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[LOGO]

 

Investor Presentation
March 2006

 



[LOGO]

 

Forward Looking Statements

 

This presentation contains statements that are forward looking within the meaning of the Private Securities Litigation Reform Act of 1995.  These statements should be considered as estimates only and actual results may ultimately differ from these estimates.  Except to the extent required by applicable securities laws, CB Richard Ellis Group, Inc. undertakes no obligation to update or publicly revise any of the forward-looking statements that you may hear today.  Please refer to our annual report on Form 10-K and our quarterly reports on Form 10-Q, which are filed with the SEC and available at the SEC’s Web site (http://www.sec.gov), for a full discussion of the risks and other factors, that may impact any estimates that you may hear today.  We may make certain statements during the course of this presentation which include references to “non-GAAP financial measures,” as defined by SEC regulations.  As required by these regulations, we have provided reconciliations of these measures to what we believe are the most directly comparable GAAP measures, which are attached hereto within the appendix.

 

1



 

 

Industry Overview

 

2



 

Favorable Trends – Investment Sales

 

[CHART]

 

                  Investment Sales

                 Investor demand continues to exceed the available supply of properties globally

                 Capital flows into commercial real estate continue at high levels

                 CBRE’s U.S. market share expanded to 18% in 2005, reflecting a 10.8 percentage point advantage over the number two firm(2)

 

Expected capital flows to real estate continue to increase

 


(1)          Source: Institutional Real Estate, Inc. 2006 Plan Sponsor Survey conducted by Kingsley Associates

(2)          Source: Real Capital Analytics

 

3



 

Favorable Trends – Leasing

 

[CHART]

 

[CHART]

 

                  Leasing Markets

                 Solid corporate hiring and strong net absorption of commercial real estate amid favorable economic and business conditions

                 Rent increases in most major office markets across the U.S.

                 Improved market conditions leading to sustained ongoing rent appreciation in the industrial sector

                 Significant office leasing market share gains within Europe

                 Strong growth in Asia Pacific due to improving business confidence

 

Source: Torto Wheaton Research, Winter 2006

 

4



 

Company Overview

 

5



 

The World Class Commercial Real Estate Services Provider

 

Leading Global
Brand

100 years

50 countries

#1 in key cities in U.S., Europe and Asia

 

 

 

Broad
Capabilities

#1 commercial real estate brokerage

#1 appraisal and valuation

#1 property and facilities management

#2 commercial mortgage brokerage

$17.3 billion in investment assets under management

 

 

 

Scale, Diversity
and Earnings
Power

2x nearest competitor

Thousands of clients, more than 70% of Fortune 100

2005 Revenue of $2.9 billion

2005 Normalized EBITDA of $461.3 million(1)

Strong organic revenue and earnings growth

 


(1)               Excludes integration related charges.

 

6



 

Global Reach & Local Leadership

 

2005 Revenue

by Region

 

[CHART]

 

Leading

Market Positions

 

New York

ý

 

 

London

ý

 

 

Los Angeles

ý

 

 

Chicago

ý

 

 

Sydney

ý

 

 

Paris

ý

 

 

Washington, D.C.

ý

 

 

Madrid

ý

 

 

Singapore

ý

 

CBRE is unique in offering customers global coverage and leading local expertise.

 

7



 

Diversified Blue Chip Client Base

 

2005 Revenue by Client Type

 

[CHART]

 

Representative Clients

 

[LOGO]

 

Top 20 customers are less than 9% of total revenue.

 

8



 

Full Services Platform

 

 

 

Advisory Services

FY 2005
Americas Revenue

Outsourcing Services

 

 

 

 

 

 

 

 

 

Revenue
Generation

 

 

 

Revenue
Generation

 

 

 

 

 

 

 

Leasing and sales

 

Commission

[CHART]

Manages properties for owners

 

Contractual

 

 

 

 

 

 

 

Mortgage brokerage

 

Commission and Servicing Fees

 

Comprehensive corporate real estate services

 

Contractual

 

 

 

 

 

 

 

Valuations, appraisals, research

 

Assignment and Subscription Fees

 

 

 

 

 

9



 

Fragmented Industry

 

$24 Billion US Commercial Real Estate Services Industry (1)

 

U.S. Market Share
Top 5 = 16.9% Share

 

[CHART]

 

The market has grown at a 4.2% CAGR from 1995 to 2005.

 


Source: External public filings and management estimates as of 12/31/05.

(1) Excluding investment management.

 

10



 

Superior Platform Drives Outperformance

 

Competitive Landscape

 

[CHART]

 

FY 2002 - 2005 CAGR

 

[CHART]

 

 

 

CBG

 

JLL

 

TCC

 

Business
Services(2)

 

 

 

 

 

 

 

 

 

 

 

FY06 P/E
(as of 3/10/06)

 

19.8

x

19.0

x

17.9

x

20.6

x

 


(1)          Excluding merger-related charges, integration expenses and IPO-related compensation expense.

(2)          Average based on ABM, ACN, ADP, CEN, FDC, KELYA, MAN, PAYX, RHI, and RMK.

 

Our full-service, global platform has allowed us to outperform competitors.

 

11



 

Key Growth Strategies

 

12



 

Growth Drivers

 

INDUSTRY TRENDS

 

RELATED STRATEGY

 

 

 

 

Increased capital allocations to real estate

 

Leverage demographic-driven investment trends and globalization of capital flows

 

Leverage expertise across all property types

 

Aggregate the fragmented private client market

 

 

 

 

Institutional ownership of real estate

 

Match risk/return profiles

 

Develop innovative investment vehicles

 

Grow assets under management

 

Capitalize on “feet on the ground” global platform

 

 

 

 

Improving leasing fundamentals

 

Customer Relationship Management initiative

 

Expanded “dash-board” for landlord/agency and tenant rep specialists

 

Foster cross-market referrals and multi-market business development

 

13



 

INDUSTRY TRENDS

 

RELATED STRATEGY

 

 

 

 

Corporate outsourcing

 

Single point-of-contact management

 

Emphasize multi-market/cross-border capabilities

 

Focus on Fortune 500 penetration

 

Invest in enabling IT platforms

 

 

 

 

Increased vendor consolidation

 

Capitalize on cross-selling opportunities

 

Leverage geographic diversity of platform

 

Capitalize on breadth of service offerings

 

 

 

 

Capital markets solutions

 

Single-brand and single-source debt and equity offerings

 

Increase mortgage origination referrals from other CBRE businesses (up 56% in 2005)

 

More joint debt-equity business development initiatives

 

 

 

 

Continued industry consolidation

 

Selective in-fill acquisitions to round out service-delivery platform

 

Buy-in partner/affiliate companies

 

14



 

Expanding Global Platform Through In-Fill Acquisitions

 

[GRAPHIC]

 

                  Purchase price for these acquisitions was approximately $101 million.

                  Associated 2006 revenue increase estimated to be approximately $179 million, which includes consolidation of revenue resulting from the now majority owned IKOMA.

                  EBITDA margins expected to be consistent with CBRE margins upon full integration.

 

15



 

Grow Investment Management Business

 

Real Estate Institutional Ownership

 

($ in billions)

 

 

 

[CHART]

 

 

Source:                 Institutional Real Estate, Inc.

Note:                            Ownership shown as of June 30th.

2005 includes $29.9 billion in public untraded funds, a new category starting in 2005.

 

CBRE’s Assets Under Management

($ in billions)

 

[CHART]

 

 

Note:                             Assets under management for 1998-2005 shown as of December 31st.

 

Substantial cross-selling of services currently drives approximately $60 million in revenue for CBRE.

 

16



 

Investment Management Business

 

Global Strategy / Fund Matrix

 

DEDICATED TEAMS

 

MANAGED ACCOUNTS

 

STRATEGIC PARTNERS

 

SPECIAL SITUATIONS

 

 

 

 

 

 

 

 

 

MAIN CHARACTERISTICS Strategy

 

CORE/CORE +

 

VALUE ADDED

 

VALUE ADDED/OPPORTUNISTIC

 

 

 

 

 

 

 

 

 

% Debt

 

0 - 50%

 

50- 70%

 

75%

 

 

 

 

 

 

 

 

 

Typical Structure

 

Separate Accounts
Open End Funds

 

Closed End Funds

 

Closed End Funds
Joint Ventures

 

 

 

 

 

 

 

 

 

Coinvestment

 

No

 

Yes

 

Yes

 

 

 

 

 

 

 

 

 

Compounded Annual Growth Rate for Assets Under Management(1)

 

6%

 

24%

 

50%

 

 

 

 

 

 

 

 

 

CBRE Income Stream

 

Acquisition Fees
Asset Management Fees
Incentive Fees

 

Acquisition Fees
Asset Management Fees
Incentive Fees
LP Profits
Carried Interest

 

Acquisition Fees
Asset Management Fees
Incentive Fees
LP Profits
Carried Interest

 

 


(1)                                  2000 – 2005 CAGR.

 

17



 

Financial Overview

 

18



 

Consistent Long Term Growth

 

[CHART]

 


(1)                                  Normalized EBITDA excludes merger-related and other non-recurring costs, Insignia integration costs and one-time IPO-related compensation expense.

 

CBRE has consistently outpaced industry growth.

 

19



 

2005 Business Performance Highlights

 

(In millions, except EPS)

 

Revenue

 

Normalized EBITDA(1)

[CHART]

 

[CHART]

 

 

 

Net Income, as adjusted(1)

 

EPS, as adjusted(1),(2)

[CHART]

 

[CHART]

 

 

 

Record 2005 Performance

 


(1)         Normalized EBITDA, net income, as adjusted and earnings per share, as adjusted exclude one-time items related to the Insignia acquisition, IPO-related compensation expense, certain costs of extinguishment of debt and tax expense related to the repatriation of foreign earnings under the American Jobs Creation Act of 2004.

(2)         Diluted earnings per share.

 

20



 

2005 Revenue Breakdown

 

[CHART]

 

 

 

Year ended December 31,

 

($ in millions)

 

2005

 

2004

 

% Change

 

 

 

 

 

 

 

 

 

Sales

 

1,077.8

 

807.4

 

33

 

 

 

 

 

 

 

 

 

Leasing

 

1,105.8

 

986.3

 

12

 

 

 

 

 

 

 

 

 

Property and Facilities Management

 

208.6

 

185.3

 

13

 

 

 

 

 

 

 

 

 

Appraisal and Valuation

 

202.4

 

156.4

 

29

 

 

 

 

 

 

 

 

 

Commercial Mortgage Brokerage

 

140.4

 

106.7

 

32

 

 

 

 

 

 

 

 

 

Investment Management

 

127.7

 

90.7

 

41

 

 

 

 

 

 

 

 

 

Other

 

47.9

 

32.3

 

48

 

 

 

 

 

 

 

 

 

Total

 

2,910.6

 

2,365.1

 

23

 

 

21



 

Normalized EBITDA Margins

 

[CHART]

 

2005 EBITDA margin improved 24% compared to 2004

 

Notes:

Normalized EBITDA and normalized EBITDA margins exclude one-time merger-related and other non-recurring costs, Insignia integration costs and one-time IPO-related compensation expense.

 

22



 

Debt Highlights

 

[CHART]

 

Notes:

                  Normalized EBITDA excludes merger-related and other non-recurring costs, Insignia integration costs and one-time IPO-related compensation expense.

                  Total debt excludes non-recourse debt.

 

23



 

Capitalization

 

 

 

As of

 

 

 

($ in millions)

 

12/31/2005

 

12/31/2004

 

Variance

 

Cash

 

449.3

 

256.9

 

192.4

 

 

 

 

 

 

 

 

 

Senior secured term loan tranche B

 

265.2

 

277.1

 

(11.9

)

11 1/4% senior subordinated notes

 

163.0

 

205.0

 

(42.0

)

9 3/4% senior notes

 

130.0

 

130.0

 

 

Other debt(1)

 

19.0

 

22.5

 

(3.5

)

Total debt

 

577.2

 

634.6

 

(57.4

)

Stockholders’ equity

 

793.7

 

560.0

 

233.7

 

Total capitalization

 

1,370.9

 

1,194.6

 

176.3

 

Total net debt

 

127.9

 

377.7

 

(249.8

)

 

                  Excludes $256.0 million and $138.2 million of warehouse facility at December 31, 2005 and 2004, respectively.

 

24



 

2005 Normalized Internal Cash Flow

 

[CHART]

 

                  Strong cash flow generator

 

                  $110 million, or 82.7% improvement from prior year

 

                  Low capital intensity

 

                  Utilization of internal cash flow

 

                  Debt reduction

                  Co-investment activities

                  In-fill acquisitions

 


(1)          Represents capital expenditures, net of concessions.

 

25



 

Key Drivers of Earnings Growth

 

Revenue 
Growth

 

Margin
Expansion

 

Deleveraging
Balance Sheet

 

Significant
EPS Growth

 

 

 

 

 

 

 

 

 

                  Market
growth

+

                  Operating
leverage

+

                  Redemption of high interest rate bonds

=

                  15% to 20%
growth

 

 

 

 

 

 

 

 

 

                  Market share gains

 

                  Fixed cost controls

 

 

 

 

 

 

 

 

 

 

 

 

 

                  In-fill acquisitions

 

                  Scalable overhead structure

 

 

 

 

 

 

 

 

 

 

 

 

 

2005 revenue
growth rate: 23%

 

2005 Normalized
EBITDA
growth rate: 54%

 

2005 debt
paydown:
$57.4 million

 

2005 Adjusted EPS
growth rate: 82%

 

 

Revenue growth, margin expansion and deleveraging allow CBRE to achieve substantial earnings growth.

 

26



 

Remember Who We Are

 

We are:

 

                  A growth-oriented business services enterprise with more than 200 offices around the world

 

                  A full service provider with a diverse suite of services to address any commercial real estate need

 

                  More than 2X the size of our nearest competitor in terms of 2005 revenue

 

                  Focused on growing existing client relationships through cross-selling opportunities and a multi-market approach

 

                  Focused on outperforming the industry in terms of margin expansion and market penetration

 

                  Able to significantly leverage our operating structure

 

                  A strong cash flow generator

 

We are not:

 

                  Asset intensive

 

                  Capital intensive

 

                  A REIT or direct property owner

 

                  Dependent on a few markets, producers or clients

 

                  Interest rate dependent

 

27



 

Appendix

 

28



 

Reconciliation of Normalized EBITDA to EBITDA to Net Income (Loss)

 

 

 

Year Ended December 31,

 

($ in millions)

 

2005

 

2004

 

2003

 

2002

 

2001(1)

 

Normalized EBITDA

 

461.3

 

300.3

 

183.2

 

130.7

 

115.0

 

 

 

 

 

 

 

 

 

 

 

 

 

Less:

 

 

 

 

 

 

 

 

 

 

 

Merger-related and other non-recurring charges

 

 

25.6

 

36.8

 

 

28.6

 

Integration costs related to the Insignia acquisition

 

7.1

 

14.4

 

13.6

 

 

 

IPO-related compensation expense

 

 

15.0

 

 

 

 

EBITDA

 

454.2

 

245.3

 

132.8

 

130.7

 

86.4

 

 

 

 

 

 

 

 

 

 

 

 

 

Add:

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

9.3

 

6.9

 

3.6

 

3.2

 

4.0

 

 

 

 

 

 

 

 

 

 

 

 

 

Less:

 

 

 

 

 

 

 

 

 

 

 

Depreciation and amortization

 

45.5

 

54.8

 

92.6

 

24.6

 

37.9

 

Interest expense

 

54.4

 

68.1

 

71.3

 

60.5

 

50.0

 

Loss on extinguishment of debt

 

7.4

 

21.1

 

13.5

 

 

 

Provision (benefit) for income taxes

 

138.9

 

43.5

 

(6.3

)

30.1

 

19.1

 

Net income (loss)

 

217.3

 

64.7

 

(34.7

)

18.7

 

(16.6

)

 

 

 

 

 

 

 

 

 

 

 

 

Revenue

 

2,910.6

 

2,365.1

 

1,630.1

 

1,170.3

 

1,170.8

 

 

 

 

 

 

 

 

 

 

 

 

 

Normalized EBITDA Margin

 

15.8

%

12.7

%

11.2

%

11.2

%

9.8

%

 


(1)         The results of operations for the year ended December 31, 2001 have been derived by combining the results of operations of the company for the period from February 20, 2001 (inception) to December 31, 2001, with the results of operations of CB Richard Ellis Services, Inc. prior to the MBO merger of the two, from January 1, 2001 to July 20, 2001, the date of the merger.

 

29



 

Reconciliation of Net Income to Net Income, As Adjusted

 

 

 

Year Ended Dec. 31,

 

($ in millions)

 

2005

 

2004

 

Net income

 

217.3

 

64.7

 

 

 

 

 

 

 

Less:

 

 

 

 

 

 

 

 

 

 

 

Amortization expense related to net revenue backlog acquired in the Insignia acquisition, net of tax

 

 

8.2

 

 

 

 

 

 

 

Merger-related charges related to the Insignia acquisition, net of tax

 

 

16.0

 

 

 

 

 

 

 

Integration costs related to the Insignia acquisition, net of tax

 

4.5

 

9.0

 

 

 

 

 

 

 

One-time compensation expense related to the initial public offering, net of tax

 

 

9.4

 

 

 

 

 

 

 

Loss on extinguishment of debt, net of tax

 

4.6

 

10.6

 

 

 

 

 

 

 

Tax expense related to the repatriation of foreign earnings under the American Jobs Creation Act of 2004

 

3.5

 

 

 

 

 

 

 

 

Net income, as adjusted

 

229.9

 

117.9

 

 

 

 

 

 

 

Diluted income per share, as adjusted

 

$

3.00

 

$

1.65

 

 

 

 

 

 

 

Weighted average shares outstanding for diluted income per share, as adjusted

 

76,618,352

 

71,345,073

 

 

30



 

[LOGO]

 

31