Financial Results Good For Real Estate Industry by Lesley Hensell The market may be wild, and the Fed may be freaking out, but there are good financial results afoot for the real estate industry. Two prime examples of recent improved financial performance were reported by CB Richard Ellis and Insignia Financial Group. In its first quarter, CB Richard Ellis (NYSE: CBG) had consolidated EBITDA of $19.8 million, an impressive 31 percent gain over same period last year. Consolidated revenue was $260.9 million, a 12 percent gain over same period last year. “We are very pleased with our first quarter performance,” said CEO Ray Wirta. “We exceeded our revenue and EBITDA expectations and, most importantly, demonstrated the results of our cost savings efforts. “First quarter operating, administrative and other expenses were significantly below comparable fourth quarter expenses,” Wirta added. “After eliminating the impact of year-end bonuses and revenue-related expenses, total operating, administrative and other expenses were actually down $5.6 million in the first quarter of 2000, compared to fourth quarter 1999.” Unfortunately, all of this good news did not add up to a profit, nor did it product the bang needed on The Street. The company’s earnings per share for the quarter were zero. On the bright side, however, this exceeded the expectations of analysts. First Call had predicted a loss of 7 cents per share, and last year the company lost 8 cents per share in the first quarter. Shares gained a bit on the news at just above $11. This is deep into the company’s 52-week range of just above $9 to just below $24. CB’s shares have experienced a steady decline since July of last year. Over at Insignia Financial Group, Inc. (NYSE: IFS), the stock price still lags despite striking improvements in first-quarter performance. The real estate and financial services company reported EBIDTA up 250 percent, to 49 cents for the first quarter of 2000. Net EBITDA showed a similar increase of 226 percent, excluding Internet investment losses. “Our traditional real estate services operations are continuing to perform well,” said Andrew Farkas, chairman CEO. “Despite increased volatility in the capital markets and rising interest rates, we were able to post results in the first quarter that were above expectations, and our business results remain on target for the full year. “The first quarter has historically been Insignia's weakest period, particularly with the normal winter slowdown in single-family home sales and the need for the commercial services business to replenish its transaction pipeline following the typical flurry of year-end transaction closings,” Farkas added. “That has not been the case this year.” With a reasonable price-to-earnings ratio of 23, Insignia shares hit $11 ¼ this week, strongly in the center of the company’s 52-week range of $7 ¼ to near $17. The company made an astonishing swing earlier this year, hitting its year-long high in February – just weeks after hitting a 52-week low in January, and then settling in the middle. The wide swing was, of course, related to Insignia’s announcement of significant Internet-related investments. Of course, only God knows what will happen to tech-oriented and real estate shares this week, as the Fed meets to consider interest rate hikes. May could be a watershed month for investors in both sectors. High tech stocks tend to flourish as rates go up, since investors move away from capital-intensive industries where boosted rates push profits down through increased debt service payments. On the other hand, real estate stocks are punished by increasing interest rates, for the obvious reason that these issues tend to be more highly leveraged than average equity investments. So what will happen to companies like CB and Insignia, both of which are pushing to publicize their burgeoning Internet strategies? Could be interesting to see the forces of the markets push and pull this week. | 
