In a bid to stay ahead of the economic challenges that continue to loom, real estate firm Cushman & Wakefield unveiled its strategic intentions on its Q3 earnings call on Monday. The firm, which has reported a nearly $34 million loss in the last quarter and a total for the year now topping $105 million, has revealed plans to reduce its debt to the tune of $130 million.
Earlier this year, the company took a significant step in cost-cutting, and according to Monday’s call, it might further consider “monetizing small noncore assets.” The CEO, Michelle MacKay, highlighted the company’s proactive approach despite external market fluctuations. “It’s true uncertainties remain, and we saw the transaction markets take another pause in mid-August when rates moved higher,” MacKay said during the call. “But even as transactional markets were idle during the quarter, we were not. We stayed focused, taking the deliberate actions … to improve our balance sheet and reduce our cost structure.”
Such improvements to the balance sheet might not always translate into outright sales of business segments. MacKay pointed out, “I just want to speak to the fact that monetization can take place in a variety of forms. It’s not always an all-out sale of a business or an entity. And what I can say about that is, because of the way the company was built through a series of mergers and acquisitions, there are components that were brought into the entity that are not necessarily strategic or core … I can tell you that they are small in size, and they wouldn’t necessarily meet the long-term growth profile of the company.”
As the fallout from the coronavirus-era cultural shifts and rising interest rates persists, the landscape for CRE firms remains unpredictable. Reflecting these challenges, Cushman & Wakefield reported a Q3 2023 net loss of $33.9 million, a stark contrast to a gain of $23.9 million in the same quarter of the previous year. The loss for the first three quarters stands at $105.2M, compared to a $166.6M gain during the same span in 2022.
This downturn is primarily attributed to lower real estate fees combined with the company’s intensified efforts to pay down debt. However, the firm’s vision seems clear, according to its leadership. It aims to cut $130 million from its budget, with no plans for another round of cost-cutting at this time. “At this point, we feel like the $130 million that we’re targeting is the appropriate level to not only ensure our margins this year in 2023 but also through 2024 in terms of what we are forecasting, and that contemplates a marked recession,” remarked Chief Financial Officer Neil Johnston during the earnings call.
Johnston also revealed that 20 percent of the projected $130 million in savings will come from “temporary costs,” such as travel and marketing. This is part of the firm’s strategy to hedge against potential ongoing economic challenges in 2024.
The company’s revenue for the initial nine months of 2023 was $6.9B, marking a 7 percent decline from 2022. Revenues from leasing, capital markets, and valuation also saw a decline from the previous year. However, in a notable uptick, Cushman & Wakefield’s stock rose by 7.5 percent on Tuesday morning, despite an overall decline of about 36.8 percent from the previous year.