Trammell Crow Purges Six Corporate Clients, More Possible

The corporate accounts now number 93. In some cases, Trammell Crow initiated the divorce and other times, it was the client's doing as a result of the seesawing business climate. Trammell Crow isn't naming names or pointing fingers, but more are sure to go as the year plays out. "Basically, we're dealing where we know we have issues," John A. Stirek, Trammell Crow's Global Services COO, tells GlobeSt.com. "We're not combing everything." He confides that some of the voided and reworked contracts included "large accounts that are in the news today."

That's just part of the news to come out of Trammell Crow's second-quarter earnings call. While the calls are usually reserved for the financials, chairman and CEO Robert E. Sulentic took the opportunity to introduce the newest team member: Art Lomenick. In Dallas-Fort Worth circles, that's a coup. Lomenick's title and role were unavailable by press time, but he was introduced to shareholders as part of a student housing team. Yesterday was his first day on the job.

Lomenick has spent most of this year consulting in his specialty of New Urbanism, coming off a short stint as head of WorkPlaceUSA's Urban Solutions. After Lomenick's exit, WorkPlaceUSA quietly put the division to bed. Lomenick, though, is better known as the former managing director in Dallas for Atlanta-based Post Properties.

Stirek says the second quarter didn't hold any shocks for the company in general. "We wished the outlook was better. The fundamental demand in the marketplace just isn't there," he says. "We're being fairly realistic based on the conditions we see."

Trammell Crow, though trimming its corporate accounts, picked up 11 million sf in new assignments in the quarter. It also re-upped Comerica for a five-year, multi-service contract with 5.5 million sf built into it. A similar full-service, multi-year pact was signed with McKesson Corp. for 18 million sf.

In the conference call, Sulentic said most of the "problematic" corporate accounts were signed a few years back when their markets were "hot." Changing business conditions warranted revisiting the terms and reworking contracts or exiting. Admittedly, in some instances "we couldn't do things to keep the customer happy," he told shareholders. A cancellation of an international outsourcing contract carried a $1.5-million impact, net a minority interest, while another forced a $1.1-million payout for Trammell Crow to buy out. This year's decisions, though difficult, will benefit Trammell Crow in 2003, he said.

Stirek confirmed broker cutbacks, for the most part, are over. The current head count is just under 500. Sulentic said there might be some more cuts, but they won't be "substantial."

On the fiscal side of the call, Trammell Crow posted earnings per share of 10 cents for the quarter and 11 cents for six months ending June 30. Second-quarter revenue totaled $179 million, down 6% from Q2 2001. Net income was $3.7 million in comparison to last year's $4.3 million while the quarter's EBITDA was $14.9 million versus $18 million for the same period in 2001. The bottom line is Trammell Crow came within its adjusted guidance. The liquidity is at its lowest level since March 31, 1998, four months after the company went public.

Global Services revenue of $157.4 million was down 5% from second quarter 2001. Those results, Sulentic said, "clearly demonstrate that the market for brokerage services has become increasingly difficult.