CB Richard Ellis Group, Inc. Reports First Quarter 2009 Financial Results

CB Richard Ellis Group, Inc. (NYSE:CBG) today reported revenue of $890.4 million and a net loss on a U.S. GAAP basis of $36.7 million, or $0.14 loss per diluted share, for the first quarter of 2009. Excluding one-time charges¹, the Company’s net loss² for the quarter was $7.5 million, or $0.03 loss per diluted share. Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA)³ totaled $38.4 million for the quarter, which was negatively impacted by the inclusion of $15.7 million⁴ of one-time charges.

These results compare with first quarter 2008 revenue of $1.2 billion; net income on a U.S. GAAP basis of $20.5 million, or $0.10 per diluted share; net income excluding one-time charges of $31.7 million, or $0.15 per diluted share; and EBITDA of $88.5 million. First quarter 2008 EBITDA included $16.1 million⁵ of one-time charges. In the first quarter of 2008, the Company was still experiencing relatively strong results with particularly good growth in outsourcing and leasing revenues.

First quarter 2009 results were in line with the Company’s expectations in light of the broad weakness in sales and leasing markets worldwide. The Company’s aggressive actions to reduce structural operating expenses and diversify its revenue sources helped to mitigate the impact of these adverse marketplace trends.

"Despite the formidable challenges posed by today’s economic environment, we were able to produce positive EBITDA for the quarter due to our efforts to diversify our revenue base, focus on our clients, and aggressively reduce fixed costs,” said Brett White, president and chief executive officer of CB Richard Ellis. "The all-in 29% reduction in operating expenses exceeded the 28% decline in revenue, which is indicative of our ability to act decisively to streamline our operations, serve clients more efficiently and support our margins. Our global reach, broad service offering, strong brand and depth of professional talent position us well to capitalize on the opportunities available today – particularly corporate and institutional outsourcing services and property restructuring and repositioning services. Further, our very effective cost cutting efforts position us to experience strong operating leverage when the market recovers, which it inevitably will.”

While the Company’s outsourcing business continues to add new clients and expand existing relationships, its revenue declined slightly for the quarter as a result of client actions to restrain project spending and reduce outsourced staffing levels (which lowers reimbursement revenue) as well as a loss of clients due to consolidations and bankruptcies. Ten new corporate customers signed outsourcing contracts in the quarter, including France Telecom, StatoilHydro, Pepsico, and Locartis, while service offerings were expanded for five existing corporate customers, including Nokia, AON and NCR.

The Company also continued to improve market share in investment sales. In a highly capital-constrained market it was responsible for 17.1% of all U.S. investment sales transactions during the first quarter – up from 14.2% for the same period in 2008.

Expense Reduction Target Raised

During the first quarter, management increased its cost containment targets by an additional $100 million of annual savings, as the Company continued to move assertively to align its expense base with lower revenue opportunities in the current market. Much of the incremental cost savings target has already been identified. The Company has now eliminated or targeted for elimination between $475 million and $500 million of structural operating expenses, versus 2007, including the $385 million of previously announced cost savings plans, which have been implemented. These operating cost reductions are in addition to reduced variable commission and compensation expense that results from lower transaction revenue.

In conjunction with the implementation of cost savings actions, the Company incurred one-time expenses consisting of severance and office closure costs totaling $7.9 million in the first quarter of 2009.

Credit Amendment Enhances Flexibility

During the quarter, the Company successfully renegotiated its credit agreement, providing greater financial flexibility. The credit agreement amendment, announced on March 24, 2009, allows for a higher maximum leverage ratio, lower minimum interest coverage ratio, modifications to the EBITDA calculation for financial covenant purposes, and other provisions that give the Company greater capacity to proactively manage its balance sheet. The Company remains in compliance with all financial covenants under its credit agreement, and has substantial cushion should market activity weaken further. In connection with this amendment, the Company prepaid $105.5 million of its term loan balance that would have been due at the end of the first and second quarters of 2009, and wrote off $29.3 million of financing costs in the first quarter of 2009.

Americas Segment Results

Revenue for the Americas region, including the U.S., Canada and Latin America, was $577.0 million for the first quarter of 2009, compared with $783.5 million for the first quarter of 2008. Operating income for the Americas region was $22.9 million for the first quarter of 2009 compared with $62.4 million for the same period of 2008. EBITDA totaled $38.6 million for the first quarter of 2009, compared with $66.3 million in last year’s first quarter. While market conditions remained weak, operating expenses for this segment declined by 30%.

EMEA Segment Results

Revenue for the EMEA region, which mainly consists of operations in Europe, was $162.2 million for the first quarter of 2009, compared with $242.8 million for the first quarter of 2008. The EMEA region reported an operating loss of $6.1 million for the first quarter of 2009 compared with operating income of $8.0 million for the same period in 2008. EMEA reported negative EBITDA of $3.1 million for the first quarter of 2009, compared with positive EBITDA of $11.7 million for last year’s first quarter. Partially mitigating the revenue decrease was a 38% reduction in operating expenses, reflecting aggressive actions to streamline operations and cut costs.

Asia Pacific Segment Results

In the Asia Pacific region, which includes operations in Asia, Australia and New Zealand, revenue totaled $93.1 million for the first quarter of 2009, compared to $137.4 million for the first quarter of 2008. Operating income for the Asia Pacific region was $0.7 million for the first quarter of 2009 compared with $12.3 million for the same period of 2008. EBITDA totaled $1.9 million for the first quarter of 2009, compared to $13.7 million for last year’s first quarter. Our Asia Pacific segment reduced operating expenses by 34% for the quarter.

Global Investment Management Segment Results

In the Global Investment Management segment, which consists of investment management operations in the U.S., Europe and Asia, revenue totaled $37.3 million for the first quarter of 2009, compared with $39.5 million in the first quarter of 2008. The decline in the first quarter of 2009 was attributable to lower acquisition, disposition and incentive fees as compared to the first quarter of 2008. Global Investment Management had operating income of $6.7 million for the first quarter of 2009 compared with an operating loss of $2.1 million for the first quarter of 2008. This segment reported negative EBITDA of $0.4 million for the first quarter of 2009 versus negative EBITDA of $1.4 million in the first quarter of 2008. Operating income for the first quarter of 2009 excludes a net, non-cash write down associated with decreases in co-investment asset valuations of $5.2 million, which is included in negative EBITDA.

Assets under management totaled $36.0 billion at the end of the first quarter, down 6% from year-end 2008 mainly due to lower property valuations and currency declines.

Development Services Segment Results

In the Development Services segment, which consists of real estate development and investment activities primarily in the U.S., revenue totaled $20.9 million for the first quarter of 2009, compared with $27.7 million recorded in the first quarter of 2008. This revenue decrease was primarily driven by reduced construction revenue, which led to a corresponding decrease in construction expense, thereby not significantly impacting operating income or EBITDA.

This segment reported an operating loss of $18.8 million for the first quarter of 2009, compared with an operating loss of $10.3 million for the same period last year. Driven by cost containment efforts, first quarter 2009 EBITDA for the segment was $1.4 million, compared to an EBITDA loss of $1.8 million in last year’s first quarter. The operating loss for the first quarter of 2009 includes the gross, non-cash write down of real estate assets of $9.4 million but not the offsetting portion attributable to non-controlling interests of $8.4 million, while EBITDA includes both items.

Development projects in process as of March 31, 2009 totaled $5.4 billion, down slightly from year-end 2008. The inventory of pipeline deals as of March 31, 2009 stood at $1.5 billion, down 40% from year-end 2008.

The Company believes that the commercial real estate market will turn, and when it does, the actions that it has taken to preserve its geographic presence and services offered, together with the reduction of operating expenses, will enable it to disproportionately grow market share and earnings versus the rest of the industry. Until the overall market improves, management believes that the largest opportunities will exist for the Company's businesses that focus on outsourcing, distressed property management, asset restructuring and disposition, and within certain areas of global investment management.

Conference Call Details

The Company’s first-quarter earnings conference call will be held on Thursday, April 30, 2009 at 10:30 a.m. Eastern Daylight Time (EDT). A live webcast will be accessible through the Investor Relations section of the Company’s Web site at www.cbre.com.

The direct dial-in number for the conference call is 800-700-7784 for U.S. callers and 612-288-0318 for international callers. A replay of the call will be available starting at 2:00 p.m. EDT on April 30, 2009 and ending at midnight EDT on May 13, 2009. The dial-in number for the replay is 800-475-6701 for U.S. callers and 320-365-3844 for international callers. The access code for the replay is 995471. A transcript of the call will be available on the Company’s Investor Relations Web site.

About CB Richard Ellis

CB Richard Ellis Group, Inc. (NYSE:CBG), a Fortune 500 and S&P 500 company headquartered in Los Angeles, is the world’s largest commercial real estate services firm (in terms of 2008 revenue). The Company has more than 30,000 employees (excluding affiliates), and serves real estate owners, investors and occupiers through more than 300 offices (excluding affiliates) worldwide. CB Richard Ellis offers strategic advice and execution for property sales and leasing; corporate services; property, facilities and project management; mortgage banking; appraisal and valuation; development services; investment management; and research and consulting. CB Richard Ellis has been named a BusinessWeek 50 "best in class” company and Fortune 100 fastest growing company two years in a row. Please visit our Web site at www.cbre.com.

Note: This release contains forward-looking statements within the meaning of the ''safe harbor'' provisions of the Private Securities Litigation Reform Act of 1995, including statements regarding our growth momentum in 2009, future operations and future financial performance. These forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the Company’s actual results and performance in future periods to be materially different from any future results or performance suggested in forward-looking statements in this release. Any forward-looking statements speak only as of the date of this release and, except to the extent required by applicable securities laws, the Company expressly disclaims any obligation to update or revise any of them to reflect actual results, any changes in expectations or any change in events. If the Company does update one or more forward-looking statements, no inference should be drawn that it will make additional updates with respect to those or other forward-looking statements. Factors that could cause results to differ materially include, but are not limited to: general conditions of financial liquidity for real estate transactions; a protraction or worsening of the economic slow-down or recession we are currently experiencing in our principal operating regions; our leverage and our ability to perform under our credit facilities; commercial real estate vacancy levels; employment conditions and their effect on vacancy rates; property values; rental rates; interest rates; our ability to reduce expenditures to help offset lower revenues; realization of values in investment funds to offset related incentive compensation expense; our ability to leverage our platform to sustain revenue growth and capture market share; our ability to retain and incentivize producers; the integration of our acquisitions and the level of synergy savings achieved as a result.

Additional information concerning factors that may influence the Company's financial information is discussed under "Risk Factors”, "Management’s Discussion and Analysis of Financial Condition and Results of Operations”, "Quantitative and Qualitative Disclosures About Market Risk” and "Forward-Looking Statements” in our Annual Report on Form 10-K for the year ended December 31, 2008, as well as in the Company’s press releases and other periodic filings with the Securities and Exchange Commission. Such filings are available publicly and may be obtained on the Company’s Web site at www.cbre.com or upon request from the CB Richard Ellis Investor Relations Department at investorrelations@cbre.com.

¹One-time charges include the write-off of financing costs incurred in connection with the credit agreement amendment entered into on March 24, 2009, amortization expense related to customer relationships resulting from acquisitions, integration costs related to acquisitions, cost containment expenses and the write-down of impaired assets.

²A reconciliation of net (loss) income attributable to CB Richard Ellis Group, Inc. to net (loss) income attributable to CB Richard Ellis Group, Inc., as adjusted for one-time items, is provided in the exhibits to this release.

³The Company’s management believes that EBITDA is useful in evaluating its operating performance compared to that of other companies in its industry because the calculation of EBITDA generally eliminates the effects of financing and income taxes and the accounting effects of capital spending and acquisitions, which items may vary for different companies for reasons unrelated to overall operating performance. As a result, the Company’s management uses EBITDA as a measure to evaluate the operating performance of various business lines and for other discretionary purposes, including as a significant component when measuring its operating performance under its employee incentive programs.

However, EBITDA is not a recognized measurement under U.S. generally accepted accounting principles (GAAP), and when analyzing the Company’s operating performance, readers should use EBITDA in addition to, and not as an alternative for, net income determined in accordance with GAAP. Because not all companies use identical calculations, the Company’s presentation of EBITDA may not be comparable to similarly titled measures of other companies. Furthermore, EBITDA is not intended to be a measure of free cash flow for management’s discretionary use, as it does not consider certain cash requirements such as tax and debt service payments. The amounts shown for EBITDA also differ from the amounts calculated under similarly titled definitions in the Company’s debt instruments, which are further adjusted to reflect certain other cash and non-cash charges and are used to determine compliance with financial covenants and the Company’s ability to engage in certain activities, such as incurring additional debt and making certain restricted payments.

For a reconciliation of EBITDA with the most comparable financial measures calculated and presented in accordance with GAAP, see the section of this press release titled "Non-GAAP Financial Measures.”

⁴Includes cost containment expenses of $7.9 million, impairment of assets of $6.1 million, net of non-controlling interests (minority interest), and integration costs related to acquisitions of $1.7 million, the majority of which related to the Trammell Crow Company acquisition.

⁵Includes an impairment of an investment of $10.6 million and integration costs related to acquisitions of $5.5 million, the majority of which related to the Trammell Crow Company acquisition.

The following measures are considered "non-GAAP financial measures” under SEC guidelines:

The Company believes that these non-GAAP financial measures provide a more complete understanding of ongoing operations and enhance comparability of current results to prior periods as well as presenting the effects of one-time items in all periods presented. The Company believes that investors may find it useful to see these non-GAAP financial measures to analyze financial performance without the impact of one-time items that may obscure trends in the underlying performance of its business.

Net (loss) income attributable to CB Richard Ellis Group, Inc., as adjusted for one-time items and diluted net (loss) income per share attributable to CB Richard Ellis Group, Inc. shareholders, as adjusted for one-time items are calculated as follows (dollars in thousands, except per share data):

EBITDA for the Company is calculated as follows (dollars in thousands):

EBITDA for segments is calculated as follows (dollars in thousands):