Good morning, everyone, and welcome to CBRE's Second Quarter 2025 Earnings Conference Call. Earlier today, we posted a presentation deck on our website that you can use to follow along with our prepared remarks and an Excel file that contains additional supplemental materials. Today's presentation contains forward-looking statements including, without limitation, statements concerning our business outlook, business plans and capital allocation strategy as well as our earnings and cash flow outlook. These statements involve risks and uncertainties that may cause actual results and trends to differ materially. For a full discussion of the risks and other factors that may impact these statements please refer to this morning's earnings release and our SEC filings. We have provided reconciliations of the non-GAAP financial measures discussed on our call to the most directly comparable GAAP measures together with explanations of these measures in our presentation deck appendix. Throughout our remarks when we cite financial performance relative to expectations, we are referring to actual results against the outlook we provided on our first quarter 2025 earnings call in April, unless otherwise noted. Also, as a reminder, our resilient businesses include facilities management, project management, property management, loan servicing, valuations, other portfolio services and recurring investment management fees. Our transactional businesses comprise property sales, leasing, mortgage origination, carried interest and incentive fee in the investment management business and development fees. I am joined on today's call by Bob Sulentic, our Chair and CEO; and Emma Giamartino, our Chief Financial Officer.

Thank you, Chandni, and good morning, everyone. The strong momentum we exhibited to start the year continued in the second quarter. Despite uncertainty in the macro environment, occupier and investor clients largely proceeded with executing their plans. Both our resilient and transactional businesses achieved strong double-digit revenue growth. Resilient revenues rose 17%, surpassing the 15% growth rate for transactional businesses. Resilient revenue growing faster than transactional revenue during a market recovery attests to the progress we've made with our resilient businesses. We are especially focused on our two new segments, Building Operations & Experience and Project Management, and are pleased with the progress they are making. In BOE, we continued to grow revenue at a mid-teens rate and delivered significant operating leverage. As the year unfolds, we expect to identify more opportunities to benefit from synergies available across our nearly 8 billion square foot management portfolio. Project Management achieved strong top line and SOP growth. This performance reflects the benefits we've been realizing in the six months since we joined our legacy business with Turner & Townsend. Although we saw some impact from large corporate clients slowing their capital spending, this was more than offset by continued strong gains across the rest of the Project Management business, underscoring the resilience Turner & Townsend's legacy business has contributed to the combined platform. Our Advisory segment had an excellent quarter as sales and leasing transaction activity was strong around the world. Global leasing revenue was the highest for any second quarter in company history, led by the continued strong recovery of demand for office space. In light of our outperformance in the year's first half, and the pipelines across our business, we're raising our core EPS expectations for the year to a range of $6.10 to $6.20. Achieving the midpoint of our guidance would represent better than 20% growth for the year. We expect to set a new earnings peak this year just two years after the 2023 trough in the commercial real estate downturn, even though capital markets activity remains well below prior peak levels. Now I'll turn the call over to Emma, who will discuss the quarter and our outlook in more detail.

Thank you, Bob. Good morning, everyone. Our second quarter results exceeded our expectations with core EBITDA and core EPS growing 30% and 47%, respectively. I'll detail our results for each segment. Note that all segment level growth rates are in local currency and do not reflect the benefit of an approximately 1% FX tailwind during the quarter. In Advisory Services, revenue rose 14% and SOP grew 31%, driven by 250 basis points of margin expansion. Global leasing revenue rose 13%, with double-digit growth across all major regions. U.S. leasing was led by a 15% increase in the office sector, driven by larger leases and broad-based growth across the country. Growth in non-gateway markets outpaced gateway markets, pointing to increased momentum in regions outside of the larger cities. U.S. industrial leasing growth was better than expected with revenue up 15% as third-party logistics providers once again drove activity. Like leasing, our capital markets businesses performed well. Global property sales rose 19%, accelerating from the first quarter. In the U.S., property sales increased 25%, with notable strength in data centers, office and retail. Outside the U.S., sales were particularly strong in India and Japan. Mortgage origination fees increased by more than 40%, with strong volume from the GSEs, debt funds and CMBS lenders. Turning to our BOE segment. We saw 18% top line growth and 21% SOP growth. Our enterprise businesses performance was supported by a balanced mix of new client wins and expansions in the technology, health care and industrial sectors and continued strong growth with hyperscale data centers. Our local business once again delivered double-digit revenue growth, led by ongoing success in the U.K. and the U.S. In Property Management, we secured another major portfolio mandate from a large institutional investor. In the Project Management segment, we achieved 13% revenue growth and 18% SOP growth. The Turner & Townsend-CBRE project management integration is progressing well. Turner & Townsend's legacy business delivered mid-teens revenue increases across most regions, with notable growth in its largest geography, the U.K. The legacy CBRE Project Management business saw low double-digit revenue growth, led by the financial services and energy sectors. This is notable given a slowdown in capital projects from some clients who are most impacted by the uncertain economic environment. In Real Estate Investments, segment operating profit was up, in line with expectations for the quarter, although against the light comparison with the prior year. In Investment Management, we saw growth in recurring revenue and recurring SOP and AUM ended the quarter at $155 billion, an increase of $6 billion from the end of Q1, mainly driven by favorable currency movements. Although certain investors remain cautious on making capital commitments, we anticipate capital raising will continue its upward trajectory building on the positive momentum of the past two years. In Development, operating profit was in line with our expectations as we anticipate most of our asset sales to occur in the fourth quarter, including a few data center development sites. The estimated profits embedded in our in-process and pipeline portfolio remained consistent with last quarter at approximately $900 million. Now I'll turn to our balance sheet and capital allocation. On a trailing 12-month basis, we generated $1.3 billion of free cash flow, in line with expectations. We continue to expect over $1.5 billion of free cash flow for the full year with full year free cash flow conversion toward the high end of our long-term target range of 75% to 85%. During the quarter, we completed a $1.1 billion bond offering and expanded our revolving credit facility, increasing our liquidity to $4.7 billion. We repurchased a modest amount of shares as we continue to balance M&A opportunities with buybacks in line with our long-term capital allocation strategy. Net leverage stood at just under 1.5x at quarter end, and we continue to expect to end the year with about 1x of net leverage, absent any large M&A. As Bob mentioned, we are increasing our full-year core EPS guidance to a range of $6.10 to $6.20. This forecast is based on constant currency and would increase by at least $0.10 based on today's forward FX curve. Our increased earnings outlook is driven by outperformance in Advisory and BOE and is underpinned by the assumptions that the economy remains resilient with limited risk of a recession later this year. With that, I'll turn the call back to the operator for questions.

My first question relates to the leasing business and more particularly in office. If we go back to, I think, the last couple of quarters of last year and the first quarter of this year, office had kind of been up, I think, closer to maybe 30% perhaps, or at least in the U.S., and I think that was up about 15% in the quarter. And so just trying to understand if the comps get a lot harder as we go into the back half of the year, or if any demand you think was maybe pulled forward or what needs to happen to see office continue to show a strong leasing recovery?

Tony, the comparisons will become more challenging. The leasing market for office buildings is performing well and is expanding. The momentum is shifting from prime locations in major cities to a wider range of gateway cities, and it is significantly growing in second-tier and smaller markets. Several factors are driving this growth. Firstly, there is a clear sense of a return to normalcy with COVID behind us. Secondly, we have observed from our interactions with corporate clients across the U.S. and globally that they are genuinely committed to utilizing office space to enhance employee connectivity, productivity, and excitement about their companies. This has been a significant advantage for us in that sector. Given these trends, we anticipate that office building leasing will remain robust. However, a potential challenge arises from limited supply in specific areas. As we approach 2025, the comparisons will indeed become more difficult.

Okay. And then just my second question is, Bob, you mentioned, I think, in your prepared comments, just potential synergies that you're working on in BOE. And just curious if you can give us any additional context on order of magnitude and what that can mean for, say, 2026 I'm guessing by the time it takes effect?

We're not ready to provide a specific number yet as we are still in the process of analyzing it internally. However, the main reason for consolidating our various building management services like enterprise facility management, local facility management, and property management is that they all share key elements in how we manage different types of businesses and service offerings for our clients. We're focusing on areas such as building engineering, procurement, and information systems that enhance efficiency. We are actively pursuing these synergies and believe they will be substantial, but we have not quantified them yet. We're optimistic about our progress so far.

I guess on the integration of Turner & Townsend with the legacy Project Management business, can you give us a sense of the benefits you've seen to date? And how long could it take before we start to see real improvements on the legacy CBRE Project Management business? Or conversely, are you seeing any challenges in achieving those expected integration benefits?

Julien, I'll start with the last part of your question and then go back to the first. We're not seeing any challenges we didn't expect. When you bring two businesses like that together, it is challenging. And it's in those challenges that create opportunities. So just as an example, between project managers, program managers and cost consultants in that business today, we have 15,000 professionals. There was some inefficiency in the use of CBRE professionals who were assigned to specific clients or doing tenant rep-type work in our Advisory business and weren't fully utilized all the time while Turner & Townsend was essentially sold out in parts of their business around the world. We can move those professionals into areas of need now in a way that we couldn't move them before. One of the things you have to do to do that, though, is you have to have systems in place. We were operating the legacy CBRE business in a very different way than the biggest program managers and engineering firms around the world operate their businesses. Turner & Townsend was operating in that way, with timesheets, with technical systems that underpin those people with training, etc., that we didn't have. They're moving those professionals onto those systems now getting greater efficiencies. And that's one of the reasons you're seeing some margin advantage there. Secondly, we have seen significant very specific incidents where our ability to bring Turner & Townsend into legacy CBRE clients has resulted in large new business for the company, both bringing them into our enterprise facilities management clients and also the Trammell Crow development clients. So we're seeing both cost and revenue synergies. And we expect that to continue, those synergies to build over the next couple of years and have a very, very different, more compelling business. I've said this before, nothing like what we had before, nothing like what anybody in our segment had before. And we're starting to see that benefit now, but there'll be a lot more unfold over the next couple of years.

Bob, that's really helpful. You mentioned in your opening remarks that the raise is driven by the year-to-date results and also the activity pipeline that you're seeing so far into the third quarter. I guess, maybe digging into sort of activity pipelines, what specifically are you seeing that sort of encourages you as we head into the back half of the year?

Julien, so you're right, about half of the increase in our guide is coming from the outperformance that we saw in Q2 across BOE and Advisory. And then the other half is primarily related to leasing. So we are seeing continued strength in leasing greater than what we were seeing 90 days ago, and that's both on the office front and the industrial front. So if you look at our guidance for leasing, it implies that in the back half of the year against those tougher comps that Bob talked about, we're at a mid- to high single-digit growth rate in leasing in the back half of the year, which is above what we were looking at 90 days ago.

Maybe just touch on the capital markets sales activity. That business came in, I think, far stronger than we had expected. And I'm just curious, given where rates are, the Fed's been a bit more steadfast in holding rates to short end. Just kind of what are your expectations for that? You didn't really change the language, I guess, in the outlook of a steady but muted recovery.

Well, we expect the sales activity and the refinancing activity to both continue strong in the back half of the year. We're not expecting interest rates to move in a way that alters that materially. If they were to rise considerably, obviously, that would slow things down. We're not expecting that. We're not expecting big drops in interest rates either. So our outlook for the year contemplates what we believe, within brackets, the interest rates will do. But a lot of what you're seeing is that the spread between bid and ask has gotten very narrow or going away. There is a lot of capital out there. We have it and other people have it that wants to buy real estate, and there is a huge amount of sell-side interest on the part of owners of real estate that haven't been able to sell it for the last few years. And as Emma said, we ended the quarter with a strong result, but we also ended the quarter with strong pipelines going into the back half of the year. And I think I'm going to turn it over to Emma and let her comment on how July has started to unfold. The other thing is there are a lot of refinancings that need to be done. And so that's helping the mortgage origination side of our business. Emma, you might want to comment on July.

Yes. So Steve, in July in the U.S., our sales activity has been very strong. And so we are seeing a bit of a pickup. I think one thing to note about the second half of the year is we are expecting continued strength and likely more strength in U.S. sales in the back half of the year, but that we are seeing some slowdown in sales in Europe. And so that is offsetting it slightly.

Great. And then maybe just on, I guess, capital deployment. Maybe just talk about the share buyback. The pace did slow. I know it was a very heavy pace in the first quarter. I guess, maybe what's embedded in guidance for the back half of the year? And I guess, how price sensitive are you kind of on the buyback? Or is it, at this point, a bit more programmatic, assuming that M&A does not take place?

Certainly. I'll take a moment to revisit our overall capital allocation strategy, which you are familiar with. Our primary focus is on mergers and acquisitions, and we supplement that with share buybacks if we are not using the full amount of capital generated from our free cash flow in a given year. As you noted, we have made significant investments through buybacks. Regarding M&A, while I can't share too many details, we are actively considering several opportunities. We are concentrating on resilient and favorably positioned sectors and well-managed companies that can enhance our capabilities. Once integrated into our platform, these targets provide more value to CBRE than they would independently. Our M&A pipeline remains strong and is our focal point. In response to your inquiry about capital allocation in our guidance, there is currently no mention of either M&A or buybacks. Any movements in these areas would influence our outlook for the year. On the topic of M&A, I want to clarify what we're not pursuing. There have been rumors about our interest in M&A within advisory capital markets. We have consistently stated that this is not an area of interest for us, and we are not currently exploring opportunities in this space.

Just two quick ones for me. Just going back to the BOE, the presentation mentioned some of the benefits from the combined platform. I appreciate we're not in a position to quantify, but just sort of thinking through high level, is this something that is a 2025 sort of benefit that normalizes in the out years? Or are we still sort of in potentially mid- to early innings of sort of harvesting those benefits? Just trying to get a sense of what's the runway here.

So what you're seeing in our guidance is a significant margin improvement in BOE in the first half, which is primarily due to the cost work we did in the latter part of 2024. We're exploring additional opportunities for operating leverage now. I don't anticipate this having a major impact in 2025, though it is possible. As it stands, our guidance indicates no additional operating leverage in BOE for the second half of the year, so I expect everything we're working on to manifest in 2026. On the sales front in the U.S., we had a very strong April, and that was as a result of deals continuing to get done that were under works pre-Liberation Day. We did see a slight slowdown in May and June. And then in July, like I said, it's picked up pretty materially and is, at this point, July is tracking above April.

Just one quick one for me. Can you just talk some about your expectations for Project Management revenue growth in the second half of the year? I think there were some reporting factors that made that look more like high single-digit growth this quarter versus low teens on an underlying basis. So would we be right to think that growth there is likely to remain at least in the double digits in the second half on both a reported and adjusted basis? Just any detail on the outlook for Project Management growth.

Yes, Stephen, on a net revenue basis for the full year, we're looking at low double-digit revenue growth. And there is some noise between Q2 and Q3. So in Q2 2024, there was net revenue that was mischaracterized in PJM that should have been in FM. So that net revenue growth at Q2 this year in Project Management is looking low. That's going to reverse in Q3, and the net revenue growth in Project Management is going to look slightly above trend, but it all will normalize for the full year.

Just wanted to come back to leasing for a second, some good color on the office side. Can you also unpack what you're seeing on the industrial side a little bit? It sounded like things have been getting better. I think there was a concern earlier this year. Do you feel like that's normalized now? Or what are you seeing out there, given that there's probably still some uncertainties in that market?

There is some uncertainty, but we expect this year to be better than initially anticipated. The first half was stronger than we had projected. We don't foresee the same growth in the second half due to tougher comparisons, but we believe the second half will improve. Overall, we now expect industrial leasing for the year to increase by roughly double digits, contrary to our initial outlook which suggested it would remain flat. We're not observing anything in our pipelines that indicates the city politics will hinder progress. The business community there is substantial, with companies from various sectors such as finance and technology increasingly returning to the city. There's significant strength in this area. More importantly, companies are placing increased emphasis on office space to assist with recruitment, retention, and fostering company culture. This focus on utilizing office space in these ways has become more prominent than I've witnessed even before COVID. We're noticing a broader range of office leasing opportunities extending beyond the most sought-after locations and buildings to more diverse areas of the city.

In terms of potential areas for value creation, considering where CBRE is currently valued and recognizing that it is a real estate conglomerate with various businesses that may have different valuations, are you concentrating on expanding infrastructure services and asset management or Investment Management, especially since some comparables in that field have higher valuations than CBRE? Are those your primary areas of focus?

Jade, we've always identified ourselves as a broad-based real estate services and investment firm, and we've stayed true to that. Over the years, we've expanded into infrastructure-related areas surrounding our core business. Currently, we have a significant presence in that sector. Turner & Townsend, for example, is heavily involved in project management for a nuclear energy plant, major airports, large data centers, and various energy projects. We also have a growing $10 billion AUM infrastructure fund within our infrastructure Investment Management business. Trammell Crow Company is actively engaged in data center land development. Our data center management business is performing exceptionally well, working on a project basis in around 700 to 800 data centers. We are handling considerable infrastructure work across our brokerage business as well. We are actively pursuing new investment opportunities to enhance our infrastructure exposure, and the results have been positive. This focus will provide an additional valuable aspect to CBRE's total addressable market in the near future and will become even more significant in the long run.

Do you have a target share of earnings or dollar amount of capital you're looking to allocate to infrastructure?

We haven't set anything about that yet, Jade.

Okay. And then just lastly, if I could squeeze one in. On free cash flow for the quarter, did it track with your expectations? I know, first of all, the second half is typically stronger. But secondly, there was some timing effects from the mortgage origination business. So adjusting for that, did the free cash flow performance track with your expectations?

So Jade, and I do want to address the mortgage origination comment. If you look at all of the lines that flow in there, I think you might be missing the warehouse lines. The impact from the GSEs to our free cash flow is about equal to what it was last quarter, roughly in line. And the big impact is really timing between Q1 and Q2. So Q1 was slightly above our expectations and Q2 slightly below. You need to look at them together. And across Q1 and Q2, our trailing 12 months free cash flow conversion was right about 85% at the high end of our target range. And we expect that to continue for the full year.

I just wanted to go back to your comments on expectations for the capital markets activity. And maybe if you could just talk a little bit about client behavior. It sounds like it's expected to improve, but are clients waiting for interest rate cuts? Or is it more where we have more clarity on tariffs, just a little bit about how your conversations with clients are trending there.

Well, clients would like interest rate cuts. I don't think they're waiting for them. I think what we're seeing is lots of financing activity and significantly escalated sales activity. We expect that to continue for the rest of the year. And the things that stimulate or put downward pressure on that will stimulate or put downward pressure on it the way they always do. So interest rates going up will be negative and interest rates coming down will be positive. And major uncertainty in the markets or a sense that we might be headed to a recession or the tariffs are a bigger problem than we thought would slow that down. But right now, the best way I'd say it is buyers and sellers are kind of powering through that and feeling that things are going to go relatively well. Obviously, here in the United States, there's a lot of enthusiasm about what's going on in the economy and in the real estate markets. And as Emma said, a little more choppiness in Europe. But I think expectations at the moment are positive and more positive than they were 90 days ago when we talked. We have no changes to our hiring plans, aside from what would be expected for a growing business that utilizes technology to enhance its operations. We are not claiming that we will drastically alter things through technology, but we are genuinely employing technology to improve efficiency. Therefore, I believe that over time, we will be able to grow and hire fewer employees to support that growth compared to what we've done in the past. We are certainly focusing on specific areas of our business to achieve those kinds of efficiencies. Overall, we anticipate this will continue to be a growing business, and we plan to hire talent to support that growth.

You mentioned in the press release that the outlook for capital markets activity is strong, even though it is currently well below the previous peak. Based on your internal discussions, what do you believe it would take to approach that peak again, and how long do you think that might take?

Capital markets have declined by 14% from the pre-COVID peak and even more significantly compared to the exceptional year we experienced in '22, which was an unusual recovery from COVID. We don't consider that year as a benchmark. While we don't have a model predicting when we will return to peak levels, I believe that continuing on our current growth trajectory will help. We expect it to grow next year. If interest rates were to decrease, or if the current interest rates combined with the limited new product offerings lead to increased rental rates, we could see some trading activity that isn't present right now. A perception of greater stability in the European economy could also enhance trading volumes. However, there's no single event we are anticipating that would bring us back to the peak levels. I think our earnings in New York, when you add it all up are probably 5% or 6% of our company's overall earnings. Thanks for joining us, everyone, and we'll talk to you at the end of the third quarter.

Thank you. This concludes today's conference call. You may disconnect your lines at this time. Thank you for your participation.