CBRE Group, Inc. (CBRE) Earnings Call Transcript & Summary

All right. Hello, everybody. Good afternoon. I'm Patrick O'Shaughnessy, the capital markets analyst here at Raymond James. Up next, we have CBRE Group, and present on their behalf, we have CFO, Leah Stearns. Format is going to be, much like probably all of these, fireside chat. Feel free to submit any questions that you have via the Zoom chat functionality, and I will try to work it into the conversation. And with that, let me welcome in Leah. Leah, how are you?

I'm good, Patrick. How are you doing?

I'm doing well. Thank you. Thanks for joining us today. Perhaps you could start us off by providing folks with a brief introduction on CBRE Group, for investors joining us who might not be intimately familiar with the company.

Sure. So I guess, first, to start off, CBRE is the largest commercial real estate services company in the world. We hold market-leading positions across leasing, property sales, outsourcing, valuations, property management and commercial property development in the U.S. We believe our size, scale, capability set and our geographic diversification is unrivaled, and we have presence across 100 countries. In relation to our platform, we serve the largest owners, investors and occupiers of real estate globally, and we believe that we generate significant synergies that stem from these extensive offerings. Just to give you a sense of how we operate, we have 3 core segments. First is our Advisory Services, which provides transaction advisory and brokerage services. We also provide financing solutions and loan services to clients; and then finally, property and project management and valuation services, particularly for our occupier and investor clients. Our Global Workplace Solutions segment provides outsourcing solutions, and we serve the largest global occupiers of real estate around the world, both on an enterprise and a local basis. This includes not just office footprints but also data center solutions, life sciences and other property types. In terms of our Real Estate Investments segment, this is an area where we leverage CBRE's balance sheet and ultimately seek to use our industry knowledge and expertise to deploy capital into real estate investments on behalf of ourselves and our clients. Over the last decade, commercial real estate has seen growth really as a result of 3 key secular tailwinds. It's ultimately driven underlying growth in total commercial real estate stock, which grew at about an 8% compounded annual basis from 20 -- 2009 to 2019. Those tailwinds include rise in institutional ownership of real estate. That's really driven a demand for institutionally run commercial real estate services, and CBRE is the largest. Another is that occupiers of real estate are increasingly turning to outsourcing to meet their needs across their real estate footprint. And then finally, commercial real estate services, our industry as a whole has experienced significant consolidation, and we have been a leader in that space. We've sought to bring together global platforms that can maximize synergy as we bring together the capabilities that our clients need most. So how has CBRE capitalized? I think it's just demonstrated in our underlying earnings growth. So over that period of time where commercial real estate stock grew by high single digits, CBRE delivered 16% CAGR of EPS. And I think that just shows that we've placed bets and we've aligned our business in areas where we have been able to benefit from those secular tailwinds. While COVID-19 certainly pressured areas of our business, the steps that this leadership team took over the last decade to ultimately enhance the diversification and resiliency of our business really helped to insulate our overall financial performance. We continue to maintain our investment-grade credit rating. We ended the year in a net cash position. Our balance sheet is in incredibly strong shape. We have about $4.6 billion of liquidity with no near-term maturities. So we believe, today, we're in a very unique position particularly as it relates to not just our sector but overall to really capitalize on the opportunity we see ahead of us to make concerted investments to further extend our leadership position in the space and also to benefit from secular tailwinds in the future.

Terrific. Well, I think I have some questions to follow up on a number of those points, so why don't I jump into those. During the last recession, from peak to trough, CBRE's fee revenue fell by 36%, and it took 6 years to get back to peak levels. In 2020, your fee revenue fell by just 8%, and it appears you could get back to 2019 levels of revenue as soon as 2021. It's going to happen presumably faster than 6 years in any case. So why has the business model proven to be much more resilient this time around? You kind of alluded to some factors, but let's go a little bit deeper into that.

Sure. I think it comes down to ultimately our diversification across our business. And many people may think of CBRE as an office broker, but we are not just an office broker. We now have a very diversified business services footprint. We're a provider focused on commercial real estate and infrastructure, and we believe that the secular tailwinds in business services and behind commercial real estate and infrastructure are ones that will help us to grow and continue that success that I just alluded to in my opening remarks. We ultimately attained this diversification by focusing on 4 areas of diversification over the last decade. It starts with our clients. So we serve clients across the universe of financial, life sciences, digital infrastructure, industrial, logistics. We also serve property types. We're not just office. We do have a large industrial business. We have a large multifamily business, a large retail, hospitality and data centers. From a geographic perspective, we do have a large portion of our business in the U.S. and the U.K., but we do have global presence across the major cities where real estate is continuing to be an attractive asset class. And finally, we have a significant diversification across our business lines. So while transactions, particularly leasing and sales, were down significantly as a result of COVID, we saw real resiliency across areas of our business like outsourcing, Investment Management, commercial property development and Project Management. So we think because of all this diversification, there are areas of weakness, which I mentioned, like office brokerage that we can offset by the areas of resiliency. We have a large loan servicing business, and that, combined with our outsourcing and our industrial and logistics property development business, has really stood out and been a great source of strength for CBRE. And in addition to that, because of our underlying balance sheet, we expect to continue deploying capital to further enhance that growth trajectory and resilience, which I think should deliver really, really nice returns over the next couple of years.

Yes. And if I can follow up on that. Is it fair to say that you think you've achieved this resiliency without having to give up any of the revenue growth opportunities?

Absolutely. So again, we -- as it relates to our business today, we have positioned ourselves to be in areas of commercial real estate where we believe you will see amplified or magnified opportunities for secular growth, but we are highly diversified. I brought up retail, hospitality, office. We do have significant positions as it relates to that across the transactions business. What's important to appreciate is that if one asset class is in favor or out of favor, it's not so much impacting CBRE's valuation as a result of the value of that asset changing. It's about the value of the service that CBRE provides to our clients, the insight and the decision-making support that we bring to them. And that's really important to appreciate because it's actually times of uncertainty when our services are in highest demand, and that's something that we believe will actually be important for investors to appreciate as we help our occupier clients reoccupy the workspace or the office. And we think that's going to be a very unique opportunity, whether it's an office leasing or in our Project Management business as we see occupiers make longer-term decisions about their real estate footprint and the potential redesign of that space.

Got it. That's helpful. On last week's earnings call, management reiterated that CBRE's long-term balance sheet leverage target is 1 to 2x. Given how resilient the business model has proven to be -- I think I look at some other companies in my coverage universe and they target 2 to 2.5x or some higher number. Can you walk us through why you think 1 to 2x is appropriate for CBRE?

Yes. I think right now, given where we are with respect to our balance sheet, we believe that maintaining -- well, first and foremost, investment-grade is important to us because it provides us very liquid access to the capital markets to help fund our growth. But ultimately, our investment capacity within the range of 1 to 2 turns is more than ample to help us drive the type of growth that we believe is attractive to investors over the next, say, 3 to 5 years. But as we look at the makeup of our business and as we think about the debt capacity of the segments that we operate in, it is different. So how we finance that growth in the future and how we use our balance sheet will be dynamic. I think right now, targeting -- where we are in the cycle, targeting 1 turn on a normalized basis is more than sufficient in terms of being well positioned. It gives us ample capacity to do large strategic transactions, if we see a very unique opportunity present itself. And obviously, we'll look at the cash flow profile of the businesses that we're seeking to acquire, and ultimately, that will help us think through the appropriate level of future debt and leverage for our business. So if we see higher levels of predictable growth -- sorry, predictable cash flow, you may see us change our view on leverage, but it certainly will be anchored around the view that maintaining investment grade is fundamentally important to our business and that we want to optimize the underlying balance sheet. I think it's also important to note that we took action to optimize our borrowing -- our cost of debt in 2020. We retired our 5.25% notes, it was a relatively high interest rate, and -- in order to effectively replace that at a more attractive rate environment, given what we see today, even with the rates run-up in '20. So we feel confident that our overall target leverage range will allow us to drive very nice growth in the future. And obviously, that will continue to evaluate as we -- as the mix of our businesses shift over time.

Got it. That makes sense. So you spoke about maybe examining opportunities for large-scale transactions. To what extent are there a lot of attractive opportunities for large transactions, just given the relative size of CBRE compared to its peers? And the consolidation of the industry that you spoke to in your opening remarks, are there a lot of scaled strategic acquisitions still out there to evaluate?

We certainly look at opportunities across all lines of our businesses. We're not specifically targeting one or another, but we do think that there are areas where we do want to gain exposure, particularly areas where we think that, again, secular growth opportunities will present themselves and areas where we alone and on our own cannot internally invest to capitalize on that opportunity. We think about M&A as adding capabilities to CBRE's platform that will improve the services and the outcomes that our clients experience with CBRE, and that needs to be done in a way that allows the target to benefit more from being on CBRE's platform than they could do alone. And it needs to effectively do the same for CBRE. We need to be able to benefit from a scale or return perspective greater than what we could build on our own. And I think the -- what's important is to think about -- say, the Industrious transaction that we recently announced, that is something that really aligns us with a strategic partner, one that will really benefit from CBRE's platform, but also CBRE is going to benefit from having a relationship with Industrious, particularly as we have a strong view that flex and agile is a key area of growth for commercial real estate services in the future.

Well, that actually dovetails really nicely with a question that was just submitted via Zoom. The question is with Industrious, why not acquire a controlling stake given your bullishness on flex/agile office space area?

Yes. This is a topic that I think goes to the 4 ways in which we think about investing: build, buy partner and sponsor. In some cases, it may make sense for us to build out the capability on our own. We certainly tried that with Hana. In terms of M&A and buying, you can take a full 100% stake or you can partner with a target and take a minority stake. And that really is dependent -- the direction that you take that is dependent on the objectives and the culture and many facets that are important to appreciate as it relates to the objectives of both CBRE and the target. In this case, we see a very unique opportunity for Industrious to remain independent, but for us to benefit from this strategic relationship that we've established and the investment that we've made. So for us, it wasn't necessarily about buying 100%. We felt like Industrious was on the right path. We want to be able to help them grow faster and expand more rapidly. And so we felt as though this was the right approach particularly given the stage in which Industrious is in, in its growth profile and plans for us to enter.

Can you contrast Industrious to some of the other flexible workspace business models that are out there and why it makes sense for CBRE to partner with that -- with Industrious?

Yes. I think from our perspective, it's important to appreciate that Industrious has some unique characteristics that we felt were particularly aligned with what CBRE was trying to achieve. First and foremost, Industrious was quite effective in executing its asset-light model, and that's something that we have always said -- we launched Hana to show our operational capabilities. We knew that it was going to be an asset-intensive investment out of the gate, with the intent of shifting that towards a more asset-light model. Industrious did a really nice job at executing that over the last year or so, particularly through COVID. And so we feel as though, given that Industrious is more asset-light unlike really the rest of the co-working companies out there, that they can grow faster and scale more efficiently with that approach. And so we think that it's very unique that they're not signing long-term leases and building out space and owning their own capital and leasehold improvements. Instead, they're doing management agreements and more revenue sharing to support that.

Got you. Certainly a less risky business model. Another question that came in also on the broad conversation of M&A. Where are you thinking of M&A in terms of those diversification components that you spoke to, so property types, lines of business, geographies, clients? How are you thinking about M&A to kind of further those diversification ends?

Yes. I mean our -- ultimately, our M&A strategy is all about ensuring that we capitalize on the right areas that are prime or opportunistic as it relates to secular growth. So we've talked about industrial. We just expanded our European development team to bring in industrial capabilities. So in addition to our multifamily business in the U.K., we're now expanding into industrial in Europe. That's a good example of where, from our perspective, we think there's tremendous secular tailwinds in both multifamily and industrial, and we'll continue to expand in that area. As it relates to line of businesses, we certainly think that there are opportunities for us to invest to add capabilities where we may not necessarily have the #1 position for full global capabilities. If I think about Project Management as an example, that's an area of focus for us where there's opportunity as our clients are reimagining space. We think there will be a lot of potential project management in a pent-up capability -- or pent-up demand and our capabilities need to be able to match that. Those are just some unique examples. But again, I'll go back to this is all grounded around expanding upon our 4-dimensional diversification, making sure that we are positioned to benefit from secular growth opportunities and that ultimately, the M&A will serve as a catalyst for us to be able to deliver greater and ultimately, better outcomes for our clients than we could do on our own.

Makes sense. Another recent investment that CBRE made was sponsoring a special purpose acquisition corporation or SPAC. Can you walk us through kind of the logic underlying that, the size of your investment, what sort of economics or other forms of value that you hope to achieve through that?

Sure. And again, going back to the 4 pillars of investing that we think about within CBRE. This is really that last pillar that we've added around sponsorship. And there are times where -- we have a very active M&A program. We find opportunities around businesses that don't necessarily fit perfectly within the CBRE set of capabilities but ones in which we can help to enhance the growth of the target and the target can benefit from our involvement. And so the SPAC is really based on the fact that we believe that there are many opportunities out there for us to explore where we can help be a good strategic partner to emerging public company. And so it's a way for us to help early-stage companies enhance their growth trajectory and ultimately, capturing some of that upside for our shareholders. And this is really about targets that -- again, going back to aren't necessarily 100% perfectly -- that wouldn't 100% fit within the CBRE footprint but again, one that can align with and benefit from CBRE's involvement. And we think there's a lot of potential opportunities to pursue things like this in the future.

Got you. And then lastly in terms of capital usage questions, what's the company's appetite for share repurchases right now? I think with the benefit of 2020 hindsight, you probably would have backed up the truck to buy back shares this past summer when the stock was trading in the 40s, but you obviously had a lot less certainty around your cash flow at that point in time as well. So as we sit here today, the stock has re-rated. So that's a good thing. But how are you weighing repurchases against some of those other uses of capital that we discussed?

Yes. And -- yes. As we said on our earnings call, we do view our stock as an attractive use of capital, and we are resuming our programmatic repurchase program. We also plan to keep our allocation program very dynamic. So as I said earlier about our investment prioritization, we're going to focus on building out our capabilities internally, our M&A pipeline, which is sizable and robust. And we'll make sure that to the extent that we can't find or can't come to the right valuation, an ultimate outcome to our M&A program, that we will return that capital to shareholders. So we're not in the business of hoarding capital. We're looking to make sure that we're being balanced in terms of how we deploy it. And I think using the buyback is a natural hurdle in comparison to the returns that we can achieve through M&A. It drives a level of discipline and instills that into our underwriting process. And so from our perspective, given the enhanced visibility that we have into our business, we believe it's more resilient. The composition of it is such that it gives us ample financial capacity to continue to invest over the next several years. We think we have a long runway for financial growth. And I think, ultimately, that gives us a very compelling deployment opportunity outside of just traditional M&A and internal investments to develop other capabilities.

Makes sense. Circling back to last week's earnings call, CBRE also spoke to your long-term plan, which reflects average annual adjusted EPS growth of a minimum of low double digits through at least 2025, absent of a recession. On the revenue side of the equation, what do you see as the key sustainable growth drivers underlying that view?

Yes. The multiyear framework ultimately contemplates positive organic growth across all 3 of our segments. We did mention that this framework does contemplate a contraction or some secular decline in the office footprint. Even with that, we do believe our advisory business will be a positive contributor to our growth over that period of time. Advisory will see slightly lower growth relative to our other segments. But we do think, given the fact that we have strong presence in industrial and multifamily, again, our valuations or property -- our Property Management business is well positioned and more recurring in nature that advisory will have some nice performance through that 5-year period. We do think GWS will likely have higher growth than REI, which is our Investment Management, and development business will be kind of squarely in the middle of the pack in terms of overall performance. Their framework includes the benefit of our organic growth, so growth through the businesses that we have today and how we build out our capabilities organically as well as reinvesting the free cash flow that the business can generate. We think that ultimately will drive low double-digit growth over that 5-year period. And what it does not include is what we believe will be meaningful upside from the incremental capital deployment that we can execute over and above just the internal free cash flow basis. I think it's important to recall we're in a net cash position. We certainly have the ability to take leverage up to 1-plus turns. And in terms of business lines, I said this before, but how are we going to be focused on growing? We certainly think that there are opportunities for us to enhance our growth around Project Management and our outsourcing business. Our Investment Management and development businesses, which are primarily again focused on those resilient asset classes, industrial, multifamily and infrastructure. So we're excited about all of these opportunities. We believe the business is -- it's time for folks to appreciate CBRE for the business it is, not the business it was. And we think 2020 sets the foundation for us to begin to demonstrate that well into the future.

Got it. And then within that framework, to what extent does margin expansion play a role in your long-term EPS outlook?

Yes. So margin expansion is something that we do believe we can continue to pursue. We certainly are focused on getting back to pre-COVID margin levels within our business. We believe that a lot of the cost work that we actioned in 2020 will remain permanent within our cost structure or it will allow us to maintain our industry-leading margins as we redeploy some of that capacity and OpEx into areas of potential growth and begin to build out new capabilities for our clients. So it is a key part -- margin expansion is a key part of that plan, but it is not something that we think is aggressive at all in nature.

Got it. Current events question for you here. Market expectations for inflation seem to keep rising. Historically, how has inflation impacted your business and I'm thinking, probably most particularly, the capital markets business?

Yes. And so thinking about capital markets. We think about the upward pressure on interest rates from inflation. And our CBRE internal research forecasted 10-year to effectively increase to about 1.8% by year-end '21 and hedge around 2% by the end of 2022. So if we think about our business from a big picture perspective, rates even though they're rising are still exceptionally low on a relative basis from a historical perspective. And the ultimate impact on our capital markets business, we think, will be fairly limited. Our capital markets and debt and structured finance business, there's more floating-rate debt in the short term, and we think that will lead to the opportunity for us to capture lower rates in the short end of the curve, and we think investors will take advantage of that. In terms of capital markets and sales, a slight modest upward pressure on cap rates that may be caused by rising interest rates, we don't think will cause a real headwind because there is effectively a lot of equity that's out there. There's a tremendous amount of liquidity. And so investors are certainly driving a significant amount of activity that we expect will continue to potentially even create downward pressure on cap rates for the most attractive assets. Now this is obviously not a statement to be held across all assets, but for those most attractive assets, we actually think there shouldn't be risk on cap rates. And then, finally, we think about it from a volume perspective. CBRE is still recovering from pre-COVID levels, and we think that those volumes on our capital markets transactional business will continue to improve. And we think that, that will be effectively catalyzed by the reduction in travel restrictions, being able to get due diligence completed for foreign capital coming onshore and also looking at specific investor confidence around the underwriting fundamentals for some of the most short-term challenged assets like student housing, senior housing and hospitality. So ultimately, while I think inflation rates are likely to rise, we don't think there will be all that much of a material negative impact to our business in '21 from that.

Got it. Your Global Workplace Solutions business saw revenue growth slow from 14% in 2019 to 6% in 2020. You see this business reaccelerating back towards double-digit revenue growth by the end of 2021, however. What sort of mandates are you starting to see in your deal pipeline?

Yes. And that pipeline continues to be quite solid. It's still challenging to monetize it because of the physical mobility and logistical complexities that have been presented because of COVID. But we certainly think that as economies begin to reopen, we'll find opportunities to transfer or to transition our pipeline into full transition mode. We do think that as vaccine rollouts continue and the mitigation measures are lifted, that will help reaccelerate our growth. In terms of how we think about it, we expect 2021 to be more benefited in the second half of the year for GWS, but it's ultimately going to depend on the trajectory of all those containment measures, the vaccine rollout and when we can get folks more focused in terms of transitioning and out on site for those client transitions. And I think it's important to appreciate that the majority of our pipeline is weighted not to office, but again, going back to those secular tailwind property types like industrial, logistics and our clients in technology and life science and health care. So there is a lot behind the GWS business that I think investors are starting to learn more and more about, particularly given the strength that we saw in 2020 and then learning more about how we were able to maintain such a robust outcome coming into 2021.

And maybe building off of that a little bit. What have been the ramifications of the pandemic on your competitive landscape and -- for Global Workplace Solutions but as well as the rest of the company? Is technology more important than ever and your scale and your ability to invest in technology becomes more important? Or kind of how are you viewing things today as opposed to a year ago?

Yes. I mean technology has always been a really important part of our business. Technology is key for any outsourcing business to rely on to become more and more efficient. Technology is important. As we think about building out our operating platform for our transactional business, making sure that we have highly efficient workflows behind all of our transactional activity continues to be important. So technology is an overall important part of our plan every year, and certainly, data plays a lot into that.

Got it. A question on the regulatory environment. I think it probably has most ramifications on your multifamily business, but with the new administration coming into D.C., what are your current expectations for what that means in terms of Fannie and Freddie? And then are there any other either headwinds or tailwinds, do you think, a new regulatory regime could provide?

Yes. I mean all signs lead to Fannie and Freddie remaining as they are today for the foreseeable future. And actually, if you go back to pre conservatorship, there was still a very strong level of activity that we were able to command as it relates to the loan origination and servicing businesses that those businesses needed. So we think that there continue to be good opportunities for us to invest in and grow those businesses. And I think from our perspective, the change in administration probably takes some of the uncertainty off the table. The uncertainty was when would they exit conservatorship, and now we think it's more likely they will stay there for the near term.

Got it. And then, I guess, speaking of the multifamily business. I think it sounds like, in some of our other conversations, it's come up where there's just more institutional ownership and more institutional management of multifamily as an asset class. What are you seeing on that front? And how does CBRE try to take advantage of that trend?

Yes. That definitely has been a key trend. And in fact, the beginning stages of that in the U.K. are the reason why we entered the U.K. through our Telford acquisition, is that the emergence of institutionally owned and commercially managed and institutionally managed multifamily is something that is lacking in the U.K., particularly the London market. So what we see in the U.S. as it relates to that is it continues to be a very attractive asset class. We do think that whether it's on the Investment Management side through global investors or through the commercial property development business that we have in the U.S. and the U.K., multifamily will continue to be a very important asset class for us to invest in. And as we think about building out the suite of services around that, that is a good example of where we would focus our energy to make sure that we have the comprehensive services needed to provide the solutions needed for both our occupier and our industrial clients. And today, we really focus on investor clients as it relates to multifamily.

Got you. You mentioned Telford, and it kind of got me thinking about other European investments. The afternoon of your earnings call, so after the earnings call, you guys put out a press release announcing that Trammell Crow is going to be expanding and doing development of, I believe, logistics facilities in Europe. And you kind of strongly hinted at it during the earnings call. What's the opportunity that you see with Trammell Crow building out a franchise outside of the U.S.?

Well, it's really why we -- if we think about what we've built in the U.S., we think that we have the road map or the playbook to be able to do that in other key developed markets. Bringing on Telford was a key component to our initial testing of that thesis, and it certainly played out. While COVID set us back in terms of construction shutdowns and other challenges within the Telford business, there's nothing structurally different about how we believe that investment will play out over time. And we actually see a tremendous amount of opportunity to expand the Telford model -- or the Telford footprint with TCC into Continental Europe. So we do think that there are opportunities for us to take that playbook and execute it in Continental Europe. And so we'll start with industrial. We think there is a tremendous need and opportunity and demand from our clients to effectively be a catalyst for us to do that. And so we're excited to move forward. And just going back to my other comments around areas of secular tailwinds in industrial, and multifamily has probably been said over and over and over again on this call. Those are the 2 areas where we're investing in EMEA right now from a development perspective, and we think there are opportunities to continue that.

Got it. How do you broadly think about the opportunity in China? Obviously, a very big economy, a rapidly growing economy, certainly a lot of build-out of office space over the last 10, 20 years. It's a relatively small portion of CBRE's revenues today. Where do you see your franchise going in China?

Yes. China is an important part of the diversification story. So it's a key growth market, and it will be part of our portfolio. It will not be an overwhelming index size for us if you think about an out-of-benchmark play. It's not something where we're going to take an out-of-benchmark position. But from our perspective, it's an important market to be in. I think it really is important to have balance across the lines of businesses that you serve and operate there that complement the rest of the capabilities that CBRE has across the rest of our largest markets. You'll see us play in the big cities, that's really the key here from a positioning perspective. We're not going to go in and play in a small market. But we also need to manage risk. And so there's inherent risk that comes along with operating in markets like China. And so we're focused on balancing our growth and our presence to ensure that we're making the right decisions to achieve the best risk-adjusted returns for the effort, time, capital that we're putting into that.

Got you. We're coming towards the end of our time, but maybe one more question on the environment in terms of attracting and retaining talent. I feel like you talk to the smaller firms and they say, "Hey, we attract talent because people want to be bigger fish in a small pond. They don't want to have to share as much with other people in the office." But at the same time, I think that there's an appeal from a platform like yours of you guys have a very broad capability set and you get exposure to probably more deal flow with your platform than with a lot of your competitors. So when you guys look at your retention data, what are you seeing right now? And how do you -- kind of what's been the trend there?

Yes. It's important that we can provide our professionals the best platform to operate. I think ultimately, you'll see the level of investment that we have to put into our recruiting and retention program every year come down as a percentage of our underlying commission structure as we have improved to have the best operating platform. And so it's imperative that we're focused on optimizing and maximizing the value of what that looks like for our professionals, that we listen to their needs, we make it easy for them to be the most productive on the CBRE platform. And so at the end of the day, I think about if any broker wants to think about -- or any transactional broker wants to think about "Where can I maximize the value of my own franchise?" It should be CBRE because we have the breadth of the full firm to bring to bear, and they should be able to benefit from that more than they can benefit anywhere else. And so that's how we think about ensuring that we're optimizing the balance of recruiting and retention. There may be areas where we need to bolster our capabilities, and those will be targeted recruiting efforts. And there may be areas where we certainly think we have a key area of focus that we need to be leaning into from a retention perspective. But my hope is, over time, as the operating platform matures and becomes fully optimized, that we can bring down the level of capital we have to deploy into that area.

Terrific. Well, I think with that, we are out of time. But Leah, thank you very much for joining us today, and enjoy the rest of your day.

Great. Thanks, Patrick.