CBRE clarifies debt ratio figures

CB Richard Ellis (CBRE) has rejected estimates of net debt and interest cover quoted by Moody's in its downgrading of the rating on the international property adviser's senior debt to Ba2 from Ba1.

CBRE CEO Brett White provided different figures during a conference call on the firm's fourth-quarter results. CBRE's net debt to EBITDA ratio was 3.28X, he said, not 4.9X as suggested by Moody's. Interest coverage was 4.7X, he added, not 3.4X.

In its note last Thursday, Moody's cited the impact of the downturn in both real estate markets and the general economy on the property services business following CBRE's acquisition of US-based Trammell Crow at the end of 2006. 'As a result, CBRE's net debt to EBITDA increased to 4.9X at 12/31/08, a material increase from 2.5X at 12/31/07 and interest coverage declined to 3.4X at 12/31/08 from 6.0X at 12/31/07.'

Commenting on the discrepancy, a spokesperson for CBRE told PropertyEU: 'Any outside party, including Moody's, can only guess at what the precise ratios are.'

CBRE also said Moody's downgrading of the credit rating to Ba2 was not unexpected and reversed a prior upgrade by Moody's when the market was very strong. 'CBRE, like all companies, is reviewed regularly by the rating agencies. When the market is buoyant, property services companies tend to be rated higher with stable to positive outlooks, and when the market weakens, not surprisingly, credit ratings tend to be more cautious in their outlook,' the property adviser said. 'In 2006, Moody's upgraded our credit rating in response to positive market conditions and company performance. Its action is not unusual or limited to CBRE.'

The company also noted that Moody's rating review also highlighted the strengths of CBRE's business and its leading position in the market. Moody's said: 'The Ba2 rating reflects CBRE's sound franchise and leadership position in the commercial real estate services sector, its diversified revenue stream and its growth in annuity-like businesses following the acquisition of Trammell Crow Company in December 2006.'