CBRE Group Inc - Class A (CBRE) — Q4 2015 Earnings Call Transcript

Thank you and welcome to CBRE's fourth quarter 2015 earnings conference call. Earlier today, we issued a press release announcing our financial results for the quarter and full year. This release is posted on the homepage of our website, CBRE.com. This conference call is being webcast through the Investor Relations section of our website. You can also find there a presentation slide deck, which you can use to follow along with our prepared remarks. An audio archive of the webcast will be posted to the website later today and a transcript of our call will be posted tomorrow. Now, please turn to the slide labeled forward-looking statements. This presentation contains statements that are forward-looking within the meaning of the Private Securities Litigation Reform Act of 1995. These include statements regarding CBRE's future growth momentum, operations, business outlook, financial performance, market share, earnings and adjusted EPS expectations for 2016. These statements should be considered to be estimates only and actual results may ultimately differ from these estimates. Except to the extent required by securities laws, we undertake no obligation to update or publicly revise any of the forward-looking statements we may make today. For a full discussion of the risks and other factors that may impact any forward-looking statements, please refer to our fourth quarter earnings report filed on Form 8-K, our quarterly reports on Form 10-Q for the quarter ended September 30, 2015, and our most recent Annual Report on Form 10-K. These reports are filed with the SEC and are available at sec.gov. During this presentation, we may make certain statements that refer to non-GAAP financial measures as defined by SEC regulations. Where required by these regulations, we have provided reconciliations of these measures to what we believe are the most directly comparable GAAP measures. These reconciliations together with the explanation of these measures can be found within the appendix of this presentation. Please turn to slide 3. Participating on our call today are Bob Sulentic, our President and Chief Executive Officer, Jim Groch, our CFO and Gil Borok, our Deputy CFO and Chief Accounting Officer. Please turn to Slide 4 as I turn the call over to Bob.

Thank you, Steve, and good morning everyone. 2015 was another year of exceptional performance for CBRE, and this strong performance continued through the fourth quarter. For both periods, we set new company records for revenue and adjusted earnings and drove double-digit growth. We are the first firm in our sector to exceed $10 billion in revenue and $1.4 million in normalized EBITDA, and we obtained these milestones while making strategic gains across CBRE. Notably, our occupier outsourcing business is materially stronger with the acquisition of the Global Workplace Solutions business. We have an unrivaled ability to self-perform facilities management services around the world. In capital markets, we made market share gains around the globe. We acquired nine leading companies in 2015, enhancing our capabilities in energy management, retail data analytics, capital markets, and consulting. We had our third straight year of outsized recruiting gains as hundreds of new senior brokerage and capital markets professionals, net of departures, elected to join our team. The average production of people joining our team is three times higher than those who leave. We opened our 30th new state-of-the-art alternative workplace office, providing our people with a collaborative and innovative work environment. Finally, we ended the year with a balance sheet that is stronger than at any time in recent history, highlighted by investment-grade credit ratings. We thank our more than 70,000 employees for an excellent year in 2015 and for their commitment to our clients. Now Jim will take you through our results in greater detail.

Thank you, Bob. Please turn to slide 5. As you’ve seen in our press release, CBRE’s growth in 2015 was outstanding. Revenue rose 20% to 10.9 billion, fee revenue increased 14% to 7.7 billion, normalized EBITDA rose 21% to 1.4 billion, and adjusted EPS was up 22% to $2.05 a share. Profitability was strong with an 18.3% normalized EBITDA margin on fee revenue in 2015, approximately 110 basis points from 2014. This performance was achieved in spite of significant headwinds from currency movements. Our three regional service segments achieved a 27% increase in normalized EBITDA with a margin on fee revenue of 16.5%, up 100 basis points for the year. Bob mentioned the strength of our balance sheet; despite investing approximately 1.6 billion in nine acquisitions during the year, we ended 2015 with no outstanding borrowings on our 2.6 billion revolving credit facility, 470 million of available cash and short-term investments, and net debt of just under 1.6 times normalized EBITDA. Please turn to slide 6 for a look at full-year revenue growth by line of business. Our businesses continue to exhibit excellent broad-based momentum in 2015. Revenue from contractual sources totaled 6 billion; contractual fee revenue was 2.9 billion, up 29% in local currency or 14% without the contributions from the acquired Global Workplace Solutions business. Leasing surpassed 2.5 billion of global revenue, up 11% in local currency. The capital markets business, property sales, and mortgage services exceeded 2.1 billion in revenue and achieved 20% growth in local currency. The multi-year shift towards a more stable, recurring business mix continued in 2015. Contractual fee revenue plus leasing, which is largely recurring, totaled 70%. Please turn to slide 7; where we will shift our attention from the full year to a review of our financial performance in Q4. Revenue and adjusted earnings growth for the quarter was very strong. Fee revenue improved 23% in local currency and 10% without the contribution from the acquired Global Workplace Solutions business. This growth was achieved on top of an exceptionally strong Q4 2014, when revenue increased 28% versus Q4 2013. Normalized EBITDA for the quarter totaled 518 million, a 26% increase from last year’s Q4, or a 31% increase in local currency. Our profit margin also improved significantly. At 20.3%, our normalized EBITDA margin on fee revenue increased 130 basis points over prior year Q4. Adjusted earnings per share increased 19% to $0.81 for the quarter. Q4 2015 normalized EBITDA reflects the following adjustments: 26 million of carried interest expense, which we will recognize in a future period when we record associated revenue. This aligns the timing of expense and revenue recognition. 24 million of integration costs related to the acquisition of Global Workplace Solutions, and 40 million incurred to eliminate costs to enhance margins going forward. Please turn to slide 8, where we will review Q4 results for our three regional services segments, all in local currency. Fee revenue increased 17% in the Americas as every business line exhibited growth. In the EMEA, fee revenue improved 36% as we saw healthy gains across the region, particularly in Germany, the Netherlands, Spain, Switzerland, and the United Kingdom. In Asia Pacific, fee revenue rose 27%, with Australia, Greater China, and India setting the pace for growth. Absent the contributions from the acquired Global Workplace Solutions business, fee revenue rose 9% in the Americas, 12% in EMEA, and 11% in Asia Pacific. Normalized EBITDA increased 9% for the Americas, 45% for EMEA, and 24% for Asia Pacific. Q4 normalized EBITDA margin on fee revenue for the three regions combined was 16.3%.

Thanks, Jim. From all you’ve heard today, it should be clear that CBRE has a sustainable competitive advantage. Our leading global brand and strong culture help us to attract and keep tremendous talent and highly desirable clients. Investments in our platform, especially in technology and data analytics, are helping our people to create more value for these clients. Our revenue base is more stable and stickier than ever before. For 2016, we expect occupier outsourcing to continue its track record of strong performance. We anticipate low double-digit revenue growth this year before the contributions from the acquired Global Workplace Solutions business. Leasing revenue should increase at a high-single digit rate, as we continue to gain market share. Our capital markets businesses, which consist of property sales and mortgage services, are most influenced by the financial markets and volumes can be hard to predict quarter-to-quarter. However, we believe that the strong fundamentals and the value that real estate offers relative to other asset classes will continue to draw global capital to real estate in 2016. We estimate our capital markets revenue will grow at a rate in the mid-to-high single digits. Normalized EBITDA from our combined principal businesses, global investment management, and development services is anticipated to be flat to slightly down in 2016, reflecting a very strong 2015. The shift to a more stable recurring business mix will continue as our financial results include a full-year contribution from the acquired Global Workplace Solutions business. Even with this shift in business mix in 2016, we expect our industry-leading margin on fee revenue to be approximately 17%. While we are mindful of concerns about China’s slowing growth and the effect of lower oil prices, fundamentals in our sector remain on solid footing. We are positioned for another strong year in 2016 but are maintaining flexibility in case the economy weakens. Our outlook is based on economist consensus that the global economy will maintain its modest rate of growth in 2016. We anticipate double-digit growth again this year, supported by continued gains in market share and expect to achieve adjusted earnings per share in the range of $2.27 to $2.37 for 2016. This equates to a growth rate of 13% at the midpoint of our guidance. With that operator, we’ll open the line for questions.

My first question is just to try to understand in 2015 can you tell us what the EBITDA was for things like promotes and gains and incentive fees and so forth, because it’s a little tough to tie kind of where that shows up in revenue or equity and income and then the adjustments to match expenses that. So do you have just an EBITDA number for those items in ’15?

Hi Anthony, it’s Gil. We’re not going to disclose an EBITDA number, but I can tell you that the gains were mostly attributable to development that were exposed to equity earnings and the carried interest flows through revenue.

Okay, so then if I could see what those are and for 2016 then in your guidance, am I reading this right, that you have that same level of those items in ’16 or no?

Anthony, this is Jim Groch. As we said, we expect for the year that it will be flat to down slightly combined for those two businesses which would include any promote income. And then also in the investment management slide, you can see we breakout promote revenue for that business so that you can see that separately. Additionally, I would highlight that if you’re trying to get to the underlying performance of the three regional services businesses, the performance in Q4 and for the year for the three regional services businesses was very strong. So EBITDA in the three regional service businesses, which would not include development or investment management, was up 19% in local currency for the quarter, 14% in USD.

And then how do we think of the impact of currency in your 2016 guidance right now? Like how do you guys think about that going forward?

We can’t forecast obviously gains and losses for hedging positions because the currencies will determine that for us as we see movement throughout the year. So there’s a good bit of headwind already baked into our forecast. As you know, the dollar strengthened throughout the year and we don’t have any hedging gains in our guidance.

And then, Bob, you mentioned maintaining flexibility if the economy weakens, so just wondering if you can elaborate on what that means? Is that built into your guidance or does that mean that you’re prepared to cut costs? So just trying to understand what type of process is there?

Well, part of that comment was related to the broader range than we normally provide. We normally, as you know, provide a nickel range, and we’ve provided a dime range this year for earnings. And as it relates to the ongoing operations of our business, we make choices about growth based on how we see the year unfold, as you would expect us to do. So that’s really what we’re talking about there.

And then as of now and then just think about your outlook, you mentioned using your guide posters as economist views, just curiously if anything has changed since your business review day in November in terms of how you’re seeing clients behave or seeing demand either regionally or by business segments, if that’s decelerated, stayed about the same, or just how you’re feeling about that outside of perhaps maybe what the economists are calling for.

No, outside of what the economists are talking about, what we are seeing with our clients is reflected in the guidance we gave by line of business. It’s an active marketplace for what we do. We are a month into the year and it’s the slowest month of the year, so you can’t draw any conclusions. We’ve reflected what we believe is the collective view of our people and our research people and our economists, and that’s all wound up in the guidance we gave by line of business.

I was hoping maybe to spend some more time just talking about the durability of your business as it stands currently in the event of an economic downturn considering what we’re all seeing in public equity markets and headlines over the last few months. Maybe you can give us some metrics to think about on how your business would perform if we were to have a recession and how that compares with what we saw during the last recession.

Well, as you know, the business is a dramatically different business than existed back in say 2006 or 2007 before the last recession. Capital markets, which is the piece with more variability, is more economically sensitive as a much smaller part of the yield for all businesses. The contractual revenues, in particular asset management and facility management, generally are either stable or, in the case of asset services, counter-cyclical, making up a much, much larger percentage of the business, and that’s growing and will continue to grow as the acquisition shows up in our full-year numbers. So, I think the business is just a different business than existed at that time. And the other comment I would make is our balance sheet is dramatically different than it was then. We have enormous liquidity; we have very, very small amounts of maturities coming out for the next several years. So we are nicely poised to take advantage of opportunities. There are parts of our business that will be impacted if we go into a recession, but overall, I think we’ll see tremendous opportunities to take advantage of as well.

And maybe talking about the opportunities since M&A has been such a focus, can you talk about the flexibility you’re looking to maintain? Does that imply a potential slowdown in incremental M&A activity? And also, when you look at M&A targets, are you seeing any of the weakness that we’re seeing in the public equity markets begin to be reflected in the private M&A multiples that you would be looking at?

Yeah Brad, this is Bob. When we talk about the opportunities, we are going to see in a downturn and how we are positioned relative to the last cycle, as Jim said, not only is our balance sheet dramatically more compelling, we’ve made a lot of investments in our business that make this a better place for people to come to, infill acquisitions want to be here more, brokers want to be here more because of the way we can support them through our capabilities. As a result, when you’re thinking of a downturn, not only will we have the financial dry powder to invest, we’ll have a platform that will be more attractive to different types of targets, people, and businesses, and that proposition we think is really exciting for our company.

Okay and just a touch on incremental M&A at this point, would we expect you to continue at the pace we’ve seen over the course of 2015?

I think we’re just going to have to see how that plays out. We continue to be very disciplined, we do still have a nice strong volume of infill M&A, as strong as we’ve seen in the past. But we are selective around fit and we’re very careful around pricing.

And somewhat related to that, are you able to say with the balance sheet at 1.6 times EBITDA now, what the guidance range that you have given today would imply for year-end 2016 leverage levels?

We’re not going to give a specific number on that, but you know the amount of cash flow that we’re generating. So unless we do a large transaction in the year, it’s likely that we’ll end the year at a lower leverage rate.

So there’s been some surveys about tightening underwriting standards on commercial real estate loans, and some new risk retention regulations coming in fact later this year that may reduce CMBS issuance. I’m just wondering, are you seeing similar trends in your commercial debt markets and what would you expect the impact to be on the capital markets business in 2016 from that?

I’d start by saying the impact from anything that we are aware of is baked into our guidance. And I’d also comment that we believe real estate offers compelling value today relative to other asset classes, and capital flows into real estate from an enormously varied range of investment types and vehicles. Just the strength of the fundamentals in the sector and the value that’s embedded in that asset class, along with what we’ve seen in the market and performance in Q4, leaves us feeling fairly optimistic about the strength of the sector.

Sure. And then I’m a little bit surprised by the commentary that the two principal businesses could be flat in terms of EBITDA contribution in ’16. Are there specific funds that have come into maturity or in development projects that are nearing sales that give you pretty good visibility and confidence in that projection?

David, we do have good visibility into those businesses, and the reason we’re projecting flat to slightly down is because we had a particularly good fourth quarter this year. We could be surprised as we were by the time we get to next year, but we have in both of those businesses, we have things going on that make us think we’ll do similarly to what we did this year, which would be good performance.

And the last one from me, the publicly traded REIT index has moved down, wondering if you’ve seen a widening out in the private market for bid-ask spreads in the capital markets business most recently here in January.

What I would say on that, the best day probably is just the cap rates where deals are closing and cap rates have either been flat or improved a bit, i.e., cap rates have come down for sellers in the quarter, so we’re not seeing that.

Maybe a little color on how closely tied the leasing business is becoming to the Occupier Outsourcing and asset services, maybe from a couple point of view. One, how much of leasing revenues in ’15 have some connection to either tight or loose from the Occupier and asset contracts? How should we think about that number progressing in ’16? And from a contribution point of view, given your comments on how leasing growth here looks in ‘16, how much variability around that growth rate could come from what happens with the Occupier Outsourcing and asset services connection with leasing?

Hi Brandon, this is Jim. I think our strength in the Occupier Outsourcing business supports our ability to gain market share in the Occupier leasing side of the business, and that’s really the impact. As we expand contractual relationships with clients on a multi-product outsourcing basis, that business becomes stickier and actually contractual in many cases, and you see our market share improving and it’s just one of the factors that supports our market share gains in the leasing business.

Any sense of how headcount growth looked ’15 versus ’14 in leasing in particular but also across capital markets?

Brandon, we won’t be giving specific numbers, but we had a third straight year of very, very strong gains associated with recruiting in both the capital market side, as we call the brokerage side, or leasing side to the tune of hundreds of brokers net. The other thing that’s really important there is that the average production and we do track this quite closely. The average production of the people we’re bringing on is three times the average production of the brokerage that are exiting, and sometimes you’ll read in the marketplace or hear a story about a CBRE broker that landed somewhere else. We have close tabs on those ins and outs, and not only is the headcount up pretty materially, but the average production per producer coming in is very strong.

And then either for Jim or Gil, you guys talked about the cost containment expenses, I think it was a $40 million number in the quarter. What is actually expected to keep going, is that related to GWS or is it something separate? Just want to get a sense of what that is and how we should think about it this year.

Sure. Late in the second half of last year, we started looking around in our business as we’d almost doubled the size of the company in four years. And as we get more granular looking at the margins in the company and in businesses around the world, we started to focus more on businesses that have margins that we felt should be higher than they were. And that’s been our focus and that’s what those charges are. So while we grew headcount quite a bit in the business, we did have a material number of people that we let go to make businesses more efficient, where we just felt the businesses were underperforming. We’ll probably continue to look for those opportunities throughout the year.

Was that or will it be concentrated in a particular geography or service line?

No, we are looking everywhere. As you know, we get pretty granular down at the markets and submarkets around the world by lines of business. So it’s a global initiative to be particularly focused on businesses that just may not have received as much attention in this perhaps they should have received at a time where we’ve been growing the business so much.

And final one from me, your expectations for synergies or growth from GWS compared to the prior expectations that you guys have put out around the time of the acquisitions, how do you think about that, either contribution or impacting ’16 versus your prior thoughts?

No change to our prior guidance. I think we’re very much on track with the guidance we’ve given.

Bob, you talked about the addition of several hundred net producers. I guess I am just curious, I couldn’t understand from your commentary in terms of your sentiments towards recruiting going into 2016. Is it just as strong or has it come down a bit here?

Here’s how we think about that. Every year we have targets, Mitch, and we have a very active program with our leaders around the world. And when I say leaders around the world, I mean not just at the high level, but all the way down to the local markets to recruit. We will have that again this year; the last three years we’ve exceeded our going-in expectations. We will pursue an aggressive path this year, and as the year unfolds we’ll determine what we actually do. One of the things I will say is that there have been some foolish deals made in all three regions of the world in recruiting. We will not participate in that activity; we’ll be very careful on an individual-by-individual basis to make sure anybody we bring on comes on a basis that works, obviously for them but also for our company. We’ll see how the marketplace for recruiting unfolds during the year, but going in, we expect to have an aggressive program again this year.

And then just what are your thoughts regarding capital markets, your guidance is kind of mid to high-single digits. Is there a way to think about that on a regional basis?

I think the only comment we make on a regional basis is that we expect the Asia Pacific region to be softer, although let’s say in the range of plus or minus flat, relative to the Americas and Europe where we expect it to be stronger. The other comment I would make is just that Asia is obviously a pretty small part of our business in the capital markets side.

Understood. How’s the integration going at this point? I know you updated us at the investor day, but just curious, as we sit here in the start of February?

The big thing I’d point to there, Mitch, is our people and our clients. It’s going quite well with our clients, and the single most probably satisfying part of this whole combination is that our people and the legacy GWS people are really quite excited about what the combined business has to offer. So it’s going well with our clients, it’s going well with our people, and Jim already commented on the financial side of things as expected.

How does the cross-sell of services, I mean, what’s the timing on when you could start to unlock some of those ancillary revenues?

Our position on that hasn’t changed. It hasn’t been even six months yet and so our total focus is on transitioning those accounts, transitioning the people related to the accounts and doing a great job for the clients. If we do that, we’re going to have lots of cross-sell opportunities because those are big, big names in the corporate world and they have a lot of real estate needs, and we think there will be opportunity out there, but we’re not handicapping what that will be. We’re simply focused on doing a great job for them, under the assumption that that will be rewarded when it happens.

Just a few follow-ups. Can you put any parameters around investment sales and how much of that revenue comes from say smaller building sales, whatever that breakpoint may be in your view versus say the more core major assets and the more institutional realm? Just trying to understand where the revenue comes from there.

Anthony, we don’t break that out, we do have substantial businesses at both ends of the spectrum and in the middle, and by the way, both ends and the middle are all growing, but we do not break that out.

And so I guess going down the path in my mind thinking about CMBS spreads widening and the liquidity there getting more difficult, do you see that putting pressure on perhaps the lower end of that spectrum at all or is that not something you guys believe is going to play out?

We don’t see that having a big impact; there are just enough varied sources of capital and enough interest in the sector that we don’t think that will have a big impact.

And then in Europe, it seems like there’s been this divergence between what’s happening on the sales side and the leasing side. How do you think that plays out in the next few quarters?

It’s a little hard to say because it’s also varying from market to market. So, the UK on the sales side has been incredibly strong for a number of years, but volume was down significantly in the quarter and the cap rates were lower, i.e., improved if you’re a seller in the quarter and rental rates rose in Q4 in the UK from Q3. The fundamentals of the market are really strong, and I think capital tends to get ahead of the fundamentals. So, the investors are smart and they’re looking ahead. I think we’re now finally seeing the fundamentals begin to improve in a material way on the leasing side. But that in and of itself is positive for the capital side as well, so I think it’s playing out in a rational way. I couldn’t comment more than that.

Maybe a little color on how closely tied the leasing business is becoming to the Occupier Outsourcing and asset services, maybe from a couple point of view, one, how much of leasing revenues in ’15 have some connection to either tight or loose from the Occupier and asset contracts. How should we think about that number progressing in ’16? And from a contribution point of view, given your comments on how leasing growth here looks in '16, how much variability around that growth rate could come from what happens with the Occupier Outsourcing and asset services connection with leasing?

Hi Brandon, this is Jim. I think our strength in the Occupier Outsourcing business supports our ability to gain market share in the Occupier leasing side of the business, and that’s really the impact. As we expand contractual relationships with clients on a multi-product outsourcing basis, that business becomes stickier, actually contractual in many cases, and you see our market share improving, and it’s just one of the factors that supports our market share gains in the leasing business.

Any sense of how headcount growth looked ’15 versus ’14 in leasing in particular but also across capital markets?

Brandon, we won’t be giving specific numbers, but we had a third straight year of very, very strong gains associated with recruiting in both the capital market side, as we call the brokerage side, or leasing side to the tune of hundreds of brokers net. The other thing that’s really important there is the average production, and we do track this quite closely. The average production of the people we’re bringing on is three times the average production of the brokerage that are exiting, and sometimes you’ll read in the marketplace or hear a story about a CBRE broker that landed somewhere else. We have close tabs on those ins and outs, and not only is the headcount up pretty materially, but the average production per producer coming in is very strong.

And then either for Jim or Gil, you guys talked about the cost containment expenses; I think it was a $40 million number in the quarter. What is actually expected to keep going, is that related to GWS or is it something separate? Just want to get a sense of what that is and how we should think about it this year.

Sure. Late in the second half of last year, we started looking around in our business as we’d almost doubled the size of the company in four years. And as we get more granular looking at the margins in the company and in businesses around the world, we started to focus more on businesses that have margins that we felt should be higher than they were. That’s been our focus and that’s what those charges are. So while we grew headcount quite a bit in the business, we did have a material number of folks that we let go to make businesses more efficient, where we just felt the businesses were underperforming. We will probably continue to look for those opportunities throughout the year.

Was that or will it be concentrated in a particular geography or service line?

No, we are looking everywhere. As you know, we get pretty granular down at the markets and submarkets around the world by lines of business. So it’s a global initiative to be particularly focused on businesses that just may not have received as much attention in this perhaps they should have received at a time where we’ve just been growing the business so much.

And final one from me, your expectations for synergies or growth from GWS compared to the prior expectations that you guys have put out around the time of the acquisitions, how do you think about that, either contribution or impacting ’16 versus your prior thoughts?

No change to our prior guidance. I think we’re very much on track with the guidance we’ve given.

Bob, you talked about the addition of several hundred net producers. I guess I am just curious, I couldn’t understand from your commentary in terms of your sentiments towards recruiting going into 2016. Is it just as strong or has it come down a bit here?

Here’s how we think about that. Every year we have targets, Mitch, and we have a very active program with our leaders around the world. When I say leaders, I mean not just at the high level, but all the way down to local markets to recruit. We will have that again this year; the last three years we’ve exceeded our going-in expectations. We will pursue an aggressive path this year, and as the year unfolds, we’ll determine what we actually do. One of the things I will say is that there have been some foolish deals made in all three regions of the world in recruiting. We will not participate in that activity; we’ll be very careful on an individual by individual basis to ensure that anybody we bring on comes on a basis that works for them, but also for our company. We’ll see how the market unfolds during the year. But going in, we expect to have an aggressive program again this year.

And then just what’s your thoughts regarding capital markets, your guidance kind of mid to high-single digit. Is there a way to think about that on a regional basis?

I think the only comment we make on a regional basis is that we expect the Asia Pacific region to be softer, although let’s say in the range of plus or minus flat, relative to the Americas and Europe where we expect it to be stronger. The other comment I would make is just that Asia is obviously a pretty small part of our business in the capital markets side.

Understood. How’s the integration going at this point? I know you updated us at the investor day, but just curious, as we sit here in the start of February?

The big thing I’d point to there, Mitch, is our people and our clients. It’s going quite well with our clients. The single most probably satisfying part of this whole combination is that our people and the legacy GWS people are really quite excited about what the combined business has to offer. So it’s going well with our clients; it’s going well with our people, and Jim already commented on the financial side of things as expected.

How does the cross-sell of services, I mean, what’s the timing on when you could start to unlock some of those ancillary revenues?

Our position on that hasn’t changed. It hasn’t been even six months yet and so our total focus is on transitioning those accounts, transitioning the people related to the accounts and doing a great job for the clients. If we do that, we’re going to have lots of cross-sell opportunities because those are big, big names in the corporate world and they have a lot of real estate needs. We think there will be opportunity out there, but we’re not handicapping what that will be. We’re simply focused on doing a great job for them under the assumption that that will be rewarded when it happens.

Just a few follow-ups. Can you put any parameters around investment sales and how much of that revenue comes from say smaller building sales, whatever that breakpoint may be in your view versus say the more core major assets and the more institutional realm? Just trying to understand where the revenue comes from there.

Anthony, we don’t break that out. We do have substantial businesses at both ends of the spectrum and in the middle, and by the way, both ends and the middle are all growing. But we do not break that out.

And so I guess going down the path in my mind thinking about CMBS spreads widening and the liquidity there getting more difficult; do you see that putting pressure on perhaps the lower end of that spectrum at all or is that not something you guys believe is going to play out?

We don’t see that having a big impact; there are just enough varied sources of capital and enough interest in the sector that we don’t think that will have a big impact.

And then in Europe, it seems like there’s been this divergence between what’s happening on the sales side and the leasing side. How do you think that plays out in the next few quarters?

It’s a little hard to say because it’s also varying perhaps from market to market. So, the UK on the sales side has been incredibly strong; for a number of years volume was down significantly in the quarter and the cap rates were lower, i.e., improved if you’re a seller in the quarter and rental rates rose in Q4 in the UK from Q3. The fundamentals of the market are really strong, and I think capital tends to get ahead of the fundamentals. So, the investors are smart and they’re looking ahead, and I think we’re now finally seeing the fundamentals begin to improve in a material way on the leasing side. But that in and of itself is positive for the capital side as well, so I think it’s playing out in a way that feels rational. I couldn’t comment more than that.

Thanks to everybody for being with us, and we’ll talk to you again at the end of the first quarter.