Ushering in good news for its shareholders, CBRE Group, Inc. CBG revealed that its debt ratings were raised to investment grade by Moody's Investors Service. Specifically, the company’s senior secured bank credit facility and senior unsecured ratings were upgraded to Baa3, with a stable outlook.
CBRE’s conservative capital structure, solid financial policy and an uptick in contractual and recurring revenue sources primarily drove this upgrade by Moody’s. Notably, Standard & Poor’s Rating Services had raised CBRE’s corporate rating to investment grade (BBB-) in Dec 2014.
In our opinion, the rating upgrade comes as a positive for CBRE, enhancing its creditworthiness in the market, and is likely to boost investors’ confidence in the stock. Specifically, rating upgrade gives companies an opportunity to enjoy reduced costs on its debts and better access to capital.
Going forward, we believe that CBRE would benefit from improving leasing, property sales and outsourcing business. Moreover, investments in people and platform augur well for the company and would help it enhance market share.
As part of these efforts, the company acquired a Dallas, TX-based commercial real estate firm United Commercial Realty (UCR) in Jan 2014. This is the second regional retail real estate firm that CBRE has purchased after the Fameco acquisition in Sep 2013. As market conditions continue to improve, we believe that such opportunistic acquisitions would serve as growth drivers, supplementing the company’s organic growth.
CBRE currently carries a Zacks Rank #3 (Hold). Investors interested in the Real Estate Operations may consider stocks like Kennedy-Wilson Holdings, Inc. KW, Landmark Infrastructure Partners LP LMRK and Reis, Inc. REIS. All these stocks hold a Zacks Rank #2 (Buy).
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