CBRE Group Inc

Greetings and welcome to the third quarter 2020 CBRE Group Incorporated earnings conference call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this call is being recorded. It is now my pleasure to introduce your host, Kristen Fairman, Vice President, Investor Relations and Corporate Finance. Please go ahead.

Good morning, everyone, and welcome to CBRE's third quarter 2020 earnings conference call. Earlier today, we issued a press release announcing our financial results, and it is posted on the Investor Relations page of our website, cbre.com, along with a presentation slide deck that you can use to follow along with our prepared remarks, as well as an Excel file that contains additional supplemental materials. Our agenda for this morning's call will be as follows. First, I'll provide an overview of our financial results for the quarter. Next, Bob Selendik, our president and CEO, and Leah Stearns, our CFO, will discuss our third quarter results in more detail. After their comments, we'll open up the call for your questions. Before I begin, I'll remind you that this presentation contains forward-looking statements that involve a number of risks and uncertainties. Examples of these statements include our expectations regarding CDRE's future growth prospects, operations, market share, capital deployment, acquisition integration, financial performance, including profitability and margins, the effect of cost savings initiatives in our 2020 outlook, including the impact of COVID-19, and any other statements regarding matters that are not historical fact. We urge you to consider these factors and remind you that we undertake no obligation to update the information contained on this call to reflect subsequent events or circumstances. You should be aware that these statements should be considered and could cause actual results to differ materially from those expressed in these forward-looking statements. For a full discussion of the risks and other factors that may impact these forward-looking statements, please refer to this morning's earnings release and our most recent annual and quarterly reports filed on Form 10-K and Form 10-Q, respectively. You have provided reconciliations of adjusted EPS, adjusted EBITDA, fee revenue, and certain other non-GAAP financial measures included in our remarks to the most directly comparable GAAP measures, together with explanations of these measures in the appendix of our presentation slide deck. Now please turn to slide four of our presentation, which highlights our financial results for the third quarter of 2020. Total revenue and fee revenue fell about 5% and 13% respectively, driven by a decline in our advisory services segment. Lower revenue was partially offset by disciplined cost management and temporary cost reduction, as well as the initial benefits of transformation initiatives targeted to improve the ongoing cost structure of the business. This limited the adjusted EBITDA decline to 3%. Overall, adjusted EPS for the quarter with 73 cents will gap EPS, which includes around 13 cents of transformation initiative costs, total 55 cents. Now for insights on the quarter and our longer-term outlook, please turn to slide six as I turn the call over to Bob.

Thanks, Kristen, and good morning, everyone. The results we reported this morning highlight the progress CBRE has made. in building a more resilient business since the last downturn occurred more than a decade ago. We are a remarkably different company from the one that endured the global financial crisis. I'll briefly cite some specific ways the company has evolved and improved. Facilities management, which provides steady recurring revenue, has grown exponentially with the portfolio up by 3.7 billion square feet in 10 years and now totaling 4.2 billion square feet. And we've added a data center management capability that is growing robustly. Our industrial and multifamily offerings have also grown dramatically and are proving to be very resilient in the current environment. These offerings together cut across leasing, sales and mortgage origination, and servicing. They also comprise the majority of our real estate development portfolio, U.S. project management has grown fivefold in 10 years, and COVID is further catalyzing demand for this group's specialized services. Finally, our investment management business's core asset portfolio, which has grown more than 300% over 10 years and now comprises near to 85% of total AUM, has held up quite well this year. The resilient aspects of our business are helping us weather the sharp COVID driven fall in property leasing and sales. Another key contributor was quickly aligning our expenses with reduced market demand. A significant portion of our compensation structure falls automatically in the current environment and our global leadership team has rapidly implemented other cost management actions. Many of these actions were contemplated before COVID following a strategic review designed to enhance scalability and efficiency. This work has been quite effective, cutting where appropriate without compromising our future. I want to briefly comment on the macro environment before handing the call to Leah. At the present time, COVID is putting downward pressure on parts of our business and creating larger opportunities in other parts, several of which I highlighted earlier. Inevitably, the magnitude of COVID's impact will diminish considerably once the public health crisis passes. We can expect our sales and leasing businesses, where decision making is now largely frozen, to be prime beneficiaries. However, a significant amount of the COVID-driven change will be permanent. For instance, our work with occupier clients confirms that companies will continue moving toward a hybrid model that combines working from the office and from home. Occupiers will take space for fewer employees, but that space will be less densely populated, more intensely managed, and more flexible. there will be a premium on high-quality, well-managed buildings with great infrastructure. We are continuing to take advantage of the strong secular growth trends that were driven by the last cycle, including occupier outsourcing, industrial and logistics space, institutional quality multifamily assets, and workplace experience services. We expect new secular opportunities to be created in the wake of COVID and are positioning our strategy and leadership focus and allocating our capital to make the most of them as the new cycle unfolds. With that, I'll turn the call over to Leah, who will take you through the quarter in detail.