Item 1. Financial Statements

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Item 1. Financial Statements

CBRE GROUP, INC.

CONSOLIDATED BALANCE SHEETS

(Unaudited)

(Dollars in thousands, except share data)


	September 30, 2021		December 31, 2020
ASSETS
Current Assets:
Cash and cash equivalents	$	2,767,820	$	1,896,188
Restricted cash	108,302		143,059
Receivables, less allowance for doubtful accounts of $100,889 and $95,533 at September 30, 2021 and December 31, 2020, respectively	4,445,790		4,394,954
Warehouse receivables	1,409,038		1,411,170
Prepaid expenses	354,682		294,992
Contract assets	331,910		318,191
Income taxes receivable	182,338		93,756
Other current assets	475,548		293,321
Total Current Assets	10,075,428		8,845,631
Property and equipment, net of accumulated depreciation and amortization of $1,231,920 and $1,074,887 at September 30, 2021 and December 31, 2020, respectively	722,646		815,009
Goodwill	3,874,743		3,821,609
Other intangible assets, net of accumulated amortization of $1,696,577 and $1,556,537 at September 30, 2021 and December 31, 2020, respectively	1,345,646		1,367,913
Operating lease assets	973,335		1,020,352
Investments in unconsolidated subsidiaries (with $397,704 and $116,314 at fair value at September 30, 2021 and December 31, 2020, respectively)	845,621		452,365
Non-current contract assets	144,563		153,636
Real estate under development	396,285		277,630
Non-current income taxes receivable	27,415		43,555
Deferred tax assets, net	83,263		91,529
Investments held in trust - special purpose acquisition company	402,519		402,501
Other assets, net	838,896		747,413
Total Assets	$	19,730,360	$	18,039,143
LIABILITIES AND EQUITY
Current Liabilities:
Accounts payable and accrued expenses	$	2,604,640	$	2,692,939
Compensation and employee benefits payable	1,466,004		1,287,383
Accrued bonus and profit sharing	1,182,150		1,183,786
Operating lease liabilities	228,421		208,526
Contract liabilities	195,145		162,045
Income taxes payable	174,522		57,892
Warehouse lines of credit (which fund loans that U.S. Government Sponsored Enterprises have committed to purchase)	1,383,772		1,383,964
Other short-term borrowings	5,311		5,330
Current maturities of long-term debt	—		1,514
Other current liabilities	195,589		160,604
Total Current Liabilities	7,435,554		7,143,983
Long-term debt, net of current maturities	1,843,849		1,380,202
Non-current operating lease liabilities	1,028,931		1,116,795
Non-current tax liabilities	122,603		87,954
Non-current income taxes payable	54,761		54,761
Deferred tax liabilities, net	156,197		124,485
Other liabilities	687,786		625,303
Total Liabilities	11,329,681		10,533,483
Commitments and contingencies	—		—
Non-controlling interest subject to possible redemption - special purpose acquisition company	402,519		385,573
Equity:
CBRE Group, Inc. Stockholders’ Equity:
Class A common stock; $0.01 par value; 525,000,000 shares authorized; 334,642,584 and 335,561,345 shares issued and outstanding at September 30, 2021 and December 31, 2020, respectively	3,346		3,356
Additional paid-in capital	938,784		1,074,639
Accumulated earnings	7,674,639		6,530,057
Accumulated other comprehensive loss	(654,176)		(529,726)
Total CBRE Group, Inc. Stockholders’ Equity	7,962,593		7,078,326
Non-controlling interests	35,567		41,761
Total Equity	7,998,160		7,120,087
Total Liabilities and Equity	$	19,730,360	$	18,039,143

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

CBRE GROUP, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

(Dollars in thousands, except share and per share data)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Revenue	$	6,798,327	$	5,645,142	$	19,195,819	$	16,915,694
Costs and expenses:
Cost of revenue	5,258,947		4,564,579		14,995,252		13,676,790
Operating, administrative and other	1,025,681		794,227		2,811,224		2,355,099
Depreciation and amortization	122,564		127,725		363,727		357,903
Asset impairments	—		—		—		75,171
Total costs and expenses	6,407,192		5,486,531		18,170,203		16,464,963
Gain on disposition of real estate	18,530		52,797		19,615		75,132
Operating income	409,665		211,408		1,045,231		525,863
Equity income from unconsolidated subsidiaries	163,809		32,376		459,535		72,487
Other income	7,693		7,947		22,470		12,974
Interest expense, net of interest income	11,038		17,829		34,916		51,795

Income before provision for income taxes	570,129		233,902		1,492,320		559,529
Provision for income taxes	133,507		49,062		343,279		119,047
Net income	436,622		184,840		1,149,041		440,482
Less: Net income attributable to non-controlling interests	879		708		4,459		2,258
Net income attributable to CBRE Group, Inc.	$	435,743	$	184,132	$	1,144,582	$	438,224
Basic income per share:
Net income per share attributable to CBRE Group, Inc.	$	1.30	$	0.55	$	3.41	$	1.31
Weighted average shares outstanding for basic income per share	335,364,942		335,287,245		335,621,337		335,128,531
Diluted income per share:
Net income per share attributable to CBRE Group, Inc.	$	1.28	$	0.55	$	3.37	$	1.30
Weighted average shares outstanding for diluted income per share	340,337,159		337,665,848		339,805,292		338,255,859

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

CBRE GROUP, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

(Dollars in thousands)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Net income	$	436,622	$	184,840	$	1,149,041	$	440,482
Other comprehensive (loss) income:
Foreign currency translation (loss) gain	(90,244)		106,201		(124,188)		(40,237)
Amounts reclassified from accumulated other comprehensive loss to interest expense, net of tax	110		106		324		320

Unrealized holding gains (losses) on available for sale debt securities, net of tax	215		811		(971)		1,311
Other, net	105		—		105		(13,045)
Total other comprehensive (loss) income	(89,814)		107,118		(124,730)		(51,651)
Comprehensive income	346,808		291,958		1,024,311		388,831
Less: Comprehensive income attributable to non-controlling interests	677		708		4,179		2,258
Comprehensive income attributable to CBRE Group, Inc.	$	346,131	$	291,250	$	1,020,132	$	386,573

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

CBRE GROUP, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(Dollars in thousands)


	Nine Months Ended September 30,
	2021		2020
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	1,149,041	$	440,482
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	363,727		357,903
Amortization of financing costs	5,080		4,632
Gains related to mortgage servicing rights, premiums on loan sales and sales of other assets	(198,131)		(179,506)
Asset impairments	—		75,171
Net realized and unrealized gains, primarily from investments	(26,898)		(12,974)
Provision for doubtful accounts	24,489		49,498
Net compensation expense for equity awards	133,308		41,841
Equity income from unconsolidated subsidiaries	(459,535)		(72,487)
Distribution of earnings from unconsolidated subsidiaries	382,831		103,796
Proceeds from sale of mortgage loans	12,767,544		11,565,281
Origination of mortgage loans	(12,712,118)		(11,727,227)
(Decrease) increase in warehouse lines of credit	(192)		214,659
Tenant concessions received	18,645		28,617
Purchase of equity securities	(5,281)		(8,932)
Proceeds from sale of equity securities	6,856		11,210
Increase in real estate under development	(123,580)		(68,178)
(Increase) decrease in receivables, prepaid expenses and other assets (including contract and lease assets)	(255,161)		610,058
Decrease in accounts payable and accrued expenses and other liabilities (including contract and lease liabilities)	(107,756)		(98,977)
Increase (decrease) in compensation and employee benefits payable and accrued bonus and profit sharing	176,413		(550,932)
Decrease in net income taxes receivable/payable	42,100		118,736
Other operating activities, net	18,739		(12,313)
Net cash provided by operating activities	1,200,121		890,358
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures	(121,409)		(190,546)
Acquisition of businesses, including net assets acquired, intangibles and goodwill, net of cash acquired	(71,373)		(25,923)
Contributions to unconsolidated subsidiaries	(400,967)		(72,058)
Distributions from unconsolidated subsidiaries	63,776		66,409
Other investing activities, net	(25,433)		15,631
Net cash used in investing activities	(555,406)		(206,487)

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

CBRE GROUP, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)

(Unaudited)

(Dollars in thousands)


	Nine Months Ended September 30,
	2021		2020
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from revolving credit facility	—		835,671
Repayment of revolving credit facility	—		(835,671)
Proceeds from notes payable on real estate	71,157		40,263
Repayment of notes payable on real estate	(13,944)		(24,704)
Proceeds from issuance of 2.500% senior notes	492,255		—
Repurchase of common stock	(188,285)		(50,028)
Acquisition of businesses (cash paid for acquisitions more than three months after purchase date)	(3,421)		(34,400)
Units repurchased for payment of taxes on equity awards	(36,747)		(41,627)
Non-controlling interest contributions	652		1,977
Non-controlling interest distributions	(4,026)		(2,471)
Other financing activities, net	(42,767)		(30,050)
Net cash provided by (used in) financing activities	274,874		(141,040)
Effect of currency exchange rate changes on cash and cash equivalents and restricted cash	(82,714)		9,981
NET INCREASE IN CASH AND CASH EQUIVALENTS AND RESTRICTED CASH	836,875		552,812
CASH AND CASH EQUIVALENTS AND RESTRICTED CASH, AT BEGINNING OF PERIOD	2,039,247		1,093,745
CASH AND CASH EQUIVALENTS AND RESTRICTED CASH, AT END OF PERIOD	$	2,876,122	$	1,646,557
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest	$	29,131	$	60,415
Income tax payments, net	$	220,955	$	4,137

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

CBRE GROUP, INC.

CONSOLIDATED STATEMENTS OF EQUITY

(Unaudited)

(Dollars in thousands)


	CBRE Group, Inc. Stockholders'
	Class A common stock		Additional paid-in capital		Accumulated earnings		Accumulated other comprehensive loss		Non- controlling interests		Total
Balance at June 30, 2021	$	3,357	$	1,001,832	$	7,238,896	$	(564,564)	$	41,155	$	7,720,676
Net income	—		—		435,743		—		879		436,622
Net compensation expense for equity awards	—		48,075		—		—		—		48,075
Units repurchased for payment of taxes on equity awards	—		(472)		—		—		—		(472)
Repurchase of common stock	(11)		(99,999)		—		—		—		(100,010)
Foreign currency translation loss	—		—		—		(90,042)		(202)		(90,244)
Amounts reclassified from accumulated other comprehensive loss to interest expense, net of tax	—		—		—		110		—		110
Unrealized holding gains on available for sale debt securities, net of tax	—		—		—		215		—		215
Contributions from non-controlling interests	—		—		—		—		125		125
Distributions to non-controlling interests	—		—		—		—		(649)		(649)
Other	—		(10,652)		—		105		(5,741)		(16,288)
Balance at September 30, 2021	$	3,346	$	938,784	$	7,674,639	$	(654,176)	$	35,567	$	7,998,160


	CBRE Group, Inc. Stockholders'
	Class A common stock		Additional paid-in capital		Accumulated earnings		Accumulated other comprehensive loss		Non- controlling interests		Total
Balance at June 30, 2020	$	3,352	$	1,046,999	$	6,032,160	$	(838,517)	$	41,057	$	6,285,051
Net income	—		—		184,132		—		708		184,840
Net compensation expense for equity awards	—		22,137		—		—		—		22,137
Units repurchased for payment of taxes on equity awards	—		(4,269)		—		—		—		(4,269)

Foreign currency translation gain	—		—		—		106,201		—		106,201
Amounts reclassified from accumulated other comprehensive loss to interest expense, net of tax	—		—		—		106		—		106

Unrealized holding gains on available for sale debt securities, net of tax	—		—		—		811		—		811
Contributions from non-controlling interests	—		—		—		—		549		549
Distributions to non-controlling interests	—		—		—		—		(1,379)		(1,379)

Other	2		(18)		—		—		271		255
Balance at September 30, 2020	$	3,354	$	1,064,849	$	6,216,292	$	(731,399)	$	41,206	$	6,594,302

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

CBRE GROUP, INC.

CONSOLIDATED STATEMENTS OF EQUITY (Continued)

(Unaudited)

(Dollars in thousands)


	CBRE Group, Inc. Stockholders'
	Class A common stock		Additional paid-in capital		Accumulated earnings		Accumulated other comprehensive loss		Non- controlling interests		Total
Balance at December 31, 2020	$	3,356	$	1,074,639	$	6,530,057	$	(529,726)	$	41,761	$	7,120,087
Net income	—		—		1,144,582		—		4,459		1,149,041
Net compensation expense for equity awards	—		133,308		—		—		—		133,308
Units repurchased for payment of taxes on equity awards	—		(36,747)		—		—		—		(36,747)
Repurchase of common stock	(22)		(188,263)		—		—		—		(188,285)
Foreign currency translation loss	—		—		—		(123,908)		(280)		(124,188)
Amounts reclassified from accumulated other comprehensive loss to interest expense, net of tax	—		—		—		324		—		324
Unrealized holding losses on available for sale debt securities, net of tax	—		—		—		(971)		—		(971)
Contributions from non-controlling interests	—		—		—		—		652		652
Distributions to non-controlling interests	—		—		—		—		(4,026)		(4,026)
Other	12		(44,153)		—		105		(6,999)		(51,035)
Balance at September 30, 2021	$	3,346	$	938,784	$	7,674,639	$	(654,176)	$	35,567	$	7,998,160


	CBRE Group, Inc. Stockholders'
	Class A common stock		Additional paid-in capital		Accumulated earnings		Accumulated other comprehensive loss		Non- controlling interests		Total
Balance at December 31, 2019	$	3,348	$	1,115,944	$	5,793,149	$	(679,748)	$	40,419	$	6,273,112
Net income	—		—		438,224		—		2,258		440,482
Net compensation expense for equity awards	—		41,841		—		—		—		41,841
Units repurchased for payment of taxes on equity awards	—		(41,627)		—		—		—		(41,627)
Repurchase of common stock	(11)		(50,017)		—		—		—		(50,028)
Foreign currency translation loss	—		—		—		(40,237)		—		(40,237)
Amounts reclassified from accumulated other comprehensive loss to interest expense, net of tax	—		—		—		320		—		320

Unrealized holding gains on available for sale debt securities, net of tax	—		—		—		1,311		—		1,311
Contributions from non-controlling interests	—		—		—		—		1,977		1,977
Distributions to non-controlling interests	—		—		—		—		(2,471)		(2,471)

Other	17		(1,292)		(15,081)		(13,045)		(977)		(30,378)
Balance at September 30, 2020	$	3,354	$	1,064,849	$	6,216,292	$	(731,399)	$	41,206	$	6,594,302

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

CBRE GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. Basis of Presentation

Readers of this Quarterly Report on Form 10-Q (Quarterly Report) should refer to the audited financial statements and notes to consolidated financial statements of CBRE Group, Inc., a Delaware corporation (which may be referred to in these financial statements as “the company,” “we,” “us” and “our”), for the year ended December 31, 2020, which are included in our 2020 Annual Report on Form 10-K (2020 Annual Report), filed with the United States Securities and Exchange Commission (SEC) and also available on our website (www.cbre.com), since we have omitted from this Quarterly Report certain footnote disclosures which would substantially duplicate those contained in such audited financial statements. You should also refer to Note 2, Significant Accounting Policies, in the notes to consolidated financial statements in our 2020 Annual Report for further discussion of our significant accounting policies and estimates.

Considerations Related to the Covid-19 Pandemic

The Covid-19 pandemic has primarily impacted the property sales and leasing lines of business in the Advisory Services segment. Many property owners and occupiers initially put transactions on hold and withdrew existing mandates, sharply reducing sales and leasing volumes. The effects of Covid-19 have eased significantly in 2021 as global economic conditions have improved. Nevertheless Covid-19 continues to pose public health challenges that impact our operations, particularly as new strains spread and vaccine administration is slow in parts of the world. As of the date of this Quarterly Report, the majority of workers remain out of their offices and occupier confidence in making long-term office leasing decisions has not returned to pre-pandemic levels.

See Note 5 (Fair Value Measurements) and Note 10 (Commitments and Contingencies) for further discussion of Covid-19 considerations.

Financial Statement Preparation

The accompanying consolidated financial statements have been prepared in accordance with the rules applicable to quarterly reports on Form 10-Q and include all information and footnotes required for interim financial statement presentation, but do not include all disclosures required under accounting principles generally accepted in the United States (U.S.), or GAAP, for annual financial statements. In our opinion, all adjustments (consisting of normal recurring adjustments, except as otherwise noted) considered necessary for a fair presentation have been included. The preparation of financial statements in conformity with GAAP requires us to make estimates and assumptions about future events, including the impact Covid-19 may have on our business. These estimates and the underlying assumptions affect the reported amounts of assets, liabilities, revenues and expenses. Such estimates include the value of goodwill, intangibles and other long-lived assets, real estate assets, accounts receivable, contract assets, operating lease assets, 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 our best judgment. We evaluate our estimates and assumptions on an ongoing basis using historical experience and other factors, including consideration of the current economic environment, and adjust such estimates and assumptions when facts and circumstances dictate. As future events and their effects cannot be determined with precision, actual results could differ significantly from these estimates. Changes in these estimates resulting from continuing changes in the economic environment will be reflected in the financial statements in future periods.

Certain reclassifications have been made to the 2020 financial statements to conform with the 2021 presentation.

CBRE GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

2. New Accounting Pronouncements

Recent Accounting Pronouncements Pending Adoption

In March 2020 and January 2021, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2020-04, “Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting” and ASU 2021-01, “Reference Rate Reform: Scope,” respectively. Together, the ASUs provide temporary optional expedients and exceptions to the U.S. GAAP guidance on contract modifications and hedge accounting to ease the financial reporting burdens related to the expected market transition from the London Interbank Offered Rate (LIBOR) and other interbank offered rates to alternative reference rates. This guidance is effective for a limited time for all entities through December 31, 2022. We are evaluating the effect that this guidance will have on our consolidated financial statements and related disclosures.

In July 2021, the FASB issued ASU 2021-05, “Leases (Topic 842): Lessors-Certain Leases with Variable Lease Payments (Topic 842).” The ASU amends the lease classification requirements for lessors to align them with practice under Topic 840. Lessors should classify and account for a lease with variable lease payments that do not depend on a reference index or a rate as an operating lease if certain criteria are met. This guidance is effective for fiscal years beginning after December 15, 2021, and interim periods within those fiscal years. We are evaluating the effect that this guidance will have on our consolidated financial statements and related disclosures, but do not expect it to have a material impact.

3. Warehouse Receivables & Warehouse Lines of Credit

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 September 30, 2021 and December 31, 2020, 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.

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


Beginning balance at December 31, 2020	$	1,411,170
Origination of mortgage loans	12,712,118
Gains (premiums on loan sales)	61,870
Proceeds from sale of mortgage loans:
Sale of mortgage loans	(12,705,674)
Cash collections of premiums on loan sales	(61,870)
Proceeds from sale of mortgage loans	(12,767,544)
Net decrease in mortgage servicing rights included in warehouse receivables	(8,576)
Ending balance at September 30, 2021	$	1,409,038

CBRE GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

The following table is a summary of our warehouse lines of credit in place as of September 30, 2021 and December 31, 2020 (dollars in thousands):


			September 30, 2021				December 31, 2020
Lender	Current Maturity	Pricing	Maximum Facility Size		Carrying Value		Maximum Facility Size		Carrying Value
JP Morgan Chase Bank, N.A. (JP Morgan) (1)	10/17/2022	daily floating rate SOFR rate plus 1.60%	$	985,000	$	734,815	$	1,585,000	$	561,726
JP Morgan	10/17/2022	daily floating rate SOFR rate plus 2.75%	15,000		3,003		15,000		—
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 1.45%, with a LIBOR floor of 0.25%	650,000		31,485		450,000		132,692
TD Bank, N.A. (TD Bank) (3)	7/15/2022	daily floating rate LIBOR plus 1.30%	800,000		222,311		800,000		401,849
Bank of America, N.A. (BofA) (4)	5/25/2022	daily floating rate LIBOR plus 1.30%, with a LIBOR floor of 0.30%	350,000		265,368		350,000		175,862
BofA (5)	5/25/2022	daily floating rate LIBOR plus 1.30%, with a LIBOR floor of 0.30%	250,000		—		—		—
MUFG Union Bank, N.A. (Union Bank) (6)	6/28/2022	daily floating rate LIBOR plus 1.30%	200,000		126,790		300,000		111,835
			$	3,250,000	$	1,383,772	$	3,500,000	$	1,383,964

(1)Effective October 19, 2020, this facility was amended and the maximum facility size was temporarily increased to $1,585.0 million, and reverted back to $985.0 million on January 18, 2021. Effective October 18, 2021, this facility was renewed and amended and the maximum facility size was increased to $1,335.0 million. This facility has a revised maturity date of October 17, 2022 and a revised interest rate to a Secured Overnight Finance Rate ("SOFR") term plus 1.60%, noting the Business Lending sublimit has a revised interest rate of daily adjusted term SOFR plus 2.75%.

(2)Effective January 15, 2021, the maximum facility was temporarily increased to $650.0 million.

(3)Effective July 1, 2020, this facility was amended and provides for a maximum aggregate principal amount of $400.0 million, in addition to an uncommitted $400.0 million temporary line of credit. Effective June 28, 2021, this facility was renewed with a revised interest rate of daily floating rate LIBOR plus 1.30% and a maturity date of July 15, 2022. As of September 30, 2021, the uncommitted $400.0 million temporary line of credit was not utilized.

(4)The total commitment amount of $350.0 million includes a separate sublimit borrowing in the amount of $100.0 million, which can be utilized for specific purposes as defined within the agreement. Effective June 30, 2021, this facility was renewed with a revised interest rate of daily floating LIBOR plus 1.30% and a maturity date of May 25, 2022. The sublimit is subject to an interest rate of daily floating LIBOR plus 1.30%, with a LIBOR floor of 0.30%. As of September 30, 2021, the sublimit borrowing has not been utilized.

(5)Effective June 30, 2021, the advised consent line was renewed for $250.0 million of capacity with a revised interest rate of daily floating LIBOR plus 1.30%, with a LIBOR floor of 0.30%, and a maturity date of May 25, 2022.

(6)On June 28, 2019, we added a new warehouse facility for $200.0 million that contains an accordion feature which allowed 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 3 times within 12 consecutive months. Effective August 4, 2020, this facility was amended and decreased the accordion feature from $150.0 million to $100.0 million, with no changes to the predefined borrowing multiples. On September 22, 2020, the temporary increase of $100.0 million was utilized and expired on January 20, 2021. Effective June 28, 2021, this facility was renewed with a revised interest rate of daily floating rate LIBOR plus 1.30%, removing the LIBOR floor, and a maturity date of June 28, 2022.

During the nine months ended September 30, 2021, we had a maximum of $2.5 billion of warehouse lines of credit principal outstanding.

CBRE GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

4. 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 September 30, 2021 and December 31, 2020, our maximum exposure to loss related to VIEs which are not consolidated was as follows (dollars in thousands):


	September 30, 2021		December 31, 2020
Investments in unconsolidated subsidiaries	$	78,561	$	66,947
Other current assets	4,219		4,219
Co-investment commitments	91,865		47,957
Maximum exposure to loss	$	174,645	$	119,123

5. Fair Value Measurements

Topic 820 of the FASB ASC defines fair value as the price that would be received to sell an asset or paid to transfer a 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.

There have been no significant changes to the valuation techniques and inputs used to develop the recurring fair value measurements from those disclosed in our 2020 Annual Report.

CBRE GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

The following tables present the fair value of assets and liabilities measured at fair value on a recurring basis as of September 30, 2021 and December 31, 2020 (dollars in thousands):


	As of September 30, 2021
	Fair Value Measured and Recorded Using
	Level 1		Level 2		Level 3		Total
Assets
Available for sale securities:
Debt securities:
U.S. treasury securities	$	7,108	$	—	$	—	$	7,108
Debt securities issued by U.S. federal agencies	—		9,825		—		9,825
Corporate debt securities	—		50,551		—		50,551
Asset-backed securities	—		3,669		—		3,669
Collateralized mortgage obligations	—		776		—		776
Total available for sale debt securities	7,108		64,821		—		71,929
Equity securities	69,539		—		—		69,539
Investments in unconsolidated subsidiaries	—		—		283,965		283,965
Warehouse receivables	—		1,409,038		—		1,409,038
Total assets at fair value	$	76,647	$	1,473,859	$	283,965	$	1,834,471

Liabilities
Warrant liabilities	$	16,603	—		—		$	16,603
Other liabilities	—		—		10,700		10,700
Total liabilities at fair value	$	16,603	$	—	$	10,700	$	27,303


	As of December 31, 2020
	Fair Value Measured and Recorded Using
	Level 1		Level 2		Level 3		Total
Assets
Available for sale securities:
Debt securities:
U.S. treasury securities	$	7,270	$	—	$	—	$	7,270
Debt securities issued by U.S. federal agencies	—		10,216		—		10,216
Corporate debt securities	—		51,244		—		51,244
Asset-backed securities	—		3,801		—		3,801
Collateralized mortgage obligations	—		1,369		—		1,369
Total available for sale debt securities	7,270		66,630		—		73,900
Equity securities	43,334		—		—		43,334
Investments in unconsolidated subsidiaries	—		—		50,000		50,000
Warehouse receivables	—		1,411,170		—		1,411,170
Total assets at fair value	$	50,604	$	1,477,800	$	50,000	$	1,578,404

We classify certain investments as level 3 in the fair value hierarchy which represent investments in non-public entities where we elected the fair value option. The valuation of these investments is determined utilizing recent market activity as well as income and/or market approach valuation methodologies. As of September 30, 2021 and December 31, 2020, investments in unconsolidated subsidiaries at fair value using NAV were $113.7 million and $66.3 million, respectively. These investments fall under practical expedient rules that do not require them to be included in the fair value hierarchy and as a result have been excluded from the tables above.

CBRE GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

The tables below present a reconciliation for assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) (dollars in thousands):


	Investment in Unconsolidated Subsidiaries		Other liabilities
Balance as of June 30, 2021	$	265,531	$	—

Net change in fair value	18,434		10,700

Balance as of September 30, 2021	$	283,965	$	10,700

Balance as of December 31, 2020	$	50,000	$	—
Transfer in	5,174		—
Net change in fair value	28,434		10,700
Purchases/ Additions	200,357		—
Balance as of September 30, 2021	$	283,965	$	10,700

Net change in fair value, included in the table above, is reported in Net income as follows:


Category of Assets/Liabilities using Unobservable Inputs						Consolidated Statements of Operations
Investments in unconsolidated subsidiaries						Equity income from unconsolidated subsidiaries
Other liabilities						Other income

There were no significant non-recurring fair value measurements recorded during the three and nine months ended September 30, 2021.

There were no significant non-recurring fair value measurement recorded during the three months ended September 30, 2020. The following non-recurring fair value measurements were recorded for the nine months ended September 30, 2020 (dollars in thousands):


	Net Carrying Value as of September 30, 2020			Fair Value Measured and Recorded Using								Total Impairment Charges for the Nine Months Ended September 30, 2020
			Level 1			Level 2			Level 3
Property and equipment	$	9,565		$	—		$	—		$	9,565	$	21,663
Goodwill	431,389			—			—			431,389		25,000
Other intangible assets	12,842			—			—			12,842		28,508
Total	$	453,796		$	—		$	—		$	453,796	$	75,171

During the nine months ended September 30, 2020, we recorded $50.2 million of non-cash asset impairment charges in our Global Workplace Solutions segment and a non-cash goodwill impairment charge of $25.0 million in our Real Estate Investments segment. Primarily as a result of the global economic disruption and uncertainty due to Covid-19, we deemed there to be triggering events in the first quarter of 2020 that required testing of goodwill and certain assets for impairment at that time. Based on these tests, we recorded the aforementioned non-cash impairment charges, which were primarily driven by lower anticipated cash flows in certain businesses directly resulting from a downturn in forecasts as well as increased forecast risk due to Covid-19 and changes in our business going forward. These asset impairment charges were included within the line item “Asset impairments” in the accompanying consolidated statements of operations. The fair value measurements employed for our impairment evaluations were based on a discounted cash flow approach. Inputs used in these evaluations included risk-free rates of return, estimated risk premiums, terminal growth rates, working capital assumptions, income tax rates as well as other economic variables.

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.

CBRE GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

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 Note 3).
Investments in Unconsolidated Subsidiaries – A portion of these investments are carried at fair value as discussed above.
Available for Sale Debt Securities – Primarily held by our wholly-owned captive insurance company, these investments are carried at their fair value.
Equity Securities – Primarily held by our wholly-owned captive insurance company, these investments are carried at their fair value.
Investments Held in Trust - special purpose acquisition company – Funds received as part of the initial public offering of CBRE Acquisition Holdings, Inc. have been deposited in an interest-bearing U.S. based trust account. The funds will be invested only in specified U.S. government treasury bills with a maturity of 180 days or less or in money market funds. The carrying amount approximates fair value due to the short-term maturities of these instruments.
Warrant liabilities - A liability of CBRE Acquisition Holdings, Inc., the redeemable warrants are separately traded on the NYSE under the symbol “CBAH.WS.” These warrants are carried at fair value, which was determined at quoted trading price of these instruments.
Other liabilities - Represents the fair value of the unfunded commitment related to a revolving facility in our Advisory Services segment. Valuations are based on discounted cash flow techniques, for which the significant inputs are the amount and timing of expected future cash flows, market comparables and recovery assumptions.
Short-Term Borrowings – The majority of this balance 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 3 and 8).
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 $761.6 million and $772.2 million at September 30, 2021 and December 31, 2020, respectively. Their actual carrying value, net of unamortized debt issuance costs, totaled $760.8 million and $785.7 million at September 30, 2021 and December 31, 2020, respectively (see Note 8).
Senior Notes – Based on dealers’ quotes (which falls within Level 2 of the fair value hierarchy), the estimated fair value of our 4.875% senior notes was $684.0 million and $702.5 million at September 30, 2021 and December 31, 2020, respectively. The actual carrying value of our 4.875% senior notes, net of unamortized debt issuance costs and discount, totaled $595.2 million and $594.5 million at September 30, 2021 and December 31, 2020, respectively. The estimated fair value of our 2.500% senior notes was $505.1 million as of September 30, 2021. The actual carrying value of our 2.500% senior notes, net of unamortized debt issuance costs and discount, totaled $487.9 million at September 30, 2021. On December 28, 2020, we redeemed the $425.0 million aggregate outstanding principal amount of our 5.25% senior notes in full (See Note 8).
Notes Payable on Real Estate - As of September 30, 2021 and December 31, 2020, the carrying value of our notes payable on real estate, net of unamortized debt issuance costs, was $73.6 million and $79.6 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.

CBRE GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

6. Goodwill

We test each of our reporting units for goodwill impairment annually at October 1st, or upon a triggering event, in accordance with ASC Topic 350, “Intangibles – Goodwill and Other.” As of January 1, 2021, we underwent an internal reorganization in our Advisory Services and Global Workplace Solutions reportable segments (see Note 14 for further discussion). This changed the composition of our reporting units which resulted in the reallocation of $101.4 million of goodwill from our Advisory Services to our Global Workplace Solutions reportable segments as of January 1, 2021. Additionally, the change in composition of our reporting units was considered a triggering event for a quantitative test as of January 1, 2021. We determined that no impairment existed as the estimated fair values of our reporting units were in excess of their respective carrying values.

7. 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):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Revenue	$	636,229	$	513,792	$	2,098,850	$	1,337,212
Operating income	375,655		97,833		1,082,656		411,291
Net income	909,341		109,251		2,386,276		267,835

During the second quarter of 2021, the company closed on its integration of Hana into Industrious National Management Company LLC (“Industrious”), increasing its ownership interest to 40%.

CBRE GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

8. Long-Term Debt and Short-Term Borrowings

Long-Term Debt

Long-term debt consists of the following (dollars in thousands):


	September 30, 2021		December 31, 2020
Senior term loans, with interest ranging from 0.75% to 1.15%, due quarterly through 2024	$	763,070	$	788,759
4.875% senior notes due in 2026, net of unamortized discount	597,799		597,470
2.500% senior notes due in 2031, net of unamortized discount	492,621		—
Other	—		1,514
Total long-term debt	1,853,490		1,387,743
Less: current maturities of long-term debt	—		1,514
Less: unamortized debt issuance costs	9,641		6,027
Total long-term debt, net of current maturities	$	1,843,849	$	1,380,202

We maintain credit facilities with third-party lenders, which we use for a variety of purposes. On March 4, 2019, CBRE Services, Inc. (CBRE Services) entered into an incremental assumption agreement with respect to its credit agreement, dated October 31, 2017 (such agreement, as amended by a December 20, 2018 incremental loan assumption agreement and such March 4, 2019 incremental assumption agreement, collectively, the 2019 Credit Agreement), which (i) extended the maturity of the U.S. dollar tranche A term loans under such credit agreement, (ii) extended the termination date of the revolving credit commitments available under such credit agreement and (iii) made certain changes to the interest rates and fees applicable to such tranche A term loans and revolving credit commitments under such credit agreement. 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 credit agreement in effect prior to the entry into the 2019 incremental assumption agreement. On July 9, 2021, CBRE Services entered into an additional incremental assumption agreement with respect to the 2019 Credit Agreement for purposes of increasing the revolving credit commitments available under the 2019 Credit Agreement by an aggregate principal amount of $350.0 million (the 2019 Credit Agreement, as amended by the July 9, 2021 incremental assumption agreement is collectively referred to in this Quarterly Report as the 2021 Credit Agreement).

The 2021 Credit Agreement is a senior unsecured credit facility that is guaranteed by us. On May 21, 2021, we entered into a definitive agreement whereby our subsidiary guarantors were released as guarantors from our 2021 Credit Agreement. As of September 30, 2021, the 2021 Credit Agreement provided for the following: (1) a $3.15 billion 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 tranche A term loan facility maturing on March 4, 2024, requiring quarterly principal payments unless our leverage ratio (as defined in the 2021 Credit Agreement) is less than or equal to 2.50x 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.

On August 13, 2015, CBRE Services issued $600.0 million in aggregate principal amount of 4.875% senior notes due March 1, 2026 (the 4.875% senior notes) 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 guaranteed on a senior basis by us. Interest accrues at a rate of 4.875% per year and is payable semi-annually in arrears on March 1 and September 1.

On March 18, 2021, CBRE Services issued $500.0 million in aggregate principal amount of 2.500% senior notes due April 1, 2031 at a price equal to 98.451% of their face value (the 2.500% senior notes). The 2.500% 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. Interest accrues at a rate of 2.500% per year and is payable semi-annually in arrears on April 1 and October 1 of each year, beginning on October 1, 2021. The 2.500% senior notes are redeemable at our option, in whole or in part, on or after January 1, 2031 at a redemption price of 100% of the principal amount on that date, plus accrued and unpaid interest, if any, to, but excluding the date of redemption. At any time prior to January 1, 2031, we may redeem all or a portion of the notes at a redemption price equal to the greater of (1) 100% of the principal amount of the notes to be redeemed and (2) the sum of the present value at the date of redemption of the remaining scheduled payments of principal and interest thereon to January 1, 2031, assuming the notes matured on January 1, 2031, discounted to the date of redemption

CBRE GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

on a semi-annual basis at an adjusted rate equal to the treasury rate plus 20 basis points, minus accrued and unpaid interest to, but excluding, the date of redemption, plus, in either case, accrued and unpaid interest, if any, to, but not including, the redemption date. The amount of the 2.500% senior notes, net of unamortized discount and unamortized debt issuance costs, included in the accompanying consolidated balance sheet was $487.9 million at September 30, 2021.

The indentures governing our 4.875% senior notes and 2.500% 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, these indentures require that the 4.875% senior notes and 2.500% senior notes be jointly and severally guaranteed on a senior basis by CBRE Group, Inc. and any domestic subsidiary that guarantees the 2021 Credit Agreement. In addition, our 2021 Credit Agreement also requires us to maintain a minimum coverage ratio of consolidated EBITDA (as defined in the 2021 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 2021 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 2021 Credit Agreement), 4.75x) as of the end of each fiscal quarter. Our coverage ratio of consolidated EBITDA to consolidated interest expense was 47.74x for the trailing twelve months ended September 30, 2021, and our leverage ratio of total debt less available cash to consolidated EBITDA was (0.32)x as of September 30, 2021.

Short-Term Borrowings

Revolving Credit Facility

The revolving credit facility under the 2021 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 $320.0 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 2021 Credit Agreement). The 2021 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 September 30, 2021, 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.

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 3 for additional information.

CBRE GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

9. 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 monitor our service arrangements to evaluate whether they meet the definition of a lease.

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


Category	Classification	September 30, 2021		December 31, 2020
Assets
Operating	Operating lease assets	$	973,335	$	1,020,352
Financing	Other assets, net	113,671		117,805
Total leased assets		$	1,087,006	$	1,138,157
Liabilities
Current:
Operating	Operating lease liabilities	$	228,421	$	208,526
Financing	Other current liabilities	35,892		39,298
Non-current:
Operating	Non-current operating lease liabilities	1,028,931		1,116,795
Financing	Other liabilities	77,405		78,881
Total lease liabilities		$	1,370,649	$	1,443,500

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


	Nine Months Ended September 30,
	2021		2020
Right-of-use assets obtained in exchange for new operating lease liabilities	$	83,214	$	175,909
Right-of-use assets obtained in exchange for new financing lease liabilities	31,693		34,169
Other non-cash increases in operating lease right-of-use assets (1)	11,431		6,729
Other non-cash decreases in financing lease right-of-use assets (1)	(2,919)		(471)

(1)The non-cash activity in the right-of-use assets resulted from lease modifications and remeasurements.

CBRE GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

10. 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 Delegated Underwriting and Servicing Lender Program (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 with unpaid principal balances of $35.6 billion at September 30, 2021, of which $31.4 billion is subject to such loss sharing arrangements. 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 capital in the event losses occur. As of both September 30, 2021 and December 31, 2020, CBRE MCI had a $95.0 million letter of credit under this reserve arrangement and had recorded a liability of approximately $62.4 million and $57.1 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 $1.1 billion (including $633.6 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 September 30, 2021.

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) was enacted in the United States in response to the Covid-19 pandemic. The CARES Act, among other things, permits borrowers with government-backed mortgages from Government Sponsored Enterprises who are experiencing a financial hardship to obtain forbearance of their loans. For Fannie Mae loans that we service, CBRE MCI is obligated to advance (for a forbearance period up to 90 consecutive days and potentially longer) scheduled principal and interest payments to Fannie Mae, regardless of whether the borrowers actually make the payments. These advances are reimbursable by Fannie Mae after 120 days. As of September 30, 2021, total advances for principal and interest were $9.3 million, all of which have already been reimbursed.

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. We could potentially be obligated to repurchase any SBL loan originated by CBRE Capital Markets that remains in default for 120 days following the forbearance period, if the default occurred during the first 12 months after origination and such loan had not been earlier securitized. In addition, CBRE Capital Markets may be responsible for a loss not to exceed 10% of the original principal amount of any SBL loan that is not securitized and goes into default after the 12-month repurchase period. 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 September 30, 2021 and December 31, 2020, CBRE Capital Markets had posted a $5.0 million letter of credit under this reserve arrangement.

We had outstanding letters of credit totaling $142.0 million as of September 30, 2021, 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 $95.0 million as of September 30, 2021 referred to in the preceding paragraphs represented the majority of the $142.0 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 the end of each of the respective agreements.

We had guarantees totaling $49.2 million as of September 30, 2021, 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 $49.2 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.

CBRE GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

In addition, as of September 30, 2021, 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 September 30, 2021, we had aggregate commitments of $154.2 million to fund these 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 September 30, 2021, we had committed to fund $45.9 million of additional capital to these unconsolidated subsidiaries.

As part of the company's sponsorship of CBRE Acquisition Holdings, Inc. ("CBAH", a special purposes acquisition company, "SPAC"), we have committed to purchase shares of CBAH Class A common stock in an aggregate amount of $70.0 million, with a commitment to purchase additional shares of CBAH Class A common stock in an aggregate amount of up to $150.0 million to the extent of the amount of redemptions of shares of CBAH Class A common stock submitted for redemption by public stockholders in connection with the closing of CBAH's proposed acquisition of Altus Power, Inc.

11. Income Taxes

Our provision for income taxes on a consolidated basis was $133.5 million for the three months ended September 30, 2021 as compared to $49.1 million for the three months ended September 30, 2020. The increase of $84.4 million is primarily related to the corresponding increase in our consolidated pre-tax book income. Our effective tax rate increased to 23.4% for the three months ended September 30, 2021 from 21.0% for the three months ended September 30, 2020 primarily resulting from an increase in unfavorable permanent book tax differences and a decrease of tax credits in 2021.

Our provision for income taxes on a consolidated basis was $343.3 million for the nine months ended September 30, 2021 as compared to $119.0 million for the nine months ended September 30, 2020. The increase of $224.2 million is primarily related to the corresponding increase in consolidated pre-tax book income. Our effective tax rate increased to 23.0% for the nine months ended September 30, 2021 from 21.3% for the nine months ended September 30, 2020 primarily resulting from an increase in unfavorable permanent book tax differences and a decrease of tax credits in 2021.

Our effective tax rate for the three and nine months ended September 30, 2021 was different than the U.S. federal statutory tax rate of 21.0% primarily due to U.S. state taxes and impact of permanent book tax differences.

As of September 30, 2021 and December 31, 2020, the company had gross unrecognized tax benefits of $182.6 million and $168.5 million, respectively. The net increase of $14.1 million primarily resulting from an accrual of gross unrecognized tax benefits of $19.8 million and a release of $5.7 million of gross unrecognized tax benefits primarily related to the expiration of statute of limitations in various tax jurisdictions.

The CARES Act has not had, nor is it expected to have, a significant impact on our effective tax rate for 2021.

CBRE GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

12. Income Per Share and Stockholders' Equity

The calculations of basic and diluted income per share attributable to CBRE Group, Inc. stockholders are as follows (dollars in thousands, except share and per share data):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Basic Income Per Share
Net income attributable to CBRE Group, Inc. stockholders	$	435,743	$	184,132	$	1,144,582	$	438,224
Weighted average shares outstanding for basic income per share	335,364,942		335,287,245		335,621,337		335,128,531
Basic income per share attributable to CBRE Group, Inc. stockholders	$	1.30	$	0.55	$	3.41	$	1.31
Diluted Income Per Share
Net income attributable to CBRE Group, Inc. stockholders	$	435,743	$	184,132	$	1,144,582	$	438,224
Weighted average shares outstanding for basic income per share	335,364,942		335,287,245		335,621,337		335,128,531
Dilutive effect of contingently issuable shares	4,972,217		2,378,603		4,183,955		3,127,328
Weighted average shares outstanding for diluted income per share	340,337,159		337,665,848		339,805,292		338,255,859
Diluted income per share attributable to CBRE Group, Inc. stockholders	$	1.28	$	0.55	$	3.37	$	1.30

For the three and nine months ended September 30, 2021, 30,903 and 31,666, 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.

For the three and nine months ended September 30, 2020, 1,294,385 and 1,191,464, 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.

In February 2019, our board of directors authorized a new program for the repurchase of up to $300.0 million of our common stock over three years, effective March 11, 2019. In both August and November 2019, our board of directors authorized an additional $100.0 million under our program, bringing the total authorized repurchase amount under the program to a total of $500.0 million. During the year ended December 31, 2020, we spent $50.0 million to repurchase 1,050,084 shares of our common stock at an average price of $47.62 per share using cash on hand. During the three months ended September 30, 2021, we spent $100.0 million to repurchase an additional 1,025,068 shares of our common stock with an average price of $97.55 per share using cash on hand. During the nine months ended September 30, 2021, we spent $188.3 million to repurchase 2,156,796 shares of our common stock with an average price of $87.29 per share using cash on hand. As of September 30, 2021, we had $161.7 million of capacity remaining under our stock repurchase program.

CBRE GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

13. Revenue from Contracts with Customers

We account for revenue with customers in accordance with FASB ASC Topic, “Revenue from Contracts with Customers” (Topic 606). 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 receive in exchange for those services.

Disaggregated Revenue

The following tables represent a disaggregation of revenue from contracts with customers by type of service and/or segment (dollars in thousands):


	Three Months Ended September 30, 2021
	Advisory Services		Global Workplace Solutions		Real Estate Investments		Corporate, other and eliminations		Consolidated
Topic 606 Revenue:
Facilities management	$	—	$	3,480,090	$	—	$	—	$	3,480,090
Advisory leasing	869,124		—		—		—		869,124
Advisory sales	673,411		—		—		—		673,411
Property management	432,658		—		—		(4,795)		427,863
Project management	—		687,053		—		—		687,053
Valuation	176,644		—		—		—		176,644
Commercial mortgage origination (1)	82,033		—		—		—		82,033
Loan servicing (2)	11,594		—		—		—		11,594
Investment management	—		—		135,175		—		135,175
Development services	—		—		87,588		—		87,588
Topic 606 Revenue	2,245,464		4,167,143		222,763		(4,795)		6,630,575
Out of Scope of Topic 606 Revenue:
Commercial mortgage origination	99,780		—		—		—		99,780
Loan servicing	66,903		—		—		—		66,903
Development services (3)	—		—		1,069		—		1,069
Total Out of Scope of Topic 606 Revenue	166,683		—		1,069		—		167,752
Total Revenue	$	2,412,147	$	4,167,143	$	223,832	$	(4,795)	$	6,798,327

CBRE GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)


	Three Months Ended September 30, 2020
	Advisory Services (4)		Global Workplace Solutions (4)		Real Estate Investments		Corporate, other and eliminations (4)		Consolidated
Topic 606 Revenue:
Facilities management	$	—	$	3,284,688	$	—	$	—	$	3,284,688
Advisory leasing	549,233		—		—		—		549,233
Advisory sales	348,238		—		—		—		348,238
Property management	406,555		—		—		(5,758)		400,797
Project management	—		566,590		—		—		566,590
Valuation	138,945		—		—		—		138,945
Commercial mortgage origination (1)	20,040		—		—		—		20,040
Loan servicing (2)	9,860		—		—		—		9,860
Investment management	—		—		99,935		—		99,935
Development services	—		—		68,850		—		68,850
Topic 606 Revenue	1,472,871		3,851,278		168,785		(5,758)		5,487,176
Out of Scope of Topic 606 Revenue:
Commercial mortgage origination	108,986		—		—		—		108,986
Loan servicing	48,153		—		—		—		48,153
Development services (3)	—		—		827		—		827
Total Out of Scope of Topic 606 Revenue	157,139		—		827		—		157,966
Total Revenue	$	1,630,010	$	3,851,278	$	169,612	$	(5,758)	$	5,645,142

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

(4)Prior period segment results have been recast to conform to the changes as discussed in Note 14.

CBRE GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)


	Nine Months Ended September 30, 2021
	Advisory Services		Global Workplace Solutions		Real Estate Investments		Corporate, other and eliminations		Consolidated
Topic 606 Revenue:
Facilities management	$	—	$	10,395,345	$	—	$	—	$	10,395,345
Advisory leasing	2,082,248		—		—		—		2,082,248
Advisory sales	1,677,557		—		—		—		1,677,557
Property management	1,283,090		—		—		(15,397)		1,267,693
Project management	—		1,880,403		—		—		1,880,403
Valuation	517,460		—		—		—		517,460
Commercial mortgage origination (1)	187,995		—		—		—		187,995
Loan servicing (2)	32,100		—		—		—		32,100
Investment management	—		—		406,516		—		406,516
Development services	—		—		258,281		—		258,281
Topic 606 Revenue	5,780,450		12,275,748		664,797		(15,397)		18,705,598
Out of Scope of Topic 606 Revenue:
Commercial mortgage origination	295,561		—		—		—		295,561
Loan servicing	181,133		—		—		—		181,133
Development services (3)	—		—		13,527		—		13,527
Total Out of Scope of Topic 606 Revenue	476,694		—		13,527		—		490,221
Total Revenue	$	6,257,144	$	12,275,748	$	678,324	$	(15,397)	$	19,195,819


	Nine Months Ended September 30, 2020
	Advisory Services (4)		Global Workplace Solutions (4)		Real Estate Investments		Corporate, other and eliminations (4)		Consolidated
Topic 606 Revenue:
Facilities management	$	—	$	9,917,520	$	—	$	—	$	9,917,520
Advisory leasing	1,696,039		—		—		(2,041)		1,693,998
Advisory sales	1,022,914		—		—		—		1,022,914
Property management	1,225,146		—		—		(18,127)		1,207,019
Project management	—		1,588,720		—		—		1,588,720
Valuation	418,520		—		—		—		418,520
Commercial mortgage origination (1)	78,044		—		—		—		78,044
Loan servicing (2)	30,290		—		—		—		30,290
Investment management	—		—		324,744		—		324,744
Development services	—		—		202,777		—		202,777
Topic 606 Revenue	4,470,953		11,506,240		527,521		(20,168)		16,484,546
Out of Scope of Topic 606 Revenue:
Commercial mortgage origination	274,523		—		—		—		274,523
Loan servicing	141,453		—		—		—		141,453
Development services (3)	—		—		15,172		—		15,172
Total Out of Scope of Topic 606 Revenue	415,976		—		15,172		—		431,148
Total Revenue	$	4,886,929	$	11,506,240	$	542,693	$	(20,168)	$	16,915,694

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

(4)Prior period segment results have been recast to conform to the changes as discussed in Note 14.

Contract Assets and Liabilities

We had contract assets totaling $476.5 million ($331.9 million of which was current) and $471.8 million ($318.2 million of which was current) as of September 30, 2021 and December 31, 2020, respectively.

CBRE GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

We had contract liabilities totaling $199.2 million ($195.1 million of which was current) and $164.1 million ($162.0 million of which was current) as of September 30, 2021 and December 31, 2020, respectively. During the nine months ended September 30, 2021, we recognized revenue of $150.8 million that was included in the contract liability balance at December 31, 2020.

14. Segments

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. Effective January 1, 2021, we have realigned our organizational structure and performance measure to how our chief operating decision maker (CODM) views the company. This includes a “Corporate, other and elimination” component and a segment measurement of profit and loss referred to as segment operating profit.

Advisory Services provides a comprehensive range of services globally, including property leasing, property sales, mortgage services, property management, and valuation. Global Workplace Solutions provides a broad suite of integrated, contractually-based outsourcing services to occupiers of real estate, including facilities management and project management. Effective January 1, 2021, transaction services was fully moved under the Advisory Services segment and project management was fully moved under the Global Workplace Solutions segment. Previously transaction services and project management were split between the Global Workplace Solutions segment and the Advisory Services segment. Real Estate Investments includes investment management services provided globally, development services in the U.S., U.K. and Continental Europe and legacy flexible office space solutions. Corporate and other includes activities not attributed to our core business, primarily consisting of corporate headquarters costs for executive officers and certain other central functions, as well as certain strategic equity investments. These costs, which were previously allocated to the business segments on a reasonable basis, are no longer allocated and are reported under Corporate and other. It also includes eliminations related to inter-segment revenue. Prior period segment results for all of our reportable segments have been recast to conform to the above changes.

Segment operating profit is the measure reported to the CODM for purposes of making decisions about allocating resources to each segment and assessing performance of each segment. Segment operating profit represents earnings before net interest expense, write-off of financing costs on extinguished debt, income taxes, depreciation and amortization and asset impairments, as well as adjustments related to the following: certain carried interest incentive compensation expense (reversal) to align with the timing of associated revenue, impact of fair value adjustments to real estate assets acquired in the Telford Acquisition (purchase accounting) that were sold in the period, costs incurred related to legal entity restructuring, costs associated with workforce optimization, transformation initiatives and integration and other costs related to acquisitions. This metric excludes the impact of corporate overhead as these costs are now reported under Corporate and other.

CBRE GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

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


	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Revenue
Advisory Services	$	2,412,147	$	1,630,010	$	6,257,144	$	4,886,929
Global Workplace Solutions	4,167,143		3,851,278		12,275,748		11,506,240
Real Estate Investments	223,832		169,612		678,324		542,693
Corporate, other and eliminations	(4,795)		(5,758)		(15,397)		(20,168)
Total revenue	$	6,798,327	$	5,645,142	$	19,195,819	$	16,915,694

Segment operating profit
Advisory Services	$	521,539	$	286,655	$	1,318,136	$	821,731
Global Workplace Solutions	187,315		160,829		509,644		395,286
Real Estate Investments	146,045		71,422		360,085		139,097
Total reportable segment operating profit	$	854,899	$	518,906	$	2,187,865	$	1,356,114

Reconciliation of total reportable segment operating profit to net income is as follows (dollars in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Net income attributable to CBRE Group, Inc.	$	435,743	$	184,132	$	1,144,582	$	438,224
Adjustments to increase (decrease) net income:
Depreciation and amortization	122,564		127,725		363,727		357,903
Asset impairments	—		—		—		75,171
Interest expense, net of interest income	11,038		17,829		34,916		51,795

Provision for income taxes	133,507		49,062		343,279		119,047
Costs associated with transformation initiatives (1)	—		55,374		—		55,374
Carried interest incentive compensation expense (reversal) to align with the timing of associated revenue	16,959		3,767		33,963		(11,517)
Impact of fair value adjustments to real estate assets acquired in the Telford Acquisition (purchase accounting) that were sold in period	47		2,289		772		9,289
Costs incurred related to legal entity restructuring	—		1,061		—		4,995
Integration and other costs related to acquisitions	16,211		525		24,345		1,544
Costs associated with workforce optimization efforts (2)	—		—		—		37,594

Corporate and other loss, including eliminations	118,830		77,142		242,281		216,695
Total reportable segment operating profit	$	854,899	$	518,906	$	2,187,865	$	1,356,114

(1)Commencing during the quarter ended September 30, 2020, management began the implementation of certain transformation initiatives to enable the company to reduce costs, streamline operations and support future growth. The majority of expenses incurred were cash in nature and primarily related to employee separation benefits, lease termination costs and professional fees.

(2)Primarily represents costs incurred related to workforce optimization initiated and executed in the second quarter of 2020 as part of management’s cost containment efforts in response to the Covid-19 pandemic. The charges are cash expenditures primarily for severance costs incurred related to this effort. Of the total costs, $7.4 million was included within the “Cost of revenue” line item and $30.2 million was included in the “Operating, administrative and other” line item in the accompanying consolidated statements of operations for the nine months ended September 30, 2020.

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.

CBRE GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Geographic Information

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


	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Revenue
United States	$	3,943,714	$	3,162,235	$	10,856,277	$	9,632,592
United Kingdom	841,241		736,927		2,451,222		2,188,822
All other countries	2,013,372		1,745,980		5,888,320		5,094,280
Total revenue	$	6,798,327	$	5,645,142	$	19,195,819	$	16,915,694

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