Q4 2024 Colliers International Group Inc Earnings Call
Welcome to the Colliers International fourth quarter year end investors conference call.
This call is being recorded.
Speaker Change: Councillor recourse asked to advice that the discussion scheduled to take place today may contain forward looking statements that involve known and unknown risks and uncertainties.
Speaker Change: So, let's maybe materially different from any future results performance or achievements contemplated in the forward looking statements.
Speaker Change: Additional information concerning factors that could cause actual results to materially differ from those in the flu, but kicking statements is contained in the company's annual information form.
Speaker Change: 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.
Speaker Change: As a reminder, today's call is being recorded today Thursday February six 2025 and at this time for opening remarks, and introduction I would now like to turn the call over to the global Chairman and Chief Executive Officer, Mr. Jay Hennick. Thank you. Please go ahead Sir.
Speaker Change: Thank you operator, good morning, and thanks for joining us for the fourth quarter and year end conference call as the operator mentioned I'm, Jay Hennick, Chairman and Chief Executive Officer, and with me today is Christian Mayer, our Chief Financial Officer as always this call is webcast and available in the Investor Relations section of our website.
Speaker Change: Along with the presentation slide deck.
Speaker Change: In the fourth quarter, Colliers delivered robust growth with strength and momentum across all business segments.
Speaker Change: Generic revenues recorded the highest percentage increase driven by recent acquisitions in Canada, The U S and Australia.
Speaker Change: Real estate services performed strongly in both capital markets and leasing well investment management.
Speaker Change: <unk> this growth compared to the previous year.
Speaker Change: Over the past few years Colliers has become stronger and more resilient driven by three high value growth engines real estate services engineering and investment management, all supported by recurring revenues now account for more than 70% of our earnings.
Speaker Change: Looking ahead to 'twenty five we expect another solid year of growth and we're quite excited about our future prospects.
Speaker Change: Our enterprising culture continues to thrive thanks to our experienced leadership that is fully aligned with shareholders. Our global teams have long tenure.
Speaker Change: Operating in a decentralized way that is supported by long term incentive programs that foster an owner's mindset.
Speaker Change: This unique culture provide significant competitive advantages to colliers that is extremely difficult to replicate.
Speaker Change: Our new engineering platform now boasts 8000 professionals is underpinned by a strong recurring revenue base and robust contractual backlogs offering significant growth opportunities on a global basis, both internally and through acquisition we are.
Speaker Change: Also see three near term catalysts that drive even stronger growth in 2025 and beyond.
Speaker Change: In our real estate services, our capital markets business is showing cyclical recovery as interest rates and asset valuations stabilize stabilize albeit slower than we expected.
Speaker Change: While performance hasn't yet reached the 2021 peak are significantly larger scale now positions us extremely well to deliver even stronger results in the future as the market recovers.
Speaker Change: In investment management improved fund raising efforts and the launch of several new vintages of our proven investment products set the stage for a robust revenue growth and a new step up in growth and profitability as we strategically deploy new capital in new investments.
Speaker Change: Going forward.
Speaker Change: Finally, as always our 2025 outlook does not include the potential upside from additional acquisitions, which we might complete during the year and have historically been very accretive.
Speaker Change: Our pipelines remain strong and we expect to continue to scale and diversify each of our three business segments throughout the year.
Speaker Change: This year, we have also decided to accelerate our plans to streamline our investment management operations to take advantage of the synergies much faster than anticipated.
Speaker Change: This move will set the stage for future opportunities and create increased optionality as we continue to build out one of the worlds largest mid market alternative asset managers with about $100 billion of assets under management.
Christian Mayer: Supported by visionary leadership significant inside ownership and approved in 30 year track record of delivering 20% annualized returns for shareholders. Colliers is extremely well positioned to continue to create value for shareholders for many years to come now let me ask Christian to.
Christian Mayer: This financial report then we'll open things up for questions Cristian <unk>.
Speaker Change: Thank you Jay and good morning, everyone. Please note that the non-GAAP measures discussed here today are as defined in the materials accompanying this call.
Speaker Change: Revenues for the fourth quarter, our $1 5 billion up 22% relative to the prior year period.
Speaker Change: Local currency internal growth, 10% overall and was led by capital markets, which was up meaningfully against a low base in the prior year.
Speaker Change: In engineering, but you had strong gains in both the engineering and project management disciplines.
Speaker Change: The fourth quarter's adjusted EBITDA was $225 million up 14% over the prior year with internal growth and acquisitions contributed.
Speaker Change: Roughly even proportions.
Speaker Change: Our real estate services operations had 13% revenue growth led by capital markets, which was up 25%.
Speaker Change: Europe and the Americas drove the capital markets gained with sharp increases in transaction activity in office and industrial asset classes.
Speaker Change: In Asia Pacific strong year over year capital markets growth in Australia was offset by Macroeconomically driven declines in China, Hong Kong and South Korea lease.
Speaker Change: Leasing revenues were up 14% with notable increases in activity in the office industrial and retail asset classes globally.
Speaker Change: The segment's margin remained flat versus the prior year quarter.
Operating leverage from higher revenues offset by ongoing investments to recruit brokerage professionals.
Speaker Change: Engineering performed well in Q4 with overall revenue growth of 61% with a bulk from acquisitions as well as high single digit percentage internal growth.
Speaker Change: The net revenue margin increased slightly decreased slightly to 12, 8% relative to 13, 5% in the prior year period, due mainly to weather related seasonality inherent in recently acquired businesses.
Speaker Change: Investment management revenues are up 6% overall and up 1% excluding pass through performance fees as expected.
Speaker Change: Q4, EBITDA was also up 1%, while the margin was flat relative to the comparable period driven by ongoing investments in our fundraising capabilities and cost to launch New fund products and.
Speaker Change: And strategies.
Speaker Change: We raised $1 $3 billion of new capital commitments during the quarter, bringing full year fundraising to $3 8 billion as we expected.
Speaker Change: We are in the process of deploying capital raised and I started to raise for new vintages launching in 2025.
Speaker Change: Assets under management at year end were $98 9 billion up slightly from September 30th.
Speaker Change: AUM gains came from fundraising and positive mark to market adjustments and then almost all asset classes.
Speaker Change: Largely offset by asset realizations at older vintage funds with capital returned to investors.
Speaker Change: Redemption activity, which is permitted certain restrictions in our perpetual funds was modest.
Speaker Change: Turning to our balance sheet during.
Speaker Change: During the quarter, we upsized and locked in our revolving credit facility for a new five year term.
Speaker Change: We currently have over $1 2 billion of capacity to fund future growth.
Speaker Change: Our leverage ratio defined as net debt to pro forma adjusted EBITDA was two times at December 31.
Speaker Change: As expected we deleveraged during the fourth quarter through a combination of EBITDA growth and seasonally strong free cash flow.
Speaker Change: For the first half of 2025, we expect leverage to remain in the two times range tend to decline to approximately one five times in the second half.
Speaker Change: This of course assumes no material acquisitions.
Speaker Change: We are introducing our outlook for 2025 with commentary by segment to provide additional clarity.
Speaker Change: The outlook reflects currently prevailing foreign exchange rates, which are closely tied to international trade uncertainty and are a headwind to our U S dollar reported results.
Speaker Change: We.
Speaker Change: <unk>, our real estate services revenues to grow at mid single digit percentage rate.
Speaker Change: With a modest margin increase.
Speaker Change: We expect engineering revenues to be up about 30% with about one fifth of that growth attributable to internal sources.
Speaker Change: Engineering margins are expected to increased nicely from the impact of higher margin acquisitions.
Speaker Change: As well as margin expansion in our base business.
Speaker Change: Our investment management Division is beginning a new cycle of fundraising with several new flagship long dated vintages launching in 2025, which should result in higher revenue streams as we progressed through the year and into 2026.
Speaker Change: Given our continuing investments and fundraising and our accelerated operational integration plans 2025 margins are expected to remain flat or modestly down relative to 2024.
Speaker Change: We are expecting a significant step change in investment management, EBITDA and margins in 2026 as capital formation strengthens.
Speaker Change: On a consolidated basis for the full year 2025, we expect high single digit to low teens percentage revenue growth.
Speaker Change: And low teens, adjusted EBITDA and adjusted adjusted EPS growth.
Speaker Change: Okay.
Speaker Change: That concludes my prepared remarks, we will now open the call to questions. Operator can you. Please open the line.
Speaker Change: Thank you ladies and gentlemen, we will now begin the question and answer session should you have a question. Please press star followed by the one on your telephone keypad. If you wish a pump that Johanna Speedways should you wish to come to your request. Please press star followed by Gucci and if you're using a speaker phone. Please keep the handset before pressing Amy Keith.
Speaker Change: Yeah.
Speaker Change: Your first question comes from the line of Anthony Powell alone from J P. Morgan. Please go ahead.
Anthony Powell: Great. Thanks, good morning.
Anthony Powell: Wanted to start on the engineering side and wondering if you can give us a little bit more color on how integration is going.
Anthony Powell: Where you may have seen any headwinds.
Anthony Powell: And just movement toward pushing price in that business and just how it's coming along.
Anthony Powell: Yeah.
Anthony Powell: Integration has been relatively simple actually because Anglo is a national player in Canada. There was no overlap with the U S business and it was a beautiful.
Anthony Powell: Ah.
Anthony Powell: <unk>.
Anthony Powell: Beautiful attachment to our base business the only integration that we're dealing with in the engineering area is Australia New Zealand.
Anthony Powell: Where we are continuing to build out a solid and more significant platform, it's going well the results are better than expected.
Anthony Powell: But over the next couple of years, we expect.
Anthony Powell: More growth and more.
Anthony Powell: <unk> and technology to be sort of consistent with what we have both in Canada and the United States. So.
Anthony Powell: We're excited about about that but integration is has not been an issue for us in engineering.
Speaker Change: Is that investment Youre, making is that a margin headwind in the near term just trying to understand how to think about.
Anthony Powell: Any pickup there in 'twenty five.
Tony: Well, Tony the margin impact.
Tony: In engineering, it will come from the higher margin acquisitions completed during 2024 and.
Tony: And also some organic margin improvement.
Tony: Some of these integration efforts in Australia that they do take time and they do take energy and they do have.
Tony: Despite adverse margin impact.
Tony: We're also integrating our newly acquired <unk> business in the U S and that will take place over the next 12 months and there is considerable work to do to integrate these tuck in acquisitions, but not meaningfully impactful on our on our margins.
Speaker Change: Okay and then just my my second question just in investment management can.
Tony: Can you give us any just.
Tony: Capital raising goals or net sort of AUM. You think you should end up with when you consider the new products, you're launching as well as net of any sort.
Tony: Liquidations.
Tony: Vehicles may be put aside.
Market.
Tony: <unk>.
Tony: Yes, Toni as I mentioned, we raised $3 8 billion of capital in 2025, which is an increase from sorry in 2024, let me say that again, we raised $3 8 billion in 2024, which is an increase from 2023.
Tony: Conditions have obviously been challenging the last couple of years. So that's the context.
Tony: For 2025, we are expecting to raise between five and $8 billion of capital.
Tony: And this isn't new vintages.
Tony: Funds. So these funds are going to have first closes and the <unk>.
Tony: Mid year to late year.
Tony: This year, and then accelerating with additional fundraising as we head into 2026.
Tony: So as I mentioned.
Tony: Hey.
Tony: A building year with a new fundraising cycle.
Tony: Starting and we expect fundraising to pick up meaningfully.
Tony: Into late 'twenty, five hopefully and certainly in 2026.
Tony: Okay. Thanks for the time.
Speaker Change: Thank you and your next question comes from the line of Stephen Macquarie Go from BMO capital markets. Please go ahead.
Speaker Change: Thank you good morning, guys.
Speaker Change: Just wanted to follow up on the engineering business, which had a nice quarter and it seems like a decent outlook.
Speaker Change: Can you talk a little bit about just the bargain dynamic in the first quarter and then and then you talked about just the margin expectation for 2025, and just curious if you can put some color around how that is expected to evolve and what level that could potentially get to this year.
Speaker Change: Yes so.
Stephen our Q4 margin was impacted by newly acquired businesses.
Speaker Change: During the year and as you know in globe is that significant Canadian engineering firm and has weather related seasonality attached to it.
Speaker Change: So that is a and impacts that we saw in the 2024 quarter, but not in the 2023 quarter.
Speaker Change: So as we look ahead to 2025.
Speaker Change: We will benefit from a full year effect.
Speaker Change: Acquisitions, which are at higher margins than the base business. So certainly expect.
Speaker Change: A.
Speaker Change: 150 basis point or so margin increase in 2025 in the engineering segment.
Speaker Change: On an overall basis the other thing you need that.
Speaker Change: Think about here is that we report our revenues on a gross basis.
Speaker Change: If you look at our revenues on a net basis and we did provide some information in our materials, but what those net revenues.
Speaker Change: Our.
Speaker Change: Our engineering segment, our margin is two to 300 basis points higher on a net revenue basis. So we're going to continue to provide it.
Speaker Change: And if our S. Also theres the other pieces when you're comparing us to the Canadian engineering firms.
Speaker Change: Under our forest they do not include rent expense.
Speaker Change: As at an expense against their EBITDA, so that again raises their margin profile relative to our U S. GAAP reported margin by another 100 to 200 basis points.
Speaker Change: Right Okay.
Speaker Change: That's helpful.
Speaker Change: And then just turning to the investment management business.
Speaker Change: You characterized this year as a new.
Speaker Change: New cycle of fundraising and it sounds like you have a lot of.
Speaker Change: A lot of initiatives on the go.
Speaker Change: As we think through the margin impact this year and next year do you foresee a scenario where investment management margins kind of get back into that.
Speaker Change: 445% range in 2026, once you've completed your fund raising and you really see that.
Speaker Change: Revenue pick up.
Steve: Steve the answer is yes.
Speaker Change: See those margins improving.
Speaker Change: And principally today were impacted by additional investments in fundraising.
Speaker Change: Integration.
Speaker Change: Which we've accelerated the process on so those are costs headwinds given the relatively modest revenue growth we've seen.
Speaker Change: But as that revenue growth accelerates with fund raising our margins should increase.
Speaker Change: In lockstep with that and certainly we would hope to be back at that mid Forty's.
Speaker Change: Hi, <unk>.
Speaker Change: Percentage margin over the next year or two.
Speaker Change: Steve I'd add I'd add something to that.
Speaker Change: <unk> been a long analyst but.
Speaker Change: Yeah.
Speaker Change: We are being very aggressive in this segment this year.
As I sort of indicated in my comments there is a massive opportunity we have a significant business with great strategies great.
Speaker Change: Great results for our investors.
Speaker Change: And the fact that fund raising has been soft across the board I am just going to give you some additional color to it across the board when it's done.
Speaker Change: It has brought our strategies closer together the leaders of each of the strategies closer together and they spent a lot of time talking about synergies fundraising and a variety of other initiatives that they believe that they can.
Speaker Change: Significantly benefit from going forward, if they took certain strategic steps. These are steps that we always had anticipated as you know and building our platform. We always focused on doing it in partnership with the operating management teams, but what's happening interestingly in this.
Speaker Change: Segment is theyre, all coming together much faster than we expected primarily because of the macro conditions and thats, creating huge opportunity so although.
Speaker Change: And yes, we have new.
Speaker Change: New products launching this year, which will help our business and will return our margins to 45%, but I think our.
Speaker Change: Our overall platform will accelerate materially.
Speaker Change: Over the next 18 months and really positions us beautifully going forward based on what we're seeing.
Speaker Change: Across the board in this segment of our business that could include name change that could include an integrated leadership team all of which creates more flexibility for us all of us.
Speaker Change: All of this creates new optionality for us and this business.
Speaker Change: As you know is highly valuable.
Speaker Change: We are.
Speaker Change: <unk> on an ongoing basis by by men.
Speaker Change: That would love to have this platform as part of their organization.
Speaker Change: On the other hand have a tremendous management team that believes that they can take this business to new heights.
Speaker Change: And we made we made the executive decision to accelerate our players and get ourselves ready for 26 and beyond.
Speaker Change: And.
Speaker Change: Theres lots of exciting things happening so we're quite excited about it.
Speaker Change: It will impact.
Speaker Change: Our margins I believe in 25, not really don't really care about that too much to be honest as long as long term shareholders.
Speaker Change: And business builders, but this will translate into huge value I think in the years to come.
Speaker Change: Yeah, Okay, well, that's great color Jay Thank you and obviously consistent with your long term approach.
Speaker Change: So thank you very much for that color, maybe just one more question if I could just on the recruiting investments in the real estate services business I mean, what do you need to see to see returns on those investments.
Speaker Change: Well, we're seeing the returns already youre seeing strong leasing results.
Speaker Change: The one thing Thats.
Speaker Change: Thats.
Speaker Change: That's become clear to us to over over the course of time is we have created again I mentioned it we've created a unique culture, which is which has been part of our way of operating for many many years.
Speaker Change: Recruiting has been right up there colliers is.
Speaker Change: Hands down the third most recognized.
Speaker Change: Firm in the World we operate in every city, we look at this business not dissimilar to the to the.
Speaker Change: Accounting industry I'm not sure there's much difference between price Waterhouse, Deloitte and the other accounting firms. There is for sure not that much difference between CB Jones Lang and Colliers our professionals are as good as their professionals, we have leading market positions in every major market around the world.
Speaker Change: And and we have a platform that continues to grow market for market despite that.
Speaker Change: The headwinds that this industry is under.
Speaker Change: So if.
Speaker Change: If we see capital markets returning as just one example.
Speaker Change: Two previous levels huge upside for us, but we also are taking advantage of other opportunities within that business to continue to accelerate our growth and.
Speaker Change: I think youll see that coming through in 'twenty, five and beyond as well.
Speaker Change: That's great. Thank you John I appreciate the color.
Speaker Change: Thank you and your next question comes from the line of Stephen Sheldon from William Blair. Please go ahead.
Speaker Change: Okay.
Stephen Sheldon: Hey, Thanks for taking my questions first one here just following up on Europe investment management commentary Jay.
Stephen Sheldon: If you think of if you talk about kind of operational integration can you give more detail about what that really means how integrated do you want those assets to be what functions are you wanting more integrated and just generally how this because this configuration. The iam segment for better financial contribution looking forward is it more about better.
Stephen Sheldon: Our top line growth with better distribution or is.
Stephen Sheldon: There is a pretty big is there potential for a margin uplift to I mean, you've kind of already talked about getting to mid <unk> mid <unk>.
And margins, but just how are you.
Speaker Change: Just more detail there I guess on the operational integration.
Speaker Change: Well the interesting part is strategy for strategy is not going to be integrated they're led by tremendous investors that have delivered superior returns.
Speaker Change: Over over many many years, what we are integrating as more of the back office.
Speaker Change: Regulatory.
Speaker Change: We're spending lots of time on.
Speaker Change: On fund raising.
Speaker Change: <unk>.
Speaker Change: And in particular.
Speaker Change: In particular.
Speaker Change: No sense for us to be fund raising.
Speaker Change: Three or four different strategies through three or four different brands.
Speaker Change: Investors investors want to consolidate.
Speaker Change: Their investment decisions and so we're looking at more of back office synergies.
Speaker Change: Our investment results have been stellar.
When compared to others and so it's all around how do we do this in a more streamlined way. It is it has been it has been the colliers wafer ever to look at simplicity and streamlining while leaving the.
Speaker Change: People on the frontline that are the <unk>.
Speaker Change: Entrepreneurs the investors to continue to deliver on on the the positive results that they have been generating so.
Speaker Change: I think I think.
Speaker Change: Youll see in the next year or two.
Speaker Change: Much of the back office come together.
Speaker Change: And the synergies created around things that are ancillary to the.
Speaker Change: To the investment principles that have made our business is as strong as they are.
Speaker Change: Got it makes a lot of sense and then just as a follow up within the Rds kind of mid single digit guidance for 2025 can you frame roughly what.
Your underlying assumptions are for the brokerage segment.
Speaker Change: Think about leasing and capital markets.
Speaker Change: How conservative do you think you've been with your assumptions at this point and are you assuming any push out of activity in the first half I guess, given some of the noise in the market right now.
Speaker Change: Things like the trade war rate uncertainty et cetera.
Speaker Change: Yes, sure Steven I mean, all those things.
Speaker Change: The trade.
Speaker Change: Issues that are being being raised.
Speaker Change: It has resulted in an uncertainty.
Speaker Change: Amongst.
Speaker Change: Occupiers and investors, particularly.
Speaker Change: Industrial occupiers and investors that relate to the trade in goods across borders so that.
Speaker Change: Thats something that were certainly thinking about we're also seeing the trade impacted.
Speaker Change: Effect on exchange rates and.
Speaker Change: Our growth as we sit here today at prevailing exchange rates, it's going to be impacted by 2% to 3%.
Speaker Change: In 2025 with real estate services half our revenue is being generated outside the U S and at the same and engineering just just on currencies fluctuate on currency alone. So we're thinking about all these things.
Speaker Change: As we look at our real estate services outlook.
Speaker Change: And we're also in terms of bifurcated the growth expectations of capital markets I would say at a high single digit growth expectation coming off a low basis.
Speaker Change: Mid single digits for our leasing and <unk>.
Speaker Change: Sourcing, but certainly.
Speaker Change: Those percentage growth.
Speaker Change: Impacts alright.
Speaker Change: Alright, those percentage growth figures that I quoted.
Speaker Change: Sure.
Speaker Change: Being influenced by current trade policy and.
Speaker Change: <unk> conditions.
Speaker Change: Steve.
Speaker Change: I think it could it could be higher.
Speaker Change: It will just have to see how things roll out.
Speaker Change: We would have expected we would've expected in capital markets, which did nicely in the fourth quarter. I think we were we were hoping it would be doing a little better than it did.
Speaker Change: And.
Speaker Change: Things could change, but it's.
Speaker Change: It relates to interest rates it relates to asset valuations gaps between buyers and sellers. There's a lot of factors that could change, but when it changes it could make a material positive impact on our.
Speaker Change: On our numbers for 25 and beyond.
Speaker Change: Got it very helpful. Thank you guys.
Speaker Change: Thank you.
Speaker Change: Thank you and your next question comes from the line of Frederic Bastien from Raymond James. Please go ahead.
Frederic Bastien: Hi, good morning, everybody.
Frederic Bastien: Just wanted to touch on the engineering business and you're calling for a fairly healthy margin expansion.
Frederic Bastien: Is.
Frederic Bastien: <unk> do you expect that to be linear over the next few quarters or is it would it be backend loaded in the back half just wanted to get some color as to the cadence of the margin improvement. Please.
Frederic Bastien: Yes, Frederic it's a good question there is a little bit of seasonality in our engineering business saw a little bit of that in Q4, we'll see a little bit more in Q1.
Speaker Change: The seasonal peak for person engineering, our Q2 and Q3.
Frederic Bastien: So I think the margin.
Frederic Bastien: That we referenced youll start to see the full effect of that in Q2 and Q3 and also in Q4 going forward as we finished the year 2025.
Okay and then.
Frederic Bastien: The.
Speaker Change: Just wanted to touch on the organic growth expectations that you have for that business.
Speaker Change: The big comps, they're all kind of guiding for multiyear.
Speaker Change: <unk> and the <unk>.
Speaker Change: And then two I would say anywhere from 5% to 8% is that sort of the ballpark that you're also aiming for.
Speaker Change: Yeah, Yeah absolutely.
Speaker Change: Any any additional color on that.
Speaker Change: <unk> segment I mean the.
The U S still in your business.
Speaker Change: Would that be.
Speaker Change: Parable in other markets.
Speaker Change: Yes, I think.
Speaker Change: Yes.
Speaker Change: The markets, we operate in particularly in the engineering space.
Speaker Change: Canada U S Australia.
Speaker Change: Have similar things going on with long term tailwind.
Speaker Change: Infrastructure spending.
Speaker Change: There is a bit of noise about some of the.
Speaker Change: Government spending in the U S. Today, but we think that theres going to be immaterial.
Speaker Change: Mike caused by the timing, but it shouldnt be material to <unk>.
Speaker Change: The long term trajectory.
Speaker Change: Our business and.
Speaker Change: In this business as you know Frederic we have.
Speaker Change: Backlogs of work.
Speaker Change: And clients.
Speaker Change: With significant.
Speaker Change: Ongoing needs for.
Speaker Change: For services.
Speaker Change: <unk> technical services around.
Speaker Change: They are various real assets that they have.
Speaker Change: Located across across the continent.
Speaker Change: And in Australia, So we feel pretty good about our prospects.
Speaker Change: Thanks for that and thank you for breaking down.
Speaker Change: The net revenues it is helpful to us.
It's up.
Speaker Change: Thank you and the next question comes from the line of Liam.
Speaker Change: From Stifel. Please go ahead.
Speaker Change: Hey, good morning, everyone.
Speaker Change: I wanted to ask first about the small architectural.
Speaker Change: Design acquisition that you did in December of empty too I recognize it's a small deal but I'm just curious if it's something you see potentially spooling up into a bigger platform in the years ahead or is it really just to augment the engineering services.
Speaker Change: Okay.
Speaker Change: It's to augment the engineering services. This particular architecture firm that we acquired although it's.
Speaker Change: Its framed as an architecture firm.
Speaker Change: Better than 50% of its revenue is more approach Act program management for.
Speaker Change: For large.
Speaker Change: Logistics providers.
Speaker Change: Across the U S and a very complementary to the rest of our business and engineering as well so.
Speaker Change: I think what's happening in that entire sector is that.
Speaker Change: The definition of what engineering is continues to widen and they become more multi disciplined professional services firms that do a variety of things.
Speaker Change: And as we continue to grow and scale that business, we're seeing new.
Speaker Change: <unk>.
Speaker Change: Our services that you might call engineering services, but they are highly specialized in.
Speaker Change: In aviation.
Speaker Change: Marine and a variety of other things that are.
Speaker Change: Non traditional engineering type firms. So that's the beauty of this this segment. It is so wide and expanding and from our perspective global in nature.
Speaker Change: With.
Speaker Change: And you've heard this before we have strong leadership teams globally. So we can easily execute when the opportunity is there and integrate as we have done so well over many many years. So we're quite excited about this segment.
Speaker Change: That's one of the reasons why we started to split ourselves into three different operating segments and growth engines, because the opportunity in this particular, one in the engineered calling in engineering.
Speaker Change: Is so wide and vast and.
Speaker Change: We have aspirations of having it.
Speaker Change: A a much bigger segment over the next five years.
Speaker Change: Got it okay. Good color. Thank you and then one other on investment management, you can give us some good color about what's going on there, but I often hear from investors about just the spectacular amounts of money being raised by some of the Super majors.
Speaker Change: I'm curious from a competitive standpoint on fundraising.
Speaker Change: What differentiators are you seeing or what are you hearing from Lps about the appetite for.
Speaker Change: Our mid tier.
Speaker Change: Investment management partner, such as yourselves in just a few thoughts there.
Speaker Change: You raised an excellent point and.
Speaker Change: And I just want to reiterate some of the things that I've said and perhaps.
Speaker Change: And the little bit of a different way.
Speaker Change: Let's start with.
Speaker Change: We're a mid market alternative asset managers so.
Speaker Change: We excel in mid market transactions as opposed to the <unk>.
Speaker Change: Biggest types of transactions not that we can't do them, but.
Speaker Change: Our networks are such that and we believe that we can get better returns in the mid market than in the large markets. So so that's that's one thing that I would emphasize the other thing that.
It has become clear as fund raising has softened.
Speaker Change: For everybody except for.
Speaker Change: Except for the larger players who have other advantages.
Speaker Change: So.
Speaker Change: So for example, some of the larger ones you hear about all of this money that they raise but theyre all or most of them are significantly in the insurance business. So as they raise capital. They include money that they're allocating for their insurance operations to their investment management operations.
Speaker Change: It skews it skews the excuse the numbers.
Speaker Change: Our particular case and this is one of the reasons why we are accelerating our efforts.
Speaker Change: <unk>.
Speaker Change: Our largest our largest division there is Harrison Street.
Speaker Change: And.
Speaker Change: But but we have three other very significant.
Speaker Change: Investment management and operations.
Speaker Change: Led by exceptional business leaders.
All have independent fundraising.
Speaker Change: Teams.
Speaker Change: And they all approach similar Lps and institutions looking for capital.
Speaker Change: And so.
Speaker Change: Bringing some of that together some of that fund raising effort together.
Speaker Change: Under one leadership team for example.
Will give us we believe a significant.
Speaker Change: Competitive advantage.
Speaker Change: And is one of the reasons that's driving.
Speaker Change: This move too.
Speaker Change: Two to streamline this business and get it ready for.
Speaker Change: Phase two of its growth.
Speaker Change: Already a $100 billion in <unk>.
Speaker Change: Assets under management or just under.
Speaker Change: It has exceptional results for Lps. It has tremendous leadership at every level our infrastructure business now has approximately 30% of our overall business, which is significant traditional real estate is.
I think only 20 or 22% of our business. The rest of world is in alternatives. So we're in very very interesting.
Asset classes.
And.
Speaker Change: We are.
Speaker Change: To put it in to put it in.
Speaker Change: My sort of way where company building right now.
Speaker Change: <unk>.
Speaker Change: We believe coming out of this we will have an exceptional platform.
Speaker Change: That will be.
Speaker Change: Positioned beautifully to continue to accelerate its growth in the years to come and we're excited about the steps that we're going to take having said that as Christian already alluded to it it's going to cost a little bit of money in 2025 to do that and.
Speaker Change: We're fully prepared to to make the changes necessary to position.
Speaker Change: Ourselves for the next phase of growth I hope that helps to provide some additional color that you are asking for.
Speaker Change: But it's exciting stuff.
Speaker Change: And it's the type of types type of type of things that.
Speaker Change: Strong and bold leadership have to do in order to create value for shareholders over the long term as we've done for many years.
Speaker Change: No that's great color. Thanks, Thanks, very much Jay.
Speaker Change: Hop back in the queue.
Okay.
Speaker Change: Thank you and your next question comes from the line of Julian <unk> from Goldman Sachs. Please go ahead.
Julian: Hi, Thank you for taking my question.
Speaker Change: Jay maybe still on investment management, you mentioned all of the streamlining and integration bolstering your optionality around the business I guess does this bring forward the feasibility of a spin off or a sale of the business and sort of over what timeframe are you sort of considering that you need to see.
Speaker Change: Phase two of AUM growth and EBITDA growth before you would consider separating off the business.
Speaker Change: Okay.
Speaker Change: No decisions have been made around that but surely putting this together the way it does create that optionality, but yes, I think I think you're absolutely right.
Speaker Change: We need to see momentum and.
Speaker Change: And we need to see sort of the step up in revenue growth and profitability because as you know.
Speaker Change: As new as new vintages hit the market new products hit the market and.
Speaker Change: And we raised capital.
Speaker Change: That's that's really phase one phase two is let's put that capital to work in deals that are going to generate alpha.
Speaker Change: And once we see that happening and we're comfortable that.
Speaker Change: That.
Speaker Change: That we have the momentum we want.
Speaker Change: We can then decide what the next steps are the other thing and again I'm, probably going too far out of my skis here, but you'll understand.
Speaker Change: Is that.
Speaker Change: The optionality that it creates is not just.
Speaker Change: Potentially to spin this off but also to bring together other.
Speaker Change: Strategies that might be a gap in our.
Speaker Change: In our group of.
Speaker Change: <unk>.
Speaker Change: Our business group.
Speaker Change: Group of strategies today. So for example, we have a very small debt.
Speaker Change: Group debt.
Speaker Change: That is the.
Speaker Change: Is the the hottest product right now not sure that that is where we would necessarily want to be maybe two years ago. We would have wanted it to be there.
Speaker Change: But it opens up lots of opportunity for others to join our Crusade to create this wonderful business that we have.
Speaker Change: We have had several conversations with with many people.
Speaker Change: <unk>.
Speaker Change: It's just the next step in the development.
Speaker Change: <unk>.
Speaker Change: This very interesting Midmarket alternative asset manager.
Thank you that's really helpful.
Speaker Change: Then one more maybe on capital markets. When we think of this sort of drop off in growth versus.
Speaker Change: The relatively strong growth we saw in the fourth quarter versus high single digit sort of baked into guidance for 2025.
Speaker Change: How much of that is just sort of uncertainty in.
Not knowing the unknowable versus how much of that is real sort of drop off youre seeing in current deal activity or have seen in December and January is sort of we got past some of this rate lock activity in September and October.
Speaker Change: Julian.
Speaker Change: Deal activity continues to be tracking reasonably well however, you have got.
Speaker Change: A lot of these macro things in the market.
That are causing it.
Speaker Change: Certainly as we speak.
Speaker Change: Trade policy issues and that first foreign exchange, there's another one that's a pretty meaningful headwind.
Speaker Change: The 2% to 3% growth just from that so we're trying to take a cautious approach here on the full year. We don't know how things are going to unwind, but we know we are well positioned.
Speaker Change: Have a stronger and bigger team than we've ever had in our capital markets business.
Speaker Change: So and they are highly motivated and properly aligned to generate.
Speaker Change: Revenues so.
Speaker Change: We will see hopefully we outperform these.
Speaker Change: The outlook that we've put in.
Speaker Change: In front of me.
Speaker Change: The other thing I would add to that as clients want to transact.
Speaker Change: They are professionals are busier now than ever our debt capital people are busier now than ever.
Speaker Change: <unk>.
Speaker Change: But theyre not ready.
Speaker Change: Some are already.
Speaker Change: But theres still a gap between buyers and sellers.
Speaker Change: Interest rate fluctuations interest rate fluctuations longer term debt all of those things are impacting the decision. So we have.
Speaker Change: We have a buyer buyer group that is keen to transact but.
Speaker Change: They're just not.
Speaker Change: Coming at the velocity that we were hoping that they were going to come now that could change very quickly everyday.
Speaker Change: We read things in the paper about.
Speaker Change: You know.
Speaker Change: The government's view on long term interest rates versus short term interest rates and so on so we'll see what happens.
Speaker Change: We'll see what happens, but there is definitely a buying.
Speaker Change: Mentality out there right now and we're we're hoping it translates.
Speaker Change: Thank you that's very helpful.
Thank you and your next question comes from the line of James Shannon from RBC Capital markets. Please go ahead.
Speaker Change: Thank you sorry, just to follow up on the investment management again I thought your comments were interesting and I just wanted to clarify on the.
Speaker Change: When you talked about the other optionality being sort of others joining the platform.
Speaker Change: Is the thinking that the fund raising and back office, our integrated it would be easier to do M&A for say.
Speaker Change: Mid market credit asset management to latch onto the platform is that the thinking there.
Speaker Change: And then in terms of your investment that you are currently doing today.
Speaker Change: Are you also sort of hiring personnel.
Speaker Change: Position the platform to launch new products, and new strategies and <unk>.
Speaker Change: Sample I saw Harrison Street clothes in a data center fund because that that.
Speaker Change: We sort of think investment that you're making into the platform.
Speaker Change: So the answer to the second question is yes.
Speaker Change: New products.
Speaker Change: People to drive those new products Harrison Street as you say has been successful with their first data Center data Center data Center fund they have been in the data center business for many years, but it's been part of their open ended our closed ended funds. So this is not a new product for them, but it's a new dedicated funds.
Speaker Change: Which is which is which is interesting.
All of the integration that I talk about the streamlining that I talk about has nothing to do really with <unk>.
Speaker Change: <unk> acquisitions joining.
Speaker Change: The platform.
Speaker Change: We should be doing that in any way.
Speaker Change: It is to set us up to be a stand alone.
Business.
Speaker Change: Right now there is four different platforms that operate essentially independently, which was what our strategy was in 2018, when we began putting together this wonderful asset that we have buried in colliers.
Speaker Change: We're really accelerating some of the earn outs have all been been most of the earn outs I think there's one left have all been extinguished one way or the other most of have been paid.
Speaker Change: In full so people have achieved certain certain targets, but now is the time to to bring them together and to and to really capitalize on the synergies and the beauty is.
Speaker Change: In some respects the softness in the marketplace has caused each of the teams to be much more open minded about doing things together and so we're excited about lots of lots of discussion that's taking place.
Speaker Change: <unk> action.
Speaker Change: <unk> of things, which you'll hear about in the coming months.
Speaker Change: And we're.
Speaker Change: We are hopeful that coming out of 25.
Speaker Change: We will have a.
Speaker Change: A.
Speaker Change: Business that is.
Speaker Change: More I would say unified.
Speaker Change: Than it currently is.
Speaker Change: Okay.
Speaker Change: And then my second question is just on the $5 billion to $8 billion of fund raising expected for 'twenty five.
Speaker Change: What does your.
Speaker Change: When does your guidance assume.
Speaker Change: Five.
Christian Mayer: Well, that's Christians guidance I would say that the the teams themselves believe they will be raising more capital than that but thats the guidance.
Speaker Change: Sure.
Speaker Change: Jimmy.
Speaker Change: The numbers I quoted tie into our.
Speaker Change: Projections for revenue and EBITDA.
Speaker Change: Okay.
Speaker Change: Okay Alright.
Speaker Change: I'm sorry, one last thing you talked about the new vintage funds. There can you talk about like how many funds are being launched in the target size of this.
Speaker Change: Good fun.
Speaker Change: I think there's there's five new five new vintage funds, meaning funds that have been in the marketplace before.
Speaker Change: There are several others that are new products like the Harrison Street data Center Fund for example.
Speaker Change: Basalt is created.
Speaker Change: Its own data its own.
Speaker Change: Yeah.
Speaker Change: Solar.
Speaker Change: Solar and wind.
Speaker Change: Our strategy, which is which is new for them.
Speaker Change: Also some infrastructure debt products that they're bringing to market early days.
Speaker Change: But.
Speaker Change: These are the types of products that that their Lps and other investors have been asking for this is expertise that they already have in house.
Speaker Change: And.
Speaker Change: And there are natural extensions.
Speaker Change: To their businesses so.
Speaker Change: In the case of the.
Speaker Change: In the case of Rockwood as an example, there.
Speaker Change: They are expanding their multifamily.
Speaker Change: Their multifamily funds has been very successful with that.
Speaker Change: And also their debt.
Speaker Change: Primarily real estate debt.
Speaker Change: Initiatives at all.
Our urging are up considerably over the past.
Speaker Change: 12 months.
Speaker Change: So lots of lots of new things coming on stream.
Speaker Change: And then as you know the new things do take time to mature in the marketplace. So you want to get them out there there is generally.
Three or four Lps that are keenly interested in then.
Speaker Change: We are we execute on a few transactions and hopefully build from there.
Speaker Change: Alright, thank you.
Speaker Change: Okay.
Speaker Change: Thank you and your next question comes from the line of Himanshu Gupta from Scotiabank. Please go ahead.
Speaker Change: Thank you and good morning.
Speaker Change: So first on the real estate services, how do you mentioned mid single digit growth for this year.
Speaker Change: Does that already include <unk> negative impact from FX.
Speaker Change: Yes, you match with net that's net of the negative foreign exchange impact I think we're showing you numbers that.
Speaker Change: We expect to deliver based on todays prevailing FX rates.
Speaker Change: Got it okay. Thank you.
Speaker Change: Do you think those real estate services.
Speaker Change: Segment, most impacted on the FX front.
Speaker Change: Probably the least and like in general.
Speaker Change: Yes.
Yeah.
Speaker Change: He meant you I am is the least impacted by foreign exchange.
Speaker Change: The majority of the fund there are denominated in U S dollars and the fees are denominated in U S dollars.
Speaker Change: But I would say that our real estate services and engineering.
Speaker Change: Each have a.
Speaker Change: 50% of their revenues in currencies other than U S. Dollars. So these are operations in Canada, Australia, Europe U K so.
Speaker Change: These currencies are all.
Speaker Change: Being devalued routes to the U S dollar today and that's what we're talking about.
Speaker Change: Got it okay. That's helpful.
Speaker Change: And then on the capital markets and thanks for the commentary so far.
Speaker Change: But is it fair to say that it's becoming another a second half story.
Speaker Change: The assumption of high single digit is it mostly in the back half in terms of the company and maybe a slower first half.
Speaker Change: Well I mean, you mentioned the business historically.
Speaker Change: Seasonal toward the fourth quarter.
Speaker Change: That's just the way the industry operates so we're going to see outsized growth in the fourth quarter.
Speaker Change: So.
Speaker Change: I think thats.
Speaker Change: Something to keep in mind here.
Speaker Change: Here we.
Speaker Change: We are cautiously optimistic that we will have capital markets growth in each quarter.
Speaker Change: A meaningful amount.
Speaker Change: <unk>.
Speaker Change: So we'll have to wait and see but that skewed towards the fourth quarter as a natural part of the business.
Speaker Change: Okay fair enough.
Speaker Change: And then on the.
Speaker Change: The investment management.
Speaker Change: And I think $5 billion to $8 billion of new capital.
Speaker Change: Do do you expect some reduction here as well.
Speaker Change: End of life funds to offset this kind of capital release.
Speaker Change: Mid single digit assumption.
Speaker Change: Yes.
Speaker Change: I mentioned in our in our.
Speaker Change: Thinking here, we do expect our AUM.
Speaker Change: AUM to increase through the year, we were just shy of 100 billion, we expect at some point during 2025.
Speaker Change: Meaningfully pop through that the 100 to 100 billion level.
Speaker Change: So I think the fundraising will be additive.
That of course.
Speaker Change: Mark to market activity, we expect will be positive and was positive in almost all cases.
Speaker Change: In Q4, we expect that to.
Speaker Change: Those marks to level off and to increase continue to increase during 2025 and redemption activity.
Speaker Change: <unk> are getting smaller in terms of redemption activity, it's been modest.
Speaker Change: In 2024, but we expect it to be.
Speaker Change: More modest even in 2025, so all of those things I think point to growth.
Speaker Change: For 2025.
Speaker Change: Thank you that's very helpful.
Speaker Change: And maybe the last question is on the it looks like you know.
Speaker Change: On the <unk> you are looking at the M&A this headwind.
Speaker Change: <unk> investment management.
Speaker Change: The private market valuations trending for the kind of product with the kind of capabilities, you're looking to add in this platform.
Speaker Change: To Jay's asking about M&A and the investment management segment and also pricing for transactions in that segment, yes.
Speaker Change: I'm, having trouble hearing I'm, having trouble hearing.
Speaker Change: <unk>.
Speaker Change: Investment investment in the <unk>.
Speaker Change: Acquisition opportunities in the investment management space.
Speaker Change: Have been very very buoyant.
Speaker Change: Lots of people in the marketplace.
Speaker Change: Looking to buy assets, making it very competitive forcing prices up.
Speaker Change: And.
Speaker Change: And Thats one of the reasons why we haven't pulled the trigger just yet on anything.
Speaker Change: Not to say that we wouldn't if the right opportunity presented itself, but as you could see.
Speaker Change: Four or five years ago, you never saw the larger players.
Speaker Change: In the market, making acquisitions.
Speaker Change: Over the past three four years youre seeing almost all of them in the marketplace, making acquisitions. Some large some small insurance companies have now entered the entered the fray and so when I say, there's lots of people.
Speaker Change: Looking at our platform and enquiring about our platform.
Speaker Change: I'm trying to.
Speaker Change: Im trying to downplay the level of interest that we see so.
Speaker Change: The segment is going through a transformation in some respects.
Speaker Change: We're very fortunate to be where we are and we're very fortunate to have started this in.
Speaker Change: It really in 2018.
Speaker Change: To build a platform that we have and the teams that we have so.
Speaker Change: We're really quite looking forward to.
Speaker Change: The next few years to see how that plays out.
Speaker Change: Okay. Thank you yeah, it's super helpful and I'll turn it back.
Speaker Change: Thank you there are no further questions at this time I will now hand, the call back to Mr. Jay Hennick for any closing remarks.
Jay Hennick: Thank you very much operator, this was a full call obviously and.
Speaker Change: We appreciate you taking the time to participate and look forward to.
Speaker Change: Two immediate again.
Speaker Change: The first quarter results of 2025, so thanks for participating.
Speaker Change: Ladies and gentlemen, this concludes today's conference call. Thank you for your participation.
Speaker Change: And have a nice day.
Speaker Change: [noise].
Speaker Change: Yes.
Speaker Change: [noise].