CBRE Plots Course in Tough Market

Later, in response to an analyst's question regarding CBRE's EBITDA, White commented that, "Trying to forecast in this environment is a fool's errand. It is a fool's errand because it is frankly impossible to forecast when the credit markets are going to return to any state of normalcy."

White said that CBRE believes that when the credit markets return to normal, it will produce "a pretty significant pickup in capital market transactions and revenues." He added that it is also "very, very difficult at the moment to try to forecast what impact the current economic malaise is going to have on the global leasing business."

Although CBRE did not provide earnings guidance, CFO Gil Borok said that for this year, the company believes that its financial results "will revert to levels seen pre-2005." What that means is that, "We'll likely see break-even earnings or a nominal loss in Q1 2009, with earnings improving to solid profitability over the remaining quarters of the year," Borok said.

CBRE officials commented on market conditions during a conference call in which the Los Angeles-based company reported that revenue and net income were both down for both the fourth quarter of 2008 and the full year. Revenue and diluted earnings per share were $5.1 billion and 39 cents respectively for the year; for the fourth quarter, they were $1.3 billion and three cents. Excluding one-time charges, diluted earnings per share were 97 cents for the full year and 37 cents for the fourth quarter.

In his comments on the difficulty of providing specific earnings guidance, White nonetheless offered some insight on how CBRE views its business and how it is operating in the current environment. The company expects investment sales to remain weak, he said, but with the possibility of modest improvement by the end of the year. It expects leasing to remain weak until global economies show signs of stabilizing.

The CBRE chief noted that the downturn has prompted more corporations to outsource their real estate services to firms like CBRE, providing "a great cushion in this difficult environment." Although the company's asset-based businesses like global investment management and development services will continue to face significant challenges in the short term because of uncertain and decreasing asset values, White said that these businesses are "well-positioned for return to profitability when market conditions improve."

One part of the company's strategy will be to continue to aggressively manage expenses. White noted that CBRE has already cut expenses significantly and continues to meet its debt obligations. He noted that the company has more than doubled its previously announced cost reduction efforts to a current total of approximately $385 million.

The CBRE chief said that despite the "extremely challenging" global economic conditions, CBRE's broad range of services and global scale enabled the company to maintain profitability and that, overall, "We're very pleased with our operating and financial results for the fourth quarter and all of 2008.