Cushman & Wakefield plc (CWK) Q4 2021 Earnings Report, Transcript and Summary

Welcome to Cushman & Wakefield’s Fourth Quarter 2021 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker [sic – speakers’] remarks, there will be a question-and-answer session. [Operator instructions] It is now my pleasure to introduce Len Texter, Head of Investor Relations, Global Controller and Chief Accounting Officer for Cushman & Wakefield. Mr. Texter, you may now begin your conference.

Thank you, and welcome again to Cushman & Wakefield’s fourth quarter 2021 earnings conference call. Earlier today, we issued a press release announcing our financial results for the period. This release along with today’s presentation can be found on our Investor Relations website at ir.cushmanwakefield.com. Please turn to the page labeled, Forward-Looking Statements. Today’s presentation contains forward-looking statements based on our current forecasts and estimates of future events. These statements should be considered estimates-only, and actual results may differ materially. During today’s call, we will refer to non-GAAP financial measures as outlined by SEC guidelines. Reconciliations of GAAP to non-GAAP financial measures, definitions of non-GAAP financial measures and other related information are found within our financial tables of our earnings release and appendix of today’s presentation. Also, please note that throughout the presentation, comparison and growth rates are to comparable periods of 2020 and are in local currency. For those of you following along with our presentation, we’ll begin on Page 4. And with that, I’d like to turn the call over to Brett White, our Executive Chairman. Brett?

Thank you, Len and thank you to everyone joining us today. Joining me this afternoon is John Forrester, our CEO as of January 1st; Kevin Thorpe, our Chief Economist, who’ll provide some commentary on the macroeconomic environment; and Neil Johnston, our CFO, who will review our financial results for the quarter and full year along with our outlook for 2022. To begin, I want to thank our team of Cushman & Wakefield professionals around the world. 2021 was another unpredictable year and their resilience and ability to serve our clients in these fluid times has been truly outstanding. As a result of their amazing efforts, we delivered record results in 2021. We grew our fee revenue to $6.9 billion, up 24% over last year; delivered record adjusted EBITDA of $886 million, up 73% over last year and expanded our margins by 365 basis points to 12.9%. Brokerage was a source of strength as momentum throughout the year continue to build with a recovery. Revenue growth in our Brokerage businesses improved 55% over last year and was even 6% ahead of 2019 pre-COVID levels. In addition to our solid financial results, 2021 was a year of continued investment in our platform. We made strategic investments in Greystone and WeWork, providing us with key capabilities in multifamily debt origination and servicing and workplace solutions. Finally, operating cash flow of $550 million further strengthened our strong balance sheet and positions us well for future growth. Before handing the call over to John, it has truly been an honor to be the CEO and lead this company over the past six years. When I stepped into the CEO role, my objective was to lead our business through a period of rapid growth and transformation. I’m very proud of what we’ve been able to accomplish, from the formation of a new player in the global commercial real estate space to taking the company public in 2018 and to where we are now as an industry leader. Today, Cushman & Wakefield is recognized as a leading global real estate services company with a comprehensive service offering that delivers exceptional value for both investors and occupiers. Our global platform is poised for continued sustainable growth and success. I have the utmost confidence in John, our leadership team and our 50,000 employees around the world. I congratulate John on his well-deserved appointment as CEO, and I wish him continued success. I look forward to working with him in my role as Executive Chairman in this exciting new chapter. And with that, I’ll turn the call over to our new CEO, John Forrester. John?

Thank you for the kind words, Brett. As I’ve transitioned into the CEO role over the past few months, I have stepped into leading a world-class real estate services company enjoying significant momentum in a global operating environment with material tailwinds. Of course, I’m thrilled to have the opportunity to lead Cushman & Wakefield as the new CEO, and I’d like to thank Brett for his contribution over the past six years as Chairman and Chief Executive Officer. It’s been an honor to work and learn alongside him. Thanks to Brett’s vision and leadership, Cushman & Wakefield has never been better positioned to take increasing market share and leadership in what remains in many sectors a fragmented market. I look forward to continuing to work with Brett as he transitions into his role as Executive Chairman. Before getting into the results, let me start with a few observations on the current operating environment and path ahead for Cushman & Wakefield. First, the market for commercial real estate services remains strong and growing. As I said at the outset, there are material tailwinds present that will power the largest full-service companies in our sector through the coming period. Kevin Thorpe will provide a more detailed picture on these market tailwinds later on the call. But in particular, I would highlight three particularly significant conditions – that will power our continued growth. The other growing volume of capital flowing into the real estate sector driven by secular trends, seeking out assets to deliver competitive and attractive investor returns, the data illustrating a return to growth in office leasing, and the momentum in corporate outsourcing with major occupiers in all sectors now building key supplier relationships on a global scale. I’ve always believed in staying close to the voice of our customer and our talent, and I’ve traveled widely over recent months physically, as well as virtually, talking to our largest clients and working directly with our industry-leading talent. And I’m happy to – reinforce that our existing strategy and priorities remain not only sound, but ever more appropriate to address the opportunities we face and to grow our company, create value and generate strong returns. Our focus and commitment to operational excellence and efficiency, which has resulted in savings of $125 million this year and $250 million over the past two years, has never been clearer. Over the past two years, we have realigned the business through four strategic transformation initiatives. Firstly, streamlining the organization to better match our occupier and investor service model; then enhancing our agility by organizing our services by sector, not just by geography; by materially improving the operating efficiency of our business units; and finally, optimizing the functions that support and guide the company. This relentless focus on the improvement is now transitioning into how we deliver our services to clients. We will use our scale to help generate greater internal operating leverage and deploy technology to make Cushman & Wakefield the easiest company to work with as a client and work for as an employee. This, together with our ongoing strategic focus of growing capacity and capabilities in the largest and highest growth sectors, has put us in a strong position to again capture market share in 2022 and beyond. As an example of that growth focus, in our last earnings call, we highlighted our strategic acquisition of a 40% stake in Greystone’s Agency, FHA and Servicing businesses, which will fully round out our service offering to investors in the US multifamily sector. In the full year 2021, the multifamily asset class drove 41% of US capital market volumes, which resulted in $335 billion of total volume, up 74% since 2019. In addition, we announced and completed the formation of a key strategic partnership with WeWork that we believe will further strengthen and differentiate our global platform, particularly in the occupier outsourcing and the portfolio of property management sectors, further penetrating these two large and high-value markets. With that, let me turn to our results. Fourth quarter was a record quarter for the company with strong top line growth across all service lines and segments. The commercial real estate sector is continuing to show tremendous resiliency to the pandemic, as evidenced by the profound recovery we’ve experienced throughout the year. Both fourth quarter and full year Brokerage revenue, including our Leasing and Capital Markets businesses, exceeded 2019 pre-pandemic levels. Whilst the strength of our performance was broad-based, the recovery was most profound in our Capital Markets portfolio, particularly across the Americas in nearly every city. Overall, liquidity and appetite for commercial real estate from investors remains at all-time high – at all-time highs and growing. The recurring revenue streams of our Property and Facilities Management service lines also continued to display strength with high single-digit growth in the fourth quarter. We’ve been heavily focused on growing our Facilities Management business over the past several years, building a strong platform to serve the largest clients. We’ve continued to win increasingly large, complex, national and global multiservice mandates as a result of our continued investment and increasing scale in this business. Adjusted EBITDA for the fourth quarter of $348 million brought full year adjusted EBITDA to $886 million, both records for the company. The execution of our strategic realignment and multiyear transformation has had a profound impact on the profitability of our company as the broader Brokerage market continues to rebound, resulting in record margins. Looking forward, our strategic road map is not changing. We are focused on efficiently delivering a complete suite of global core services and solutions to owner and occupier clients around the world, which in turn will deliver material shareholder value. Our four strategic pillars will continue to guide how we run the business, through client centricity, a relentless operational excellence, being a leading people and talent platform and increasingly leveraging our data with analytics that provide unique insight and value. And with growing resonance, Cushman & Wakefield is set on a path to be a leader in the area of ESG, now a fundamental consideration in real estate decision-making. To that end, we are taking bold action that will materially reduce our own environmental impact and also that of our clients with our previously announced science-based targets and net-zero commitments. We are committed to making a meaningful impact for our people, our clients, our shareholders, and the – communities in which we operate around the world. I’m optimistic for the year ahead, confident in our strategy and the commitment of our teams across the world to continue to drive value for our clients and shareholders every day. And with that, I’d now like to turn the call over to Kevin to discuss our macroeconomic outlook. Kevin?

Thanks, John. 2021 was clearly a strong rebound year for the commercial real estate sector. And importantly, what we learned last year is that the commercial real estate sector and the economy, in general, are both becoming increasingly resilient to the pandemic. As we all know, last year featured new waves and variants. As the year went on, it became apparent that the commercial real estate sector was becoming less disrupted by these waves, as evidenced by the increasingly strong performance throughout the year. Looking ahead, the economic outlook remains strong. US real GDP grew by a preliminary estimate of 5.7% in 2021 and this forecast to grow at a healthy rate of 4% in 2022. These growth rates are significantly above the pre-pandemic average and are anticipated to be among the strongest back-to-back growth years – growth rates ever recorded. The global economy is projected to have grown by a similar amount, 5.9% according to the International Monetary Fund, with growth in 2022 expected to register in the mid-4s. As we know historically, GDP has been a solid predictor for the commercial real estate sector. When the economy grows at a healthy rate, it typically means more jobs, more leasing, more capital markets deals, more buildings to manage, giving us conviction on a strong outlook for property in 2022. Lastly, we continue to monitor the impact of elevated inflation and other downside risks. However, I would emphasize that the commercial real estate sector has been successfully navigating these challenges for several months, which again speaks to the sector’s resiliency. Additionally, we are monitoring the Federal Reserve and interest rate movements. But here, I would emphasize that even with a 10-year treasury yield drifting higher, interest rates still remain low and below pre-pandemic levels and are still half of their historical average making spreads still attractive in the commercial real estate sector. Turning to the property sectors. The stronger economic backdrop has shifted most sectors from recovery to growth. Of course, the performance varies greatly depending on geography, product type and other factors. But overall, the commercial real estate sector has momentum going into 2022. One of the clearest bright spots in the commercial real estate sector space continues to be the industrial logistics sector. In the US, the industrial market ended the year with record-setting demand outpacing supply such that vacancy is now below 4% for the first time ever. Net absorption in 2021 was 533 million square feet. And just for context, prior to last year, the industrial sector had never absorbed 400 million square feet of space in a calendar year, so 500 million square feet is truly astonishing. Likewise, we continue to observe very robust demand for data centers, life sciences, self-storage and apartments, and these strong trends are expected to continue in 2022. Retail and office continue to lag behind in the recovery, but there are also many encouraging signs indicating that the worst is over, and the recovery is well underway. For instance, last year, we saw the US retail sector surpassed 37 million square feet of net absorption, which was the best year since 2017. On the office side, gross leasing activity trended higher every quarter in 2021. Tour activity continues to rebound, and net absorption is turning positive in an increasing number of markets. Importantly, the office employment recovery has been very robust in this cycle. US has created 3.4 million office jobs since the nadir of the COVID-19 recession and has already returned to pre-pandemic peak levels of employment. So, for context, it took six years to fully recover all the jobs lost from the great financial crisis. In this cycle, it took less than two years. And so, when businesses do get back, even with a more agile workforce, we are confident that the office sector will continue on its path to recovery. And lastly, capital markets continue to demonstrate tremendous resiliency and momentum. According to Real Capital Analytics, US fourth quarter property sales registered at $326 billion, up 97% compared to a year ago, setting a new fourth quarter record. For the full year 2021, sales volume of all commercial real estate property types totaled $809 billion, which is 35% higher than the previous record set in 2019. So, clearly, the commercial real estate sector remained in an attractive asset class for investors as demand drivers remain favorable and fundraising remains aggressive as it sits at near-record levels. While there are still uncertainties remaining as the pandemic continues to play out, if the virus and the economy follow the most probable script, then there are strong reasons to continue to be optimistic for [technical difficulty] strong performance in the commercial real estate sector. And with that, I’d like to turn the call over to Neil. Neil?

Thanks, Kevin and good afternoon, everyone. We are very pleased with our financial performance for both the fourth quarter and full year of 2021. Strong revenue growth, combined with the execution of our operating efficiency initiatives, drove record adjusted EBITDA growth and margins. In addition, strong operating cash flow further strengthened our balance sheet, resulting in improved leverage and continuing strong liquidity. For the fourth quarter, fee revenue surpassed $2.2 billion, an increase of 35%, resulting in $348 million of adjusted EBITDA or about $150 million more than the fourth quarter of 2020. Adjusted EBITDA margin of 15.7% increased by 365 basis points compared to prior year, driven by Brokerage revenue growth of 72% and the benefit of operating efficiency initiatives. Adjusted earnings per share for the quarter was $0.94, an increase of 51% over prior year. For the full year, we generated fee revenue of $6.9 billion, an increase of 24%, and adjusted EBITDA of $886 million, an increase of 73% over prior year. The strength of our Brokerage business, which grew 55%, coupled with our strong execution of operating efficiency initiatives and disciplined cost management, led to adjusted EBITDA margins of 12.9%, a year-over-year increase of 365 basis points and an increase of over 150 basis points compared to 2019. As a result of our strong earnings and efficient management of working capital, we delivered $550 million of operating cash flow for the full year. Adjusted earnings per share for the year was $2.04, up from $0.81 in the prior year. Taking a look at our fee revenue by service line. In the fourth quarter, Leasing and Capital Markets revenue increased 65% and 80% versus prior year, respectively. Leasing exceeded pre-pandemic levels for the quarter with fee revenue increasing 5% over the fourth quarter of 2019. Non-office leasing reflects the continued momentum and strength in the industrial logistics sectors. We also saw continuing improvement in the office sector, which Kevin already touched on. In Capital Markets, volumes reached record levels with fee revenue growth of 54% compared to pre-pandemic levels in the fourth quarter of 2019, largely driven by the Americas segment in nearly every property sector. The environment for capital investments continues to be favorable with no signs of slowing momentum. PM/FM and Valuation and Other service lines were up 7% and 11%, respectively for the fourth quarter. Our PM/FM service lines have been a source of ongoing stability with full year growth of 6% year-over-year, which is a clear reflection of the resilience and commitment of our Facility Services at Facilities Management teams. Our Facility Services represents just under half of our PM/FM fee revenue and generate solid cash flow on a very stable revenue stream, which was up mid-single digits for the full year, reflecting continued demand for COVID-related deep cleaning services principally in the Americas. Turning to our financial results for the quarter by segment. Our Americas segment was positively impacted by the strong rebound in Brokerage. Leasing and Capital Markets revenues improved 76% and 93%, respectively year-over-year, which equates to 35% growth in Brokerage revenue versus 2019 pre-pandemic levels. This, together with our operating efficiency initiatives, resulted in a record level of adjusted EBITDA in the Americas for the fourth quarter, where we recorded $251 million of adjusted EBITDA, an improvement of $124 million versus prior year. In EMEA and APAC, we generated adjusted EBITDA of $55 million and $41 million, respectively, which represents an increase of 36% and 48%, respectively, versus the fourth quarter of 2020. This performance reflects strong revenue growth of 14% and 26%, respectively, led by Brokerage activity, where fee revenue improved 35% in EMEA and 50% in APAC for the fourth quarter. Our financial position remains strong. We ended the fourth quarter with $1.8 billion of liquidity, consisting of cash on hand of $771 million and availability on our revolving credit facility of $1 billion. We had no outstanding borrowings on our revolver. Net leverage was 2.8 times at the end of the year, down from 4.3 times we reported at the end of 2020. We are well-positioned to continue to fund operations and invest in future accretive infill M&A and broker onboarding opportunities, while maintaining optionality within our capital allocation framework. In December, we closed on our strategic joint venture with Greystone, contributing $500 million for a 40% stake. We expect the joint venture to be accretive on both in adjusted EPS and adjusted EBITDA contribution basis with a contribution to EBITDA that equates to a 6 times to 8 times EBITDA multiple based on historical performance. The investment will be accounted for as an equity method investment in our financial statements, which will reflect the impact of all revenue streams, including origination fees, MSR gains and servicing fees. The impact of Greystone to our 2021 full year and fourth quarter was immaterial, given the timing of the close. Looking forward, we expect the strong momentum experienced in our business this year, particularly in logistics and multifamily, to continue in 2022 as well as continuing improvement of the office and retail sectors. In Q4, both Leasing and Capital Markets revenues were back above 2019 levels with Capital Markets experiencing significant growth of 54% over 2019. We expect this growth momentum to continue in 2022 and are anticipating year-over-year Brokerage revenue growth in the upper single digits, consistent with pre-pandemic historical growth rates. In our non-Brokerage service lines, we anticipate continued revenue growth in the mid-single digits, in line with last year. As we look forward, we are focused on continuing to drive efficiency and cost savings, while balancing investment to drive profitable growth. As a result, we are aiming for an adjusted EBITDA margin improvement of approximately 100 basis points year-over-year, including contributions from our Greystone joint venture. For the year, we expect our adjusted effective tax rate to be in the range of 27% with an adjusted cash tax rate slightly below our adjusted ETR. Overall, with the momentum we are seeing in all segments and service lines of our business, our focus on profitable growth, continued disciplined cash management and investment, we are well-positioned to continue to drive significant value for shareholders. With that, I’ll – turn the call back to the operator for the Q&A portion of today’s call. Operator?

Thank you very much. At this time, we will be conducting a question-and-answer session. [Operator instructions] We have a first question from the line of Anthony Paolone with JPMorgan. Please go ahead.

Great, thank you. My first question relates to Brokerage revenue growth in 2022. It seems like leasing has a lot of runway to go. And so wondering what you think the puts and takes are to you know this upper single-digit revenue outlook might be for your system and what might keep that from being higher?

Let’s – let’s John take that.

Hi, Tony. We see relatively positive outcomes in all sectors. As you said, the continuing growth in logistics and multifamily, life sciences you know there’s strong momentum. Unlike – unlikely to duplicate what we saw in Q4, but still strong. We’re very positive about the continued rebound in offices, now moving strongly through green shoots all over the data sets that we watch. And as Kevin mentioned, actually bottoming out and some growth now in retail. So combined, you know we do see a good outlook for the Brokerage market, but we’re taking it you know one quarter at a time as we move through the recovery and into a true growth.

Okay. And then on the expense side, you had mentioned I think it was $125 million that you expect to see. I think that’s in 2022, I believe. But I was just curious if you’re starting to see any cost returning faster than expected or cost pressures from inflation anywhere in the system.

Neil?

Yes, sure. Tony, that $125 million we took out in 2021. As we go into 2022, we will clearly be focused on costs, but not to that same extent. Some of the factors we considered as we look at 2022 are considering this, we do expect inflation. But the good news is the business has a natural hedge against inflation. So, the area that we focused on around inflation is really just our non-fee-earners and the salaries there that could go up. Other considerations, we do have some – the final piece of the savings as a result of COVID coming back in. So those are things like travel. But then offsetting that are, as I said, continued focus on permanent cost out. So, those are some of the factors that weigh in as we look to expenses next year.

Okay. And then last one just on the investment side. Can you talk about just your appetite to do transactions and what the pipeline or activity levels look like right now?

Sure. Let’s – John, you can take that?

Thanks, Brett. 2021 was actually a very big year for our acquisitions. So it was the most that we spent in any single year since growing the organization together. So, we are focused on you know the performance and success of what we did in 2021, and we’ll remain opportunistic both around value and fit across the full piece in 2022. As we said in the prepared remarks, we – we’ve built a fully diversified by geography, sector and service line model. But there are still significantly fragmented markets out there both in the Brokerage and in recurring revenue lines. So, I won’t you know state any specific areas at this time, because as I say, it’s based on value and opportunity, but we are you know ready to execute at the right time on the right assets.

And just I want to add that, Tony to John’s comments here. So, you know 2021 was a year where I think all the peer group talked about lofty valuations and the difficulty to finding high-quality terms. Greystone deal is emblematic and the way we go around M&A. So, that was a deal that was specific to a vertical we were very interested in and have been interested for a long time. We’re able, because of our platform, what to offer. And what Greystone was looking for in a partner, we’re able to get a deal done at a highly accretive value. It will add instant value to our platform and synergy to our multifamily transaction professionals. So, we always have to look out for great deals like that. We’re very careful around valuation and our ability to integrate. I think that deal is emblematic that we’re dealt in a marketplace where opportunities exist, and we’re going to pursue them as John mentioned there.

Great. Thanks for the help.

Thanks, Tony.

Thank you. [Operator instructions] Your next question from the line of Stephen Sheldon with William Blair. Please go ahead.

Hi. This is Patrick McIlwee on for Stephen. Just a couple of quick ones. So, first, could you talk about how you’re thinking about the integration of Greystone and how you plan to incentivize your – your brokers to work closely with that team and those officers? Thanks.

Yeah, I’m going to let John take that, but will just make a quick comment on that front, which is the Greystone acquisition stands on its own, stands on its own very, very powerfully. If we never did a single deal between our investment property professional and the Greystone platform now, of course, we’re highly focused on that, but that is snow on the mountain. But John, I’ll let you talk a little bit about how we’re going to handle the integration and what that might look like.

Yes, the joint venture doesn’t actually come with a need to build a cost platform and then, as Brett says, revenues off it. But what we are seeing already in the very early days of our work with this great company is that, the offering to the market taken by our teams jointly is proving extremely attractive, and we are taking market share at this point. The offering that the acquisition provides to our existing multifamily business, particularly in the Capital Markets area, it strengthens our ability to penetrate the Capital Markets’ stack, both equity and debt. And as we add that into the capabilities and knowledge we get from the Pinnacle acquisition now nearly three years ago, which makes us the largest player in the full service multifamily market, gives us a pretty powerful offering to clients. And as I said, the motivation is actually more of what we’re all doing in taking market share, and we’ve got a very aggressive set of colleagues who are bent on delivering the best they can in those markets. And we are seeing it, as I say, we are seeing it now.

And just, Patrick on that, just to underscore what John said. So specifically, our investment property professionals in multifamily are clinical folks. They needed and wanted an answer that we were able to provide them in this acquisition. So we don’t need to provide incentives for people who do business together. They were crying for it. And this makes as John well said, this gives them a rounded toolkit which they can use to service their clients to retain them as valuable clients and do more business with them.

Got it. That’s really helpful. Thank you. And then another one quickly. So, on the PM/FM side of things, it’s my understanding that an increase in transactional activity, so asset sales kind of create an opportunity for contract wins. And I wanted to ask if you can talk a little bit about how that transactional activity trending off has impacted your ability to win clients in that space?

Again, I’ll let John get into the detail here, but I would think about it first this way, which is every time we transact with a new client is an opportunity for us to cross-sell into that client additional value-add services. And there’s no place for that. You see that more prevalent than in our Leasing and Brokerage business, where our folks are out there working with a customer. That customer tells them that in addition to this large lease they’re doing in Dallas, they’re looking at an outsourced requirement for the US. They bring in our outsourced professionals. We’re able to pitch that business. But John can speak very specifically to how increased transaction activity gives us more visibility in our clients.

There’s a lot of facets to it, but all positive in all tailwinds for an organization like Cushman & Wakefield. As a full-service business, we have no interruption in our engagement with the clients. They seek all the services around the asset. So, that’s been part of our strategy of build-out. But as I think about the Capital Markets’ volumes rising and therefore more deals in the market. I point to the fact that actually during COVID, during the pandemic, there was actually quite a low level of churn in the management of buildings and the management of facilities contracts, et cetera, that there was quite low level versus – historic levels of renewals and like. And so, it was a very robust period for us, and taking market share on top of that added to our overall volume and our growth. Coming out of the pandemic and looking at the Capital Markets trading, as Brett says, every deal is an opportunity for us to either sell more to an existing client or get a new relationship with a new client. I’d point again to the multifamily stack that we – full-service stack we built out because there, we can now go to an equity client or a buyer of a multifamily asset, provide debt servicing to that client, refinance the asset. We can manage the asset. We can reposition the asset. And that’s something that is part of our long-term strategy of building out in those largest and fastest-growing sectors. Finally, one of the trailing growth areas in the return to the office, of course, is going to be project management because, ultimately, whether you believe offices gets back to its full amount of volume or not doesn’t really matter to how we drive revenue, because it’s the journey and the churn to get to whichever portfolio any occupier needs to get to. And we’re already seeing quite a lot of CapEx going into office space certainly more than 12 months and 24 months ago as occupiers seek to reposition the office as somewhere attractive and certainly more attractive than being at home. So there’s quite a lot of tailwind factors out there that are driving volume across the full sector – sorry, a full-service model.

Understood. Thank you all for the color, and congrats on the strong end of the year.

Thank you.

Thank you. [Operator instructions] We have a next question from the line of Richard Hill with Morgan Stanley. Please go ahead.

Hi, everyone. Congratulations on the great quarter and year. It’s Jose Herrera on for Rich. Just a quick question regarding commercial real estate fundamentals for ‘22. You guys gave some good insight into that, but just curious on tailwind risk for the market. What do you think could drive the guide for the commercial real estate market down and regarding any risks and then potentially anything to the high end that could surprise? Thank you.

Yeah. So, we have Kevin Thorpe on the line, our Chief Economist, who can talk to the question of what macro could be out there that could depress the market, which I think is actually very low risk at the moment. And also I think, perhaps, more importantly, could drive performance above estimated levels currently. So, Kevin, do you want to take a shot at that?

Yeah, sure. Certainly. So, of course, there’s you know there’s geopolitical risk that’s forming with Russia, Ukraine as that relates to oil. I would say just in my view, it’s really too soon to say precisely how that conflict will impact the property sector. There’s actually a couple of points I’d make on that. So, I think it’s important, just speaking to that downside risk to no commercial real estate is not the stock market, right. The stock market is subject to these wild daily swings, real estate is not. Real estate is more grounded in local economic fundamentals and generally has a longer investment horizon, right, with valuation supported by long-term leases. We know that interest rates remain very low. And it’s actually possible that this conflict could drive interest rates even lower, making spreads even more attractive, could actually drive demand for core real estate up. There’s you know the risk of elevated energy prices. Again, that does in some way link to the conflict. Certainly, European countries are more exposed to some of the economic ties with Russia. We’ll have to see kind of where – you know what happens with oil and gas and other you know raw materials and see how that feeds through to inflation. But as I believe it was Neil or John had pointed out, we all know commercial real estate does perform well during periods of elevated inflationary environment. It is a hedge to a degree on inflation. And I feel good about the fundamentals. I think what’s really important is to focus on the secular trends and the momentum kind of that’s been building across the commercial real estate sector in areas that are resilient in some ways to the – whether it’s interest rate movements, inflation, geopolitical events. And I can point to a couple of things. The industrial sector, which we talked about, I mean, e-commerce is gaining share as people climb up the online learning curve that’s clearly fueling demand for warehouse space and last mile. The multifamily sector, very much a growth area. People need a place to live, regardless of geopolitical inflation, interest rate movements. Demographics, still very favorable, fueling demand there. Excess savings, this has sort of been glossed over in recent weeks. But excess savings, this is savings on top of savings that really indicating very strong consumer demand, particularly for experiential retail concepts. And finally, the pandemic, I mean, perhaps we’re officially – that’s officially fading in the rearview mirror, boosting the return to office, right. So, there’s always downside scenarios. There always - you know it can create dark – really dark scenarios, but in my view, the commercial real estate sector is positioned really well, I think to handle a lot of these challenges and headwinds. Hopefully, that helps.

Yeah, definitely –

Great answer, Kevin. Thank you.

Thank you. Mr. Hill, do you have any further questions?

No, that’s all. Thank you.

Thank you. Ladies and gentlemen, we have reached the end of the question-and-answer session. And I’d like to turn the call back to Brett White for closing remarks. Over to you, sir.

Great. Thanks – thanks, everybody. We appreciate your support. Great year in 2021. Looking forward into a great year this year. We’ll talk to you in another quarter. Thanks.

Thank you. Ladies and gentlemen, this concludes today’s conference. You may disconnect your lines at this time. Thank you for your participation.