Speaker Change: Examples of this include their work for the Sydney, Australia Rapid transit system.
Speaker Change: The New York Metropolitan Transit Authority.
Speaker Change: Toronto in Abu Dhabi International airports, and the first new nuclear power station to be constructed in the United Kingdom and over 20 years.
Speaker Change: These programs typically span many years and include an array of individual projects.
Bob: When Turner and Townsend is project work for corporate clients. It typically involves larger more complex strategically important assignments.
Bob: For instance, they are currently program or project managing 112, Hyperscale data centers.
Bob: And the creation of multiple billion dollar plus advanced manufacturing plants around the world.
Bob: Turner and Townsend is also the world's largest cost consultancy.
Speaker Change: 10%.
Speaker Change: Since CBRE acquired our 60% ownership interest in November 2021.
Speaker Change: Turner and Townsend net revenue has grown at a compounded rate of nearly 20%.
Speaker Change: Attesting to the benefits of being part of Cbre's platform.
Speaker Change: Finally, I want to stress that the combined business.
Speaker Change: Which is positioned to provide years of resilient double digit growth is large.
Speaker Change: It is expected to generate approximately $3 5 billion of net revenue and more than half a billion dollars of Sop.
Emma: In 2024.
Emma: The business will be large enough resilient enough.
Emma: And rapidly growing enough to change the long term profile of CBRE.
Speaker Change: Now operator, let's open the line for questions.
Speaker Change: Thank you we will now be conducting a question and answer session.
Speaker Change: I'd like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue. You May press star two if you'd like to remove your question from the queue for participants using speaker equipment to may be necessary to pick up your handset before pressing the star keys.
Speaker Change: Thank you.
Speaker Change: Question is from Ronald Ken Camden with Morgan Stanley. Please proceed with your question.
Speaker Change: Hey, congrats on a great quarter to start starting with the Gws business.
Speaker Change: For the first part of the answer to your question is very anecdotal we had in the quarter, we had in leasing and more mortgage originations in the second quarter.
Speaker Change: The positive activity has continued into the first part of the third quarter and I'm going to pass it to <unk>.
Speaker Change: Let her talk a little bit more about that.
Speaker Change: But there is there is some other things that are giving us confidence so for instance.
Speaker Change: We get insight from the fact that we do a lot of different things, where not only are we an intermediary but were principal.
Speaker Change: And in our development business now we are seeing demand for projects that we didn't expect.
Speaker Change: And it's going to happen in the fourth quarter of this year that gives us confidence that other parts of the capital markets are acting that way. Obviously, there is a sentiment out there that there's going to be a couple of rate cuts or at least one rate cut this year. The bid ask spreads are narrower than they were before except may be in office.
Emma:
Emma: Our investment sales brokers and mortgage brokers or more active and have stronger pipelines than they did before.
Speaker Change: Work with office tenants, where we measure through all kinds of different mechanisms and surveys.
Toni: And Toni it's different.
Speaker Change: But theres a lot of synergy between what Turner and Townsend does and what we do and it's two way synergy there. They operate in 60 countries around the world and they're more substantial in parts of the world than we are.
Speaker Change: We've been able to introduce them to our client base and a number of places very successfully and I'm going to give you an anecdote and I'm going to give you.
Speaker Change: Some numbers one that's repetitive Turner and Townsend grew.
Speaker Change: Over Vince as Vince Clancy's tenure, 13% for many many years on a compounded basis more than a decade.
Speaker Change: They've been part of us they have grown at 20%.
Speaker Change: Anecdotally.
Speaker Change: And I mentioned earlier, we benefit from having a whole bunch of different businesses that we undertake anecdotally there are a couple of major corporate manufacturing plants that tremor.
Speaker Change: Trammell Crow company in Turner, and Townsend are cooperating on to deliver the development services work and the program management work.
Speaker Change: Billion plus dollar plants.
Speaker Change: We believe.
Speaker Change: At Trammell Crow company, and we believe that Turner, and Townsend and Vince and his team believe those projects Wouldnt have been landed by US had we not had the ability for those two businesses to cooperate so.
Emma: <unk>.
Speaker Change: Turner and Townsend would be a great public company make make no mistake about it there is a lot of enthusiasm for companies like them in the public markets today, they're very unique even rare.
Emma: Relative to other large program and project management firms and large engineering firms.
Speaker Change: Within Gws the increase is largely due to M&A.
Speaker Change: Our organic growth expectations are in line with what we expected going into the year.
Speaker Change: And we're getting to mid to high teens at the op growth for the year within Gws as well and then Rei is probably about half was the contribution for the increase in guidance and those are in those couple of very large development deals that we expect to monetize in the fourth quarter.
Emma: And when you look at the second half what Youre seeing is.
Emma: Accelerated growth across all segments advisory Youre going to see low double digit revenue growth in the second half, but very strong <unk> growth as we have very strong high incremental margins.
Emma: Across our leasing and sales business and then gws as we've talked about.
Emma: We expected very strong revenue growth in the second half as both M&A.
Emma: Picks up in the second half and as the large contracts that we won earlier this year and late last year start to be on boarded.
And again, we've done a lot of cross works, you're going to see higher than higher than our run rate margins within gws in the second half as well.
Speaker Change: Okay, great. Thank you.
Speaker Change: Thank you. Our next question is from Jade Rahmani with <unk>. Please proceed with your question.
Jade Joseph Rahmani: Thank you very much.
Capital market side could you characterize the tone and tenor from participants in the quarter property sales were still down year on year, but commercial mortgage Serge.
Jade Joseph Rahmani: Could you please provide some color on what youre seeing.
Speaker Change: So on the commercial mortgage side, we saw a strong uptick in loan origination and that was primarily for refinancing. So there was a big uptick in loans sourced from debt funds.
Speaker Change: Volumes from debt funds increased by over 70% in the quarter.
Speaker Change: And that was all refinancing they're offering very short term.
Speaker Change: To bridge to.
Speaker Change: To bridge providers until the banks and the agencies pickup.
Speaker Change: We saw a decline in originations from banks and the agencies as well, but we expect that to pick up in the second half of the errors as rates come down.
Speaker Change: Okay.
Speaker Change: On the sales side are you seeing an uptick in acquisitions, yet or still pretty subdued there most of steel.
Speaker Change: Deal flows on the debt side.
Speaker Change: We're still seeing brisk.
Speaker Change: We're still seeing we are having a slight uptick in acquisitions, but it's off such a low base, but it's not meaningful it's not a meaningful contributor to our increase.
Speaker Change: Thank you on the leasing side, many office tenants continue to shrink on average somewhere around 10, 12%.
Speaker Change: But activity was slow through the past two years you are seeing an uptick could you talk about that and also comment on retail.
Speaker Change: So on the office side.
Speaker Change: We arent, we think we've stabilized in terms of.
Speaker Change: The size of transactions and we're really seeing an uptick in volume.
Speaker Change: And we're seeing our uptick in terms of regionally we talked about it you are seeing most of that increase in New York as occupiers are transacting across larger deals, we arent seeing big movements in terms of square footage per transaction.
Speaker Change: In terms of obviously rent per transaction all of those metrics seem to have stabilized.
Speaker Change: And lastly on the Rei uptick.
Speaker Change: Is that primarily driven by multifamily I believe that's around 30% of the pipeline.
Speaker Change: Could you comment as to the percentage of gains.
Speaker Change: Are they going to be lower than historical due to the cost inflation, we've seen as well as interest rates or do you think the demand for new products is outweighing that.
Speaker Change: James Let me ask you to clarify that when you say already are you talking about development or the investment management business.
Speaker Change: Yes, sorry, I should have clarified within the travel CRO business.
James: The activity, we're seeing is across three product types.
Speaker Change: In multifamily.
Speaker Change: The stuff, we harvested in the fourth quarter is it going to be more skewed towards data centers than it ever has been before.
Speaker Change: And what happens what's happened there and again.
Speaker Change: I don't mean to be too repetitive in what I say, but because of the number of things we're doing across our platform.
Speaker Change: We ended up being in a very strong position to generate certain kind of benefits that we wouldn't other generate we wouldnt otherwise generate trammell Crow company. When you hear the headline there should developer we build.
Speaker Change: This kind of building that kind of building and we sell it but one of the things that Trammell Crow company is exceptional at is land acquisition entitlements.
Speaker Change: And then developing on the land or harvesting land sites at a profit.
Speaker Change: The development work they've done over time on the industrial side has put trammell Crow company in a position to end up with considerable amounts of land that can be used for data centers when that happens the transition from industrial land to data center land generally.
Speaker Change: Our results in pretty significant profitability and that's going to be a big part of the picture you see in the fourth quarter looking out a little further though what's really really important to know is that.
Speaker Change: There has been.
Speaker Change: Real lack of capital for securing development new development opportunities in the market. The last couple of years, we went through that ourselves third party third.
Speaker Change: Pretty capital slowed way down that started to come back significantly we've capitalized.
Speaker Change: A good number of development projects with third party capital this year, but the other thing we've done is we've come in ourselves and we've identified opportunities.
Speaker Change: In a bigger way than we have historically to use our own balance sheet to buy development land and in some cases fund components of the development process beyond the land and we are when we study. It very closely we are quite confident that we are going to be developing projects and in particular multifamily projects.
Speaker Change: Into markets, where the number of new projects coming online it has slowed down dramatically.
Speaker Change: And thats, what youre seeing or hearing in our comments about profitability coming out of that business.
Speaker Change: Can you say, whether the increase in guidance or the uptick in <unk> in the fourth quarter is predominantly due to the data center sales I have in my coverage screen Homebuilders for example, sell land parcels. They intended for residential to data center developers and they've generated.
Speaker Change: Huge gains, but those really are not as sustainable as the regular business.
Speaker Change: So the uptick in the fourth quarter is large.
Speaker Change: Hi is largely related to the data center.
Speaker Change: Asset sales.
Speaker Change: But the comment around whether that that's sustainable I think one of the one of the pieces that we really focus on in our remarks is the embedded profits within our channel CRO in process and pipeline portfolio.
Speaker Change: And we talked about $750 million of profit.
Speaker Change: <unk> are in that portfolio today at relatively conservative underwriting assumptions that we expect to generate over the next four years now that will be more weighted towards the outer years.
Speaker Change: It takes time to build these projects.
Speaker Change: But there is a a.
Speaker Change: <unk> amount of earnings embedded in our portfolio and it is very much sustainable and we do think that that element of our business is underappreciated is the amount of profit that will be coming out of that and so when you look at these data center sales that we're expecting this year, we believe that that that's a signal to us that there is enough.
Speaker Change: Churn in this business coming and there will be an uptick from here.
Speaker Change: If I could just to add onto that in June two to specifically address what you said and that $750 million does not depend on all kinds of good luck with industrial sites transitioning to be data center sites, that's a asset by asset.
Speaker Change: View of our portfolio.
Speaker Change: For the purposes that we acquired it for.
Speaker Change: Yes, we know today that it's going to move to another asset class and measuring where we think it will come out over time.
Speaker Change: Our next question is from Michael Griffin with Citi. Please proceed with your question.
Michael Anderson Griffin: Great. Thanks.
Michael Anderson Griffin: Want to go to capital deployment for my first question, obviously, you guys have been active.
Michael Anderson Griffin: So far this first half of the year, whether it's M&A or buying back stock.
Michael Anderson Griffin: Im wondering if you can give us a sense of how you weigh kind of those opportunities against each other.
Speaker Change: We're at a time, where your stock price might hit a certain dollar amount that you're like all right. It's time to really get aggressive here and just kind of how you weigh those two factors against each other color there would be appreciated.
Speaker Change: So our strategy has remained consistent in terms of capital deployment, we prioritize M&A.
Speaker Change: Focused on looking at strategic highly accretive acquisition of the drive a very strong return return and enhance our capabilities. We've been very focused on facilities management and project management and we expect both of those two.
Speaker Change: Pick up over the next few years, our pipeline is very strong.
Speaker Change: So we always caution that it's very difficult to predict M&A and we are extremely diligent in our underwriting.
Speaker Change: We focus on the deals that make the most sense and are going to drive the strongest return and then every single one of our deals.
Speaker Change: They have to they have to exceed our hurdle rate that makes sense and they have to exceed the return that we would get from share repurchases. So we look at where <unk> demonstrated and compare it to your intrinsic value and make sure that those deals exceed that and we don't have a tremendous amount of M&A and our pipeline are difficult.
Speaker Change: To execute for whatever reason and you've seen us in the past three years, we will buy back our shares.
Speaker Change: This year, we've done a lot of M&A, so far so I don't expect that.
Speaker Change: A tremendous amount of repurchases in the second half of the year, but that's simply a result of the amount of capital we've deployed this year.
Speaker Change: Can you give us a sense of kind of those hurdle rates, you're underwriting for potential M&A opportunities.
Speaker Change: So well above our cost of capital.
Speaker Change: Most of our deals I think all of our deals are under and that above the mid teens return.
Speaker Change: And that's.
Speaker Change: Pretty much all I can say about that.
Speaker Change: Great that's helpful.
Speaker Change: And then my second question was just kind of on the leasing I know you touched on it earlier.
Speaker Change: For the office side, but are you seeing this greater demand coming from all office product broadly or is it just in kind of a trophy and class a product.
Speaker Change: Then you called out New York is a relative bright spot, but I'm wondering if there are any other big markets, either domestically or globally that surprised you to the upside.
Speaker Change: We will for sure class a office space is really attractive now because so many companies are focused on the experience of their employees the productivity of their employees the presence of their employees et cetera, that's a well documented dynamic.
Speaker Change: These year to make that happen and better quality office space, but beyond New York, Yes in the tech markets, we're seeing that.
Speaker Change: Considerable pickup in <unk>.
Speaker Change: I believe we believe that it's driven by.
Speaker Change: AI and all the activity around the Bay area Austin, Texas.
Speaker Change: Et cetera, we're seeing a pickup in those markets.
Speaker Change: Great. That's it for me thanks for the time.
Speaker Change: Okay.
Stephen Hardy Sheldon: Thank you. Our next question is from Steve <unk> with Evercore ISI. Please proceed with your question.
Steve: Yes. Thanks. Good morning, most of my questions have been asked but I guess one small.
Steve: Just follow up I know the share buybacks was relatively late in the quarter, but I didn't see the actual shares bought back or an average price on the buybacks I didn't know if you have that.
Speaker Change: In the quarter. It was minimal we repurchased $50 million worth of shares at an average price of 80.
Steve: $7.
Speaker Change: Great. Thanks.
Speaker Change: Then maybe Bob just on the cost containment, obviously that that seem to maybe come through much faster than I think you expected and we expected you know maybe just speak to that a little bit and I guess, just how are you thinking about talent retention and talent acquisition at this part of the cycle and.
Speaker Change: How does that maybe a factor not affect kind of the margins going forward.
Speaker Change: Steve we have a philosophy about our business here that we want to drive this company in a way.
Steve: That we perform.
Steve: At a high level and everything we do one of the things that we're doing in that regard is focusing more and more and more.
Speaker Change: On getting rid of course don't contribute to the success of the company.
Speaker Change: Severity of every kind technology projects that don't contribute people that don't contribute.
Speaker Change: Office space.
Speaker Change: Isn't contribute and the stuff that does contribute good office space good technology good people.
Speaker Change: Aggressive buyers of those things to build our business and what's happened is and we have a transformation office that reports to amyris.
Speaker Change: I'll, let Andrew comment on that is we are we are aggressively looking for those things we can get rid of and you saw that happen in the second quarter.
Speaker Change: The stuff we need we are aggressive buyers who are aggressive buyers of land. We were aggressive buyers of talent. We brought on some spectacular talent in the last quarter.
Speaker Change: We have an aggressive technology investment program, but we are narrowing the things that we're investing in and being very careful and if you want to add to that yeah I'll add that we our transformation office is focused on making long term sustainable change in how we operate our business and so we are not focus on.
Speaker Change: <unk> cost reduction we wanted to be focused on delivering consistent operating leverage over time, you can see that margin expansion and that's not an easy thing to do but it's something that we're very focused on all of our business leaders are very focused on.
Speaker Change: So from here on out everything and focus on really driving that efficiency and as we add resources as we invest in technology as we invest in people those are extremely smart decisions. So that we know that down the road, we don't have to cut back.
Speaker Change: Great. Thanks, that's it for me.
Speaker Change: Thank you. Our next question is from Stephen Sheldon with William Blair. Please proceed with your question.
Stephen Hardy Sheldon: Hey, Thanks for taking my questions and nice work here for.
Stephen Hardy Sheldon: Youll have direct line are there other pieces you might need to pursue a comprehensive facility management solution around data centers and gws and just generally how are you thinking about that opportunity and the differentiation of your capabilities now relative to peers and others claimed in that market.
Speaker Change: Yes.
Steven: Steven to answer that question I want to back up and talk about how we think about M&A.
Speaker Change: And I think Jim and I would agree that.
Jim: There is more work we have to do on our side to get the market that invests in cbre's shares to understand how we do M&A.
Jim: First of all we don't have a group of businesses and a group of leaders.
Jim: Sits there and waits for something to come up for sale at a good price.
Jim: We were a very strategy driven company each of our businesses has a strategy for how they want to grow.
Jim: And that strategy is very attentive to adding capabilities.
Jim: <unk> be adding capabilities in areas that we think will sustainably do well in the marketplace either because they are cyclically resilient or they are cyclical secular really favor. There is no. Better example of that obviously, then Turner and Townsend. So if you look at our facilities management business.
Speaker Change: We're doing things that the marketplace, we wouldn't expect this to be.
Speaker Change: Because we've asked our leaders in the various sectors within facilities management, So manufacturing financial technology et cetera to understand their business and the capabilities that they can bid in that business that will differentiate it and make it attractive to our clients in the long run and then we go out in the marketplace.
Speaker Change: Seeking out those acquisitions so the.
Jim: The deals that you've heard us make in the last year. Those we do not do those deals through auctions, none of those deals came to us Turner and Townsend.
Jim: Done through an auction J&J wasn't done through an auction.
Jim: Direct line wasn't done through an auction.
Jim: Local FM business, we bought in Canada during the quarter wasn't done through an auction those were none of those were done through an auction.
Jim: We went to the sellers of those businesses are the owners of those businesses.
Jim: And pursued them because we thought they were a good fit we have ideas around our business, we have an increasingly well developed corporate development team led by.
Speaker Change: 714, 15 year Morgan Stanley veteran.
Speaker Change: To acquire them and we integrate them after that Thats our approach to M&A.
Jim: M&A and as a result, you should expect us to see you should expect to see us do more deals in the facilities management space and other spaces that you didn't expect because they arent highly visible by others in the market.
Jim: Got it that's really helpful. Thanks, Bob.
Speaker Change: And then just I guess as a follow up in investment management can you just talk about what youre seeing on the fundraising side right now is the environment. There changed as you look back over the last few months.
Speaker Change: Yes, we've seen a pickup activity inactivity.
Speaker Change: We're expecting.
Speaker Change: A pickup in activity.
Speaker Change: Enhanced return strategies, but we've also seen a pickup in the first half and core and core plus I think youre hearing that broadly across the market, which we think is a very positive indicator for the remainder of the year.
Speaker Change: Okay.
Speaker Change: Great. Thank you.
Speaker Change: Thank you. Our next question is from Peter Abramowitz with Jefferies. Please proceed with your question.
Peter Dylan Abramowitz: Thank you and thanks for the time I just wanted to ask you about sort of the relative stabilization and resilience versus your expectation in the investment sales market.
Peter Dylan Abramowitz: Could you just give more color on what you think is driving that.
Speaker Change: And could you comment.
Speaker Change: Give us more color on.
Speaker Change: Whether that's dry powder on the sidelines and how much kind of pent up demand. There is from from the last couple of years of pretty depressed activity.
Speaker Change: Peter you just said something Thats really important pent up demand.
Peter: When we talk about investment sales activity coming back the trading of assets coming back.
Peter: It's not going to be a circumstance, where the marketplace is going to become more attractive because rates have stabilized.
Peter: The bid ask spreads have come down.
Speaker Change: And therefore, a bunch of people.
Speaker Change: Wouldn't have otherwise been in the market are going to say Oh, its a better environment, maybe I should sell something there has been a massive base.
Speaker Change: Of assets held by people wanted to sell them for the last couple of years. There has been a massive amount of capital on the sidelines that wanted to get in and do real estate deals for the last couple of years, the buyers and sellers have been there we don't have to find them. They are there.
Speaker Change: Has to happen is the environment needs to get to a place where you're going to see people jump in and act.
Speaker Change: What's happened is the certainty around interest rates coming down has grown.
Speaker Change: The bid ask spread has narrowed.
Speaker Change: Less volatility in the market and that's why in a business like our Trammell Crow company development business, where we're a principal not an intermediary we're seeing action very real action, that's going to take place in the fourth quarter. We've been there with those assets now we're going to trade those assets because the environment is going.
Speaker Change: B right.
Speaker Change: Thanks, Bob I appreciate the color and then I wanted to ask you about specifically on the office leasing side I guess.
Speaker Change: Kind of looking at the algorithm between pricing and volume obviously volume is improving to start the first half of the year.
Speaker Change: Overall.
Speaker Change: Still seeing pricing continuing to go up on those trophy assets.
Speaker Change: And then overall in the broader market.
Bob: If you zoom out towards the trophy is rose.
Bob: Class, a minus and then commodity below that.
Speaker Change: How is pricing trending and how is that sort of affect your outlook for beef.
Bob: Leasing revenues.
Bob: Peter Amazon Good one to answer that question because in addition to all the other things. She does she actually handles our real estate portfolio and she is in the market now.
Peter Dylan Abramowitz: And so she can tell you as a consumer what that feels like.
Bob: So on the office leasing side and Bob was talking about <unk>.
Speaker Change #100: And in New York.
Speaker Change: For trophy assets.
Speaker Change: Actually in New York.
Bob: Prices are increasing but if you look broadly across our office.
Speaker Change: <unk> portfolio of transaction pricing has pretty much stabilized, but there are very.
Speaker Change: Big differences in what's happening by appetite and by quality of assets and by market.
Speaker Change: Alright, Thanks, that's all for me.
Speaker Change: Thank you there are no further questions at this time.
Speaker Change: I would like to hand, the floor back over to Bob Olympic for any closing comments.
Robert E. Sulentic: Thanks for joining US everyone and we'll talk to you again at the end of the third quarter.
Speaker Change #101: This concludes today's conference you may disconnect your lines at this time. Thank you for your participation.
Speaker Change: Okay.