Colliers International Group Inc

TSX:CIGI

Earnings Call Transcript 2019-Q3

[Operator]

Welcome to the Colliers International Third Quarter Investors Conference Call. Today's call is being recorded.Legal counsel 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 U.S. Securities and Exchange Commission. As a reminder, today's call is being recorded. Today is Tuesday, October 29, 2019.And at this time for opening remarks and introductions, I would like to turn the call over to the Global Chief Executive Officer and Chairman, Mr. Jay Hennick. Please go ahead, sir.

[Jay Steward Hennick, Founder, Global Chairman & CEO]

Thank you, operator. Good morning, everyone, and thanks for joining us for our third quarter conference call. I'm Jay Hennick, Chairman and Chief Executive Officer. And as some of you have heard, unfortunately, John Friedrichsen, our Chief Financial Officer, is not available for our call today. He's dealing with a medical issue. We hope to have him back very quickly. But in the interim, Christian Mayer, Senior Vice President and Treasurer will be standing in for John. I'll turn things over to Christian in just a few minutes.This morning's conference call is being webcast, and it's available in the information in the Investor Relations section of our website. As usual, the presentation deck is also available to accompany today's call. Colliers delivered solid operating results with higher margins for the third quarter. Revenues grew 5% over a very strong third quarter last year. Adjusted EBITDA was up 18%, and adjusted earnings per share increased 13%. Year-to-date, revenues were up 12%, adjusted EBITDA up 23%, while earnings per share came in at 14%. Year-to-date internal growth was 4%, which is in line with our full year expectations.We also continue to grow our recurring revenue streams. EBITDA from our outsourcing and advisory and investment management components of our business, represented about 50% of our total EBITDA for the quarter. Having a high percentage of earnings coming from recurring revenues, especially those that are well diversified, gives us a resilient platform to capitalize on opportunities in the future regardless of market conditions. Given our performance for the first 9 months and our current business outlook, we fully expect to finish the year strongly. Just after year-end, we completed the strategic acquisition of synergy property developments, the leading project management firm in India, with more than 1,000 professionals operating out of 8 offices across the country. Synergy will merge with our existing operations in India under the Colliers International brand and will take its place as one of the top players in one of the world's fastest growing economies. So far this year, we've completed a total of 4 acquisitions, 2 in the Americas and one in each of Europe and Asia, adding about $120 million in annualized revenue. This, together with our growth over the past 4 years, puts us firmly on track to meet or exceed our 5-year growth target to double the size of our business by the year 2020. As you know, our leadership team owns more than 40% of the equity in our company, making us truly unique in our industry and representing a tremendous growth -- and tremendous vote of confidence in our company's future. As we look forward to next year and beyond. We're very enthusiastic about our prospects. In every way, Colliers is better today than it's ever been before. In addition to building a world-class internationally and institutionally recognized global brand. It is the fastest-growing platform in our industry. Last year, we established a new Investment Management segment that provides us with another important engine for growth. All of this to say, our platform is strong, and Colliers is in a very enviable position to continue to capitalize on opportunities for the benefit of our shareholders for many years to come. With that said, I'd now like to turn things over to Christian for his financial report. Christian?

[Christian Mayer, Senior VP of Finance & Treasurer]

Thank you, Jay. As announced earlier today, Colliers International Group reported solid third quarter financial results with higher margins. My comments will focus on our Q3 results by segment, investing activities, financial position and our outlook for the remainder of 2019. My comments will follow the flow of the presentation deck posted on the Investor Relations section of colliers.com to accompany this call. Please note that my comments reference non-GAAP measures such as adjusted EBITDA and adjusted EPS, both of which are outlined in our press release issued today as well as the accompanying deck. The adjustments are composed primarily of noncash charges that we view as largely unrelated to our operating results. It's important to note that in Q3, currency continued to have an impact on our reported results. Please note that references to revenue growth, including internal growth, are calculated based on local currency. Our third quarter revenues were $737 million, up 5% over the prior year. Both Sourcing & Advisory revenues of $278 million were up 10%. Revenues from sales brokerage totaled $201 million, up 4%. Lease brokerage revenues of $219 million were down 3%, relative to a strong prior year comparative. Finally, in Investment Management, which was established in mid-2018, we generated $40 million of revenue in the quarter, up 26%, all internally generated.Consolidated adjusted EBITDA was $84 million for Q3 compared to $73 million with our margin at 11.4% versus 10.2% in the prior year quarter. In fact, margins were up in every segment of our company, except for EMEA, as I will explain in a moment. The geographic split of both our revenues and adjusted EBITDA continued to be well diversified. Investment management represented 18% of adjusted EBITDA for the quarter, up significantly relative to the comparative period due to the outsized growth of the segment over the past year. On an ongoing basis, we expect Investment Management to represent 15% to 20% of our EBITDA assuming no further acquisitions.Quarterly revenues in the Americas totaled $424 million, up 5%. Americas Outsourcing & Advisory revenues were up 16% with continuing robust growth in each of project management, property management and valuations. Sales brokerage revenues were up 2% for the quarter, up broadly across the region, offset in part by a decline in Western Canada due to softer market conditions. Lease brokerage revenue of $160 million was down 1% against a strong prior year quarter. Adjusted EBITDA was $38.8 million, up 17% versus last year to 9.1% margin, up 90 basis points compared to last year primarily due to service mix and lower discretionary expenses. In the EMEA region, Q3 revenues were $139 million, down 1% with a 3% internal decline. Outsourcing & Advisory revenues were $67 million, down 1%, impacted by lower project management revenues in our French Workplace Solutions business. Sales Brokerage revenues, however, were up 16% across several countries. Lease Brokerage revenues were down 17%, primarily, due to timing of transactions on markets. As a result, we expect a significant number of transactions to be recorded in the fourth quarter. Adjusted EBITDA margin for the region was 12 -- sorry, adjusted EBITDA for the region was $12.6 million compared to $17.3 million last year at a 9.1% margin, down from 11.8% last year, primarily impacted by lower revenues, service mix and ongoing investments in talent acquisition to fill service line gaps.Asia Pacific region revenues were $134 million, up 5%, with 4% internal growth and 1% from acquisitions. Outsourcing & Advisory revenues were up 9%, led by Property Management. Sales Brokerage revenues were up 1%. Lease Brokerage revenues were up 2%. Adjusted EBITDA was $18.6 million compared to $17.8 million last year, with margins at 13.9%, up from 13.4% last year. In our investment management operations, revenues were $40 million in Q3, up 26% and all from internal sources. Harrison Street, which was acquired in July 2018 is included in both the current and comparative quarters. Revenue growth reflected incremental management fees from new capital commitments in both open-ended and closed end fund products. Assets under management were $30.6 billion as of September 30, 2019, up 18% from 1 year ago. Adjusted EBITDA for the quarter was $15.9 million, up from $9.6 million in the comparative period.In terms of investing activities for Q3 2019, capital expenditures totaled $7.2 million, down slightly from the comparative quarter. For the full year 2019, we expect to invest between $45 million and $50 million in total CapEx across our operations. We did not complete any business acquisitions during the quarter. Our net debt position was $509 million as of September 30, 2019, compared to $706 million 1 year ago. Our financial leverage expressed in terms of net debt to EBITDA was 1.5x for the quarter, down substantially from 2.2x reported 1 year ago. The reduction in leverage is attributable to debt repayment from operating cash flow as well as proceeds from our accounts receivable facility implemented earlier this year. In terms of financial capacity, with cash on hand and committed availability under our revolving credit facility. We had more than $700 million of liquidity at quarter end, a level sufficient to fund operations and other capital investments, including acquisitions, under our growth strategy.Looking ahead to the fourth quarter, which is our seasonally most significant quarter, our revenue pipeline continues to reflect solid activity in both sales brokerage and leasing. In addition, we continue to see solid demand for our recurring outsourcing advisory services and investment management fees are secure based on AUM in place. As a result, our 2019 outlook remains unchanged, including our expectations for low single-digit percentage internal revenue growth in local currency, combined with growth from acquisitions, which we expect will result in high single-digit percentage growth in revenue. We anticipate a full year adjusted EBITDA margin improvement of 100 to 120 basis points compared to 2018. We also estimate low double-digit growth in full year adjusted EPS compared to 2018, all excluding the impact of any further acquisitions completed between now and the end of the year. That concludes my prepared remarks. Operator, please open the line for questions.

[Operator]

[Operator Instructions] Our first question comes from the line of George Doumet of Scotiabank.

[George Doumet, Analyst]

I'd like to start off by focusing on the Americas, the organic growth there was flat. I think it's been 2 years since we've seen the organic growth there. Just wondering if you'd expect to see an improvement in brokerage activity in the near term. Anything you can share with us, I guess, as it relates to navigating that big Q4 quarter?

[Jay Steward Hennick, Founder, Global Chairman & CEO]

Well, we've historically had some very strong internal growth in the U.S. I think, last quarter, the year-ago quarter was above 9% internal growth. And as you can appreciate, in a business that's 4 quarters. Some quarters, you'll have stronger growth versus less growth. So it's really not a great indicator to look at growth quarter for quarter, you really need to look at it on an annualized basis. And as I mentioned in my comments, we're averaging a bit more than 4% internal growth year-to-date. We hope to pick up a little ground with some luck in the fourth quarter. Our 5-year forecast has always been sort of 4% to 5% internal growth. So we see ourselves in line. This quarter was a little bit of an outlier. But we don't read anything into that at all.

[George Doumet, Analyst]

Okay. And just staying in the Americas, maybe moving over the margins, some pretty good margin expansion, I guess, in the face of flat internal growth. Can you maybe give us some color on what happened there exactly?

[Christian Mayer, Senior VP of Finance & Treasurer]

Sure, George. Maybe a few points. Our lower-margin lease brokerage operations were down in the quarter. And O&A was up at a very healthy clip in the quarter. And we saw some higher margins in some of our O&A, Outsourcing & Advisory service line. So a bit of mix change there. Also, we had some lower discretionary spending in several areas around the Americas with some more disciplined cost management. So we're pleased to see the 90 basis point margin improvement. And we hope that, that will continue.

[George Doumet, Analyst]

That's helpful. And just one last one, if I may, I'm shifting gears to the Investment Management business. Jay, what would be a win for you, if you look a year from now -- the AUM line? And would you expect to see, I guess, a material amount of growth coming from M&A?

[Jay Steward Hennick, Founder, Global Chairman & CEO]

Well, it's a great question, and I'm going to break it down into 2 pieces. One of them is how -- what is success for Harrison Street as a stand-alone and not just Harrison Street, our European Investment management business that's part of that division. And so we've enjoyed tremendous growth, both in Harrison Street and, to a lesser degree, our European business over the past while. Again, in Investment Management and Harrison Street, in particular, about half of the business is their open ended funds, the other are their more opportunistic funds. There is fund raising seasons effectively, which do create fluctuations in the reported revenue that we generate. But if I look out 12 months, if our combined business is up by 10% or 15% in terms of assets under management, we'll be thrilled because that translates into significant incremental recurring revenue. The second part of that is -- and one of the reasons we entered this space 1.5 years ago, which feels like 3, 4 years ago, given the amount of time it took us to actually complete the transaction. We see several other opportunities in the investment management space and believe that over the course of the next couple of years, we can add significant incremental assets under management in that segment of our business in different disciplines. It's a business we understand. It's a business that we can leverage globally through our operations around the world and our ability to raise capital from institutions. For smaller operators that have -- I mean relatively smaller operators that have distribution strengths and weaknesses. So we believe that we can use our partnership philosophy to continue to grow our investment management business. And so in 12 months from now or 18 months from now, I'd like to see us add another significant player in that segment of our business and move the EBITDA coming out of our investment management business from sort of 15% to 20% where it is today to closer to 25% or even more if we're successful.

[Operator]

Our next question comes from the line of Stephen MacLeod of BMO Capital Markets.

[Stephen MacLeod, Analyst]

I just wanted to talk a little bit about the EMEA business? And what kind of impact you saw, if any from Brexit? And then, I guess, a follow-on to that. You talked a little bit about Q4 being -- having sort of a significant loaded in lease brokerage transactions. Can you talk a little bit about why those were pushed into the quarter? And where they are, if there's any geographic concentration?

[Jay Steward Hennick, Founder, Global Chairman & CEO]

Yes. So for sure, Brexit is an issue and the uncertainty in the rest of Europe is an issue. Frankly, we were tired of talking about it, so we didn't even raise it in our material. I think it's so glaringly obvious with all the geopolitical changes in Europe. And so we just sort of take that as table stakes. In terms of EMEA this quarter. And again, I want to emphasize it's always difficult to look at quarter for quarter, and we saw -- the rest of our businesses -- our segments were fine. But when we look at EMEA, and we saw the shortfall and drilled into our pipelines. It was very clear that several larger transactions in 3 or 4 different countries. We're delayed in part because of the geopolitical uncertainty, many of those transactions we expected to close in the third quarter which would have meant EMEA would have been in line, slightly below, but not as different as -- not 5% below the prior year as we reported. And I'm pleased to say that many of those delayed transactions have already closed. You won't see that, of course, until we report the fourth quarter numbers, but that's just the reality of the beast.

[Stephen MacLeod, Analyst]

Okay, that makes sense. When you look at broker productivity, you talked about having some of those incremental costs weighing on the EMEA business, which, again, I understand the quarterly fluctuations. Would you expect that you would begin to sort of cover or generate returns on those broker investments into Q4? And then similarly, I guess, you had some incremental costs weighing on the first half margin in the Americas. Is your view still that you would begin to generate returns on these brokers late 2019 into 2020?

[Christian Mayer, Senior VP of Finance & Treasurer]

Let me start with the Americas, Stephen. Through the first half of this year, we did have incremental cost of talent acquisition and recruitment and retention weighing on our numbers. That was not a factor in Q3. We've essentially lapped it. And that is -- that's a good news story for us. And I think we're through it. As it relates to EMEA, we made several strategic hires in various markets and service lines late in 2018 and the first quarter of 2019. Those producers aren't productive just yet, and we're continuing to see that impact our results for Q3. As we roll into Q3 and -- sorry, into Q4 and into next year. We expect the productivity of those teams to accelerate, and we should not be seeing that impact any further.

[Operator]

Our next question comes from the line of Matt Logan of RBC Capital Markets.

[Matt Logan, Senior Associate]

Jay, you mentioned you're enthusiastic about your prospects for 2020 and beyond. Can you talk a little bit about how we should balance the positive fund flows into the sector against other factors such as potentially slowing leasing velocity or geopolitical risk.

[Jay Steward Hennick, Founder, Global Chairman & CEO]

Yes, the reality is we've always taken the position that we really can't control exterior impacts on our business other than to manage in a way that gives us a strong balance sheet and the ability to capitalize on opportunities when they present themselves. And we have, over many years, capitalized on some very interesting opportunities when market conditions were slower than expected. So I have to tell you that we don't really manage our business quarter per quarter, year-to-year, don't really care where interest rates are. And yes, they impact our business, don't really care about a recession in the U.S. but not in Australia and Canada. Because we're highly diversified, and our history has shown -- and I think the global history has shown around recessions that we all hear about the Great American recessions in 2006 to 2008 or '09, and when Canada was bullish, and Australia was bullish, and Asia was pretty good. And as the U.S. was coming out of it. All of a sudden, Europe, which was fine, started to go into its meltdown. So we've sort of tried to keep a very close eye on all of these exterior factors but manage our business day-to-day in a conservative manner and jump on opportunities that are available because others are managing their business differently, taking on excess leverage or just losing the battle. So I don't know if I've answered your question, but I think in terms of philosophy in our business and in most other businesses, in my view, you can't really -- you can't really manage your business based on outside influences, you just have to be aware of them, and you have to do downside protections at every turn. And get ready in case, God forbid, something happens or, at worst, a black swan impacts you.

[Matt Logan, Senior Associate]

So I guess, in short, barring a globally synchronized downturn, you don't see any issues with hitting that 4% to 5% organic growth target in 2020?

[Jay Steward Hennick, Founder, Global Chairman & CEO]

No, we don't. And I haven't seen a global meltdown. When was the last time we all saw global meltdown. I am not even sure in 1929, we saw a global meltdown.

[Matt Logan, Senior Associate]

But suffice it to say, you guys are seeing opportunity and maybe just changing gears towards your Indian acquisition, would you mind giving us a little bit of color on the opportunity in India?

[Jay Steward Hennick, Founder, Global Chairman & CEO]

Yes, we're very excited about that opportunity. I don't have to talk about the opportunities for the country. It's not without its issues, it has a leader that was recently reelected. He's very pro business and growth. This particular target is one that we sought after for probably 4 years, it was owned 75-ish percent by Blackstone and 25% by the founder managers. We bought out Blackstone, every one of the managers rolled their equity. And in fact, some of them -- actually, that's not true, some did monetize a modest piece of their equity and others have ponied up to become shareholders in that business. Together, Colliers now has a significant presence across the country in a more high value-add service line, and that is to build major projects as a landlord representative for companies like Oracle and other major U.S. companies that happen to want to grow their business in India. So in addition to hospitals and academic institutions and so on, very similar to our businesses in Canada and the U.S. and our growing business in Australia. So we see project management as a natural add-on to what we do. The average job size is 3 years, you build long-term relationships with the owner of a building, and you know where all the bodies are buried in the building. And it leads to additional service areas, acquiring the property, managing the property, leasing the property. So we're very excited about the opportunity, and it happens to be in a country that has massive growth opportunities and still very, very immature from a business standpoint.

[Matt Logan, Senior Associate]

So would you expect to do tuck-under acquisitions in India over the next few years?

[Jay Steward Hennick, Founder, Global Chairman & CEO]

Our experience with acquisitions in Asia is that they're very difficult for a whole variety of reasons, part of which is disciplines around controlling the business. The fact that this target was owned by Blackstone -- controlled by Blackstone for many years, gave them the disciplines of reporting to a sophisticated buyer. But yes, I think there's big opportunities for us to add more agency business. We have a nice business in India, but it is well under scale. Now that we are able to be a dominant player in building these buildings and potentially managing them, it gives us the opportunity to add capital markets, leasing in a much bigger way. So if we can find the right acquisitions or pull outs in that region to augment our business, I think looking out 12 to 18 months you should probably see that, and this is a strategy that we used, and I'm going on probably too long on this, probably not interesting to some of you but it's the same strategy we used in Spain and Denmark over the past couple of years where we had a good business, but we weren't one of the top players, and there was an opportunity to integrate with another market leader and have them become our partners in the business. So in India, we own 75% of the equity, the balance are owned by the people that run it day-to-day. They're roughly the same structures in Spain and in Denmark, 2 phenomenal, highly value-add advisory businesses where we can build strong and deep relationships with our clients. So we're going to continue to look for those opportunities, specifically in areas where we have -- where we're under scale.

[Matt Logan, Senior Associate]

That's great color. I certainly appreciate that. And last one for me. Maybe just a few thoughts on the broader acquisition potential outside of the Investment management segment.

[Jay Steward Hennick, Founder, Global Chairman & CEO]

Well, I would say that the acquisition -- our targets, as you know, are to add 10% of the prior year's EBITDA and acquisitions annually, whether it's investment management, or it's in the services space. We continue to see lots of flow. Our acquisitions are more specialty, I would say. We dominate in many markets now or have a significant position in many markets now. So the opportunity is to leverage our boots on the ground, our management teams on the ground to build scale in our base business, to add service lines where appropriate. And in a business that is as massive as commercial real estate, there really is countless opportunities to grow. So we have to apply our same disciplines that we've hired, that we've employed historically, but we see lots of opportunity to continue to grow.

[Operator]

Our next question comes from the line of Stephen Sheldon of William Blair.

[Stephen Hardy Sheldon, Analyst]

First in the EMEA business, I think it was a bigger pullback in adjusted EBITDA margins than most were expecting. You've talked about the high pace of hiring and people still ramping productivity. But I was just curious to get a rough ballpark of how much of the 300 basis point year-over-year decline would be due to the push out of leasing activity. And I'll, I guess, asked another way, if those transactions had come in as maybe expected during the third quarter, would the margin decline have looked a lot less severe.

[Christian Mayer, Senior VP of Finance & Treasurer]

Yes, Stephen. It would have looked a lot less severe for sure. And the service mix is also an issue. And the -- what I talked about in terms of talent acquisition was definitely an issue and weighed on the margin also. So a combination of factors there. But certainly, if we had the leasing transactions being booked to Q3, it would have looked much different.

[Stephen Hardy Sheldon, Analyst]

And then, I guess, I wanted to ask about your kind of a higher-level question. Your opportunity in the occupier services area. I know you promoted Scott Nelson to run that globally, so curious where you see the opportunities in terms of both expanding more geographically and potentially expanding the breadth of services that you offer to occupiers.

[Jay Steward Hennick, Founder, Global Chairman & CEO]

Well, that's a very good question and a huge amount of white space for us to be honest. Scott is a tremendous executive, he has been with us for a lot of years, spent a lot of time traveling the world around primarily corporate solutions. But the number of multi-market transactions that we undertake at Colliers. That is a transaction that's originated in New York that might be completed in a different city or in a different country or services that are originated in one place and executed in another place is too low a percentage for Colliers. Having a global platform gives us a unique advantage over all of our peers that don't have this type of deep platform. And when we looked and analyzed the ability that we have to leverage our occupier services business to really drive incremental revenue streams and also differentiate ourselves through our boots on the ground in so many different regions. We realized that we had to start getting much better at things like occupier services. So it's early days for us. We generate about 20% to 22% of our revenues on a multi-market transaction basis. Some of our peers might be as close to 30%. That is a big potential opportunity for not only our company, but also our professionals. How do we encourage our professionals to leverage their relationships locally and bring opportunities to their clients or serve their clients in other markets that they choose to do business in? So we see it as a big opportunity for us. And one that we're dedicating more focus to, and it'll be a critical part of our 2025 plan when we come forward with that.

[Operator]

Our next question comes from the line of Mitch Germain of JMP Securities.

[Mitchell Bradley Germain, Managing Director and Senior Research Analyst]

I'm curious, Jay, with regards to Harrison Street, are you able to drive cross-sell in terms of what they're doing across the other business lines that you guys have?

[Jay Steward Hennick, Founder, Global Chairman & CEO]

Candidly not as much as I'm sure is the case at some of our peers. Harrison Street is a very specialized investment management firm, seniors, health care, social infrastructure, storage, and so there's opportunities around some of those things, but there's not as many leasing opportunities. There is opportunities to show Harrison Street different product. So there's been some synergy there. We've been very successful helping Harrison Street grow its business much more rapidly in the past. Our operations in Europe have been helping Harrison Street expand their investor base materially, we provide that service in Europe. We also provide the same service in Asia and in Australia, New Zealand. So we have taken Harrison Street on a variety of roadshows that have borne some fruit. But it's not as -- and we -- going into this transaction, we did it on the basis that we knew we -- Harrison Street funds were not traditional assets like buying or selling industrial buildings or buying and selling office buildings, which -- where it's very hard to differentiate. But the amount of service level revenue that you could generate as a service provider are much more significant in those areas. We focused on strategy first. And the strategy was we have a great platform with great growth opportunities, and let's pick our spots in terms of leverage. I'm hoping, over time, we'll build our specialties in health care, which we have. We'll build our specialties in senior care, which we have, but we have work to do in those areas to maximize the potential. So again, it's back to -- it's an opportunity, but we're very excited about the growth of Harrison Street and gaining some momentum through that.

[Mitchell Bradley Germain, Managing Director and Senior Research Analyst]

So when I think about the growth that you're planning for investment management, is it to remain specialized and stick with kind of the core that Harrison Street has been able to create? Or is it maybe in more traditional asset classes.

[Jay Steward Hennick, Founder, Global Chairman & CEO]

Again, a good question. We use a partnership philosophy, which you've known about for many, many years. And I think that's a significant differentiator for Colliers. So as it relates to Harrison Street, Harrison Street is going to continue to employ their strategy that has been so successful over many years. They might add a product line from time to time that they think that they could develop over time, but their focus will remain intact. We are, at the same time, looking at other opportunities in other asset classes, where we think that we could utilize our partnership philosophy or our institutional, global brand, feet on the street relationship value to help accelerate the growth of another Harrison Street, potentially in another specialty area. So we have high hopes for that segment of our business, but one step at a time.

[Mitchell Bradley Germain, Managing Director and Senior Research Analyst]

Got you. Last one for me. I recognize the leasing comps have fairly expanded this quarter, but they've been for the last several quarters, and you've been able to produce some pretty solid growth in that business line in the first part of the year. Is it just really a function of maybe some timing? Or is there anything else that we should lead into in terms of that performance of that line in the third quarter.

[Christian Mayer, Senior VP of Finance & Treasurer]

Yes, Mitch, in the Americas, our prior year comp was at 9% internal growth. That was the highest, I think, last year that we had in any one quarter. So it was a tough comparison in the Americas. In EMEA, it really is timing. And as we've talked about a little bit on the call earlier. So I think that's the main driver in EMEA.

[Operator]

[Operator Instructions] Our next question comes from the line of Frederic Bastien of Raymond James.

[Frederic Bastien, MD & Equity Research Analyst]

I want to go back to the investment management discussion. AUM is up 18% year over year, which is quite healthy. Jay, is this roughly in line with the projections you had when you acquired Harrison Street?

[Jay Steward Hennick, Founder, Global Chairman & CEO]

It's actually in excess of our underwriting criteria on Harrison Street, to be honest.

[Frederic Bastien, MD & Equity Research Analyst]

Okay. And that's good to hear. But what sort of growth rate would you see as a sustainable for that particular side of the business?

[Jay Steward Hennick, Founder, Global Chairman & CEO]

That's a hard one. That's a hard one because that -- in terms of new money, that is an area where it does get impacted by market conditions, and so on. But Harrison Street's got a lot of new funds in the marketplace. I'm hoping that they will continue to raise capital, but they have to raise capital and put it to work in a good way. So if we could raise internally, our AUM, 10% a year -- 5% to 10% a year, I'd be very, very comfortable with that, especially if at least half or more of that growth comes in our open-ended fund, which has been growing as quickly as our opportunistic funds. And of course, the beauty of the open-ended fund is it's essentially permanent capital.

[Frederic Bastien, MD & Equity Research Analyst]

Great. Any thoughts you'd like to share on the WeWork debacle and how that might impact the sector?

[Jay Steward Hennick, Founder, Global Chairman & CEO]

I would just reference Sam Zell, and just say, I agree with Sam Zell.

[Operator]

There are no further questions at this time. I will turn the call back over to Mr. Jay Hennick for closing remarks.

[Jay Steward Hennick, Founder, Global Chairman & CEO]

Thank you, everyone, for joining us today. We see our results as very, very positive. And we've got a great foundation for growth that keeps getting stronger. The opportunities for us continue to unfold. And as long as we continue to apply the same discipline that we've applied over many, many years. I'm hopeful that we will continue to generate outsized returns for shareholders. And given the fact that we own 40% of the equity, it means a hell of a lot to us. The other thing that I think I should mention to you is, and I've been asked this several times offline, but let's mention it online, we are starting to do some work on our enterprise plan 2025. Of course, we have all next year to meet or exceed our 2020 plan. When we first set out on our 2020 plan, people thought it very ambitious. I'm glad to see, with hopefully with some luck and of course, the market not changing drastically, we should finish next year in a nice position. But focusing on 2025 is our current thoughts around the company, and we hope to be in a position probably near the fall of next year to give you a sense of where we think we'll do over the next 5 years ending in 2025. So with that, thanks for joining us and look forward to a strong finish and our fourth quarter conference call in February. Thanks again.

[Operator]

Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.