Colliers International Gr Q3 2026 Earnings Call Transcript
Colliers International Gr (TSX:CIGI) reported third-quarter financial results on Wednesday. The transcript from the company’s third-quarter earnings call has been provided below.
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Summary
Colliers International Group agreed to acquire a controlling interest in Vicinity Energy for $2.9 billion, expanding its infrastructure business.
Third quarter revenue grew 12% to $1.6 billion, with net revenues up 13% to $1.4 billion; adjusted EBITDA increased 14% to $219 million.
The company revised its 2026 outlook to low-teens growth due to geopolitical uncertainty and interest rate volatility affecting commercial real estate transactions.
Investment Management raised $5.3 billion in new capital year-to-date, with assets under management at $110.5 billion; however, deployment of new capital is slower than expected.
The company emphasizes an asset-light model generating strong cash flows, prioritizing strategic acquisitions and internal growth.
Management highlights an entrepreneurial culture with significant equity ownership among operators and a long-term focus on shareholder value.
Full Transcript
Jay Hennick (Chairman & Chief Executive Officer)
Street funds. We agreed to acquire controlling interest in Vicinity Energy, the largest district energy provider in the U.S. This transaction, valued at $2.9 billion, serves more than a thousand hospitals, universities and other buildings across 12 cities, all under long-term contracts. Three transactions. Three more ways to grow across our enterprise. All in essential infrastructure with durable long-term demand and deeper client relationships. Second, grow our resilient earnings. Currently, about 70% of our earnings are repeat or recurring, a high-quality earnings base that we intend to keep on growing. And when markets normalize, our higher-margin transactional businesses are well positioned to benefit. That’s the balance we like: protection on the downside and meaningful upside when the markets turn.
Third, leverage our scale. Each of our businesses have the scale they need to serve the best clients and to deliver on the largest and most complex projects. The opportunity between our platforms is just as important. Data centers are an excellent example. Our real estate professionals help clients find and secure sites. Our engineers design, deliver and manage facilities. And Harrison Street provides the capital. That combination truly sets Colliers International Gr apart.
Fourth, allocate capital. Our asset-light model generates strong cash flows which we can reinvest where returns are the highest—internal growth always first, complemented by strategic acquisitions. This year is already a record year for acquisitions. We’ve added about $80 million in annualized EBITDA to our company, and we still have almost a billion dollars of dry powder for new opportunities ahead. Finally, we think and act like owners. Let’s face it, equity ownership is the most important ingredient in delivering superior results over the long term. About 1,500 of our operators hold significant equity in the businesses they run day to day. And together with senior leadership, we collectively own more than a third of our company. That alignment with shareholders is our most defining characteristic—an entrepreneurial culture built over decades and very difficult for others to replicate.
If there’s one thing I would leave you with today, it’s this: We never manage Colliers International Gr quarter for quarter or even year for year. We manage it for the long term. As a permanent capital partner in each of our businesses, we can compound value for shareholders over many years. Markets move in cycles we can’t control. What we can control is how well we run our businesses. And you can be sure that we run them like owners. For more than three decades, our shares have compounded at about 20% per year, although closer to 17% at today’s price.
If we keep strengthening and growing our businesses one step at a time, as we’ve always done in the past, I’m confident our share price will again reflect the value we’re creating. I’ll now turn things over to Christian to review our financial results in detail. Christian.
Christian Mayer (Global Chief Financial Officer & CEO, Commercial Real Estate)
Thank you, Jay, and good morning everyone. Please note that the non-GAAP measures discussed on this call are defined in our press release and quarterly presentation. Unless otherwise noted, all revenue growth figures are presented in local currency. Third quarter consolidated revenues came in at 1.6 billion, up 12%, and net revenues increased 13% to 1.4 billion. Internal revenue growth was 2% and on a net basis was 4% against a tough prior year comparable where internal growth was up 13%.
Adjusted EBITDA was 219 million, up 14%, and adjusted EPS increased 20% to $1.97. Our third quarter Commercial Real Estate segment net revenue increased 6%. Capital Markets revenues rose 9%, led by the Americas and EMEA, with slowing transaction velocity late in the quarter as geopolitical and interest rate volatility increased. Leasing revenues were up 6% as expected, compared to a very tough prior year comparable—in Q3 2025 we had industry-leading leasing growth of 15%. Segment margin was 11.3%, up from 10.9% in the prior year on operating leverage from higher transactional revenues.
Third quarter Engineering net revenue was up 37%, driven primarily by recent acquisitions including the first full quarter of IESSA and solid internal growth. Our net margin was 17.3%, up 30 basis points over last year. We continue to see strong tailwinds driving demand for infrastructure, defense projects and technical consulting services. Our engineering backlog stood at just over 12 months as of September 30, up nicely from June 30. Investment Management net revenues increased 8%. The net margin was 38%, reflecting continued investments in people, new capabilities and integration under the global Harrison Street Asset Management brand. Bringing together a global business and streamlining operations takes time and the team is executing well. We expect margins to stabilize in the 40% range through 2027. Assets under management were $110.5 billion at September 30, up 2% from a year ago driven by new capital raised net of realizations.
We have raised 5.3 billion in new capital commitments so far this year through the end of October. We continue to see good momentum on fundraising and expect to finish the year within our previously discussed range of 6 to 9 billion. During the quarter, Harrison Street successfully sold 1.8 billion in assets at compelling valuations, with proceeds being returned to our investors. For 2026, we expect to sell over 5 billion of assets. Our demonstrated capability to generate strong realized gains and returns of capital to investors differentiates us from other asset managers.
Our deployment of new capital raised has been slower than expected, with the result that the commencement of certain management fee revenue is being deferred into 2027. Turning to our balance sheet, in the third quarter our leverage ratio improved to 2.7 times. We expect to continue delevering in the fourth quarter as seasonal cash flow comes in, and we expect to finish the year at or under 2.5 times. Free cash flow for the trailing 12 months was 428 million, or 118% of adjusted net earnings, reflecting our asset-light business model and strong cash generation.
We have revised our full year 2026 outlook to reflect year-to-date results and increasing geopolitical uncertainty and interest rate volatility which we expect to affect commercial real estate transaction volumes for the remainder of the year. We now expect low-teens growth in each of our key metrics compared to mid-teens growth previously. Our margin expectations for each segment are unchanged. That concludes my prepared remarks. Operator, can you please open the line for questions?
OPERATOR
We will now begin the question and answer session. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question is from the line of Stephen Sheldon with William Blair. Stephen, your line is open. Please go ahead.
Stephen Sheldon (Analyst)
Hey, good morning. Thanks. Just first one on the capital market slowdown late in the quarter. Can you just give some more detail on how broad-based that was versus being more targeted in certain subsectors like multifamily or in certain geographies? And does it seem more like a delay or push-out, or are you seeing deals get canceled outright? Just would love to see more detail on what you’re seeing in the third quarter and maybe some early detail on what you’re seeing in the fourth quarter so far.
Christian Mayer (Global Chief Financial Officer & CEO, Commercial Real Estate)
Yeah, Stephen, we’re not seeing cancellations of deals. We’re seeing deals slow down, get pushed out. And it’s most notably in Europe. And as you can imagine, in Europe there’s a lot of geopolitical tension at the moment—places like France in particular. So that’s causing some delay in decision-making. That’s really the bulk of it. I think things are also perhaps affected a little bit in Australia. That’s a market that’s seen three interest rate increases and some government taxation challenges.
So that’s really where we’re seeing the bulk of the impact.
Stephen Sheldon (Analyst)
Got it. Makes sense. And then great to see the year-over-year expansion in engineering margins. Can you just unpack what drove that and how should we be thinking about the margin trajectory for the rest of this year and into next? Based upon what you can see there, are there levers that you would expect to support continued year-over-year expansion as we look out over the coming quarters?
Christian Mayer (Global Chief Financial Officer & CEO, Commercial Real Estate)
So, Stephen, the engineering business does have seasonality in its margins, and Q3 is the seasonal margin peak given the nature of the summer work season in Canada and the U.S. So when we add DIESA, its geographic presence is much more, you know, equatorial, I would say, or more modest weather. So its business tends to be more evenly spaced through the year. So the margin increase in Q3 was 30 basis points on a highly seasonal number to begin with.
So the impact of IESA was very modest in the quarter. So we did see some margin expansion on the organic business, which was good. In the fourth quarter you will see the seasonal lower margins in our North American business, and you’ll also see the impact of IESSA, so the margin growth in Q4 will be greater.
Stephen Sheldon (Analyst)
Great, thank you.
OPERATOR
Your next question is from the line of Himanshu Gupta with Scotiabank. Himanshu, your line is open.
Himanshu Gupta (Analyst)
Thank you and good morning. So first a follow-up on Capital Markets. How’s the pipeline looking for Q4? Was there some revenue slippage from Q3 into Q4 as you mentioned about pushing out of certain deals?
Christian Mayer (Global Chief Financial Officer & CEO, Commercial Real Estate)
Yeah, our pipelines look good for the fourth quarter. But as you know, a pipeline always has a level of uncertainty to it and requires probability weighting. And that probability weighting, based on our interactions with our clients, has been impacted by the geopolitical situation and rate environment that we’re experiencing. So we are accordingly adjusting our expectations for fourth quarter Capital Markets growth. It’ll still grow, but it just won’t grow as much as we expected.
Himanshu Gupta (Analyst)
Got it. Okay, thank you. And then on Real Estate Services margins, Q3 margins were up nicely, but your full-year margin outlook has not changed. Is it some conservatism built into Q4 margins on Real Estate?
Christian Mayer (Global Chief Financial Officer & CEO, Commercial Real Estate)
Yeah, I think that’s right, Himanshu. We had very strong margins in the fourth quarter of 2025 and it will be difficult for us to replicate that given the current backdrop. So trying to be a bit conservative there.
Himanshu Gupta (Analyst)
Got it. Okay, now shifting to IAM Investment Management. Looks like fundraising was solid in Q3 and year to date. How much of this will start producing fee in Q4, or is it mostly next year when the funds get deployed?
Christian Mayer (Global Chief Financial Officer & CEO, Commercial Real Estate)
So, Himanshu, I noted in my prepared remarks that the commencement of management fees is being delayed. And we have had a very successful fundraising push this year, in particular in the month of October—800 million raised that month alone. But that capital will not necessarily start being fee bearing immediately, as I’m sure you know. We have a mix of closed-end and open-ended funds and separately managed accounts. And those open-ended funds and separately managed accounts require the capital to be deployed before it can start earning fees.
And as such, we’re seeing a bit of a delay in terms of the capital starting to bear fees. But that will happen. The capital is committed and that revenue will start to be recognized as we proceed early into 2027.
Himanshu Gupta (Analyst)
Yeah. And then in terms of the timeline or the catalyst for it to be revenue producing, should we look for the final closing of the Hyzon fund 10 and Basalt 5? Is that what we should be eyeing for?
Jay Hennick (Chairman & Chief Executive Officer)
Well, those two funds are active in their marketing periods and they are, you know, flagship funds for us and ones that are highly visible in the market. You know, we continue to actively and successfully raise capital for those strategies.
OPERATOR
Your next question is from the line of Stephen McLeod with BMO Capital Markets. Stephen, your line is now open.
Stephen McLeod (Analyst)
Thank you. Good morning. Morning guys. Just had a couple of follow ups relative to just the investment management business, just on the capital deployment delay or maybe just extending the timeline on that. Is any of it driven by the macro factors you referenced relative to the CRE business or is it just a matter of timing?
Jay Hennick (Chairman & Chief Executive Officer)
It’s, it’s totally impacted by the macro. Also interest rates in particular, you know, you, you’ve read a lot about and we’ve heard even in today’s call about delayed transactions. There’s still this gap between buyer and seller and the increased interest rates do have an impact on the velocity of the closing of transactions. So yes, we’ve enjoyed some great success in raising capital this year. We think we’ll have continued success going into the balance of the year.
Christian also mentioned realizations. We’ve had some very good realizations at great prices for our investors and that hopefully helps accelerate the fundraising growth. But now we have to put that money to work. And you know, Harrison Street has a unique needs-based, demographically focused strategy that works and the relationships that are deep. So we’re quite excited about some of the things in the pipeline. The Vicinity deal that I talked about is an important deal for us.
It expands our infrastructure business in a major way and that’s a beautiful investment for those that are looking for durable long-term investments that will pay dividends over a long period of time. So we’re excited about a lot of things at Harrison Street right now.
Stephen McLeod (Analyst)
That’s great color. Thanks, Jay. Maybe just turning the page to the engineering business, obviously, you know, still a very strong quarter there and positive commentary around just the long term drivers. I’m just curious, does the macro uncertainty impact that business at all or are you still seeing no real changes in demand and workflow? I know you referenced your backlog, but just curious if you’re seeing anything more on the nitty gritty.
Jay Hennick (Chairman & Chief Executive Officer)
Well, again, it is totally impacting us. For example, IESA looks after all, all or most of the desalination plants in the Middle East and a few of them have been bombed. So that’s good for us because we’ve got to fix them up. But it’s not so good for us because we’ve got to, you know, we’ve got to wait until we fix them to start managing them again. So that’s just one example of the macro that’s impacting our business. But what’s very interesting is our pipelines continue to grow, our backlogs continue to grow, our internal growth in that segment of our business is nice.
And so we’re quite excited about that segment of our business as well. But in giving you, in giving you the answer, I think the macro and interest rate environment impacts all of our businesses. And that’s one of the reasons why we’re taking a cautious outlook on the fourth quarter.
OPERATOR
Your next question is from the line of Jimmy Shan with RBC Capital Markets. Jimmy, your line is open. Please go ahead. A reminder to unmute your line if you can.
Jimmy Shan (Analyst)
Thanks. I wanted to maybe get your early thoughts on 2027.
Christian Mayer (Global Chief Financial Officer & CEO, Commercial Real Estate)
Well, Jimmy, we don’t talk about.
OPERATOR
Jimmy, can you hear me? Jimmy? Hello? Hello?
Jimmy Shan (Analyst)
Hello, can you hear me?
Christian Mayer (Global Chief Financial Officer & CEO, Commercial Real Estate)
Hi, Jimmy, we heard your question. Can you hear us?
Jimmy Shan (Analyst)
Yeah, I think.
Jay Hennick (Chairman & Chief Executive Officer)
Operator, maybe go to the next line, but I couldn’t hear the last.
OPERATOR
Okay, I can ask. Can you hear me now? Jimmy, Your next question is from the line of Darrell Young with Stifel. Darrell, your line is open. Please go ahead.
Darrell Young (Analyst)
Hey, good morning everyone. My question’s around the engineering business and wanted to get a little bit more color on your Canada business, your recent Obsidian acquisition, and just planning your pipeline or maybe around some of the Canadian infrastructure initiatives that are underway and the natural resource renaissance.
Jay Hennick (Chairman & Chief Executive Officer)
Well, you know, Obsidian is a great addition. Obviously it hasn’t closed yet, but it really augments our Western Canadian business, which is very strong already. And we have enjoyed the Canadian operations. The engineering operations has enjoyed several new projects around Canada’s drive not only to be a superpower but also its investments in military. So, for example, this quarter we were given the contract to do all of the modernization of CFB Bagotville, which is all the supporting facilities for the air operations to support NORAD.
That’s a big retainer. It’ll take several years for us. And it’s just another example of the benefits that engineering is realizing based on what Canada’s current thinking is in terms of investment.
Darrell Young (Analyst)
Got it. Okay. And then one more for me on investment management fundraisings, obviously tracking well towards your guidance. Can you give us a bit of detail on the mix of new LPs versus re-ups from existing. And I’m just wondering if some of the monetization activity is what’s really fueling the fundraising or are you seeing benefits of your cross-sell and I’ll call it a more diverse investment product capability with the integration work you’re doing.
Jay Hennick (Chairman & Chief Executive Officer)
So if you’re in the asset management business, you never raise enough capital. It’s always the issue. So yes, we’re having a much better year than last year. We’re quite excited about stuff but it’s never enough. So let’s start with that. The second thing I would say is that we have expanded the number of LPs in our various funds significantly. I think the number—I don’t have it exactly—but I think it’s up 20% in terms of number of net new investors in our various funds.
What happens on realizations is some investors reinvest the total amount realized. Some invest more, some invest less. So there’s a give and take. It’s very hard to give you net new numbers of investors but some increase their allocations or reduce their allocations based on their internal parameters. But generally speaking, we continue to expand the number of LPs and, frankly, the integration of the four pieces, the four pillars of Harrison Street has really helped there because LPs that might have been in the Basalt Fund are now going into the Harrison Street funds and vice versa.
And that’s happening throughout the organization, number one. And number two, we have consolidated all of our fundraising into one global group, and that too is helping to introduce new LPs to funds that they might not have invested in before. So again, lots happening at Harrison Street and the team is executing well, as Christian said.
Darrell Young (Analyst)
Got it. That’s great. I’ll get back in the queue, thanks very much.
OPERATOR
Your next question is from the line of Frederick Bastian with Raymond James. Frederic, your line is open. Please go ahead.
Frederick Bastian (Analyst)
Thank you. Just building on this last question around fundraising and the momentum you’ve been enjoying, which strategies are seeing the strongest investor demand right now and where are you having the most success in raising capital?
Jay Hennick (Chairman & Chief Executive Officer)
Well, that’s a good question. Infrastructure—very, very strong right now. Vicinity is just one example, but it’s happening across the board. And, you know, I think the percentage of our business from infrastructure as a percentage of overall AUM will go up this year as a result. We’re also seeing a resurgence in interest in all of Harrison Street’s traditional needs-based, demographically focused funds—seniors, students, 3P partnerships, health care facilities.
All of these have been the focus of Harrison Street since they began and those are seeing a resurgence. When you think about real estate, where do you want to allocate your capital? You want to allocate your capital in assets like those where rates go up on an annual basis or there’s an opportunity to increase rates on an annual basis. So they’re almost inflation-adjusted. And so I think that a lot of our LPs are increasing their allocations to those two areas in a big way.
Frederick Bastian (Analyst)
Thanks. Thanks, Jay, for the color. Switching gears to engineering, can you give us a sense of how organic growth is trending across the business? I appreciate, Christian, you mentioned healthy increase, but any way you can provide like a number around the growth and is that growth concentrated in certain regions or discipline?
Christian Mayer (Global Chief Financial Officer & CEO, Commercial Real Estate)
Frederick, the organic growth in our engineering business on a net revenue basis is trending in the mid single digits. It was 4% in the third quarter and we expect that to continue in the coming quarters. It is definitely benefiting from additional infrastructure work that we’re doing. There’s a couple of areas that are softer and that’s the reason we have a balanced business and a mixed business that has multiple end markets and public and private sector clientele.
Frederick Bastian (Analyst)
Okay. And from a regional standpoint, given the comments you made about the Middle East and Europe, is it fair to say that you’re seeing better growth in North America right now?
Jay Hennick (Chairman & Chief Executive Officer)
I think the growth is pretty even geographically. You know, just to add to what Christian said, my sense is the U.S. has been tougher in terms of internal growth in the last quarter or so. I mean, it showed internal growth, but it’s been tougher. And I don’t know whether it’s the interest rate environment, the political environment, the U.S., the private sector clients in a couple of areas in the U.S. But on balance, I think we’re pretty solid. Yeah, there you go.
There you go.
Frederick Bastian (Analyst)
Thank you.
OPERATOR
My apologies. Your next question is from the line of Julian Bluein with Goldman Sachs. Julian, your line is open. Please go ahead.
Julian Bluein (Analyst)
Yeah, thank you for taking my question. I know it’s still early, but I was wondering if you could provide any parameters for how we should be thinking about 2027. And I guess just the bigger picture: the last time we saw capital markets become choppier in 23, I think Colliers International Gr earnings growth remained relatively resilient versus peers. Wondering, do you think that consistency of earnings growth should recur in 27, sort of irrespective of the capital markets environment?
And how do the differences today, whether it be geopolitical or the mix of engineering or investment management, maybe sort of change your thinking?
Christian Mayer (Global Chief Financial Officer & CEO, Commercial Real Estate)
It’s a good question, Julian. And I think Jimmy will thank you because that’s the one he was trying to ask when he called earlier. So, you know, we don’t give 2027 guidance until February. But your question is a good one. And we have, you know, a resilient business. As Jay said, we have 70% of our earnings coming from recurring and repeat services. So I think that is only stronger now than it was back in 2023. So the resiliency of our business is high.
And, you know, should there be another capital markets shock of some kind, we definitely will enjoy the benefits of that diversification that we built in our business. The one thing I will say about 2027 is that we have, as Jay mentioned, made significant acquisitions this year. During the year, and all else being equal, those acquisitions will add about 5% revenue and about 7% to our EBITDA in 2027, just as they annualize.
Jay Hennick (Chairman & Chief Executive Officer)
And the other point I might make, Julian, and I guess this relates primarily to commercial real estate. There’s a misnomer out there a little bit when you talk about transaction services, because transaction services is typically made up of capital markets and leasing. And if you look at the numbers from 23 on and, in fact, over the past decade or more for us, leasing consistently delivers. It’s not recurring — we don’t call it recurring revenue — but every lease is 1, 3, 5, 10 years.
And our leasing professionals build relationships with clients as they renew their leases or expand their operations or contract or whatever they’re doing that creates a repeat revenue stream from a client relationship. So when I think about volatility, I think more about volatility around capital markets versus leasing. And so I thought I would just add that point because I think it gets lost in the narrative, especially for those that talk specifically around commercial real estate.
Julian Bluein (Analyst)
Thank you. Appreciate those thoughts, Jay. And then, Christian, the net margin investment management, I think, fell another sort of 4 percentage points year over year. I think that’s 9 percentage points over the last couple years. I appreciate the comments around stabilizing in the 40% range through 27, I guess. Can you give us a sense of how far along you are in the integration efforts and is there a path sort of back up to sort of the mid-40% net margins that the business used to see?
Christian Mayer (Global Chief Financial Officer & CEO, Commercial Real Estate)
Yeah, I mean, as I indicated in my prepared remarks, you know, we see a 40% margin through 2027. You know, certainly that margin can continue to evolve and expand over time. But, you know, I think I want to sort of be careful and cautious around, you know, talking about getting margins to the 45 or higher percent range. Our mix of business has shifted a little bit in the segment — credit capabilities, as an example — which generally has a little bit lower fee attached to it.
So there are things like that that are impacting the margin profile of the business, as well as some ancillary services that we now offer as well, beyond just the usual management fees.
Julian Bluein (Analyst)
Okay, great. Thank you.
OPERATOR
Your next question is from the line of Anthony Paolone with JP Morgan. Anthony, your line is open. Please go ahead.
Anthony Paolone (Analyst)
Great, thanks. Apologies if maybe you covered some of this, but you guys were cutting out on my line a bit through this. The guidance change. Was that all capital markets related, or can you maybe go through the bigger segments and provide any changes that were made to get to that?
Christian Mayer (Global Chief Financial Officer & CEO, Commercial Real Estate)
Tony, the guidance change is primarily tied to our expectations for capital markets revenues for the fourth quarter. But as Jay mentioned, you know, the rate environment, the geopolitical environment does impact all of our businesses and would include what we talked about earlier — you know, the deployment of capital on our investment management business, which, you know, we’ve raised a solid amount of capital, but it’s come later in the year, so the fees are turning on later than we originally expected.
So it’s primarily capital markets, but also just generally, you know, some impacts on the business.
Anthony Paolone (Analyst)
Okay. And then my other question relates to management of data centers. You brought that up as one of the things you do in terms of providing a full suite of products there. Haven’t heard much about it in the past, but can you talk about how big that business is, rate of growth, and kind of exactly what you’re doing at the site on an ongoing basis?
Jay Hennick (Chairman & Chief Executive Officer)
Yes, a couple of things on data centers. Number one, and we discussed this on the last quarterly call, data centers is an important element — and Christian can talk to this — in the commercial real estate segment. It’s an important segment of our business, but it’s not overly material in the overall scheme of things. Where it is very interesting is in our engineering business where we’re actively involved in many aspects of the construction, the design, the management of data centers.
And Harrison Street has been in the data center business now for seven years and has something like six to seven billion dollars in investments in data centers already. This is not new for them. So data centers is an important element for the company virtually across the board. But, you know, in each one of the segments, it has a different level of materiality, I’d say.
Anthony Paolone (Analyst)
Okay, thank you.
OPERATOR
Your next question is from the line of Aaron Kyle with CIBC. Erin, your line is open. Please go ahead. Just a reminder.
Aaron Kyle (Analyst)
Thanks for taking the questions. I apologize if… Can you hear me?
OPERATOR
Yes, we can hear you. Go ahead, Erin. Thank you.
Aaron Kyle (Analyst)
Thanks. There’s some line issues — you were cutting out on my end — but as it relates to the guidance, you know, you referenced geopolitical uncertainty and the rate environment. I wanted to ask, as it relates to your U.S. business and commercial real estate and capital markets specifically, you know, without changing the guide this morning obviously, but have the U.S. Midterm results changed your view at all in terms of the range of potential outcomes, particularly around transaction activity or business confidence in the U.S.?
Christian Mayer (Global Chief Financial Officer & CEO, Commercial Real Estate)
Well, I mean, we haven’t really had full time to digest that one yet, but based on, you know, you’ve had—
Aaron Kyle (Analyst)
Two hours, three hours.
Christian Mayer (Global Chief Financial Officer & CEO, Commercial Real Estate)
But, you know, certainly what you see from the commentators and we see in the markets, it is a possibly a positive sign that could yield some upside for the fourth quarter.
Aaron Kyle (Analyst)
That’s fair enough. To your point, it—
Jay Hennick (Chairman & Chief Executive Officer)
—might bring stability. It might bring some… I was going to say it might bring some stability, but I think that some to help transactions get over the line. As Christian said, there’s a lot of them that are delayed. But I think what’s really impacting them right now, especially the active ones, is the interest rate environment, and that’s what’s really slowing the transactions down. I’m not sure the political environment in the U.S. on existing transactions that will flow through the fourth quarter will really impact anything, but that’s just my take on it.
Aaron Kyle (Analyst)
That’s helpful. Thank you. Maybe just on the capital allocation side then, with organic growth moderating a bit in some parts of the business, does it change the willingness at all to use the balance sheet for buybacks? Understanding — I know leverage is still around 2.7 — but how are you thinking about that ceiling? Is there room to push it at all?
Christian Mayer (Global Chief Financial Officer & CEO, Commercial Real Estate)
Yeah, Erin, certainly, you know, we look at the full range of capital allocation opportunities in front of us all the time and, you know, we are an active acquirer of businesses. And recently, you know, just this Obsidian transaction is the latest and one we’re really excited about. Our first priority is always going to be allocating capital to acquisition opportunities. And as we delever — and we talked about this last quarter — you know, we will also consider a stock buyback, you know, if that is the right thing to do at that point in time.
But we’re thinking about all this stuff, you know, on an ongoing basis.
Jay Hennick (Chairman & Chief Executive Officer)
But as Christian said, you know, our goal is to build each of the three platforms one step at a time. And one of the interesting things that’s happening now is that there’s some interesting acquisition opportunities coming into the marketplace. They haven’t been able to sell for a whole variety of reasons and they would be great additions to our business. And as I said in my prepared remarks, we really do focus on building long-term shareholder value.
And if there’s something spectacular that we think that we can acquire now because the market conditions are conducive, that would be our first priority.
Aaron Kyle (Analyst)
Thank you.
OPERATOR
Your next question is from the line of Stephen Sheldon with William Blair. Steven, your line is open. Please go ahead.
Stephen Sheldon (Analyst)
Hey, thanks for putting me back in. Just had a quick follow-up for Christian on interest expense. It seemed like it dipped quite a bit sequentially this quarter. So curious if there were one-time items driving that, and then any guardrails you can give us on interest expense you’ve embedded for the fourth quarter in the guide.
Christian Mayer (Global Chief Financial Officer & CEO, Commercial Real Estate)
Yes, Stephen, there was a one-time item in the interest expense for the quarter, and it was a result of an interest rate swap that we terminated late in the quarter. It was something we had to do from a balance sheet management perspective, but it was at an opportune time, and we took a nice gain on that of 17 cents. Also in the quarter we had a tax matter in Europe which resulted in certain deferred tax assets being written off, which had a fully offsetting impact of about $0.16.
So those two items combined neutralized each other and offset each other.
Stephen Sheldon (Analyst)
Great. Thank you.
OPERATOR
This concludes our question and answer period. I will now turn the call back to Mr. Jay Hennick for closing remarks.
Jay Hennick (Chairman & Chief Executive Officer)
Thank you, operator, and thanks, everyone, for participating in the third quarter conference call. We appreciate it. We’ll see you at year-end.
OPERATOR
Ladies and gentlemen, this concludes the conference call. Thank you for your participation and have a nice day.
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