世邦魏理仕集團 (CBRE) 2005 Q4 法說會逐字稿

Welcome to Trammell Crow Company's fourth-quarter and full-year ended 2005 financial results conference call. All participants will be able to listen only until the question-and-answer session of the call. This call 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.

Good morning and thank you for joining us for Trammell Crow Company's fourth-quarter and full-year 2005 earnings release conference call. This morning, we issued a press release announcing our results. The release is posted on our Website at TrammellCrow.com, or you may call 214-863-3350 for a faxed copy. This call is being Webcast live. It will be archived and available through February 28th. The call may be accessed from the Investor Relations section of our Website. In just a moment, Trammell Crow Company's management will provide commentary on its earnings, and then 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 could materially differ 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 Sulentic, our Chairman and CEO.

Thank you, Barbara, and good morning, everyone. With me here today from management are Derek McClain, our Chief Financial Officer; Arlin Gaffner, our Chief Accounting Officer; Mike Lafitte, President of our Global Services Business; and Chris Roth, President of our Development and Investment Eastern Operations. We will start with Derek walking us through the financial results.

Thanks, Bob. We had a very good year. Earnings per share for the full year 2005 were up 55% from the EPS of $1.05 that we posted in 2004, materially exceeding expectations. Consensus revenues increased -- excuse me, consolidated revenues increased 16%. EBITDA of over $112 million was up 41% from 2004. At year-end, our shareholders' equity was over $400 million, and our market cap now exceeds $1.1 billion.

As anticipated, it was the Global Services segment that delivered the growth. Global Services revenues were up 17%, and Global Services profit contribution was up 79%. All of our user services revenues were up nicely. We had a very good year in the outsourcing business. Revenues from user services in total were up almost 22%. Facilities management revenues were up 13%, and corporate advisory services revenues were up 30%, as were corporate project management revenues.

Brokerage work for investor customers was also up nicely. Revenues from this line were up 21%, driven in large part by capital markets activity. Global Services margins continued their improvement. Segment pretax income margins increased from 5.4% to 8.2%, marking the third consecutive year of significant increase. 69% of our total EBITDA was Global Services derived. Mike Lafitte's comments will illustrate the momentum in this business.

Our development and investment business performed exactly as we had projected it to for 2005, consistent with our goals and our guidance. Recall the profits in that business tripled from 2003 to 2004, and we had two overarching goals for the development and investment business in 2005 -- first, to deliver profits at least equal to those paid in 2004 and second, to position the business to deliver strong profit growth in future years. Both goals were achieved.

Segment pretax income was up modestly -- about 4.5% -- from 2004 to 2005, and the business is well-positioned to deliver strong future growth. In his comments, Chris Roth will address activity levels in this business and progress with our capital programs and initiatives.

A few comments for you on our balance sheet. At year-end, we had cash of approximately $77 million and line of credit borrowings of $35 million. You will recall that we invested $91 million to increase our stake in our alliance partner, Savills, during the year. That purchase was financed with borrowings under our line of credit that have been substantially reduced.

It's interesting to note that based on the current market price of Savills shares and current exchange rates, the dollar value of our entire stake in Savills is now worth over $250 million. It's on the books for approximately $128 million at year-end.

Our investment in real estate increased over the year, consistent with the pickup in development and investment activity. Our equity in real estate, including investments in unconsolidated real estate subs, was approximately $125 million at year-end.

Total real estate exposure, including recourse debt and guarantees, was approximately $147 million. That represents about 4% of the value of our in-process inventory and is almost exactly where it was percentage-wise at 12/31/2004 on similar in-process -- excuse me, on smaller in-process inventory.

Consolidated real estate debt increased to approximately $256 million at year-end. It's important to note as we pointed out in our release that the overwhelming majority of this debt is single asset, non-recourse project financing, consistent with our acute focus on risk mitigation in this business. And only approximately $12 million of that amount counted against our recourse debt covenant under our line of credit.

With regard to 2006, I would note that we feel very good about the momentum in our businesses. We are expecting earnings per share growth in 2006 to approach 20% with both segments contributing and with 2006 being a particularly strong year for development investment. Bob?

Thanks, Derek. As Derek said, 2005 was a very good year for Trammell Crow Company in terms of our financial results and growth also in terms of the way we served our clients, which as we've said many times is our top priority, and in terms of meeting operational objectives that will continue -- that will allow us to continue to grow and to serve our customers in a very strong fashion.

Our Global Services team had an outstanding year. Mike will walk us through more specifics but to highlight a couple of things -- the outsourcing team, serving our user clients, performed extremely well. We won or expanded numerous assignments, and we competed very, very effectively against our strongest competitors.

We grew our international capability materially during the year. Through these new outsourcing wins, we served with dedicated professionals in locations around the world now and by purchasing 30% of Trammell Crow Meghraj. Through this investment and alliance, we now have over 500 professionals on the ground in India and we expect that to continue to grow rapidly. Our team now serves outsourcing customers in approximately 60 countries, and we also expect this to continue to grow. Domestically, we strengthened our network, particularly in New York and Chicago.

With regard to our development and investment business as Derek noted, we met our financial goals for the year and into the year positioned for strong growth. Very importantly, the development business is a late-cycle business. Real estate investment has been strong now for several years, but we're still fairly early in the demand cycle for new development of several types of product. We have an extremely strong group of capital partners, and I would say maybe the strongest we've ever had with whom we formed capital programs and funds.

Our portfolio of in-process and pipeline opportunities is outstanding, and Chris will give us more on that. Our network of local market and product line specialists gives us a big advantage in executing these opportunities and in sourcing new ones. We should see very strong growth from our development and investment business in 2006.

Overall, we are extremely pleased with our performance in '05, and we are excited about the prospects for this year, 2006. You should expect our top priorities to remain largely the same as they have been -- great service for our both our user and investor clients; growing our base of professionals, particularly our brokerage team; continuing to focus on growing our outsourcing and healthcare businesses and our development in investment funds and programs; and continuing to expand our international capability.

So, you can count on us to work very hard to grow Trammell Crow Company, and you should expect us to succeed in that endeavor. Mike?

Thank you, Bob. I'm pleased to report on the progress for Global Services segment for the quarter and for the year. As Derek reported earlier, the results for Global Services this quarter and for the year were very strong. We had a successful year as a result of focusing around a key set of initiatives. Our priorities for 2005 were -- number one, customer service; number two, operational focus including process improvement execution and platform enhancements; number three, growth strategies around all of our lines of business with particular focus around brokerage, outsourcing and geographical expansion especially around our international division; and forth and lastly, a focus on our people.

As to our financial results, we reported Global Services revenues up 14% for the quarter and 17% for the year, representing a $121 million increase in revenue for the year. We've had significant improvement in our margins as we projected. Net income before tax was up 62% for the quarter and 79% for the year. The full-year NIBT margin has increased from 5.4% in 2004 to 8.2% for 2005.

Obviously, we're very pleased with the top-line growth and the bottom-line improvements. We're growing our business with both our customer groups, users and investors of real estate. The substantial bottom-line improvements can be attributed to a combination of things -- incentive fees earned in our user business, discipline around pricing new business, operational focus, increased brokerage volume and lift through growth in our overall business.

Now, a few comments regarding our business lines. Our user revenues increased 22% for the year. We have announced significant outsourcing contracts this past year with customers, such as EDS, BP, Aetna, Siemens, and Chubb. Our competitive position in this segment is very strong, and the market conditions for new business remains very healthy. Our ability to deliver complex full-service solutions for our user clients is driving the growth of this business.

Our facilities management business has shown 22% growth in square footage under management this year. Revenues for facilities management are up 12% for the quarter and 13% for the year.

On the overall brokerage front, transaction professionals had another good year with revenues up 26% for the quarter and for the year. The strongest gains for the year remain in our investment sales area, up 35%; followed by our corporate advisory area, up 26%; and project leasing, up 14%. Our brokerage headcount grew by 6% for the year, and production per broker is up considerably on the year-over-year comparison.

During the fourth quarter, we completed significant corporate advisory services assignments representing Intel Corporation, Sovereign Bank, Home Depot, and many others. User project management grew 8% for the quarter and 30% for the year. Trammell Crow Company now has over 800 project managers and development managers throughout the world, making our position in this area dominant for our sector.

For the 3 years ending December 31, 2005, we have grown the user project management business at a compounded rate of 35% per year. Obviously, we're proud of that number.

Our healthcare business saw revenues up 11% for the year on the Global Services side, representing consistent year-over-year growth in this important segment of our growth strategy. Our investor revenues increased 5% for the quarter and 9% for the year. On the property management leasing front, we continued to win new business with our investor customers. During the quarter, we signed new contracts with Invesco, Behringer Harvard, TA Associates, AmeriVest, McMorgan & Company, and [Yonan] Properties. Property management revenues essentially remained flat, but we have improved operations and the earnings contribution from this line of business showed significant gains this past year.

On the capital markets side of the business, we completed numerous transactions across our network this past quarter, with investor customers including AMB, BlackRock Realty, Kennedy Associates, Legg Mason Real Estate Services, ProLogis, RREEF Funds, and TIAA/CREF. The investment sales business continues to see record pricing and transaction volumes as the capital markets continue to be very active.

As to the expansion of our overall footprint and reach, 2005 was a very good year in that regard. We closed on the acquisition of our stake in Trammell Crow Meghraj in India, putting us squarely in the middle of this dynamic and growing market for real estate services. We agreed to terms and have now closed with Krombach Partners in St. Louis with expansion of our operation in that market. Through successful efforts to win new global outsourcing customers along with our expansion of leadership outside of the US, we added operations in 11 countries around the globe in 2005. We continued to make progress in New York and Chicago, two key US markets we have talked about for the last few years.

We have recently hired veteran market leader, Ken Krasnow, in New York to help further drive our business there. And our Chicago office continues to grow with new business wins and new additions to our team.

Looking back at 2005, the investments we have made to improve operations has helped in our margin growth. We added infrastructure support and technical expertise this year around our facilities business. We added a team to head process improvement around all areas of our operations. We are in the process of implementing a new customer relationship management application to enhance our internal brokerage and customer databases.

Now, looking ahead, we believe the marketplace will remain healthy. The outsourcing space should continue to allow for strong growth opportunities for Trammell Crow Company. Our brokerage business is growing due to market conditions as well as our active recruiting efforts. For 2006, our goal will continue to be to grow revenue and earnings across all of our lines of businesses. We will continue to focus on customer satisfaction, great employees, and the diversity of our business. Chris, I will now turn it over to you.

Thanks a lot, Mike. As Bob and Derek stated, our Development and Investment segment results for 2005 were consistent with our projections that we would meet or exceed our 2004 results, which as you all know had reflected a three-fold growth in profit over 2003. Accordingly, we're very pleased, not only with these results but more importantly with the direction of our D&I business overall. The progress we've made in a number of our focus areas leads us to believe that we are well-positioned to deliver strong profit growth in future years.

The metrics we watch most closely for our business are our overall development starts and our in-process and pipeline inventories, which we have shared with you previously. We saw 43 starts in 2004 with a value of over $1 billion, while our 2005 starts were up to 53 with a budget of over 1.1 billion; that's a 23% increase in the number of starts. Our inventory of in-process development work increased by 969 million or 37% over 2004, and our pipeline inventory increased by 9% to $2.7 billion. These in-process and pipeline transactions will be the feeder stock to provide us with earnings over an 18 to 36-month period.

We also believe we made strong progress with respect to our focus on people, capital programs and initiatives. Our network of experienced developers continues to grow as we selectively add people in strategic markets throughout our system. We feel this is the appropriate time to invest in new talent as the development cycle recovery has clearly begun to strengthen with corporate demand; our capital programs continue to gain traction. In less than 2 years, the in-process development work in our line industrial fund has grown to $250 million and 14 deals for 6 million square feet with another 225 million in 9 transactions in our pipeline.

Our focus on the healthcare industry and on medical office buildings with our partners, Health Trust fund in partnership with the State of Michigan, has resulted in nearly 2 million square feet of healthcare projects budgeted at 579 million currently in-process in roughly 12 deals. With $1 million -- or excuse me, 1 million square feet valued at $218 million in the pipeline.

We are also in the advanced stages of forming an office development fund to address the opportunities we perceive coming as the improvement in corporate growth results in demand for new office space. We are currently targeting funds totaling over $1 billion for this area.

On the initiative front where we targeted industry segments which are less cyclical than our historic speculative development business, we experienced continued growth with 21 of our 53 2005 starts, which represents 40% of our starts and roughly 51% of our dollar amount of starts which total over 574 million being related to our initiatives, primarily in healthcare, higher education and acquisitions. We expect continued growth this year in all these areas.

Overall, the strength of our people, capital programs and initiatives combined with the fact that the development cycle has clearly moved into the recovery stage suggest that we are very optimistic regarding the prospects for our Development and Investment business for the next several years. Bob?

Thanks, Chris. With that, we will open it up for questions.

(Operator Instructions). Will Marks, JMP Securities.

I had a few questions here; I will try to keep this short. But one, I had a lot of calls this morning, people asking about the discontinued operations line. And I think I have a good understanding of it, but I haven't heard it from you guys in a while. Maybe you could just clarify what that line is all about.

You bet, Will. Under applicable accounting literature, FAS 144, when we sell a development project and will not have a continuing interest -- significant continuing interest in it post sale, we report that sale as income from discontinued operations. What we have kind of gone out of our way to point out several times in the past is, in our Development and Investment business -- I mean that really defines our Development and Investment business. We are in the business of (technical difficulty) and selling product.

It's unfortunate for us that GAAP requires us to report it in that fashion, but in fact that's it. And in fact, we always point out that we expect it to be a recurring part of our business every year and to contribute significantly to profits every year. I think if you will look at the full-year amount of that on our income statement from '04 to '05, you will see it's pretty constant.

Then I guess finally the thing I would say about it is that it a little bit overstates the amount of that income if you will because substantial expenses associated with the production of that income are born in the Development and Investment numbers up above the line and not -- don't burden that income from discontinued operations.

A couple other things and I apologize if I missed it. Did you mention anything on share repurchase? Do you have any? Do you have a program in place right now with the capacity? And if not, do you plan to?

Well, we don't have anything in place right now. Although, as you will know, we've been significant buyers of our own stock over time, particularly in the last 18 months. I think in that period, we bought back about $58 million worth of our stock. We do have a very strong balance sheet and strong cash flow, and we're constantly evaluating our investment alternatives including buying back our own shares. But, we just don't have anything in that regard to announce at this time.

Just one last question on the guidance. Can you tell me if on the Global Services side do you expect margin improvement from here and where can it go? Just any comments regarding that, I would appreciate it.

I will start, but I'm sure Mike will want to pile on. Yes, we think that there is room for growth. I think we've spoken about a target -- a NBIT margin in that business from 8 to 10%. Obviously, we are within that strike zone at the moment. We've also said that we think that's very much attainable because we've been there in the past.

I would point out to you that when we were there in the past, we had very little in the way of an income contribution from Savills, which flows in kind of below the continuing ops line and is part of what's going on in the 8.2% NBIT margin that we have today. But, if you will -- I think we quoted this stat in the press release -- if you will look at the operating income margin in that business, it went from 4% to 6.4% from '04 to '05 and really that would be kind of a fair corollary with our historic 8 to 10%. So, we think there's still room for growth.

So I'm sorry. The Savills because it shows up as a net income number, it does drag down that 8.2 figure, is that right?

It improves it.

Oh, it improves it.

Because it is an element of income before income taxes, it then is part of the calculation in coming to the 8.4% you know NBIT margin. And it's in dollar for dollar as a contribution. But, the operating -- and if you just look at our segment tables that is included in the press release tables, there you'll see revenues and expenses for Global Services and operating income. That operating income margin is what we're talking about, the 6.4% for '05 and was 4% for '04. It doesn't include that Savills, which flows through our -- the Savills equity pickup -- which flows through that statement further down as income from unconsolidated subs.

(multiple speakers) And so what we're saying is, we've grown it from 4 to 6.5 -- or 6.4. We think there's room to grow it to where it's been in the past, which is up in the 8 to 10% range.

Yes, this is Mike. It's clearly a goal I would say of Global Services to continue to increase those operating margins. Some of it comes with scale; some of it comes with just increase in revenues overall. But, it's again just focused around those margins and driving the disciplines around increasing them. So it is a priority, and we do believe there is upside there.

Bill Baldwin, Baldwin Anthony Securities.

Congratulations on an outstanding job here. A couple of questions -- first for you, Mike. Corporate advisory just was very, very strong here in this last quarter of the year. Were there any unusual items in the revenue corporate advisory here in the fourth quarter?

Bill, I would say there is really two things that are driving it -- number one, just our continued growth in our outsourcing business overall, which is attached directly to that corporate advisory services brokerage line. The more outsourcing contracts that we win, the more mandates we have to execute upon. So, that's driving it, number one.

Number two, I would say that over the last 2 or 3 years, all the brokerage hiring that we have done has been heavily weighted towards the CAS side of our business and the investment sales side of our business. So, as we are bringing in new producers to the firm, the average production of the recruiting efforts that we're out executing upon -- the average production for those brokers that are coming to our Company are probably higher than our overall Company average. So, we're getting lift there, but there is also a focus around just bringing in professionals that are focused in that area.

So, I think those two pieces are the answer. It's not one particular deal. It would really be driven by both of those strategies that really connect.

Well, very good then, that speaks to the initiatives you all have been working on here in the last few years. Arlin, archaic question here on the Development and Investment. Minority interest was a positive, looks like 1.662 million this quarter versus a negative 5.268 a year ago (multiple speakers). Can you kind of bring me through there, so I understand what's going on with minority interest?

Yes, a couple of things there. In fourth quarter last year, we had some significant sales of consolidated assets with -- although consolidated having a significant part of that ownership was outside owners. So, what you see is the gross gains that will come in up above and then to the extent that those gains belong to the outside partners, they are backed off.

In the fourth quarter of '05, there's a little bit of income there that relates to a couple of things. One, there were some current operating losses in our Fund 5 just because we bought some operating assets that we're in the process of repositioning those, generated somewhat of an operating loss in the fourth quarter. But, 80% of that fund is outside owned.

The other thing that gets credit into there to the extent we earn any fees on consolidated but less than 100%-owned assets, whether they be project leasing fees or development fees, those fees to us come in through that line as a credit to minority interest rather than a credit to the top-line revenues under the GAAP rules. So, just a little bit of anomaly there this quarter.

David Gold, Sidoti & Company.

A couple of questions for you. First, Derek, on the guidance, you practically -- I guess we've backed off a touch, where we were a quarter ago announcing we will approach 20% and curious -- a) with everything strengthening if anything has changed or if it's more a function of the fourth quarter being stronger than you had anticipated?

It's entirely the latter, David. I think if you look at kind of where we were targeting 2005 finishing when we gave the guidance of 20% or greater growth from '05 to '06, you will see we finished a lot higher than that for '05 and just didn't feel like we could lead with that same guidance at this point for '06. But I think if you do the math on the prior guidance and do whatever math you want to do with this guidance in terms of approaching 20%, I think you would see that on an absolute basis we're signaling a higher number than we were before.

In there, it sounds like you are really looking for a blockbuster year on the development side in '06 and just curious as we think about growth for the next year, would you expect more significant -- especially given the strength we saw from services this year -- a more significant contribution from development via growth in the '06 than you are looking for from services?

I think that's a fair read of what we've said in the release -- the guidance we've given. But, I would just like to emphasize we're looking for nice growth from both segments.

Just one smaller one -- by way of options, '06 is about $0.04 for the year a good number?

I think that that's high. In fact, you know as we worked kind of through the all of the implications of FAS 123R, we think that for options under our long-term incentive plan and also under our employee stock purchase plan, there is probably less than a penny's worth of expense to be born in 2006. And then one other element of FAS 123R, we will -- as it relates to restricted stock, we've been under APB 25 expensing restricted stock all long. So really no change there in FAS 123R except this quarter when we first moved to FAS 123R, we will be estimating forfeitures for restricted stock as you are required to under the new guidance. And that will in fact result in a cumulative catch-up in the first quarter to the good that will in fact more than offset that penny of expense I just mentioned a moment ago. So, unlike a lot of companies anyway, the impact of FAS 123R for us in 2006 is going to be to the good.

Jennifer Pinnick, Morgan Stanley.

Back to the Development and Investment business, I was wondering if you could talk about what type of yields you're getting now versus last year and where you see them going. Also, your NBIT margins in Development and Investment, have we reached a peak here? Or do you continue to expect that line to grow as well?

Jennifer, this is Chris Roth. What I would tell you is that when you ask about yields, are you asking about yields generally that we see in the business as people are buying and selling real estate?

Yes.

You know, I think we've all experienced probably the most extraordinary time in a couple decades in terms of the capital markets and the intensity of demand for real estate. And I think that as we look at the demand in the economy while sometimes it's hard given the fundamentals to believe that those yields would continue, we see them continuing. And I think as you -- so goes the economy, so goes our business, I think that we would anticipate some slowdown or some increase in cap rates if you look at what's likely to happen with interest rates. But, frankly, none of us have seen it yet.

So, my own view would be -- and this is just one view -- would be that we'll continue to see a fairly frothy market for real estate. We are seeing in some cases less intensity for purchase of product than we were seeing before. But must admit to you that in spite of that, we're still seeing people buying empty office buildings and empty warehouse in areas and instances where they have been fully leased. So there is still a very aggressive market, so I don't see a great increase in cap rates shortly.

I think in terms of what we look at as our NBIT growth, we look at a mix of our business being a fee-with-principal-type business, probably skewing more toward the principal type business with our institutional partners in originating real estate more than doing fee business for those next 2 years. While that doesn't give you a specific number, I think it gives you a direction of our belief.

But, one thing that I would add to that, Chris, is just to emphasize that in particularly in the Development and Investment segment, there is significant income bottom-line contributions from things besides GAAP revenues. So, when you look at that segment table in the Development and Investment portion, you will see revenues, you will see significant income from unconsolidated subs because we execute part of our development business through unconsolidated subs and you'll see the income from discontinued operations that I spoke of earlier.

So, when we internally think about NBIT margins, we think about pretax net income against the combination of those three line items. For our internal purposes, we treat income from subs and income from [BO] as if they were development revenues. So we think that's the way you can kind of meaningfully watch a trend and make something out of the numbers.

Okay, And just a small follow-up on the tax rate. It looks like it came down from last year. Do you expect it to stay in this range going forward?

I think that where we've ended up for this year, which is 37%, is probably the best proxy to use for go forward. And while it is down a little bit from last year in fact kind of versus where we were tracking for the first 9 months of the year, it's just up slightly.

(Operator Instructions). Will Marks, JMP Securities.

A couple follow-ups. Derek or Arlin, I'm curious on Savills and the contribution to earnings. I think it's in that line that had 15 million for the full year '05. I'm wondering what that would have been -- I don't know if you would breakout, but I guess Savills was reported already. So, what their earnings were and what 20% of that would've been?

It flows through the income from unconsolidated subs line on the face of our income statement; you are right. And then it also gets picked up in the same place on our segment table. But in the income statement, it's net of tax; and on the segment table, it's pretax.

But it is combined with other things, even in the services segment table. We pick up our share of their bottom-line net income, but then we amortize against that some intangibles booked in connection with the purchase. And then we also combine it with equity pick-up of other unconsolidated subs.

I can't directly answer your question because in fact they haven't reported yet and there's really no way to kind of reverse engineer the number we report back to their earnings. But I would tell you it's a nice contribution that it makes to our earnings and maybe in the neighborhood of 10% of our EPS last year.

Okay, great.

It's net of amortization and all that kind of stuff.

Some quick questions on -- what does investment sales represent of your total let's say revenues or however you would like to word it approximately -- EBITDA maybe?

Of the Global Services revenue, it's about 12% of revenues overall. So when you think about it as a line of business -- within our brokerage business, it's less than one-third of our brokerage revenues in total. And as it relates to our overall Global Services revenues, it represents something close to 12% for 2005.

Then on -- this is a tough one but that's a -- in terms of brokerage, maybe you can answer this. What was your average broker making at the trough of this cycle let's say in 2001 versus today, and can you compare that to last cycle? I don't know if you want to use dollar numbers or percentage or just qualitative thoughts.

Well, I will give you just some thoughts. We don't publish what our average production numbers are per broker; we do watch them internally. Last year, the production number was up double digits from our 2004. When you go back to the last cycle peak, we were certainly probably at that level production per broker today. But I would tell you that we continue to dramatically change the profile of our brokerage business from that peak. I mean, we are now in major markets like New York City, where the average production per broker is a multiple of potentially of what our Company average would be. So, I don't think it represents any indication that we are anywhere near done in terms of growing that revenue per broker.

We are very focused on not just being the biggest in the business but really having great production and increasing our level of expertise in all of those three lines of business that we are in. We still think there is a pretty good run ahead of us in terms of where that production per head will go, and there's margin uplift by us focusing on that. The higher the production is, the more will drop to our bottom line and we think the better operation, the better shop we will have.

I just have one other question, and you can ignore it if you mentioned in your prepared remarks (indiscernible) -- does the announcement you guys made early last week on a new healthcare assignment, can you touch on that and if that is meaningful to earnings?

You know, we really don't talk about any kind of contribution you know on an account-by-account basis. We continue to have a lot of very active prospects in the healthcare space. We think this will be a great year for us and our focus on the outsourcing side of the business. Anything material to earnings I would say not material to earnings but the cumulative effect of what we think will happen with the pipeline this year could be. So we're just not able to talk individually about it at this point.

That's not necessary. But I mean can you just refresh us on what that announcement was and then how many offices does it impact or -- I'm not really asking for impact on earnings, just exactly--?

You are talking about the VHA announcement. The VHA announcement really is an alliance, where we will be one of two preferred providers for that network. What it really is an endorsement and a road into that network. So, it's a strategic alliance. We have other specific accounts that are in a pipeline, but that alliance with VHA is a very exciting opportunity for us to go in as a preferred real estate services partner with VHA -- if you are talking about that deal, if that's what you are talking about. It's hard to put a number in terms of what that might mean for us on a go-forward basis, but I would tell you we're very optimistic about it. We're very proud to have -- it was a very competitive process to get to that position, and we are excited about the opportunities.

At this time, there are no further questions.

Okay, well, thanks everybody for joining us, and we will talk to you again at the end of the first quarter.

This does conclude today's conference. Thank you for attending. You may disconnect at this time.