Neil Johnston: Michael, look, if we think about ’23, we had a very strong free cash flow year. So that’s given us a lot of flexibility and optionality as we look at ’24. Leverage is clearly a key priority. And as I said on the call, we will begin repaying debt at the end of the quarter. Our intent is to pay down the $193 million that is out on the 25 term loan by August of ’25. But the exact timing will depend on how we see that recovery. We are fairly optimistic about the year. And so we will see leverage come down naturally as EBITDA improves. We ended the year at 4.3x which was right in line with what we guided to. And our long-run target remains intact. We would like to operate in that 2 to 3x but naturally leverage is driven by 2 things: debt and EBITDA. And so as we see that recovery in EBITDA, that’s where we really see the decline in leverage. Yes, I’ll just add, we very comfortable at these levels. We feel like we’re in a good place.
Michael Griffin: And then maybe just a broader question about the leasing market. It seems like results in the fourth quarter were better than what expectations were going into it. I mean, are you seeing a more concerted effort for these occupiers of particularly office real estate to make decisions around leasing? I mean, we’ve heard, I guess, more on the REIT side, that large occupiers are still kind of delayed in making these big decisions. So has anything changed there? Or has the time from first interacting with the broker to assign the lease, is that still pretty long relative to historical levels?
Michelle MacKay: Michael, this is Michelle. Let me unpack that for you. Net-net, leasing is looking really solid for us and it’s a global strength at Cushman & Wakefield. It has been driven by the performance that we’ve seen, has been driven by larger office and industrial deals. And if you look at 2023, the average deal size for us did increase in office in particular, so we are seeing a lot of those larger, more concentrated transactions. And in the U.S., in particular, we saw strength in the Northeast markets, the Tri-State, the Midwest. And in Europe, I would call out the U.K. And in APAC, I would call out India. So we’re feeling pretty optimistic about leasing going forward in 2024. To your question about occupiers making decisions. I think the type of occupier that we are dealing with and the Class A product that we tend to work in has really driven that kind of performance because those occupiers are making decisions.
Operator: [Operator Instructions] The next question comes from Steve Sheldon with William Blair.
Pat McIlwee: You’ve got Pat McIlwee on today. So my first question. It sounds like you’re essentially at your targeted run rate for the cost saving initiatives at this point. I just wanted to ask if you’d be able to quantify the impact of those initiatives in the quarter and if you feel that you’re still at an appropriate run rate heading into 2024? Or if there are any areas you’re still looking at for additional efficiency.
Neil Johnston: Yes. So we are very comfortable where we are at cost efficiency standpoint. ’23 was the year when we really set our cost base. Our target was to take out $130 million of cost. We achieved $140 million. So we feel good about what we achieved and just very proud of what the teams did throughout the world in achieving those cost savings. We are now at a pretty good place. So now we’re sort of turning our attention on how we start seeding growth in the company as we look forward, obviously, depending on what we see happening in the brokerage markets. That $140 million will have a carryover impact of about $30 million which we’ll see primarily in the first half of the year. We’ll continue to be very prudent on cost.
Cost management is clearly a focus and a discipline that we’re very good at over time and will continue. At this point, we are not planning any specific cost initiatives like we did in 2023. But at the same time, there are always levers that we can pull but we are turning our attention more to seeding growth.
Pat McIlwee: And then just quickly, can you provide any additional color on the — some of the underlying trends within PM/FM or services and specifically what exactly is driving some of that weakness you saw? I think you said it accelerated a bit in the fourth quarter. Just what’s going on there broadly.
Neil Johnston: If we look at services. Services performed right in line with our expectations and our guidance for the full year. The one adjustment you have to make is for a single large contract, where we changed the win which we are accounting for that contract. That’s about $50 million in ’23 and about $50 million in ’24. So if you exclude that contract which really just changes the way our gross net revenue is reflected but does not change the EBITDA or the profitability of the contract, we grew our services business at 4% for the year which is right in line with our guidance. We expect similar performance in ’24. If we look at where we saw it, essentially, it was in the project management, where we saw a slight slowdown but property management and facilities management were very strong and we saw particularly strong growth in Asia Pacific, where we have large services businesses and those businesses performed well.
On the project management side and certainly, as we look at making the business more efficient, that was really what drove the decline in services in EMEA. A very, very healthy look at the business and really a long-term focus, as I say, to drive long-term accretion. So as we look in the first and second quarter, we’ll continue to focus on profitability and expect to achieve the same level of growth in ’24 as we achieved in ’23.
