Cushman & Wakefield Looks To Sell Assets, Reduce Debt As Losses Continue

Cushman & Wakefield will focus on reducing debt following cost-cutting efforts earlier this year and could consider selling pieces of the company, according to its Q3 earnings call Monday.

CEO Michelle MacKay stressed the company's efforts to cut debt, noting it will reduce its leverage by about $200M in 2025. 

“It’s true uncertainties remain, and we saw the transaction markets take another pause in mid-August when rates moved higher,” MacKay said on 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.”

Part of that balance sheet improvement includes “monetizing small noncore assets,” MacKay said. That could include a sale of business segments, but Cushman could also find other ways to create cash from its existing assets, she said. 

“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,” she said. “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.”

The outlook for CRE firms of all kinds remains cloudy as the fallout from coronavirus-era cultural shifts and rapidly rising interest rates continues. Cushman reported a net loss of $33.9M for Q3 2023, down from a gain of $23.9M during the same quarter a year ago. The loss for the first three quarters of the year came in $105.2M, a reversal from the $166.6M gain during the same period in 2022.

The brokerage giant attributed the drop to lower real estate fees, as well as efforts to pay down debt. 

The company said it does not foresee another round of cost-cutting for now and is on track to meet its goal of cutting $130M from its budget.

“At this point we feel like the $130M 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,” Chief Financial Officer Neil Johnston said during the call. “We are always focused on efficiencies. There are always additional levers we can pull.”

Johnston said 20% of the $130M in cost savings came from “temporary costs,” such as travel and marketing. Those same kinds of costs could be contained in 2024 to hedge against continued economic and industry turmoil, he said.

Company revenue for the first nine months of 2023 came in at $6.9B, down 7% from the same period in 2022. Leasing, capital markets and valuation revenue for the first three quarters all declined from last year as well.

Cushman & Wakefield stock climbed 7.5% Tuesday morning. Its stock is down about 36.8% from last year.