The largest real estate brokerage in the world, Los Angeles-based CB Richard Ellis Group Inc., reported a steep drop in second-quarter profit as the international credit crisis stifled property transactions.
“Our second-quarter 2008 results were affected by a notably weakened market environment,” company President Brett White said in a statement. “As we had anticipated, the leasing business turned down from the strong first quarter, especially in the Americas and the United Kingdom, reflecting weak economic activity and decreasing business confidence.”
U.S. office rents rose 1.1% in the second quarter from a year earlier, the smallest gain in almost three years, as job losses and a slowing economy cut tenant demand, according to research firm Reis Inc.
The company recorded net income of $16.6 million, or 8 cents a share, for the quarter, down 88% from $141.1 million, or 59 cents, in the same period a year earlier.
Excluding one-time charges, CB Richard Ellis earned 16 cents a share, falling well short of Wall Street analysts’ average estimate of 41 cents in a Bloomberg survey. Shares closed up $1.23 at $18.65 on Tuesday, but fell more than 12% in after-hours trading.
Commercial property sales activity also “remained quite soft due to a broadening of the credit market turmoil and a continuing gap between buyer and seller expectations of property values,” White said. Decreased sales “have now become evident in all parts of the world.”
The company’s revenue for the U.S., Canada and Latin America was $785.5 million, compared with $934 million a year earlier.
“A commercial real estate slowdown is negatively impacting CB Richard Ellis’ performance and near-term growth prospects,” analysts for Lehman Bros. Holdings Inc. said in a report last week. “Over the long term, CB Richard Ellis’ dominant market position and true franchise value should leave the company well positioned to thrive.”
Bloomberg News was used in compiling this report.