Profit wilts for real estate giant
Battered by falling sales and leasing activity, international commercial real estate brokerage company CB Richard Ellis Group Inc. reported a 94% drop in profit during the fourth quarter Tuesday but still managed to beat Wall Street’s expectations.
The Los Angeles company said it had net income of $6.5 million, or 3 cents a share, compared with $122.4 million or 54 cents, in the same period a year ago. Revenue was down 30% to $1.3 billion.
CB Richard Ellis, the largest commercial real estate services firm in the world, is feeling the woes of its clients, property owners it represents who can’t sell their buildings and landlords who are losing tenants. Fewer deals mean fewer commissions for the brokerage.
“Results during the quarter were impacted, as expected, by weak sales and leasing activity caused by the credit crunch and global economic downturn,” the company said.
It has also moved to slash costs. CB Richard Ellis said in November that it had cut $190 million in fixed costs in 2008, in part by eliminating about 1,100 budgeted positions from a workforce of 29,000, mostly through layoffs and attrition. It also reduced other expenses such as travel, marketing, entertainment and incentive events for employees.
The company said it expected to cut an additional $195 million in costs this year 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.
CB Richard Ellis managed to expand its business of managing commercial real estate such as office buildings for corporations and investors. “We have significantly diversified our revenue mix in the last few years,” President Brett White said.
Fourth-quarter results included more than $81 million in one-time charges. Among them were write-downs of the value of real estate investments, severance payments to laid-off employees and the elimination of its deferred compensation program for managers and sales brokers.
Without those one-time charges the company would have had a profit of $87.7 million, or 37 cents a share. Wall Street analysts had estimated a profit of about 27 cents.
Shares of CB Richard Ellis fell 60 cents to $3.77 in a down day on Wall Street but rose 43 cents in after-hours trading after the release of fourth-quarter earnings.
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