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

Great. So I think we'll get started just to keep us on time. My name is Ron Kamdem. I'm the Head of REIT and commercial real estate research here at Morgan Stanley. Before we start, some disclosures. For important disclosures, please see the Morgan Stanley research disclosures website at www.morganstanley.com/researchdisclosures. The taking of photograph and use of recording devices is also not allowed. If you have any questions, please reach out to your Morgan Stanley sales representative. So I'm thrilled to be joined today by Emma Giamartino from CBRE. For those who don't know, CBRE is the largest commercial real estate services company in the U.S. They did about $31 billion of revenues last year. The company's been around for over 100 years. It's in over 100 different countries. And they're certainly #1 in a number of different businesses, including property sales, leasing and so forth. So we thought this would be a great sort of lunch panel to get a pulse on the commercial real estate market. So Emma, thanks so much for joining.

Yes. Thanks for having me.

So why don't we start with the macro. Given you have a front row seat to the commercial real estate market, can you compare and contrast maybe this cycle versus previous? And how is the company better positioned to outperform this time around?

Yes. It's a great question and one that we're receiving a lot. How are we performing today? Or how is the market today compared to what occurred during the Great Financial Crisis? And there's 2 big differences. As you all know, the market that we're in right now is not as severe as the Great Financial Crisis. There's a number of factors going into that. But we're expecting a mild to moderate recession later this year, which is in line with, I think, what most of you are expecting. From a real estate market perspective, there are big differences from the financial crisis. Fundamentals in asset classes outside of office still remain very strong. Demand for multifamily is very strong. Industrial is performing very well. So if we get through this downturn, activity should pick up meaningfully, and we expect that to happen next year. In terms of our company, we are fundamentally different than who we were in the GFC, and that's across a variety of aspects. So we talk a lot about our 4 dimensions of diversification. You've heard that from Bob, who's here with us today, on a number of occasions. And across each of those 4 dimensions, we are radically different. So let me bring that to life a little bit. In terms of asset type, if you go back to the GFC, our property sales business was over 1/3 office. Today, it's less than 15% office. So that's a meaningful change in diversification towards industrial and multifamily. By client type, if you go back to the GFC, our outsourcing business was primarily focused on financial services clients, and that was by nature of the fact that real estate outsourcing started with financial services clients. And today, we have a balanced portfolio of clients across 8 different sectors: technology, health care, life sciences, public sector, industrial and logistics. So that gives us a much more balanced portfolio. It also gives us insights into what our clients are doing and what they want -- the services that they want us to provide. By geography, I mean, this is one of the most notable differences in our company from the GFC. In the GFC, we were primarily a U.S.-focused company. Today, we're in over 100 countries, and we're scaled in those countries outside of the U.S. One very notable milestone that we achieved this year is that Japan, within our advisory segment, is the second largest country behind the U.S. by EBITDA. That's a meaningful milestone that we've reached, and that allows us to have balance. When the U.S. is under pressure, our other geographies can pick up and offset some of those declines. And then by line of business. We pretty much do anything that you can think of in the real estate services market. Today, we talk about our resilient lines of business ever increasing as a portion of our overall EBITDA. This year, we expect our resilient lines of business to be over 50% of our EBITDA. And those are lines of business that will grow through a recession. So that's a meaningful supporter for our resiliency. You go back to 2007, pre-GFC, those resilient lines of business were less than 20% of our EBITDA. So we're in a meaningfully stronger position today. We also have a meaningfully stronger balance sheet, and there's virtually no comparison to where we were in the GFC. We were highly levered, preserving our profit streams, and we spent the years coming out of the crisis delevering. Today, we have about a half turn of leverage. If we didn't deploy any capital through the rest of this year, we would end the year in a net cash position. So that allows us to really focus on deploying capital at an opportune time and driving that growth into the future. So really, how -- when we look at our business, we are highly confident we can not only weather the next 12 to 18 months, but really drive capital and investment into the areas that can drive greater growth and return over the next decade.

Excellent. Let's talk about commercial real estate transaction volumes. So in 1Q, volumes were down about 56%. Your capital markets business outperformed that, down 43%. Maybe can you talk about what tightening lending conditions is having an impact on buyers and sellers and also what your expectation is for transaction volumes going into the rest of the year?

Yes. So that is the #1 question that we receive. It is -- property sales is not the largest part of our business. But obviously, it is an indicator of what is happening in the real estate market. This year, we're expecting property sales overall to be down about 20%, but that sequence of how that occurs, it varies very much by quarter. So like you said, our first quarter, over 40% decline. We're expecting that to continue into the second half and then start to alleviate in the latter half of the year. What's important to note about that is that it's not just the seasonality, but it is the comparisons versus last year that are impacting how those earnings are coming in and how that revenue is coming in. If you go back to 2022, the first half of the year, our sales revenue increased by 33%. And then when the Fed started raising rates in the middle of the year last year and, as you said, credit conditions tightened meaningfully, our sales revenue declined. So the second half of the year, our revenue declined 34%, and most of that was in the fourth quarter. So even though we're saying transaction activity is going to pick up at the latter half of this year and in the fourth quarter, it is off of very easy comparisons versus last year. And then I do want to comment on seasonality a little bit. It does -- is impacting our overall earnings stream. So not only is that happening in our sales business, but it's happening in our other transactional businesses: so development, leasing to a lesser extent. And because of that, we're expecting an overall decline in our EPS this year by mid-double digits, as we talked about on our last earnings call. And the cadence of that is somewhat unique. So nearly 2/3 of that should be generated in the second half of the year, which is more than we typically have. And then remember that in Q1, around 20% of our EPS was generated in that quarter. So this second quarter will be uniquely down and will be the lowest EPS for the year.

Excellent. So there's a big debate in the market about commercial real estate pricing. You guys are the authority, right? You're the largest in the space. Do you have a view internally this cycle how much commercial real estate pricing will be down? And can you maybe touch on different subsectors?

Yes, absolutely. So on average globally, we -- our internal view was that property values will decline by mid-double-digit percentage. And that is going to vary greatly across asset types and geographies, as you can imagine. No surprise, the greatest decline will be in office, and we've seen a lot of that, to a lesser extent, in industrial and multifamily. The U.S. will be the geography with the greatest declines, and then we'll see that less so in Europe and in Asia. One thing that's notable is that we are starting to see some activity in Europe. The bid-ask spreads are starting to close. And that's mostly in instances where REITs are, that are highly levered, are looking for opportunities to generate liquidity and delever and sell some very high-quality assets. So we just had -- when one of our European investment management funds just acquired a $500 million portfolio of German residential product that's high quality. But again, out of -- one of those REITs that is highly levered and looking for opportunities for liquidity. And that's something we wouldn't see those opportunities if those REITs weren't feeling that pressure. So we're seeing that in Europe. That's just one example of the pockets of transactions starting to occur, and we expect that to start to come into the U.S. later this year.

So what's interesting about that is, so the public markets move a lot faster than the private market. So REITs were down about 25% last year, up a little bit this year. But maybe can you talk about what you're seeing on the private side in terms of cap rate movement? And where is the biggest disconnect between sort of the public and private?

Yes. So I think first, I just want to comment on -- we all know that there is a lag. I think you go back to the GFC, the lag between private and public valuations was about 12 months, and that was both on the decline and the recovery. Right now, what we're seeing is we believe that the public REITs are trading at probably a 20% discount to their actual fair net asset value. So they are trading at the low end, and it's likely creating opportunities to invest in those public REITs that have strong balance sheets, have termed out, that will survive and thrive through the next few years. But by property type, we're seeing the greatest disconnect in multifamily. So on the private side, multifamily cap rates have increased by about 100 basis points, and we think that's probably likely fair. On the public side, cap rates have increased by 200 to 250 basis points. So this is multifamily. I started by saying that we're seeing -- the fundamentals in multifamily are strong. The global supply for multifamily is low. And so it feels like the public markets have overcorrected for the valuation in multifamily, and you're seeing some of that in the other asset types as well.

Interesting. So I want to switch gears and dig into leasing activity a little bit because we've -- we got a whole CRE track. We've got a couple of different data points on leasing. So the numbers we've seen is if I look over the last 12 months, leasing activity is down about 24% versus 2019. Obviously, it varies by subsector, right? Office could be down more than that. So I guess you guys have guided this year to leasing down sort of in the high single digits. So I'm curious what activity looks like on the ground and why you're best positioned to sort of outperform the rest of the market.

Yes. Absolutely. So first, I just want to put some context around leasing. We are expecting it to decline. But I just want to remind everyone, as you all know, that leasing is less cyclical than our sales business. So if you go back to the GFC, our property sales revenue declined by 70% peak to trough. Leasing declined about half that. And so we're expecting something similar today. So sales revenue for the year should decline by about 20%; leasing, about half that. And that's because leasing activity does continue despite the fact that the credit markets are not lending. What we're seeing in leasing overall is that our occupier clients are hesitant to make decisions. That's in office, and we're seeing it elsewhere. Office is down, as you can imagine, and that's for a number of reasons. Our average lease size by square footage is down about 20% from pre-pandemic levels. So they're looking at smaller spaces, but there's still activity. So they're still transacting, and we benefit from those transactions. We're also seeing that TI is up about 30%, and free rent is up about 50%. And what tenants are looking for from landlords is high-quality credit. They are going towards those landlords where they're confident that they're actually -- that the TI will actually materialize in the leases that they sign. On the industrial side, it is very positive. Leasing activity is slowing down somewhat. They are -- occupiers on the industrial side are also hesitant to make decisions, but it's being entirely offset by increases in rent. So for us, we expect our industrial leasing revenue to increase this year despite that slight slowdown in activity. And then retail, smaller portion of our leasing revenue, but it is showing resiliency. That's, of course, off a much smaller base and due to the fact that there has been very low supply and construction in high-quality retail over the past decade, but we are continuing to see growth there. In terms of impacts to our business and what we're seeing in terms of our market share, we continue to see leasing market share grow, especially through these times of greater stress. Our clients and producers want to come to our platform because we are the most stable, we have the most resources and we have the greatest commitment to invest in greater resources over time. And so both producers and our clients see the opportunity to work with us.

Yes. I think those comments are pretty consistent with what we've heard from some of the other broker panels, that is, sort of great variation by subsectors, but multifamily, currently retail, are doing quite well. I want to go back to one of the comments that you made earlier, which I thought was really interesting, which is talking about the resiliency of the business, right? So if I double click on the Global Workplace Solutions business, it's about 25% to 30% of operating profit last year. That business actually grew double digits in 1Q '13. So maybe can you -- what's the secret sauce? Can you give us some color what's driving such strong demand in that business when we know that the macro is actually slowing down?

Yes. So GWS is performing incredibly well. It's delivered double-digit growth for as long as we can remember, and we expect it to continue to deliver that growth on an enduring basis. We expected this year to achieve about $1 billion of EBITDA, which is a big milestone for us. So it will be over 2/3 of our EBITDA and really contributing to that -- those resilient lines of business. It is, of course, the biggest contributor and the highest grower within our resilient lines of business. And there's a number of factors that are driving that growth. So on the Facilities Management side, we have a record pipeline. I think each quarter, we come out with another record pipeline. And that's both with existing clients where we're expanding our wallet share and with new clients. And today, we're seeing an even greater amount of, not just new clients that are shifting from another service provider to us, but we're seeing a large amount of first-generation clients. On the existing client side, if you look at last year, we had a record number of renewals within that existing client base. And we were able to convert those clients to grow that base of revenue by 10%. So it's not just about preserving our revenue from our existing clients, but we have the opportunity to grow that because we're either taking share from the services that they procure from other providers or we're expanding the scope of what we provide them. On the first-generation side -- client side, we are seeing a big increase in the number of conversations we're having with first-generation clients. And as you can imagine, many of them -- many occupier clients are looking for opportunities to save costs. And what we've been able to show historically is that we can generate at least 10% to 15% cost savings for those first-generation clients based on the real estate costs that they currently have to manage their space. And for some clients, it can be even higher than that. And there's a couple of reasons for that. One is, when we bring on a new client, we take their entire employee base that manages their real estate. And because we are the experts in this business, we can streamline that employee base and deliver it back to them at a lower cost. The second piece is we are scaled and we work with all suppliers and vendors in this space. And so we can procure those services for them, even if we don't provide them directly, at a lower cost than they'd be able to do on their own. So we don't do janitorial. We don't do catering. But we do procure those services, and we work with all those providers. And we can naturally deliver those services at a lower cost than the clients can do on their own. So we're seeing tremendous amount of growth there. And to put context around those first-generation clients, because I think this is underappreciated, we estimate that only 30% of this Facilities Management market is outsourced today. So that green space, that first-generation space is 70% of the market.

Wow. So there's a little [ TAM ] there. And it sort of makes sense because those services that you're providing to those occupiers, doesn't matter what sort of the environment is going on. It's not like they're going to wake up one day and just walk away from the asset. They still need it to sort of ride it through.

Absolutely. And I think what's also misunderstood about that is we don't -- in general, we're not getting paid just simply based on the square footage of the property we manage. So if our clients can track their space, we help advise them on the portfolio that they really need. But if they can track their space, we're not necessarily earning any less fees than we did previously. And on top of that, we're likely getting project management work. So the other big portion of GWS is our project management business, which we grew, I think, over doubled in size through our acquisition of Turner & Townsend a couple of years ago.

Excellent. So we can't have a CRE conference in this day and age without talking about office. It's been in the news. [ We've read ] a lot on it. We've sized the CRE market at $11 trillion in asset value, and we've said office is about 25% of it. So I want to dig in here. So number one, what are you seeing in terms of office transaction activity, investor interest, leasing? And also, I'd love to hear your comments on this push to return to office.

Yes, absolutely. So I said before, I think that capital markets is our #1 question. This is 1b. I think overall, what we've been seeing is that office is obviously challenged. That is not an enlightening statement. But it has been challenged for a while now ever since the pandemic, and that will persist. But we are seeing very different dynamics by geography and then also by asset quality. So by geography, in the U.S., it is the most challenged. We're seeing about 20% vacancy in office. But in Asia, it's a much different story. If you look at Singapore, Seoul, Tokyo, in all of those markets, office vacancy is less than 5%. So that challenge just simply doesn't exist in those markets. And then by asset quality, I think this is no surprise, but the top 20% of office assets are performing well. Great amenities, great locations, high ceilings, windows, places that people actually want to be, those are performing well. And then even what I found really interesting is that the top 10% of office assets actually have increasing rents. So there is a very different story than if you look at the bottom 20%, which is unclear what will happen to those properties. And then in the middle, the middle 60%, something will happen. It will take some time, and there's a number of things -- of uses for that -- those office buildings that could happen. A small portion of them could be converted into multifamily if the [ floor plan ] works. Some of them could be converted into Class A office space if, again, it's in a great location and the building suits itself to being converted. And then some space that's in great locations will be sold for their land value. So that's going to unravel over the next number of years. I think what's important and probably underappreciated about our business is how office impacts us. I said before, it's a small portion of our property sales business, less than 15%. Within leasing, we are seeing activity. And we, as a services company, benefit from those leases happening. So we're advising our clients on -- they may be going from larger space to a smaller space, and we're helping to advise them how to do that. We're generating transaction fees when we do that. And then on top of that, we're getting the project management work. So when we're putting in those great amenities and we're making it a space where the employees want to come back, we're doing that project management work. So there's actually a benefit on that end. So overall, I don't want to imply that we don't understand that there's meaningful headwinds in office. But we do feel very strongly that the rest of our businesses will more than offset any headwinds that we'll face within office over the next number of years.

Yes. So your point is as long as transactions are happening, you're getting sort of the fees there and the project management on the back of that. Just any -- just follow-up thought on the push to return to office. Where do you think -- where are we in sort of that cycle?

So I'd say if it was a few weeks ago or a month ago, we felt like it kind of have stalled in the U.S. But recently, and I know Bob was in recent conversations and has been hearing from a number of CEOs, that there's a greater push towards return to the office, not just in financial services, but in other sectors as well. And I think there's a realization that we're more productive in the office. I know I feel that way. I know my team feels that way. So we won't get to 5 days a week, but maybe we get to 2, 3 days a week on a consistent basis. But that's going to -- that will continue to unfold. I also think as the market starts to be more challenged through the remainder of this year, that will also create a greater opportunity for us to drive more employees back to the office.

Yes. So Morgan Stanley did a return-to-work survey, which we do every year with our partners in AlphaWise. And I think some of that data is consistent, which is users are coming in 3 days a week. And the sweet spot now is 60% utilization versus historical 80%. So I think it sort of ties in. So I want to switch gears to the balance sheet because I think you touched on it upfront. You're very underlevered this time versus sort of previous cycle, have you guys at half a turn of debt to EBITDA. And obviously, with balance sheet strength comes opportunity. I think what's interesting is you guys are one of the few companies that's actually looking to put more capital to work in the next 12 months versus the prior 12 months. So can you talk about where that capital is being deployed and what gives you confidence to be investing when the macro is so uncertain?

Yes. Maybe I'll touch on the second half of your question first. So given everything that I started with in the place that our company is today, our strong balance sheet, our diversification, what I didn't mention is we're generating a tremendous amount of cash flow. So last year, we generated $1.4 billion. This year, we expect to generate another $1 billion. And then in the recovery, that will approach $2 billion very quickly. So not only do we have a tremendous amount of capacity today, but that's building. So just to deploy the same amount of capital as the free cash flow we generate is -- takes a lot of effort and concentration in building up a strong pipeline. So today, if we don't -- if we lever up to 2 turns, we have $5 billion of capacity right now. And this is what we've been preparing for. We know there will be opportunities now. We've been building a very strong pipeline of M&A in very focused areas over the last number of years. And now we're starting to see those conversations and those bid-ask spreads close and hope that we can transact over the next 12 months. Within our M&A pipeline, we've said on our last number of earnings calls, we are focused in our more resilient lines of business, primarily within Facilities Management. And that's really around building out our sector focus. So we have 8 sectors, like I said before: technology, life sciences, health care, et cetera. And within each of those sectors, there are opportunities to increase our capabilities and make our service offering even more valuable to our clients. So for example, last year, we bought a smaller company called Full Spectrum Group, and it provides lab maintenance services to our life science clients. So now they come to us and we're providing a really differentiated service. There are a number of companies out there that provide similar specialized services in those other sectors outside of life sciences. And then the other place that we've talked about investing is Investment Management. Investment Management is our one segment or sector that is not leading in the real estate investment management space. I would say virtually all of our other lines of business are the market share leader. We are the leader in core and core plus, one of the leaders in core and core plus. But overall, we're not. So we see opportunities to fill in gaps there. And then within our advisory business as well, we -- within our resilient lines of business within advisory, valuations, property management, loan servicing, we're looking for opportunities. So as a result of all of that and a lot of work over a number of years, we have multiple acquisition opportunities approaching $1 billion, exceeding $1 billion that we hope to convert over the next 12 months. But of course, we're being patient. The other area we want to deploy capital and we think there's a big opportunity to do so is directly into our REI business. So that's our development business and our investment management business. On the development side, as you can imagine, there's huge opportunities to acquire land at attractive values. So we're looking for those opportunities so that we can build the supply to deliver those fantastic returns that we saw coming out of the Great Financial Crisis, and our Trammell Crow business is the best suited to do that and to deliver those returns. And then within our Investment Management business, we see opportunities to launch funds, delivering that higher return. And we [indiscernible] balance sheet, want to invest in those funds to align our interests and then also deliver that return to our shareholders. So those are the 2 major areas we're focused on. And then, of course, we'll continue to balance that out with buybacks as long as our share price remains at an attractive valuation. So it keeps going up. So...

So buyback is on the table. Got it. So I want to talk about earnings a little bit. So earlier in the conversation, you mentioned the core EPS guidance sort of down mid-double digits, I think, was the number you said. And what's interesting about that is so you reported earnings and you reiterated the guidance. I think what stood out to us is you are still expecting 2024 core EPS to be above prior peak levels. It's interesting for a lot of reasons. One is a lot of companies haven't even put out 2024 guidance yet, but you've already sort of talked about it. So my question would be, so we know that there's probably going to be lower capital markets and leasing revenues potentially. What's offsetting that to get back to sort of a new high in 2024? Like how should we think about that?

Yes. So we thought -- or we think it's important to talk about 2024 because we do think that the resiliency in our business is underappreciated and the dynamics in our business and our ability to control costs and the dynamics of what happens to our transactions business. So if you look back to COVID and you look back to the Great Financial Crisis, transactions, so leasing and sales, will slow -- development as well, will slow during a recession. But then when they come back, they come back aggressively. And in COVID, they bounced back extremely quickly. It will probably be slower than that, but in 2024, we expect that transaction recovery to continue from the end of 2023. And so the assumptions around getting back to our record EPS that we achieved in 2022 are not extremely aggressive. So if you look at advisory, for example, you could assume -- and these are -- this is not what we're expecting. I'm just talking through what you'd have to assume just to get to that bare minimum of our record EPS. Our advisory business, if it grew 15%, GWS grew 10%, REI grew 10%. And to put context around those numbers, our advisory business coming out of COVID grew 30% -- it grew its revenue 30% and its EBITDA 50% in 2021. So it's very achievable to get to that 15% level. Our GWS business has delivered growth over 10% on an enduring basis. So we believe that's entirely achievable. And our REI business, if it grew 10%, it would still be below -- 25% below its prior peak. And then on top of all of that, we have the ability to allocate capital to drive greater growth. So it feels very achievable to us, and we thought -- we think it's an important way to underscore the confidence in our business and the confidence in our resiliency.

Yes. This is where the good balance sheet comes into play. I've got 2 more, and then we'll open it up to the room for any questions. Don't be shy. So this one is about the secret sauce of the company. What do you think are the 2 or 3 things that you do that no one else can? And the other side of that coin is, are there any obvious gaps, whether it's geography or business line, that you'd look to fill?

Yes. So there's obvious things, which I think we've talked about a lot here today. Our balance sheet is unrivaled. I mean even for us, it's in the best position that it's ever been, clearly for our sector as well. We -- there's just no question how our -- the shape of our balance sheet versus others and our ability to generate free cash flow when our peers are having a challenge. So that is a big differentiator and allows us to be on the offense when others are focused on the defense and preserving their profit streams. We are the market leader in almost every line of business. That creates a huge advantage for us in our ability to attract talent and obviously, our ability to serve our clients. And then I think it's important to remember that we have unrivaled scale. So we -- our market cap today is double our 4 largest competitors combined. So we really are separating from the pack. And I think right now, we have the opportunity to increase that separation even further. In terms of gaps, we don't have a lot. We talked about our interest in investing in Investment Management. I think that's the only place that I would call an actual gap because that business is not the market leader in its space. And then others are really adding on to our core capabilities. When you talk about Facilities Management and adding those differentiated capabilities, to me, that's not a gap. That is augmenting the services that we already have. So we don't have a tremendous amount of gap. On the advisory side, what we'll see over the next 12 months or what we're seeing now is we're seeing opportunities to attract producers to our platform. And so that will fill gaps in certain geographies and asset types that we might have.

Right. So it's sort of growth. All right. So the last one from my side is I take a step back, I look at the sector, multiples have been down across sort of the CRE space across different sort of vehicles. So what do you think investors underappreciate the most about CBRE and about the company?

Yes. So I think there's 3 main things. I talked, first, about our diversification and what that means. I think that is -- what that means is underappreciated. We are everywhere. We serve all clients. We serve every real estate line of business, and we are the market share leader in most of those cases. And what that allows us to do is to, one, know where the growth is going to come. So we know what our clients are asking for. We know how different asset types are performing across the world. So if we see an opportunity, we can quickly take our leadership and our talent and point those -- and our capital and point those resources towards it. So for example, we had identified, as everyone did, an opportunity in industrial. But we've been investing in that over the past decade. And 2 years ago, we quickly launched a U.S. logistics fund within our Investment Management business and used our balance sheet to raise that fund, and it's outperforming all of our expectations. Similar for multifamily. We focused on building out our multifamily business and augmenting it, and we've been able to do that as well. So I think that overall, that ability to shift our resources towards where we see the opportunity and the growth in the future, I think that is underappreciated. The resiliency in our business, I think everyone's starting to get it more. But it is -- it's still, I think, everyone wants to see how things turn out over the 12 months -- next 12 months, if we do achieve that record EPS in 2024, which I know we will, and really underscore that our business is fundamentally different than it's been historically. And then finally, we talked about all of the capital that we have, and our balance sheet is in great shape. I do think it's underappreciated if -- what it will mean if we -- when we deploy that capital in strategic M&A that's highly accretive in growth areas, what that will do to our shareholder return over time. And I think if we do that -- when we do that in the right way, we're going to deliver return to our shareholders far exceeding what our peers are doing, but also far exceeding what we've historically done.

Got it. So the takeaway is sort of record EPS even if capital markets are still sort of not even going at 100%, you're still going to get there in '24. Interesting. All right. Questions in the room? Any questions? We got one up here.

You, I believe, we're on the Board of a SPAC entity that merged into Altus Power. What was the investment thesis at the time? Is that a good asset? Do you still -- are you still involved? And what is your exit strategy?

Yes. So it's a great asset. Bob and I were both on that Board a few years ago, and we formed a team to identify an opportunity to invest in energy and sustainability. And the thesis behind that is that we touch all portions of -- all aspects of real estate at CBRE. And the largest opportunity to generate ESG savings and opportunities is within real estate. And so we looked for a company that could deliver those energy solutions and sustainability solutions but also benefit from what CBRE has to offer. So Altus Power quickly came to the top of that list. They are working very closely with the rest of CBRE, so with our Trammell Crow development team. They're putting a lot of their solar installations on our warehouses with our Investment Management business, very similar within the assets in our funds. They're putting solar panels on those properties. So there's a lot of synergies between our businesses. Once we acquired the -- once we acquired Altus Power, we dissolved the stack. It's now its own publicly traded company. We still have representation on the Board from Bill Concannon, who was the founder of our outsourcing business and a long-time CEO of it. He's still very, very closely tied to that business. And it's performing well. One of the challenges that Altus Power has today is a challenge that all smaller start-up companies are having in the public markets. But I'm very confident that they're going to weather through that. They keep -- they are consistently hitting their earnings expectations. So hopefully, as we recover, their valuation recovers as well.

We probably have time for 1 or 2 more. All right. I think we'll leave it there. Thanks so much. Thanks for joining us. Appreciate it.

Thanks, Ron.