CB Richard Ellis reports its first loss
Commercial real estate brokerage CB Richard Ellis Group Inc. on Wednesday reported its first loss since it went public nearly five years ago, capping months of difficulty in the depressed property market.
The Los Angeles company said it had a net loss of $36.7 million, or 14 cents a share, in the first quarter compared with a profit of $20.4 million, or 10 cents, in the same period in 2008. Revenue was down 28% to $890 million.
Plunging revenue at CB Richard Ellis, the world’s largest commercial real estate brokerage, reflects the sluggish pace of sales and leasing that has dragged on since the middle of last year, according to industry observers.
Many property owners are unable or reluctant to sell their buildings in the weak market, and a lot of business operators are cutting back on rented space or postponing moves to new quarters. That means fewer commissions for brokerages and hence less revenue.
Will Marks, an analyst at JMP Securities, said he had expected the company to make more money. “Revenues were disappointing but not shockingly low in light of the current environment,” he said.
Excluding one-time charges for financing costs incurred from renegotiating its debt agreements with lenders last month and other expenses, the company’s loss for the quarter ending March 31 was $7.5 million, or 3 cents a share, a penny more than the average estimate of Wall Street analysts.
“First-quarter results were in line with the company’s expectations in light of the broad weakness in sales and leasing markets worldwide,” the company said in a statement.
CB Richard Ellis has been slashing costs and said more cuts were on the way.
In its statement, the company said that starting last year it had cut $385 million in fixed costs from 2007 levels partly by eliminating about 1,100 positions from a workforce of 29,000.
The company also said that it expected to cut as much as an additional $115 million in operating expenses but wouldn’t provide details about the cuts until a conference call with analysts scheduled for today. The reduced costs do not include sales commissions and other variable compensation payments that have fallen because of the lower number of deals.
Improvements for real estate service companies such CB Richard Ellis could come in the months ahead as the market bottoms out, analysts said. “Distressed selling will . . . help revive the eventual trading of buildings,” said analyst Brandon Dobell of William Blair & Co.
CB Richard Ellis has contracts to sell more than $200 million worth of distressed assets in the U.S., the company said.
Dobell also predicted that corporations and other real estate owners including banks will increasingly turn to service companies such as CB Richard Ellis and Jones Lang LaSalle to help manage their properties.
CB Richard Ellis said its income from managing real estate declined in the quarter but that it had signed 10 new corporate customers, including France Telecom and PepsiCo.
Chicago-based Jones Lang reported a first-quarter net loss of $61.5 million Tuesday, its first loss since 2005.
CB Richard Ellis shares rose 33 cents to $6.57 in regular trading Wednesday.
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