Cutting Debt And Growing Cash Flow, Cushman & Wakefield Prepares For Market Turnaround

By paying down debt and selling a noncore business line, Cushman & Wakefield is gearing up to capitalize on a wave of pent-up demand as commercial real estate continues to improve amid decreasing interest rates.

A slow recovery is underway for commercial real estate and will continue into 2025, executives said during a third-quarter earnings call Monday evening. The recovery promises to be a grind, but C&W CEO Michelle MacKay said there has been an important shift in the minds of investors, setting up opportunities for growth.

“Rate cuts, which we anticipate one in November and one in December, are going to help move some of this dry powder off the sidelines,” MacKay said on the call. “What we've seen is a real step forward in the investor mindset, from risk off to risk on.”

The brokerage reported $2.3B in revenue in the third quarter, up 3% from a year prior. Cushman & Wakefield leasing revenue rose 13% in the third quarter, the largest year-over-year growth since mid-2022 and the fourth consecutive quarter of positive momentum, the company announced after markets closed Monday.

Leasing revenue, bolstered by activity in the Americas and Asia, helped the brokerage post positive results despite mixed performance across its other service lines. Valuations revenue also increased by 2%, while revenue from the services division, which includes property maintenance and management, and capital markets business fell by 2% and 7%, respectively.  

Executives expect leasing revenue for this fiscal year to show moderate growth and services revenue to be flat. But a wave of capital waiting to close deals is expected to push capital markets revenue up 20% year-over-year in the fourth quarter.

“In terms of market fundamentals, we continue to be optimistic about recovery,” MacKay said. “The Fed’s move in September was a really important first step for us. There is an enormous amount of pent-up demand waiting, and we believe we are positioned exactly where we need to be to handle that demand.”

Still, MacKay said the firm expects the capital markets recovery to take years to play out, with velocity building in what she described as a waterfall effect.

Cushman & Wakefield continued working to cut its debt load in Q3, repaying a $48M term loan due in 2025 and cutting interest expenses 39% from a year prior to $55M. The firm also repriced $1B in debt due in 2030, cutting the interest rate by 50 basis points.

The debt restructuring was a key part of the firm’s strategy this year. Rising interest rates had contributed to the firm’s $281M in interest payments in 2023, a 46% increase compared to a year earlier. 

“Solidifying our balance sheet and improving our cash flow were key early priorities in our strategy to position the company to take full advantage of future growth opportunities, and we executed on this priority six months ahead of plan,” Chief Financial Officer Neil Johnston said. 

At the end of the third quarter, Cushman & Wakefield had $1.9B in liquidity, including more than $800M in cash and a $1.1B revolving credit line. 

The firm disclosed the sale of a noncore business in the Americas that resulted in a $4.5M loss, bringing the firm’s total restructuring impairments and related charges to $14M for the year. 

The brokerage sold its Cushman & Wakefield Facilities Solutions firm to maintenance company Vixxo in a deal that was reported in August, but the firm didn’t name the company that led to the balance sheet loss in its quarterly press release. 

“We are extremely pleased with our continued execution against our strategic priorities,” Johnston said. 

The firm's approach through the year allowed it to “reinvest cost savings into the business, protect margins and position the company for growth.” 

MacKay said the firm’s capital deployment moving forward would have three areas of focus: funding the brokerage to lean into the capital markets recovery, building the firm's services revenue, including through acquisitions, and continuing to deleverage where appropriate. 

“As a company, we continue to mature, and with a more diligent and focused operational initiative,” MacKay said. “This, in turn, is creating optionality for growth.”