GLOBAL - CB Richard Ellis (CBRE) will continue trying to reduce expenses this year as net income plummeted to $83.9m (€65.37m) in 2008 compared to $390.5m recorded the previous year.
Weak sales and limited leasing activity brought about by the global economic turmoil caused revenue in the fourth quarter to fall to $3.1bn, down from $1.8bn recorded the same time in 2007 and officials say it is unlikely to pick up soon.
"As would be expected in this environment we believe that our asset-based businesses, global investment management and development services will continue to face significant challenges in a short-term due to uncertain and dropping asset values," said Brett White, president and chief executive officer of CBRE, in a conference call.
"However, we believe these businesses are operationally sound and are well-positioned for return to profitability when market conditions improve. Given these expectations, our strategy remains consistent. We will continue to aggressively manage expenses," he added.
A drop in sales and property values caused the global investment management to generate revenue of $39.1m in the fourth quarter compared to $78.4m in 2007.
The firm had $38.5bn in assets under management in 2008, representing a 2% increase from 2007 but a 6% decline in the last quarter of 2008, caused mainly by fluctuating currencies and valuation declines.
The company's development services business, which focuses on the US, also suffered revenue declines, caused mainly by a decrease in construction revenue. Revenue for the last quarter of 2008 was $29.4m compared to $72.6m the same time last year.
Commenting on the prospects for the year ahead, Brett said: "As we look to 2009, we anticipate that capital markets activities will remain weak, leasing condition will remain soft and the industry will continue to experience higher volatility in sales activities."
On 31 December 2008, the combined total value of pipeline developments and those currently underway was $8.1bn, down 12% from the previous year.
CBRE is currently concentrating on reducing operational costs in order to increase profits.
"To better position CBRE for long-term success, we have strategically diversified our revenue mix in the last few years with significantly increased contributions from fee-based outsourcing services and gave moved decisively to eliminate fixed costs and improve operational efficiencies," said Brett.
CBRE will continue to focus on its outsourcing operation, to provide a cushion in the turbulent market, and expects this business to produce $2bn in annual run-rate revenue relatively soon.
The firm will also seek to eliminate approximately $385m of annual run-rate expenses for 2009 and has already reduced its net debt by around 14% with the help of cash flow from operations and net proceeds from an equity offering of $207.8m.
The Americas region suffered weaker sales, leasing and commercial mortgage activity, generating revenue of $824.6m in the last quarter.
Revenue for the Europe, Middle East and Africa region was $266.5m, down from $437.6 the previous year, while revenue for the Asia-Pacific region was $123.6m compared to $198.4m.
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