CB Richard Ellis Group, Inc. (CBG)

i know this is one of the better managed real estate companies and has international hedging, but when the usa commercial crash starts hitting hard, every stock associated with commerical real estate will get pummelled regardless of fundamentals, so i'm just preparing for what's to come.

Commercial real estate will likely take longer to recover than residential.in the U. S. This company however has holding world wide and many of those market are in much better condition and will recover somewhat more rapidly. Also this company has traditionally been considered to have very good management skills. I expect the price to rise slowly with obvious ups and downs but should be good for the long haul from my perspective.

A GOOD REIT

I thought to short this but commercial real estate must be doing OK. This is a best of breed along with SLG.

outperform....

regarding your bearish outlook in CBRichardEllis...you couldn't be more off base. CBRE will outperform the market, as they have been undervalued for some time. they recently restructured their maturing debt. a large investor bought $100M of stock @ $7.50 recently. what do you think he was thinking? he saw the great earnings potential of the leveraged balance sheet, the prospect of the dominant real estate broker in the world now taking up the slack as smaller cometitors fall by the wayside, a great, young management team...remember: CBRE doesn't own real estate, they are basically transaction brokers, so they have no toxic assets. they are poised to scream to $20 per share in the next 6 months. sit back and watch....and don't be short

A good company

Bad segment. Loads of debt. No dividend.CFO bailed at 9.40.Negative BV What goodwill? The market will catch on soon. Big drop coming when earnings and full year sales are know.This stock is a posterboy for shorting

Following John Paulson

For someone who has been bullish on a lot of commercial REITs, you might think that I would have a positive outlook for CB Richard Ellis. If you thought that, you'd be wrong.

While I'm not bullish on all REITs (just the quality ones without excessive leverage, good holdings, and profitable outlooks moving forward), I am not bullish on commercial real estate. Rather, my favoritism for REITs like Winthrop (FUR), Brandywine (BDN), and Lexington (LXP) comes from the fact that the stock prices reflect huge drops from the book values of their properties. Those properties also often end up understated on balance sheets due to the accounting treatment of assets.

CBRE, on the other hand, has very little RE holdings on their balance sheet. Their B/S consist more of receivables, goodwill, and various other items. The goodwill account is MASSIVE! For those not in the know, "goodwill" is simply an accounting concept. It shows the premium a company paid to acquire other companies. This "premium" is pretty much meaningless if the cash flows don't hold up in the future. Once you discount the massive goodwill account, you'll find that CBRE has about -$3.50 in net tangible assets. Note the minus sign in front of that figure.

Just to add fuel to the fire, CBRE's profitability has been severely impacted by the current downturn. They've gone from earning nearly $1.65 per share (in FY '07) to something closer to $0.80 - $1.00 per share (normalized FY '08). Their most recent quarter was downright ugly with a 0.006% operating margin. Things might only be worse moving forward. At the very least, I'm not totally convinced that they'll ever see a fiscal year with $1.35+/share earnings soon.

Then there's another little tidbit. CBRE recently completed an offering for senior subordinated notes. That will help them pay their bills, but check out the interest rate on that offering: 11.625%!!!!! That's really high and I question how a real estate services firm can stay profitable with such an extremely high cost of capital. And it's not like they didn't have a lot of debt to begin with! Long-term debt to equity is 6.41 even if I count goodwill to ascertain that ratio. And remember, goodwill is sky high! In reality, CBRE has negative equity.

All the same, there's still some possibility that CBRE is undervalued. If they could average $1.25 per share in free cash flows with a 3% growth rate in the future, I value them at around $10 with a 12% cost of capital. Costs of capital could also decrease in the future, which would drive that valuation up significantly. With a 10% COC, I come up with a $13.60 valuation.

Despite the risk that I outline above, I don't like CBRE's outlook moving forward and I don't like the fact that I see large insider sells lately. Yet, the stock is up nearly 14% today! Seems to me that upside here is somewhat limited and downside is still very significant. Moreover, I believe the rest of the market is undervalued by a bit. Given this, I believe that CBRE is an excellent underperform pick.

Commercial Real Estate is a next bubble.

More pain ahead for commercial real estate but CBRE sells and rents the stuff so it's a revenue 'opportunity'. Should become apparent in late 2009.

Strong Company, always has been. Some would say, wasn't AIG in the same category a few months ago, and I would say no. Reason being, Management that cares.

Share up 58% for what?

Large debts, declining revenues.

This stock would be a better pick for later this year when it's debt and revenue situations clear up. Of course, when such things are clearer, the stock will be dearer!
As the downturn continues, buildings are put up for sale and lease and while there isn't much business right now, eventually this will pick up. Essentially this is CBRE's inventory which costs them nothing and is all future revenue.
The question, of course, is when will this happen and if you know that you've probably picked when this recession has bottomed. 2H09? 2010? Read CBRE's quarterly transcripts (seekingalpha seems to be a good site for these) and watch for management's discussions of increased transactions.

Fee-driven company in an industry with no fees to earn. Investment sales/RE inv banking business has been crushed with no end in sight. Most likely will end up merging with another group

Going long on this stock was a mistake on my part.... the company did a stock purchase of about 635 Million dollars last November, this was a terrible move by management. What they should have done was pay down their debt, this would have dropped their leverage down by about a third, creating a much stronger balance sheet, and give them a greater competitive edge in a market that will certainly hammer any commercial real estate company. Remember this, in the long run fundamentals will always control the stock price!

commercial real estate will slow down during recession. Fewer business expansions, etc.

Bottoming