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CRE Drives Improved Results For NGKF, Colliers Parent Companies

Integration Of Grubb & Ellis Brokers Contributes to Strong Performance By BGC Partners
February 15, 2013
Newmark Grubb Knight Frank (NGKF) and Colliers International contributed dramatically to the bottom lines of their parent companies in the fourth quarter and for 2012, according to results released by the companies this week.

BGC Partners, Inc. (Nasdaq: BGCP) revenue rose to $436.3 million in the fourth quarter, up 19.4% from the year-earlier quarter, driven by the continuing success of NGKF, which more than doubled its revenues to $148.7 million, BGC Partners Chairman and CEO Howard Lutnick said in an earnings call.

The addition of NGKF, which is integrating brokers from the bankrupt Grubb & Ellis, drove a nearly 18% increase in the company's revenue-generating headcount, from 2,147 brokers in fourth-quarter 2011 to 2,528 brokers and sales people at the end of last year, added President Shaun D. Lynn.

"Our diversification into real estate services provided a substantial contribution to BGC's overall 2012 results and lessened the impact of challenging industry conditions across the global financial markets," Lutnick said. "Over the course of the year, industry volumes and volatility were lower, reflecting reduced trading activity by many large global banks."

Meanwhile, Toronto-based FirstService Corp. reported strong fourth quarter results, with revenues for the full year hitting a record $2.3 billion on the basis of strong performances from each of the Colliers International, FirstService Residential and FS brands, said Jay S. Hennick, founder and CEO.

Unfortunately, overall earnings declined from the previous year as results from the company's property preservation and distressed asset management operation fell off significantly due to challenging market conditions, Hennick said.

Hennick noted that solid results from the distressed services and resident operations during the financial crisis allowed FirstService "to strategically invest in our Colliers International commercial real estate business at the right time in the cycle, and those investments are beginning to pay off handsomely for FirstService shareholders."

Colliers International revenues totaled $369.9 million for the fourth quarter, up 23% from the prior year quarter. Colliers revenue included significant internal and acquisition growth.

The Americas and Asia Pacific regions led internal growth, with both regions reporting solid year-over-year growth in brokerage, property management and project management activity.

The challenging financial volumes of the last three quarters were "well below what anyone would consider ordinary," BGC's Lutnick said. "However, our volumes have rebounded since the beginning of the year."

Real estate services firms tend to have lower revenues and profitability in the first quarter and higher revenues profits in the fourth quarter, so BGC expects the addition of NGKF to reduce the seasonality of the company's overall quarterly results, Lutnick noted.

CRE metrics continued to move in a positive direction in the fourth quarter. This strong volume growth is due in part to the relatively high spread between the average capitalization rate or yield on commercial property versus 10-year treasury rates.

Lower interest rates and the increased availability of credit have made CRE borrowing easier for most buyers, and NGKF's research team expects sale volumes to continue to grow in 2013, according to BGC President Shaun Lynn.

Citing CoStar and NGKF research, Lynn said vacancy rates, asking rents and absorption rates also improved.

The NGKF real estate services segment generated a total of $148.7 million in revenue for the fourth quarter, including $107.5 million in brokerage revenues and $41.2 million in management services and other revenues, a substantial improvements compared with a year earlier when real estate services generated $54.4 million in brokerage revenues and $2.7 million in management services and other revenues, Lynn said.

During the quarter, both Nokia Siemens Networks and Cummins, Inc. chose NGKF as their sole global corporate real estate supplier, representing hundreds of locations and tens of millions of square feet in over 100 countries around the world, Lynn said.

NGKF had 807 brokers and sales people at yearend, more than double the year earlier figure of 381. Average revenue per broker was about $131,000 in the fourth quarter, an increase of almost 21%.

"These improved metrics demonstrate the success we've had integrating Grubb & Ellis and Newmark, and we expect to further grow NGKF in 2013," Lynn said.

Real estate services drove BGC's overall 17.7% increase in front office headcount to 2,528 brokers and sales people as of the yearend. BGC's total average revenue per front office employee was approximately $149,000. A year earlier, these figures were 2,147 brokers and sales people at an average of approximately $163,000 each.
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