Welcome to the Second Quarter Year End Investors Conference Call. Today's call is being recorded. Legal Council requires us to advise that the discussion scheduled to take place today may contain forward looking statements that involve known and unknown risks and uncertainties. Actual results may be materially different from any future results, performance or achievements contemplated in the forward looking statements. Additional information concerning factors that could cause actual results to materially differ from those in the forward looking statements is contained in the company's annual information form as filed with the Canadian securities administrators and in the company's annual report on Form 40 F as filed with the US Securities And Exchange Commission.
As a reminder, today's call is being recorded. Today and introductions, I would like to turn the call over to the chairman and chief executive officer, Mr. Jay Hennick. Please go ahead, sir.
Thank you, operator. Good morning, everyone, and thanks for joining us for our second quarter conference call. As mentioned, I'm Jay Hennick, Chairman and Chief Executive Officer. And with me is John Frederick's and Chief Financial Officer. This morning's conference call is being webcast and is available in the Investor Relations section of our website.
A presentation slide deck is also available to accompany today's call. Earlier today, Colliers reported strong financial results for the second quarter, a combination of solid internal growth and acquisitions. Revenues were up 14%, adjusted EBITDA up 15% and adjusted earnings per share increased 23% over the prior year. Year to date, revenues were up 16%, adjusted EBITDA up 15% and adjusted earnings per share, also up 23% over the comparable period. During the quarter, we completed 3 acquisitions all in North America.
We added company owned operations in Pittsburgh and Winnipeg, and we acquired the dominant market player in commercial real estate in the Intermountain Region of Utah, and then we rebranded it as Colliers. This strategy of adding significant market players particularly in new geographic regions where we can partner with the leadership teams has been a tremendous growth opportunity for Colliers. Not only does it help us expand and diversify our growing platform, it brings a host of high quality professionals with important client relationships to our global business. Just real estate, 1 of the largest investment management firms dedicated to education, healthcare, and storage. I'll have more to say about Harrison Street and our new investment management platform once John has completed his financial review.
After the quarter end, we also added 1 of Denmark's leading capital market specialists and merged it our existing full service operations, establishing Colliers International as the undisputed leader in commercial real estate in Denmark. Fortifying and expanding our operations by integrating top tier leaders in different specialties has been another growth strategy that has paid off handsomely for our company. Earlier this year, we did the same thing in Spain, doubling the size of our operations there, by merging with a significant local market player and bringing together a group of professionals that is second to none. Just after quarter end, we also announced that we have streamlined our business in Finland. We sold the residential property management business that we acquired as part of a larger business earlier this year.
While we liked the business and obviously understood it completely, we chose to focus on our core of providing property management and brokerage services to owners and occupiers of commercial real estate. So in addition to generating healthy internal growth for the first half of the year, we also added about 225,000,000 net dollars in annualized revenues through acquisition, and we still have the balance of the year left to go. Based on our results to date and our business pipelines and the acquisitions we've already completed, we're optimistic that 2018 will be another rec gear for call years. Now, let me turn things over to John for his financial highlights. I'll then return to provide an overview of our new investment management platform, and then we'll open things up for questions.
John? Thank you, Jay. As announced earlier today and highlighted by Jayne's opening remarks, Colliers International Report strong solid financial results for our second quarter of 2018, with solid contributions from our operations across our global platform. My comments will be tailored to address our Q2 regional results, capital deployment, as well as our financial capacity and outlook for 2018. And will follow the flow of the slides posted on our website for the company of this call.
Please note that my comments may reference non GAAP measures. Such as adjusted EBITDA and adjusted EPS, both of which are 1 in our press release issued today. As well as the accompanying slide deck and are composed primarily of non cash charges that we view as largely unrelated to our operating results for the quarter. References to revenue growth, including internal growth, are calculated based on local currency Finally, both our second quarter 2018 and comparative second quarter 2017 results reflect the adoption. Of the new revenue recognition standards under US GAAP.
Our 2nd quarter revenues of 667,000,000 were up 11% over the prior year and comprised of $186,000,000 in sales brokerage, up 5%. While lease brokerage generated revenues of $222,000,000, up 21%, exhibiting strong year over year growth across all regions. Revenues from outsourcing and advisory services totaled $260,000,000, up 8%, led by solid growth in property management, and our appraisal and consulting services. The more recurring revenue is generated by our Outsourcing And Advisory Services segment represented 39% of our overall revenues in the quarter, comparable to Q2 of last year. Consolidated adjusted EBITDA was $69,400,000 compared to $60,300,000 with our margin at 10.4% versus 10.3%
in the prior
17 as both internal growth and acquisitions contributed favorably to a strong balanced global platform. Quarterly revenues in the Americas totaled $389,000,000, up 11% with 7% internal growth in the balance from acquisitions. Lease brokerage revenue growth of 22 percent led the way and were driven by strong internal growth, particularly in the US West region and in Canada. Meanwhile, sales brokerage revenues were up a more modest 3% in the quarter. Consourcing and advisory revenues were up 6% led by robust growth across all outsourcing and and advisory service lines in our Canadian operations.
Adjusted EBITDA came in at $36,200,000 versus $32,900,000 last year and a 9.3% margin down 20 basis points compared to last year. Turning to EMEA, revenues of $150,000,000 in the quarter increased 15%. With 1% internal growth, which was impacted by timing of transactions and reduced activity in our workplace solutions, services and trans. Sales brokerage revenues were up 34% over the last year, led by strong internal growth in Germany, Netherlands and France. Lease brokerage revenues were up 18% with strong internal growth led by our operations in the UK, Denmark, Poland, and Russia.
Meanwhile, revenues from Outsourcing and Advisory services increased 5% with contributions from acquisition related growth. Offset by a decline in our Workplace Solutions Services revenues in France as we reorient our operations to more sizable and profitable project activities going forward. Adjusted EBITDA for the region was $21,500,000 compared to $17,500,000 last year at a 14.3% margin, down slightly compared to last year. And finally, in our Asia Pacific region, revenues came in at 129,000,000 up 6% with 2% internal growth and the balance from acquisitions. Lease Broader Derivatives were up 17% led by strong internal growth in China, Hong Kong, Australia, and New Zealand, while sales brokerage revenues contracted 10%.
With lower activity in Australia and Hong Kong, some of which is timing related and opposite the strong Q2 of last year. Revenues generated by our Outsourcing Advisory Services were up 15%, both by strong growth in consulting and appraisal revenues in Australia, China, and Hong Kong, as well as strong gains in property management in Singapore and India, and a robust increase in project management revenues in Australia and China with acquisitions contributing to the latter. Adjusted EBITDA was 15,400,000, up from $12,700,000 last year, with our margin up 120 basis points at 11.9% versus 10.7% as we continue to build additional scale in Asia. Moving to our capital deployment and balance sheet. In our second quarter, 2018, capital expenditures totaled $7,800,000, down from $13,800,000 last year, normalizing from an elevated spend in q 2 of last year.
We do expect a higher level of spend in the back half of the year, such that for the full year 2018, we expect to invest about $40,000,000 in total CapEx across our operations. Turning to acquisitions, we invested $19,000,000 in acquisition activities during the quarter compared to $28,000,000 in Q2 of last year. Of course, the big news on the investment fund was the Harrison Street transaction, which we announced in Q2, to close an early Q3, along with another acquisition in Denmark creating a market leading business for Colliers and this important Nordic Market. As we previously announced in Q2, we fortitized our debt capital structure by increasing our revolving credit facility to 1,000,000,000 more favorable pricing and facility with a €210,000,000 issue of 10 year senior notes at a very attractive long term fixed interest rate of two point 3%, providing a natural foreign exchange hedge on our euro denominated cash flows. Our net debt position stood at $316,000,000 at the end of the quarter compared to $304,000,000 at the end of Q2 of last year, with our leverage ratio expressed a net debt to adjusted EBITDA at one point two times compared to one point three times at the end of the prior year quarter.
Pro form a for Harrison Street and Denmark acquisitions completed after quarter end, our financial leverage stood at two point four times. Still well within our levered covenants of 3.5 times. In terms of our financial capacity, with cash on hand and committed availability under our revolver. We had $820,000,000 of liquidity at quarter end and adjusted for the investment in Harrison Street completed after quarter end $370,000,000 of liquidity, a level sufficient up fund operations and other capital investments, including acquisitions under our growth strategy. Looking across our global operations, our pipelines in most markets can seem to reflect solid commercial real estate activity, comparing favorably to levels at this time last year, with generally stable economic conditions and modest growth accompanied by low interest rates based on historical parameters and a supportive lending environment The key elements remain in place to support steady activity in sales, leasing and other commercial real estate services.
For the balance of 2018. As a result, our 2018 outlook for Collier's existing business, excluding our new investment management platform, has been adjusted for acquisitions completed to date, but otherwise remains largely unchanged, including our expectations for low to mid single digit percentage internal growth in local currency revenues, plus mid single digit percentage growth in local currency revenues from acquisitions. And an adjusted EBITDA margin improvement of 30 to 40 basis points compared to 2017. Separately, for the balance of 20.18, we expect Harrison Street to generate revenues in the $50,000,000 to $55,000,000 range adjusted EBITDA margins of 35 to 40 percent, a noncontrolling interest share of earnings of 25%, and significant intangible asset amortization, which will be expensed under US GAAP. On a consolidated basis, we estimated tax rate in the 30% to 32% range and the mid teen to 20% growth in full year adjusted EPS compared to 2017, inclusive of the impact from our investment in Harrison Street.
That concludes my prepared remarks. I would now like to turn our call back over to Jay. Jay? Thank you, John. As mentioned, we completed now completed our transformational investment in Harrison Street, and we did that at the beginning of this quarter.
The acquisition establishes Colliers as one of the top players in Global Real Estate Investment Management provides us with an important new platform for growth. And it facilitates the inter the integration of our existing investment management operations in Europe. Harrison Street is a pioneer in demographic based investing, focused exclusively in education, health care, and storage. These are massive investable markets that won't change with the changes in the economy. Perhaps most importantly, though, Harrison Street has a proven track record of performance and best in class returns over a long period of time.
Today, they manage about $15,600,000,000 in assets under management, and it does that for 245 of the world's most respected investors. Colliers acquired 75 percent of Harrison Street with the balance of the equity retained by management. Our entrepreneurial culture and performance and, performance driven business model align perfectly with the team at Harrison Street who will continue to operate the business as our partners. Beginning with the third quarter, we will update our reporting to separately disclose our new investment management platform. It will initially comprise the results of Harrison Street as well as our existing European Investment Management business.
Together, the segment will have annual recurring revenues of between 115 and a $130,000,000, the EBITDA margins of between 35% 40% and a total of more than $20,000,000 of ask S under management. During the first full year, we expect this division to contribute about 15% of our overall EBITDA. Industry dynamics show strong potential for the investment management sector, with almost $2,000,000,000,000 invested in real date in 2017, and more than 80 percent of investors polled expecting to maintain or increase their investment allocations during 2018 and beyond. The opportunity to leverage our combined track records, enterprise and cultures, and focus on best in class results will accelerate our growth both internally and through acquisition. And by capitalizing on Colliers' global brand, platform of operations in 69 countries, significant financial resources and deep client relationships among many others, we expect to accelerate our success even further.
The addition of Harrison Street fits perfectly with our strategy of building calliers into the best advisory business in our industry. With a focus on enterprising differentiated professional services delivered to clients wherever they choose to do business. While size and scale is always important, then we surely have that. Our strategic priority continues to be creating a professional services leader that attracts the best clients and the very best real estate professionals to call yours without diluting execution by introducing a variety of non core services. With that, I'd like to open things up for questions.
Operator, please open, open things up if you would.
Certainly. At this time, I would like to remind everyone Your first question comes from the line of Frederick Bastian of Raymond James. Your line is open.
Hey, good morning.
Hey, go ahead.
Guys, you mentioned some particularly strong momentum in leasing brokerage across many of your regions, but a bit more modest, modest growth on the sales side. Are you expecting a continuing of these trends into the 2nd half?
I think our pipelines reflect strong activity. And, certainly on the leasing side, as well as, sales. And I would say that, there were, you know, some timing related, issues since they're often are related to sales transactions, which impacted Q2, but we expect to realize those in Q3 and Q4. But, across the board, I would say in both areas, we see strong activity and pipelines.
Thanks for that. You also mentioned, the West Coast of the U. S. Seeing, very strong momentum on the leasing side there. Is this a result of, some of the acquisition, the transactions you made and and and those investments finally bearing fruit, or is it more is there more to that?
I wouldn't say there's a whole lot more to it other than what you what you said. And, you'll recall a year ago, We did acquire the, the Northern California Nevada Colliers affiliate. We've integrated that into our operation. And, has created a much more robust, business for us in the US West Coast. So that's, that's that's important.
As well, you know, the US, west is certainly, a very robust economy, including, you know, the tech sector and other, businesses that continue to grow. So I think by being situated there, we're seeing some of that and, it's it's impacted favorably our results in the US.
Okay, great. Thanks for that color.
Last one for me. Just wondering if
you have any views on the Cushman and Wake field business and the IPO it's pursuing?
We wish them tremendous luck and hope that their offering is very successful, Fred.
Your next question comes from the line of Steven MacLeod of BMO Capital Markets. Your line is open.
Thank you. Good morning, guys.
Good morning.
Hey.
Just on the EMEA region, I just wanted to ask about the margin here. I would have expected maybe margins to be a bit stronger with lower outsourcing and advisory revenues. So I'm just curious what you're seeing on the margin side there. And, And then I guess in terms of activity, what you're seeing by, by major region in in in Europe?
Well, you're, you're right. You know, the, the margin has been impacted by ongoing investments, in, in, in people. In that business as we have spoken out before. It's one of our key areas, for developing our business across Europe, in major markets in particular. And, we've continued to make those investments.
So though the the, the revenue related to those investments, lags the investment timing. So we expect that later in the year, certainly into 2019, those investments and people to become, more productive and generate returns. So that's impacted, our results there. I did mention our, our Workplace Solutions business in France, which, we are reorganizing, and reorienting towards, you know, larger, more profitable contracts. So we're, we're suffering a little bit from the impact of, of that, which absolutely is the, the best thing to do for the long term health of that business, and we're confident we're going to be able to achieve our objectives later in the year by and in Q2 and possibly in Q3, it's negatively impacted the overall margin.
Right. And what are some of the initiatives you're undertaking and the workplace solutions with Franches, can you just elaborate on what's actually happening there?
It's really, really trying to better, focus again on larger projects, projects that generally are more profitable as opposed to many, many projects, which tend to be somewhat inefficient. And we're kind of reevaluating the way we deliver our services in that market, including, you know, the headcount, the personnel that have in place. A lot of it is very good, but there needs to be some fine tuning done. That's what we're doing now.
Right. Okay. Then just turning to Harrison, which obviously is a very, transformative acquisition for you. Can you just talk a little bit about, give some color around the EBITDA margin for 2018 of roughly 35% to 40% as well as the revenue run rate Can you just talk a little bit about how you expect that to evolve when we get into 2019 and beyond? What are your expectations for ongoing AUM growth And how do you expect the EBITDA margin to evolve over the next couple of years?
Well, look, we have you know, we have bought a, a, an exceptionally well run business with a team that has a demonstrated track record of success in investing in these important areas, defensive, categories of, of real estate, really, And, we expect them to continue to flourish, certainly within callers and leverage both, what they bring to the table in terms of their relationships and track record and what Colliers offer. So, we expect the business to grow significantly. Don't really want to put a fine point on what what that growth looks like, but needless to say, there success and ongoing fundraising and deployment and investment, is, is continuing. And we expect that to, to be very significant going forward. So let me add, let me add a couple of things to that.
So first of all, they have a commanding position in North America. Principally the US, not much in Canada. And they have a nice smaller business in the UK. And the rest of Europe. But the appetite for what Harrison Street does in, in its, chosen, areas of focus is massive.
And so they're seeing lots of traction. Both on the deal opportunity side, as well as the fundraising side in Europe, which is, which we always saw as a big opportunity for us And, we're currently investigating, integrating our European operations in with Harrison Street because obviously, although they have a much, our existing operations have a much wider net in terms of the various different categories, They have in, in, in, deep relationships with, with those that wish to allocate capital particularly in Harrison Street's areas of focus. So you're going to have to give us a little bit of time to integrate this thing, well. The teams are hard at work, and trying to capitalize on some early opportunities we saw in bringing the, the 2 organizations together. But suffice it to say we're excited about the quality of the business, the ability for it to, scale.
It it was one of the, top I forget the exact number, but in the top 20 fundraisers, last year, globally, so they've got lots of great support from their investor universe and what they have to do is they have to find the high quality transactions that, that the investors are looking for. So I think we need a little bit more time to integrate this thing and to get our mitts around the, the puts and takes But early, early returns are, are very positive.
Okay. That's, that's really helpful. Thank you guys.
Your next question comes from the line of Stephen Sheldon of William Blair. Your line is open.
Hi, good morning. First on Harrison Street, I know you're keeping it somewhat separate operationally, but just curious how trends there have been since the acquisition announcement in terms of retaining both key talent and AUM And then secondarily, any thoughts on whether you want to continue expanding more into the I'm business and and whether that'll be an area of increased investment for you?
So so since we announced the transaction, the AUM has gone up almost a $1,000,000,000. So I think that's proved positive that that's been the positive, that investors have been very positively predisposed we are very excited about the existing management team who, under our partnership philosophy be among other things. We'll have a much deeper vested interest in the business and the long term success of the business than than they did as a private company. So we're excited about that. The phones have been ringing at Harrison Street from others in the industry that would like to come over and join, what what we're what we're building there.
So I believe we've got a, we've got the right mix of, both, history and forward momentum to, to make a difference long term. In terms of acquisitions, we we we truly see this as as a, the next, road engine for, for Colliers. Not only does Harrison Street itself have very interesting opportunities to grow and scale its business that it wasn't able to do as a private company. We also see, other very differentiated, potential opportunities for us, and know, I'd underlined focused and differentiated because that has been in, in many ways, the key, to Harrison Street's success. But, you know, we, we're, we're gonna follow a one step at a time approach as we always do.
We're gonna dedicate our efforts in the, in the early, months or, to, to integrating this thing well. And to get the, the flow between the Harrison Street leadership team and our leadership team working well. And the leverage points between Colliers globally, and Harrison Street working well. So, you know, it's it's it's it's it's e it's it's it's not easy, but it's somewhat easy to make an acquisition. It's a hell of a lot harder to integrate it well.
And, it just does take a lot of time and effort.
Got it. Very helpful. And I believe one
of the potential benefits with Harrison Street
is the opportunity to build better relationships and maybe attracts more brokers within the education, healthcare, and storage sector here in North America. I realized, you know, it's still very early here with the closing earlier this month, but have you seen any early indications that may be support the view that could happen over time?
Yeah. I mean, you know, interesting happenstance is that we had, 2 very strong practice groups, one in, one in seniors housing and, and one in student housing. So both of those teams have engaged already with Harrison Street. There's been others in the industry that that that have, and that have had a history with Harrison Street, in sourcing acquisitions or selling assets, that, that have, approached us to join these practice groups. But again, again, it'll take time to execute on those things.
Got it. And then I guess a couple of modeling questions. What metrics are you planning to provide for the I'm segment? And specifically will you give quarterly kind of AUM detail. And then also any detail on the revenue and adjusted EBITDA contribution from the European time business, just so we know how much to, you know, essentially reclassify out of the EMEA segment?
Yes. I mean, we're, we're still, determining what metrics we're going to be, providing, but certainly AOM would be an important metric. To go along with the usual financial, revenue profitability metrics. So that absolutely will be out there. And, we're going to, select, you know, those metrics that are meaningful, and we think are going to provide investors with good information to track the, ongoing progress of the business.
So that's, that's, that's the, I guess, the main focus, for the time being.
And then, yeah, any of the for the European I'm business, are you able to
It's relatively small. At this point. So, you know, we will, we will provide, all the comparatives and restate the comparatives to ensure that, you can, you you can track comparability back on a standalone basis for the last, certainly the last year, whether or not we go back, in terms of more quarters, but The bottom line is it is a very, very small part, of the business today and, in that material. We'll provide that information.
Great. I appreciate the color.
Your next question comes from the line of Michael Smith of Capital Markets.
So on the, on the, again, on Harrison Street, so the you've added $1,000,000,000 of AUM since you announced the deal. Is it fair to assume that was in the open ended funds?
No. It's not fair to assume that. It's probably And I don't know the exact amount, but it's generally fifty-fifty. Yeah, I would assume fifty-fifty for your for your purposes.
Okay. And Jay, you mentioned that, you know, one of the opportunities. And, again, I realize it's early stages, of expanding that business is, through focused, I guess, real estate. So is that does that mean, like, niche real estate kind of like, you know, the medical office, that kind of thing, student housing would be that type of thing as opposed to, let's say, office retail, industrial, that kind of thing.
Well, I don't want to foreclose the others because there's a lot of leverage possibilities with those others. But, you know, medical office, student housing, seniors housing, affordable housing, even multi beds are massive, massive, investable, categories. And so, the, the reason I've raised it is that we don't wanna be all things to all people. We wanna be very focused in specific areas. Where not only can we buy assets well, but we can also, gain expertise in managing those assets that can bring enhanced yield to our clients, whether it's through sustainability, whether it's through, leveraging, the combined buying power, in, in a particular area.
And as you know, we have experience in doing that in, residential property management among other things. So we're very focused on, how do we enhance the existing what we hope is a good yield on, say, student housing, with additional leverage points that we bring because of our scale size or expertise.
Okay. And for some of those, let's say, newer areas that you may go into in the future, would you envision potentially doing tuck under acquisitions, in that platform?
Yes, for sure. I mean, that's for sure. A, an avenue of growth. And, you know, it, for us, we can, we can scale that a lot faster using the, for that matter.
Okay. And, are you planning on co branding Harrison Street?
You know, it's it's been discussed. I think we're gonna get through, fiscal 'eighteen. And, and and visited early in 'nineteen. There's, there's a lots of, a lot of puts and takes around that. But, one of the benefits of utilizing Colliers is it is an institutionally known brand all around the world.
And it may help, by by co branding it, and, and again, I'm probably going on too long about this, but it may help, you know, modestly in the US, but it will help major league in Europe, in Asia, in Australia, New Zealand, because the brand is so powerful there. So we'll have to balance all of those things.
Sure. That makes sense. And just on your leverage, so, you know, pro, you know, pro form a, you're at 2.4 times debt to EBITDA. Could you, remind us where do you where do you think you'll end up at the end, let's say, by the end of 2019?
Yeah. You mean, of 2019?
Yeah. Yeah. I think I think last quarter, you last call, you mentioned you plan you had a plan for the next year or so to get that leverage down?
Yes, I mean, look, I mean, it it comes down to, a lot of it comes down to the acquisition pipeline. And know, with a with a with a modest tuck on your strategy, which would not include anything, significant, by the, by the end of 2019, we would expect to be debt deleveraged down about one times at the end of the year. So through that would include, you know, a lot of amount of tuck in our acquisition activity, consistent with, what we've done in the past, and then ongoing, cash, cash flow generation from a business. We would delever down about one times.
Okay. So down to about 1.4?
Yeah. At 20 and that's for the end of 2019, you asked. Right?
Yep. Yep. Okay. And, just lastly on Asia Pacific. So you had a nice bump in margins.
From to 11.9 from 10.7 even though your sales brokerage revenue went down. And I know you've made a bunch of investments there. In prior years. I'm wondering if you could just give us some color on that margin.
Yes. Look, I mean, the we've been going through some build in in Asia, which you're, probably aware of. We've talked about it in the past. Changed out, our, our executive team and, and, and that has, brought in a number of new people over the last several years. We have the Japan expansion as well.
So, you know, all of these things are coming together now and we're getting, you know, some additional scale in Asia, better productivity. And as a result, we're seeing some, margin improvement. That also included, in Asia Asia Pacific region, an uptick in our margin in New Zealand as well, which had underperformed in the prior quarter. So we benefited a little bit from that as well.
Your next question comes from the line of Mitch Germaine of JMP Securities. Your line is open.
Thanks for taking my question. Jay, I know you guys streamlines so many operations in Finland. And I'm curious, are there any other regions where you have a similar opportunity to do that?
You know, there's a little bit of work going on in France, as John talked about, but, but, you know, Finland was, was for us obvious and, you know, given our knowledge of residential property management, it really did hurt for us to sell a great business that generated great profitability. We did it at a very good price for us and reduced our overall cost of the Finland acquisition, but, it really helped refine our focus into the area that we operate. And, that was the principal reason. But, across the board, we have been very, disciplined around what we're into and what we're not into as as you know, and as we've discussed historically with you in the past, we believe we wanna be a high quality professional service firm that focuses on high end advisory work and, and, less on, you know, other services that may be recurring but, are really different businesses and, are sold differently, etcetera. So I guess in a long way, the answer to your question is, other than Finland and perhaps a bit in France, the answer is no.
Great. And then when you factor in outsourcing a 15% of EBITDA, I think you're around a third, a third, a third, a third in terms 3 major segments today. I I is that kind of a it seems like you obviously wanna make some maybe future investments in in investment management, but are are you somewhat comfortable with that kind of revised business mix, you know, going forward for the next couple of years?
We we like our business mix. But with Investment Management, it actually, it's an interesting it's an interesting one because you're you're talking about revenue breakdown. But if you look at the EBITDA breakdown, which is where the recurring revenue number really, really grows. You're talking about a, a much larger percentage of our business now being recurring in nature given the recurability of, and the size of the EBITDA of the, of the investment management platform.
Your next question comes from the line of Mark Riddick of Sidoti. Your line is open.
Hi, good morning.
Good morning.
So you covered a lot of things around Harrison Street when really appreciate the color and information on that. I wanted to shift over a little bit to just sort of get maybe a latest update or thoughts on some of business activity in the major markets, if you're seeing anything that's kind of shifted or changed, that's kind of caught your eye. And also some thoughts around, the progress of growth in 2nd tier markets as well.
Well, you know, I might, I might add 1 or 2 things. I mean, it is it's becoming clearer, I think, to us, that investments that that, investment sales is slowing relative to, obviously, leasing, as you can see, leasing was up significantly across the board. There's a lot of people, tuitions, corporations, REITs, etcetera, that are buying assets and holding them for a longer period. Than they have historically, which is bringing down the overall velocity of investment sales. And so it's, it's nice to be able to have a full service platform where you can provide a variety of different services to, to, to your clients.
So I would say that that would be the first thing I I I'm seeing people holding real estate longer and less, trading in better quality real estate than than has been historically. John, I don't know. I would just add you were asking about secondary markets and know, that's that continues to be a focus of ours. And I think we're, we're we're we're seeing, ongoing improvements in activity and what people characterize as secondary markets. And I think that's a natural outcome of the kind of economy that we're in.
You know, the the, the ongoing kind of slower growth, but growth oriented economy is I think bringing greater confidence to real estate investors. Obviously, some markets, probably have become overpriced. And naturally based on, you know, a strong economic backdrop, investors and, and other occupiers are at secondary markets as opportunities for additional investments. So we're seeing that activity and, not surprising. So we continue to focus on those markets.
They're very important to us. Obviously, the major markets are are critical to our growth. But, these important secondary markets, which themselves are, in some cases, being reinvented and and growing, are important areas for our, business? Yes. I just want, I just want to jump on what John said.
One of the things that we have done successfully, and because it's been a key part of our strategy, is to dominate in secondary markets. And I haven't done the math recently, but with Salt Lake City and Winnipeg and and, Denmark and Finland and, and now Spain markets that, some would consider to be by and large secondary markets. And we already dominated Detroit and Kansas City and and, you know, the list goes on. Colliers has methodically over the past number of years establish themselves as market leaders in every one of these secondary markets. I think at the expense of others who are focusing on other things.
And so that has always been a key component of our strategy. And as, investors are looking for real estate assets in secondary markets, when Colliers has a 60% market share in Ken in Salt Lake City or a or a 55% market share in Kansas City or a whatever market share in Denmark, we really have the the blocks covered. And if you want to do business, in those markets, Colliers is the place to be.
Excellent. One other follow-up. I wanted to go back to the comment you made about the pulled investors that, about 80% have been looking to, I guess, maintain or grow, spending in the remainder
of the year and beyond.
Wanted to get a sense of it, is it
fair to
then characterize that as representing and increase as a of real estate as a percentage of their assets that you're hearing from, and whether that represents an opportunity for greater exposure for those clients. Thank you.
Yeah. The the there's no question allocations are going up in real estate and, in all sectors. Whether it's direct investing or or directing, or investing indirectly through firms like Harrison Street.
Excellent. Thank you very much.
Thank you.
Your line is open.
Thank you. I just had a quick follow-up question. John, when you were talking about the 2018 existing business outlook, just wanted to confirm, do you expect margins to be up 20 to 30 basis points? Or I thought I heard 30 to 40 basis points.
20 to 30.
Okay.
Sorry. If if if I said 30 to 40, it's 20 to 30
on the existing business.
Yes. I mean, obviously, the Harrison Street acquisition will be incremental overall, but, just staying with the existing business 20 to 30 in terms of increase in EBITDA margin.
Right. Okay. And then just when you think about Harrison versus the European business, is it safe to assume that the European business is roughly $10,000,000 of incremental revenue at the at the midpoint?
I think that's that's probably okay.
Yeah. Okay.
We'll give we'll give you that. We'll give you the exact numbers next quarter, but, yeah, that's a little higher, maybe.
There are no further questions in the queue. I'll turn the call back over to the presenters.
Okay. Thank you very much, everyone, for joining us. Exciting times, lots going on, and we look forward to, another a strong quarter in Q3. So thanks for joining us. Have a good, good export.
Ladies and gentlemen, this concludes the quarterly investors conference call. Thank you for your participation, and have a nice day.