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CBRE in Talks for $3 Billion Credit Facility: Should You Buy?

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Real estate services firm, CBRE Group Inc. (CBG - Free Report) revealed that it is in talks with lenders regarding a possible amendment of its current credit agreement. If realized, the amendment would help increase the company’s revolving credit facility to a maximum of $2.5 billion as well as refinance its present Tranche A term loan with a new $500 million Tranche A term loan.

We believe that for CBRE Group, the acceptance of this $3 billion credit facility proposal  would signify a greater liquidity to pursue its growth needs.

The company exited third-quarter 2014 with cash and cash equivalents of $615.4 million, up from $381.9 million at the end of second-quarter 2014. At the end of the third quarter, the balance under its existing revolving credit facility amounted to $149.2 million while that on the existing Tranche A term loan was $443.7 million.

In late October, CBRE Group reported third-quarter 2014 adjusted earnings of 40 cents per share, 4 cents ahead of the Zacks Consensus Estimate and up 33.3% year over year. Results were driven by solid growth in revenues across all global regions.

Earlier this month, CBRE announced that it has been chosen for providing real estate services to Southern California’s MemorialCare Health System. A multi-year contract has been sketched and under it, services like strategic real estate planning, property and transaction management, lease administration as well as real estate accounting expertise would be offered by CBRE Healthcare Group for MemorialCare’s 85-location outpatient portfolio.

Going forward, we expect CBRE Group to benefit from improving leasing, property sales and outsourcing business. Moreover, with market conditions continuing to improve, opportunistic acquisitions would serve as growth drivers, supplementing the company’s organic growth. Strategic investments in people and platform stand good for the long-term perspective. Further, we believe an enhanced financial flexibility would add to this process of growth.

CBRE Group currently carries a Zacks Rank #2 (Buy). Investors interested in the real estate industry may also consider stocks like Jones Lang LaSalle Inc. (JLL - Free Report) , Kennedy-Wilson Holdings, Inc. (KW - Free Report) and Reis, Inc. (REIS - Free Report) . All these stocks carry the same rank as CBRE.



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