filings.toolsItem 1. Financial Statements
132K characters. Original on sec.gov · Markdown
Item 1. Financial Statements
CBRE GROUP, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Dollars in thousands, except share data)
| September 30, 2022 | December 31, 2021 | ||||||||||
| ASSETS | |||||||||||
| Current Assets: | |||||||||||
| Cash and cash equivalents | $ | 1,125,011 | $ | 2,430,951 | |||||||
| Restricted cash | 98,040 | 108,830 | |||||||||
| Receivables, less allowance for doubtful accounts of $96,298 and $97,588 at September 30, 2022 and December 31, 2021, respectively | 4,936,146 | 5,150,473 | |||||||||
| Warehouse receivables | 1,190,964 | 1,303,717 | |||||||||
| Prepaid expenses | 312,374 | 333,885 | |||||||||
| Contract assets | 373,484 | 338,749 | |||||||||
| Income taxes receivable | 19,559 | 44,104 | |||||||||
| Other current assets | 534,379 | 371,656 | |||||||||
| Total Current Assets | 8,589,957 | 10,082,365 | |||||||||
| Property and equipment, net of accumulated depreciation and amortization of $1,308,977 and $1,288,509 at September 30, 2022 and December 31, 2021, respectively | 768,445 | 816,092 | |||||||||
| Goodwill | 4,660,638 | 4,995,175 | |||||||||
| Other intangible assets, net of accumulated amortization of $1,819,575 and $1,725,280 at September 30, 2022 and December 31, 2021, respectively | 2,146,468 | 2,409,427 | |||||||||
| Operating lease assets | 992,831 | 1,046,377 | |||||||||
| Investments in unconsolidated subsidiaries (with $870,604 and $813,031 at fair value at September 30, 2022 and December 31, 2021, respectively) | 1,461,287 | 1,196,088 | |||||||||
| Non-current contract assets | 131,341 | 135,626 | |||||||||
| Real estate under development | 237,611 | 326,416 | |||||||||
| Non-current income taxes receivable | 46,001 | 33,150 | |||||||||
| Deferred tax assets, net | 155,945 | 157,032 | |||||||||
| Other assets, net | 1,024,806 | 875,743 | |||||||||
| Total Assets | $ | 20,215,330 | $ | 22,073,491 | |||||||
| LIABILITIES AND EQUITY | |||||||||||
| Current Liabilities: | |||||||||||
| Accounts payable and accrued expenses | $ | 2,720,466 | $ | 2,916,331 | |||||||
| Compensation and employee benefits payable | 1,403,934 | 1,539,291 | |||||||||
| Accrued bonus and profit sharing | 1,297,105 | 1,694,590 | |||||||||
| Contract liabilities | 314,299 | 280,659 | |||||||||
| Operating lease liabilities | 196,521 | 232,423 | |||||||||
| Income taxes payable | 119,930 | 246,035 | |||||||||
| Short-term borrowings: | |||||||||||
| Warehouse lines of credit (which fund loans that U.S. Government Sponsored Enterprises have committed to purchase) | 1,176,514 | 1,277,451 | |||||||||
| Revolving credit facility | 283,000 | — | |||||||||
| Other short-term borrowings | 38,411 | 32,668 | |||||||||
| Total short-term borrowings | 1,497,925 | 1,310,119 | |||||||||
| Other current liabilities | 205,473 | 199,421 | |||||||||
| Total Current Liabilities | 7,755,653 | 8,418,869 | |||||||||
| Long-term debt, net of current maturities | 1,476,929 | 1,538,123 | |||||||||
| Non-current operating lease liabilities | 1,065,815 | 1,116,562 | |||||||||
| Non-current tax liabilities | 134,188 | 144,884 | |||||||||
| Non-current income taxes payable | 54,761 | 54,761 | |||||||||
| Deferred tax liabilities, net | 284,123 | 405,258 | |||||||||
| Other liabilities | 804,217 | 1,035,917 | |||||||||
| Total Liabilities | 11,575,686 | 12,714,374 | |||||||||
| Commitments and contingencies | — | — | |||||||||
| Equity: | |||||||||||
| CBRE Group, Inc. Stockholders’ Equity: | |||||||||||
| Class A common stock; $0.01 par value; 525,000,000 shares authorized; 317,055,298 and 332,875,959 shares issued and outstanding at September 30, 2022 and December 31, 2021, respectively | 3,171 | 3,329 | |||||||||
| Additional paid-in capital | — | 798,892 | |||||||||
| Accumulated earnings | 9,155,739 | 8,366,631 | |||||||||
| Accumulated other comprehensive loss | (1,223,083) | (640,659) | |||||||||
| Total CBRE Group, Inc. Stockholders’ Equity | 7,935,827 | 8,528,193 | |||||||||
| Non-controlling interests | 703,817 | 830,924 | |||||||||
| Total Equity | 8,639,644 | 9,359,117 | |||||||||
| Total Liabilities and Equity | $ | 20,215,330 | $ | 22,073,491 |
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, | ||||||||||||||||||||||
| 2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||
| Revenue | $ | 7,529,546 | $ | 6,798,327 | $ | 22,633,757 | $ | 19,195,819 | |||||||||||||||
| Costs and expenses: | |||||||||||||||||||||||
| Cost of revenue | 5,934,490 | 5,258,947 | 17,740,668 | 14,995,252 | |||||||||||||||||||
| Operating, administrative and other | 1,080,316 | 1,025,681 | 3,335,131 | 2,811,224 | |||||||||||||||||||
| Depreciation and amortization | 142,136 | 122,564 | 453,527 | 363,727 | |||||||||||||||||||
| Asset impairments | — | — | 36,756 | — | |||||||||||||||||||
| Total costs and expenses | 7,156,942 | 6,407,192 | 21,566,082 | 18,170,203 | |||||||||||||||||||
| Gain on disposition of real estate | 1,746 | 18,530 | 200,564 | 19,615 | |||||||||||||||||||
| Operating income | 374,350 | 409,665 | 1,268,239 | 1,045,231 | |||||||||||||||||||
| Equity income from unconsolidated subsidiaries | 233,972 | 163,809 | 396,011 | 459,535 | |||||||||||||||||||
| Other income (loss) | 7,844 | 7,693 | (13,529) | 22,470 | |||||||||||||||||||
| Interest expense, net of interest income | 19,957 | 11,038 | 51,301 | 34,916 | |||||||||||||||||||
| Write-off of financing costs on extinguished debt | 1,862 | — | 1,862 | — | |||||||||||||||||||
| Income before provision for income taxes | 594,347 | 570,129 | 1,597,558 | 1,492,320 | |||||||||||||||||||
| Provision for income taxes | 142,667 | 133,507 | 259,691 | 343,279 | |||||||||||||||||||
| Net income | 451,680 | 436,622 | 1,337,867 | 1,149,041 | |||||||||||||||||||
| Less: Net income attributable to non-controlling interests | 5,041 | 879 | 11,609 | 4,459 | |||||||||||||||||||
| Net income attributable to CBRE Group, Inc. | $ | 446,639 | $ | 435,743 | $ | 1,326,258 | $ | 1,144,582 | |||||||||||||||
| Basic income per share: | |||||||||||||||||||||||
| Net income per share attributable to CBRE Group, Inc. | $ | 1.40 | $ | 1.30 | $ | 4.07 | $ | 3.41 | |||||||||||||||
| Weighted average shares outstanding for basic income per share | 319,827,769 | 335,364,942 | 325,705,500 | 335,621,337 | |||||||||||||||||||
| Diluted income per share: | |||||||||||||||||||||||
| Net income per share attributable to CBRE Group, Inc. | $ | 1.38 | $ | 1.28 | $ | 4.01 | $ | 3.37 | |||||||||||||||
| Weighted average shares outstanding for diluted income per share | 324,742,584 | 340,337,159 | 330,558,314 | 339,805,292 |
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, | ||||||||||||||||||||||
| 2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||
| Net income | $ | 451,680 | $ | 436,622 | $ | 1,337,867 | $ | 1,149,041 | |||||||||||||||
| Other comprehensive loss: | |||||||||||||||||||||||
| Foreign currency translation loss | (329,794) | (90,244) | (714,973) | (124,188) | |||||||||||||||||||
| Amounts reclassified from accumulated other comprehensive loss to interest expense, net of tax | 113 | 110 | 328 | 324 | |||||||||||||||||||
| Unrealized holding (losses) gains on available for sale debt securities, net of tax | (1,313) | 215 | (5,160) | (971) | |||||||||||||||||||
| Other, net of tax | 127 | 105 | 127 | 105 | |||||||||||||||||||
| Total other comprehensive loss | (330,867) | (89,814) | (719,678) | (124,730) | |||||||||||||||||||
| Comprehensive income | 120,813 | 346,808 | 618,189 | 1,024,311 | |||||||||||||||||||
| Less: Comprehensive (loss) income attributable to non-controlling interests | (54,312) | 677 | (125,645) | 4,179 | |||||||||||||||||||
| Comprehensive income attributable to CBRE Group, Inc. | $ | 175,125 | $ | 346,131 | $ | 743,834 | $ | 1,020,132 |
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, | |||||||||||
| 2022 | 2021 | ||||||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | |||||||||||
| Net income | $ | 1,337,867 | $ | 1,149,041 | |||||||
| Adjustments to reconcile net income to net cash provided by operating activities: | |||||||||||
| Depreciation and amortization | 453,527 | 363,727 | |||||||||
| Amortization of financing costs | 6,537 | 5,080 | |||||||||
| Gains related to mortgage servicing rights, premiums on loan sales and sales of other assets | (132,938) | (198,131) | |||||||||
| Asset impairments | 36,756 | — | |||||||||
| Net realized and unrealized losses (gains), primarily from investments | 29,046 | (26,898) | |||||||||
| Provision for doubtful accounts | 11,501 | 24,489 | |||||||||
| Net compensation expense for equity awards | 123,812 | 133,308 | |||||||||
| Equity income from unconsolidated subsidiaries | (396,011) | (459,535) | |||||||||
| Distribution of earnings from unconsolidated subsidiaries | 369,511 | 382,831 | |||||||||
| Proceeds from sale of mortgage loans | 10,696,971 | 12,767,544 | |||||||||
| Origination of mortgage loans | (10,559,591) | (12,712,118) | |||||||||
| Decrease in warehouse lines of credit | (100,937) | (192) | |||||||||
| Tenant concessions received | 9,140 | 18,645 | |||||||||
| Purchase of equity securities | (15,779) | (5,281) | |||||||||
| Proceeds from sale of equity securities | 27,387 | 6,856 | |||||||||
| Decrease (increase) in real estate under development | 59,116 | (123,580) | |||||||||
| Increase in receivables, prepaid expenses and other assets (including contract and lease assets) | (375,359) | (255,161) | |||||||||
| Decrease in accounts payable and accrued expenses and other liabilities (including contract and lease liabilities) | (132,424) | (107,756) | |||||||||
| (Decrease) increase in compensation and employee benefits payable and accrued bonus and profit sharing | (375,180) | 176,413 | |||||||||
| (Increase) decrease in net income taxes receivable/payable | (129,514) | 42,100 | |||||||||
| Other operating activities, net | (128,629) | 18,739 | |||||||||
| Net cash provided by operating activities | 814,809 | 1,200,121 | |||||||||
| CASH FLOWS FROM INVESTING ACTIVITIES: | |||||||||||
| Capital expenditures | (160,996) | (121,409) | |||||||||
| Acquisition of businesses, including net assets acquired and goodwill, net of cash acquired | (60,131) | (71,373) | |||||||||
| Contributions to unconsolidated subsidiaries | (322,127) | (400,967) | |||||||||
| Distributions from unconsolidated subsidiaries | 46,720 | 63,776 | |||||||||
| Investment in VTS | (100,432) | — | |||||||||
| Other investing activities, net | (6,783) | (25,433) | |||||||||
| Net cash used in investing activities | (603,749) | (555,406) |
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, | |||||||||||
| 2022 | 2021 | ||||||||||
| CASH FLOWS FROM FINANCING ACTIVITIES: | |||||||||||
| Net proceeds from revolving credit facility | 283,000 | — | |||||||||
| Proceeds from notes payable on real estate | 25,904 | 71,157 | |||||||||
| Repayment of notes payable on real estate | (22,514) | (13,944) | |||||||||
| Proceeds from issuance of 2.500% senior notes | — | 492,255 | |||||||||
| Repurchase of common stock | (1,404,394) | (188,285) | |||||||||
| Acquisition of businesses (cash paid for acquisitions more than three months after purchase date) | (31,525) | (3,421) | |||||||||
| Units repurchased for payment of taxes on equity awards | (35,162) | (36,747) | |||||||||
| Non-controlling interest contributions | 1,293 | 652 | |||||||||
| Non-controlling interest distributions | (740) | (4,026) | |||||||||
| Other financing activities, net | (28,583) | (42,767) | |||||||||
| Net cash (used in) provided by financing activities | (1,212,721) | 274,874 | |||||||||
| Effect of currency exchange rate changes on cash and cash equivalents and restricted cash | (315,069) | (82,714) | |||||||||
| NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS AND RESTRICTED CASH | (1,316,730) | 836,875 | |||||||||
| CASH AND CASH EQUIVALENTS AND RESTRICTED CASH, AT BEGINNING OF PERIOD | 2,539,781 | 2,039,247 | |||||||||
| CASH AND CASH EQUIVALENTS AND RESTRICTED CASH, AT END OF PERIOD | $ | 1,223,051 | $ | 2,876,122 | |||||||
| SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: | |||||||||||
| Cash paid during the period for: | |||||||||||
| Interest | $ | 68,878 | $ | 29,131 | |||||||
| Income tax payments, net | $ | 507,557 | $ | 220,955 | |||||||
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, 2022 | $ | 3,221 | $ | — | $ | 9,084,358 | $ | (951,569) | $ | 758,974 | $ | 8,894,984 | |||||||||||||||||||||||
| Net income | — | — | 446,639 | — | 5,041 | 451,680 | |||||||||||||||||||||||||||||
| Net compensation expense for equity awards | — | 41,490 | — | — | — | 41,490 | |||||||||||||||||||||||||||||
| Units repurchased for payment of taxes on equity awards | — | (321) | — | — | — | (321) | |||||||||||||||||||||||||||||
| Repurchase of common stock | (51) | (32,829) | (375,431) | — | — | (408,311) | |||||||||||||||||||||||||||||
| Foreign currency translation loss | — | — | — | (270,441) | (59,353) | (329,794) | |||||||||||||||||||||||||||||
| Amounts reclassified from accumulated other comprehensive loss to interest expense, net of tax | — | — | — | 113 | — | 113 | |||||||||||||||||||||||||||||
| Unrealized holding losses on available for sale debt securities, net of tax | — | — | — | (1,313) | — | (1,313) | |||||||||||||||||||||||||||||
| Contributions from non-controlling interests | — | — | — | — | 580 | 580 | |||||||||||||||||||||||||||||
| Distributions to non-controlling interests | — | — | — | — | (370) | (370) | |||||||||||||||||||||||||||||
| Other | 1 | (8,340) | 173 | 127 | (1,055) | (9,094) | |||||||||||||||||||||||||||||
| Balance at September 30, 2022 | $ | 3,171 | $ | — | $ | 9,155,739 | $ | (1,223,083) | $ | 703,817 | $ | 8,639,644 |
| 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 |
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, 2021 | $ | 3,329 | $ | 798,892 | $ | 8,366,631 | $ | (640,659) | $ | 830,924 | $ | 9,359,117 | |||||||||||||||||||||||
| Net income | — | — | 1,326,258 | — | 11,609 | 1,337,867 | |||||||||||||||||||||||||||||
| Net compensation expense for equity awards | — | 123,812 | — | — | — | 123,812 | |||||||||||||||||||||||||||||
| Units repurchased for payment of taxes on equity awards | — | (35,162) | — | — | — | (35,162) | |||||||||||||||||||||||||||||
| Repurchase of common stock | (168) | (872,992) | (537,323) | — | — | (1,410,483) | |||||||||||||||||||||||||||||
| Foreign currency translation loss | — | — | — | (577,719) | (137,254) | (714,973) | |||||||||||||||||||||||||||||
| Amounts reclassified from accumulated other comprehensive loss to interest expense, net of tax | — | — | — | 328 | — | 328 | |||||||||||||||||||||||||||||
| Unrealized holding losses on available for sale debt securities, net of tax | — | — | — | (5,160) | — | (5,160) | |||||||||||||||||||||||||||||
| Contributions from non-controlling interests | — | — | — | — | 1,293 | 1,293 | |||||||||||||||||||||||||||||
| Distributions to non-controlling interests | — | — | — | — | (740) | (740) | |||||||||||||||||||||||||||||
| Other | 10 | (14,550) | 173 | 127 | (2,015) | (16,255) | |||||||||||||||||||||||||||||
| Balance at September 30, 2022 | $ | 3,171 | $ | — | $ | 9,155,739 | $ | (1,223,083) | $ | 703,817 | $ | 8,639,644 |
| 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 |
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, 2021, which are included in our 2021 Annual Report on Form 10-K (2021 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 2021 Annual Report for further discussion of our significant accounting policies and estimates.
Considerations Related to the Covid-19 Pandemic, the war in Ukraine and Monetary Policy
During the first quarter of 2020, the emergence of the novel coronavirus (Covid-19) resulted in sharp contraction of economic and commercial real estate activity across much of the world. Commercial real estate markets recovered strongly beginning in 2021 and continuing into the second quarter of 2022. However, the pandemic has likely engendered structural changes to the utilization of many types of commercial real estate, which will have ongoing repercussions for our business. In addition, Russia’s invasion of Ukraine and the ongoing military conflict pose heightened risks for our operations in Europe, exacerbating supply chain disruptions, worsening inflation and raising the specter of energy shortages this winter. As a result of Russia’s invasion, we elected to exit most of our business in Russia, although we continue have a limited number of employees in the country, managing facilities for existing corporate clients under pre-existing global outsourcing contracts. In addition, the second half of 2022 has been marked by significant macroeconomic challenges as central banks around the world have sharply raised interest rates in efforts to rein in inflation, reducing credit availability. Less available and more expensive debt capital has pronounced effects on our capital markets (mortgage origination and property sales) businesses, making property acquisitions and dispositions harder to finance. Similar factors also impact the timing and ultimate proceeds realized for property sales within our development business.
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 General Accepted Accounting Principles (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 ongoing impacts of Covid-19, the war in Ukraine and weakening global macroeconomic conditions, including less available and more expensive debt capital. 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.
CBRE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
2. New Accounting Pronouncements
Recently Adopted Accounting Pronouncements
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 have completed our evaluation of significant contracts and concluded these ASUs did not have a material impact on our consolidated financial statements and related disclosures.
Recent Accounting Pronouncements Pending Adoption
In October 2021, the FASB issued ASU 2021-08, “Accounting for Contract Assets and Contract Liabilities from Contracts with Customers.” This ASU requires that an acquirer entity in a business combination recognize and measure contract assets and liabilities acquired in a business combination at the acquisition date in accordance with Topic 606 as if the acquirer entity had originated the contracts. This ASU is effective for fiscal years beginning after December 15, 2022, and interim periods within those years. Early application of the amendments is permitted but should be applied to all acquisitions occurring in the annual period of adoption. The amendment should be applied prospectively to business combinations occurring on or after the effective date of the amendments. We are evaluating the effect that ASU 2021-08 will have on our consolidated financial statements and related disclosures, but do not expect it to have a material impact.
In March 2022, the FASB issued ASU 2022-01,“Derivatives and Hedging (Topic 815): Fair Value Hedging - Portfolio Layer Method.” This ASU allows nonprepayable financial assets to be included in a closed portfolio hedged using the portfolio layer method. The expanded scope permits an entity to apply the same portfolio hedging method to both prepayable and nonprepayable financial assets, thereby allowing consistent accounting for similar hedges. This guidance is effective for fiscal years beginning after December 15, 2022, 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.
In March 2022, the FASB issued ASU 2022-02, “Financial Instruments - Credit Losses (Topic 326): Troubled Debt Restructuring and Vintage Disclosures.” This ASU eliminates the accounting guidance for Troubled Debt Restructuring by creditors in 310-40 and enhances disclosure requirements for certain loan refinancings and restructurings by creditors when a borrower is experiencing financial difficulty. Additionally, this ASU requires entities to disclose current-period gross writeoffs by year of origination for financing receivables and net investments in leases within the scope of ASC 326-20. This guidance is effective for fiscal years beginning after December 15, 2022, 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.
In June 2022, the FASB issued ASU 2022-03, “Fair Value Measurement (Topic 820): Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions.” Topic 820, Fair Value Measurement, states that a reporting entity should consider the characteristics of the asset or liability when measuring the fair value, including restrictions on the sale of the asset or liability, if a market participant would take those characteristics into account and the key to that determination is the unit of account for the asset or liability being measured at fair value. Topic 820 contains conflicting guidance on what the unit of account is when measuring the fair value of an equity security and this has resulted in diversity in practice on whether the effects of a contractual restriction that prohibits the sale of an equity security should be considered in measuring the equity security’s fair value. To address this, the amendments in the ASU clarify that a contractual restriction on the sale of an equity security is not considered part of the unit of account of the equity security and, therefore, is not considered in measuring fair value. The ASU introduces new disclosure requirements to provide investors with information about the restriction including the nature and remaining duration of the restriction. This guidance is effective for fiscal years beginning after December 15, 2022, 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.
CBRE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
In September 2022, the FASB issued ASU 2022-04, “Supplier Finance Programs (Sub Topic 405-50): Disclosure of Supplier Finance Program Obligations.” This ASU requires a buyer in a supplier finance program to disclose qualitative and quantitative information about its supplier finance programs in each annual reporting period including the key terms of the program and the following for obligations that the buyer has confirmed as valid to the provider: (1) the amount outstanding that remains unpaid by the buyer as of the end of the annual period, (2) a description of where those obligations are presented in the balance sheet, and (3) a rollforward of those obligations during the annual period, including the amount of obligations confirmed and the amount of obligations subsequently paid. Additionally, in each interim period, the buyer should disclose the amount of obligations outstanding that the buyer has confirmed as valid to the finance provider as of the end of the interim period. This guidance is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years, except for the amendment on rollforward information, which is effective for fiscal years beginning after December 15, 2023. Early adoption is permitted. We are evaluating the effect that this guidance will have on our consolidated financial statements and related disclosures.
3. Turner & Townsend Acquisition
On November 1, 2021, we acquired a 60% ownership interest in, and entered into a strategic partnership with Turner & Townsend Holdings Limited (Turner & Townsend). Turner & Townsend is a leading professional services company specializing in program management, project management, cost and commercial management and advisory services across the real estate, infrastructure and natural resources sectors, and is reported in our Global Workplace Solutions segment. The Turner & Townsend acquisition was funded with cash on hand. The preliminary purchase accounting has been recorded in the accompanying consolidated financial statements (with no changes made in 2022). The excess purchase price over the fair value of net assets acquired and non-controlling interest has been recorded to goodwill. The goodwill arising from the Turner & Townsend acquisition consists largely of the synergies and opportunities to deliver a premier project, program and cost management services. The goodwill recorded in connection with the Turner & Townsend acquisition was not deductible for tax purposes. The purchase price allocation for the business combination is preliminary, primarily for intangibles, and subject to change within the respective measurement period which will not extend beyond one year from the acquisition date.
CBRE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
4. 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, 2022 and December 31, 2021, 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, 2021 | $ | 1,303,717 | |||
| Origination of mortgage loans | 10,559,591 | ||||
| Gains (premiums on loan sales) | 31,262 | ||||
| Proceeds from sale of mortgage loans: | |||||
| Sale of mortgage loans | (10,665,709) | ||||
| Cash collections of premiums on loan sales | (31,262) | ||||
| Proceeds from sale of mortgage loans | (10,696,971) | ||||
| Net decrease in mortgage servicing rights included in warehouse receivables | (6,635) | ||||
| Ending balance at September 30, 2022 | $ | 1,190,964 |
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, 2022 and December 31, 2021 (dollars in thousands):
| September 30, 2022 | December 31, 2021 | |||||||||||||||||||||||||||||||||||||
| Lender | Current Maturity | Pricing | Maximum Facility Size | Carrying Value | Maximum Facility Size | Carrying Value | ||||||||||||||||||||||||||||||||
| JP Morgan Chase Bank, N.A. (JP Morgan) (1) | 12/16/2022 | daily floating rate SOFR rate plus 1.60%, with a SOFR adjustment rate of 0.05% | $ | 1,335,000 | $ | 922,817 | $ | 1,335,000 | $ | 742,124 | ||||||||||||||||||||||||||||
| JP Morgan | 12/16/2022 | daily floating rate SOFR rate plus 2.75%, with a SOFR adjustment rate of 0.05% | 15,000 | 729 | 15,000 | 4,326 | ||||||||||||||||||||||||||||||||
| 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 | 62,715 | 650,000 | 133,084 | ||||||||||||||||||||||||||||||||
| TD Bank, N.A. (TD Bank) (3) | 7/15/2023 | daily floating rate SOFR rate 1.30%, with a SOFR adjustment rate of 0.10% | 800,000 | 30,753 | 800,000 | 217,672 | ||||||||||||||||||||||||||||||||
| Bank of America, N.A. (BofA) (4) | 5/24/2023 | daily floating rate SOFR rate plus 1.25%, with a SOFR adjustment rate of 0.10% | 350,000 | 152,280 | 350,000 | 178,600 | ||||||||||||||||||||||||||||||||
| BofA (5) | 5/24/2023 | daily floating rate SOFR rate 1.25%, with a SOFR adjustment rate of 0.10% | 250,000 | — | 250,000 | — | ||||||||||||||||||||||||||||||||
| MUFG Union Bank, N.A. (Union Bank) (6) | 6/27/2023 | daily floating rate SOFR plus 1.30% | 200,000 | 7,220 | 200,000 | 1,645 | ||||||||||||||||||||||||||||||||
| $ | 3,600,000 | $ | 1,176,514 | $ | 3,600,000 | $ | 1,277,451 |
(1)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%, with a SOFR adjustment rate of 0.05%, noting the Business Lending sublimit has a revised interest rate of daily adjusted term SOFR plus 2.75%, with a SOFR adjustment rate of 0.05%. Effective October 17, 2022, the facility maturity date was extended to December 16, 2022.
(2)Effective January 15, 2021, the maximum facility was 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 July 15, 2022, this facility was renewed with a revised interest rate of daily floating rate SOFR rate plus 1.30%, with a SOFR adjustment rate of 0.10% and a maturity date of July 15, 2023. As of September 30, 2022, 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 May 25, 2022, this facility was renewed with a revised interest rate of daily floating rate SOFR rate plus 1.25%, with a SOFR adjustment rate of 0.10% and a maturity date of May 24, 2023. The sublimit is subject to an interest rate of daily floating rate SOFR plus 1.75%, with a SOFR adjustment rate of 0.10%. As of September 30, 2022, the sublimit borrowing has not been utilized.
(5)Effective May 25, 2022, the advised consent line was renewed for $250.0 million of capacity with a revised interest rate of daily floating rate SOFR rate plus 1.25%, with a SOFR adjustment rate of 0.10%, and a maturity date of May 24, 2023.
(6)Effective June 27, 2022, this facility was renewed with a facility size of $200.0 million and a revised interest rate of daily floating rate SOFR rate plus 1.30% and a maturity date of June 27, 2023.
During the nine months ended September 30, 2022, we had a maximum of $1.6 billion of warehouse lines of credit principal outstanding.
CBRE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
5. Variable Interest Entities (VIEs)
We hold variable interests in certain VIEs primarily 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, 2022 and December 31, 2021, our maximum exposure to loss related to VIEs which are not consolidated was as follows (dollars in thousands):
| September 30, 2022 | December 31, 2021 | ||||||||||
| Investments in unconsolidated subsidiaries | $ | 150,602 | $ | 109,530 | |||||||
| Other current assets | — | 4,219 | |||||||||
| Co-investment commitments | 82,008 | 90,328 | |||||||||
| Maximum exposure to loss | $ | 232,610 | $ | 204,077 |
6. 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 2021 Annual Report.
The following tables present the fair value of assets and liabilities measured at fair value on a recurring basis as of September 30, 2022 and December 31, 2021 (dollars in thousands):
| As of September 30, 2022 | |||||||||||||||||||||||
| Fair Value Measured and Recorded Using | |||||||||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||||||
| Assets | |||||||||||||||||||||||
| Available for sale debt securities: | |||||||||||||||||||||||
| U.S. treasury securities | $ | 6,262 | $ | — | $ | — | $ | 6,262 | |||||||||||||||
| Debt securities issued by U.S. federal agencies | — | 8,824 | — | 8,824 | |||||||||||||||||||
| Corporate debt securities | — | 45,542 | — | 45,542 | |||||||||||||||||||
| Asset-backed securities | — | 3,360 | — | 3,360 | |||||||||||||||||||
| Collateralized mortgage obligations | — | 28 | — | 28 | |||||||||||||||||||
| Total available for sale debt securities | 6,262 | 57,754 | — | 64,016 | |||||||||||||||||||
| Equity securities | 34,669 | — | — | 34,669 | |||||||||||||||||||
| Investments in unconsolidated subsidiaries | 270,342 | — | 503,935 | 774,277 | |||||||||||||||||||
| Warehouse receivables | — | 1,190,964 | — | 1,190,964 | |||||||||||||||||||
| Other assets | — | — | 1,867 | 1,867 | |||||||||||||||||||
| Total assets at fair value | $ | 311,273 | $ | 1,248,718 | $ | 505,802 | $ | 2,065,793 | |||||||||||||||
There were no liabilities measured at fair value on a recurring basis as of September 30, 2022.
CBRE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
| As of December 31, 2021 | |||||||||||||||||||||||
| Fair Value Measured and Recorded Using | |||||||||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||||||
| Assets | |||||||||||||||||||||||
| Available for sale debt securities: | |||||||||||||||||||||||
| U.S. treasury securities | $ | 7,002 | $ | — | $ | — | $ | 7,002 | |||||||||||||||
| Debt securities issued by U.S. federal agencies | — | 9,276 | — | 9,276 | |||||||||||||||||||
| Corporate debt securities | — | 50,897 | — | 50,897 | |||||||||||||||||||
| Asset-backed securities | — | 3,428 | — | 3,428 | |||||||||||||||||||
| Collateralized mortgage obligations | — | 725 | — | 725 | |||||||||||||||||||
| Total available for sale debt securities | 7,002 | 64,326 | — | 71,328 | |||||||||||||||||||
| Equity securities | 69,880 | — | — | 69,880 | |||||||||||||||||||
| Investments in unconsolidated subsidiaries | 229,900 | 23,741 | 406,690 | 660,331 | |||||||||||||||||||
| Warehouse receivables | — | 1,303,717 | — | 1,303,717 | |||||||||||||||||||
| Total assets at fair value | $ | 306,782 | $ | 1,391,784 | $ | 406,690 | $ | 2,105,256 | |||||||||||||||
| Liabilities | |||||||||||||||||||||||
| Other liabilities | — | — | $ | 10,700 | $ | 10,700 | |||||||||||||||||
| Total liabilities at fair value | $ | — | $ | — | $ | 10,700 | $ | 10,700 |
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 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 ask prices on such date. During the third quarter, the company made a $100.4 million capital investment in VTS, a leading proptech company, and the balance is included in “other assets” in the accompanying consolidated balance sheets. The tables above do not include this non-marketable equity investment accounted for under the measurement alternative, defined as cost minus impairment, if any, and adjusted for subsequent observable transactions for the same or similar investments of the same issuer. No adjustments or impairments were recorded during the three months ended September 30, 2022.
The fair values of the warehouse receivables are primarily calculated based on already locked in purchase prices. At September 30, 2022 and December 31, 2021, 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 Note 4). These assets are classified as Level 2 in the fair value hierarchy as a substantial majority of inputs are readily observable.
As of September 30, 2022 and December 31, 2021, investments in unconsolidated subsidiaries at fair value using NAV were $96.3 million and $152.7 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 as of September 30, 2022 using significant unobservable inputs (Level 3) (dollars in thousands):
| Investment in Unconsolidated Subsidiaries | Other assets (liabilities) | ||||||||||
| Balance as of June 30, 2022 | $ | 441,626 | $ | 1,867 | |||||||
| Transfer in | — | — | |||||||||
| Net change in fair value | 62,309 | — | |||||||||
| Purchases / Additions | — | — | |||||||||
| Balance as of September 30, 2022 | $ | 503,935 | $ | 1,867 | |||||||
| Balance as of December 31, 2021 | $ | 406,690 | $ | (10,700) | |||||||
| Transfer in | — | — | |||||||||
| Net change in fair value | (2,755) | — | |||||||||
| Purchases / Additions | 100,000 | 12,567 | |||||||||
| Balance as of September 30, 2022 | $ | 503,935 | $ | 1,867 |
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 assets (liabilities) | Other income (loss) |
The table below presents information about the significant unobservable inputs used for recurring fair value measurements for certain Level 3 instruments as of September 30, 2022:
| Valuation Technique | Unobservable Input | Range | |||||||||||||||
| Investment in unconsolidated subsidiaries | Discounted cash flow | Discount rate | 14.5% - 27.0% | ||||||||||||||
| Monte Carlo | Volatility | 70.0 | % | ||||||||||||||
| Risk free interest rate | 4.04 | % | |||||||||||||||
| Other assets (liabilities) | Discounted cash flow | Discount rate | 27.0 | % |
We recorded $10.4 million during the first quarter of this year, in non-cash asset impairment charges (primarily comprised of receivables), on a pretax basis, related to the exit of our Advisory Services business in Russia.
During the second quarter of this year, we recorded a non-cash goodwill impairment charge of $26.4 million in our Real Estate Investments segment for the Telford Homes business. The charge was attributable to the effects of elevated inflation on construction, materials and labor costs which increased Telford Homes’ risk as the contractor and reduced the profitability of current projects. The fair value measurements employed for our impairment evaluation was based on a discounted cash flow approach. Significant inputs used in the evaluation included a risk-free rate of return, estimated risk premium, terminal growth rates, working capital assumptions, income tax rates as well as other economic variables.
There were no asset impairment charges or other significant non-recurring fair value measurements recorded during the three months ended September 30, 2022. There were no significant non-recurring fair value measurements recorded during the three and nine months ended September 30, 2021.
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.
CBRE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
-
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 Note 4).
-
Investments in Unconsolidated Subsidiaries – A portion of these investments are carried at fair value as discussed above. It includes our equity investment and related interests in both public and non-public entities. Our ownership of common shares in Altus Power Inc. (Altus) is considered level 1 and is measured at fair value using a quoted price in an active market. Private placement warrants related to Altus are considered level 2 and measured at fair value using observable inputs for similar assets in an active market. Our ownership of alignment shares of Altus and our investment in Industrious and certain other non-controlling equity investments are considered level 3 which are measured at fair value using a Monte Carlo and a discounted cash flow approach, respectively. The valuation of Altus’ common shares, private placement warrants and alignment shares are dependent on its stock price which could be volatile and subject to wide fluctuations in response to various market conditions.
-
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.
-
Other assets / liabilities – Represents the net fair value of the 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, and our revolving credit facilities. Due to the short-term nature and variable interest rates of these instruments, fair value approximates carrying value (see Notes 4 and 9).
-
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 $387.7 million and $451.8 million at September 30, 2022 and December 31, 2021, respectively. Their actual carrying value, net of unamortized debt issuance costs, totaled $391.7 million and $454.5 million at September 30, 2022 and December 31, 2021, respectively (see Note 9).
-
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 $589.8 million and $671.7 million at September 30, 2022 and December 31, 2021, respectively. The actual carrying value of our 4.875% senior notes, net of unamortized debt issuance costs and discount, totaled $596.2 million and $595.5 million at September 30, 2022 and December 31, 2021, respectively. The estimated fair value of our 2.500% senior notes was $381.2 million and $502.1 million at September 30, 2022 and December 31, 2021. The actual carrying value of our 2.500% senior notes, net of unamortized debt issuance costs and discount, totaled $489.0 million and $488.1 million at September 30, 2022 and December 31, 2021.
-
Notes Payable on Real Estate - As of September 30, 2022 and December 31, 2021, the carrying value of our notes payable on real estate, net of unamortized debt issuance costs, was $50.8 million and $48.2 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)
7. 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.” During the three months ended June 30, 2022, we recorded a non-cash goodwill impairment charge of $26.4 million in our Real Estate Investments segment for the Telford Homes business. The charge is attributable to the effects of elevated inflation on construction, materials and labor costs. This increased Telford Homes’ risk as the contractor and reduced the profitability of current projects. The requirement to test certain assets for impairment was triggered as a result of changing market conditions as of June 30, 2022, which resulted in the impairment to the goodwill balance associated with the Telford Homes reporting unit.
There were no other triggering events requiring an impairment assessment be conducted in the nine months ended September 30, 2022. However, it is possible that future changes in circumstances would require the company to record additional non-cash impairment charges.
8. 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%. The following table represents the composition of investment in unconsolidated subsidiaries under equity method of accounting and fair value option (dollars in thousands):
| Investment type | September 30, 2022 | December 31, 2021 | |||||||||||||||
| Real estate investments | $ | 617,099 | $ | 453,813 | |||||||||||||
| Investment in Altus Power, Inc.: | |||||||||||||||||
| Class A common stock (22 million shares) | 270,342 | 229,900 | |||||||||||||||
| Alignment shares (1) | 121,549 | 114,727 | |||||||||||||||
| Private placement warrants (2) | — | 23,741 | |||||||||||||||
| Subtotal | 391,890 | 368,368 | |||||||||||||||
| Other (3) | 452,298 | 373,907 | |||||||||||||||
| Total investment in unconsolidated subsidiaries | $ | 1,461,287 | $ | 1,196,088 |
(1)The alignment shares, also known as Class B common shares, will automatically convert into Altus Class A common shares based on the achievement of certain total return thresholds on Altus Class A common shares as of the relevant measurement date over the seven fiscal years following the merger. As of March 31, 2022 (the first measurement date), 201,250 of alignment shares automatically converted into 2,011 shares of Class A common stock, which were issued on April 11, 2022.
(2)On September 21, 2022, we exercised all of the private placement warrants on a “cashless basis” and receive 2,552,390 shares of Class A common stock based on a 0.2763 conversion rate.
(3)Consists of our investments in Industrious and other non-public entities.
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, | ||||||||||||||||||||||
| 2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||
| Revenue | $ | 688,584 | $ | 636,229 | $ | 1,916,277 | $ | 2,098,850 | |||||||||||||||
| Operating income | 280,290 | 375,655 | 745,676 | 1,082,656 | |||||||||||||||||||
| Net income (1) | 937,221 | 909,341 | 3,889,302 | 2,386,276 |
(1)Included in net income are realized and unrealized earnings and losses in investments in unconsolidated investment funds and realized earnings and losses from sales of real estate projects in investments in unconsolidated subsidiaries. These realized and unrealized earnings and losses are not included in revenue and operating income.
CBRE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
9. Long-Term Debt and Short-Term Borrowings
Long-Term Debt
Long-term debt consists of the following (dollars in thousands):
| September 30, 2022 | December 31, 2021 | ||||||||||
| Senior term loan, with interest of 0.75% plus EURIBOR adj, due in full at maturity on December 20, 2023 | $ | 392,080 | $ | 455,166 | |||||||
| 4.875% senior notes due in 2026, net of unamortized discount | 598,257 | 597,911 | |||||||||
| 2.500% senior notes due in 2031, net of unamortized discount | 493,307 | 492,782 | |||||||||
| Total long-term debt | 1,483,644 | 1,545,859 | |||||||||
| Less: unamortized debt issuance costs | 6,715 | 7,736 | |||||||||
| Total long-term debt, net of current maturities | $ | 1,476,929 | $ | 1,538,123 |
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). On December 10, 2021, CBRE Services and certain of the other borrowers entered into an amendment of the 2021 Credit Agreement which (i) changed the interest rate applicable to revolving borrowings denominated in Sterling from a LIBOR-based rate to a rate based on the Sterling Overnight Index Average (SONIA) and (ii) changed the interest rate applicable to revolving borrowings denominated in Euros from a LIBOR-based rate to a rate based on EURIBOR. The revised interest rates described above went into effect on January 1, 2022. On May 21, 2021, we entered into a definitive agreement whereby our subsidiary guarantors were released as guarantors from the 2021 Credit Agreement.
On August 5, 2022, CBRE Group, Inc., as Holdings, and CBRE Global Acquisition Company, as the Luxembourg Borrower, Services entered into a second amendment to the 2021 Credit Agreement which, among other things (i) amended certain of the representations and warranties, affirmative covenants, negative covenants and events of default in the 2021 Credit Agreement in a manner consistent with the new 5-year senior unsecured Revolving Credit Agreement (as described below), (ii) terminated all revolving commitments previously available to the subsidiaries of the company thereunder and (iii) reflected the resignation of the previous administrative agent and the appointment of Wells Fargo Bank, National Association as the new administrative agent (the 2021 Credit Agreement, as amended by the second amendment is referred to in this Quarterly Report as the 2022 Credit Agreement).
The 2022 Credit Agreement is a senior unsecured credit facility that is guaranteed by CBRE Group, Inc. As of September 30, 2022, the 2022 Credit Agreement provided for a €400.0 million term loan facility due and payable in full at maturity on December 20, 2023. The $300.0 million tranche A term loan facility that was also covered under this agreement was repaid on November 23, 2021. In addition, a $3.15 billion revolving credit facility, which included the capacity to obtain letters of credit and swingline loans and would have terminated on March 4, 2024, was also previously provided under this agreement and was replaced with a new $3.5 billion 5-year senior unsecured Revolving Credit Agreement entered into on August 5, 2022 (as described below).
CBRE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
The 2022 Credit Agreement also requires us to maintain a minimum coverage ratio of consolidated EBITDA (as defined in the 2022 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 2022 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 2022 Credit Agreement), 4.75x) as of the end of each fiscal quarter. Our coverage ratio of consolidated EBITDA to consolidated interest expense was 45.56x for the trailing twelve months ended September 30, 2022, and our leverage ratio of total debt less available cash to consolidated EBITDA was 0.33x as of September 30, 2022. In addition, the 2022 Credit Agreement also contains other customary affirmative and negative covenants and events of default.
On March 18, 2021, CBRE Services issued $500.0 million in aggregate principal amount of 2.500% senior notes due April 1, 2031 (the 2.500% senior notes) at a price equal to 98.451% of their face value. 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. The 2.500% senior notes are guaranteed on a senior basis by CBRE Group, Inc. Interest accrues at a rate of 2.500% per year and is payable semi-annually in arrears on April 1 and October 1.
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 CBRE Group, Inc. Interest accrues at a rate of 4.875% per year and is payable semi-annually in arrears on March 1 and September 1.
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 2022 Credit Agreement.
Short-Term Borrowings
Revolving Credit Agreement
On August 5, 2022, we entered into a new 5-year senior unsecured Revolving Credit Agreement (the “Revolving Credit Agreement”). The Revolving Credit Agreement provides for a senior unsecured revolving credit facility available to CBRE Services with a capacity of $3.5 billion and a maturity date of August 5, 2027. The commitments replaced in full and increased the revolving credit facility previously available under the 2021 Credit Agreement by $350.0 million. Borrowings bear interest at (i) CBRE Services’ option, either (a) a Term SOFR rate published by CME Group Benchmark Administration Limited for the applicable interest period or (b) a base rate determined by reference to the greatest of (1) the prime rate determined by Wells Fargo, (2) the federal funds rate plus 1/2 of 1% and (3) the sum of (x) a Term SOFR rate published by CME Group Benchmark Administration Limited for an interest period of one month and (y) 1.00% plus (ii) 10 basis points, plus (iii) a rate equal to an applicable rate (in the case of borrowings based on the Term SOFR rate, 0.630% to 1.100% and in the case of borrowings based on the base rate, 0.0% to 0.100%, in each case, as determined by reference to our Debt Rating (as defined in the Revolving Credit Agreement). The applicable rate is also subject to certain increases and/or decreases specified in the Revolving Credit Agreement linked to achieving certain sustainability goals.
The Revolving Credit Agreement requires us to pay a fee based on the total amount of the revolving credit facility commitment (whether used or unused). In addition, the Revolving Credit Agreement also includes capacity for letters of credit of an outstanding aggregate amount of $300.0 million.
The Revolving Credit Agreement also requires us to maintain a minimum coverage ratio of consolidated EBITDA (as defined in the Revolving 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 Revolving 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 Revolving Credit Agreement), 4.75x) as of the end of each fiscal quarter. In addition, the Revolving Credit Agreement also contains other customary affirmative and negative covenants and events of default.
CBRE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
On August 5, 2022, CBRE Services made an initial borrowing of $220.0 million under the Revolving Credit Agreement. These proceeds, in addition to cash on hand, were used to repay in full all revolving credit borrowings outstanding under the 2021 Credit Agreement and terminate the revolving commitments thereunder. As of September 30, 2022, $283.0 million was outstanding under the Revolving Credit Agreement. No letters of credit were outstanding as of September 30, 2022. Letters of credit are issued in the ordinary course of business and would reduce the amount we may borrow under the Revolving Credit Agreement.
Revolving Credit Facilities under the 2021 Credit Agreement
The revolving credit facility under the 2021 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 $320.0 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 0.68% 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 required us to pay a fee based on the total amount of the revolving credit facility commitment (whether used or unused).
As of January 1, 2022, pursuant to an amendment to the 2021 Credit Agreement entered into on December 10, 2021, the applicable fixed rate for revolving borrowings denominated in Euros was changed to EURIBOR and the applicable fixed rate for revolving borrowings denominated in Sterling was changed to SONIA (with SONIA-based borrowings subject to a “credit spread adjustment” of an additional 0.0326% in addition to the interest rate spreads described above).
On August 5, 2022, all revolving commitments previously available to the subsidiaries of the company under the 2021 Credit Agreement were terminated and replaced with a new $3.5 billion 5-year senior unsecured Revolving Credit Agreement (as described above).
Turner & Townsend Revolving Credit Facilities
Turner & Townsend has a revolving credit facility with a capacity of £120.0 million and an additional accordion option of £20.0 million that matures on March 31, 2027. As of September 30, 2022, $29.4 million (£26.3 million) was outstanding under this revolving credit facility bearing interest at SONIA plus 0.75%, of which $22.3 million (£20.0 million) matures on November 11, 2022 and $7.1 million (£6.3 million) matures on February 21, 2023.
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 4 for additional information.
CBRE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
10. 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, 2022 | December 31, 2021 | |||||||||||||||||
| Assets | ||||||||||||||||||||
| Operating | Operating lease assets | $ | 992,831 | $ | 1,046,377 | |||||||||||||||
| Financing | Other assets, net | 86,233 | 110,809 | |||||||||||||||||
| Total leased assets | $ | 1,079,064 | $ | 1,157,186 | ||||||||||||||||
| Liabilities | ||||||||||||||||||||
| Current: | ||||||||||||||||||||
| Operating | Operating lease liabilities | $ | 196,521 | $ | 232,423 | |||||||||||||||
| Financing | Other current liabilities | 29,825 | 38,103 | |||||||||||||||||
| Non-current: | ||||||||||||||||||||
| Operating | Non-current operating lease liabilities | 1,065,815 | 1,116,562 | |||||||||||||||||
| Financing | Other liabilities | 56,023 | 73,257 | |||||||||||||||||
| Total lease liabilities | $ | 1,348,184 | $ | 1,460,345 |
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, | |||||||||||
| 2022 | 2021 | ||||||||||
| Right-of-use assets obtained in exchange for new operating lease liabilities | $ | 108,649 | $ | 83,214 | |||||||
| Right-of-use assets obtained in exchange for new financing lease liabilities | 21,331 | 31,693 | |||||||||
| Other non-cash increases in operating lease right-of-use assets (1) | 37,741 | 11,431 | |||||||||
| Other non-cash increases (decreases) in financing lease right-of-use assets (1) | 5,444 | (2,919) |
(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)
11. 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 consolidated financial statements are unlikely to be significant, but litigation is inherently uncertain and there is the potential for a material adverse effect on our consolidated 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 $37.4 billion at September 30, 2022, of which $33.5 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 September 30, 2022 and December 31, 2021, CBRE MCI had $108.0 million and $100.0 million, respectively, of letters of credit under this reserve arrangement and had recorded a liability of approximately $62.4 million and $64.0 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 $881.3 million (including $424.1 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, 2022.
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, 2022 and December 31, 2021, CBRE Capital Markets had posted a $5.0 million letter of credit under this reserve arrangement.
We had outstanding letters of credit totaling $177.3 million as of September 30, 2022, 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 $113.0 million as of September 30, 2022 referred to in the preceding paragraphs represented the majority of the $177.3 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 $60.4 million as of September 30, 2022, 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 $60.4 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 September 30, 2022, 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.
CBRE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
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, 2022, we had aggregate commitments of $110.5 million to fund these future co-investments. Additionally, an important part of our Real Estate Investments business strategy is selective investment in real estate projects. We invest on our own account or co-invest with our clients as a principal in unconsolidated real estate subsidiaries. As of September 30, 2022, we had committed to fund $82.7 million of additional capital to unconsolidated subsidiaries and $138.3 million to real estate projects that were consolidated in our financial statements.
On April 28, 2022, Telford Homes signed the UK government’s non-binding Fire Safety Pledge (the Pledge), which states that subject to entering into mutually acceptable definitive agreements with the UK government, Telford Homes will (1) take responsibility for performing or funding self-remediation works relating to certain life-critical fire-safety issues on all Telford Homes-constructed buildings of 11 meters in height or greater in England and (2) withdraw Telford Homes-constructed buildings from, or reimburse the government for, Telford Homes-constructed buildings covered in the government-sponsored Building Safety Fund (BSF) and Aluminum Composite Material Funds. CBRE believes there is a potential risk of loss attributable to past events, including retroactive changes in building fire-safety regulations, under the Pledge, and also under existing contracts and / or the new Building Safety Act. The estimated potential costs for buildings within the required scope of the remediation are subjective, highly complex and dependent on a number of variables outside of Telford Homes’ control. These include, but are not limited to, the time required for the remediation to be completed, the size and number of buildings that may require remediation, cost of construction or remediation materials, potential discoveries made during remediation that could necessitate incremental work, investigation costs, potential business disruption costs, potential changes to or new regulations and regulatory approval. As a result of signing the Pledge and the potential for CBRE to pay for remediation under any definitive agreements that may negotiated by the parties under the Pledge, CBRE recorded non-cash charges of $9.5 million and $47.0 million during the three months and nine months ended September 30, 2022, respectively. This potential liability primarily represents adjusted amounts the UK government has already paid or quantified through the BSF for remediation of Telford-constructed buildings. Given the significant unknowns and multiple variables described above, CBRE is not able to estimate a reasonable range of costs in excess of the amount recorded as of September 30, 2022. CBRE continues to assess its potential liability, including likelihood of payment, and believes it could be material to the company.
12. Income Taxes
Our provision for income taxes on a consolidated basis was $142.7 million for the three months ended September 30, 2022 as compared to a provision for income taxes of $133.5 million for the three months ended September 30, 2021. The increase of $9.2 million is primarily related to increase of earnings.
Our provision for income taxes on a consolidated basis was $259.7 million for the nine months ended September 30, 2022 as compared to a provision for income taxes of $343.3 million for the nine months ended September 30, 2021. The decrease of $83.6 million is primarily related to the recognition of a net discrete tax benefit attributable to an outside basis difference recognized as a result of legal entity restructuring. The recognition of the outside tax basis difference generated tax attribute carry forwards that will offset income generated during the current year and be carried forward. Based on our strong history of earnings and the nature of our business we expect to generate sufficient taxable income within the carry forward period and therefore conclude it is more likely than not that we will realize the full tax benefit of the tax attributes. Accordingly, we have not provided any valuation allowance against the deferred tax assets.
Our effective tax rate increased to 24.0% for the three months ended September 30, 2022 from 23.4% for the three months ended September 30, 2021. Our effective tax rate for the three months ended September 30, 2022 was different than the U.S. federal statutory tax rate of 21.0% primarily due to state and local taxes.
Our effective tax rate decreased to 16.3% for the nine months ended September 30, 2022 from 23.0% for the nine months ended September 30, 2021. Our effective tax rate for the nine months ended September 30, 2022 was different than the U.S. federal statutory tax rate of 21.0% primarily due to the recognition of a net discrete tax benefit attributable to an outside basis difference recognized as a result of legal entity restructuring, partially offset by state and local taxes.
CBRE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
As of September 30, 2022 and December 31, 2021, the company had gross unrecognized tax benefits of $347.5 million and $191.9 million, respectively. The increase of $155.6 million resulted from accrual of gross unrecognized tax benefits of $157.4 million primarily related to certain legal entity reorganizations and a release of $1.8 million of gross unrecognized tax benefits primarily related to the expiration of statute of limitations in various tax jurisdictions.
On August 16, 2022, the Inflation Reduction Act (IRA), a budget reconciliation package that contained legislation targeting energy security and climate change, healthcare and taxes, was signed into law. With respect to corporate-level taxes, the IRA included a 1% excise tax on stock buybacks and a 15% minimum corporate minimum tax (CAMT) based on financial statement income of certain U.S. companies that meet the $1 billion profitability threshold criteria, effective after December 31, 2022. We continue to evaluate the impact of the legislation and forthcoming administrative guidance and regulations to our financial statements and results of operations.
13. 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, | ||||||||||||||||||||||
| 2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||
| Basic Income Per Share | |||||||||||||||||||||||
| Net income attributable to CBRE Group, Inc. stockholders | $ | 446,639 | $ | 435,743 | $ | 1,326,258 | $ | 1,144,582 | |||||||||||||||
| Weighted average shares outstanding for basic income per share | 319,827,769 | 335,364,942 | 325,705,500 | 335,621,337 | |||||||||||||||||||
| Basic income per share attributable to CBRE Group, Inc. stockholders | $ | 1.40 | $ | 1.30 | $ | 4.07 | $ | 3.41 | |||||||||||||||
| Diluted Income Per Share | |||||||||||||||||||||||
| Net income attributable to CBRE Group, Inc. stockholders | $ | 446,639 | $ | 435,743 | $ | 1,326,258 | $ | 1,144,582 | |||||||||||||||
| Weighted average shares outstanding for basic income per share | 319,827,769 | 335,364,942 | 325,705,500 | 335,621,337 | |||||||||||||||||||
| Dilutive effect of contingently issuable shares | 4,914,815 | 4,972,217 | 4,852,814 | 4,183,955 | |||||||||||||||||||
| Weighted average shares outstanding for diluted income per share | 324,742,584 | 340,337,159 | 330,558,314 | 339,805,292 | |||||||||||||||||||
| Diluted income per share attributable to CBRE Group, Inc. stockholders | $ | 1.38 | $ | 1.28 | $ | 4.01 | $ | 3.37 |
For the three and nine months ended September 30, 2022, 1,506,140 and 1,369,162, 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, 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.
In February 2019, our board of directors authorized a program for the repurchase of up to $500.0 million of our Class A common stock over three years (the 2019 program). During the first quarter of 2022, we repurchased 615,108 shares of our common stock under the 2019 program at an average price of $101.88 per share using cash on hand for $62.7 million, fully utilizing the remaining capacity under this program.
On November 19, 2021, our board of directors authorized a new program for the repurchase of up to $2.0 billion of our common stock over five years (the 2021 program). On August 18, 2022, our board of directors authorized an additional $2.0 billion, bringing the total authorized repurchase amount under this program to a total of $4.0 billion. During the three months ended September 30, 2022, we repurchased 5,094,577 shares of our common stock with an average price of $80.14 per share using cash on hand for $408.3 million. During the nine months ended September 30, 2022, we repurchased 16,167,978 shares of our common stock with an average price of $83.35 per share using cash on hand for $1.3 billion. As of September 30, 2022, we had approximately $2.6 billion of capacity remaining under the 2021 program.
CBRE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
14. 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, 2022 | |||||||||||||||||||||||||||||
| Advisory Services | Global Workplace Solutions | Real Estate Investments | Corporate, other and eliminations | Consolidated | |||||||||||||||||||||||||
| Topic 606 Revenue: | |||||||||||||||||||||||||||||
| Facilities management | $ | — | $ | 3,671,930 | $ | — | $ | — | $ | 3,671,930 | |||||||||||||||||||
| Advisory leasing | 989,615 | — | — | — | 989,615 | ||||||||||||||||||||||||
| Advisory sales | 600,527 | — | — | — | 600,527 | ||||||||||||||||||||||||
| Property management | 458,292 | — | — | (5,732) | 452,560 | ||||||||||||||||||||||||
| Project management | — | 1,171,809 | — | — | 1,171,809 | ||||||||||||||||||||||||
| Valuation | 177,198 | — | — | — | 177,198 | ||||||||||||||||||||||||
| Commercial mortgage origination (1) | 59,149 | — | — | — | 59,149 | ||||||||||||||||||||||||
| Loan servicing (2) | 13,869 | — | — | — | 13,869 | ||||||||||||||||||||||||
| Investment management | — | — | 146,695 | — | 146,695 | ||||||||||||||||||||||||
| Development services | — | — | 95,142 | — | 95,142 | ||||||||||||||||||||||||
| Topic 606 Revenue | 2,298,650 | 4,843,739 | 241,837 | (5,732) | 7,378,494 | ||||||||||||||||||||||||
| Out of Scope of Topic 606 Revenue: | |||||||||||||||||||||||||||||
| Commercial mortgage origination | 71,276 | — | — | — | 71,276 | ||||||||||||||||||||||||
| Loan servicing | 63,875 | — | — | — | 63,875 | ||||||||||||||||||||||||
| Development services (3) | — | — | 15,901 | — | 15,901 | ||||||||||||||||||||||||
| Total Out of Scope of Topic 606 Revenue | 135,151 | — | 15,901 | — | 151,052 | ||||||||||||||||||||||||
| Total Revenue | $ | 2,433,801 | $ | 4,843,739 | $ | 257,738 | $ | (5,732) | $ | 7,529,546 |
CBRE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
| 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 |
(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.
CBRE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
| Nine Months Ended September 30, 2022 | |||||||||||||||||||||||||||||
| Advisory Services | Global Workplace Solutions | Real Estate Investments | Corporate, other and eliminations | Consolidated | |||||||||||||||||||||||||
| Topic 606 Revenue: | |||||||||||||||||||||||||||||
| Facilities management | $ | — | $ | 11,292,738 | $ | — | $ | — | $ | 11,292,738 | |||||||||||||||||||
| Advisory leasing | 2,732,045 | — | — | — | 2,732,045 | ||||||||||||||||||||||||
| Advisory sales | 1,936,073 | — | — | — | 1,936,073 | ||||||||||||||||||||||||
| Property management | 1,375,156 | — | — | (12,751) | 1,362,405 | ||||||||||||||||||||||||
| Project management | — | 3,264,762 | — | — | 3,264,762 | ||||||||||||||||||||||||
| Valuation | 554,879 | — | — | — | 554,879 | ||||||||||||||||||||||||
| Commercial mortgage origination (1) | 214,333 | — | — | — | 214,333 | ||||||||||||||||||||||||
| Loan servicing (2) | 41,710 | — | — | — | 41,710 | ||||||||||||||||||||||||
| Investment management | — | — | 454,816 | — | 454,816 | ||||||||||||||||||||||||
| Development services | — | — | 297,635 | — | 297,635 | ||||||||||||||||||||||||
| Topic 606 Revenue | 6,854,196 | 14,557,500 | 752,451 | (12,751) | 22,151,396 | ||||||||||||||||||||||||
| Out of Scope of Topic 606 Revenue: | |||||||||||||||||||||||||||||
| Commercial mortgage origination | 221,345 | — | — | — | 221,345 | ||||||||||||||||||||||||
| Loan servicing | 194,691 | — | — | — | 194,691 | ||||||||||||||||||||||||
| Development services (3) | — | — | 66,325 | — | 66,325 | ||||||||||||||||||||||||
| Total Out of Scope of Topic 606 Revenue | 416,036 | — | 66,325 | — | 482,361 | ||||||||||||||||||||||||
| Total Revenue | $ | 7,270,232 | $ | 14,557,500 | $ | 818,776 | $ | (12,751) | $ | 22,633,757 |
| 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 |
**(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.
CBRE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
Contract Assets and Liabilities
We had contract assets totaling $504.8 million ($373.5 million of which was current) and $474.4 million ($338.7 million of which was current) as of September 30, 2022 and December 31, 2021, respectively.
We had contract liabilities totaling $321.8 million ($314.3 million of which was current) and $288.9 million ($280.7 million of which was current) as of September 30, 2022 and December 31, 2021, respectively. During the nine months ended September 30, 2022, we recognized revenue of $244.7 million that was included in the contract liability balance at December 31, 2021.
15. 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. As part of the realignment of our organizational structure and performance measure to how our chief operating decision maker (CODM) views the company, we created a “Corporate, other and elimination” segment.
Our Corporate segment primarily consists of corporate headquarters costs for executive officers and certain other central functions. We track our strategic non-core non-controlling equity investments in “other” which is considered an operating segment and reported together with Corporate as it does not meet the criteria for presentation as a separate reportable segment. These activities are not allocated to the other business segments. Corporate and other also includes eliminations related to inter-segment revenue.
Segment operating profit (SOP) 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, inclusive of amounts attributable to non-controlling interest, 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, 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, integration and other costs related to acquisitions, costs associated with efficiency and cost-reduction initiatives, and a provision associated with Telford’s fire safety remediation efforts. This metric excludes the impact of corporate overhead as these costs are now reported under Corporate and other. During fourth quarter of 2021, we changed the definition of SOP to include net income (loss) attributable to non-controlling interest to provide a more meaningful view of the segment’s performance and related margins and to conform to the CODM’s view of the business segments. Prior period segment operating profit for our reportable segments have been recast to conform to this change.
Summarized financial information by segment is as follows (dollars in thousands):
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||
| Revenue | |||||||||||||||||||||||
| Advisory Services | $ | 2,433,801 | $ | 2,412,147 | $ | 7,270,232 | $ | 6,257,144 | |||||||||||||||
| Global Workplace Solutions | 4,843,739 | 4,167,143 | 14,557,500 | 12,275,748 | |||||||||||||||||||
| Real Estate Investments | 257,738 | 223,832 | 818,776 | 678,324 | |||||||||||||||||||
| Corporate, other and eliminations | (5,732) | (4,795) | (12,751) | (15,397) | |||||||||||||||||||
| Total revenue | $ | 7,529,546 | $ | 6,798,327 | $ | 22,633,757 | $ | 19,195,819 | |||||||||||||||
| Segment operating profit | |||||||||||||||||||||||
| Advisory Services | $ | 423,802 | $ | 521,678 | $ | 1,410,113 | $ | 1,318,762 | |||||||||||||||
| Global Workplace Solutions | 219,406 | 187,332 | 640,438 | 509,684 | |||||||||||||||||||
| Real Estate Investments | 59,458 | 146,768 | 501,028 | 363,878 | |||||||||||||||||||
| Total reportable segment operating profit | $ | 702,666 | $ | 855,778 | $ | 2,551,579 | $ | 2,192,324 |
CBRE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(Unaudited)
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, | ||||||||||||||||||||||
| 2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||
| Net income attributable to CBRE Group, Inc. | $ | 446,639 | $ | 435,743 | $ | 1,326,258 | $ | 1,144,582 | |||||||||||||||
| Net income attributable to non-controlling interests | 5,041 | 879 | 11,609 | $ | 4,459 | ||||||||||||||||||
| Net income | 451,680 | 436,622 | 1,337,867 | $ | 1,149,041 | ||||||||||||||||||
| Adjustments to increase (decrease) net income: | |||||||||||||||||||||||
| Depreciation and amortization | 142,136 | 122,564 | 453,527 | 363,727 | |||||||||||||||||||
| Asset impairments | — | — | 36,756 | — | |||||||||||||||||||
| Interest expense, net of interest income | 19,957 | 11,038 | 51,301 | 34,916 | |||||||||||||||||||
| Write-off of financing costs on extinguished debt | 1,862 | — | 1,862 | — | |||||||||||||||||||
| Provision for income taxes | 142,667 | 133,507 | 259,691 | 343,279 | |||||||||||||||||||
| Carried interest incentive compensation (reversal) expense to align with the timing of associated revenue | (6,161) | 16,959 | 9,200 | 33,963 | |||||||||||||||||||
| Impact of fair value adjustments to real estate assets acquired in the Telford acquisition (purchase accounting) that were sold in period | (1,300) | 47 | (4,447) | 772 | |||||||||||||||||||
| Costs incurred related to legal entity restructuring | 893 | — | 12,814 | — | |||||||||||||||||||
| Integration and other costs related to acquisitions | 7,716 | 16,211 | 24,046 | 24,345 | |||||||||||||||||||
| Costs associated with efficiency and cost-reduction initiatives | 18,929 | — | 18,929 | — | |||||||||||||||||||
| Provision associated with Telford’s fire safety remediation efforts | 9,479 | — | 46,984 | — | |||||||||||||||||||
| Corporate and other (income) loss, including eliminations | (85,192) | 118,830 | 303,049 | 242,281 | |||||||||||||||||||
| Total reportable segment operating profit | $ | 702,666 | $ | 855,778 | $ | 2,551,579 | $ | 2,192,324 |
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):
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||
| 2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||
| Revenue | |||||||||||||||||||||||
| United States | $ | 4,320,235 | $ | 3,943,714 | $ | 12,887,747 | $ | 10,856,277 | |||||||||||||||
| United Kingdom | 970,307 | 841,241 | 3,002,798 | 2,451,222 | |||||||||||||||||||
| All other countries | 2,239,004 | 2,013,372 | 6,743,212 | 5,888,320 | |||||||||||||||||||
| Total revenue | $ | 7,529,546 | $ | 6,798,327 | $ | 22,633,757 | $ | 19,195,819 |
16. Efficiency and Cost Reduction Initiatives
During the third quarter of 2022, we launched certain cost and operational efficiency initiatives that will further improve the company’s resiliency in an economic downturn while enabling continued operating platform investments that support future growth. The efficiency initiatives include management and workforce structure simplification, occupancy footprint rationalization and certain third-party spending reductions. For the three months ended September 30, 2022, the company incurred $19.3 million of costs (primarily to be settled in the fourth quarter of 2022) related to employee separation, lease termination, and consulting fees. Management continues to evaluate and modify these initiatives, which are likely to continue over the next several months.
Previous: Cover and table of contents · Next: Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations