Item 8. Financial Statements and Supplementary Data.

| --- | --- |

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

AND FINANCIAL STATEMENT SCHEDULES

	Page

Report of Independent Registered Public Accounting Firm on Consolidated Financial Statements	52

Report of Independent Registered Public Accounting Firm on Internal Control Over Financial Reporting	54

Consolidated Balance Sheets at December 31, 2019 and 2018	56

Consolidated Statements of Operations for the years ended December 31, 2019, 2018 and 2017	57

Consolidated Statements of Comprehensive Income for the years ended December 31, 2019, 2018 and 2017	58

Consolidated Statements of Cash Flows for the years ended December 31, 2019, 2018 and 2017	59

Consolidated Statements of Equity for the years ended December 31, 2019, 2018 and 2017	61

Notes to Consolidated Financial Statements	63

Quarterly Results of Operations (Unaudited)	117


FINANCIAL STATEMENT SCHEDULES:

Schedule II -Valuation and Qualifying Accounts	122

All other schedules are omitted because they are either not applicable, not required or the information required is included in the Consolidated Financial Statements, including the notes thereto.

Report of Independent Registered Public Accounting Firm

To the Stockholders and Board of Directors

CBRE Group, Inc.:

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheets of CBRE Group, Inc. and subsidiaries (the Company) as of December 31, 2019 and 2018, the related consolidated statements of operations, comprehensive income, cash flows, and equity for each of the years in the three‑year period ended December 31, 2019, and the related notes and financial statement schedule II (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2019 and 2018, and the results of its operations and its cash flows for each of the years in the three‑year period ended December 31, 2019, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2019, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated March 2, 2020 expressed an adverse opinion on the effectiveness of the Company’s internal control over financial reporting.

Change in Accounting Principle

As discussed in Note 3 to the consolidated financial statements, the Company has changed its method of accounting for leases in 2019 due to the adoption of Accounting Standards Codification Topic 842, Leases.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgment. The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Assessment of G**ross U**nrecognized T**ax B**enefits

As discussed in Notes 2 and 15 to the consolidated financial statements, the Company has recorded gross unrecognized tax benefits of $141.2 million as of December 31, 2019. The Company utilizes a two-step approach to recognizing and measuring uncertain tax positions. The first step is to evaluate the tax position for recognition by determining if the available evidence indicates there is more than a 50% likelihood that the position will be sustained upon examination, including resolution of related appeals or litigation processes. The second step is to measure the tax benefit as the largest amount which is more than 50% likely of being realized upon ultimate settlement.

We identified the assessment of the gross unrecognized tax benefits as a critical audit matter. Complex auditor judgment was required in evaluating the Company’s interpretation of tax law and its estimate of the resolution of the tax positions underlying the unrecognized tax benefits.

The primary procedures we performed to address this critical audit matter included the following. We tested certain internal controls over the Company’s unrecognized tax benefits process, including the interpretation of tax law and the estimate of the unrecognized tax benefits. Since tax law is complex and often subject to interpretations, we involved tax and valuation professionals with specialized skills and knowledge, who assisted in:

	•	Evaluating the Company’s interpretation of tax law and the potential impact on the Company’s tax positions,

	•	Assessing transfer pricing policies for compliance with applicable laws and regulations,

	•	Inspecting settlement documents with applicable taxing authorities, and assessing the expiration of statutes of limitations, and

	•	Performing an independent assessment of certain of the Company’s tax positions and comparing the results to the Company’s assessment.

/s/ KPMG LLP

We have served as the Company’s auditor since 2008.

Los Angeles, California

March 2, 2020

Report of Independent Regist****ered Public Accounting Firm

To the Stockholders and Board of Directors

CBRE Group, Inc.:

Opinion on Internal Control Over Financial Reporting

We have audited CBRE Group, Inc. and subsidiaries’ (the Company) internal control over financial reporting as of December 31, 2019, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. In our opinion, because of the effect of the material weaknesses, described below, on the achievement of the objectives of the control criteria, the Company has not maintained effective internal control over financial reporting as of December 31, 2019, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2019 and 2018, the related consolidated statements of operations, comprehensive income, cash flows, and equity for each of the years in the three-year period ended December 31, 2019, and the related notes and financial statement schedule II (collectively, the consolidated financial statements), and our report dated March 2, 2020 expressed an unqualified opinion on those consolidated financial statements.

The Company acquired Telford Homes Plc during 2019 and management excluded from its assessment of the effectiveness of the Company’s internal control over financial reporting as of December 31, 2019 Telford Homes Plc’s internal control over financial reporting associated with total assets of $525.4 million and total revenues of $97.5 million included in the consolidated financial statements of the Company as of and for the year ended December 31, 2019. Our audit of internal control over financial reporting of the Company also excluded an evaluation of the internal control over financial reporting of Telford Homes Plc.

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis. The following material weaknesses have been identified and included in management’s assessment:

	•	The Global Workplace Solutions segment in the Company’s EMEA region (GWS EMEA) did not have sufficient resources with the appropriate reporting lines, roles and responsibilities, authority, training and skill sets to design and operate financial activities, including controls, in an appropriate and timely manner.

	•	GWS EMEA did not effectively assess and address the risks posed by changes in the business and the related effect on the GWS EMEA system of internal controls. In relation to this, specific to the rollout of GWS EMEA’s primary financial system, GWS EMEA did not effectively operate general information technology controls related to financial data migrations, user access, system changes and financial data processing. Because of the deficiencies in general information technology controls, the business process controls (automated and manual) that are dependent on this system were also deemed ineffective because they could have been adversely impacted.

	•	GWS EMEA did not design or execute control activities that sufficiently mitigated the financial reporting risks related to GWS EMEA.

	•	GWS EMEA did not have an effective information and communication process to identify, capture and process relevant information necessary for financial accounting and reporting.

	•	The Company did not monitor the presentation and effectiveness of components of internal control through evaluation and remediation in an appropriate manner within GWS EMEA and GWS EMEA was not sufficiently integrated with the corporate oversight function.

Consequently, there were control failures for GWS EMEA in the areas of revenue and receivables, balance sheet account reconciliations, journal entries and general information technology controls. The material weaknesses were considered in determining the nature, timing, and extent of audit tests applied in our audit of the 2019 consolidated financial statements, and this report does not affect our report on those consolidated financial statements.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control Over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ KPMG LLP

Los Angeles, California

March 2, 2020

CBRE GROUP, INC.

CONSOLIDATED BALANCE SHEETS

(Dollars in thousands, except share data)

	December 31,
		2019			2018
ASSETS
Current Assets:
Cash and cash equivalents	$	971,781		$	777,219
Restricted cash		121,964			86,725
Receivables, less allowance for doubtful accounts of $72,725 and $60,348 at December 31, 2019 and 2018, respectively		4,466,674			3,668,591
Warehouse receivables		993,058			1,342,468
Contract assets		328,012			307,020
Prepaid expenses		282,741			254,892
Income taxes receivable		93,915			71,684
Other current assets		276,319			245,611
Total Current Assets		7,534,464			6,754,210
Property and equipment, net		836,206			721,692
Goodwill		3,753,493			3,652,309
Other intangible assets, net of accumulated amortization of $1,358,528 and $1,180,393 at December 31, 2019 and 2018, respectively		1,379,546			1,441,308
Operating lease assets		997,966			—
Investments in unconsolidated subsidiaries		426,711			216,174
Non-current contract assets		201,760			74,762
Real estate under development		185,508			4,586
Non-current income taxes receivable		139,136			—
Deferred tax assets, net		73,864			51,703
Other assets, net		668,542			540,049
Total Assets	$	16,197,196		$	13,456,793
LIABILITIES AND EQUITY
Current Liabilities:
Accounts payable and accrued expenses	$	2,436,084		$	1,919,827
Compensation and employee benefits payable		1,324,990			1,121,179
Accrued bonus and profit sharing		1,261,974			1,189,395
Operating lease liabilities		168,663			—
Contract liabilities		108,671			82,227
Income taxes payable		30,207			68,100
Short-term borrowings:
Warehouse lines of credit (which fund loans that U.S. Government Sponsored Enterprises have committed to purchase)		977,175			1,328,761
Other		4,534			—
Total short-term borrowings		981,709			1,328,761
Current maturities of long-term debt		1,814			3,146
Other current liabilities		122,339			90,745
Total Current Liabilities		6,436,451			5,803,380
Long-term debt, net of current maturities		1,761,245			1,767,260
Non-current operating lease liabilities		1,057,758			—
Non-current income taxes payable		93,647			—
Non-current tax liabilities		85,966			172,626
Deferred tax liabilities, net		34,593			107,425
Other liabilities		454,424			596,200
Total Liabilities		9,924,084			8,446,891
Commitments and contingencies		—			—
Equity:
CBRE Group, Inc. Stockholders’ Equity:
Class A common stock; $0.01 par value; 525,000,000 shares authorized; 334,752,283 and 336,912,783 shares issued and outstanding at December 31, 2019 and 2018, respectively		3,348			3,369
Additional paid-in capital		1,115,944			1,149,013
Accumulated earnings		5,793,149			4,504,684
Accumulated other comprehensive loss		(679,748	)		(718,269	)
Total CBRE Group, Inc. Stockholders’ Equity		6,232,693			4,938,797
Non-controlling interests		40,419			71,105
Total Equity		6,273,112			5,009,902
Total Liabilities and Equity	$	16,197,196		$	13,456,793

The accompanying notes are an integral part of these consolidated financial statements.

CBRE GROUP, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(Dollars in thousands, except share data)

	Year Ended December 31,
		2019		2018		2017
Revenue	$	23,894,091	$	21,340,088	$	18,628,787
Costs and expenses:
Cost of revenue		18,689,013		16,449,212		14,305,099
Operating, administrative and other		3,436,009		3,365,773		2,858,720
Depreciation and amortization		439,224		451,988		406,114
Intangible asset impairment		89,787		—		—
Total costs and expenses		22,654,033		20,266,973		17,569,933
Gain on disposition of real estate		19,817		14,874		19,828
Operating income		1,259,875		1,087,989		1,078,682
Equity income from unconsolidated subsidiaries		160,925		324,664		210,207
Other income		28,907		93,020		9,405
Interest expense, net of interest income		85,754		98,685		126,961
Write-off of financing costs on extinguished debt		2,608		27,982		—
Income before provision for income taxes		1,361,345		1,379,006		1,171,333
Provision for income taxes		69,895		313,058		467,757
Net income		1,291,450		1,065,948		703,576
Less: Net income attributable to non-controlling interests		9,093		2,729		6,467
Net income attributable to CBRE Group, Inc.	$	1,282,357	$	1,063,219	$	697,109
Basic income per share:
Net income per share attributable to CBRE Group, Inc.	$	3.82	$	3.13	$	2.06
Weighted average shares outstanding for basic income per share		335,795,654		339,321,056		337,658,017
Diluted income per share:
Net income per share attributable to CBRE Group, Inc.	$	3.77	$	3.10	$	2.05
Weighted average shares outstanding for diluted income per share		340,522,871		343,122,741		340,783,556

The accompanying notes are an integral part of these consolidated financial statements.

CBRE GROUP, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Dollars in thousands)

	Year Ended December 31,
		2019			2018			2017
Net income	$	1,291,450		$	1,065,948		$	703,576
Other comprehensive income (loss):
Foreign currency translation (loss) gain		(14,092	)		(161,384	)		218,001
Adoption of Accounting Standards Update 2016-01, net of $2,141 income tax benefit for the year ended December 31, 2018		—			(3,964	)		—
Amounts reclassified from accumulated other comprehensive loss to interest expense, net of $471, $876 and $3,066 income tax expense for the years ended December 31, 2019, 2018 and 2017, respectively		1,320			2,439			4,964
Unrealized gains on interest rate swaps, net of $254 and $362 income tax expense for the years ended December 31, 2018 and 2017, respectively		—			708			585
Unrealized holding gains (losses) on available for sale debt securities, net of $559 income tax expense, $349 income tax benefit and $1,685 income tax expense for the years ended December 31, 2019, 2018 and 2017, respectively		2,101			(971	)		2,737
Pension liability adjustments, net of $194, $269 and $2,601 income tax expense for the years ended December 31, 2019, 2018 and 2017, respectively		944			1,315			12,701
Legal entity restructuring, net of $17,694 income tax expense for the year ended December 31, 2019		63,149			—			—
Other, net of $3,795 and $3,550 income tax benefit and $342 income tax expense for the years ended December 31, 2019, 2018 and 2017, respectively		(14,946	)		(5,070	)		364
Total other comprehensive income (loss)		38,476			(166,927	)		239,352
Comprehensive income		1,329,926			899,021			942,928
Less: Comprehensive income attributable to non-controlling interests		9,048			1,657			6,879
Comprehensive income attributable to CBRE Group, Inc.	$	1,320,878		$	897,364		$	936,049

The accompanying notes are an integral part of these consolidated financial statements.

CBRE GROUP, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in thousands)

	Year Ended December 31,
		2019			2018			2017
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	1,291,450		$	1,065,948		$	703,576
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		439,224			451,988			406,114
Amortization and write-off of financing costs on extinguished debt		8,662			35,175			10,783
Gains related to mortgage servicing rights, premiums on loan sales and sales of other assets		(246,690	)		(229,376	)		(200,386	)
Intangible asset impairment		89,787			—			—
Gain associated with remeasuring our investment in a joint venture entity to fair value at the date we acquired the remaining interest		—			(100,420	)		—
Net realized and unrealized (gains) losses from investments		(28,907	)		7,400			(9,405	)
Provision for doubtful accounts		20,373			19,760			8,044
Compensation expense for equity awards		127,738			128,171			93,087
Equity income from unconsolidated subsidiaries		(160,925	)		(324,664	)		(210,207	)
Distribution of earnings from unconsolidated subsidiaries		199,011			336,925			211,855
Proceeds from sale of mortgage loans		19,805,060			20,230,676			18,052,756
Origination of mortgage loans		(19,389,979	)		(20,591,602	)		(17,655,104	)
(Decrease) increase in warehouse lines of credit		(351,586	)		417,995			(343,887	)
Tenant concessions received		21,249			38,400			19,337
Purchase of equity securities		(83,001	)		(99,789	)		(110,570	)
Proceeds from sale of equity securities		46,949			75,120			68,547
Decrease (increase) in real estate under development		34,776			(4,586	)		2,472
Increase in receivables, prepaid expenses and other assets (including contract and lease assets)		(824,490	)		(773,361	)		(534,190	)
Increase in accounts payable and accrued expenses and other liabilities (including contract and lease liabilities)		306,677			273,782			159,145
Increase in compensation and employee benefits payable and accrued bonus and profit sharing		244,895			270,371			148,714
(Increase) decrease in net income taxes receivable/payable		(274,436	)		(47,074	)		108,151
Other operating activities, net		(52,457	)		(49,590	)		(34,421	)
Net cash provided by operating activities		1,223,380			1,131,249			894,411
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures		(293,514	)		(227,803	)		(178,042	)
Acquisition of businesses, including net assets acquired, intangibles and goodwill, net of cash acquired		(355,926	)		(322,573	)		(118,427	)
Contributions to unconsolidated subsidiaries		(105,947	)		(62,802	)		(68,700	)
Distributions from unconsolidated subsidiaries		33,289			61,709			63,664
Purchase of equity securities		(12,017	)		(21,402	)		(15,584	)
Proceeds from sale of equity securities		15,623			16,314			15,587
Purchase of available for sale debt securities		(8,853	)		(23,360	)		(19,280	)
Proceeds from the sale of available for sale debt securities		4,671			5,792			15,790
Other investing activities, net		1,650			13,441			2,392
Net cash used in investing activities		(721,024	)		(560,684	)		(302,600	)

The accompanying notes are an integral part of these consolidated financial statements.

CBRE GROUP, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in thousands)

	Year Ended December 31,
		2019			2018			2017
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from senior term loans		300,000			1,002,745			200,000
Repayment of senior term loans		(300,000	)		(450,000	)		(751,876	)
Proceeds from revolving credit facility		3,609,000			3,258,000			1,521,000
Repayment of revolving credit facility		(3,609,000	)		(3,258,000	)		(1,521,000	)
Repayment of 5.00% senior notes (including premium)		—			(820,000	)		—
Repayment of debt assumed in acquisition of Telford Homes		(110,687	)		—			—
Repayment of debt assumed in acquisition of FacilitySource		—			(26,295	)		—
Repurchase of common stock		(145,137	)		(161,034	)		—
Acquisition of businesses (cash paid for acquisitions more than three months after purchase date)		(42,147	)		(18,660	)		(24,006	)
Units repurchased for payment of taxes on equity awards		(18,426	)		(29,386	)		(29,549	)
Non-controlling interest contributions		46,612			25,355			5,301
Non-controlling interest distributions		(3,957	)		(13,413	)		(8,715	)
Other financing activities, net		1,793			(15,912	)		(18,897	)
Net cash used in financing activities		(271,949	)		(506,600	)		(627,742	)
Effect of currency exchange rate changes on cash and cash equivalents and restricted cash		(606	)		(24,840	)		29,338
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS AND RESTRICTED CASH		229,801			39,125			(6,593	)
CASH AND CASH EQUIVALENTS AND RESTRICTED CASH, AT BEGINNING OF PERIOD		863,944			824,819			831,412
CASH AND CASH EQUIVALENTS AND RESTRICTED CASH, AT END OF PERIOD	$	1,093,745		$	863,944		$	824,819
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest	$	86,666		$	104,165		$	117,164
Income taxes, net	$	365,065		$	375,849		$	356,997

The accompanying notes are an integral part of these consolidated financial statements.

CBRE GROUP, INC.

CONSOLIDATED STATEMENTS OF EQUITY

(Dollars in thousands)

	CBRE Group, Inc. Shareholders
										Accumulated other comprehensive loss
	Shares		Class A common stock		Additional paid-in capital			Accumulated earnings		Minimum pension liability			Foreign currency translation and other			Non- controlling interests			Total
Balance at December 31, 2016		337,279,449	$	3,373	$	1,145,226		$	2,745,897	$	(165,670	)	$	(625,684	)	$	42,758		$	3,145,900
Net income		—		—		—			697,109		—			—			6,467			703,576
Pension liability adjustments, net of tax		—		—		—			—		12,701			—			—			12,701
Non-cash issuance of common stock related to acquisition		495,828		5		11,688			—		—			—			—			11,693
Restricted stock awards vesting		1,660,269		17		(17	)		—		—			—			—			—
Compensation expense for equity awards		—		—		93,087			—		—			—			—			93,087
Units repurchased for payment of taxes on equity awards		—		—		(29,549	)		—		—			—			—			(29,549	)
Amounts reclassified from accumulated other comprehensive loss to interest expense, net of tax		—		—		—			—		—			4,964			—			4,964
Unrealized gains on interest rate swaps, net of tax		—		—		—			—		—			585			—			585
Unrealized holding gains on available for sale debt securities, net of tax		—		—		—			—		—			2,737			—			2,737
Foreign currency translation gain		—		—		—			—		—			217,589			412			218,001
Contributions from non-controlling interests		—		—		—			—		—			—			5,301			5,301
Distributions to non-controlling interests		—		—		—			—		—			—			(8,715	)		(8,715	)
Acquisition of non-controlling interests		—		—		—			—		—			—			12,671			12,671
Other		23,592		—		73			1		—			364			1,224			1,662
Balance at December 31, 2017		339,459,138		3,395		1,220,508			3,443,007		(152,969	)		(399,445	)		60,118			4,174,614
Net income		—		—		—			1,063,219		—			—			2,729			1,065,948
Adoption of Accounting Standards Update 2016-01, net of tax		—		—		—			3,964		—			(3,964	)		—			—
Pension liability adjustments, net of tax		—		—		—			—		1,315			—			—			1,315
Restricted stock awards vesting		1,424,462		14		(14	)		—		—			—			—			—
Compensation expense for equity awards		—		—		128,171			—		—			—			—			128,171
Reclassification of stock incentive plan award from an equity award to a liability award		—		—		(9,074	)		—		—			—			—			(9,074	)
Units repurchased for payment of taxes on equity awards		—		—		(29,386	)		—		—			—			—			(29,386	)

The accompanying notes are an integral part of these consolidated financial statements.

CBRE GROUP, INC.

CONSOLIDATED STATEMENTS OF EQUITY

(Dollars in thousands)

	CBRE Group, Inc. Shareholders
													Accumulated other comprehensive loss
	Shares			Class A common stock			Additional paid-in capital			Accumulated earnings			Minimum pension liability			Foreign currency translation and other			Non- controlling interests			Total
Repurchase of common stock		(3,980,656	)		(40	)		(160,994	)		—			—			—			—			(161,034	)
Foreign currency translation loss		—			—			—			—			—			(160,312	)		(1,072	)		(161,384	)
Amounts reclassified from accumulated other comprehensive loss to interest expense, net of tax		—			—			—			—			—			2,439			—			2,439
Unrealized gains on interest rate swaps, net of tax		—			—			—			—			—			708			—			708
Unrealized holding losses on available for sale debt securities, net of tax		—			—			—			—			—			(971	)		—			(971	)
Contributions from non-controlling interests		—			—			—			—			—			—			25,355			25,355
Distributions to non-controlling interests		—			—			—			—			—			—			(13,413	)		(13,413	)
Other		9,839			—			(198	)		(5,506	)		3,747			(8,817	)		(2,612	)		(13,386	)
Balance at December 31, 2018		336,912,783			3,369			1,149,013			4,504,684			(147,907	)		(570,362	)		71,105			5,009,902
Net income		—			—			—			1,282,357			—			—			9,093			1,291,450
Pension liability adjustments, net of tax		—			—			—			—			944			—			—			944
Restricted stock awards vesting		920,407			9			(9	)		—			—			—			—			—
Compensation expense for equity awards		—			—			127,738			—			—			—			—			127,738
Units repurchased for payment of taxes on equity awards		—			—			(18,426	)		—			—			—			—			(18,426	)
Repurchase of common stock		(3,080,907	)		(31	)		(145,106	)		—			—			—			—			(145,137	)
Foreign currency translation loss		—			—			—			—			—			(14,047	)		(45	)		(14,092	)
Amounts reclassified from accumulated other comprehensive loss to interest expense, net of tax		—			—			—			—			—			1,320			—			1,320
Unrealized holding gains on available for sale debt securities, net of tax		—			—			—			—			—			2,101			—			2,101
Contributions from non-controlling interests		—			—			—			—			—			—			46,612			46,612
Distributions to non-controlling interests		—			—			—			—			—			—			(3,957	)		(3,957	)
Deconsolidation of investments		—			—			—			—			—			—			(76,349	)		(76,349	)
Legal entity restructuring, net		—			—			—			—			—			63,149			—			63,149
Other		—			1			2,734			6,108			—			(14,946	)		(6,040	)		(12,143	)
Balance at December 31, 2019		334,752,283		$	3,348		$	1,115,944		$	5,793,149		$	(146,963	)	$	(532,785	)	$	40,419		$	6,273,112

The accompanying notes are an integral part of these consolidated financial statements.

CBRE GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.	Nature of Operations

CBRE Group, Inc., a Delaware corporation (which may be referred to in these financial statements as “the company,” “we,” “us” and “our”), was incorporated on February 20, 2001. We are the world’s largest commercial real estate services and investment firm, based on 2019 revenue, with leading global market positions in our leasing, property sales, occupier outsourcing and valuation businesses. Our business is focused on providing services to real estate occupiers and investors. For occupiers, we provide facilities management, project management, transaction (both property sales and leasing) and consulting services, among others. For investors, we provide capital markets (property sales, mortgage origination, sales and servicing), leasing, investment management, property management, valuation and development services, among others. We generate revenue from both management fees (large multi-year portfolio and per-project contracts) and commissions on transactions. As of December 31, 2019, we operated in more than 530 offices worldwide with more than 100,000 employees, excluding independent affiliates, providing services under the following brand names: “CBRE” (real estate advisory and outsourcing services); “CBRE Global Investors” (investment management); “Trammell Crow Company” (U.S. development); “Telford Homes” (U.K. development) and “Hana” (flexible-space solutions).

2.	Significant Accounting Policies

Principles of Consolidation

The accompanying consolidated financial statements include our accounts and those of our consolidated subsidiaries, which are comprised of variable interest entities in which we are the primary beneficiary and voting interest entities, in which we determined we have a controlling financial interest, under the “Consolidations” Topic of the Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) (Topic 810). The equity attributable to non-controlling interests in subsidiaries is shown separately in the accompanying consolidated balance sheets. All significant intercompany accounts and transactions have been eliminated in consolidation.

Variable Interest Entities (VIEs)

We determine whether an entity is a VIE and, if so, whether it should be consolidated by utilizing judgments and estimates that are inherently subjective. Our determination of whether an entity in which we hold a direct or indirect variable interest is a VIE is based on several factors, including whether the entity’s total equity investment at risk upon inception is sufficient to finance the entity’s activities without additional subordinated financial support. We make judgments regarding the sufficiency of the equity at risk based first on a qualitative analysis, and then a quantitative analysis, if necessary.

We analyze any investments in VIEs to determine if we are the primary beneficiary. In evaluating whether we are the primary beneficiary, we evaluate our direct and indirect economic interests in the entity. A reporting entity is determined to be the primary beneficiary if it holds a controlling financial interest in the VIE. Determining which reporting entity, if any, has a controlling financial interest in a VIE is primarily a qualitative approach focused on identifying which reporting entity has both: (i) the power to direct the activities of a VIE that most significantly impact such entity’s economic performance; and (ii) the obligation to absorb losses or the right to receive benefits from such entity that could potentially be significant to such entity. Performance of that analysis requires the exercise of judgment.

We consider a variety of factors in identifying the entity that holds the power to direct matters that most significantly impact the VIE’s economic performance including, but not limited to, the ability to direct financing, leasing, construction and other operating decisions and activities. In addition, we consider the rights of other investors to participate in those decisions, to replace the manager and to sell or liquidate the entity. We determine whether we are the primary beneficiary of a VIE at the time we become involved with a variable interest entity and reconsider that conclusion continually.

CBRE GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

We consolidate any VIE of which we are the primary beneficiary and disclose significant VIEs of which we are not the primary beneficiary, if any, as well as disclose our maximum exposure to loss related to VIEs that are not consolidated (see Note 6).

Voting Interest Entities (VOEs)

For VOEs, we consolidate the entity if we have a controlling financial interest. We have a controlling financial interest in a VOE if: (i) for legal entities other than limited partnerships, we own a majority voting interest in the VOE or, for limited partnerships and similar entities, we own a majority of the entity’s kick-out rights through voting limited partnership interests; and (ii) non-controlling shareholders or partners do not hold substantive participating rights and no other conditions exist that would indicate that we do not control the entity.

Other Investments

Our investments in unconsolidated subsidiaries in which we have the ability to exercise significant influence over operating and financial policies, but do not control, or entities which are variable interest entities in which we are not the primary beneficiary are accounted for under the equity method. We eliminate transactions with such equity method subsidiaries to the extent of our ownership in such subsidiaries. Accordingly, our share of the earnings from these equity-method basis companies is included in consolidated net income. All other investments held on a long-term basis are valued at cost less any impairment in value.

Marketable Securities

Debt securities are classified as held to maturity when we have the positive intent and ability to hold the securities to maturity. Marketable debt securities not classified as held to maturity are classified as available for sale. Available for sale debt securities are carried at their fair value and any difference between cost and fair value is recorded as an unrealized gain or loss, net of income taxes, and is reported as accumulated other comprehensive income (loss) in the consolidated statement of equity. Premiums and discounts are recognized in interest using the effective interest method. Realized gains and losses and declines in value expected to be other-than-temporary on available for sale debt securities have not been significant. The cost of securities sold is based on the specific identification method. Interest and dividends on securities classified as available for sale are included in interest income.

All equity securities that do not result in consolidation and are not accounted for under the equity method are measured at fair value with changes therein reflected in net income. Equity instruments that do not have readily determinable fair values and do not qualify for using the net asset value per share practical expedient in the “Fair Value Measurements and Disclosures” topic (Topic 820) of the FASB ASC are measured at cost, less any impairment.

Impairment Evaluation

Impairment losses are recognized upon evidence of other-than-temporary losses of value. When testing for impairment on investments that are not actively traded on a public market, we generally use a discounted cash flow approach to estimate the fair value of our investments and/or look to comparable activities in the marketplace. Management’s judgment is required in developing the assumptions for the discounted cash flow approach. These assumptions include net asset values, internal rates of return, discount and capitalization rates, interest rates and financing terms, rental rates, timing of leasing activity, estimates of lease terms and related concessions, etc. When determining if impairment is other-than-temporary, we also look to the length of time and the extent to which fair value has been less than cost as well as the financial condition and near-term prospects of each investment. Based on our review, we did not record any significant other-than-temporary impairment losses during the years ending December 31, 2019, 2018 and 2017.

CBRE GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Use of Estimates

Our consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (U.S.), or GAAP, which require management to make estimates and assumptions about future events. These estimates and assumptions affect the amounts of assets, liabilities, revenue and expenses we report. Such estimates include the value of goodwill, intangibles and other long-lived assets, accounts receivable, investments in unconsolidated subsidiaries and assumptions used in the calculation of income taxes, retirement and other post-employment benefits, among others. These estimates and assumptions are based on management’s best judgment, and are evaluated on an ongoing basis and adjusted, as needed, using historical experience and other factors, including consideration of the macroeconomic environment. As future events and their effects cannot be forecast with precision, actual results could differ significantly from these estimates. Changes in estimates resulting from continuing changes in the economic environment will be reflected in the financial statements in future periods.

Cash and Cash Equivalents

Cash and cash equivalents generally consist of cash and highly liquid investments with an original maturity of three months or less. Included in the accompanying consolidated balance sheets as of December 31, 2019 and 2018 is cash and cash equivalents of $70.5 million and $155.2 million, respectively, from consolidated funds and other entities, which are not available for general corporate use. We also manage certain cash and cash equivalents as an agent for our investment and property and facilities management clients. These amounts are not included in the accompanying consolidated balance sheets (see Fiduciary Funds discussion below).

Restricted Cash

Included in the accompanying consolidated balance sheets as of December 31, 2019 and 2018 is restricted cash of $122.0 million and $86.7 million, respectively. The balances primarily include restricted cash set aside to cover funding obligations as required by contracts executed by us in the ordinary course of business.

Fiduciary Funds

The accompanying consolidated balance sheets do not include the net assets of escrow, agency and fiduciary funds, which are held by us on behalf of clients and which amounted to $6.1 billion and $5.9 billion at December 31, 2019 and 2018, respectively.

Concentration of Credit Risk

Financial instruments that potentially subject us to credit risk consist principally of trade receivables and interest-bearing investments. Users of real estate services account for a substantial portion of trade receivables and collateral is generally not required. The risk associated with this concentration is limited due to the large number of users and their geographic dispersion.

We place substantially all of our interest-bearing investments with several major financial institutions to limit the amount of credit exposure with any one financial institution.

Property and Equipment

Property and equipment, which includes leasehold improvements, is stated at cost, net of accumulated depreciation. Depreciation and amortization of property and equipment is computed primarily using the straight-line method over estimated useful lives ranging up to 10 years. Leasehold improvements are amortized over the term of their associated leases, excluding options to renew, since such leases generally do not carry prohibitive penalties for non-renewal. We capitalize expenditures that significantly increase the life of our assets and expense the costs of maintenance and repairs.

CBRE GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

We review property and equipment for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If this review indicates that such assets are considered to be impaired, the impairment is recognized in the period the changes occur and represents the amount by which the carrying value exceeds the fair value of the asset.

Certain costs related to the development or purchase of internal-use software are capitalized. Internal-use software costs that are incurred in the preliminary project stage are expensed as incurred. Significant direct consulting costs and certain payroll and related costs, which are incurred during the development stage of a project are generally capitalized and amortized over a three-year period (except for enterprise software development platforms, which range from three to seven years) when placed into production.

Real Estate

Classification and Impairment Evaluation

We classify real estate in accordance with the criteria of the “Property, Plant and Equipment” Topic of the FASB ASC (Topic 360) as follows: (i) real estate held for sale, which includes completed assets or land for sale in its present condition that meet all of Topic 360’s “held for sale” criteria; (ii) real estate under development (current), which includes real estate that we are in the process of developing that is expected to be completed and disposed of within one year of the balance sheet date; (iii) real estate under development (non-current), which includes real estate that we are in the process of developing that is expected to be completed and disposed of more than one year from the balance sheet date; or (iv) real estate held for investment, which consists of land on which development activities have not yet commenced and completed assets or land held for disposition that do not meet the “held for sale” criteria. Any asset reclassified from real estate held for sale to real estate under development (current or non-current) or real estate held for investment is recorded individually at the lower of its fair value at the date of the reclassification or its carrying amount before it was classified as “held for sale,” adjusted (in the case of real estate held for investment) for any depreciation that would have been recognized had the asset been continuously classified as real estate held for investment.

Real estate held for sale is recorded at the lower of cost or fair value less cost to sell. If an asset’s fair value less cost to sell, based on discounted future cash flows, management estimates or market comparisons, is less than its carrying amount, an allowance is recorded against the asset. Real estate under development and real estate held for investment are carried at cost less depreciation, as applicable. Buildings and improvements included in real estate held for investment are depreciated using the straight-line method over estimated useful lives, generally up to 39 years. Tenant improvements included in real estate held for investment are amortized using the straight-line method over the shorter of their estimated useful lives or terms of the respective leases. Land improvements included in real estate held for investment are depreciated over their estimated useful lives, up to 15 years.

A summary of our real estate assets is as follows (dollars in thousands):

	December 31,
		2019		2018
Real estate under development, current (included in other current assets)	$	14,757	$	—
Real estate and other assets held for sale (included in other current assets)		5,066		24
Real estate under development		185,508		4,586
Real estate held for investment (included in other assets, net)		8,101		9,923
Total real estate	$	213,432	$	14,533

Real estate under development and real estate held for investment are evaluated for impairment and losses are recorded when undiscounted cash flows estimated to be generated by an asset are less than the asset’s carrying amount. The amount of the impairment loss, if any, is calculated as the excess of the asset’s carrying value over its fair value, which is determined using a discounted cash flow analysis, management estimates or market comparisons.

CBRE GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Cost Capitalization and Allocation

When acquiring, developing and constructing real estate assets, we capitalize recoverable costs. Capitalization begins when the activities related to development have begun and ceases when activities are substantially complete and the asset is available for occupancy. Recoverable costs capitalized include pursuit costs, or pre-acquisition/pre-construction costs, taxes and insurance, interest, development and construction costs and costs of incidental operations. We do not capitalize any internal costs when acquiring, developing and constructing real estate assets. We expense transaction costs for acquisitions that qualify as a business in accordance with the “Business Combinations” Topic of the FASB ASC (Topic 805). Pursuit costs capitalized in connection with a potential development project that we have determined not to pursue are written off in the period that determination is made.

At times, we purchase bulk land that we intend to sell or develop in phases. The land basis allocated to each phase is based on the relative estimated fair value of the phases before construction. We allocate construction costs incurred relating to more than one phase between the various phases; if the costs cannot be specifically attributed to a certain phase or the improvements benefit more than one phase, we allocate the costs between the phases based on their relative estimated sales values, where practicable, or other value methods as appropriate under the circumstances. Relative allocations of the costs are revised as the sales value estimates are revised.

When acquiring real estate with existing buildings, we allocate the purchase price between land, land improvements, building and intangibles related to in-place leases, if any, based on their relative fair values. The fair values of acquired land and buildings are determined based on an estimated discounted future cash flow model with lease-up assumptions as if the building was vacant upon acquisition. The fair value of in-place leases includes the value of lease intangibles for above or below-market rents and tenant origination costs, determined on a lease by lease basis. The capitalized values for both lease intangibles and tenant origination costs are amortized over the term of the underlying leases. Amortization related to lease intangibles is recorded as either an increase to or a reduction of rental income and amortization for tenant origination costs is recorded to amortization expense.

Disposition of Real Estate

We account for gains and losses on the sale of real estate and other nonfinancial assets or in substance nonfinancial assets to noncustomers that are not a output of our ordinary activities and are not a business in accordance with Topic 610-20, “Other Income – Gains and Losses from the Derecognition of Nonfinancial Assets” Where we do not have a controlling financial interest in the entity that holds the transferred assets after the transaction, we derecognize the assets or in substance nonfinancial assets and recognize a gain or loss when control of the underlying assets transfer to the counterparty.

We may also dispose of real estate through the transfer of a long-term leasehold representing a major part of the remaining economic life of the property. We account for these transfers as sales-type leases in accordance with the “Leases” Topic of the FASB ASC (Topic 842) by derecognizing the carrying amount of the underlying asset, recognizing any net investment in the lease and recognizing selling profit or loss in net income.

Goodwill and Other Intangible Assets

Our acquisitions require the application of purchase accounting, which results in tangible and identifiable intangible assets and liabilities of the acquired entity being recorded at fair value. The difference between the purchase price and the fair value of net assets acquired is recorded as goodwill. The majority of our goodwill balance has resulted from our acquisition of CBRE Services, Inc. (CBRE Services) in 2001 (the 2001 Acquisition), our acquisition of Insignia Financial Group, Inc. (Insignia) in 2003 (the Insignia Acquisition), our acquisition of the Trammell Crow Company in 2006 (the Trammell Crow Company Acquisition), our acquisition of substantially all of the ING Group N.V. (ING) Real Estate Investment Management (REIM) operations in Europe and Asia, as well as substantially all of Clarion Real Estate Securities (CRES) in 2011 (collectively referred to as the REIM Acquisitions), our acquisition of Norland Managed Services Ltd (Norland) in 2013 (the Norland Acquisition), our acquisition of Johnson Controls, Inc. (JCI)’s Global Workplace Solutions (JCI-GWS) business in 2015, our acquisition of FacilitySource Holdings, LLC (FacilitySource) in 2018 and our acquisition of Telford Homes Plc (Telford) on October 1, 2019. Other intangible assets that have indefinite estimated useful lives that are not being

CBRE GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

amortized include certain management contracts identified in the REIM Acquisitions, a trademark, which was separately identified as a result of the 2001 Acquisition, as well as a trade name separately identified as a result of the REIM Acquisitions. The remaining other intangible assets primarily include customer relationships, mortgage servicing rights and trade names/trademarks, which are all being amortized over estimated useful lives ranging up to 20 years.

We are required to test goodwill and other intangible assets deemed to have indefinite useful lives for impairment at least annually, or more often if circumstances or events indicate a change in the impairment status, in accordance with FASB ASC Topic 350, “Intangibles – Goodwill and Other” (Topic 350). ASC paragraphs 350-20-35-3 through 35-3B permit, but do not require an entity to perform a qualitative assessment with respect to any of its reporting units to determine whether a quantitative impairment test is needed. Entities are permitted to assess based on qualitative factors whether it is more likely than not that a reporting unit’s fair value is less than its carrying amount before applying the quantitative goodwill impairment test. If it is more likely than not that the fair value of a reporting unit is less than its carrying amount, the entity conducts the quantitative goodwill impairment test. If not, the entity does not need to apply the quantitative test. The qualitative test is elective and an entity can go directly to the quantitative test rather than making a more-likely-than-not assessment based on an evaluation of qualitative factors. When performing a quantitative test, we use a discounted cash flow approach to estimate the fair value of our reporting units. Management’s judgment is required in developing the assumptions for the discounted cash flow model. These assumptions include revenue growth rates, profit margin percentages, discount rates, etc.

Deferred Financing Costs

Costs incurred in connection with financing activities are generally deferred and amortized over the terms of the related debt agreements ranging up to ten years. Debt issuance costs related to a recognized debt liability are presented in the accompanying consolidated balance sheets as a direct deduction from the carrying amount of that debt liability. Amortization of these costs is charged to interest expense in the accompanying consolidated statements of operations. Accounting Standards Update (ASU) 2015-15, “Interest—Imputation of Interest (Subtopic 835-30): Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements” permits classifying debt issuance costs associated with a line of credit arrangement as an asset, regardless of whether there are any outstanding borrowings on the arrangement. Total deferred financing costs, net of accumulated amortization, related to our revolving line of credit have been included in other assets in the accompanying consolidated balance sheets and were $17.0 million and $18.3 million as of December 31, 2019 and 2018, respectively.

During 2019, we entered into an additional incremental assumption agreement with respect to our credit agreement which: (i) extended the maturity of the U.S. dollar tranche A term loans, (ii) extended the termination date of the revolving credit commitments available and (iii) made certain changes to the interest rates and fees applicable to such tranche A term loans and revolving credit commitments. During the year ended December 31, 2019, we incurred approximately $5.8 million of financing costs, of which $2.6 million were included in write-off of financing costs on extinguished debt in the accompanying consolidated statements of operations.

During 2018, we redeemed in full our $800.0 million aggregate outstanding principal amount of 5.00% senior notes. In connection with this early redemption, we incurred costs, including a $20.0 million premium paid and the write-off of $8.0 million of unamortized deferred financing costs, both of which were included in write-off of financing costs on extinguished debt in the accompanying consolidated statements of operations. Additionally, during 2018, we entered into an incremental term loan assumption agreement with respect to our credit agreement in connection with which we incurred approximately $1.6 million of financing costs.

During 2017, we entered into a credit agreement in connection with which we incurred approximately $8.0 million of financing costs.

See Note 11 for additional information on activities associated with our debt.

CBRE GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Revenue Recognition

We account for revenue with customers in accordance with FASB ASC Topic, “Revenue from Contracts with Customers” (Topic 606). Topic 606 also includes Subtopic 340-40, “Other Assets and Deferred Costs – Contracts with Customers,” which requires deferral of incremental costs to obtain and fulfill a contract with a customer. We adopted the new revenue recognition guidance on January 1, 2018, using the full retrospective method. Revenue is recognized when or as control of the promised services is transferred to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those services.

The following is a description of principal activities – separated by reportable segments – from which we generate revenue. For more detailed information about our reportable segments, see Notes 18 and 19.

Advisory Services

Our Advisory Services segment provides a comprehensive range of services globally, including property leasing, property sales, mortgage services, property management, project management services and valuation services.

Property Leasing and Property Sales

We provide strategic advice and execution for owners, investors, and occupiers of real estate in connection with the leasing of office, industrial and retail space. We also offer clients fully integrated property sales services under the CBRE Capital Markets brand. We are compensated for our services in the form of a commission and, in some instances may earn various forms of variable incentive consideration. Our commission is paid upon the occurrence of certain contractual event(s) which may be contingent. For example, a portion of our leasing commission may be paid upon signing of the lease by the tenant, with the remaining paid upon occurrence of another future contingent event (e.g. payment of first month’s rent or tenant move-in). For leases, we typically satisfy our performance obligation at a point in time when control is transferred; generally, at the time of the first contractual event where there is a present right to payment. We look to history, experience with a customer, and deal specific considerations as part of the most likely outcome estimation approach to support our judgement that the second contingency (if applicable) will be met. Therefore, we typically accelerate the recognition of the revenue associated with the second contingent event. For sales, our commission is typically paid at the closing of the sale, which represents transfer of control for services to the customer.

In addition to our commission, we may recognize other forms of variable consideration which can include, but are not limited to, commissions subject to concession or claw back and volume based discounts or rebates. We assess variable consideration on a contract by contract basis, and when appropriate, recognize revenue based on our assessment of the outcome (using the most likely outcome approach or weighted probability) and historical results, if comparable and representative. We recognize variable consideration if it is deemed probable that there will not be significant reversal in the future.

Mortgage Originations and Loan Sales

We offer clients commercial mortgage and structured financing services. Fees from services within our mortgage brokerage business that are in the scope of Topic 606 include fees earned for the brokering of commercial mortgage loans primarily through relationships established with investment banking firms, national and regional banks, credit companies, insurance companies and pension funds. We are compensated for our brokerage services via a fee paid upon successful placement of a commercial mortgage borrower with a lender who will provide financing. The fee earned is contingent upon the funding of the loan, which represents the transfer of control for services to the customer. Therefore, we typically satisfy our performance obligation at the point in time of the funding of the loan.

We also earn fees from the origination and sale of commercial mortgage loans for which the company retains the servicing rights. These fees are governed by the “Fair Value Measurements and Disclosures” topic (Topic 820) and “Transfers and Servicing” topic (Topic 860) of the FASB ASC. Upon origination of a mortgage loan held for

CBRE GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

sale, the fair value of the mortgage servicing rights (MSR) to be retained is included in the forecasted proceeds from the anticipated loan sale and results in a net gain (which is reflected in revenue). Upon sale, we record a servicing asset or liability based on the fair value of the retained MSR associated with the transferred loan. Subsequent to the initial recording, MSRs are amortized and carried at the lower of amortized cost or fair value in other intangible assets in the accompanying consolidated balance sheets. They are amortized in proportion to and over the estimated period that the servicing income is expected to be received.

Property Management and Project Management Services

We provide property management services on a contractual basis for owners of and investors in office, industrial and retail properties. These services include construction management, marketing, building engineering, accounting and financial services. We are compensated for our services through a monthly management fee earned based on either a specified percentage of the monthly rental income, rental receipts generated from the property under management or a fixed fee. We are also often reimbursed for our administrative and payroll costs directly attributable to the properties under management. Property management services represent a series of distinct daily services rendered over time. Consistent with the transfer of control for distinct, daily services to the customer, revenue is recognized at the end of each period for the fees associated with the services performed. The amount of revenue recognized is presented gross for any services provided by our employees, as we control them. We generally do not control third-party services delivered to property management clients. As such, we report revenues net of third-party reimbursements.

Project management services are often provided on a portfolio wide or programmatic basis. Revenues from project management services generally include fixed management fees, variable fees, and incentive fees if certain agreed-upon performance targets are met. Revenues from project management may also include reimbursement of payroll and related costs for personnel providing the services and subcontracted vendor costs. Project management services represent a series of distinct daily services rendered over time. Consistent with the transfer of control for distinct, daily services to the customer, revenue is typically recognized at the end of each period for the fees associated with the services performed.

The amount of revenue recognized is presented gross for any services provided by our employees, as we control them. This is evidenced by our obligation for their performance and our ability to direct and redirect their work, as well as negotiate the value of such services. The amount of revenue recognized related to certain project management arrangements is presented gross (with offsetting expense recorded in cost of revenue) for reimbursements of costs of third-party services because we control those services that are delivered to the client. In the instances where we do not control third-party services delivered to the client, we report revenues net of the third-party reimbursements.

In addition to our management fee, we receive various types of variable consideration which can include, but is not limited to; key performance indicator bonuses or penalties which may be linked to subcontractor performance, gross maximum price, glidepaths, savings guarantees, shared savings, or fixed fee structures. We assess variable consideration on a contract by contract basis, and when appropriate, recognize revenue based on our assessment of the outcome (using the most likely outcome approach or weighted probability) and historical results, if comparable and representative. Using management assessment, historical results and statistics, we recognize revenue if it is deemed probable there will not be significant reversal in the future.

Valuation Services

We provide valuation services that include market-value appraisals, litigation support, discounted cash flow analyses, feasibility studies as well as consulting services such as property condition reports, hotel advisory and environmental consulting. We are compensated for valuation services in the form of a fee, which is payable on the occurrence of certain events (e.g., a portion on the delivery of a draft report with the remaining on the delivery of the final report). For consulting services, we may be paid based on the occurrence of time or event-based milestones (such as the delivery of draft reports). We typically satisfy our performance obligation for valuation services as services are rendered over time.

CBRE GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Global Workplace Solutions

Our Global Workplace Solutions segment provides a broad suite of integrated, contractually-based outsourcing services globally for occupiers of real estate, including facilities management, project management and transaction services.

Facilities Management and Project Management Services

Facilities management involves the day-to-day management of client-occupied space and includes headquarter buildings, regional offices, administrative offices, data centers and other critical facilities, manufacturing and laboratory facilities, distribution facilities and retail space. Contracts for facilities management services are often structured so we are reimbursed for client-dedicated personnel costs and subcontracted vendor costs as well as associated overhead expenses plus a monthly fee, and, in some cases, annual incentives tied to agreed-upon performance targets, with any penalties typically capped. In addition, we have contracts for facilities management services based on fixed fees or guaranteed maximum prices. Fixed fee contracts are typically structured where an agreed upon scope of work is delivered for a fixed price while guaranteed maximum price contracts are structured with an agreed upon scope of work that will be provided to the client for a not to exceed price. Facilities management services represent a series of distinct daily services rendered over time. Consistent with the transfer of control for distinct, daily services to the customer, revenue is typically recognized at the end of each period for the fees associated with the services performed.

Project management services are often provided on a portfolio wide or programmatic basis. Revenues from project management services generally includes fixed management fees, variable fees, and incentive fees if certain agreed-upon performance targets are met. Revenues from project management may also include reimbursement of payroll and related costs for personnel providing the services and subcontracted vendor costs. Project management services represent a series of distinct daily services rendered over time. Consistent with the transfer of control for distinct, daily services to the customer, revenue is typically recognized at the end of each period for the fees associated with the services performed.

The amount of revenue recognized is presented gross for any services provided by our employees, as we control them. This is evidenced by our obligation for their performance and our ability to direct and redirect their work, as well as negotiate the value of such services. The amount of revenue recognized related to the majority of facilities management contracts and certain project management arrangements is presented gross (with offsetting expense recorded in cost of revenue) for reimbursements of costs of third-party services because we control those services that are delivered to the client. In the instances when we do not control third-party services delivered to the client, we report revenues net of the third-party reimbursements.

Transaction Services

We provide strategic advice and execution for occupiers of real estate in connection with the leasing, sale or acquisition of office, industrial and retail space. Within the Global Workplace Solutions business, transaction services are performed for account-based clients, often as a key part of an integrated suite of commercial real estate services (with leasing being the most meaningful revenue stream included in our Global Workplace Solutions revenue). Similar to the transaction services (leasing sale or acquisition of space) we perform in our Advisory Services segment, we are compensated for our services in the form of a commission whereby a portion of our leasing commission may be paid upon signing of the lease by the client, with the remaining paid upon occurrence of another future contingent event. We typically satisfy our performance obligation at a point in time when control is

CBRE GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

transferred; generally, at the time of the first contractual event where there is a present right to payment. We look to history, experience with a customer, and deal specific considerations as part of the most likely outcome estimation approach to support our judgement that the second contingency (if applicable) will be met. Therefore, we typically accelerate the recognition of the revenue associated with the second contingent event.

Real Estate Investments

Our Real Estate Investments segment is comprised of investment management services provided globally; development services in the U.S. and United Kingdom (U.K.) and a service designed to help property occupiers and owners meet the growing demand for flexible office space solutions on a global basis.

Investment Management Services

Our investment management services are provided to pension funds, insurance companies, sovereign wealth funds, foundations, endowments and other institutional investors seeking to generate returns and diversification through investment in real assets. We sponsor investment programs that span the risk/return spectrum in: North America, Europe, Asia and Australia. We are typically compensated in the form of a base management fee, disposition fees, acquisition fees and incentive fees in the form of performance fees or carried interest based on fund type (open or closed ended, respectively). For the base management fee, we typically satisfy the performance obligation as service is rendered over time pursuant to the series guidance. Consistent with the transfer of control for distinct, daily services to the customer, revenue is recognized at the end of each period for the fees associated with the services performed. For acquisition and disposition services, we typically satisfy the performance obligation at a point in time (at acquisition or upon disposition). For contracts with contingent fees, including performance fees, incentive fees and carried interest, we assess variable consideration on a contract by contract basis, and when appropriate, recognize revenue based on our assessment of the outcome (using the most likely outcome approach or weighted probability) and historical results, if comparable and representative. Revenue associated with performance fees and carried interest are typically constrained due to volatility in the real estate market, a broad range of possible outcomes, and other factors in the market that are outside of our control.

Development Services

Our development services consist of real estate development and investment activities in the United States to users of and investors in commercial real estate, as well as for our own account. In addition, with our recent acquisition of Telford Homes, we also develop residential-led, mixed-use sites in locations across London.

We pursue opportunistic, risk-mitigated development and investment in commercial real estate across a wide spectrum of property types, including: industrial, office and retail properties; healthcare facilities of all types (medical office buildings, hospitals and ambulatory surgery centers); and residential/mixed-use projects. We pursue development and investment activity on behalf of our clients on a fee basis with no, or limited, ownership interest in a property, in partnership with our clients through co-investment – either on an individual project basis or through programs with certain strategic capital partners or for our own account with 100% ownership. Development services represent a series of distinct daily services rendered over time. Consistent with the transfer of control for distinct, daily services to the customer, revenue is recognized at the end of each period for the fees associated with the services performed. Fees are typically payable monthly over the service term or upon contractual defined events, like project milestones. In addition to development fee revenue, we receive various types of variable consideration which can include, but is not limited to, contingent lease-up bonuses, cost saving incentives, profit sharing on sales and at-risk fees. We assess variable consideration on a contract by contract basis, and when appropriate, recognize revenue based on our assessment of the outcome (using the most likely outcome approach or weighted probability) and historical results, if comparable and representative. We accelerate revenue if it is deemed probable there will not be significant reversal in the future. Sales of real estate to customers which are considered an output of ordinary activities are recognized as revenue when or as control of the assets are transferred to the customer.

CBRE GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Flexible-Space Solutions

Flexible-space solutions operations are conducted through our indirect wholly-owned subsidiary, CBRE Hana, LLC, which we also refer to as Hana. Hana develops and operates integrated, scalable, flexible workspaces, which contain office suites, conference rooms and event space and communal co-working space. Hana helps institutional property owners meet the rapidly growing demand from real estate occupiers for flexible office space solutions. Member services represent a series of distinct daily services rendered over time. Revenue is recognized at the end of each period for the fees associated with the services performed.

Accounts Receivable and Allowance for Doubtful Accounts

We record accounts receivable for our unconditional rights to consideration arising from our performance under contracts with customers. The carrying value of such receivables, net of the allowance for doubtful accounts, represents their estimated net realizable value. We estimate our allowance for doubtful accounts for specific accounts receivable balances based on historical collection trends, the age of outstanding accounts receivables and existing economic conditions associated with the receivables. Past-due accounts receivable balances are written off when our internal collection efforts have been unsuccessful. As a practical expedient, we do not adjust the promised amount of consideration for the effects of a significant financing component when we expect, at contract inception, that the period between our transfer of a promised service to a customer and when the customer pays for that service will be one year or less. We do not typically include extended payment terms in our contracts with customers.

Remaining Performance Obligations

Remaining performance obligations represent the aggregate transaction prices for contracts where our performance obligations have not yet been satisfied. As of December 31, 2019, the aggregate amount of transaction price allocated to remaining performance obligations in our property leasing business was not significant. We apply the practical expedient related to remaining performance obligations that are part of a contract that has an original expected duration of one year or less and the practical expedient related to variable consideration from remaining performance obligations pursuant to the series guidance. All of our remaining performance obligations apply to one of these practical expedients.

Contract Assets and Contract Liabilities

Contract assets represent assets for revenue that has been recognized in advance of billing the customer and for which the right to bill is contingent upon something other than the passage of time. This is common for contingent portions of commissions in brokerage, development and construction revenue in development services and incentive fees present in various businesses. Billing requirements vary by contract but are generally structured around fixed monthly fees, reimbursement of employee and other third-party costs, and the achievement or completion of certain contingent events.

When we receive consideration, or such consideration is unconditionally due, from a customer prior to transferring services to the customer under the terms of the services contract, we record deferred revenue, which represents a contract liability. We recognize the contract liability as revenue once we have transferred control of service to the customer and all revenue recognition criteria are met.

Contract assets and contract liabilities are determined for each contract on a net basis. For contract assets, we classify the short-term portion as a separate line item within current assets and the long-term portion within other assets, long-term in the accompanying consolidated balance sheets. For contract liabilities, we classify the short-term portion as a separate line item within current liabilities and the long-term portion within other liabilities, long-term in the accompanying consolidated balance sheets.

Contract Costs

Contract costs primarily consist of upfront costs incurred to obtain or to fulfill a contract. These costs are typically found within our Global Workplace Solutions segment. Such costs relate to transition costs to fulfill

CBRE GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

contracts prior to services being rendered and are included within other intangible assets in the accompanying consolidated balance sheets. Capitalized transition costs are amortized based on the transfer of services to which the assets relate which can vary on a contract by contract basis, and are included in cost of revenue in the accompanying consolidated statement of operations. For contract costs that are recognized as assets, we periodically review for impairment.

Applying the contract cost practical expedient, we recognize the incremental costs of obtaining contracts as an expense when incurred if the amortization period of the assets that we otherwise would have recognized is one year or less.

Business Promotion and Advertising Costs

The costs of business promotion and advertising are expensed as incurred. Business promotion and advertising costs of $76.1 million, $74.8 million and $63.1 million were included in operating, administrative and other expenses for the years ended December 31, 2019, 2018 and 2017, respectively.

Foreign Currencies

The financial statements of subsidiaries located outside the U.S. are generally measured using the local currency as the functional currency. The assets and liabilities of these subsidiaries are translated at the rates of exchange at the balance sheet date, and income and expenses are translated at the average monthly rate. The resulting translation adjustments are included in the accumulated other comprehensive loss component of equity. Gains and losses resulting from foreign currency transactions are included in the results of operations.

Comprehensive Income

Comprehensive income consists of net income and other comprehensive (loss) income. In the accompanying consolidated balance sheets, accumulated other comprehensive loss primarily consists of foreign currency translation adjustments, fees associated with the termination of interest rate swaps, unrealized gains (losses) on interest rate swaps, unrealized holding (losses) gains on available for sale debt securities and pension liability adjustments. Foreign currency translation adjustments exclude any income tax effect given that earnings of non-U.S. subsidiaries are deemed to be reinvested for an indefinite period of time (see Note 15).

Warehouse Receivables

Our wholly-owned subsidiary CBRE Capital Markets, Inc. (CBRE Capital Markets) is a Federal Home Loan Mortgage Corporation (Freddie Mac) approved Multifamily Program Plus Seller/Servicer and an approved Federal National Mortgage Association (Fannie Mae) Aggregation and Negotiated Transaction Seller/Servicer. In addition, CBRE Capital Markets’ wholly-owned subsidiary CBRE Multifamily Capital, Inc. (CBRE MCI) is an approved Fannie Mae Delegated Underwriting and Servicing (DUS) Seller/Servicer and CBRE Capital Markets’ wholly-owned subsidiary CBRE HMF, Inc. (CBRE HMF) is a U.S. Department of Housing and Urban Development (HUD) approved Non-Supervised Federal Housing Authority (FHA) Title II Mortgagee, an approved Multifamily Accelerated Processing (MAP) lender and an approved Government National Mortgage Association (Ginnie Mae) issuer of mortgage-backed securities (MBS). Under these arrangements, before loans are originated through proceeds from warehouse lines of credit, we obtain either a contractual loan purchase commitment from either Freddie Mac or Fannie Mae or a confirmed forward trade commitment for the issuance and purchase of a Fannie Mae or Ginnie Mae MBS that will be secured by the loans. The warehouse lines of credit are generally repaid within a one-month period when Freddie Mac or Fannie Mae buys the loans or upon settlement of the Fannie Mae or Ginnie Mae MBS, while we retain the servicing rights. Loans are funded at the prevailing market rates. We elect the fair value option for all warehouse receivables. At December 31, 2019 and 2018, all of the warehouse receivables included in the accompanying consolidated balance sheets were either under commitment to be purchased by Freddie Mac or had confirmed forward trade commitments for the issuance and purchase of Fannie Mae or Ginnie Mae mortgage-backed securities that will be secured by the underlying loans.

CBRE GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Mortgage Servicing Rights (MSRs)

In connection with the origination and sale of mortgage loans with servicing rights retained, we record servicing assets or liabilities based on the fair value of the mortgage servicing rights on the date the loans are sold. Our MSRs are initially recorded at fair value. Subsequent to the initial recording, MSRs are amortized and carried at the lower of amortized cost or fair value in other intangible assets in the accompanying consolidated balance sheets. They are amortized in proportion to and over the estimated period that net servicing income is expected to be received based on projections and timing of estimated future net cash flows.

Our initial recording of MSRs at their fair value resulted in net gains, as the fair value of servicing contracts that result in MSR assets exceeded the fair value of servicing contracts that result in MSR liabilities. The net assets and net gains are presented in the accompanying consolidated financial statements. The amount of MSRs recognized during the years ended December 31, 2019 and 2018 was as follows (dollars in thousands):

	Year Ended December 31,
		2019			2018
Beginning balance, mortgage servicing rights	$	424,470		$	373,131
Mortgage servicing rights recognized		182,443			173,737
Mortgage servicing rights sold		—			—
Amortization expense		(123,008	)		(115,743	)
Other		(413	)		(6,655	)
Ending balance, mortgage servicing rights	$	483,492		$	424,470

MSRs do not actively trade in an open market with readily available observable prices; therefore, fair value is determined based on certain assumptions and judgments, including the estimation of the present value of future cash flows realized from servicing the underlying mortgage loans. Management’s assumptions include the benefits of servicing (servicing fee income and interest on escrow deposits), inflation, the cost of servicing, prepayment rates, delinquencies, discount rates and the estimated life of servicing cash flows. The assumptions used are subject to change based on management’s judgments and estimates of changes in future cash flows and interest rates, among other things. The key assumptions used during the years ended December 31, 2019, 2018 and 2017 in measuring fair value were as follows:


	2019		2018		2017
Discount rate	10.12	%	10.00	%	10.06	%
Conditional prepayment rate	10.34	%	8.89	%	8.88	%

The estimated fair value of our MSRs was $579.8 million and $554.2 million as of December 31, 2019 and 2018, respectively. Impairment is evaluated through a comparison of the carrying amount and fair value of the MSRs, and recognized with the establishment of a valuation allowance. We did not incur any impairment charges related to our MSRs during the years ended December 31, 2019, 2018 or 2017. No valuation allowance was created previously and we did not record a valuation allowance for MSRs in 2019 or 2018.

Included in revenue in the accompanying consolidated statements of operations are contractually specified servicing fees from loans serviced for others of $191.8 million, $167.5 million and $144.2 million for the years ended December 31, 2019, 2018 and 2017, respectively, and prepayment fees/late fees/ancillary income earned from loans serviced for others of $14.9 million, $15.9 million and $13.2 million for the years ended December 31, 2019, 2018 and 2017, respectively.

Accounting for Broker Draws

As part of our recruitment efforts relative to new U.S. brokers, we offer a transitional broker draw arrangement. Our broker draw arrangements generally last until such time as a broker’s pipeline of business is sufficient to allow him or her to earn sustainable commissions. This program is intended to provide the broker with a minimal amount of cash flow to allow adequate time for his or her training as well as time for him or her to develop business relationships. Similar to traditional salaries, the broker draws are paid irrespective of the actual revenues

CBRE GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

generated by the broker. Often these broker draws represent the only form of compensation received by the broker. Furthermore, it is not our general policy to pursue collection of unearned broker draws paid under this arrangement. As a result, we have concluded that broker draws are economically equivalent to salaries paid and accordingly charge them to compensation expense as incurred. The broker is also entitled to earn a commission on completed revenue transactions. This amount is calculated as the commission that would have been payable under our full commission program, less any amounts previously paid to the broker in the form of a draw.

Stock-Based Compensation

We account for all employee awards under the fair value recognition provisions of the “Compensation – Stock Compensation” Topic of the FASB ASC (Topic 718). Topic 718 requires the measurement of compensation cost at the grant date, based upon the estimated fair value of the award, and requires amortization of the related expense over the employee’s requisite service period. We do not estimate forfeitures, but instead recognize forfeitures when they occur.

See Note 14 for additional information on our stock-based compensation plans.

Income Per Share

Basic income per share attributable to CBRE Group, Inc. is computed by dividing net income attributable to CBRE Group, Inc. shareholders by the weighted average number of common shares outstanding during each period. The computation of diluted income per share attributable to CBRE Group, Inc. generally further assumes the dilutive effect of potential common shares, which include stock options and certain contingently issuable shares. Contingently issuable shares consist of non-vested stock awards.

Income Taxes

Income taxes are accounted for under the asset and liability method in accordance with the “Accounting for Income Taxes” Topic of the FASB ASC (Topic 740). Deferred tax assets and liabilities are determined based on temporary differences between the financial reporting and tax basis of assets and liabilities and operating loss and tax credit carry forwards. Deferred tax assets and liabilities are measured by applying enacted tax rates and laws and are released in the years in which the temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Valuation allowances are provided against deferred tax assets when it is more likely than not that some portion or all of the deferred tax asset will not be realized.

We utilize a two-step approach to recognizing and measuring uncertain tax positions. The first step is to evaluate the tax position for recognition by determining if the available evidence indicates there is more than a 50% likelihood that the position will be sustained upon examination, including resolution of related appeals or litigation processes. The second step is to measure the tax benefit as the largest amount which is more than 50% likely of being realized upon ultimate settlement.

The Tax Cuts and Jobs Act (the Tax Act) includes provisions for Global Intangible Low-Taxed Income (GILTI) wherein taxes on foreign earnings are imposed for more than a deemed return on tangible assets of foreign corporations. An accounting policy election allows to either: (i) account for GILTI as a component of tax expense in the period in which we are subject to the rules (the “period cost method”) or (ii) account for GILTI in our measurement of deferred taxes (the “deferred method”). During 2018, as a result of completing our analysis of the Tax Act, we made an accounting policy election to account for GILTI using the period cost method.

See Note 15 for additional information on income taxes.

CBRE GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Self-Insurance

Our wholly-owned captive insurance company, which is subject to applicable insurance rules and regulations, insures our exposure related to workers’ compensation insurance, general liability insurance and automotive insurance for our U.S. operations risk on a primary basis and we purchase excess coverage from unrelated insurance carriers. The captive insurance company also insures primary risk relating to professional indemnity claims globally. Given the nature of these types of claims, it may take several years for resolution and determination of the cost of these claims. We are required to estimate the cost of these claims in our financial statements.

The estimates that we utilize to record our potential losses on claims are inherently subjective, and actual claims could differ from amounts recorded, which could result in increased or decreased expense in future periods. As of December 31, 2019 and 2018, our reserves for claims under these insurance programs were $125.8 million and $113.0 million, respectively, of which $1.8 million and $2.7 million, respectively, represented our estimated current liabilities.

Reclassifications

Certain reclassifications have been made to the 2018 and 2017 financial statements to conform with the 2019 presentation.

3.	New Accounting Pronouncements

Recently Adopted Accounting Pronouncements

The FASB previously issued six ASUs related to leases. The ASUs issued were: (1) in February 2016, ASU 2016-02, “Leases (Topic 842)”, (2) in January 2018, ASU 2018-01, “Leases (Topic 842): Land Easement Practical Expedient for Transition to Topic 842”, (3) in July 2018, ASU 2018-10, “Codification Improvements to Topic 842, Leases”, (4) in July 2018, ASU 2018-11, “Targeted Improvements”, (5) in December 2018, ASU 2018-20, “Leases (Topic 842): Narrow-Scope Improvements for Lessors” and (6) in March 2019, ASU 2019-01, “Leases (Topic 842): Codification Improvements.” ASU 2016-02 requires lessees to recognize most leases on the balance sheet as liabilities, with corresponding right-of-use assets. For income statement recognition purposes, leases will be classified as either a finance or operating lease in a manner similar to the requirements under the previous lease accounting literature, but without relying upon the bright-line tests. The amendments in ASU 2018-01 specify how land easements are within the scope of Accounting Standards Codification (ASC) 842 and permit a practical expedient to not assess whether expired or existing land easements that were not previously accounted for as leases are leases under ASC 842. The amendments in ASU 2018-10 affect narrow aspects of the guidance issued in the amendments in ASU 2016-02. The amendments in ASU 2018-11 provide an optional method for adopting the new leasing guidance and provide lessors with a practical expedient to combine lease and associated non-lease components by class of underlying asset in contracts that meet certain criteria. The amendments in ASU 2018-20 provide an accounting policy election permitting lessors to treat certain sales and other similar taxes incurred as lessee costs, guidance on the treatment of certain lessor costs and guidance on recognizing variable payments for contracts with a lease and non-lease component. The amendments in ASU 2019-01 affect narrow aspects of the guidance issued in the amendments in ASU 2016-02. These ASUs are effective for annual periods in fiscal years beginning after December 15, 2018.

We adopted these ASUs in the first quarter of 2019 by using the optional transitional method associated with no adjustment to comparative period financial statements presented for prior periods. We elected certain practical expedients, including the package of transition practical expedients and the practical expedient to forego separating lease and non-lease components in our lessee contracts. We also made an accounting policy election to exempt short-term leases of 12 months or less from balance sheet recognition requirements associated with the new standard; fixed rental payments for short-term leases will be recognized as a straight-line expense over the lease term.

As a result of the adoption of the leasing guidance, the consolidated balance sheet as of January 1, 2019 reflected $1.2 billion of additional lease liabilities, along with corresponding right-of-use assets of $1.0 billion, reflecting adjustments for items such as prepaid and deferred rent, unamortized initial direct costs, and unamortized

CBRE GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

lease incentive balances. The adoption of the leasing guidance did not have a material impact on our consolidated statements of operations.

As of January 1, 2019, we account for leases in accordance with Topic 842. The present value of lease payments, which are either fixed payments, in-substance fixed payments, or variable payments tied to an index or rate are recognized on the balance sheet with corresponding lease liabilities and right-of-use assets upon the commencement of the lease. These lease costs are expensed over the respective lease term in accordance with the classification of the lease (i.e. operating versus finance classification). Variable lease payments not tied to an index or rate are expensed as incurred and not subject to capitalization.

Recent Accounting Pronouncements Pending Adoption

The FASB issued four ASUs related to financial instruments – credit losses. The ASUs issued were: (1) in June 2016, ASU 2016-13, “Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments”, (2) in November 2018, ASU 2018-19 “Codification Improvements to Topic 326, Financial Instruments—Credit Losses”, (3) in May 2019, ASU 2019-05, “Financial Instruments – Credit Losses (Topic 326): Targeted Transition Relief” and (4) in November 2019, ASU 2019-11, “Codification Improvements to Topic 326, Financial Instruments—Credit Losses.” ASU 2016-13 is intended to improve financial reporting by requiring timelier recording of credit losses on loans and other financial instruments held by financial institutions and other organizations. Additionally, ASU 2019-04, discussed further below, also includes amendments to ASU 2016-13. ASU 2018-19 clarifies that receivables arising from operating leases are not within the scope of the credit losses standard, but rather, should be accounted for in accordance with the leasing standard. ASU 2019-05 provide entities that have certain instruments within the scope of Subtopic 326-20, Financial Instruments—Credit Losses—Measured at Amortized Cost, with an option to irrevocably elect the fair value option in Subtopic 825-10, Financial Instruments—Overall. ASU 2019-11 clarifies guidance around how to report expected recoveries and reinforces existing guidance that prohibits organizations from recording negative allowances for available-for-sale debt securities, among other narrow scope and technical improvements. These ASUs are effective for fiscal years beginning after December 15, 2019, and interim periods within those years, with early adoption permitted. We have completed our evaluation of ASU 2016-13, ASU 2018-19, ASU 2019-05 and ASU 2019-11 and concluded they will not have a material impact on our consolidated financial statements and related disclosures.

In August 2018, the FASB issued ASU 2018‑14, “Compensation—Retirement Benefits—Defined Benefit Plans—General (Subtopic 715-20): Disclosure Framework—Changes to the Disclosure Requirements for Defined Benefit Plans.” This ASU makes minor changes to the disclosure requirements for employers that sponsor defined benefit pension or other postretirement plans. This ASU is effective for fiscal years ending after December 15, 2020, with early adoption permitted. As ASU 2018-14 only revises disclosure requirements, it will not have any impact on our consolidated financial statements. We are evaluating the effect, if any, that ASU 2018‑14 will have on our disclosures, but do not expect it to have a material impact.

In November 2018, the FASB issued ASU 2018‑18, “Collaborative Arrangements (Topic 808): Clarifying the Interaction Between Topic 808 and Topic 606.” This ASU provides guidance on how to assess whether certain transactions between collaborative arrangement participants should be accounted for within the revenue recognition standard and provides more comparability in the presentation of revenue for certain transactions between collaborative arrangement participants. This ASU is effective for fiscal years beginning after December 15, 2019, and interim periods within those years, with early adoption permitted. We have completed our evaluation of ASU 2018‑18 and concluded it will not have a material impact on our consolidated financial statements and related disclosures.

In April 2019, the FASB issued ASU 2019‑04, “Codification Improvements to Topic 326, Financial Instruments—Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments.” The amendments in ASU 2019-04 clarify and improve areas of guidance related to the recently issued standards on financial instruments – credit losses, derivatives and hedging, and financial instruments. The amendments in this ASU that are related to financial instruments – credit losses are effective at the same time as the effective date of ASU 2016-13. We elected to early adopt the amendments in this ASU that are related to derivatives and hedging and financial instruments in the second quarter of 2019 and the adoption of these amendments did not have any impact

CBRE GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

on our consolidated financial statements and related disclosures. We have completed our evaluation of the amendments in this ASU that are related to financial instruments – credit losses and concluded they will not have a material impact on our consolidated financial statements and related disclosures.

In December 2019, the FASB issued ASU 2019‑12, “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes.” This ASU removes specific exceptions to the general principles in Topic 740 and improves and simplifies financial statement preparers’ application of income tax-related guidance. This ASU is effective for fiscal years beginning after December 15, 2020, and interim periods within those years, with early adoption permitted. We are evaluating the effect that ASU 2019‑12 will have on our consolidated financial statements and related disclosures, but do not expect it to have a material impact.

In January 2020, the FASB issued ASU 2020‑01, “Investments—Equity Securities (Topic 321), Investments—Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815)—Clarifying the Interactions between Topic 321, Topic 323, and Topic 815.” This ASU, among other things, clarifies that a company should consider observable transactions that require a company to either apply or discontinue the equity method of accounting under Topic 323 and clarifies that, when determining the accounting for certain forward contracts and purchased options a company should not consider, whether upon settlement or exercise, if the underlying securities would be accounted for under the equity method or fair value option. This ASU is effective for fiscal years beginning after December 15, 2020, and interim periods within those years, with early adoption permitted. We are evaluating the effect that ASU 2020‑01 will have on our consolidated financial statements and related disclosures.

4.	Telford Acquisition

On October 1, 2019, we acquired Telford to expand our real estate development business outside of the U.S. (Telford Acquisition). A leading developer of multifamily residential properties in the London area, Telford is reported in our Real Estate Investments segment. Telford shareholders received £3.50 per share in cash, valuing Telford at £267.1 million, or $328.5 million as of the acquisition date. The Telford Acquisition was funded with borrowings under our revolving credit facility.

The following represents a summary of the excess purchase price over the estimated fair value of net assets acquired (dollars in thousands):

Estimated purchase price		$	328,502
Less: Estimated fair value of net assets acquired (see table below)			297,669
Excess purchase price over estimated fair value of net assets acquired		$	30,833

The preliminary purchase accounting related to the Telford Acquisition has been recorded in the accompanying consolidated financial statements. The excess purchase price over the estimated fair value of net assets acquired has been recorded to goodwill. The goodwill arising from the Telford Acquisition consists largely of the synergies and economies of scale expected from combining the operations acquired from Telford with ours. We are currently assessing if any portion of the goodwill recorded in connection with the Telford Acquisition will be deductible for tax purposes, but do not expect any tax deductible goodwill to be significant. Given the complexity of the transaction, the calculation of the fair value of certain assets and liabilities acquired, primarily intangibles, real estate assets and income tax items, is still preliminary. The purchase price allocation is expected to be completed as soon as practicable, but no later than one year from the acquisition date. The following table summarizes the aggregate estimated fair values of the assets acquired and the liabilities assumed in the Telford Acquisition (dollars in thousands):

CBRE GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Assets Acquired:
Cash and cash equivalents	$	7,896
Receivables		6,993
Contract assets, current		31,850
Prepaid expenses		2,704
Property and equipment		2,637
Other intangible assets		26,749
Operating lease assets		6,488
Investments in unconsolidated subsidiaries		79,667
Non-current contract assets		8,015
Real estate under development		208,402
Deferred tax assets, net		2,857
Other assets (current and non-current)		99,429
Total assets acquired		483,687
Liabilities Assumed:
Accounts payable and accrued expenses		47,552
Compensation and employee benefits payable		1,580
Accrued bonus		3,274
Operating lease liabilities		941
Contract liabilities, current		1,949
Income taxes payable		1,813
Line of credit		110,687
Non-current operating lease liabilities		5,547
Other liabilities (current and non-current)		12,675
Total liabilities assumed		186,018
Estimated Fair Value of Net Assets Acquired	$	297,669

In connection with the Telford Acquisition, below is a summary of the preliminary estimate of the trademark acquired (dollars in thousands):

								As of December 31, 2019
Asset Class		Amortization Period		Amount Assigned at Acquisition Date				Accumulated Amortization and Foreign Currency Translation				Net Carrying Value
Trademark		20 years		$	26,749			$	1,725			$	28,474

Upon close of the Telford Acquisition, we immediately repaid the line of credit assumed from Telford.

The accompanying consolidated statement of operations for the year ended December 31, 2019 includes revenue, operating income and operational net income of $97.5 million, $1.0 million and $1.4 million, respectively, attributable to the Telford Acquisition. This does not include direct transaction and integration costs of $15.0 million and amortization expense of $0.4 million related to the trademark acquired, all of which were incurred during the year ended December 31, 2019 in connection with the Telford Acquisition.

Unaudited pro forma results, assuming the Telford Acquisition had occurred as of January 1, 2018 for purposes of the pro forma disclosures for the years ended December 31, 2019 and 2018 are presented below. They include certain adjustments for increased amortization expense related to the trademark acquired (approximately $1.0 million and $1.5 million in 2019 and 2018, respectively) as well as increased interest expense (approximately $4.1 million in 2018) associated with borrowings under our revolving credit facility used to fund the acquisition.

Pro forma adjustments also include the removal of $15.0 million of direct costs incurred by us during the year ended December 31, 2019 as well as the tax impact of all pro forma adjustments for all periods presented. These unaudited pro forma results have been prepared for comparative purposes only and do not purport to be indicative of what operating results would have been had the Telford Acquisition occurred on January 1, 2018 and may not be indicative of future operating results (dollars in thousands, except share data):

CBRE GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

	Year Ended December 31,
		2019		2018
Revenue	$	24,158,427	$	21,803,506
Operating income		1,294,480		1,157,051
Net income attributable to CBRE Group, Inc.		1,321,097		1,121,469
Basic income per share:
Net income per share attributable to CBRE Group, Inc.	$	3.93	$	3.31
Weighted average shares outstanding for basic income per share		335,795,654		339,321,056
Diluted income per share:
Net income per share attributable to CBRE Group, Inc.	$	3.88	$	3.27
Weighted average shares outstanding for diluted income per share		340,522,871		343,122,741

5.	Warehouse Receivables & Warehouse Lines of Credit

A rollforward of our warehouse receivables is as follows (dollars in thousands):

Beginning balance at December 31, 2018	$	1,342,468
Origination of mortgage loans		19,389,979
Gains (premiums on loan sales)		64,002
Proceeds from sale of mortgage loans:
Sale of mortgage loans		(19,741,058	)
Cash collections of premiums on loan sales		(64,002	)
Proceeds from sale of mortgage loans		(19,805,060	)
Net increase in mortgage servicing rights included in warehouse receivables		1,669
Ending balance at December 31, 2019	$	993,058

The following table is a summary of our warehouse lines of credit in place as of December 31, 2019 and 2018 (dollars in thousands):

			December 31, 2019				December 31, 2018
Lender	Current Maturity	Pricing	Maximum Facility Size		Carrying Value		Maximum Facility Size		Carrying Value
JP Morgan Chase Bank, N.A. (JP Morgan) (1)	10/19/2020	daily one-month LIBOR plus 1.30%	$	985,000	$	267,075	$	985,000	$	871,680
JP Morgan (1)	10/19/2020	daily one-month LIBOR plus 2.75%		15,000		—		15,000		—
Capital One, N.A. (Capital One)	7/27/2020	daily one-month LIBOR plus 1.25%		200,000	$	39,538		325,000		120,195
Fannie Mae Multifamily As Soon As Pooled Plus Agreement and Multifamily As Soon As Pooled Sale Agreement (ASAP) Program (2)	Cancelable anytime	daily one-month LIBOR plus 1.35%, with a LIBOR floor of 0.35%		450,000		360,784		450,000		149,089
TD Bank, N.A. (TD Bank) (3)	6/30/2020	daily one-month LIBOR plus 1.15%		800,000		92,266		400,000		165,945
Bank of America, N.A. (BofA)	5/27/2020	daily one-month LIBOR plus 1.20%		350,000		189,465		—		—
BofA	5/27/2020	daily one-month LIBOR plus 1.15%		250,000		17,457		200,000		—
BofA	6/4/2019	daily one-month LIBOR plus 1.30%		—		—		225,000		21,852
MUFG Union Bank, N.A. (Union Bank) (4)	6/28/2020	daily one-month LIBOR plus 1.20%		350,000		10,590		—		—
			$	3,400,000	$	977,175	$	2,600,000	$	1,328,761

(1)	Effective October 21, 2019, we amended this facility which extended the maturity date until October 19, 2020.

(2)	Effective February 6, 2020, the maximum facility size was temporarily increased from $450.0 million to $600.0 million, and will revert back to $450.0 million on March 1, 2020.

CBRE GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(3)	Effective July 1, 2019, this facility was amended with a revised interest rate of daily one-month LIBOR plus 1.15% and a maturity date of June 30, 2020. Effective August 1, 2019, this facility contained an accordion feature which provided for a temporary increase to $800.0 million, if needed, and expired on February 1, 2020. The temporary increase was never requested.

(4)

On June 28, 2019, we added a new warehouse facility for $200.0 million with Union Bank. This facility contains an accordion feature which allows for temporary increases not to exceed an additional $150.0 million. If utilized, the additional borrowings must be in predefined multiples and are not to occur more than three times within twelve consecutive months. Since inception, no short-term temporary increases have been requested.

During the year ended December 31, 2019, we had a maximum of $2.5 billion of warehouse lines of credit principal outstanding.

6.	Variable Interest Entities (VIEs)

We hold variable interests in certain VIEs in our Real Estate Investments segment which are not consolidated as it was determined that we are not the primary beneficiary. Our involvement with these entities is in the form of equity co-investments and fee arrangements.

As of December 31, 2019 and 2018, our maximum exposure to loss related to the VIEs which are not consolidated was as follows (dollars in thousands):

	December 31,
		2019		2018
Investments in unconsolidated subsidiaries	$	30,484	$	23,266
Other current assets		4,307		3,827
Co-investment commitments		29,696		22,363
Maximum exposure to loss	$	64,487	$	49,456

7.	Fair Value Measurements

Topic 820 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date. Topic 820 also establishes a three-level fair value hierarchy that prioritizes the inputs used to measure fair value. This hierarchy requires entities to maximize the use of observable inputs and minimize the use of unobservable inputs. The three levels of inputs used to measure fair value are as follows:

	•	Level 1 – Quoted prices in active markets for identical assets or liabilities.

	•	Level 2 – Observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.

	•	Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. This includes certain pricing models, discounted cash flow methodologies and similar techniques that use significant unobservable inputs.

CBRE GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The following tables present the fair value of assets and liabilities measured at fair value on a recurring basis as of December 31, 2019 and 2018 (dollars in thousands):

	As of December 31, 2019
	Fair Value Measured and Recorded Using
	Level 1		Level 2		Level 3		Total
Assets
Available for sale securities:
Debt securities:
U.S. treasury securities	$	6,998	$	—	$	—	$	6,998
Debt securities issued by U.S. federal agencies		—		10,639		—		10,639
Corporate debt securities		—		29,098		—		29,098
Asset-backed securities		—		5,152		—		5,152
Collateralized mortgage obligations		—		2,222		—		2,222
Total available for sale debt securities		6,998		47,111		—		54,109
Equity securities		51,399		—		—		51,399
Warehouse receivables		—		993,058		—		993,058
Total assets at fair value	$	58,397	$	1,040,169	$	—	$	1,098,566

	As of December 31, 2018
	Fair Value Measured and Recorded Using
	Level 1		Level 2		Level 3		Total
Assets
Available for sale securities:
Debt securities:
U.S. treasury securities	$	3,138	$	—	$	—	$	3,138
Debt securities issued by U.S. federal agencies		—		11,196		—		11,196
Corporate debt securities		—		27,201		—		27,201
Asset-backed securities		—		5,017		—		5,017
Collateralized mortgage obligations		—		2,224		—		2,224
Total available for sale debt securities		3,138		45,638		—		48,776
Equity securities		153,762		—		—		153,762
Warehouse receivables		—		1,342,468		—		1,342,468
Total assets at fair value	$	156,900	$	1,388,106	$	—	$	1,545,006
Liabilities
Interest rate swaps	$	—	$	1,070	$	—	$	1,070
Securities sold, not yet purchased		3,133		—		—		3,133
Total liabilities at fair value	$	3,133	$	1,070	$	—	$	4,203

The following non-recurring fair value measurement was recorded for the year ended December 31, 2019 (dollars in thousands):

		Net Carrying Value as of				Fair Value Measured and Recorded Using												Total Impairment Charges for the Year Ended
		December 31, 2019				Level 1				Level 2				Level 3				December 31, 2019
Other intangible assets		$	14,753			$	—			$	—			$	14,753			$	89,787

During the year ended December 31, 2019, we recorded an intangible asset impairment of $89.8 million in our Real Estate Investments segment. Such impairment charge was included as a separate line item in the accompanying consolidated statements of operations.

This non-cash write-off resulted from a review of the anticipated cash flows and the decrease in assets under management in our public securities business driven in part by continued industry-wide shift in investor preference for passive investment programs. The fair value measurements employed for our impairment evaluation was

CBRE GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

generally based upon a discounted cash flow approach. Inputs used in such evaluation included risk-free rates of return, estimated risk premiums as well as other economic variables.

During the year ended December 31, 2018, we recorded a gain of $100.4 million associated with remeasuring our 50% investment in a previously unconsolidated subsidiary in New England to fair value as of the date we acquired the remaining 50% controlling interest. Fair value of this investment in our unconsolidated subsidiary as of the acquisition date was $110.1 million, based upon the purchase price paid for the remaining 50% interest acquired, excluding the estimated control premium paid, which falls under Level 3 of the fair value hierarchy. Such gain was reflected in other income in our Advisory Services segment in the accompanying consolidated statements of operations for the year ended December 31, 2018.

There were no significant non-recurring fair value measurements recorded during the year ended December 31, 2017.

The fair values of the warehouse receivables are primarily calculated based on already locked in purchase prices. At December 31, 2019 and 2018, all of the warehouse receivables included in the accompanying consolidated balance sheets were either under commitment to be purchased by Freddie Mac or had confirmed forward trade commitments for the issuance and purchase of Fannie Mae or Ginnie Mae mortgage backed securities that will be secured by the underlying loans (See Notes 2 and 5). These assets are classified as Level 2 in the fair value hierarchy as a substantial majority of inputs are readily observable.

Fair value measurements for our available for sale debt securities are obtained from independent pricing services which utilize observable market data that may include quoted market prices, dealer quotes, market spreads, cash flows, the U.S. treasury yield curve, trading levels, market consensus prepayment speeds, credit information and the instrument's terms and conditions.

The equity securities and securities sold, not yet purchased are primarily in the U.S. and are generally valued at the last reported sales price on the day of valuation or, if no sales occurred on the valuation date, at the mean of the bid and asked prices on such date.

FASB ASC Topic 825, “Financial Instruments” requires disclosure of fair value information about financial instruments, whether or not recognized in the accompanying consolidated balance sheets. Our financial instruments are as follows:

	•	Cash and Cash Equivalents and Restricted Cash – These balances include cash and cash equivalents as well as restricted cash with maturities of less than three months. The carrying amount approximates fair value due to the short-term maturities of these instruments.

	•	Receivables, less Allowance for Doubtful Accounts – Due to their short-term nature, fair value approximates carrying value.

	•	Warehouse Receivables – These balances are carried at fair value. The primary source of value is either a contractual purchase commitment from Freddie Mac or a confirmed forward trade commitment for the issuance and purchase of a Fannie Mae or Ginnie Mae MBS (see Notes 2 and 5).

	•	Available For Sale Debt Securities – These investments are carried at their fair value.

	•	Equity Securities – These investments are carried at their fair value.

	•	Securities Sold, not yet Purchased – These liabilities are carried at their fair value.

	•	Short-Term Borrowings – This balance primarily represents outstanding amounts under our warehouse lines of credit of our wholly-owned subsidiary, CBRE Capital Markets. Due to the short-term nature and variable interest rates of these instruments, fair value approximates carrying value (see Notes 5 and 11).

	•	Senior Term Loans – Based upon information from third-party banks (which falls within Level 2 of the fair value hierarchy), the estimated fair value of our senior term loans was approximately $745.5 million and $757.0 million at December 31, 2019 and 2018, respectively. Their actual carrying value, net of

CBRE GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

		unamortized debt issuance costs, totaled $744.6 million and $751.3 million at December 31, 2019 and 2018, respectively (see Note 11).

	•	Interest Rate Swaps – These liabilities are carried at their fair value as calculated by using widely-accepted valuation techniques including discounted cash flow analysis on the expected cash flows of each derivative (see Note 11).

	•	Senior Notes – Based on dealers’ quotes (which falls within Level 2 of the fair value hierarchy), the estimated fair values of our 4.875% senior notes and 5.25% senior notes were $670.7 million and $478.3 million, respectively, at December 31, 2019 and $616.4 million and $443.7 million, respectively, at December 31, 2018. The actual carrying value of our 4.875% senior notes and 5.25% senior notes, net of unamortized debt issuance costs as well as unamortized discount or premium, if applicable, totaled $593.6 million and $423.0 million, respectively, at December 31, 2019 and $592.8 million and $422.7 million, respectively, at December 31, 2018.

	•	Notes Payable on Real Estate – As of December 31, 2019 and 2018, the carrying value of our notes payable on real estate, net of unamortized debt issuance costs, was $13.1 million and $6.3 million, respectively. These notes payable were not recourse to CBRE Group, Inc., except for being recourse to the single-purpose entities that held the real estate assets and were the primary obligors on the notes payable. These borrowings have either fixed interest rates or floating interest rates at spreads added to a market index. Although it is possible that certain portions of our notes payable on real estate may have fair values that differ from their carrying values, based on the terms of such loans as compared to current market conditions, or other factors specific to the borrower entity, we do not believe that the fair value of our notes payable is significantly different than their carrying value.

8.	Property and Equipment

Property and equipment consists of the following (dollars in thousands):

		December 31,
	Useful Lives		2019			2018
Computer hardware and software	2-10 years	$	1,011,704		$	848,955
Leasehold improvements	1-15 years		551,049			472,952
Furniture and equipment	1-10 years		344,351			307,812
Total cost			1,907,104			1,629,719
Accumulated depreciation and amortization			(1,070,898	)		(908,027	)
Property and equipment, net		$	836,206		$	721,692

Depreciation and amortization expense associated with property and equipment was $207.8 million, $192.8 million and $166.0 million for the years ended December 31, 2019, 2018 and 2017, respectively.

9.	Goodwill and Other Intangible Assets

On August 17, 2018, we announced a new organizational structure that became effective on January 1, 2019. Under the new structure, we organize our operations around, and publicly report our financial results on, three global business segments: (1) Advisory Services; (2) Global Workplace Solutions and (3) Real Estate Investments (see Note 19). In connection with this change, we reassessed our reporting units as of January 1, 2019. As a result, we have reassigned the goodwill balance to reflect our new segment structure using a relative fair value allocation approach. Under this approach, the fair value of each impacted reporting unit was determined using a combination of the income approach and the market approach and was compared to the goodwill of the impacted regional segments immediately prior to the reorganization to arrive at the reassigned goodwill balance.

We are required to test goodwill for impairment at least annually, or more often if circumstances or events indicate there may be a change in the impairment status, in accordance with Topic 350. We considered the change to our reportable segments and the resulting change in our identified reporting units to be a triggering event that required testing of our goodwill for impairment as of January 1, 2019. We elected to perform a quantitative test using a discounted cash flow approach to estimate the fair value of our reporting units. Management’s judgment is

CBRE GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

required in developing the assumptions for the discounted cash flow model. These assumptions include revenue growth rates, profit margin percentages, discount rates, etc. When we performed our goodwill impairment review as of January 1, 2019, we determined that no impairment existed as the estimated fair value of each of our reporting units was in excess of their carrying value.

Our annual assessment of goodwill and other intangible assets deemed to have indefinite lives has historically been completed as of the beginning of the fourth quarter of each year. We performed the 2019, 2018 and 2017 annual assessments as of October 1. When we performed our required annual goodwill impairment review as of October 1, 2019, 2018 and 2017, we determined that no impairment existed as the estimated fair value of our reporting units was in excess of their carrying value.

The following table summarizes the changes in the carrying amount of goodwill for the years ended December 31, 2019 and 2018 (dollars in thousands):

	Advisory Services			Global Workplace Solutions			Real Estate Investments			Total
Balance as of December 31, 2017
Goodwill	$	3,107,787		$	623,355		$	592,104		$	4,323,246
Accumulated impairment losses		(761,448	)		(175,473	)		(131,585	)		(1,068,506	)
		2,346,339			447,882			460,519			3,254,740
Purchase accounting entries related to acquisitions		188,071			288,243			(5,110	)		471,204
Foreign exchange movement		(25,904	)		(36,028	)		(11,703	)		(73,635	)
Balance as of December 31, 2018
Goodwill		3,269,954			875,570			575,291			4,720,815
Accumulated impairment losses		(761,448	)		(175,473	)		(131,585	)		(1,068,506	)
		2,508,506			700,097			443,706			3,652,309
Purchase accounting entries related to acquisitions		29,544			7,657			42,176			79,377
Foreign exchange movement		2,720			16,279			2,808			21,807
Balance as of December 31, 2019
Goodwill		3,302,218			899,506			620,275			4,821,999
Accumulated impairment losses		(761,448	)		(175,473	)		(131,585	)		(1,068,506	)
	$	2,540,770		$	724,033		$	488,690		$	3,753,493

In the fourth quarter of 2019, we completed the Telford Acquisition (see Note 4). Additionally, during 2019, we completed eight in-fill acquisitions: a leading advanced analytics software company based in the U.K., a commercial and residential real estate appraisal firm headquartered in Florida, our former affiliate in Omaha, a project management firm in Australia, a valuation and consulting business in Switzerland, a leading project management firm in Israel, a full-service real estate firm in San Antonio with a focus on retail, office, medical office and land, and a debt-focused real estate investment management business in the U.K.

On June 12, 2018, we acquired FacilitySource through a stock purchase and merger agreement with its stockholders, including FacilitySource Holdings, LLC, WP X Finance, LP and Warburg Pincus X Partners, LP (FacilitySource Acquisition). FacilitySource, which is reported in our Global Workplace Solutions segment, was acquired to help us build a tech-enabled supply chain capability for the occupier outsourcing industry, which would drive meaningfully differentiated outcomes for leading occupiers of real estate. The final net purchase price was approximately $266.5 million paid in cash, with $263.0 million paid in 2018 and $3.5 million paid in 2019. We financed the transaction with cash on hand and borrowings under our revolving credit facility. The purchase accounting related to the FacilitySource Acquisition has been finalized (with no changes made in 2019 to the preliminary purchase accounting recorded in 2018). The excess purchase price over the estimated fair value of net assets acquired has been recorded to goodwill. The goodwill arising from the FacilitySource Acquisition consisted largely of the synergies and economies of scale expected from combining the operations acquired from FacilitySource with ours. The goodwill recorded in connection with the FacilitySource Acquisition that is deductible for tax purposes was not significant.

During 2018, we completed six in-fill acquisitions, the largest of which was the purchase of the remaining 50% equity interest in our longstanding New England joint venture. We also acquired a retail leasing and property

CBRE GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

management firm in Australia, two firms in Israel (our former affiliate and a majority interest in a local facilities management provider), a commercial real estate services provider in San Antonio, and a provider of real estate and facilities consulting services to healthcare companies across the U.S.

Other intangible assets totaled $1,379.5 million, net of accumulated amortization of $1,358.5 million as of December 31, 2019, and $1,441.3 million, net of accumulated amortization of $1,180.4 million, as of December 31, 2018 and are comprised of the following (dollars in thousands):

	December 31,
	2019					2018
	Gross Carrying Amount		Accumulated Amortization			Gross Carrying Amount		Accumulated Amortization
Unamortizable intangible assets:
Management contracts	$	62,338				$	86,585
Trademarks		56,800					56,800
Trade names		6,000					16,250
		125,138					159,635
Amortizable intangible assets:
Customer relationships		857,772	$	(519,162	)		843,387	$	(435,225	)
Mortgage servicing rights		803,419		(319,927	)		697,322		(272,852	)
Trademarks/Trade names		345,834		(92,730	)		312,699		(76,514	)
Management contracts		142,767		(138,891	)		200,251		(135,835	)
Covenant not to compete		73,750		(73,750	)		73,750		(73,750	)
Other		389,394		(214,068	)		334,657		(186,217	)
		2,612,936		(1,358,528	)		2,462,066		(1,180,393	)
Total intangible assets	$	2,738,074	$	(1,358,528	)	$	2,621,701	$	(1,180,393	)

Unamortizable intangible assets include management contracts identified as a result of the REIM Acquisitions relating to relationships with open-end funds, a trademark separately identified as a result of the 2001 Acquisition and a trade name separately identified in connection with the REIM Acquisitions, which represents the Clarion Partners trade name in the U.S. These intangible assets have indefinite useful lives and accordingly are not being amortized.

Customer relationships relate to existing relationships acquired through acquisitions mainly in our Global Workplace Solutions segment that are being amortized over useful lives of up to 20 years.

Mortgage servicing rights represent the carrying value of servicing assets in the U.S. in our Advisory Services segment. The mortgage servicing rights are being amortized over the estimated period that net servicing income is expected to be received, which is typically up to ten years. See Mortgage Servicing Rights discussion within Note 2 for additional information.

In connection with the Telford Acquisition, a trademark of approximately $26.7 million was separately identified and is being amortized over 20 years (see Note 4). Trademarks of approximately $280 million were separately identified in connection with the GWS Acquisition and are being amortized over 20 years.

Management contracts consist primarily of asset management contracts relating to relationships with closed-end funds and separate accounts in the U.S., Europe and Asia that were separately identified as a result of the REIM Acquisitions. These management contracts are being amortized over useful lives of up to 13 years.

Other amortizable intangible assets mainly represent transition costs, which primarily get amortized to cost of revenue over the life of the associated contract.

During the year ended December 31, 2019, we recorded an intangible asset impairment of $89.8 million in our Real Estate Investments segment (see Note 7). This non-cash write-off related to intangibles acquired in the REIM Acquisitions, including unamortizable management contracts relating to relationships with open-end funds and the

CBRE GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Clarion Partners trade name in the U.S, as well as amortizable management contracts relating to relationships with closed-end funds and separate accounts in the U.S.

Amortization expense related to intangible assets was $225.7 million, $258.7 million and $238.7 million for the years ended December 31, 2019, 2018 and 2017, respectively. The estimated annual amortization expense for each of the years ending December 31, 2020 through December 31, 2024 approximates $167.7 million, $152.2 million, $130.4 million, $113.2 million and $101.8 million, respectively.

10.	Investments in Unconsolidated Subsidiaries

Investments in unconsolidated subsidiaries are accounted for under the equity method of accounting. Our investment ownership percentages in equity method investments vary, generally ranging up to 50.0%.

Combined condensed financial information for the entities accounted for using the equity method is as follows (dollars in thousands):

Condensed Balance Sheets Information:

	December 31,
		2019		2018
Current assets	$	5,407,082	$	3,931,111
Non-current assets		20,414,598		16,578,905
Total assets	$	25,821,680	$	20,510,016
Current liabilities	$	2,241,930	$	1,919,955
Non-current liabilities		5,857,413		4,495,117
Total liabilities	$	8,099,343	$	6,415,072
Non-controlling interests	$	461,018	$	261,654

Condensed Statements of Operations Information:

	Year Ended December 31,
		2019		2018		2017
Revenue	$	1,545,424	$	1,524,685	$	1,392,590
Operating income		549,111		906,889		1,425,824
Net income		419,966		679,712		1,254,345

Our Real Estate Investments segment invests our own capital in certain real estate investments with clients. We have provided investment management, property management, brokerage and other professional services in connection with these real estate investments on an arm’s length basis and earned revenues from these unconsolidated subsidiaries of $97.0 million, $134.3 million and $100.3 million during the years ended December 31, 2019, 2018 and 2017, respectively.

CBRE GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

11.	Long-Term Debt and Short-Term Borrowings

Total long-term debt and short-term borrowings consist of the following (dollars in thousands):

	December 31,
		2019			2018
Long-Term Debt
Senior term loans, with interest ranging from 0.75% to 3.38%, due through 2024	$	748,531		$	758,452
4.875% senior notes due in 2026, net of unamortized discount		597,052			596,653
5.25% senior notes due in 2025, net of unamortized premium		425,952			426,134
Other		1,861			3,682
Total long-term debt		1,773,396			1,784,921
Less: current maturities of long-term debt		(1,814	)		(3,146	)
Less: unamortized debt issuance costs		(10,337	)		(14,515	)
Total long-term debt, net of current maturities	$	1,761,245		$	1,767,260
Short-Term Borrowings
Warehouse lines of credit, with interest ranging from 2.95% to 5.25%, due in 2020	$	977,175		$	1,328,761
Other		4,534			—
Total short-term borrowings	$	981,709		$	1,328,761

Future annual aggregate maturities of total consolidated gross debt (excluding unamortized discount, premium and deferred financing costs) at December 31, 2019 are as follows (dollars in thousands): 2020—$983,523; 2021—$47; 2022—$0; 2023—$448,531; 2024—$300,000 and $1,025,000 thereafter.

Long-Term Debt

We maintain credit facilities with third-party lenders, which we use for a variety of purposes. On October 31, 2017, CBRE Services entered into a Credit Agreement (the 2017 Credit Agreement), which refinanced and replaced our prior credit agreement (the 2015 Credit Agreement). We used $200.0 million of borrowings from the tranche A term loan facility and $83.0 million of revolving credit facility borrowings under the 2017 Credit Agreement, in addition to cash on hand, to repay all amounts outstanding under the 2015 Credit Agreement. On December 20, 2018, CBRE Global Acquisition Company, a wholly-owned subsidiary of CBRE Services, entered into an incremental term loan assumption agreement with a syndicate of banks jointly led by Wells Fargo Bank and National Westminster Bank plc to establish a euro term loan facility under the 2017 Credit Agreement in an aggregate principal amount of 400.0 million euros. The proceeds from the euro term loan facility were used to repay a portion of the U.S. dollar denominated term loans outstanding under the 2017 Credit Agreement. On March 4, 2019, CBRE Services entered into an additional incremental assumption agreement with respect to the 2017 Credit Agreement (the 2017 Agreement as amended by such incremental assumption agreement, the 2019 Credit Agreement), which (i) extended the maturity of the U.S. dollar tranche A term loans under the 2017 Credit Agreement, (ii) extended the termination date of the revolving credit commitments available under the 2017 Credit Agreement and (iii) made certain changes to the interest rates and fees applicable to such tranche A term loans and revolving credit commitments. The proceeds from the new tranche A term loan facility under the 2019 Credit Agreement were used to repay the $300.0 million of tranche A term loans outstanding under the 2017 Credit Agreement.

The 2019 Credit Agreement is a senior unsecured credit facility that is jointly and severally guaranteed by us and certain of our subsidiaries. As of December 31, 2019, the 2019 Credit Agreement provided for the following: (1) a $2.8 billion incremental revolving credit facility, which includes the capacity to obtain letters of credit and swingline loans and terminates on March 4, 2024; (2) a $300.0 million incremental tranche A term loan facility maturing on March 4, 2024, requiring quarterly principal payments unless our leverage ratio (as defined in the 2019 Credit Agreement) is less than or equal to 2.50 to 1.00 on the last day of the fiscal quarter immediately preceding any such payment date and (3) a €400.0 million term loan facility due and payable in full at maturity on December 20, 2023.

CBRE GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

As of December 31, 2019, borrowings under the tranche A term loan facility under the 2019 Credit Agreement bear interest, based at our option, on either (1) the applicable fixed rate plus 0.875% to 1.25% or (2) the daily rate plus 0.0% to 0.25%, in each case as determined by reference to our Credit Rating (as defined in the 2019 Credit Agreement) and borrowings under the euro term loan facility under the 2019 Credit Agreement bear interest at a minimum rate of 0.75% plus EURIBOR. We had $297.3 million of tranche A term loan borrowings outstanding under the 2019 Credit Agreement (at an interest rate of 2.69%), net of unamortized debt issuance costs, included in the accompanying consolidated balance sheets at December 31, 2019. In addition, as of December 31, 2019, we had $447.3 million of euro term loan borrowings outstanding under the 2019 Credit Agreement (at an interest rate of 0.75%), net of unamortized debt issuance costs, which was included in the accompanying consolidated balance sheets.

The 2017 Credit Agreement was a senior unsecured credit facility that was jointly and severally guaranteed by us and certain of our subsidiaries. Our 2017 Credit Agreement provided for the following: (1) a $2.8 billion revolving credit facility, which included the capacity to obtain letters of credit and swingline loans and had a termination date of October 31, 2022; (2) a $750.0 million delayed draw tranche A term loan facility which would have matured on October 31, 2022 and which required quarterly principal payments unless our leverage ratio (as defined in the 2017 Credit Agreement) was less than or equal to 2.50 to 1.00 on the last day of the fiscal quarter immediately preceding any such payment date and (3) a €400.0 million term loan facility which would have been due and payable in full at maturity on December 20, 2023. We had $294.4 million of tranche A term loan borrowings outstanding under the 2017 Credit Agreement (at an interest rate of 3.36%), net of unamortized debt issuance costs, included in the accompanying consolidated balance sheets at December 31, 2018. In addition, as of December 31, 2018, we had $456.9 million of euro term loan borrowings outstanding under the 2017 Credit Agreement (at an interest rate of 0.75%), net of unamortized debt issuance costs, which was included in the accompanying consolidated balance sheets.

In March 2011, we entered into five interest rate swap agreements, all with effective dates in October 2011, and immediately designated them as cash flow hedges in accordance with FASB ASC Topic 815, “Derivatives and Hedging”. The purpose of these interest rate swap agreements was to attempt to hedge potential changes to our cash flows due to the variable interest nature of our senior term loan facilities. The total notional amount of these interest rate swap agreements was $400.0 million, $200.0 million of which expired in October 2017 and $200.0 million of which expired in September 2019. The ineffective portion of the change in fair value of the derivatives was recognized directly in earnings. There was no significant hedge ineffectiveness for the years ended December 31, 2019, 2018 and 2017. The effective portion of changes in the fair value of derivatives designated and qualifying as cash flow hedges was recorded in accumulated other comprehensive loss on the balance sheet and was subsequently reclassified into earnings in the period that the hedged forecasted transaction affects earnings. We reclassified $1.2 million, $2.7 million and $7.4 million for the years ended December 31, 2019, 2018, and 2017, respectively, from accumulated other comprehensive loss to interest expense. In addition, we recorded a net loss of $0.1 million and net gains of $1.0 million and $0.9 million for the years ended December 31, 2019, 2018 and 2017, respectively, to other comprehensive loss in relation to such interest rate swap agreements. As of December 31, 2018, the fair value of such interest rate swap agreements were reflected as a $1.1 million liability (included in other current liabilities) in the accompanying consolidated balance sheets.

On August 13, 2015, CBRE Services issued $600.0 million in aggregate principal amount of 4.875% senior notes due March 1, 2026 at a price equal to 99.24% of their face value. The 4.875% senior notes are unsecured obligations of CBRE Services, senior to all of its current and future subordinated indebtedness, but effectively subordinated to all of its current and future secured indebtedness. The 4.875% senior notes are jointly and severally guaranteed on a senior basis by us and each domestic subsidiary of CBRE Services that guarantees our 2017 Credit Agreement. Interest accrues at a rate of 4.875% per year and is payable semi-annually in arrears on March 1 and September 1, with the first interest payment made on March 1, 2016. The 4.875% senior notes are redeemable at our option, in whole or in part, prior to December 1, 2025 at a redemption price equal to the greater of (1) 100% of the principal amount of the 4.875% senior notes to be redeemed and (2) the sum of the present values of the remaining scheduled payments of principal and interest thereon to December 1, 2025 (not including any portions of payments of interest accrued as of the date of redemption) discounted to the date of redemption on a semi-annual basis at the Adjusted Treasury Rate (as defined in the indenture governing these notes). In addition, at any time on or after December 1, 2025, the 4.875% senior notes may be redeemed by us, in whole or in part, at a redemption price equal

CBRE GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

to 100.0% of the principal amount, plus accrued and unpaid interest, if any, to (but excluding) the date of redemption. If a change of control triggering event (as defined in the indenture governing these notes) occurs, we are obligated to make an offer to purchase the then outstanding 4.875% senior notes at a redemption price of 101.0% of the principal amount, plus accrued and unpaid interest, if any, to the date of purchase. The amount of the 4.875% senior notes, net of unamortized discount and unamortized debt issuance costs, included in the accompanying consolidated balance sheets was $593.6 million and $592.8 million at December 31, 2019 and 2018, respectively.

On September 26, 2014, CBRE Services issued $300.0 million in aggregate principal amount of 5.25% senior notes due March 15, 2025. On December 12, 2014, CBRE Services issued an additional $125.0 million in aggregate principal amount of 5.25% senior notes due March 15, 2025 at a price equal to 101.5% of their face value, plus interest deemed to have accrued from September 26, 2014. The 5.25% senior notes are unsecured obligations of CBRE Services, senior to all of its current and future subordinated indebtedness, but effectively subordinated to all of its current and future secured indebtedness. The 5.25% senior notes are jointly and severally guaranteed on a senior basis by us and each domestic subsidiary of CBRE Services that guarantees our 2017 Credit Agreement. Interest accrues at a rate of 5.25% per year and is payable semi-annually in arrears on March 15 and September 15, with the first interest payment made on March 15, 2015. The 5.25% senior notes are redeemable at our option, in whole or in part, prior to December 15, 2024 at a redemption price equal to the greater of (1) 100% of the principal amount of the 5.25% senior notes to be redeemed and (2) the sum of the present values of the remaining scheduled payments of principal and interest thereon to December 15, 2024 (not including any portions of payments of interest accrued as of the date of redemption) discounted to the date of redemption on a semi-annual basis at the Adjusted Treasury Rate (as defined in the indentures governing these notes). In addition, at any time on or after December 15, 2024, the 5.25% senior notes may be redeemed by us, in whole or in part, at a redemption price equal to 100.0% of the principal amount, plus accrued and unpaid interest, if any, to (but excluding) the date of redemption. If a change of control triggering event (as defined in the indenture governing these notes) occurs, we are obligated to make an offer to purchase the then outstanding 5.25% senior notes at a redemption price of 101.0% of the principal amount, plus accrued and unpaid interest, if any, to the date of purchase. The amount of the 5.25% senior notes, net of unamortized premium and unamortized debt issuance costs, included in the accompanying consolidated balance sheets was $423.0 million and $422.7 million at December 31, 2019 and 2018, respectively.

On March 14, 2013, CBRE Services issued $800.0 million in aggregate principal amount of 5.00% senior notes due March 15, 2023. The 5.00% senior notes were unsecured obligations of CBRE Services, senior to all of its current and future subordinated indebtedness, but effectively subordinated to all of its current and future secured indebtedness. The 5.00% senior notes were jointly and severally guaranteed on a senior basis by us and each domestic subsidiary of CBRE Services that guaranteed our 2017 Credit Agreement. Interest accrued at a rate of 5.00% per year and was payable semi-annually in arrears on March 15 and September 15. The 5.00% senior notes were redeemable at our option, in whole or in part, on March 15, 2018 at a redemption price of 102.5% of the principal amount on that date. We redeemed these notes in full on March 15, 2018 and incurred charges of $28.0 million, including a premium of $20.0 million and the write-off of $8.0 million of unamortized deferred financing costs. We funded this redemption with $550.0 million of borrowings from our tranche A term loan facility and $270.0 million of borrowings from our revolving credit facility under our 2017 Credit Agreement.

The indentures governing our 4.875% senior notes and 5.25% senior notes contain restrictive covenants that, among other things, limit our ability to create or permit liens on assets securing indebtedness, enter into sale/leaseback transactions and enter into consolidations or mergers. In addition, our 2019 Credit Agreement also requires us to maintain a minimum coverage ratio of consolidated EBITDA (as defined in the 2019 Credit Agreement) to consolidated interest expense of 2.00x and a maximum leverage ratio of total debt less available cash to consolidated EBITDA (as defined in the 2019 Credit Agreement) of 4.25x (and in the case of the first four full fiscal quarters following consummation of a qualified acquisition (as defined in the 2019 Credit Agreement), 4.75x) as of the end of each fiscal quarter. On this basis, our coverage ratio of consolidated EBITDA to consolidated interest expense was 22.62x for the year ended December 31, 2019, and our leverage ratio of total debt less available cash to consolidated EBITDA was 0.44x as of December 31, 2019.

CBRE GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Short-Term Borrowings

We had short-term borrowings of $981.7 million and $1.3 billion as of December 31, 2019 and 2018, respectively, with related weighted average interest rates of 3.1% and 3.8%, respectively, which are included in the accompanying consolidated balance sheets.

Revolving Credit Facility

The revolving credit facility under the 2019 Credit Agreement allows for borrowings outside of the U.S., with a $200.0 million sub-facility available to CBRE Services, one of our Canadian subsidiaries, one of our Australian subsidiaries and one of our New Zealand subsidiaries and a $300.0 million sub-facility available to CBRE Services and one of our U.K. subsidiaries. Borrowings under the revolving credit facility bear interest at varying rates, based at our option, on either (1) the applicable fixed rate plus 0.680% to 1.075% or (2) the daily rate plus 0.0% to 0.075%, in each case as determined by reference to our Credit Rating (as defined in the 2019 Credit Agreement). The 2019 Credit Agreement requires us to pay a fee based on the total amount of the revolving credit facility commitment (whether used or unused). As of December 31, 2019, no amount was outstanding under the revolving credit facility other than letters of credit totaling $2.0 million. These letters of credit, which reduce the amount we may borrow under the revolving credit facility, were primarily issued in the ordinary course of business.

The revolving credit facility under the 2017 Credit Agreement allowed for borrowings outside of the U.S., with a $200.0 million sub-facility available to CBRE Services, one of our Canadian subsidiaries, one of our Australian subsidiaries and one of our New Zealand subsidiaries and a $300.0 million sub-facility available to CBRE Services and one of our U.K. subsidiaries. Borrowings under the revolving credit facility bore interest at varying rates, based at our option, on either (1) the applicable fixed rate plus 0.775% to 1.075% or (2) the daily rate plus 0.0% to 0.075%, in each case as determined by reference to our Credit Rating (as defined in the 2017 Credit Agreement). The 2017 Credit Agreement required us to pay a fee based on the total amount of the revolving credit facility commitment (whether used or unused). As of December 31, 2018, no amount was outstanding under our revolving credit facility other than letters of credit totaling $2.0 million. These letters of credit, which reduced the amount we could have borrowed under the revolving credit facility, were primarily issued in the ordinary course of business.

Warehouse Lines of Credit

CBRE Capital Markets has warehouse lines of credit with third-party lenders for the purpose of funding mortgage loans that will be resold, and a funding arrangement with Fannie Mae for the purpose of selling a percentage of certain closed multifamily loans to Fannie Mae. These warehouse lines are recourse only to CBRE Capital Markets and are secured by our related warehouse receivables. See Note 5 for additional information.

12.	Leases

We are the lessee in contracts for our office space tenancies, for leased vehicles and for our wholly-owned subsidiary Hana. These arrangements account for the significant portion of our lease liabilities and right-of-use assets. We continually monitor our service arrangements to evaluate whether they meet the definition of a lease.

The base terms for our lease arrangements typically do not extend beyond 10 years. We commonly have renewal options in our leases, but most of these options do not create a significant economic incentive for us to extend the lease term. Therefore, payments during periods covered by these renewal options are typically not included in our lease liabilities and right-of-use assets. Specific to our vehicle leases, early termination options are common and economic penalties associated with early termination of these contracts are typically significant enough to make it reasonably certain that we will not exercise such options. Therefore, payments during periods covered by these early termination options in vehicle leases are typically included in our lease liabilities and right-of-use assets. As an accounting policy election, our short-term leases with an initial term of 12 months or less are not recognized as lease liabilities and right-of-use assets in the consolidated balance sheets. The rent expense associated with short term leases is recognized on a straight-line basis over the lease term.

CBRE GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Most of our office space leases include variable payments based on our share of actual common area maintenance and operating costs of the leased property. Many of our vehicle leases include variable payments based on actual service and fuel costs. For both office space and vehicle leases, we have elected the practical expedient to not separate lease components from non-lease components. Therefore, these costs are classified as variable lease payments.

Lease payments are typically discounted at our incremental borrowing rate because the interest rate implicit in the lease cannot be readily determined in the absence of key inputs which are typically not reported by our lessors. Because we do not generally borrow on a collateralized basis, judgement was used to estimate the secured borrowing rate associated with our leases based on relevant market data and our inputs applied to accepted valuation methodologies. The incremental borrowing rate calculated for each lease also reflects the lease term, currency, and geography specific to each lease.

Supplemental balance sheet information related to our leases is as follows (dollars in thousands):

Category	Classification	December 31, 2019
Assets
Operating lease assets	Operating lease assets	$	997,966
Financing lease assets	Other assets, net		94,141
Total leased assets		$	1,092,107

Liabilities
Current:
Operating	Operating lease liabilities	$	168,663
Financing	Other current liabilities		34,966
Non-current:
Operating	Non-current operating lease liabilities		1,057,758
Financing	Other liabilities		60,001
Total lease liabilities		$	1,321,388

Components of lease cost are as follows (dollars in thousands):

Component	Classification	Year Ended December 31, 2019
Operating lease cost	Operating, administrative and other	$	189,106
Finance lease cost:
Amortization of right-to-use assets	(1)		31,081
Interest on lease liabilities	Interest expense		1,317
Variable lease cost	(2)		74,476
Sublease income	Revenue		(3,734	)
Total lease cost		$	292,246

(1)	Amortization costs of $25.5 million from vehicle finance leases utilized in client outsourcing arrangements are included in cost of revenue. Amortization costs of $5.6 million from all other finance leases are included in depreciation and amortization.

(2)	Variable lease costs of $17.5 million from leases in client outsourcing arrangements are included in cost of revenue. Variable lease costs of $57.0 million from all other leases are included in operating, administrative and other.

Weighted average remaining lease term and discount rate for our operating leases are as follows:

		December 31, 2019
Weighted-average remaining lease term:
Operating leases		9 years
Finance leases		3 years
Weighted-average discount rate:
Operating leases		3.4%
Finance leases		2.3%

CBRE GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Maturities of lease liabilities by fiscal year as of December 31, 2019 are as follows (dollars in thousands):

	Operating Leases		Financing Leases
2020	$	175,958	$	35,532
2021		200,043		27,314
2022		178,314		19,264
2023		160,300		12,303
2024		148,681		4,628
Thereafter		569,360		—
Total remaining lease payments at December 31, 2019	$	1,432,656	$	99,041
Less: Interest		206,235		4,074
Present value of lease liabilities at December 31, 2019	$	1,226,421	$	94,967

As previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2018 and under the previous lease accounting standard, the following is a schedule by year of future minimum lease payments for noncancelable operating leases as of December 31, 2018 (dollars in thousands):

2019	$	238,954
2020		219,351
2021		202,205
2022		172,267
2023		145,705
Thereafter		510,741
Total minimum payment required	$	1,489,223

Supplemental cash flow information and non-cash activity related to our operating leases are as follows (dollars in thousands):

	Year Ended December 31, 2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	167,652
Operating cash flows from financing leases		1,559
Financing cash flows from financing leases		32,352
Right-of-use assets obtained in exchange for new operating lease liabilities		168,972
Right-of-use assets obtained in exchange for new financing lease liabilities		63,041
Other non-cash increases in operating lease right-of-use assets (1)		47,851
Other non-cash decreases in finance lease right-of-use assets (1)		(1,826	)

(1)	These noncash increases in right-of-use assets resulted from lease modifications and remeasurements.

13.	Commitments and Contingencies

We are a party to a number of pending or threatened lawsuits arising out of, or incident to, our ordinary course of business. We believe that any losses in excess of the amounts accrued therefore as liabilities on our financial statements are unlikely to be significant, but litigation is inherently uncertain and there is the potential for a material adverse effect on our financial statements if one or more matters are resolved in a particular period in an amount materially in excess of what we anticipated.

In January 2008, CBRE MCI, a wholly-owned subsidiary of CBRE Capital Markets, entered into an agreement with Fannie Mae under Fannie Mae’s DUS Program to provide financing for multifamily housing with five or more units. Under the DUS Program, CBRE MCI originates, underwrites, closes and services loans without prior approval by Fannie Mae, and typically, is subject to sharing up to one-third of any losses on loans originated under the DUS Program. CBRE MCI has funded loans subject to such loss sharing arrangements with unpaid principal balances of $28.0 billion at December 31, 2019. CBRE MCI, under its agreement with Fannie Mae, must post cash reserves or other acceptable collateral under formulas established by Fannie Mae to provide for sufficient

CBRE GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

capital in the event losses occur. As of December 31, 2019 and 2018, CBRE MCI had a $72.0 million and a $64.0 million, respectively, letter of credit under this reserve arrangement, and had recorded a liability of approximately $37.0 million and $37.9 million, respectively, for its loan loss guarantee obligation under such arrangement. Fannie Mae’s recourse under the DUS Program is limited to the assets of CBRE MCI, which assets totaled approximately $930.7 million (including $636.4 million of warehouse receivables, a substantial majority of which are pledged against warehouse lines of credit and are therefore not available to Fannie Mae) at December 31, 2019.

CBRE Capital Markets participates in Freddie Mac’s Multifamily Small Balance Loan (SBL) Program. Under the SBL program, CBRE Capital Markets has certain repurchase and loss reimbursement obligations. These obligations are for the period from origination of the loan to the securitization date. CBRE Capital Markets must post a cash reserve or other acceptable collateral to provide for sufficient capital in the event the obligations are triggered. As of both December 31, 2019 and 2018, CBRE Capital Markets had posted a $5.0 million letter of credit under this reserve arrangement.

We had outstanding letters of credit totaling $91.8 million as of December 31, 2019, excluding letters of credit for which we have outstanding liabilities already accrued on our consolidated balance sheet related to our subsidiaries’ outstanding reserves for claims under certain insurance programs as well as letters of credit related to operating leases. The CBRE Capital Markets letters of credit totaling $77.0 million as of December 31, 2019 referred to in the preceding paragraphs represented the majority of the $91.8 million outstanding letters of credit as of such date. The remaining letters of credit are primarily executed by us in the ordinary course of business and expire at varying dates through September 2020.

We had guarantees totaling $80.1 million as of December 31, 2019, excluding guarantees related to pension liabilities, consolidated indebtedness and other obligations for which we have outstanding liabilities already accrued on our consolidated balance sheet, and excluding guarantees related to operating leases. The $80.1 million primarily represents guarantees executed by us in the ordinary course of business, including various guarantees of management and vendor contracts in our operations overseas, which expire at the end of each of the respective agreements.

In addition, as of December 31, 2019, we had issued numerous non-recourse carveout, completion and budget guarantees relating to development projects for the benefit of third parties. These guarantees are commonplace in our industry and are made by us in the ordinary course of our Real Estate Investments business. Non-recourse carveout guarantees generally require that our project-entity borrower not commit specified improper acts, with us potentially liable for all or a portion of such entity’s indebtedness or other damages suffered by the lender if those acts occur. Completion and budget guarantees generally require us to complete construction of the relevant project within a specified timeframe and/or within a specified budget, with us potentially being liable for costs to complete in excess of such timeframe or budget. While there can be no assurance, we do not expect to incur any material losses under these guarantees.

An important part of the strategy for our Real Estate Investments business involves investing our capital in certain real estate investments with our clients. These co-investments generally total up to 2.0% of the equity in a particular fund. As of December 31, 2019, we had aggregate commitments of $72.1 million to fund future co-investments. Additionally, an important part of our Real Estate Investments business strategy is to invest in unconsolidated real estate subsidiaries as a principal (in most cases co-investing with our clients). As of December 31, 2019, we had committed to fund $50.1 million of additional capital to these unconsolidated subsidiaries.

14.	Employee Benefit Plans

Stock Incentive Plans

2012 Equity Incentive Plan and 2017 Equity Incentive Plan

Our 2012 equity incentive plan and 2017 equity incentive plan were adopted by our board of directors and approved by our stockholders on May 8, 2012 and May 19, 2017, respectively. Both the 2012 and 2017 equity incentive plans authorized the grant of stock-based awards to our employees, directors and independent contractors.

CBRE GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Our 2012 equity incentive plan was terminated in May 2017 in connection with the adoption of our 2017 equity incentive plan. Our 2017 equity incentive plan was terminated in May 2019 in connection with the adoption of our 2019 equity incentive plan, which is described below. At termination of the 2012 equity incentive plan, no unissued shares from the 2012 stock incentive plan were allocated to the 2017 equity incentive plan for potential future issuance. At termination of the 2017 equity incentive plan, no unissued shares from the 2017 equity incentive plan were allocated to the 2019 equity incentive plan for potential future issuance. Since our 2012 and 2017 equity incentive plans have been terminated, no new awards may be granted under them. As of December 31, 2019, assuming the maximum number of shares under our performance-based awards will later be issued, 2,166,537 outstanding restricted stock unit (RSU) awards to acquire shares of our Class A common stock granted under the 2012 equity incentive plan remain outstanding according to their terms, and we will continue to issue shares to the extent required under the terms of such outstanding awards. Shares underlying awards that expire, terminate or lapse under the 2012 equity incentive plan will not become available for grant under the 2017 equity incentive plan or the 2019 equity incentive plan. As of December 31, 2019, 5,736,560 outstanding RSU awards to acquire shares of our Class A common stock granted under the 2017 equity incentive plan remain outstanding according to their terms, and we will continue to issue shares to the extent required under the terms of such outstanding awards (noting that any shares granted above target will get deducted from the 2019 equity incentive plan reserve as noted below). Shares underlying awards outstanding under the 2017 equity incentive plan at termination that are subsequently canceled, forfeited or terminated without issuance to the holder thereof will be available for grant under the 2019 equity incentive plan.

2019 Equity Incentive Plan

Our 2019 equity incentive plan was adopted by our board of directors on March 1, 2019 and approved by our stockholders on May 17, 2019. The 2019 equity incentive plan authorizes the grant of stock-based awards to employees, directors and independent contractors. Unless terminated earlier, the 2019 equity incentive plan will terminate on March 1, 2029. A total of 9,900,000 shares of our Class A common stock are reserved for issuance under the 2019 equity incentive plan, less 189,499 shares granted under the 2017 equity incentive plan between March 1, 2019, the date our board of directors approved the plan, and May 17, 2019, the date our stockholders approved the 2019 equity incentive plan. Additionally, as mentioned above, shares underlying awards outstanding under the 2017 equity incentive plan at termination that are subsequently canceled, forfeited or terminated without issuance to the holder thereof will be available for reissuance under the 2019 equity incentive plan. As of December 31, 2019, 234,242 shares were canceled under the 2017 equity incentive plan and added to the authorized pool for the 2019 equity incentive plan, bringing the total authorized amount under the 2019 equity incentive plan to 9,944,743 shares of our Class A common stock.

Shares underlying expired, canceled, forfeited or terminated awards under the 2019 equity incentive plan (other than awards granted in substitution of an award previously granted), plus those utilized to pay tax withholding obligations with respect to an award (other than an option or stock appreciation right) will be available for reissuance. Awards granted under the 2019 equity incentive plan are subject to a minimum vesting condition of one year. As of December 31, 2019, assuming the maximum number of shares under our performance-based awards will later be issued (which includes shares that could be issued over target related to performance awards issued and outstanding under the 2017 equity incentive plan), 7,538,712 shares remained available for future grants under this plan.

The number of shares issued or reserved pursuant to the 2012, 2017 and 2019 equity incentive plans are subject to adjustment on account of a stock split of our outstanding shares, stock dividend, dividend payable in a form other than shares in an amount that has a material effect on the price of the shares, consolidation, combination or reclassification of the shares, recapitalization, spin-off, or other similar occurrences.

Non-Vested Stock Awards

We have issued non-vested stock awards, including restricted stock units and restricted shares, in our Class A common stock to certain of our employees, independent contractors and members of our board of directors. The following is a summary of the awards granted during the years ended December 31, 2019, 2018 and 2017.

CBRE GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

	•	During the year ended December 31, 2019, we granted RSUs that are performance vesting in nature, with 888,726 reflecting the maximum number of RSUs that may be issued if all of the performance targets are satisfied at their highest levels, and 1,493,788 RSUs that are time vesting in nature.

	•	During the year ended December 31, 2018, we granted RSUs that are performance vesting in nature, with 1,014,269 reflecting the maximum number of RSUs that may be issued if all of the performance targets are satisfied at their highest levels, and 1,332,085 RSUs that are time vesting in nature.

	•	During the year ended December 31, 2017, we granted RSUs that are performance vesting in nature, with 1,458,033 reflecting the maximum number of RSUs that may be issued if all of the performance targets are satisfied at their highest levels, and 1,466,986 RSUs that are time vesting in nature.

Our annual performance-vesting awards generally vest in full three years from the grant date, based on our achievement against various adjusted income per share performance targets. Our time-vesting awards generally vest 25% per year over four years from the grant date.

In addition, on December 1, 2017, we made a special grant of RSUs under our 2017 equity incentive plan (Special RSU grant) to certain of our employees, with 3,288,618 reflecting the maximum number of RSUs that may be issued if all of the performance targets are satisfied at their highest levels, and 939,605 RSUs that are time vesting in nature. During 2018 and 2019, we made additional grants under this Special RSU grant program to certain of our employees, with 195,907 reflecting the maximum number of RSUs that may be issued if all of the performance targets are satisfied at their highest levels, and 55,973 RSUs that are time vesting in nature. As a condition to this Special RSU grant, each participant has agreed to execute a Restrictive Covenants Agreement. Each Special RSU grant consisted of:

	(i)	Time Vesting RSUs with respect to 33.3% of the total number of target RSUs subject to the grant.

	(ii)	Total Shareholder Return (TSR) Performance RSUs with respect to 33.3% of the total number of target RSUs subject to the grant. The actual number of TSR Performance RSUs that will vest is determined by measuring our cumulative TSR against the cumulative TSR of each of the other companies comprising the S&P 500 on the Grant Date (the Comparison Group) over a six-year measurement period commencing on the Grant Date and ending on December 1, 2023. For purposes of measuring TSR, the initial value of our common stock was the average closing price of such common stock for the 60 trading days immediately preceding the Grant Date and the final value of our common stock will be the average closing price of such common stock for the 60 trading days immediately preceding December 1, 2023.

	(iii)	EPS Performance RSUs with respect to 33.3% of the total number of target RSUs subject to the grant. The actual number of EPS Performance RSUs that will vest is determined by measuring our cumulative adjusted income per share growth against the cumulative EPS growth, as reported under GAAP (GAAP EPS), of each of the other members of the Comparison Group over a six-year measurement period commencing on January 1, 2018 and ending on December 31, 2023.

The Time Vesting and TSR Performance RSUs subject to the Special RSU grants vest on December 1, 2023, while the EPS Performance RSUs subject to the Special RSU grants vest on December 31, 2023.

We estimated the fair value of the TSR Performance RSUs referred to above on the date of the grant using a Monte Carlo simulation with the following assumptions:


	2019		2018		2017
Volatility of common stock	25.96	%	25.02	%	27.85	%
Expected dividend yield	0.00	%	0.00	%	0.00	%
Risk-free interest rate	2.12	%	2.73	%	2.33	%

Lastly, on December 15, 2017, we granted 127,160 RSUs that are time vesting in nature to certain senior brokers. Such awards generally vest in full three years from the grant date.

CBRE GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

A summary of the status of our non-vested stock awards is presented in the table below:

			Weighted Average Market Value Per Share
Balance at December 31, 2016	4,843,273		$	31.66
Granted	5,152,082			40.11
Performance award achievement adjustments	489,219			30.93
Vested	(2,510,031	)		29.98
Forfeited	(297,441	)		32.85
Balance at December 31, 2017	7,677,102			37.76
Granted	2,023,266			45.70
Performance award achievement adjustments	282,953			38.09
Vested	(2,177,800	)		34.78
Forfeited	(623,161	)		40.85
Balance at December 31, 2018	7,182,360			41.04
Granted	2,000,977			50.07
Performance award achievement adjustments	166,007			37.36
Vested	(1,323,351	)		37.43
Forfeited	(316,294	)		42.09
Balance at December 31, 2019	7,709,699			43.89

Total compensation expense related to non-vested stock awards was $127.7 million, $128.2 million and $93.1 million for the years ended December 31, 2019, 2018 and 2017, respectively. At December 31, 2019, total unrecognized estimated compensation cost related to non-vested stock awards was approximately $173.8 million, which is expected to be recognized over a weighted average period of approximately 2.9 years.

Bonuses

We have bonus programs covering select employees, including senior management. Awards are based on the position and performance of the employee and the achievement of pre-established financial, operating and strategic objectives. The amounts charged to expense for bonuses were $309.4 million, $363.6 million and $286.5 million for the years ended December 31, 2019, 2018 and 2017, respectively.

401(k) Plan

Our CBRE 401(k) Plan (401(k) Plan) is a defined contribution savings plan that allows participant deferrals under Section 401(k) of the Internal Revenue Code (IRC). Most of our U.S. employees, other than qualified real estate agents having the status of independent contractors under section 3508 of the IRC of 1986, as amended, and non-plan electing union employees, are eligible to participate in the plan. The 401(k) Plan provides for participant contributions as well as a company match. A participant is allowed to contribute to the 401(k) Plan from 1% to 75% of his or her compensation, subject to limits imposed by applicable law. Effective January 1, 2007, all participants hired post January 1, 2007 vest in company match contributions 20% per year for each plan year they are employed. All participants hired before January 1, 2007 are immediately vested in company match contributions. For both 2019 and 2018, we contributed a 67% match on the first 6% of annual compensation for participants with an annual base salary of less than $100,000 and we contributed a 50% match on the first 6% of annual compensation for participants with an annual base salary of $100,000 or more (up to $150,000 of compensation). For 2017, we contributed a 50% match on the first 6% of annual compensation (up to $150,000 of compensation) deferred by each participant. In connection with the 401(k) Plan, we charged to expense $59.9 million, $46.3 million and $38.8 million for the years ended December 31, 2019, 2018 and 2017, respectively.

Participants are entitled to invest up to 25% of their 401(k) account balance in shares of our common stock. As of December 31, 2019, approximately 1.3 million shares of our common stock were held as investments by participants in our 401(k) Plan.

CBRE GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Pension Plans

We have two contributory defined benefit pension plans in the U.K. The London-based firm of Hillier Parker May & Rowden, which we acquired in 1998, had a contributory defined benefit pension plan. A subsidiary of Insignia, which we acquired in connection with the Insignia Acquisition in 2003, also had a contributory defined benefit pension plan in the U.K. Our subsidiaries based in the U.K. maintain the plans to provide retirement benefits to existing and former employees participating in these plans. With respect to these plans, our historical policy has been to contribute annually to the plans, an amount to fund pension liabilities as actuarially determined and as required by applicable laws and regulations. Our contributions to these plans are invested by the plan trustee and, if these investments do not perform well in the future, we may be required to provide additional contributions to cover any pension underfunding. Effective July 1, 2007, we reached agreements with the active members of these plans to freeze future pension plan benefits. In return, the active members became eligible to enroll in a defined contribution plan. As of December 31, 2019 and 2018, the fair values of pension plan assets were $331.4 million and $274.4 million, respectively, and the fair values of projected benefit obligations in aggregate were $439.4 million and $387.4 million, respectively. As a result, the plans were underfunded by approximately $108.0 million and $113.0 million at December 31, 2019 and 2018, respectively, and were recorded as net liabilities included in other long term liabilities in the accompanying consolidated balance sheets. Items not yet recognized as a component of net periodic pension cost (benefit) were $191.6 million and $192.7 million at December 31, 2019 and 2018, respectively, and were included in accumulated other comprehensive loss in the accompanying consolidated balance sheets. Net periodic pension (benefit) cost was not material for the years ended December 31, 2019, 2018 and 2017.

15.	Income Taxes

The components of income before provision for income taxes consisted of the following (dollars in thousands):

	Year Ended December 31,
		2019		2018		2017
Domestic	$	839,899	$	807,590	$	575,222
Foreign		521,446		571,416		596,111
	$	1,361,345	$	1,379,006	$	1,171,333

Our tax provision (benefit) consisted of the following (dollars in thousands):

	Year Ended December 31,
		2019			2018			2017
Federal:
Current	$	(51,980	)	$	166,024		$	275,475
Deferred		(74,432	)		(7,667	)		39,045
		(126,412	)		158,357			314,520
State:
Current		52,403			43,320			21,212
Deferred		(5,760	)		(3,692	)		5,573
		46,643			39,628			26,785
Foreign:
Current		163,833			149,194			123,840
Deferred		(14,169	)		(34,121	)		2,612
		149,664			115,073			126,452
	$	69,895		$	313,058		$	467,757

CBRE GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The following is a reconciliation stated as a percentage of pre-tax income of the U.S. statutory federal income tax rate to our effective tax rate:


	2019		2018		2017
Federal statutory tax rate	21	%	21	%	35	%
Foreign rate differential	4		—		(5	)
State taxes, net of federal benefit	3		3		2
Non-deductible expenses	1		2		2
Reserves for uncertain tax positions	1		—		(2	)
Credits and exemptions	(4	)	(2	)	(3	)
Outside basis differences recognized as a result of a legal entity restructuring	(20	)	—		—
Tax Reform	—		1		12
Change in valuation allowance	—		(1	)	(2	)
Acquisition-related costs	—		(2	)	—
Other	(1	)	1		1
Effective tax rate	5	%	23	%	40	%

In the fourth quarter of 2019, we recognized a net tax benefit of approximately $277.2 million attributable to outside basis differences recognized as a result of a legal entity restructuring. The recognition of the outside tax basis differences generated a capital loss that will offset capital gains generated during 2019. In addition, a portion of the capital loss will be carried back to tax years 2016, 2017 and 2018 to offset capital gains in those years. The remaining capital loss will be carried forward and will be available to offset future capital gains. Based on our strong history of capital gains in the prior three years and the nature of our business we expect to generate sufficient capital gains in the five year carry forward period and therefore concluded that it is more likely than not that we will realize the full tax benefit from the capital loss carried forward. Accordingly, we have not provided any valuation allowance against the deferred tax asset for the capital loss carried forward.

On December 22, 2017, the Tax Act was signed into law making significant changes to the IRC, including a decrease to the U.S. corporate tax rate from 35% to 21% and a one-time transition tax (i.e. toll charge, or the Transition Tax) on the mandatory deemed repatriation of cumulative foreign earnings as of December 31, 2017. We recorded a provisional amount for our one-time Transition Tax liability of $158.0 million for the year ended December 31, 2017, which represented our estimate of the U.S. federal and state tax impact of the Transition Tax, partially offset by a net income tax benefit of $14.6 million related to the re-measurement of U.S. federal deferred tax assets and liabilities. Our provision for income taxes for 2018 included a net expense true-up of $13.3 million associated with the Tax Act. As required, we paid the full state tax liability for the Transition Tax in 2018. We are paying the federal tax liability for the Transition Tax in annual interest-free installments over a period of eight years through 2025 as allowed by the Tax Act. As of December 31, 2019, remaining amounts due for the Transition Tax (including a 2019 true-up of the Transaction Tax liability) include the third installment due in 2020 of $14.2 million, which is included within income taxes payable, and the remaining payable of $93.6 million, which is included within non-current income taxes payable in the accompanying consolidated balance sheets.

CBRE GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Cumulative tax effects of temporary differences are shown below at December 31, 2019 and 2018 (dollars in thousands):

	December 31,
		2019			2018
Asset (Liability)
Tax losses and tax credits	$	330,839		$	275,574
Operating lease liabilities		320,261			—
Bonus and deferred compensation		280,747			276,572
Bad debt and other reserves		66,504			57,506
Pension obligation		24,022			22,950
Investments		5,236			5,211
Tax effect on revenue items related to Topic 606 adoption		(25,620	)		(38,510	)
Property and equipment		(54,370	)		(49,935	)
Unconsolidated affiliates and partnerships		(63,594	)		(64,448	)
Capitalized costs and intangibles		(277,246	)		(289,674	)
Operating lease assets		(314,433	)		—
All other		(1,153	)		(2,457	)
Net deferred tax assets before valuation allowance		291,193			192,789
Valuation allowance		(251,922	)		(248,511	)
Net deferred tax assets (liabilities)	$	39,271		$	(55,722	)

In the first quarter of 2019 we adopted new lease accounting guidance (see Note 3). As a result of such adoption, we recorded deferred tax assets of $320.3 million and deferred tax liabilities of $314.4 million for book tax basis differences in the operating lease liabilities and operating lease assets, respectively. As of December 31, 2019, we had a U.S. federal capital loss carryforward, net of related reserves for uncertain tax positions, of approximately $327.9 million, translating to a net deferred tax asset before valuation allowance of $64.9 million, which will expire after the five-year carryforward period. As of December 31, 2019, we had U.S. federal net operating losses (NOLs), net of related reserves for uncertain tax positions, of approximately $32.2 million, translating to a net deferred tax asset before valuation allowance of $6.8 million, which will begin to expire in 2023. As of December 31, 2019, there were also deferred tax assets before valuation allowances of approximately $3.5 million related to state NOLs as well as $255.9 million related to foreign NOLs. The state and foreign NOLs both begin to expire in 2020, but the majority carry forward indefinitely. The utilization of NOLs may be subject to certain limitations under U.S. federal, state and foreign laws. We have recorded a full valuation allowance for NOLs that we believe will not be fully utilized.

We determined that as of December 31, 2019, $251.9 million of deferred tax assets do not satisfy the realization criteria set forth in Topic 740. Accordingly, a valuation allowance has been recorded for this amount. If released, the entire amount would result in a benefit to continuing operations. During the year ended December 31, 2019, our valuation allowance increased by approximately $3.4 million. The change in the valuation allowance was driven by an increase in the valuation allowance of $7.9 million associated with NOLs generated by our operations in Luxembourg and Norway and was partially offset by a decrease of $4.5 million due to tax rate changes, currency translation adjustments and utilization of foreign NOLs that had full valuation allowances. We believe it is more likely than not that future operations will generate sufficient taxable income to realize the benefit of the deferred tax assets recorded net of these valuation allowances.

Our foreign subsidiaries have accumulated $2.6 billion of undistributed earnings for which we have not recorded a deferred tax liability. No additional income taxes have been provided for any remaining undistributed foreign earnings not subject to the Transition Tax, in connection with the enactment of the Tax Act, or any additional outside basis difference inherent in these entities, as these amounts continue to be indefinitely reinvested in foreign operations. While federal and state current income tax expense have been recognized as a result of the Tax Act, we have not provided any additional deferred taxes with respect to items such as foreign withholding taxes, state income tax or foreign exchange gain or loss that would be due when cash is actually repatriated to the U.S. because those foreign earnings are considered permanently reinvested in the business or may be remitted substantially free of any additional local taxes. The determination of the amount of the unrecognized deferred tax liability related to the undistributed earnings if eventually remitted is not practicable.

CBRE GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The total amount of gross unrecognized tax benefits was approximately $141.2 million and $95.0 million as of December 31, 2019 and 2018, respectively. The total amount of unrecognized tax benefits that would affect our effective tax rate, if recognized, is $44.5 million ($42.7 million, net of federal benefit received from state positions) and $50.2 million ($49.2 million, net of federal benefit received from state positions) as of December 31, 2019 and 2018, respectively.

A reconciliation of the beginning and ending amount of unrecognized tax benefits for the years ended December 31, 2019 and 2018 is as follows (dollars in thousands):

	Year Ended December 31,
		2019			2018
Beginning balance, unrecognized tax benefits	$	(94,962	)	$	(35,826	)
Gross increases - tax positions in prior period		(22,229	)		(49,412	)
Gross decreases - tax positions in prior period		17,390			—
Gross increases - current-period tax positions		(45,262	)		(18,861	)
Decreases relating to settlements		218			4,619
Reductions as a result of lapse of statute of limitations		3,680			4,531
Foreign exchange movement		1			(13	)
Ending balance, unrecognized tax benefits	$	(141,164	)	$	(94,962	)

During the year ended December 31, 2019, we released $3.7 million of gross unrecognized tax benefits primarily due to expiration of the U.S. federal statute of limitations related to the 2015 tax year. As a result, we recognized $3.2 million of income tax benefits related to decreases in tax positions and $0.5 million of income tax benefits related to interest and penalties. We believe the amount of gross unrecognized tax benefits that will be settled during the next twelve months due to filing amended returns and settling ongoing exams cannot be reasonably estimated but will not be significant.

Our continuing practice is to recognize potential accrued interest and/or penalties related to income tax matters within income tax expense. During the years ended December 31, 2019, 2018 and 2017, we accrued an additional $0.3 million, $0.6 million and $1.0 million, respectively, in interest and penalties associated with uncertain tax positions. As of December 31, 2019 and 2018, we have recognized a liability for interest and penalties of $3.8 million ($3.1 million, net of related federal benefit received from interest expense) and $4.0 million ($3.5 million, net of related federal benefit received from interest expense), respectively.

We conduct business globally and, as a result, one or more of our subsidiaries files income tax returns in the U.S. federal jurisdiction and in multiple state, local and foreign jurisdictions. We are no longer open to assessment by the U.S. Internal Revenue Service for years prior to 2016. With limited exception, our significant state and foreign tax jurisdictions are no longer subject to audit by the various tax authorities for tax years prior to 2011.

16.	Stockholders’ Equity

Our board of directors is authorized, subject to any limitations imposed by law, without the approval of our stockholders, to issue a total of 25,000,000 shares of preferred stock, in one or more series, with each such series having rights and preferences including voting rights, dividend rights, conversion rights, redemption privileges and liquidation preferences, as our board of directors may determine.

In October 2016, our board of directors authorized the company to repurchase up to an aggregate of $250.0 million of our Class A common stock over three years. No shares were repurchased during the years ended December 31, 2016 and 2017. During the year ended December 31, 2018, we spent $161.0 million to repurchase 3,980,656 shares of our Class A common stock with an average price paid per share of $40.43. During January 2019, under the October 2016 program, we spent $45.1 million to repurchase 1,144,449 shares of our Class A common stock with an average price paid per share of $39.38.

CBRE GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

In February 2019, our board of directors authorized a new program for the company to repurchase up to $300.0 million of our Class A common stock over three years, effective March 11, 2019. The previous program terminated upon the effectiveness of the new program. In both August and November 2019, our board of directors authorized an additional $100.0 million under our new program, bringing the total authorized amount under the new program to a total of $500.0 million. During the year ended December 31, 2019, under the March 2019 program, we spent $100.0 million to repurchase an additional 1,936,458 shares of our Class A common stock with an average price paid per share of $51.64. As of December 31, 2019, we had $400.0 million of capacity remaining under our current stock repurchase program.

17.	Income Per Share Information

The following is a calculation of income per share (dollars in thousands, except share data):

	Year Ended December 31,
		2019		2018		2017
Basic Income Per Share
Net income attributable to CBRE Group, Inc. shareholders	$	1,282,357	$	1,063,219	$	697,109
Weighted average shares outstanding for basic income per share		335,795,654		339,321,056		337,658,017
Basic income per share attributable to CBRE Group, Inc. shareholders	$	3.82	$	3.13	$	2.06
Diluted Income Per Share
Net income attributable to CBRE Group, Inc. shareholders	$	1,282,357	$	1,063,219	$	697,109
Weighted average shares outstanding for basic income per share		335,795,654		339,321,056		337,658,017
Dilutive effect of contingently issuable shares		4,727,217		3,801,293		3,121,987
Dilutive effect of stock options		—		392		3,552
Weighted average shares outstanding for diluted income per share		340,522,871		343,122,741		340,783,556
Diluted income per share attributable to CBRE Group, Inc. shareholders	$	3.77	$	3.10	$	2.05

For the years ended December 31, 2019, 2018 and 2017, 374,555, 259,274 and 621,805, respectively, of contingently issuable shares were excluded from the computation of diluted income per share because their inclusion would have had an anti-dilutive effect.

CBRE GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

18.	Revenue from Contracts with Customers

Disaggregated Revenue

The following tables represent a disaggregation of revenue from contracts with customers for the years ended December 31, 2019, 2018 and 2017 by type of service and/or segment (dollars in thousands):

	Year Ended December 31, 2019
	Advisory Services		Global Workplace Solutions		Real Estate Investments		Consolidated
Topic 606 Revenue:
Global workplace solutions	$	—	$	14,164,001	$	—	$	14,164,001
Advisory leasing		3,269,993		—		—		3,269,993
Advisory sales		2,130,979		—		—		2,130,979
Property and advisory project management		2,255,398						2,255,398
Valuation		630,399		—		—		630,399
Commercial mortgage origination (1)		154,227		—		—		154,227
Loan servicing (2)		30,943		—		—		30,943
Investment management		—		—		424,882		424,882
Development services		—		—		213,264		213,264
Topic 606 Revenue		8,471,939		14,164,001		638,146		23,274,086
Out of Scope of Topic 606 Revenue:
Commercial mortgage origination		421,736		—		—		421,736
Loan servicing		175,793		—		—		175,793
Development services (4)		—		—		22,476		22,476
Total Out of Scope of Topic 606 Revenue		597,529		—		22,476		620,005
Total revenue	$	9,069,468	$	14,164,001	$	660,622	$	23,894,091

	Year Ended December 31, 2018 (3)
	Advisory Services		Global Workplace Solutions		Real Estate Investments		Consolidated
Topic 606 Revenue:
Global workplace solutions	$	—	$	12,365,362	$	—	$	12,365,362
Advisory leasing		3,080,117		—		—		3,080,117
Advisory sales		1,980,932						1,980,932
Property and advisory project management		2,057,433		—		—		2,057,433
Valuation		598,806		—		—		598,806
Commercial mortgage origination (1)		136,534		—		—		136,534
Loan servicing (2)		24,192		—		—		24,192
Investment management		—		—		434,405		434,405
Development services		—		—		100,319		100,319
Topic 606 Revenue		7,878,014		12,365,362		534,724		20,778,100
Out of Scope of Topic 606 Revenue:
Commercial mortgage origination		402,814		—		—		402,814
Loan servicing		159,174		—		—		159,174
Total Out of Scope of Topic 606 Revenue		561,988		—		—		561,988
Total revenue	$	8,440,002	$	12,365,362	$	534,724	$	21,340,088

(1)	We earn fees for arranging financing for borrowers with third-party lender contacts. Such fees are in scope of Topic 606.

(2)	Loan servicing fees earned from servicing contracts for which we do not hold mortgage servicing rights are in scope of Topic 606.

(3)	Our new organizational structure became effective January 1, 2019. See Note 19 for additional information. Revenue classifications for 2018 and 2017 have been restated to conform to the new structure.

(4)	Out of scope revenue for development services represents selling profit from transfers of sales-type leases in the scope of Topic 842.

CBRE GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

	Year Ended December 31, 2017 (3)
	Advisory Services		Global Workplace Solutions		Real Estate Investments		Consolidated
Topic 606 Revenue:
Global workplace solutions	$	—	$	10,791,963	$	—	$	10,791,963
Advisory leasing		2,592,203		—		—		2,592,203
Advisory sales		1,869,872		—		—		1,869,872
Property and advisory project management		1,748,594		—		—		1,748,594
Valuation		556,008						556,008
Commercial mortgage origination (1)		117,009		—		—		117,009
Loan servicing (2)		19,759		—		—		19,759
Investment management		—		—		377,644		377,644
Development services		—		—		79,455		79,455
Topic 606 Revenue		6,903,445		10,791,963		457,099		18,152,507
Out of Scope of Topic 606 Revenue:
Commercial mortgage origination		338,590		—		—		338,590
Loan servicing		137,690		—		—		137,690
Total Out of Scope of Topic 606 Revenue		476,280		—		—		476,280
Total revenue	$	7,379,725	$	10,791,963	$	457,099	$	18,628,787

(1)	We earn fees for arranging financing for borrowers with third-party lender contacts. Such fees are in scope of Topic 606.

(2)	Loan servicing fees earned from servicing contracts for which we do not hold mortgage servicing rights are in scope of Topic 606.

(3)	Our new organizational structure became effective January 1, 2019. See Note 19 for additional information. Revenue classifications for 2018 and 2017 have been restated to conform to the new structure.

Contract Assets and Liabilities

We had contract assets totaling $529.8 million ($328.0 million of which was current) and $381.8 million ($307.0 million of which was current) as of December 31, 2019 and 2018, respectively. During the year ended December 31, 2019, our contract assets increased by $148.0 million, primarily due to an increase in contract assets in our leasing business as well as due to contract assets acquired in the Telford Acquisition (see Note 4).

We had contract liabilities totaling $115.0 million ($108.7 million of which was current) and $92.5 million ($82.2 million of which was current) as of December 31, 2019 and 2018, respectively. During the year ended December 31, 2019, we recognized revenue of $75.2 million that was included in the contract liability balance at December 31, 2018.

Contract Costs

Within our Global Workplace Solutions segment, we incur transition costs to fulfil contracts prior to services being rendered. We capitalized $69.3 million, $45.7 million and $31.9 million, respectively, of transition costs during the years ended December 31, 2019, 2018 and 2017. We recorded amortization of transition costs of $32.3 million, $23.4 million and $19.2 million, respectively, during the years ended December 31, 2019, 2018 and 2017.

19.	Segments

CBRE GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Advisory Services provides a comprehensive range of services globally, including property leasing, property sales, mortgage services, property management, project management and valuation. Global Workplace Solutions provides a broad suite of integrated, contractually-based outsourcing services to occupiers of real estate, including facilities management, project management and transaction services. Real Estate Investments includes: (i) investment management services provided globally; (ii) development services in the U.S. and U.K. and (iii) flexible office space solutions.

Summarized financial information by segment is as follows (dollars in thousands):

	Year Ended December 31,
		2019			2018		2017
Revenue
Advisory Services	$	9,069,468		$	8,440,002	$	7,379,725
Global Workspace Solutions		14,164,001			12,365,362		10,791,963
Real Estate Investments		660,622			534,724		457,099
Total revenue	$	23,894,091		$	21,340,088	$	18,628,787

Depreciation and Amortization
Advisory Services	$	304,766		$	280,921	$	243,791
Global Workspace Solutions		120,975			147,222		136,127
Real Estate Investments		13,483			23,845		26,196
Total depreciation and amortization	$	439,224		$	451,988	$	406,114

Equity Income (Loss) from Unconsolidated Subsidiaries
Advisory Services	$	6,894		$	16,017	$	20,740
Global Workspace Solutions		(1,423	)		115		—
Real Estate Investments		155,454			308,532		189,467
Total equity income from unconsolidated subsidiaries	$	160,925		$	324,664	$	210,207

Adjusted EBITDA
Advisory Services	$	1,465,792		$	1,303,251	$	1,174,943
Global Workspace Solutions		424,026			345,560		334,377
Real Estate Investments		173,965			256,357		207,454
Total Adjusted EBITDA	$	2,063,783		$	1,905,168	$	1,716,774

Adjusted EBITDA is the measure reported to the chief operating decision maker (CODM) for purposes of making decisions about allocating resources to each segment and assessing performance of each segment. EBITDA represents earnings before net interest expense, write-off of financing costs on extinguished debt, income taxes, depreciation and amortization and intangible asset impairments. Amounts shown for adjusted EBITDA further remove (from EBITDA) the impact of certain cash and non-cash items related to acquisitions, certain carried interest incentive compensation expense (reversal) to align with the timing of associated revenue, costs associated with our reorganization, including cost-savings initiatives, and other non-recurring costs.

CBRE GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Adjusted EBITDA is calculated as follows (dollars in thousands):

	Year Ended December 31,
		2019		2018			2017

Net income attributable to CBRE Group, Inc.	$	1,282,357	$	1,063,219		$	697,109
Add:
Depreciation and amortization		439,224		451,988			406,114
Intangible asset impairment		89,787		—			—
Interest expense, net of interest income		85,754		98,685			126,961
Write-off of financing costs on extinguished debt		2,608		27,982			—
Provision for income taxes		69,895		313,058			467,757
EBITDA		1,969,625		1,954,932			1,697,941
Adjustments:
Costs associated with our reorganization, including cost-savings initiatives (1)		49,565		37,925			—
Integration and other costs related to acquisitions		15,292		9,124			27,351
Carried interest incentive compensation expense (reversal) to align with the timing of associated revenue		13,101		(5,261	)		(8,518	)
Impact of fair value adjustments to real estate assets acquired in the Telford Acquisition (purchase accounting) that were sold in period		9,301		—			—
Costs incurred related to legal entity restructuring		6,899		—			—
Costs incurred in connection with litigation settlement		—		8,868			—
One-time gain associated with remeasuring an investment in an unconsolidated subsidiary to fair value as of the date the remaining controlling interest was acquired		—		(100,420	)		—
Adjusted EBITDA	$	2,063,783	$	1,905,168		$	1,716,774

(1)	Primarily represents severance costs related to headcount reductions in connection with our reorganization announced in the third quarter of 2018 that became effective January 1, 2019.

Our CODM is not provided with total asset information by segment and accordingly, does not measure or allocate total assets on a segment basis. As a result, we have not disclosed any asset information by segment.

Geographic Information

Revenue in the table below is allocated based upon the country in which services are performed (dollars in thousands):

	Year Ended December 31,
		2019		2018		2017

Revenue
United States	$	13,852,018	$	12,264,188	$	10,954,608
United Kingdom		2,972,704		2,586,890		2,242,973
All other countries		7,069,369		6,489,010		5,431,206
Total revenue	$	23,894,091	$	21,340,088	$	18,628,787

CBRE GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

20.	Related Party Transactions

The accompanying consolidated balance sheets include loans to related parties, primarily employees other than our executive officers, of $416.7 million and $350.1 million as of December 31, 2019 and 2018, respectively. The majority of these loans represent sign-on and retention bonuses issued or assumed in connection with acquisitions and prepaid commissions as well as prepaid retention and recruitment awards issued to employees. These loans are at varying principal amounts, bear interest at rates up to 5.25% per annum and mature on various dates through 2028.

21.	Guarantor and Nonguarantor Financial Statements

The following condensed consolidating financial information includes condensed consolidating balance sheets as of December 31, 2019 and 2018, condensed consolidating statements of operations, condensed consolidating statements of comprehensive income and condensed consolidating statements of cash flows for the years ended December 31, 2019, 2018 and 2017 of:

	•	CBRE Group, Inc., as the parent; CBRE Services, as the subsidiary issuer; the guarantor subsidiaries; the nonguarantor subsidiaries;

	•	Elimination entries necessary to consolidate CBRE Group, Inc., as the parent, with CBRE Services and its guarantor and nonguarantor subsidiaries; and

	•	CBRE Group, Inc., on a consolidated basis.

Investments in consolidated subsidiaries are presented using the equity method of accounting. The principal elimination entries eliminate investments in consolidated subsidiaries and intercompany balances and transactions.

CBRE GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Condensed Consolidating Balance Sheet

	As of December 31, 2019
	Parent		CBRE Services		Guarantor Subsidiaries		Nonguarantor Subsidiaries		Eliminations			Consolidated Total
ASSETS
Current Assets:
Cash and cash equivalents	$	7	$	13,453	$	254,992	$	703,329	$	—		$	971,781
Restricted cash		—		—		55,849		66,115		—			121,964
Receivables, net		—		16		1,627,598		2,839,060		—			4,466,674
Warehouse receivables (1)		—		—		303,559		689,499		—			993,058
Contract assets		—		—		286,225		41,787		—			328,012
Prepaid expenses		—		—		127,413		155,328		—			282,741
Income taxes receivable		—		—		91,398		2,517		—			93,915
Other current assets		—		—		70,554		205,765		—			276,319
Total Current Assets		7		13,469		2,817,588		4,703,400		—			7,534,464
Property and equipment, net		—		—		560,509		275,697		—			836,206
Goodwill		—		—		2,249,274		1,504,219		—			3,753,493
Other intangible assets, net		—		—		726,897		652,649		—			1,379,546
Operating lease assets		—		—		451,769		546,197		—			997,966
Investments in unconsolidated subsidiaries		—		—		273,532		153,179		—			426,711
Non-current contract assets		—		—		175,215		26,545		—			201,760
Real estate under development		—		—		—		185,508		—			185,508
Investments in consolidated subsidiaries		8,395,563		6,642,233		2,816,035		—		(17,853,831	)		—
Intercompany loan receivable		—		3,054,548		700,000		—		(3,754,548	)		—
Non-current income taxes receivable		—		—		113,194		25,942		—			139,136
Deferred tax assets, net		—		—		57,639		106,127		(89,902	)		73,864
Other assets, net		—		17,016		480,968		170,558		—			668,542
Total Assets	$	8,395,570	$	9,727,266	$	11,422,620	$	8,350,021	$	(21,698,281	)	$	16,197,196
LIABILITIES AND EQUITY
Current Liabilities:
Accounts payable and accrued expenses	$	—	$	17,790	$	947,817	$	1,470,477	$	—		$	2,436,084
Compensation and employee benefits payable		—		—		758,367		566,623		—			1,324,990
Accrued bonus and profit sharing		—		—		686,793		575,181		—			1,261,974
Operating lease liabilities		—		—		75,906		92,757		—			168,663
Contract liabilities		—		—		58,701		49,970		—			108,671
Income taxes payable		—		—		2,002		28,205		—			30,207
Short-term borrowings:
Warehouse lines of credit (which fund loans that U.S. Government Sponsored Enterprises have committed to purchase) (1)		—		—		300,260		676,915		—			977,175
Other		—		—		—		4,534		—			4,534
Total short-term borrowings		—		—		300,260		681,449		—			981,709
Current maturities of long-term debt		—		—		18		1,796		—			1,814
Other current liabilities		—		—		46,121		76,218		—			122,339
Total Current Liabilities		—		17,790		2,875,985		3,542,676		—			6,436,451
Long-Term Debt, net:
Long-term debt, net		—		1,313,913		—		447,332		—			1,761,245
Intercompany loan payable		2,162,877		—		1,017,046		574,625		(3,754,548	)		—
Total Long-Term Debt, net		2,162,877		1,313,913		1,017,046		1,021,957		(3,754,548	)		1,761,245
Non-current operating lease liabilities		—		—		520,155		537,603		—			1,057,758
Non-current income taxes payable		—		—		93,647		—		—			93,647
Non-current tax liabilities		—		—		40,066		45,900		—			85,966
Deferred tax liabilities, net		—		—		—		124,495		(89,902	)		34,593
Other liabilities		—		—		233,488		220,936		—			454,424
Total Liabilities		2,162,877		1,331,703		4,780,387		5,493,567		(3,844,450	)		9,924,084
Commitments and contingencies		—		—		—		—		—			—
Equity:
CBRE Group, Inc. Stockholders’ Equity		6,232,693		8,395,563		6,642,233		2,816,035		(17,853,831	)		6,232,693
Non-controlling interests		—		—		—		40,419		—			40,419
Total Equity		6,232,693		8,395,563		6,642,233		2,856,454		(17,853,831	)		6,273,112
Total Liabilities and Equity	$	8,395,570	$	9,727,266	$	11,422,620	$	8,350,021	$	(21,698,281	)	$	16,197,196

(1)

Although CBRE Capital Markets is included among our domestic subsidiaries that jointly and severally guarantee our 4.875% senior notes, 5.25% senior notes and our 2019 Credit Agreement, a substantial majority of warehouse receivables funded under Fannie Mae ASAP, JP Morgan, BofA, TD Bank, Capital One and Union Bank lines of credit are pledged to Fannie Mae, JP Morgan, BofA, TD Bank, Capital One and Union Bank, and accordingly, are not included as collateral for these notes or our other outstanding debt.

CBRE GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Condensed Consolidating Balance Sheet

	As of December 31, 2018
	Parent		CBRE Services		Guarantor Subsidiaries		Nonguarantor Subsidiaries		Eliminations			Consolidated Total
ASSETS
Current Assets:
Cash and cash equivalents	$	7	$	34,063	$	261,181	$	481,968	$	—		$	777,219
Restricted cash		—		—		13,767		72,958		—			86,725
Receivables, net		—		5		1,340,120		2,328,466		—			3,668,591
Warehouse receivables (1)		—		—		664,095		678,373		—			1,342,468
Contract assets		—		—		289,214		17,806		—			307,020
Prepaid expenses		—		—		122,305		132,587		—			254,892
Income taxes receivable		6,099		—		18,992		52,692		(6,099	)		71,684
Other current assets		—		—		56,853		188,758		—			245,611
Total Current Assets		6,106		34,068		2,766,527		3,953,608		(6,099	)		6,754,210

Property and equipment, net		—		—		512,110		209,582		—			721,692
Goodwill		—		—		2,224,909		1,427,400		—			3,652,309
Other intangible assets, net		—		—		835,270		606,038		—			1,441,308
Investments in unconsolidated subsidiaries		—		—		170,698		45,476		—			216,174
Non-current contract assets		—		—		74,762		—		—			74,762
Real estate under development		—		—		4,586		—		—			4,586
Investments in consolidated subsidiaries		6,759,815		5,595,831		3,228,512		—		(15,584,158	)		—
Intercompany loan receivable		—		2,440,775		700,000		711,244		(3,852,019	)		—
Deferred tax assets, net		—		—		2,666		51,755		(2,718	)		51,703
Other assets, net		—		18,257		404,442		117,350		—			540,049
Total Assets	$	6,765,921	$	8,088,931	$	10,924,482	$	7,122,453	$	(19,444,994	)	$	13,456,793
LIABILITIES AND EQUITY
Current Liabilities:
Accounts payable and accrued expenses	$	40	$	17,450	$	655,582	$	1,246,755	$	—		$	1,919,827
Compensation and employee benefits payable		—		—		662,196		458,983		—			1,121,179
Accrued bonus and profit sharing		—		—		685,521		503,874		—			1,189,395
Contract liabilities		—		—		41,045		41,182		—			82,227
Income taxes payable		—		720		6,417		67,062		(6,099	)		68,100
Short-term borrowings:
Warehouse lines of credit (which fund loans that U.S. Government Sponsored Enterprises have committed to purchase) (1)		—		—		657,731		671,030		—			1,328,761
Total short-term borrowings		—		—		657,731		671,030		—			1,328,761
Current maturities of long-term debt		—		—		39		3,107		—			3,146
Other current liabilities		—		1,070		70,202		19,473		—			90,745
Total Current Liabilities		40		19,240		2,778,733		3,011,466		(6,099	)		5,803,380
Long-Term Debt, net:
Long-term debt, net		—		1,309,876		18		457,366		—			1,767,260
Intercompany loan payable		1,827,084		—		2,024,935		—		(3,852,019	)		—
Total Long-Term Debt, net		1,827,084		1,309,876		2,024,953		457,366		(3,852,019	)		1,767,260
Non-current tax liabilities		—		—		164,857		7,769		—			172,626
Deferred tax liabilities, net		—		—		—		110,143		(2,718	)		107,425
Other liabilities		—		—		360,108		236,092		—			596,200
Total Liabilities		1,827,124		1,329,116		5,328,651		3,822,836		(3,860,836	)		8,446,891
Commitments and contingencies		—		—		—		—		—			—
Equity:
CBRE Group, Inc. Stockholders’ Equity		4,938,797		6,759,815		5,595,831		3,228,512		(15,584,158	)		4,938,797
Non-controlling interests		—		—		—		71,105		—			71,105
Total Equity		4,938,797		6,759,815		5,595,831		3,299,617		(15,584,158	)		5,009,902
Total Liabilities and Equity	$	6,765,921	$	8,088,931	$	10,924,482	$	7,122,453	$	(19,444,994	)	$	13,456,793

(1)

Although CBRE Capital Markets is included among our domestic subsidiaries that jointly and severally guarantee our 4.875% senior notes, 5.25% senior notes and our 2017 Credit Agreement, a substantial majority of warehouse receivables funded under BofA, Fannie Mae ASAP, JP Morgan, Capital One and TD Bank lines of credit are pledged to BofA, Fannie Mae, JP Morgan, Capital One and TD Bank, and accordingly, are not included as collateral for these notes or our other outstanding debt.

CBRE GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Condensed Consolidating Statement of Operations

	For the Year Ended December 31, 2019
	Parent			CBRE Services			Guarantor Subsidiaries			Nonguarantor Subsidiaries			Eliminations			Consolidated Total
Revenue	$	—		$	—		$	13,550,005		$	10,344,086		$	—		$	23,894,091
Costs and expenses:
Cost of revenue		—			—			10,836,412			7,852,601			—			18,689,013
Operating, administrative and other		1,000			1,036			1,705,837			1,728,136			—			3,436,009
Depreciation and amortization		—			—			265,220			174,004			—			439,224
Intangible asset impairment		—			—			89,787			—			—			89,787
Total costs and expenses		1,000			1,036			12,897,256			9,754,741			—			22,654,033
Gain on disposition of real estate		—			—			19,432			385			—			19,817
Operating (loss) income		(1,000	)		(1,036	)		672,181			589,730			—			1,259,875
Equity income (loss) from unconsolidated subsidiaries		—			—			162,019			(1,094	)		—			160,925
Other income		—			—			7,842			21,065			—			28,907
Interest expense, net of interest income		—			(31,037	)		80,604			36,187			—			85,754
Write-off of financing costs on extinguished debt		—			2,608			—			—			—			2,608
Royalty and management service (income) expense		—			—			(92,728	)		92,728			—			—
Income from consolidated subsidiaries		1,283,103			1,262,674			284,038			—			(2,829,815	)		—
Income before (benefit of) provision for income taxes		1,282,103			1,290,067			1,138,204			480,786			(2,829,815	)		1,361,345
(Benefit of) provision for income taxes		(254	)		6,964			(124,470	)		187,655			—			69,895
Net income		1,282,357			1,283,103			1,262,674			293,131			(2,829,815	)		1,291,450
Less: Net income attributable to non-controlling interests		—			—			—			9,093			—			9,093
Net income attributable to CBRE Group, Inc.	$	1,282,357		$	1,283,103		$	1,262,674		$	284,038		$	(2,829,815	)	$	1,282,357

Condensed Consolidating Statement of Operations

	For the Year Ended December 31, 2018
	Parent			CBRE Services			Guarantor Subsidiaries			Nonguarantor Subsidiaries			Eliminations			Consolidated Total
Revenue	$	—		$	—		$	11,998,469		$	9,341,619		$	—		$	21,340,088
Costs and expenses:
Cost of revenue		—			—			9,513,947			6,935,265			—			16,449,212
Operating, administrative and other		24,523			1,156			1,715,150			1,624,944			—			3,365,773
Depreciation and amortization		—			—			271,378			180,610			—			451,988
Total costs and expenses		24,523			1,156			11,500,475			8,740,819			—			20,266,973
Gain on disposition of real estate		—			—			7,705			7,169			—			14,874
Operating (loss) income		(24,523	)		(1,156	)		505,699			607,969			—			1,087,989
Equity income from unconsolidated subsidiaries		—			—			323,080			1,584			—			324,664
Other income (loss)		—			1			103,657			(10,638	)		—			93,020
Interest expense, net of interest income		—			(32,031	)		329,083			(198,367	)		—			98,685
Write-off of financing costs on extinguished debt		—			27,982			—			—			—			27,982
Royalty and management service (income) expense		—			—			(61,626	)		61,626			—			—
Income from consolidated subsidiaries		1,081,643			1,079,469			578,320			—			(2,739,432	)		—
Income before (benefit of) provision for income taxes		1,057,120			1,082,363			1,243,299			735,656			(2,739,432	)		1,379,006
(Benefit of) provision for income taxes		(6,099	)		720			163,830			154,607			—			313,058
Net income		1,063,219			1,081,643			1,079,469			581,049			(2,739,432	)		1,065,948
Less: Net income attributable to non-controlling interests		—			—			—			2,729			—			2,729
Net income attributable to CBRE Group, Inc.	$	1,063,219		$	1,081,643		$	1,079,469		$	578,320		$	(2,739,432	)	$	1,063,219

CBRE GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Condensed Consolidating Statement of Operations

	For the Year Ended December 31, 2017
	Parent			CBRE Services			Guarantor Subsidiaries		Nonguarantor Subsidiaries			Eliminations			Consolidated Total
Revenue	$	—		$	—		$	10,702,005	$	7,926,782		$	—		$	18,628,787
Costs and expenses:
Cost of revenue		—			—			8,517,114		5,787,985			—			14,305,099
Operating, administrative and other		5,661			1,972			1,437,641		1,413,446			—			2,858,720
Depreciation and amortization		—			—			239,863		166,251			—			406,114
Total costs and expenses		5,661			1,972			10,194,618		7,367,682			—			17,569,933
Gain on disposition of real estate		—			—			6,037		13,791			—			19,828
Operating (loss) income		(5,661	)		(1,972	)		513,424		572,891			—			1,078,682
Equity income from unconsolidated subsidiaries		—			—			206,655		3,552			—			210,207
Other income		—			1			22		9,382			—			9,405
Interest expense, net of interest income		—			(10,648	)		110,494		27,115			—			126,961
Royalty and management service expense (income)		—			—			66,191		(66,191	)		—			—
Income from consolidated subsidiaries		700,608			695,245			464,046		—			(1,859,899	)		—
Income before (benefit of) provision for income taxes		694,947			703,922			1,007,462		624,901			(1,859,899	)		1,171,333
(Benefit of) provision for income taxes		(2,162	)		3,314			312,217		154,388			—			467,757
Net income		697,109			700,608			695,245		470,513			(1,859,899	)		703,576
Less: Net income attributable to non-controlling interests		—			—			—		6,467			—			6,467
Net income attributable to CBRE Group, Inc.	$	697,109		$	700,608		$	695,245	$	464,046		$	(1,859,899	)	$	697,109

Condensed Consolidating Statement of Comprehensive Income

	For the Year Ended December 31, 2019
	Parent		CBRE Services			Guarantor Subsidiaries		Nonguarantor Subsidiaries			Eliminations			Consolidated Total
Net income	$	1,282,357	$	1,283,103		$	1,262,674	$	293,131		$	(2,829,815	)	$	1,291,450
Other comprehensive income:
Foreign currency translation loss		—		—			—		(14,092	)		—			(14,092	)
Amounts reclassified from accumulated other comprehensive loss to interest expense, net		—		1,320			—		—			—			1,320
Unrealized holding gains on available for sale debt securities, net		—		—			2,101		—			—			2,101
Pension liability adjustments, net		—		—			—		944			—			944
Legal entity restructuring, net		—		—			—		63,149			—			63,149
Other, net		—		(104	)		—		(14,842	)		—			(14,946	)
Total other comprehensive income		—		1,216			2,101		35,159			—			38,476
Comprehensive income		1,282,357		1,284,319			1,264,775		328,290			(2,829,815	)		1,329,926
Less: Comprehensive income attributable to non-controlling interests		—		—			—		9,048			—			9,048
Comprehensive income attributable to CBRE Group, Inc.	$	1,282,357	$	1,284,319		$	1,264,775	$	319,242		$	(2,829,815	)	$	1,320,878

CBRE GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Condensed Consolidating Statement of Comprehensive Income

	For the Year Ended December 31, 2018
	Parent		CBRE Services		Guarantor Subsidiaries			Nonguarantor Subsidiaries			Eliminations			Consolidated Total
Net income	$	1,063,219	$	1,081,643	$	1,079,469		$	581,049		$	(2,739,432	)	$	1,065,948
Other comprehensive income (loss):
Foreign currency translation loss		—		—		—			(161,384	)		—			(161,384	)
Adoption of Accounting Standards Update 2016-01, net		—		—		(3,964	)		—			—			(3,964	)
Amounts reclassified from accumulated other comprehensive loss to interest expense, net		—		2,439		—			—			—			2,439
Unrealized gains on interest rate swaps, net		—		708		—			—			—			708
Unrealized holding losses on available for sale debt securities, net		—		—		(971	)		—			—			(971	)
Pension liability adjustments, net		—		—		—			1,315			—			1,315
Other, net		—		—		7			(5,077	)		—			(5,070	)
Total other comprehensive income (loss)		—		3,147		(4,928	)		(165,146	)		—			(166,927	)
Comprehensive income		1,063,219		1,084,790		1,074,541			415,903			(2,739,432	)		899,021
Less: Comprehensive income attributable to non-controlling interests		—		—		—			1,657			—			1,657
Comprehensive income attributable to CBRE Group, Inc.	$	1,063,219	$	1,084,790	$	1,074,541		$	414,246		$	(2,739,432	)	$	897,364

Condensed Consolidating Statement of Comprehensive Income

	For the Year Ended December 31, 2017
	Parent			CBRE Services		Guarantor Subsidiaries			Nonguarantor Subsidiaries		Eliminations			Consolidated Total
Net income	$	697,109		$	700,608	$	695,245		$	470,513	$	(1,859,899	)	$	703,576
Other comprehensive (loss) income:
Foreign currency translation gain		—			—		—			218,001		—			218,001
Amounts reclassified from accumulated other comprehensive loss to interest expense, net		—			4,964		—			—		—			4,964
Unrealized gains on interest rate swaps, net		—			585		—			—		—			585
Unrealized holding gains on available for sale debt securities, net		—			—		2,557			180		—			2,737
Pension liability adjustments, net		—			—		—			12,701		—			12,701
Other, net		(2	)		—		(21	)		387		—			364
Total other comprehensive (loss) income		(2	)		5,549		2,536			231,269		—			239,352
Comprehensive income		697,107			706,157		697,781			701,782		(1,859,899	)		942,928
Less: Comprehensive income attributable to non-controlling interests		—			—		—			6,879		—			6,879
Comprehensive income attributable to CBRE Group, Inc.	$	697,107		$	706,157	$	697,781		$	694,903	$	(1,859,899	)	$	936,049

CBRE GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Condensed Consolidating Statement of Cash Flow

	For the Year Ended December 31, 2019
	Parent			CBRE Services			Guarantor Subsidiaries			Nonguarantor Subsidiaries			Consolidated Total
CASH FLOWS PROVIDED BY OPERATING ACTIVITIES:	$	133,051		$	28,603		$	906,398		$	155,328		$	1,223,380
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures		—			—			(190,143	)		(103,371	)		(293,514	)
Acquisition of businesses, including net assets acquired, intangibles and goodwill, net of cash acquired		—			—			(13,788	)		(342,138	)		(355,926	)
Contributions to unconsolidated subsidiaries		—			—			(63,016	)		(42,931	)		(105,947	)
Distributions from unconsolidated subsidiaries		—			—			29,319			3,970			33,289
Purchase of equity securities		—			—			(12,017	)		—			(12,017	)
Proceeds from sale of equity securities		—			—			14,065			1,558			15,623
Purchase of available for sale debt securities		—			—			(8,853	)		—			(8,853	)
Proceeds from the sale of available for sale debt securities		—			—			4,671			—			4,671
Other investing activities, net		—			—			1,102			548			1,650
Net cash used in investing activities		—			—			(238,660	)		(482,364	)		(721,024	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from senior term loans		—			300,000			—			—			300,000
Repayment of senior term loans		—			(300,000	)		—			—			(300,000	)
Proceeds from revolving credit facility		—			3,609,000			—			—			3,609,000
Repayment of revolving credit facility		—			(3,609,000	)		—			—			(3,609,000	)
Repayment of debt assumed in the acquisition of Telford Homes		—			—			—			(110,687	)		(110,687	)
Repurchase of common stock		(145,137	)		—			—			—			(145,137	)
Acquisition of businesses (cash paid for acquisitions more than three months after purchase date)		—			—			(30,268	)		(11,879	)		(42,147	)
Units repurchased for payment of taxes on equity awards		(18,426	)		—			—			—			(18,426	)
Non-controlling interest contributions		—			—			—			46,612			46,612
Non-controlling interest distributions		—			—			—			(3,957	)		(3,957	)
Decrease (increase) in intercompany receivables, net		30,512			(45,862	)		(601,577	)		616,927			—
Other financing activities, net		—			(3,351	)		—			5,144			1,793
Net cash (used in) provided by financing activities		(133,051	)		(49,213	)		(631,845	)		542,160			(271,949	)
Effect of currency exchange rate changes on cash and cash equivalents and restricted cash		—			—			—			(606	)		(606	)
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS AND RESTRICTED CASH		—			(20,610	)		35,893			214,518			229,801
CASH AND CASH EQUIVALENTS AND RESTRICTED CASH, AT BEGINNING OF PERIOD		7			34,063			274,948			554,926			863,944
CASH AND CASH EQUIVALENTS AND RESTRICTED CASH, AT END OF PERIOD	$	7		$	13,453		$	310,841		$	769,444		$	1,093,745
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest	$	—		$	69,667		$	—		$	16,999		$	86,666
Income taxes, net	$	—		$	—		$	188,329		$	176,736		$	365,065

CBRE GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Condensed Consolidating Statement of Cash Flows

	For the Year Ended December 31, 2018
	Parent			CBRE Services			Guarantor Subsidiaries			Nonguarantor Subsidiaries			Consolidated Total
CASH FLOWS PROVIDED BY OPERATING ACTIVITIES:	$	105,850		$	21,834		$	429,540		$	574,025		$	1,131,249
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures		—			—			(140,670	)		(87,133	)		(227,803	)
Acquisition of businesses, including net assets acquired, intangibles and goodwill, net of cash acquired		—			—			(305,315	)		(17,258	)		(322,573	)
Contributions to unconsolidated subsidiaries		—			—			(51,046	)		(11,756	)		(62,802	)
Distributions from unconsolidated subsidiaries		—			—			57,269			4,440			61,709
Purchase of equity securities		—			—			(21,402	)		—			(21,402	)
Proceeds from sale of equity securities		—			—			16,314			—			16,314
Purchase of available for sale debt securities		—			—			(23,360	)		—			(23,360	)
Proceeds from the sale of available for sale debt securities		—			—			5,792			—			5,792
Other investing activities, net		—			—			2,793			10,648			13,441
Net cash used in investing activities		—			—			(459,625	)		(101,059	)		(560,684	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from senior term loans		—			550,000			—			452,745			1,002,745
Repayment of senior term loans		—			(450,000	)		—			—			(450,000	)
Proceeds from revolving credit facility		—			3,258,000			—			—			3,258,000
Repayment of revolving credit facility		—			(3,258,000	)		—			—			(3,258,000	)
Repayment of 5.00% senior notes (including premium)		—			(820,000	)		—			—			(820,000	)
Repayment of debt assumed in acquisition of FacilitySource		—			—			(26,295	)		—			(26,295	)
Repurchase of common stock		(161,034	)		—			—			—			(161,034	)
Acquisition of businesses (cash paid for acquisitions more than three months after purchase date)		—			—			(16,774	)		(1,886	)		(18,660	)
Units repurchased for payment of taxes on equity awards		(29,386	)		—			—			—			(29,386	)
Non-controlling interest contributions		—			—			—			25,355			25,355
Non-controlling interest distributions		—			—			—			(13,413	)		(13,413	)
Decrease (increase) in intercompany receivables, net		84,213			716,837			233,975			(1,035,025	)		—
Other financing activities, net		357			(212	)		(16	)		(16,041	)		(15,912	)
Net cash (used in) provided by financing activities		(105,850	)		(3,375	)		190,890			(588,265	)		(506,600	)
Effect of currency exchange rate changes on cash and cash equivalents and restricted cash		—			—			—			(24,840	)		(24,840	)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS AND RESTRICTED CASH		—			18,459			160,805			(140,139	)		39,125
CASH AND CASH EQUIVALENTS AND RESTRICTED CASH, AT BEGINNING OF PERIOD		7			15,604			114,143			695,065			824,819
CASH AND CASH EQUIVALENTS AND RESTRICTED CASH, AT END OF PERIOD	$	7		$	34,063		$	274,948		$	554,926		$	863,944
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest	$	—		$	102,491		$	—		$	1,674		$	104,165
Income taxes, net	$	—		$	—		$	198,930		$	176,919		$	375,849

CBRE GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Condensed Consolidating Statement of Cash Flows

	For the Year Ended December 31, 2017
	Parent			CBRE Services			Guarantor Subsidiaries			Nonguarantor Subsidiaries			Consolidated Total
CASH FLOWS PROVIDED BY (USED IN) OPERATING ACTIVITIES:	$	89,341		$	37,990		$	424,787		$	342,293		$	894,411
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures		—			—			(121,347	)		(56,695	)		(178,042	)
Acquisition of businesses, including net assets acquired, intangibles and goodwill, net of cash acquired		—			—			(87,248	)		(31,179	)		(118,427	)
Contributions to unconsolidated subsidiaries		—			—			(63,119	)		(5,581	)		(68,700	)
Distributions from unconsolidated subsidiaries		—			—			52,896			10,768			63,664
Purchase of equity securities		—			—			(15,584	)		—			(15,584	)
Proceeds from sale of equity securities		—			—			15,587			—			15,587
Purchase of available for sale debt securities		—			—			(19,280	)		—			(19,280	)
Proceeds from the sale of available for sale debt securities		—			—			15,790			—			15,790
Other investing activities, net		—			—			1,968			424			2,392
Net cash used in investing activities		—			—			(220,337	)		(82,263	)		(302,600	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from senior term loans		—			200,000			—			—			200,000
Repayment of senior term loans		—			(751,876	)		—			—			(751,876	)
Proceeds from revolving credit facility		—			1,521,000			—			—			1,521,000
Repayment of revolving credit facility		—			(1,521,000	)		—			—			(1,521,000	)
Acquisition of businesses (cash paid for acquisitions more than three months after purchase date)		—			—			(19,854	)		(4,152	)		(24,006	)
Units repurchased for payment of taxes on equity awards		(29,549	)		—			—			—			(29,549	)
Non-controlling interest contributions		—			—			—			5,301			5,301
Non-controlling interest distributions		—			—			—			(8,715	)		(8,715	)
(Increase) decrease in intercompany receivables, net		(60,271	)		520,579			(338,396	)		(121,912	)		—
Other financing activities, net		479			(7,978	)		(3,145	)		(8,253	)		(18,897	)
Net cash used in financing activities		(89,341	)		(39,275	)		(361,395	)		(137,731	)		(627,742	)
Effect of currency exchange rate changes on cash and cash equivalents and restricted cash		—			—			—			29,338			29,338
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS AND RESTRICTED CASH		—			(1,285	)		(156,945	)		151,637			(6,593	)
CASH AND CASH EQUIVALENTS AND RESTRICTED CASH, AT BEGINNING OF PERIOD		7			16,889			271,088			543,428			831,412
CASH AND CASH EQUIVALENTS AND RESTRICTED CASH, AT END OF PERIOD	$	7		$	15,604		$	114,143		$	695,065		$	824,819
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest	$	—		$	117,072		$	—		$	92		$	117,164
Income taxes, net	$	—		$	—		$	198,520		$	158,477		$	356,997

CBRE GROUP, INC.

QUARTERLY RESULTS OF OPERATIONS

(Unaudited)

	Three Months Ended December 31, 2019		Three Months Ended September 30, 2019		Three Months Ended June 30, 2019		Three Months Ended March 31, 2019
	(Dollars in thousands, except share data)
Revenue	$	7,119,407	$	5,925,101	$	5,714,073	$	5,135,510
Operating income	$	513,841	$	316,630	$	284,417	$	144,987
Net income attributable to CBRE Group, Inc.	$	637,618	$	256,599	$	223,731	$	164,409
Basic income per share	$	1.90	$	0.76	$	0.67	$	0.49
Weighted average shares outstanding for basic income per share		334,745,003		336,203,747		336,222,471		336,020,431
Diluted income per share	$	1.87	$	0.75	$	0.66	$	0.48
Weighted average shares outstanding for diluted income per share		340,333,005		341,100,182		340,508,931		340,158,399

	Three Months Ended December 31, 2018		Three Months Ended September 30, 2018		Three Months Ended June 30, 2018		Three Months Ended March 31, 2018
	(Dollars in thousands, except share data)
Revenue	$	6,293,748	$	5,260,954	$	5,111,434	$	4,673,952
Operating income	$	459,347	$	189,717	$	225,316	$	213,609
Net income attributable to CBRE Group, Inc.	$	393,795	$	290,469	$	228,667	$	150,288
Basic income per share	$	1.16	$	0.86	$	0.67	$	0.44
Weighted average shares outstanding for basic income per share		339,823,278		339,477,316		339,081,556		338,890,098
Diluted income per share	$	1.15	$	0.85	$	0.67	$	0.44
Weighted average shares outstanding for diluted income per share		342,683,720		343,733,947		343,471,513		342,589,810

Previous: Item 7A. Quantitative and Qualitative Disclosures About Market Risk. · Next: Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.