CBRE Group Inc

Greetings and welcome to the CBRE Group Inc. Q3 2023 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 conference is being recorded. It is now my pleasure to introduce your host, Mr. Brad Burke, Head of Investor Relations and Treasurer. Thank you, Mr. Burke. You may begin.

Good morning, everyone, and welcome to CBRE's third quarter 2023 earnings conference call. Earlier today, we posted a presentation deck on our website that you can use to follow along with our prepared remarks and an Excel file that contains additional supplemental materials. Before we kick off today's call, I'll remind you that today's presentation contains forward-looking statements, including without limitation, statements concerning our economic outlook, our business plans, and our financial outlook. Forward-looking statements are predictions, projections, or other statements about future events. These statements involve risks and uncertainties that may cause actual results and trends to differ materially from those projected. 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 SEC filings. We have provided reconciliations of the non-GAAP financial measures discussed on our call to the most directly comparable GAAP measures, together with explanations of these measures in our presentation deck appendix. I am joined on today's call by Bob Sondik, our President and CEO, and Emma Giammartino, our Chief Financial Officer. Now, please turn to slide five as I turn the call over to Bob.

Thank you, Brad, and good morning, everyone. Commercial real estate capital markets remained under significant pressure in the third quarter. As a result, we experienced a sustained slowdown in property sales and debt financing activity, which drove the decline in core EPS. This decline was exacerbated by delays in harvesting development assets, which we will sell when market conditions improve. Over the last several quarters, we have detailed the increased importance of our resilient and secularly favored businesses. These businesses saw continued solid growth in the third quarter, led by global workplace solutions. Interest rates have increased more than 100 basis points since we reported second quarter results 90 days ago, continuing the sharpest rise in rates in nearly 40 years. The unexpected jump in rates has pushed back the capital markets recovery. Property prices are gradually declining and we believe this process won't complete and transaction activity won't rebound materially until investors are confident that interest rates have peaked and credit becomes readily available. We now believe this rebound is unlikely to occur until the second half of next year at the earliest. In the meantime, as we discussed last quarter, pockets of opportunity exist, and the breadth and depth of our market presence gives us visibility into where we want to be positioned for the long term. For example, year to date, we've committed more than $350 million in co-investments to value add, opportunistic, and development strategies, and believe these investments are positioned to deliver quite attractive returns as market conditions improve. This is the time in the market cycle when well-positioned investors can secure opportunities that deliver outsized returns. We expect to identify and act on more opportunities to deploy capital, especially in co-investments in M&A, while the market is depressed. In light of continuing challenges in the real estate capital markets, we have lowered our expectations for 2023 core EPS to a mid 30% decrease from the 20 to 25% decline we anticipated 90 days ago. The reduced outlook is almost entirely attributable to our interest rate sensitive businesses. While it's difficult to forecast the timing of the capital markets recovery, the resilient and secularly favored businesses we mentioned earlier have generated over $1.5 billion of SOP over the last 12 months and we expect them to represent over 60% of CBRE's SOP for full year 2023. We further expect SOP from these businesses to increase by double digits next year. Emma will walk you through our outlook after she reviews the quarter. Emma?