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CBRE Keeps Foot On Growth Pedal With Acquisition of Louisville Affiliate

Analyst: CBRE Plan to Recruit Brokers, Build Market Share Should Bring Further Earnings Growth
August 6, 2014
Keeping up with its pace of closing roughly one growth transaction a month this year, CBRE Group, Inc. this week announced it has acquired full ownership of CBRE | Louisville, which has served as the global company’s Kentucky and southern Indiana affiliate since 1996.

The announcement comes less than a month after the Los Angeles-based CRE services company acquired Chicago-based boutique firm U.S. Equities Realty LLC and its staff of 400, merging the company into CBRE’s Chicago area operations.

CBRE Louisville, led by Managing Director David Hardy and his partners, Kevin Grove and Robert Schwartz, is among the region’s leading leasing, investment sales, property management and consulting services providers. The office has a staff of 34 and manages more than 10 million square feet.

Louisville's diversified economy includes several Fortune 500 and many middle-market companies, with strong growth in the manufacturing, logistics and health-care sectors. The city's CBD is seeing a burst of activity, with numerous high-dollar construction and renovation projects under way.

"By fully integrating into CBRE’s premier global platform, we can take our service to the next level of scale and quality," said Hardy, who will serve as CBRE's managing director for Kentucky.

CBRE, the world's largest commercial real estate services provider with about 44,000 employees, excluding affiliates, operates 350 owned offices globally. Part of the firm's growth strategy is to increase market share in selected markets by recruiting brokers and acquiring affiliates and local boutiques.

Over the last 18 months, the firm has closed an average of about one transaction a month, with 11 deals in 2013. The six deals closed in the first six months of this year -- CBRE Louisville would be the seventh -- are expected to contribute $130 million of the company's revenue, CBRE President and CEO Bob Sulentic told investors in the company's midyear conference call last week.

"We may have a low for a couple of months as we’ve just had a crunch of deals coming through at close, but the pipeline continues to look pretty good," Sulentic said, adding that CBRE has also added a good number of producers to grow stronger in some regions while growing its presence in areas where it enjoys lesser market share.

Talent upgrades and recruiting remain a key growth driver as CBRE looks to grow its market-leading position and continue to take market share, said Mitch Germain, REIT analyst with JMP Securities.

"The company posted an approximate 10% increase in transaction personnel in 2013, and is on pace to hire similar levels of producers," Germain said, noting that the strategy will unlock revenue and earnings growth as
production ramps up.

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