世邦魏理仕集團 (CBRE) 2003 Q4 法說會逐字稿

Welcome to the Trammell Crow Company fourth-quarter and full-year 2003 financial results conference call. All participants will be able to listen only until the question-and-answer session of the call. This conference is being recorded. If you have any objections, you may disconnect at this time.

I would like to introduce Ms. Barbara Bower of Trammell Crow Company. Ms. Bower, you may begin.

Thank you. Good morning, and thank you for joining us for Trammell Crow Company's fourth-quarter and full-year 2003 earnings release conference call. This morning, we issued a press release announcing our results. If there is anyone on the line who needs a copy of that release, please call 214-863-3350, and we will fax you one immediately. This call is being Webcast live. It will be archived and available through March 4th. The call may be accessed from the Investor Relations section of TCC's Website at www.TrammellCrow.com. In just a moment, Trammell Crow Company's management will provide commentary on its earnings, and than we will open up the line for Q&A.

First, I would like to remind you that comments made during this call may include certain forward-looking statements. Actual results and the timing of certain events may differ materially from those projected and/or contemplated by the forward-looking statements, due to a number of factors, including those set forth in the Company's Form 10-K, as filed with the Securities and Exchange Commission.

With that, I will turn things over to Bob Sulenic, our Chairman and CEO.

Thank you, Barbara, and thanks, everyone, for joining us today. There's a number of members of our management team on the call. I will read them out for you -- Derek McClain, our Chief Financial Officer; Arlin Gaffner, our Chief Accounting Officer; Mike Lafitte, President of our Global Services Segment; Chris Roth, President of Development and Investment, Eastern Operations; Bill Concannon, our Vice Chairman; Jim Groch, our Chief Investment Officer; and John Stirek, President of our Western Development Investment Operations.

As usual, we will start by having Derek give us some background on the numbers. And then I, along with others, will give you some thoughts on our operational results.

Thanks, Bob. I'll begin with our consolidated results. We had a very strong fourth quarter. Earnings per share for the fourth quarter were 41 cents. That is up 71 percent from the fourth quarter of 2002, during which we had EPS of 24 cents. That drove earnings per share for the full year 2003 up to 57 cents. That is up 27 percent from the earnings per share of 45 cents last year, and well above the range that we have been committed to all year.

Consolidated revenues were down about 3.6 percent for the full year, from 734 million in 2002 to 708 million in 2003, but up about 2.4 percent for the fourth quarter of 2003 from the fourth quarter of 2002. Obviously, we have had an improvement in margins, and I will address that when we walk through the segment results.

EBITDA was up modestly for the year, from 58.2 million to 59.8 million, a 2.6 percent increase. Global Services EBITDA was up substantially, however, by 30 percent, increasing from $33.8 million to $43.9 million.

Turning now to segment results -- first, Global Services -- revenues for the full year in Global Services were down about 1 percent, from $657 million to $650 million. But for the fourth quarter, they were up over 5 percent. Pretax income for the segment for the full year was up about 85 percent, from $14.7 million to $27.2 million. Global Services' pretax income margin went from 2.2 percent in 2002 to 4.2 percent in 2003. Here, we're seeing the impact from continued attention to costs, and beginning to see a little of the operating leverage that's built into the brokerage business.

I'll say just a few words about individual Global Services revenue line items. Mike Lafitte will have more to say about those when he makes his comments on the Global Services business.

For the full year, declines in building management business revenue were not quite offset by increases in other segment revenue lines. As I noted earlier, however, for the fourth quarter, segment revenues increased over 5 percent.

Facilities management revenues for the full year were down about 9 percent, and that is in large part due to the shutdown of our centralized call center operations. That's old news, but it does affect these year-to-year comparisons.

Property management revenues for the year were down a little over 2.5 percent.

We enjoyed big increases in brokerage revenue lines for the fourth quarter. Corporate advisory services revenues -- and that is the brokerage work we do for our corporate customers -- was up 18 percent for the quarter, and institutional brokerage was up 29 percent. That resulted in corporate advisory services revenues being up about 14 percent for the full year, and institutional brokerage being roughly flat.

Construction management revenues were up slightly, and corporate project manager management revenues were up almost 13 percent.

Looking next to development and investment, as expected, the segment posted substantial net income in the fourth quarter, after losing money in the first nine months. This segment had net pretax income of $10.7 million for the fourth quarter. That is roughly flat with the fourth quarter of 2002. It produced pretax income for the full year of $8.2 million, down from pretax income of 15.3 million for 2002.

Taking a look at revenue plus income from subs and income from discontinued operations, less minority interest -- and that is the way we used to show our development investment revenues, which we think is more meaningful -- that measure was down 15 percent. As we note every quarter, and as noted in the release, income from discontinued operations will be a significant continuing earnings stream for this business.

Also, as noted in the release, and as I believe Chris Roth will speak to, we believe we're in the trough in the cycle for this business. Nonetheless, we are cautiously optimistic that the segment can make a positive contribution to earnings growth that we're targeting for 2004.

With regard to the balance sheet, we ended the quarter with a very strong cash position. We had almost $106 million of unrestricted balance-sheet cash at year end, versus $67 million at the end of the prior quarter. This reflects collections from strong year-end activity in brokerage and development. As noted in the release, we expect to have opportunities to deploy these resources in pursuit of our strategy on both sides of our business in 2004.

With regard to guidance, our earnings guidance for the full year 2004 is that we are again targeting earnings per share growth of 10 to 20 percent. As I have stated, we would like to see development and investment make a positive contribution to that growth, and on the Global Services side, we're looking for the growth to come primarily from revenue growth from new and expanded contracts with corporate outsourcing customers, and also to come from continued attention to costs.

With regard to the timing of earnings by quarter, we have noted that we again expect our earnings to be heavily concentrated in the fourth quarter of the year and, consistent with our historical practice, we're indicating only what we're targeting with regard to the next quarter.

For the first quarter of 2004, we're targeting earnings per share that meets or slightly exceeds 2003's first-quarter EPS of 3 cents.

With that, I will turn it back over to Bob.

Thanks, Derek. Obviously, I am very satisfied with our financial performance for the past year, both on the income statement side and on the balance sheet -- good progress in both areas. But I am equally, if not more, satisfied with the progress we made on a number of stated operational priorities for the year. And I will just hit those quickly, and then Mike and Chris will give you more detail.

First and foremost, we stated at the outset of the year that we wanted to make measurable gains in the customer service area. And in fact, the independent firm that surveys those customers for us, Kingsley Associates, showed that we did make material progress and movement in that regard. That is our most important priority. It will continue to be our most important priority in the current year, 2004. Throughout our system, we hired a number of key producers, key geographic leaders and key functional leaders -- very, very important to our business. Our people are our product. As the economy and as our prospects improve, we will be doing more business, and these people will be key to our ability to deliver on that deliver on that.

Our Global Services margins improved dramatically in the past year, and we think they will continue to improve. But that was a focal point for us. Mike will have more for you on that. We continue to improve in what we call the back-office area. It probably should not be called the back-office area, because it is part of the product we offer to our customers; but that is our human resources area, our technology area and our accounting area, all of which we think provide particular advantage for us with our large customers.

Our higher education business and our health-care business both had significant wins for us during the year. These are important initiatives for us at the current time. They will grow in importance over time, because those are some of the areas of our business that we are looking to help us become less cyclical as we go forward.

And then, finally, as we've stated in recent discussions, we think the development and investment business is at the trough, and about to hit in the right direction. Is exactly the right time to put new capital programs in place. Those capital programs served us very, very well in the last cycle, and we have made tremendous progress in that regard in the past year. Chris Roth will talk more about that, but I think most of you probably saw that we announced one of those programs last night.

So, when you look at where we are at, our focus over the past few years has really paid off, in my view. The quality of the service we provide to our customers is better, and our cost is down. Our balance sheet has improved dramatically and is very strong. We think our organization is much better oriented toward the marketplace we serve, and we've got a very, very strong team in place in all parts of our business to serve our customers.

So, going into 2004, where will we focus? We are largely going to continue to focus on the same priorities we talked about for last year, but we are also going to focus much more than we have in recent years in growing the top line. And those who invest in our stock, or those are thinking about investing in our stock, should hold us to that commitment. Specifically, our '04 priorities into will be customer service. Again, we want to have measurable improvements in that regard. We want to continue to add to the ranks of the our key producers and leaders, for all the reasons that I mentioned a moment ago, relating last year's additions. We're going to continue to grow our health-care and our higher education businesses. Health-care is now a $35 million contributor to the our top line. We think that will grow materially. We want to add to the base of corporate customers we have, and we want to grow the existing customers. Mike will talk more about that.

There are several places where we want to grow our geographic offices, most notably Chicago and New York. We think we have a big opportunity there. We start with significant customers in each of those markets. We want to make key additions to our development investment team that are overlapping with these capital programs we're putting in place. Chris will talk more about that.

And then, this year, because we have made the progress we have made with these capital programs, we're going to start securing projects for those -- land and projects for those programs, particularly the industrial program that was announced.

Our financial target for the coming year is to grow our earnings per share by 10 to 20 percent, the same target we set for last year. And I would say, kind of as a parting shot before I turn it over to Mike, given where we are at coming out of the bottom of the cycle, given that our development and investment business -- the pickup in that business is much more in our future then in our past, I would expect that sometime in the coming years, not too far off in the future, we would see even more significant growth in our earnings.

So with that, Mike, I'll turn it over to you.

Thank you, Bob. For the Global Services sector, the fourth quarter as well as the full year for 2003 proved to be a year where our increasing focus on profitable business and specific initiatives are delivering good results for our segment. While revenues were down slightly overall, as Derek mentioned, profits were up for 2003 substantially as compared to 2002, with Global Services' pretax margin up 85 percent for the full year. Our focus on pricing disciplines and cost controls, along with our commitment to customer satisfaction, is improving our bottom line. Our diversified revenue base across all three of our functional areas has proven to serve us and our customers well.

My comments this morning will be aimed at the following. First, a look back at 2003; second, a look forward at 2004 and our priorities within Global Services; and, finally, comments about our position for growth.

In looking at 2003, first I will comment on the corporate segment of our business. In the facilities management business, while revenues were lower, we did see higher margins. 2002 numbers, which Derek mentioned again, still reflected some tough contracts that we have exited and no longer are dealing with. Our disciplines around pricing and our contracting has definitely helped our bottom line in the facilities management business.

On the corporate advisory services line, we showed strong fourth-quarter results, with revenue up 18 percent for the quarter and 14 percent for the year. Trammell Crow Company continues to recruit and focus on expanding our corporate advisory services network. Our strategy is to grow our headcount, and this supports completely our outsourcing customer growth, as well as the delivery of our services within this sector.

The corporate project management business saw higher revenue again, up 28 percent for the quarter and 13 percent for the year. Customer wins and expansions in the project management area drives this business for us. This business delivers good margins, and plays into the our strength of development services, where we are strong and have expertise across project management and development management.

Then, this is additionally connected directly to our growth and brokerage and our corporate side, and our outsourcing pursuits, again, as all of these services cross-sell and deliver into our corporate services strategy.

On the institutional side, Trammell Crow Company, our market presence, remains a very strong position in the sector. Our traditional city strength and our local presence is a clear Trammell Crow Company advantage. This segment is influenced directly by market conditions and market fundamentals. And certainly, in the domestic sector, office/industrial/retail sectors have experienced increased vacancies and slower demand, and it has had an effect on the sector for us.

Property management revenues were down slightly, with a loss of 3 percent for the quarter and 2 percent for the year. Again, pressure on rents and vacancies here is driving this. Our focus continues to be on office buildings for new business, and our customers served in this area include top advisers and investors in real estate.

On the institutional brokerage side, revenues were up 29 percent for the quarter and relatively flat for the year. Project leasing has similar pressures as the project management sector, due to vacancies and volumes and rents. The positive side in this sector for us this year has been the investment sales activity was the highlight for the brokerage services sector of the investor side. With strong capital markets, the investment sales side has continued to be strong. And we actually serve both our corporate and investor side with our investment services and capital markets group.

The investor project management side of our business saw revenues up 9 percent for the quarter and 7 percent for the year. Slower growth here, again due to leasing activity and fewer starts.

Looking forward to 2004, our priorities remain, number one, customer satisfaction and operational excellence. This has continued to be our theme for the last couple of years, and will continue into the future. Second is customer growth, and third is brokerage growth.

Let me come back to our customer service and operational excellence theme. Our commitment to these two priorities will absolutely fuel our growth going forward. Outsourcing continues as corporations look to shed non-core activities, and outsourcing is driven by savings to customers, along with great execution by our teams. As Bob mentioned our Trammell Crow customer service scores, measured by our independent third-party firm, shows our scores are going up relative to our previous scores, as well as relative to our peers. We continue to bring best practices and strategic solutions to all of our customers.

When we think about the customer growth side of the business going forward, I will comment both on the corporate side as well as the investor side. On the corporate side, first, we believe that we can grow all lines of the corporate segment in 2004 and in 2005. Our senior team of pursuit in this area is now under the leadership of Jim Hayden, is in place and is very active with a very strong pipeline. Our operations outside the United States have been consolidated in the fourth quarter and, under the strong leadership of Alex Darragh, to drive global solutions and to drive our international network. As I said, our pipeline is strong, and our experience also shows that we can grow with new customers into multiple lines of services for delivery.

On the investor side, we have a clear focus on our office building growth, along with initiatives around driving efficiencies to serve our industrial and retail customers, and drive more margin in those sectors of this business. We do view the investor side of our business as a slower growth for 2004, as compared to the corporate sector. Last, in terms of the priorities, the real focus for us this year is, again, this theme of brokerage growth. Our headcount increased from 2002 to 2003 by 5 percent in all of our brokerage lines. Total brokerage revenues increased a blended average of 7 percent from 2002 to 2003, with good results in the fourth quarter.

Our alliances around the globe, with J.J. Barnicke that we put in place last summer, as well as our Savills relationship, which we have had established for several years now, takes our reach of transaction professionals well over 1,200 professionals around the globe.

Our new brokerage leadership that is in place with Bob Shibuya and Jack Minter, who were both named in the fourth quarter of last year, is proving to be extremely effective, as we continue to recruit great talent to this Company. As Bob also mentioned, our focus on key U.S. markets, large major metropolitan areas to grow our brokerage ranks, with specific focus on New York City and Chicago, we believe, will prove to be valuable in the long run. There is clearly movement within the brokerage sector, and the Trammell Crow Company platform is attracting great talent within our industry.

And finally, just some comments on how I view our position for growth. First of all, our organizational structure is very solid. Our geographical strength, our people, our functional strength, along with our pricing and our controls, puts us in a very, very good position. Second, our platform is also in very good shape, from technology offering to our customer focus, our customer communication tools and in all the other tools that we provide to our network.

And finally, our organization around pursuits of new business. We have a highly-focused team around our corporate outsourcing pursuits, we have a highly-focused team around our health-care pursuits, and we have a highly-focused team around our investor pursuits.

In closing, we feel very good about the condition of Global Services and our position in the marketplace.

Thanks, Mike. Chris, do you want to talk about development and investment?

Sure, Bob. As Bob noted, we are pleased with our 2003 development and investment performance, and especially our fourth-quarter results, in light of the general economy and its impact on the development cycle. It's tough to be too excited with lower results year over year, but if you step back in time to when our Company went public, there was some Wall Street skepticism that we would be able to maintain a profitable development business through a cyclical downturn. We believe that with the recovery now in progress, that we have passed the bottom of the development cycle, and have remained profitable in our development and investment business.

That's not to say that we are experiencing or forecasting dramatic growth in our development revenues for 2004. We previously shared with you our development and investment business typically reflects a 12 to, really, 24 month lag in the general corporate recovery. We are seeing in our service brokerage revenue increases in the fourth quarter, the signal of the beginning of the corporate expansion. And remember that, post 2000 and certainly post 9-11-01, corporate expansions and demand for new space literally stopped. So seeing some of the sublease demand and the sublease starting to be leased up, and many of our markets experiencing reductions in vacancy rates, really makes us feel that we are seeing the beginning of demand for new space and, hence, an expansion of our business.

So on the general economic front, we see considerable evidence leading us to be cautiously optimistic regarding the next several years in our development business.

Our earnings in 2003 are also a reflection of the continuing success of our focus on our national user-driven initiatives, primarily in the health-care and higher education areas, as Bob had mentioned. These areas provide a focus where, really, the demographic fundamentals provide for less cyclical opportunities than our traditional development business. In 1997, these areas accounted for only 1 percent of our project starts, and in 2003 they represented over one-third of our project starts and over 60 percent of the dollar volume of our starts.

Customers we did not work with three years ago, with whom we now have significant relationships, are Cleveland Clinic, Memorial Herman Hospital in Houston, Redding Hospital, Baylor Hospital, U.S. Surgical Partners, Duke University, Boston University, Rice, Villanova University and Howard University. We expect the momentum we generated in these areas to continue to have a balancing effect on the historic cyclicality of our D&I business.

While our revenues and our development pipeline during the last two years have in fact declined, we believe this dynamic is appropriate. Frequently in a downcycle, the temptation is to take on riskier transactions to maintain momentum. We have been cautious to maintain our focus on risk-mitigated transactions, and therefore find ourselves, frankly, in better financial condition coming out of the trough than at any time in our history. Accordingly, our strategy going forward is to focus on user-driven initiatives, on new capital programs to assist us in the market-driven development we see occurring as the cycle improves, and on retaining and selectively adding great new people.

With respect to our capital programs, we're announcing today, and I am sure many of you have seen, the formation of an industrial development program with ING Clarion. Trammell Crow Company will be a co-investor in this program, which were focus on the creation of new bulk industrial warehouse distribution centers in major markets throughout the United States. We're targeting development of up to 500 million of new product over time in this program. We also continue to target formation of capital programs in the health-care area.

Turning to our people, as I mentioned, we believe we have come through the trough with a better roster of experienced developers than in any previous significant downturn. We've also begun to add development talent in select markets and parts of our business. Notably, we have added industrial talent in Southern California, as well as bringing in a leader for our industrial program with ING Clarion. We have also added talent in our acquisition area and on our health-care team. You will see us continue to add development talent in specific markets and in specific product areas.

Overall, we believe we're well positioned to perform and grow our development business as the cycle improves. Contrasted with 10 years ago, we do not have any significant problems coming out of the trough. We have a strong capital position, and we are experiencing growth in our user-driven business, as well as in our more traditional development business in select markets. We have a large volume of in-process development, a still-strong pipeline and strong relationships with capital partners old and new.

So all in all, while our development investment earnings in 2003 were below 2002, we are pleased with our performance, and believe we're well positioned to perform strongly as the economy continues to improve.

Thanks very much, Chris. With that, let's go ahead and open the line for questions.

(OPERATOR INSTRUCTIONS). Matt Ostrower, Morgan Stanley.

I know, Bob, you touched a bit on the types of things you thought CapEx might go towards, I think, in 2004. Can you give us any sense for the magnitude of your expected spending? And I guess, more specifically, if you achieve your 10 to 20 percent EPS growth next year, would you also expect the cash balance to go up? Or will that money merely be spent on internal things?

Derek, do you want to take that?

Sure. Matt, while we have not quantified anything in the release, we have indicated that we do expect in 2004 to have opportunities to make investments that would benefit both sides of our business. In Global Services, as you heard from both Bob and Mike, we're looking to grow in select markets. We are also looking to make investments -- continued investments in our technology platform, but then kind of notably on the development and investment side, we would expect to be making co-investments in the capital programs that Chris mentioned. And he talked a little bit about the ING Clarion program that was announced yesterday, in which we'll be targeting to do up to $500 million of development over time. I would think that, ultimately, our capital investment in that program may grow to $15 to $25 million. And then Chris made reference to the fact that we're looking to do other programs, as well.

Where we sit today, we have strengthened our balance sheet through this downcycle exactly as we had intended. And we believe that we're at a point where good investment opportunities are on the way, and we believe as well that patients patience is a virtue here. Just because we have the financial resources does not mean we need to rush to spend them. (multiple speakers).

Would you guys consider -- I guess, for the right opportunity, would you consider adding leverage to your balance sheet?

Absolutely. We have plenty of capacity to do that. We have a $150 million line of credit and over $100 million of availability under it. So yes, absolutely. When I reference the financial resources at our disposal, kind of our borrowing capacity is implicitly included in those comments.

And then just again, trying to quantify things a little bit more, on the Global Services side, obviously margins have been great. It seems like you have done a very good job improving those. And it also seems like the cost structure has changed materially from, say, three or four years ago. What do you see as the upside potential there, particularly in 2004, but even looking forward beyond that, if we have a strong recovery? What kind of margins do you think you could generate in a stronger environment?

I don't have any really specific guidance to give you, other than to say history might be a good indicator. We enjoyed very strong margins on both sides of the business in '99 and 2000. Obviously, when things turned against us in early 2001, we went through a very tough cost-cutting exercise. And we have resolved that, as things improve, we're going to be more attentive to costs this time. So maybe there's even -- if we can enjoy the same kind of strength to the recovery that we enjoyed in the economy in the late '90s, and we can continue to have real discipline on the cost side, we might be able to rival those margins or even do better.

I'd add just a couple of comments about that for Global Services. Number one, we certainly have target margins internally that are higher than what we are delivering today. One of the real opportunities, I think, for lift in our margins going forward is we would certainly be in the brokerage area. As volumes can increase, there is a lot of leverage in that workforce for us, and we hope that we would see leverage there. And the final comment I would make there is I think we do have leverage in terms of our organizational structure today. We can grow our Global Services business from where we sit today, with our national and regional structure and international structure, definitely, from here without adding a lot of cost from here.

And then, finally -- if you addressed this, I apologize; I did not hear it. Could you sort of characterize the nature of the leasing business that you did this quarter, renewals versus new leasing, and also sort of the size of transactions involve? What does that tell us about the fundamentals?

Well, we don't really break it down and release our numbers on the project leasing side by size of deals. There's some general comments I could make about the sector, and it would probably differ, certainly, for retail and industrial as compared to office.

I'm speaking mainly about office; I'm sorry.

Well, it's all over the board, I think, is the answer to that question. We are certainly seeing -- a significant amount of our decrease in our availability is moving the subleases space out. So we have seen a pretty good movement, in terms of corporations who have had excess space for the last two or three years moving that space out, either as leases have rolled, or just getting it leased and getting it off of their books. We don't publish, by square footage, some of those results. But I would tell you that the sublease activity has been pretty good. Many of the major markets obviously are still in a tough spot on the office sector. You know, the U.S. office market is probably at the worst cycle it has been in 10 years, in terms of just occupancies. So while rents are down -- I mean, all of that drives both our property management and our fees on the investor side, clearly. With rents down, and our fees as a percentage of those, that's what is keeping us -- and I think we have done well to remain relatively flat in that side of our business, actually. The institutional investment sales side is what has really been the good news there.

Will Marks, JMP Securities.

Actually, most of my questions have been answered. But with the brokerage business, can you just give me a refresher on how your brokers are compensated, commission structure? And then the second part would be, if you were to look back at the last recession, coming out of it, brokerage revenues, maybe revenue per broker -- I know there is this pretty quick acceleration. But do brokers typically end up making 20 percent more per two or three straight years? If you can quantify it at all? I know that's difficult.

First of all, on the commission structure, we had remained -- in the marketplace, we have always paid brokers -- and it's a little bit different by sector, but typically a commission structure where 50 to 60 percent of the revenues on corporate advisory services is paid to the agent procuring the deal. So we have clung to, and we believe that our commission-based compensation system not only enables us to keep the best talent in the marketplace, but also attract it. The best brokers are going to go where they can make the best money. We strongly believe in that system. Where we have a need for dedicated resources for corporate account and corporate solutions, we will apply a dedicated team, in instances where we have got work that requires that kind of teeming environment, as well. So we very much hold up and believe that that is the right structure to attract and keep the best talent, which ends up driving the best results for our customers. I would say the majority of our competitors also are in that space.

As it relates to the revenue per broker, we do follow that pretty closely. I would say, from our peak of '99 to 2000, we saw our average revenue per broker decline by 20 percent. Clearly, that can start to tick back up. We do see some evidence and some signs that that can happen.

The other think that I would say we're doing is we are recruiting and attracting new talent to this Company, we are recruiting talent that is higher than our current average revenue per broker. So not only will we get lift in the market conditions and the fundamentals improving, we also will get lift from just continuing to attract really strong talent to the Company.

If I could add to that, Mike, just to quantify that a little, we had a net add last year, Will, of 25 brokers, but in fact, we hired or brought into the Company 125 brokers, and we turned over 100. We're confident that not only is the headcount up, but the production capability of the team we're sitting with here at the beginning of this year is a stronger team per person than we had a year ago. So you should see upward pressure on revenues from both of those sides of the brokerage business.

One other comment about that is some of the markets that we are aiming at are every significant commission revenue markets, where averages are high.

Bill Baldwin, Baldwin Anthony Securities.

First, Mike, continuing with your thought on the rental situation, in terms of your outlook in 2004, would you assume overall that, say, the average rental rates in 2004 will be about the same as 2003? Let's say, start with your office markets. Looking at the year as a whole, would it be about flat with this year, do you think? Or it will be down, or do you think it will be up a little bit?

Chris may also weigh in on this, too, because our development and investment side obviously sees these trends, as well. I would say some of the tougher markets are going to continue to have pressure on rents in 2004, certainly on the office side. Overall, I think they will be maybe slightly down to flat. I wouldn't see any significant increases. Industrial, I think, will remain pretty strong, flat to maybe a tick up. Retail probably the same, nationally.

Chris, weigh in -- or Bob, anybody else?

I would say that's roughly accurate. There are a couple of pockets throughout the country where we are seeing -- as I mentioned, we are starting to see some vacancies decline. And therefore you are seeing some rental movement. But they are the exception, at this point. I would anticipate this year is going to be primarily flat.

And, Mike, based upon the pipeline you're seeing in your outsourcing, in your facilities management business, would you care to give us any color as to what type of revenue growth is in your guidance for 2004 out of that category? You could bracket it -- is it 5 to 10 percent type growth? Is that kind of reasonable, do you think? Or do you think we ought to be a little more optimistic than that?

Well, I would make a general comment, and then maybe Derek can add to it. By general comment would reflect what I have said in my comments, and that is I really do believe that all three of our lines of business on the corporate side will grow -- FM, brokerage and project management. We have seen good evidence of that lately. Derek, in terms of any guidance around those --?

Bill, we are just not prepared to give any guidance or bracketed ranges for earnings growth for those particular revenue line items, and I would just echo what Mike said. We're looking for growth across the board in those corporate lines.

If I could, I'm going to ask Bill Concannon, our Vice Chairman, to comment because, as you know, over the years, he has been as close to the corporate customer as anybody in the industry. And without quantifying these things, if you could comment, Bill, on kind of the opportunity you're seeing in the trends, I think that would be helpful.

Bill, I would just say to your question about outsourcing growth related to FM, clearly this business for us is a customer-centric pursuit model. So we're actively working the pipeline of large corporate relationships that are interested in outsourcing, and when Mike and Derek talk about the three lines, they are interested in outsourcing their services to a kind of a better business model, where we can handle their facilities management, their building operations, their project management and their portfolio, under the transaction piece. So when we get those new clients, it's a very customer-centric approach. We get them where we will take one service line or we'll take all three under an integrated contract. So from that perspective, it's hard to model the revenue growth year over year, because you are really growing by client around the customer contract. But we clearly see continued momentum, where clients want to buy centralized -- in other words, their real estate departments are organized in a centralized fashion, so they are buying from companies like ours that can offer it on an integrated basis.

Are you seeing opportunities, both from the standpoint of new customers as well as corporate clients that are consolidating their outside managers, from maybe a number down to just a few? Are you seeing growth on both fronts, from both areas?

Yes. The trend on the second part of your question continues to where if a large corporation has five or six service providers, they're really trying to reduce the number of third parties that they are working with, because they believe they can achieve their goals in a more efficient way by working with a fewer number of service providers.

Bill, I would add that that is also true on the investor side of our business. We're definitely still continuing to see it (ph) on our large national advisories and funds that we represent that they are also continuing to consolidate.

And would you repeat again your potentially three service areas? I got the project management, I got the facilities management. What is the third line item, or the third service area?

It's brokerage, corporate advisory services.

Oh, okay, corporate advisory -- okay. And lastly, do you care to comment as to when you think you'll begin to deploy capital in this new partnership you announced last evening?

We would hope to be doing fairly significant business throughout this year.

So that kicks off pretty quick here, then?

Yes. We believe the industrial cycle really is the leader for -- and again, as part of the answer to your previous question is really how much does this stimulative impact of all the spending that has occurred really affect the economy? We believe it will affect it pretty dramatically this year, in corporate investment. But I think we definitely start to see that happening this year.

And Bill, if you go back to the last cycle, where you really create a lot of opportunity for yourself and your investor partners on this industrial -- well, in all of institutional development, but in industrial in particular, is when you can get in early cycle and secure land opportunities. If you wait too long, if you wait until the market is clearly hot, you can't secure the land, and you basically can't create the product. So one of the things that we have done in structuring this ING Clarion program is we have great flexibility to take on land positions, more than we had in the past cycle, I might add, and I think -- you followed us through the last cycle. You know that that served us well in the last cycle.

You have already identified, then, I guess, a lot of your markets, and where you want to get started. Have you already begun on your land acquisition in that regard? Are you that far down the road?

We have certainly identified where we would like to be. And I think in certain cases, we have in fact identified specific opportunities, yes. So I think you'll see some legs this year.

(OPERATOR INSTRUCTIONS). At this time, I am showing no questions.

Well, thanks to everyone for joining us. We will talk to again in the next quarter.

This concludes today's conference call. You may disconnect at this time.