Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A) is designed to provide the reader of our financial statements with a narrative from the perspective of management on our financial condition, results of operations, liquidity and certain other factors that may affect future results. The MD&A in this Quarterly Report on Form 10-Q (Quarterly Report) for CBRE Group, Inc. for the three months and nine months ended September 30, 2022 should be read in conjunction with our consolidated financial statements and related notes included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021 (2021 Annual Report) as well as the unaudited financial statements included elsewhere in this Quarterly Report.

In addition, the statements and assumptions in this Quarterly Report that are not statements of historical fact are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 or Section 21E of the Securities Exchange Act of 1934, each as amended, including, in particular, statements about our plans, strategies and prospects as well as estimates of industry growth for the next quarter and beyond. For important information regarding these forward-looking statements, please see the discussion below under the caption “Cautionary Note on Forward-Looking Statements.”

Overview

CBRE Group, Inc. is a Delaware corporation. References to “CBRE,” “the company,” “we,” “us” and “our” refer to CBRE Group, Inc. and include all of its consolidated subsidiaries, unless otherwise indicated or the context requires otherwise.

We are the world’s largest commercial real estate services and investment firm, based on 2021 revenue, with leading global market positions in leasing, property sales, occupier outsourcing and valuation businesses. As of December 31, 2021, the company had more than 105,000 employees (excluding Turner & Townsend employees) serving clients in more than 100 countries.

We provide services to real estate investors and occupiers. For investors, our services include capital markets (property sales, mortgage origination, sales and servicing), property leasing, investment management, property management, valuation and development services, among others. For occupiers, our services include facilities management, project management, transaction (both property sales and leasing) and consulting services, among others. We provide services under the following brand names: “CBRE” (real estate advisory and outsourcing services); “CBRE Investment Management” (investment management); “Trammell Crow Company” (U.S. development); “Telford Homes” (U.K. development); and “Turner & Townsend Holdings Limited” (global project, program and cost management).

We generate revenue from both stable, recurring (large multi-year portfolio and per-project contracts) and more cyclical, non-recurring (commissions and fees on transactions) sources. Our revenue mix has become heavily weighted towards stable revenue sources, particularly occupier outsourcing, and markedly less dependent on highly cyclical property sales and lease transaction revenue. As a result of our four-dimension diversification strategy (asset types, lines of business, clients and geographies) and strong balance sheet, we believe we are well -positioned to capture a substantial and growing share of market opportunities at a time when investors and occupiers increasingly prefer to purchase integrated, account-based services on a national and global basis. We also believe we are increasingly well situated to weather challenging macroeconomic environments due to our increased diversification and resiliency.

In 2021, we generated revenue from a highly diversified base of clients, including 93 of the Fortune 100 companies. We have been an S&P 500 company since 2006 and in 2022 we were ranked #126 on the Fortune 500. We have been voted the most recognized commercial real estate brand in the Lipsey Company survey for 21 years in a row (including 2022). We have also been rated a World’s Most Ethical Company by the Ethisphere Institute for nine consecutive years (including 2022), and have been included in both the Dow Jones World Sustainability Index for three years in a row and the Bloomberg Gender-Equality Index for three years in a row.

In 2020, the Covid-19 pandemic primarily impacted the property sales and leasing lines of business in the Advisory Services segment. The adverse effects eased significantly in 2021 and early 2022 as global economic conditions improved and sales and leasing volumes rose markedly. Further, the pandemic catalyzed strong industrial and multifamily transaction volumes, which offset subdued office activity. Nevertheless, Covid-19 continues to impact our operations, and company return-to-office strategies have been slow to gain momentum. As a result, occupier confidence in making long-term office leasing decisions has not returned to pre-pandemic levels. 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, among other macroeconomic challenges. As a result of Russia’s invasion, we elected to exit most of our business in Russia, although we continue to have a limited number of employees in the country, managing facilities for corporate clients under pre-existing global outsourcing contracts. While the economies most directly impacted by the invasion, Russia and Ukraine, are not material to our business, the future direct and indirect impacts on regional and global economies are difficult to predict. 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.

Critical Accounting Policies and Estimates

Our consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States, or GAAP, which require us to make estimates and assumptions that affect reported amounts. The estimates and assumptions are based on historical experience and on other factors that we believe to be reasonable. Actual results may differ from those estimates. We believe that the following critical accounting policies represent the areas where more significant judgments and estimates are used in the preparation of our consolidated financial statements. A discussion of such critical accounting policies, which include revenue recognition, goodwill and other intangible assets, and income taxes can be found in our 2021 Annual Report. There have been no material changes to these policies and estimates as of September 30, 2022.

New Accounting Pronouncements

See Note 2 of the Notes to Consolidated Financial Statements (Unaudited) set forth in Item 1 of this Quarterly Report.

Seasonality

In a typical year, a significant portion of our revenue and earnings generation follow seasonal patterns, which an investor should keep in mind when comparing our financial condition and results of operations on a quarter-by-quarter basis. Historically, our revenue, operating income, net income and cash flow from operating activities have tended to be lowest in the first quarter and highest in the fourth quarter when investors and occupiers intensely focus on completing sales, financing and leasing transactions prior to year-end. The ongoing impact of the Covid-19 pandemic and intensifying current macroeconomic challenges may cause seasonality to deviate from historical patterns.

Inflation

Our commissions and variable costs related to revenue are primarily affected by commercial real estate transactions as well as market supply and demand, which may be impacted by inflation. For example, inflation has sharply increased construction materials and labor costs in our development business. Nonetheless, we believe that our business has significant inherent protections against inflation, and to date, general inflation has not had a material impact upon most of our operations. The company continues to monitor inflation, central bank monetary policy changes and potentially adverse effects to our business from elevated inflation, higher interest rates or both.

Items Affecting Comparability

When you read our financial statements and the information included in this Quarterly Report, you should consider that we have experienced, and continue to experience, several material trends and uncertainties (particularly those caused or exacerbated by Covid-19) that have affected our financial condition and results of operations that make it challenging to predict our future performance based on our historical results. We believe that the following material trends and uncertainties are crucial to an understanding of the variability in our historical earnings and cash flow and the potential for continued variability in the future.

Macroeconomic Conditions

Economic trends and government policies affect global and regional commercial real estate markets as well as our operations directly. These include overall economic activity and employment growth, with specific sensitivity to growth in office-based employment; levels of and changes in interest rates; the cost and availability of credit; the impact of tax and regulatory policies, and geopolitical events, such as the ongoing war in Ukraine. Periods of economic weakness or recession, significantly rising interest rates, fiscal uncertainty, declining employment levels, decreasing demand for commercial real estate, falling real estate values, disruptions to the global capital or credit markets or general economic activity, or the public perception that any of these events may occur, will negatively affect the performance of our business.

Compensation is our largest expense and our sales and leasing professionals generally are paid on a commission and/or bonus basis that correlates with their revenue production. As a result, the negative effects on our operating margins of difficult market conditions, such as the environment that prevailed in the early months of the Covid-19 pandemic, were partially mitigated by the inherent variability of our compensation cost structure. In addition, when negative economic conditions have been particularly severe, like during the depth of the Covid-19 pandemic, we have moved decisively to lower operating expenses to improve financial performance. We are taking such steps to reduce expenses in light of the intensifying macroeconomic challenges. Additionally, our contractual and other more stable revenue sources have increased over many years primarily as a result the growth of our occupier outsourcing business, and we believe this contractual revenue should help offset the negative impacts that macroeconomic deterioration could have on other parts of our business. We also believe that we have significantly improved the resiliency of our business through a four-dimension diversification strategy that has expanded the business across asset types, clients, geographies and lines of business. Nevertheless, adverse global and regional economic trends could pose significant risks to our consolidated operating results and financial condition.

Effects of Acquisitions and Investments

We have historically made significant use of strategic acquisitions to add and enhance service capabilities around the world. On November 1, 2021, we acquired a 60% controlling ownership interest in Turner & Townsend Holdings Limited (Turner & Townsend) for £960.0 million, or $1.3 billion along with the acquisition of $44.0 million (£32.2 million) in cash. The Turner & Townsend acquisition was funded with cash on hand and gross deferred purchase consideration of $591.2 million (£432.0 million). We believe Turner & Townsend helps us advance our diversification strategy across asset types, lines of business, clients, and geographies. 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 consolidated and reported in our Global Workplace Solutions segment.

Strategic in-fill acquisitions have played a key role in strengthening our service offerings. The companies we acquired have generally been regional or specialty firms that complement our existing platform, or independent affiliates, which, in some cases, we held a small equity interest. During 2021, we completed eight in-fill acquisitions: a U.S. firm that provides construction and project management services, a professional service advisory firm in Australia, a U.S. firm focused on investment banking and investment sales in the global gaming real estate market, a leading facilities management firm in the Netherlands, a workplace interior design and project management company in Singapore, a property management firm in France, a residential brokerage in the Netherlands, and an occupancy management company based in the U.S. During the first nine months of 2022, we completed nine in-fill acquisitions: a leading project management firm in Spain and Portugal, a retail acquisition and a property agency in the United Kingdom, an advisory firm in Scotland, a consulting firm focused on real-estate related sustainability issues in France and a valuation firm in New Zealand, a property tax consultancy in the United States, a technology company serving clients in our occupier outsourcing business, and a professional services company in Australia focused on project development, execution and operation services. In addition, during the third quarter of 2022, we made a $100.4 million investment in VTS, a technology company that helps leasing agents better serve property owners and enables property managers to create more engaging experiences for building tenants, thus improving occupancy rates.

We believe strategic acquisitions can significantly decrease the cost, time and resources necessary to attain a meaningful competitive position – or expand our capabilities – within targeted markets or business lines. In general, however, most acquisitions will initially have an adverse impact on our operating income and net income as a result of transaction-related expenditures, including severance, lease termination, transaction and deferred financing costs, as well as costs and charges associated with integrating the acquired business and integrating its financial and accounting systems into our own.

Our acquisition structures often include deferred and/or contingent purchase consideration in future periods that are subject to the passage of time or achievement of certain performance metrics and other conditions. As of September 30, 2022, we have accrued deferred purchase and contingent considerations totaling $532.1 million, which is included in “Accounts payable and accrued expenses” and in “Other long-term liabilities” in the accompanying consolidated balance sheets set forth in Item 1 of this Quarterly Report.

International Operations

We conduct a significant portion of our business and employ a substantial number of people outside the U.S. As a result, we are subject to risks associated with doing business globally. Our Real Estate Investments business has significant euro and British pound denominated assets under management, as well as associated revenue and earnings in Europe. In addition, our Global Workplace Solutions business also derives significant revenue and earnings in foreign currencies, such as the euro and British pound sterling. Our business has been materially impacted this year by the sharp appreciation of the U.S. dollar against these and other foreign currencies. Further fluctuations in foreign currency exchange rates may continue to produce corresponding changes in our AUM, revenue and earnings.

Our businesses could suffer from the effects of public health crises (such as the ongoing Covid-19 pandemic), geopolitical events (such as the war in Ukraine) or economic disruptions (or the perception that such disruptions may occur) that affect interest rates or liquidity or create financial, market or regulatory uncertainty.

During the nine months ended September 30, 2022, approximately 43.1% of our revenue was transacted in foreign currencies. The following table sets forth our revenue derived from our most significant currencies (dollars in thousands):


	Three Months Ended September 30,								Nine Months Ended September 30,
	2022				2021				2022				2021
United States dollar	$	4,320,235	57.4	%	$	3,943,714	58.0	%	$	12,887,747	56.9	%	$	10,856,277	56.6	%
British pound sterling	970,307		12.9	%	841,241		12.4	%	3,002,798		13.3	%	2,451,222		12.8	%
Euro	690,675		9.2	%	668,061		9.8	%	2,085,971		9.2	%	2,016,846		10.5	%
Canadian dollar	297,266		3.9	%	252,553		3.7	%	940,042		4.2	%	751,275		3.9	%
Australian dollar	196,313		2.6	%	152,027		2.2	%	558,456		2.5	%	423,320		2.2	%
Indian rupee	129,506		1.7	%	113,142		1.7	%	376,992		1.7	%	322,662		1.7	%
Chinese yuan	127,952		1.7	%	109,768		1.6	%	367,875		1.6	%	320,354		1.7	%
Swiss franc	96,821		1.3	%	89,696		1.3	%	289,394		1.3	%	279,683		1.5	%
Singapore dollar	90,069		1.2	%	68,481		1.0	%	258,129		1.1	%	210,129		1.1	%
Japanese yen	84,702		1.1	%	75,178		1.1	%	297,604		1.3	%	243,287		1.3	%
Other currencies (1)	525,700		7.0	%	484,466		7.2	%	1,568,749		6.9	%	1,320,764		6.7	%
Total revenue	$	7,529,546	100.0	%	$	6,798,327	100.0	%	$	22,633,757	100.0	%	$	19,195,819	100.0	%

(1)Approximately 47 currencies comprise 7.0% of our revenue for the three months ended September 30, 2022 and approximately 48 currencies comprise 6.9% of our revenue for the nine months ended September 30, 2022. Approximately 37 currencies comprise 7.2% and 6.7% of our revenues for the three and nine months ended September 30, 2021, respectively.

Although we operate globally, we report our results in U.S. dollars. As a result, the strengthening or weakening of the U.S. dollar may positively or negatively impact our reported results. For example, we estimate that had the British pound sterling-to-U.S. dollar exchange rates been 10% higher during the nine months ended September 30, 2022, the net impact would have been a decrease in pre-tax income of $1.0 million. Had the euro-to-U.S. dollar exchange rates been 10% higher during the nine months ended September 30, 2022, the net impact would have been an increase in pre-tax income of $21.6 million. These hypothetical calculations estimate the impact of translating results into U.S. dollars and do not include an estimate of the impact that a 10% change in the U.S. dollar against other currencies would have had on our foreign operations.

Due to the constantly changing currency exposures to which we are subject and the volatility of currency exchange rates, we cannot predict the effect of exchange rate fluctuations upon future operating results. In addition, fluctuations in currencies relative to the U.S. dollar may make it more difficult to perform period-to-period comparisons of our reported results of operations. Our international operations also are subject to, among other things, political instability and changing regulatory environments, which affect the currency markets and which as a result may adversely affect our future financial condition and results of operations. We routinely monitor these risks and related costs and evaluate the appropriate amount of oversight to allocate towards business activities in foreign countries where such risks and costs are particularly significant.

Results of Operations

The following table sets forth items derived from our consolidated statements of operations for the three and nine months ended September 30, 2022 and 2021 (dollars in thousands):


	Three Months Ended September 30,								Nine Months Ended September 30,
	2022				2021				2022				2021
Revenue:
Net revenue:
Facilities management	$	1,281,525	17.0	%	$	1,231,101	18.1	%	$	3,807,804	16.8	%	$	3,587,247	18.7	%
Property management	439,125		5.8	%	422,652		6.2	%	1,321,669		5.8	%	1,252,599		6.5	%
Project management	674,671		9.0	%	320,694		4.7	%	1,970,850		8.7	%	966,821		5.0	%
Valuation	177,198		2.4	%	176,644		2.6	%	554,879		2.5	%	517,460		2.7	%
Loan servicing	77,744		1.0	%	78,497		1.2	%	236,401		1.0	%	213,233		1.1	%
Advisory leasing	989,615		13.1	%	869,124		12.8	%	2,732,045		12.1	%	2,082,248		10.9	%
Capital markets:
Advisory sales	600,527		8.0	%	673,411		9.9	%	1,936,073		8.6	%	1,677,557		8.7	%
Commercial mortgage origination	130,425		1.7	%	181,813		2.7	%	435,678		1.9	%	483,556		2.5	%
Investment management	146,695		1.9	%	135,175		2.0	%	454,816		2.0	%	406,516		2.1	%
Development services	111,043		1.5	%	88,657		1.3	%	363,960		1.6	%	271,808		1.4	%
Corporate, other and eliminations	(5,732)		(0.1)	%	(4,795)		(0.1)	%	(12,751)		(0.1)	%	(15,397)		0.0	%
Total net revenue	4,622,836		61.3	%	4,172,973		61.4	%	13,801,424		60.9	%	11,443,648		59.6	%
Pass through costs also recognized as revenue	2,906,710		38.7	%	2,625,354		38.6	%	8,832,333		39.1	%	7,752,171		40.4	%
Total revenue	7,529,546		100.0	%	6,798,327		100.0	%	22,633,757		100.0	%	19,195,819		100.0	%
Costs and expenses:
Cost of revenue	5,934,490		78.8	%	5,258,947		77.3	%	17,740,668		78.4	%	14,995,252		78.1	%
Operating, administrative and other	1,080,316		14.3	%	1,025,681		15.1	%	3,335,131		14.7	%	2,811,224		14.6	%
Depreciation and amortization	142,136		1.9	%	122,564		1.8	%	453,527		2.0	%	363,727		2.0	%
Asset impairments	—		0.0	%	—		0.0	%	36,756		0.2	%	—		0.0	%
Total costs and expenses	7,156,942		95.0	%	6,407,192		94.2	%	21,566,082		95.3	%	18,170,203		94.7	%
Gain on disposition of real estate	1,746		0.0	%	18,530		0.3	%	200,564		0.9	%	19,615		0.1	%
Operating income	374,350		5.0	%	409,665		6.0	%	1,268,239		5.6	%	1,045,231		5.4	%
Equity income from unconsolidated subsidiaries	233,972		3.1	%	163,809		2.4	%	396,011		1.7	%	459,535		2.4	%
Other income (loss)	7,844		0.1	%	7,693		0.1	%	(13,529)		(0.1)	%	22,470		0.1	%
Interest expense, net of interest income	19,957		0.3	%	11,038		0.1	%	51,301		0.1	%	34,916		0.1	%
Write-off of financing costs on extinguished debt	1,862		0.0	%	—		0.0	%	1,862		0.0	%	—		0.0	%
Income before provision for income taxes	594,347		7.9	%	570,129		8.4	%	1,597,558		7.1	%	1,492,320		7.8	%
Provision for income taxes	142,667		1.9	%	133,507		2.0	%	259,691		1.1	%	343,279		1.8	%
Net income	451,680		6.0	%	436,622		6.4	%	1,337,867		6.0	%	1,149,041		6.0	%
Less: Net income attributable to non-controlling interests	5,041		0.1	%	879		0.0	%	11,609		0.1	%	4,459		0.0	%
Net income attributable to CBRE Group, Inc.	$	446,639	5.9	%	$	435,743	6.4	%	$	1,326,258	5.9	%	$	1,144,582	6.0	%

Core EBITDA	$	605,839	8.0	%	$	732,437	10.8	%	$	2,256,494	10.0	%	$	1,908,006	9.9	%

Consolidated Adjusted EBITDA (1)	$	787,858	10.5	%	$	736,948	10.8	%	$	2,248,530	9.9	%	$	1,950,043	10.2	%

Adjusted EBITDA attributable to non-controlling interests (1)	$	17,477			$	879			$	55,602			$	4,459
Adjusted EBITDA attributable to CBRE Group, Inc. (1)	$	770,381			$	736,069			$	2,192,928			$	1,945,584

(1)In conjunction with the acquisition of a 60% interest in Turner & Townsend in the fourth quarter of 2021, we modified our definition of Consolidated Adjusted EBITDA and Segment Operating Profit (SOP) to be inclusive of net income attributable to non-controlling interests and have recast prior periods to conform to this definition.

Net revenue, segment operating profit on net revenue margin, core EBITDA and consolidated adjusted EBITDA are not recognized measurements under accounting principles generally accepted in the United States, or GAAP. When analyzing our operating performance, investors should use these measures in addition to, and not as an alternative for, their most directly comparable financial measure calculated and presented in accordance with GAAP. We generally use these non-GAAP financial measures to evaluate operating performance and for other discretionary purposes. We believe these measures provide a more complete understanding of ongoing operations, enhance comparability of current results to prior periods and may be useful for investors to analyze our financial performance because they eliminate the impact of selected costs and charges that may obscure the underlying performance of our business and related trends. Because not all companies use identical calculations, our presentation of net revenue, core EBITDA and consolidated adjusted EBITDA may not be comparable to similarly titled measures of other companies.

Net revenue is gross revenue less costs largely associated with subcontracted vendor work performed for clients and generally has no margin. Segment operating profit on net revenue margin is computed by dividing segment operating profit by net revenue and is a better indicator of the segment’s margin since it does not include the diluting effect of pass through revenue which generally has no margin.

We use consolidated adjusted EBITDA as an indicator of consolidated financial performance. It represents earnings before the portion attributable to non-controlling interests, net interest expense, write-off of financing costs on extinguished debt, income taxes, depreciation and amortization, asset impairments, adjustments related to 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. Core EBITDA removes from adjusted EBITDA the impact of fair value changes on certain non-core non-controlling equity investments that are not directly related to our business segments as these could fluctuate significantly period over period. We believe that investors may find these measures useful in evaluating our operating performance compared to that of other companies in our industry because their calculations generally eliminate the effects of acquisitions, which would include impairment charges of goodwill and intangibles created from acquisitions, the effects of financings and income taxes and the accounting effects of capital spending.

Consolidated adjusted EBITDA and Core EBITDA are not intended to be measures of free cash flow for our discretionary use because it does not consider certain cash requirements such as tax and debt service payments. These measures may also differ from the amounts calculated under similarly titled definitions in our credit facilities and debt instruments, which are further adjusted to reflect certain other cash and non-cash charges and are used by us to determine compliance with financial covenants therein and our ability to engage in certain activities, such as incurring additional debt. We also use consolidated adjusted EBITDA as a significant component when measuring our operating performance under our employee incentive compensation programs.

Consolidated adjusted EBITDA and Core EBITDA are calculated 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
Add:
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		—
Consolidated Adjusted EBITDA	$	787,858	$	736,948	$	2,248,530	$	1,950,043

Less: Net fair value adjustments on strategic non-core investments	182,019		4,511		(7,964)		42,037
Core EBITDA	$	605,839	$	732,437	$	2,256,494	$	1,908,006

Three Months Ended September 30, 2022 Compared to the Three Months Ended September 30, 2021

We reported consolidated net income of $446.6 million for the three months ended September 30, 2022 on revenue of $7.5 billion as compared to consolidated net income of $435.7 million on revenue of $6.8 billion for the three months ended September 30, 2021.

Our revenue on a consolidated basis for the three months ended September 30, 2022 increased by $0.7 billion, or 10.8%, as compared to the three months ended September 30, 2021. The revenue increase reflects growth in the Global Workplace Solutions (GWS) and the Real Estate Investments (REI) segments while Advisory Services revenue remained relatively flat. Revenue in our Global Workplace Solutions segment increased by $676.6 million or 16.2% due to an increase in the project management revenue stream which now also reflects a full quarter contribution from our acquisition of Turner & Townsend that closed in November 2021, and growth in our facilities management line of business. Revenue in the Real Estate Investment segment was up 15.1% as we continue to realize elevated asset management fees driven by asset appreciation and increased development and construction revenue due to completion of certain key projects in our Telford line of business. Advisory Services gross revenue remained relatively flat primarily due to a decline in our capital markets line of business (which includes sales and commercial mortgage origination) which offset the revenue growth in leasing and property management. Foreign currency translation had a 5.1% negative impact on total revenue during the three months ended September 30, 2022, primarily driven by weakness in the British pound sterling, euro and Japanese yen.

Our cost of revenue on a consolidated basis increased by $0.7 billion, or 12.8%, during the three months ended September 30, 2022 as compared to the same period in 2021. This increase was primarily due to higher costs associated with our Global Workplace Solutions segment due to growth in our facilities and project management businesses, full quarter of Turner & Townsend operations, and increased development and construction costs to generate higher development and construction revenue. Our Advisory Services segment also experienced an increase in cost of revenue mainly due to higher commission expense due to growth in our sales and leasing business earlier this year, in addition to higher support costs. Foreign currency translation had a 5.1% positive impact on total cost of revenue during the three months ended September 30, 2022. Cost of revenue as a percentage of revenue increased to 78.8% for the three months ended September 30, 2022 as compared to 77.3% for the three months ended September 30, 2021. This was mainly due to a shift in the composition of revenue mix for Advisory which saw a decline in its high margin debt origination line of business. In addition, inflationary market conditions drove up the cost of construction and development in our Telford line of business.

Our operating, administrative and other expenses on a consolidated basis increased by $54.6 million, or 5.3%, during the three months ended September 30, 2022 as compared to the same period in 2021. The increase was primarily due to an increase in compensation and benefits for support staff given the expansion of the overall business, foreign currency transaction losses, increased discretionary expenses, and acquisition and integration related costs as compared to the three months ended September 30, 2021. In addition, the current quarter also includes operating expenses from our Turner & Townsend business. We also recorded an incremental $9.5 million of estimated provision related to fire and building safety remediation work that our Telford business in the Real Estate Investment segment expects to undertake based on the local government mandate. The company also initiated certain efficiency and cost reduction initiatives in the third quarter which resulted in approximately $18.9 million of charges that did not occur last year. These increased expenses were partially offset by downward revisions to certain incentive compensation expenses as we align with expected company performance. Foreign currency translation had a 5.1% positive impact on total operating, administrative and other expenses during the three months ended September 30, 2022. Operating expenses as a percentage of revenue decreased to 14.3% for the three months ended September 30, 2022 from 15.1% for the three months ended September 30, 2021, primarily due to downward revisions to incentive compensation in both investment management and development lines of businesses.

Our depreciation and amortization expense on a consolidated basis increased by $19.6 million, or 16.0%, during the three months ended September 30, 2022 as compared to the same period in 2021. This increase was primarily attributable to amortization of backlog and customer relationship intangibles from the acquisition of Turner & Townsend, with no comparable activity in the prior period.

Our gain on disposition of real estate on a consolidated basis was $1.7 million for the three months ended September 30, 2022, which was a decrease of $16.8 million over the prior year period, due to property sales on certain consolidated deals within our Real Estate Investments segment.

Our equity income from unconsolidated subsidiaries increased by $70.2 million, or 42.8%, during the three months ended September 30, 2022 as compared to the same period in 2021, primarily driven by an increase in the fair value adjustment of our non-core strategic equity investment in Altus Power, Inc. (Altus) partially offset by lower equity earnings associated with property sales reported in our Real Estate Investments segment.

Our consolidated interest expense, net of interest income, increased by $8.9 million, or 80.8%, for the three months ended September 30, 2022 as compared to the same period in 2021. This increase was primarily due to interest expense associated with deferred purchase consideration related to the Turner & Townsend transaction and borrowings on the revolving credit facility this quarter as compared to the same period last year.

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 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.

Nine Months Ended September 30, 2022 Compared to the Nine Months Ended September 30, 2021

We reported consolidated net income of $1.3 billion for the nine months ended September 30, 2022 on revenue of $22.6 billion as compared to consolidated net income of $1.1 billion on revenue of $19.2 billion for the nine months ended September 30, 2021.

Our revenue on a consolidated basis for the nine months ended September 30, 2022 increased by $3.4 billion, or 17.9%, as compared to the nine months ended September 30, 2021. The revenue increase reflects growth across the three business segments. Revenue in our Global Workplace Solutions segment increased by more than 18.6% primarily due to an increase in the project management revenue stream which now also reflects a full period contribution from our Turner & Townsend partnership supplemented by a modest growth in our facilities management business. Advisory Services revenue increased by $1.0 billion or 16.2% as all lines of business, except commercial mortgage origination, experienced growth this period as compared to the same period in the prior year. Significant growth occurred in our transaction business with sales and lease revenue up over 15.4% and 31.2%, respectively, as we continue to recover from the impacts of the Covid-19 pandemic across our major markets. Revenue in the Real Estate Investment services segment was up 20.7% as we continue to realize higher asset management fees driven by asset appreciation and increased development and construction revenue, partially offset by lower co-investment returns. Foreign currency translation had a 3.7% negative impact on total revenue during the nine months ended September 30, 2022, primarily driven by weakness in the euro, British pound sterling and Japanese yen.

Our cost of revenue on a consolidated basis increased by $2.7 billion, or 18.3%, during the nine months ended September 30, 2022 as compared to the same period in 2021. This increase was primarily due to higher costs associated with our Global Workplace Solutions segment given the growth in our facilities management and project management businesses, including Turner & Townsend, and higher commission expense associated with our Advisory Services segment due to growth in our sales and leasing business earlier in the year. Foreign currency translation had a 3.5% positive impact on total cost of revenue during the nine months ended September 30, 2022. Cost of revenue as a percentage of revenue increased slightly to 78.4% for the nine months ended September 30, 2022 as compared to 78.1% for the nine months ended September 30, 2021.

Our operating, administrative and other expenses on a consolidated basis increased by $523.9 million, or 18.6%, for the nine months ended September 30, 2022 as compared to the same period in 2021. The increase was primarily due to an increase in compensation and benefits for support staff given the expansion of the overall business, discretionary expenses, incentive compensation expense, acquisition and integration related costs, provision related to Telford Home’s building and fire safety remediation work, and charges associated with efficiency and cost reduction initiatives as compared to the nine months ended September 30, 2021. In addition, the current period also included operating expenses from our Turner & Townsend business. Foreign currency translation also had a 3.9% positive impact on total operating expenses during the nine months ended September 30, 2022. Operating expenses as a percentage of revenue increased slightly to 14.7% for the nine months ended September 30, 2022 from 14.6% for the nine months ended September 30, 2021, primarily due to investments made by GWS in new roles to drive future business growth.

Our depreciation and amortization expense on a consolidated basis increased by $89.8 million, or 24.7%, during the nine months ended September 30, 2022 as compared to the same period in 2021. This increase was primarily attributable to amortization of backlog and customer relationship intangibles from the acquisition of Turner & Townsend, with no comparable activity in the prior period.

Our asset impairments on a consolidated basis totaled $36.8 million for the nine months ended September 30, 2022. We recorded $10.4 million in asset impairment during the first quarter of 2022 related to our exit of the Advisory Services business in Russia. We recorded $26.4 million of non-cash asset impairment charges in our Real Estate Investment segment during the second quarter related to Telford Homes. The charge is attributable to the effect of elevated inflation on construction, materials and labor costs, which will reduce Telford Homes’ profitability because the sales prices for the build-to-rent developments are fixed at the time the developments are sold to a long-term investor. This resulted in a need to impair the goodwill balance associated with the Telford Homes reporting unit, primarily due to an expected reduction in cash flows and profitability. There were no asset impairments recorded in the comparative prior period.

Our gain on disposition of real estate on a consolidated basis increased by $180.9 million, during the nine months ended September 30, 2022 as compared to the same period in 2021 due to significant gains associated with certain property sales on consolidated deals within our Real Estate Investments segment.

Our equity income from unconsolidated subsidiaries on a consolidated basis decreased by $63.5 million, or 13.8%, during the nine months ended September 30, 2022 as compared to the same period in 2021, primarily driven by a lower equity pickup and fair value adjustment in our non-core investment portfolio this year. In addition, we recorded higher equity earnings associated with property sales reported in our Real Estate Investments segment last year as compared to this year.

Our consolidated interest expense, net of interest income, increased by $16.4 million, or 46.9%, for the nine months ended September 30, 2022 as compared to the same period in 2021. This increase was primarily due to interest expense related to deferred purchase consideration associated with the Turner & Townsend acquisition and interest expense associated with net borrowings on the revolving credit facilities. In addition, we recorded nine months’ interest expense this period on the 2.500% senior note issued in late March 2021.

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. 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.

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.

Segment Operations

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.

Advisory Services provides a comprehensive range of services globally, including property leasing, property sales, mortgage services, property management, and valuation. Global Workplace Solutions provides a broad suite of integrated, contractually-based outsourcing services to occupiers of real estate, including facilities management and project management. Real Estate Investments includes investment management services provided globally and development services in the U.S., U.K. and Continental Europe.

We also have a Corporate and Other segment. Corporate primarily consists of corporate overhead costs. Other consists of activities from strategic non-core non-controlling equity investments and is considered an operating segment but does not meet the aggregation criteria for presentation as a separate reportable segment and is, therefore, combined with Corporate and reported as Corporate and other. It also includes eliminations related to inter-segment revenue. For additional information on our segments, see Note 15 of the Notes to Consolidated Financial Statements (Unaudited) set forth in Item 1 of this Quarterly Report.

Advisory Services

The following table summarizes our results of operations for our Advisory Services operating segment for the three and nine months ended September 30, 2022 and 2021 (dollars in thousands):


	Three Months Ended September 30,								Nine Months Ended September 30,
	2022				2021				2022				2021
Revenue:
Net revenue:
Property management	$	439,125	18.0	%	$	422,652	17.5	%	$	1,321,669	18.2	%	$	1,252,599	20.0	%
Valuation	177,198		7.3	%	176,644		7.3	%	554,879		7.6	%	517,460		8.3	%
Loan servicing	77,744		3.2	%	78,497		3.3	%	236,401		3.3	%	213,233		3.4	%
Advisory leasing	989,615		40.7	%	869,124		36.0	%	2,732,045		37.6	%	2,082,248		33.3	%
Capital markets:
Advisory sales	600,527		24.7	%	673,411		27.9	%	1,936,073		26.6	%	1,677,557		26.8	%
Commercial mortgage origination	130,425		5.4	%	181,813		7.6	%	435,678		6.0	%	483,556		7.7	%
Total segment net revenue	2,414,634		99.3	%	2,402,141		99.6	%	7,216,745		99.3	%	6,226,653		99.5	%
Pass through costs also recognized as revenue	19,167		0.7	%	10,006		0.4	%	53,487		0.7	%	30,491		0.5	%
Total segment revenue	2,433,801		100.0	%	2,412,147		100.0	%	7,270,232		100.0	%	6,257,144		100.0	%
Costs and expenses:
Cost of revenue	1,501,276		61.7	%	1,433,315		59.4	%	4,368,039		60.1	%	3,652,711		58.4	%
Operating, administrative and other	516,270		21.2	%	466,189		19.3	%	1,510,937		20.8	%	1,298,407		20.7	%
Depreciation and amortization	72,867		3.0	%	76,249		3.2	%	227,170		3.1	%	220,172		3.5	%
Asset impairments	—		0.0	%	—		0.0	%	10,351		0.1	%	—		0.0	%
Total costs and expenses	2,090,413		85.9	%	1,975,753		81.9	%	6,116,497		84.1	%	5,171,290		82.6	%
Gain on disposition of real estate	21		0.0	%	—		0.0	%	21		0.0	%	—		0.0	%
Operating income	343,409		14.1	%	436,394		18.1	%	1,153,756		15.9	%	1,085,854		17.4	%
Equity income from unconsolidated subsidiaries	3,514		0.1	%	19,567		0.8	%	14,775		0.2	%	22,466		0.4	%
Other income (loss)	511		0.1	%	(10,531)		(0.5)	%	560		0.0	%	(9,729)		(0.2)	%
Add-back: Depreciation and amortization	72,867		3.0	%	76,249		3.2	%	227,170		3.1	%	220,172		3.5	%
Add-back: Asset impairments	—		0.0	%	—		0.0	%	10,351		0.1	%	—		0.0	%
Adjustments:





Costs associated with efficiency and cost-reduction initiatives	3,501		0.1	%	—		0.0	%	3,501		0.1	%	—		0.0	%
Segment operating profit and segment operating profit on revenue margin (1)	$	423,802	17.4	%	$	521,679	21.6	%	$	1,410,113	19.4	%	$	1,318,763	21.1	%
Segment operating profit on net revenue margin			17.6	%			21.7	%			19.5	%			21.2	%

Segment operating profit attributable to non-controlling interests (1)	$	728			$	140			$	2,648			$	627
Segment operating profit attributable to CBRE Group, Inc. (1)	$	423,074			$	521,539			$	1,407,465			$	1,318,136

(1)During the fourth quarter of 2021, we changed the definition of SOP to include net income (loss) attributable to non-controlling interest, as discussed further in Note 15 (Segments). Prior period segment operating profit for our reportable segments have been recast to conform to this change.

Three Months Ended September 30, 2022 Compared to the Three Months Ended September 30, 2021

Revenue increased by $21.7 million, or 0.9%, for the three months ended September 30, 2022 as compared to the three months ended September 30, 2021. Lease revenue increased 13.9% with strengths across most global markets. Growth in leasing revenue was supported by the continued recovery in industrial and office sectors, mainly in the Americas, which saw an increase of over 18.6% this quarter as compared to the prior period. This was partially offset by a drop in sales revenue, mainly in the Americas region, and commercial mortgage origination revenue. The current macroeconomic and fiscal environment has put a significant stress on the lending environment making it difficult to access capital at a reasonable cost. Sales activity remained strong in the Continental Europe and the United Kingdom which experienced growth of 15.6% and 5.7%, respectively. Foreign currency translation had a 4.1% negative impact on total revenue during the three months ended September 30, 2022, primarily driven by weakness in the euro, British pound sterling and Japanese yen.

Cost of revenue increased by $68.0 million, or 4.7%, for the three months ended September 30, 2022 as compared to the same period in 2021, primarily due to increased commission expense related to growth in the sales and leasing business earlier in the year along with higher support costs. Foreign currency translation had a 3.8% positive impact on total cost of revenue during the three months ended September 30, 2022. Cost of revenue as a percentage of revenue increased to 61.7% for the three months ended September 30, 2022 versus 59.4% for the same period in 2021. This was mainly due to increased commissions. In addition, there was a shift in the composition of total revenue as higher margin capital markets revenue decreased as a percentage of total revenue this quarter versus the same period last year.

Operating, administrative and other expenses increased by $50.1 million, or 10.7%, for the three months ended September 30, 2022 as compared to the three months ended September 30, 2021. This increase was primarily due to an increase in discretionary expenses, support staff compensation and related benefits, and technology enablement charges, partially offset by lower incentive compensation expense to align with expected segment and company performance as compared to the three months ended September 30, 2021. Foreign currency translation had a 5.8% positive impact on total operating expenses during the three months ended September 30, 2022.

In connection with the origination and sale of mortgage loans for which the company retains servicing rights, we record servicing assets or liabilities based on the fair value of the retained mortgage servicing rights (MSRs) on the date the loans are sold. Upon origination of a mortgage loan held for sale, the fair value of the mortgage servicing rights to be retained is included in the forecasted proceeds from the anticipated loan sale and results in a net gain (which is reflected in revenue). Subsequent to the initial recording, MSRs are amortized (within amortization expense) and carried at the lower of amortized cost or fair value in other intangible assets in the accompanying consolidated balance sheets. They are amortized in proportion to and over the estimated period that the servicing income is expected to be received. For the three months ended September 30, 2022, MSRs contributed to operating income $34.7 million of gains recognized in conjunction with the origination and sale of mortgage loans, offset by $39.4 million of amortization of related intangible assets. For the three months ended September 30, 2021, MSRs contributed to operating income $48.6 million of gains recognized in conjunction with the origination and sale of mortgage loans, offset by $42.3 million of amortization of related intangible assets. The decline in MSRs was associated with lower origination activity given the higher cost of debt.

Equity income from unconsolidated subsidiaries decreased by $16.1 million, or 82.0%, during the three months ended September 30, 2022 as compared to the same period in 2021, due to a positive fair value adjustments on our investment in Industrious last year as compared to a relatively neutral adjustment this quarter.

Nine Months Ended September 30, 2022 Compared to the Nine Months Ended September 30, 2021

Revenue increased by $1.0 billion, or 16.2%, for the nine months ended September 30, 2022 as compared to the nine months ended September 30, 2021, driven by growth in all lines of business except commercial mortgage origination. The revenue increase primarily reflects higher sales, up 15.4%, and leasing revenue, up 31.2%, as well as higher valuation revenue driven by increased revenue per assignment and higher demand given the market conditions. Commercial mortgage origination experienced a large increase in revenue last year due to a resurgence of activity following the pandemic in 2020. Foreign currency translation had a 3.4% negative impact on total revenue during the nine months ended September 30, 2022, primarily driven by weakness in euro, British pound sterling and Japanese yen.

Cost of revenue increased by $715.3 million, or 19.6%, for the nine months ended September 30, 2022 as compared to the same period in 2021, primarily due to increased commission expense resulting from higher sales and leasing revenue and increased professional compensation to support the growth in the business. Foreign currency translation also had a 3.1% positive impact on total cost of revenue during the nine months ended September 30, 2022. Cost of revenue as a percentage of revenue increased to 60.1% for the nine months ended September 30, 2022 from 58.4% for the nine months ended September 30, 2021. This was due to a shift in the composition of total revenue where high margin debt origination revenue decreased as a percentage of total revenue this quarter versus the same period last year.

Operating, administrative and other expenses increased by $212.5 million, or 16.4%, for the nine months ended September 30, 2022 as compared to the nine months ended September 30, 2021. This increase was primarily due to an increase in discretionary spend, support staff compensation and related benefits, technology enablement charges, employee recruitment and temporary help related charges as compared to the nine months ended September 30, 2021. Foreign currency translation also had a 4.3% positive impact on total operating expenses during the nine months ended September 30, 2022.

For the nine months ended September 30, 2022, MSRs contributed to operating income $105.4 million of gains recognized in conjunction with the origination and sale of mortgage loans, offset by $125.1 million of amortization of related intangible assets. For the nine months ended September 30, 2021, MSRs contributed to operating income $140.6 million of gains recognized in conjunction with the origination and sale of mortgage loans, offset by $117.8 million of amortization of related intangible assets. The decline was associated with lower origination activity given the higher cost of debt.

Amortization expense during the nine months ended September 30, 2022 increased by $7.8 million, as compared to the same period in 2021, primarily due to accelerated amortization related to loan payoffs in the Capital Markets business.

Global Workplace Solutions

The following table summarizes our results of operations for our Global Workplace Solutions operating segment for the three and nine months ended September 30, 2022 and 2021 (dollars in thousands):


	Three Months Ended September 30,								Nine Months Ended September 30,
	2022				2021				2022				2021
Revenue:
Net revenue:
Facilities management	$	1,281,525	26.5	%	$	1,231,101	29.5	%	$	3,807,804	26.2	%	$	3,587,247	29.2	%
Project management	674,671		13.9	%	320,694		7.7	%	1,970,850		13.5	%	966,821		7.9	%
Total segment net revenue	1,956,196		40.4	%	1,551,795		37.2	%	5,778,654		39.7	%	4,554,068		37.1	%
Pass through costs also recognized as revenue	2,887,543		59.6	%	2,615,348		62.8	%	8,778,846		60.3	%	7,721,680		62.9	%
Total segment revenue	4,843,739		100.0	%	4,167,143		100.0	%	14,557,500		100.0	%	12,275,748		100.0	%
Costs and expenses:
Cost of revenue	4,360,311		90.0	%	3,788,156		90.9	%	13,177,844		90.5	%	11,215,553		91.4	%
Operating, administrative and other	281,783		5.8	%	209,232		5.0	%	776,131		5.3	%	578,527		4.7	%
Depreciation and amortization	57,105		1.2	%	34,580		0.9	%	189,933		1.3	%	101,586		0.8	%

Operating income	144,540		3.0	%	135,175		3.2	%	413,592		2.9	%	380,082		3.1	%
Equity income from unconsolidated subsidiaries	645		0.0	%	749		0.0	%	1,108		0.0	%	983		0.0	%
Other income	2,690		0.1	%	617		0.0	%	5,049		0.0	%	2,688		0.1	%
Add-back: Depreciation and amortization	57,105		1.2	%	34,580		0.9	%	189,933		1.3	%	101,586		0.8	%

Adjustments:


Integration and other costs related to acquisitions	7,716		0.1	%	16,211		0.4	%	24,046		0.2	%	24,345		0.2	%

Costs associated with efficiency and cost-reduction initiatives	6,710		0.1	%	—		0.0	%	6,710		0.0	%	—		0.0	%
Segment operating profit and segment operating profit on revenue margin (1)	$	219,406	4.5	%	$	187,332	4.5	%	$	640,438	4.4	%	$	509,684	4.2	%
Segment operating profit on net revenue margin			11.2	%			12.1	%			11.1	%			11.2	%

Segment operating profit attributable to non-controlling interests (1)	$	16,225			$	17			$	51,060			$	40
Segment operating profit attributable to CBRE Group, Inc. (1)	$	203,181			$	187,315			$	589,378			$	509,644

Three Months Ended September 30, 2022 Compared to the Three Months Ended September 30, 2021

Revenue increased by $676.6 million, or 16.2%, for the three months ended September 30, 2022 as compared to the three months ended September 30, 2021. The increase was primarily attributable to growth in the facilities management and project management line of businesses as both experienced growth from new and existing clients. We recorded approximately $325.2 million in revenue from Turner & Townsend during the quarter with no such activity in the comparable period. Excluding Turner & Townsend, revenue rose 8.4% with project management up 23.2% due to certain large projects and focused growth initiatives. Foreign currency translation had a 5.5% negative impact on total revenue during the three months ended September 30, 2022, primarily driven by weakness in the British pound sterling and euro.

Cost of revenue increased by $572.2 million, or 15.1%, for the three months ended September 30, 2022 as compared to the same period in 2021, driven by the higher revenue leading to higher pass through costs and higher professional compensation. Foreign currency translation had a 5.4% positive impact on total cost of revenue during the three months ended September 30, 2022. Cost of revenue as a percentage of revenue declined modestly at 90.0% for the three months ended September 30, 2022 as compared to 90.9% for the same period in 2021, primarily due to increase in project management revenue which generally has higher margins.

Operating, administrative and other expenses increased by $72.6 million, or 34.7%, for the three months ended September 30, 2022 as compared to the three months ended September 30, 2021. This increase was attributable to higher support staff compensation and related benefits, expenses related to efficiency and cost reduction initiatives and integration costs associated with the Turner & Townsend transaction. In addition, we recorded operating expenses incurred by Turner & Townsend this quarter with no such activity in the comparable period. Foreign currency translation had a 6.0% positive impact on total operating expenses during the three months ended September 30, 2022.

Nine Months Ended September 30, 2022 Compared to the Nine Months Ended September 30, 2021

Revenue increased by $2.3 billion, or 18.6%, for the nine months ended September 30, 2022 as compared to the nine months ended September 30, 2021. The increase was primarily attributable to growth in our project management line of business, supplemented by moderate growth in facilities management revenue. We recorded approximately $975.5 million in revenue from Turner & Townsend during the quarter with no such activity in the comparable period. Excluding Turner & Townsend, revenue rose nearly 10.6% with project management up 21.7%. Foreign currency translation had a 3.7% negative impact on total revenue during the nine months ended September 30, 2022, primarily driven by weakness in the British pound sterling and euro.

Cost of revenue increased by $2.0 billion, or 17.5%, for the nine months ended September 30, 2022 as compared to the same period in 2021, driven by the higher revenue leading to higher pass through costs and increased professional compensation. Foreign currency translation had a 3.6% positive impact on total cost of revenue during the nine months ended September 30, 2022. Cost of revenue as a percentage of revenue decreased slightly to 90.5% for the nine months ended September 30, 2022 from 91.4% for the nine months ended September 30, 2021, primarily due to increase in project management revenue which generally has higher margins.

Operating, administrative and other expenses increased by $197.6 million, or 34.2%, for the nine months ended September 30, 2022 as compared to the nine months ended September 30, 2021. The increase in compensation expense was attributable to investment in new roles to drive business growth. We also recorded higher stock compensation expenses, employee recruitment costs, and integration related costs for Turner & Townsend. In addition, we recorded operating expenses incurred by Turner & Townsend for the nine months ended September 30, 2022 with no such activity in the comparable period. Foreign currency translation also had a 4.0% positive impact on total operating expenses during the nine months ended September 30, 2022.

Real Estate Investments

The following table summarizes our results of operations for our Real Estate Investments operating segment for the three and nine months ended September 30, 2022 and 2021 (dollars in thousands):


	Three Months Ended September 30,								Nine Months Ended September 30,
	2022				2021				2022				2021
Revenue:
Investment management	$	146,695	56.9	%	$	135,175	60.4	%	$	454,816	55.5	%	$	406,516	59.9	%
Development services	111,043		43.1	%	88,657		39.6	%	363,960		44.5	%	271,808		40.1	%
Total segment revenue	257,738		100.0	%	223,832		100.0	%	818,776		100.0	%	678,324		100.0	%
Costs and expenses:
Cost of revenue	57,967		22.5	%	40,224		18.0	%	202,296		24.7	%	138,184		20.4	%
Operating, administrative and other	194,480		75.5	%	229,303		102.4	%	747,687		91.3	%	645,558		95.2	%
Depreciation and amortization	3,911		1.5	%	4,617		2.1	%	11,385		1.4	%	20,570		3.0	%
Asset impairments	—		0.0	%	—		0.0	%	26,405		3.2	%	—		0.0	%
Gain on disposition of real estate	1,725		0.7	%	18,530		8.3	%	200,543		24.5	%	19,615		2.9	%
Operating income (loss)	3,105		1.2	%	(31,782)		(14.2	%)	31,546		3.9	%	(106,373)		(15.7	%)
Equity income from unconsolidated subsidiaries	50,300		19.5	%	156,479		69.9	%	380,726		46.5	%	411,546		60.7	%
Other (loss) income	(493)		(0.2)	%	447		0.2	%	(1,388)		(0.2)	%	3,399		0.5	%
Add-back: Depreciation and amortization	3,911		1.5	%	4,617		2.1	%	11,385		1.4	%	20,570		3.0	%
Add-back: Asset impairments	—		0.0	%	—		0.0	%	26,405		3.2	%	—		0.0	%

Adjustments:
Carried interest incentive compensation (reversal) expense to align with the timing of associated revenue	(6,161)		(2.4	%)	16,959		7.6	%	9,200		1.1	%	33,963		5.0	%
Impact of fair value adjustments to real estate assets acquired in the Telford Acquisition (purchase accounting) that were sold in period	(1,300)		(0.5)	%	47		0.0	%	(4,447)		(0.5)	%	772		0.1	%



Costs associated with efficiency and cost-reduction initiatives	617		0.2	%	—		0.0	%	617		0.1	%	—		0.0	%
Provision associated with Telford’s fire safety remediation efforts	9,479		3.7	%	—		0.0	%	46,984		5.7	%	—		0.0	%
Segment operating profit (1)	$	59,458	23.0	%	$	146,767	65.6	%	$	501,028	61.2	%	$	363,877	53.6	%

Segment operating profit attributable to non-controlling interests (1)	$	523			$	722			1,894				3,792
Segment operating profit attributable to CBRE Group, Inc. (1)	$	58,935			$	146,045			$	499,134			$	360,085

Three Months Ended September 30, 2022 Compared to the Three Months Ended September 30, 2021

Revenue increased by $33.9 million, or 15.1%, for the three months ended September 30, 2022 as compared to the three months ended September 30, 2021, primarily driven by an increase in real estate sales, primarily in the United Kingdom, and increased development and construction fees. Investment management fees increased as a result of appreciating asset values. Foreign currency translation had a 10.6% negative impact on total revenue during the three months ended September 30, 2022, primarily driven by weakness in the British pound sterling and euro.

Cost of revenue increased by $17.7 million, or 44.1%, for the three months ended September 30, 2022 as compared to the three months ended September 30, 2021. Cost of revenue as a percentage of revenue was 22.5% as compared to 18.0% during the same period in 2021. This was primarily due to increased construction costs as a result of inflation in the Telford Homes business. The gross increase in cost of revenue from Telford Homes was offset by increased revenue from the investment management line of business, which has no associated cost of revenue. Foreign currency translation had a 22.6% positive impact on total cost of revenue during the three months ended September 30, 2022.

Operating, administrative and other expenses decreased by $34.8 million, or 15.2%, for the three months ended September 30, 2022 as compared to the same period in 2021, primarily due to lower carried interest compensation expense this quarter as compared to the same period last year, lower incentive compensation expense to align with business performance, partially offset by an increase in compensation expense consistent with higher revenue growth as well as an increase to Telford Homes’ building and fire safety remediation provision. Foreign currency translation had a 6.1% positive impact on total operating expenses during the three months ended September 30, 2022.

Equity income from unconsolidated subsidiaries declined by $106.2 million, or 67.9%, and gain on disposition of real estate decreased by $16.8 million during the three months ended September 30, 2022 as compared to the same period in 2021. These declines are due to lower global development sale activity than third quarter last year.

A roll forward of our AUM by product type for the three months ended September 30, 2022 is as follows (dollars in billions):


	Funds		Separate Accounts		Securities		Total
Balance at June 30, 2022	$	64.7	$	71.4	$	10.8	$	146.9
Inflows	4.2		2.2		0.5		6.9
Outflows	(0.7)		(1.3)		(0.8)		(2.8)
Market depreciation	(2.2)		(3.6)		(1.3)		(7.1)
Balance at September 30, 2022	$	66.0	$	68.7	$	9.2	$	143.9

AUM generally refers to the properties and other assets with respect to which we provide (or participate in) oversight, investment management services and other advice, and which generally consist of real estate properties or loans, securities portfolios and investments in operating companies and joint ventures. Our AUM is intended principally to reflect the extent of our presence in the real estate market, not the basis for determining our management fees. Our assets under management consist of:

the total fair market value of the real estate properties and other assets either wholly-owned or held by joint ventures and other entities in which our sponsored funds or investment vehicles and client accounts have invested or to which they have provided financing. Committed (but unfunded) capital from investors in our sponsored funds is not included in this component of our AUM. The value of development properties is included at estimated completion cost. In the case of real estate operating companies, the total value of real properties controlled by the companies, generally through joint ventures, is included in AUM; and
the net asset value of our managed securities portfolios, including investments (which may be comprised of committed but uncalled capital) in private real estate funds under our fund of funds investments.

Our calculation of AUM may differ from the calculations of other asset managers, and as a result, this measure may not be comparable to similar measures presented by other asset managers.

Nine Months Ended September 30, 2022 Compared to the Nine Months Ended September 30, 2021

Revenue increased by $140.5 million, or 20.7%, for the nine months ended September 30, 2022 as compared to the nine months ended September 30, 2021, primarily driven by an increase in real estate sales, primarily in the U.K. and an increase in our development and construction management fees in our development services line of business globally. Investment management fees increased, supported by market appreciation driving up asset fees, partially offset by lower co-investment returns. Foreign currency translation had a 7.0% negative impact on total revenue during the nine months ended September 30, 2022, primarily driven by weakness in the British pound sterling and euro.

Cost of revenue increased by $64.1 million, or 46.4%, for the nine months ended September 30, 2022 as compared to the nine months ended September 30, 2021. Cost of revenue as a percentage of revenue was 24.7% for the nine months ended September 30, 2022 as compared to 20.4% for the nine months ended September 30, 2021. This was primarily driven by the increased construction costs due to inflation in our Telford Homes business. We also experienced a change in composition of revenue for this period. Revenue from global development services, which has an associated cost of revenue in the Telford Homes business increased to 44.5% of total segment revenue as compared to 40.1% last year. Revenue from investment management, which have no associated cost of revenue, contributed 55.5% to total segment revenue as compared to 59.9% last year. Foreign currency translation had a 12.0% positive impact on total cost of revenue during the nine months ended September 30, 2022.

Operating, administrative and other expenses increased by $102.1 million, or 15.8%, for the nine months ended September 30, 2022 as compared to the same period in 2021, primarily due to an increase in overall compensation, bonuses and profit share in our development services and investment management line of business consistent with higher revenue growth. We also recorded approximately $47.0 million of estimated provision related to fire and building safety remediation work that our Telford Homes business expects to undertake based on the pledge signed in the second quarter. These increases are partially offset by lower carried interest compensation expense, and decreases in certain operating expenses, such as legal fees and technology related expenses. Foreign currency translation had a 4.5% positive impact on total operating expenses during the nine months ended September 30, 2022.

Our equity income from unconsolidated subsidiaries decreased by $30.8 million, or 7.5%, during the nine months ended September 30, 2022 as compared to the same period in 2021. Gain on disposition of real estate increased by $180.9 million during the nine months ended September 30, 2022 as compared to the same period in 2021. This was primarily due to the composition of the portfolio, deal structures, and timing. During the nine months ended September 30, 2021 our sales activity was almost entirely sales of our equity interests to our JV partners whereas in the current year we had sales of equity interests as well as significant assets sales, primarily land sales.

A roll forward of our AUM by product type for the nine months ended September 30, 2022 is as follows (dollars in billions):


	Funds		Separate Accounts		Securities		Total
Balance at December 31, 2021	$	56.6	$	73.6	$	11.7	$	141.9
Inflows	14.1		6.2		2.3		22.6
Outflows	(3.8)		(6.9)		(1.5)		(12.2)
Market depreciation	(0.9)		(4.2)		(3.3)		(8.4)
Balance at September 30, 2022	$	66.0	$	68.7	$	9.2	$	143.9

We describe above how we calculate AUM. Also, as noted above, our calculation of AUM may differ from the calculations of other asset managers, and as a result, this measure may not be comparable to similar measures presented by other asset managers.

Corporate and Other

Our Corporate segment primarily consists of corporate overhead costs. Other consists of activities from strategic non-core non-controlling equity investments and is considered an operating segment but does not meet the criteria for presentation as a separate reportable segment and is, therefore, combined with our core Corporate function and reported as Corporate and other. The following table summarizes our results of operations for our core Corporate and other segment for the three and nine months ended September 30, 2022 and 2021 (dollars in thousands):


	Three Months Ended September 30, (1)				Nine Months Ended September 30, (1)
	2022		2021		2022		2021
Elimination of inter-segment revenue	$	(5,732)	$	(4,795)	$	(12,751)	$	(15,397)
Costs and expenses:
Cost of revenue (2)	14,936		(2,748)		(7,511)		(11,196)
Operating, administrative and other	87,783		120,957		300,376		288,732
Depreciation and amortization	8,253		7,118		25,039		21,399


Operating loss	(116,704)		(130,122)		(330,655)		(314,332)
Equity income (loss) from unconsolidated subsidiaries	179,513		(12,986)		(598)		24,540
Other income (loss)	5,136		17,160		(17,750)		26,112
Add-back: Depreciation and amortization	8,253		7,118		25,039		21,399

Adjustments:


Costs incurred related to legal entity restructuring	893		—		12,814		—
Costs associated with efficiency and cost-reduction initiatives	8,101		—		8,101		—
Segment operating profit (loss)	$	85,192	$	(118,830)	$	(303,049)	$	(242,281)

(1)Percentage of revenue calculations are not meaningful and therefore not included.

(2)Primarily relates to inter-segment eliminations.

Three Months Ended September 30, 2022 Compared to the Three Months Ended September 30, 2021

Core corporate

Operating, administrative and other expenses for our core corporate function were approximately $87.8 million for the three months ended September 30, 2022, a decrease of $33.2 million or 27.4% as compared to the three months ended September 30, 2021. This was primarily due to a decrease in incentive compensation (equity and bonuses) to align with expected company performance, change in recharge approach of shared service expenses to the segments, partially offset by increased general compensation and benefits and charges associated with efficiency and cost reduction initiatives.

Other (non-core)

Equity income from non-core non-controlling equity investments (unconsolidated subsidiaries) was approximately $179.5 million for the three months ended September 30, 2022, an increase of $192.5 million as compared to equity loss in the three months ended September 30, 2021. This was primarily due to significant positive fair value adjustments on Altus as compared to unfavorable fair value adjustments that were recorded in same period last year on certain other non-core investments.

Other income was approximately $2.5 million for the three months ended September 30, 2022 versus $17.5 million same period last year. We held certain marketable equity securities in our non-core portfolio last year that experienced an increase in market value during the nine months ended September 30, 2021. These securities were disposed of during the first quarter of 2022.

Nine Months Ended September 30, 2022 Compared to the Nine Months Ended September 30, 2021

Core corporate

Operating, administrative and other expenses for our core corporate function were approximately $299.4 million for the nine months ended September 30, 2022, an increase of $10.7 million or 3.7% as compared to the nine months ended September 30, 2021. This was primarily due to an increase in compensation and related benefits, a provision associated with transfer taxes and costs related to previous legal entity restructures, and charges associated with efficiency and cost reduction initiatives, partially offset by lower stock compensation and bonus expense as compared to prior period and a change in recharge approach of shared service expenses to the segments.

Other loss was approximately $11.3 million for the nine months ended September 30, 2022 versus income of $8.6 million in the same period last year. This is primarily comprised of net unfavorable activity related to unrealized and realized gain/loss on equity and available for sale debt securities owned by our wholly-owned captive insurance company. These mark to market adjustments were in a net unfavorable position compared to the same period of the prior year.

Other (non-core)

We recorded equity income of approximately $24.5 million during the nine months ended September 30, 2021 from favorable fair value adjustments related to certain non-core investments. During the nine months ended September 30, 2022, we are in a net neutral position because of a significant recovery in our holdings of Altus equity in the third quarter which has essentially offset the losses recorded earlier in the year on Altus and certain other non-core investments.

We recorded other loss of $6.4 million which is mainly due to realized losses on sale of marketable securities in early part of this year as compared to positive unrealized mark to market adjustments recorded in the same period last year.

Liquidity and Capital Resources

We believe that we can satisfy our working capital and funding requirements with internally generated cash flow and, as necessary, borrowings under our revolving credit facility. Our expected capital requirements for 2022 include up to approximately $257.3 million of anticipated capital expenditures, net of tenant concessions. During the nine months ended September 30, 2022, we incurred $151.9 million of capital expenditures, net of tenant concessions received, which includes approximately $18.7 million related to technology enablement. As of September 30, 2022, we had aggregate commitments of $110.5 million to fund future co-investments in our Real Estate Investments business, $20.4 million of which is expected to be funded in 2022. Additionally, as of September 30, 2022, we are committed to fund additional capital of $82.7 million and $138.3 million, respectively, to unconsolidated subsidiaries and to consolidated projects within our Real Estate Investments business. As of September 30, 2022, we had $3.3 billion of borrowings available under our revolving credit facilities and $1.1 billion of cash and cash equivalents available for general corporate use.

We have historically relied on our internally generated cash flow and our revolving credit facility to fund our working capital, capital expenditure and general investment requirements (including strategic in-fill acquisitions) and have not sought other external sources of financing to help fund these requirements. In the absence of extraordinary events or a large strategic acquisition, we anticipate that our cash flow from operations and our revolving credit facility would be sufficient to meet our anticipated cash requirements for the foreseeable future, and at a minimum for the next 12 months. Given compensation is our largest expense and our sales and leasing professionals are generally paid on a commission and/or bonus basis that correlates with their revenue production, the negative effect of difficult market conditions is partially mitigated by the inherent variability of our compensation cost structure. In addition, when negative economic conditions have been particularly severe, we have moved decisively to lower operating expenses to improve financial performance, and then have restored certain expenses as economic conditions improved. We may seek to take advantage of market opportunities to refinance existing debt instruments, as we have done in the past, with new debt instruments at interest rates, maturities and terms we deem attractive. We may also, from time to time in our sole discretion, purchase, redeem, or retire our existing senior notes, through tender offers, in privately negotiated or open market transactions, or otherwise.

As noted above, we believe that any future significant acquisitions we may make could require us to obtain additional debt or equity financing. In the past, we have been able to obtain such financing for material transactions on terms that we believed to be reasonable. However, it is possible that we may not be able to obtain acquisition financing on favorable terms, or at all, in the future if we decide to make any further significant acquisitions.

Our long-term liquidity needs, other than those related to ordinary course obligations and commitments such as operating leases, are generally comprised of three elements. The first is the repayment of the outstanding and anticipated principal amounts of our long-term indebtedness. If our cash flow is insufficient to repay our long-term debt when it comes due, then we expect that we would need to refinance such indebtedness or otherwise amend its terms to extend the maturity dates. We cannot make any assurances that such refinancing or amendments would be available on attractive terms, if at all.

The second long-term liquidity need is the payment of obligations related to acquisitions. Our acquisition structures often include deferred and/or contingent purchase consideration in future periods that are subject to the passage of time or achievement of certain performance metrics and other conditions. As of September 30, 2022, we had accrued deferred purchase consideration totaling $532.1 million ($111.2 million of which was a current liability), which was included in “Accounts payable and accrued expenses” and in “Other liabilities” in the accompanying consolidated balance sheets set forth in Item 1 of this Quarterly Report.

Lastly, as described in our 2021 Annual Report, 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 fully utilized the remaining capacity and repurchased 615,108 shares of our Class A common stock with an average price of $101.88 per share using cash on hand for $62.7 million.

In November 2021, our board of directors authorized a new program for the company to repurchase up to $2.0 billion of our Class A common stock over five years, effective November 19, 2021 (the 2021 program). In August 2022, our board of directors authorized an additional $2.0 billion, bringing the total authorized repurchase amount under the 2021 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 and October 24, 2022, respectively, we had $2.6 billion and $2.5 billion of capacity remaining under the 2021 program.

Our stock repurchases have been funded with cash on hand and we intend to continue funding future repurchases with existing cash. We may utilize our stock repurchase programs to continue offsetting the impact of our stock-based compensation program and on a more opportunistic basis if we believe our stock presents a compelling investment compared to other discretionary uses. The timing of any future repurchases and the actual amounts repurchased will depend on a variety of factors, including the market price of our common stock, general market and economic conditions and other factors.

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.

Historical Cash Flows

Operating Activities

Net cash provided by operating activities totaled $814.8 million for the nine months ended September 30, 2022, a decrease of $385.3 million as compared to the nine months ended September 30, 2021. The primary drivers that contributed to the decline were as follows: (1) the net cash outflow associated with net working capital increased in the current period as compared to same period last year by approximately $832.7 million. This was primarily due to increased issuance of incentive compensation in the form of producer based loans, higher increase in accounts receivable and contract assets, higher outflow related to net bonus payments, compensation and other employee benefits, and net outflow related to real estate held for sale and under development. This change in working capital was partially offset by (1) timing of certain cash tax payments and refunds, (2) increased cash collection of equity income from unconsolidated subsidiaries, (3) higher net proceeds from equity securities, and (4) stronger operating performance, supplemented by add backs of higher net non-cash charges, such as impairments.

Investing Activities

Net cash used in investing activities totaled $603.7 million for the nine months ended September 30, 2022, an increase of $48.3 million as compared to the nine months ended September 30, 2021. This increase was primarily driven by our $100.4 million investment in VTS during the third quarter 2022. In addition, we received lower distributions from unconsolidated subsidiaries. This was partially offset by lower contributions to unconsolidated subsidiaries and less spend on strategic in-fill acquisitions during this period as compared to the nine months ended September 30, 2021. We also had an increase of capital expenditures compared to 2021 to support various growth initiatives.

Financing Activities

Net cash used in financing activities totaled $1.2 billion for the nine months ended September 30, 2022 as compared to net cash provided by financing activities of $274.9 million for the nine months ended September 30, 2021. The increased usage during the period was primarily due to $1.4 billion used to repurchase shares as compared to $188.3 million in the prior period; as well as $28.1 million in increased outflow related to acquisitions where cash was paid after 90 days of the acquisition date. In addition, the cash flow benefited from the issuance of the 2.500% senior notes in the prior period. This was partially offset by $283.0 million in net proceeds from our revolving credit facility received this period whereas no such proceeds were received in the prior period.

Indebtedness

Our level of indebtedness increases the possibility that we may be unable to pay the principal amount of our indebtedness and other obligations when due. In addition, we may incur additional debt from time to time to finance strategic acquisitions, investments, joint ventures or for other purposes, subject to the restrictions contained in the documents governing our indebtedness. If we incur additional debt, the risks associated with our leverage, including our ability to service our debt, would increase.

Long-Term Debt

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, is collectively referred to in this Quarterly Report as 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 a 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 went into effect on January 1, 2022.

On August 5, 2022, CBRE Group, Inc., as Holdings, and CBRE Global Acquisition Company, as the Luxembourg Borrower, 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 successor 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. 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).

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 jointly and severally guaranteed on a senior basis by CBRE Group, Inc. and any domestic subsidiary of CBRE Services that guarantees our 2022 Credit Agreement. 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 jointly and severally guaranteed on a senior basis by CBRE Group, Inc. and any domestic subsidiary of CBRE Services that guarantees our 2022 Credit Agreement. Interest accrues at a rate of 4.875% per year and is payable semi-annually in arrears on March 1 and September 1.

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.

On May 21, 2021, all existing subsidiary guarantors were released from their guarantees of our 2022 Credit Agreement, 4.875% senior notes and 2.500% senior notes. Our 2022 Credit Agreement, Revolving Credit Agreement, 4.875% senior notes and 2.500% senior notes remain fully and unconditionally guaranteed by CBRE Group, Inc. Combined summarized financial information for CBRE Group, Inc. (parent) and CBRE Services (subsidiary issuer) is as follows (dollars in thousands):


	September 30, 2022		December 31, 2021
Balance Sheet Data:
Current assets	$	6,508	$	8,604
Non-current assets (1)	11,719		34,711
Total assets (1)	$	18,227	$	43,315

Current liabilities	$	302,654	$	17,610
Non-current liabilities (1)	1,517,763		1,083,584
Total liabilities (1)	$	1,820,417	$	1,101,194


	Nine Months Ended September 30,
	2022		2021 (2)
Statement of Operations Data:
Revenue	$	—	$	—
Operating loss	(1,787)		(1,725)
Net income	8,116		22,142

(1)Includes $432.6 million of intercompany loan payables and $25.3 million of intercompany loan receivables from non-guarantor subsidiaries as of September 30, 2022 and December 31, 2021, respectively. All intercompany balances and transactions between CBRE Group, Inc. and CBRE Services have been eliminated.

(2)Amounts include activity related to our subsidiaries that were still listed as guarantors for the period presented.

For additional information on all of our long-term debt, see Note 11 of the Notes to Consolidated Financial Statements set forth in Item 8 included in our 2021 Annual Report and Note 9 of the Notes to Consolidated Financial Statements (Unaudited) set forth in Item 1 of this Quarterly Report.

Short-Term Borrowings

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) at 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.

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. As of October 24, 2022, $283.0 million was outstanding under the Revolving Credit Agreement. Letters of credit are issued in the ordinary course of business and would reduce the amount we may borrow under the Revolving Credit Agreement.

In addition, Turner & Townsend maintains a £120.0 million revolving credit facility under the March 31, 2022 credit agreement, with an additional accordion option of £20.0 million. For additional information on all of our short-term borrowings, see Notes 5 and 11 of the Notes to Consolidated Financial Statements set forth in Item 8 included in our 2021 Annual Report and Notes 4 and 9 of the Notes to Consolidated Financial Statements (Unaudited) set forth in Item 1 of this Quarterly Report.

We also maintain warehouse lines of credit with certain third-party lenders. See Note 4 of the Notes to Consolidated Financial Statements (Unaudited) set forth in Item 1 of this Quarterly Report.

Off –Balance Sheet Arrangements

We do not have off-balance sheet arrangements that we believe could have a material current or future impact on our financial condition, liquidity or results of operations. Our off-balance sheet arrangements are described in Note 11 of the Notes to Consolidated Financial Statements (Unaudited) set forth in Item 1 of this Quarterly Report and are incorporated by reference herein.

Cautionary Note on Forward-Looking Statements

This Quarterly Report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. The words “anticipate,” “believe,” “could,” “should,” “propose,” “continue,” “estimate,” “expect,” “intend,” “may,” “plan,” “predict,” “project,” “will” and similar terms and phrases are used in this Quarterly Report to identify forward-looking statements. Except for historical information contained herein, the matters addressed in this Quarterly Report are forward-looking statements. These statements relate to analyses and other information based on forecasts of future results and estimates of amounts not yet determinable. These statements also relate to our future prospects, developments and business strategies.

These forward-looking statements are made based on our management’s expectations and beliefs concerning future events affecting us and are subject to uncertainties and factors relating to our operations and business environment, all of which are difficult to predict and many of which are beyond our control. These uncertainties and factors could cause our actual results to differ materially from those matters expressed in or implied by these forward-looking statements.

The following factors are among those, but are not only those, that may cause actual results to differ materially from the forward-looking statements:

disruptions in general economic, political and regulatory conditions and significant public health events or the outbreak of war, particularly in geographies or industry sectors where our business may be concentrated;
volatility or adverse developments in the securities, capital or credit markets, interest rate increases and conditions affecting the value of real estate assets, inside and outside the U.S.;
poor performance of real estate investments or other conditions that negatively impact clients’ willingness to make real estate or long-term contractual commitments and the cost and availability of capital for investment in real estate;
foreign currency fluctuations and changes in currency restrictions, trade sanctions and import/export and transfer pricing rules;
disruptions to business, market and operational conditions related to the Covid-19 pandemic and the impact of government rules and regulations intended to mitigate the effects of this pandemic, including, without limitation, rules and regulations that impact us as a loan originator and servicer for U.S. GSEs;
our ability to compete globally, or in specific geographic markets or business segments that are material to us;
our ability to identify, acquire and integrate accretive businesses;
costs and potential future capital requirements relating to businesses we may acquire;
integration challenges arising out of companies we may acquire;
increases in unemployment and general slowdowns in commercial activity;
trends in pricing and risk assumption for commercial real estate services;
the effect of significant changes in capitalization rates across different property types;
a reduction by companies in their reliance on outsourcing for their commercial real estate needs, which would affect our revenues and operating performance;
client actions to restrain project spending and reduce outsourced staffing levels;
our ability to further diversify our revenue model to offset cyclical economic trends in the commercial real estate industry;
our ability to attract new user and investor clients;
our ability to retain major clients and renew related contracts;
our ability to leverage our global services platform to maximize and sustain long-term cash flow;
our ability to continue investing in our platform and client service offerings;
our ability to maintain expense discipline;
the emergence of disruptive business models and technologies;
negative publicity or harm to our brand and reputation;
the failure by third parties to comply with service level agreements or regulatory or legal requirements;
the ability of our investment management business to maintain and grow assets under management and achieve desired investment returns for our investors, and any potential related litigation, liabilities or reputational harm possible if we fail to do so;
our ability to manage fluctuations in net earnings and cash flow, which could result from poor performance in our investment programs, including our participation as a principal in real estate investments;
the ability of CBRE Capital Markets to periodically amend, or replace, on satisfactory terms, the agreements for its warehouse lines of credit;
declines in lending activity of U.S. GSEs, regulatory oversight of such activity and our mortgage servicing revenue from the commercial real estate mortgage market;
changes in U.S. and international law and regulatory environments (including relating to anti-corruption, anti-money laundering, trade sanctions, tariffs, currency controls and other trade control laws), particularly in Asia, Africa, Russia, Eastern Europe and the Middle East, due to certain conflicts and the level of political instability in those regions;
litigation and its financial and reputational risks to us;
our exposure to liabilities in connection with real estate advisory and property management activities and our ability to procure sufficient insurance coverage on acceptable terms;
our ability to retain, attract and incentivize key personnel;
our ability to manage organizational challenges associated with our size;
liabilities under guarantees, or for construction defects, that we incur in our development services business;
variations in historically customary seasonal patterns that cause our business not to perform as expected;
our leverage under our debt instruments as well as the limited restrictions therein on our ability to incur additional debt, and the potential increased borrowing costs to us from a credit-ratings downgrade;
our and our employees’ ability to execute on, and adapt to, information technology strategies and trends;
cybersecurity threats or other threats to our information technology networks, including the potential misappropriation of assets or sensitive information, corruption of data or operational disruption;
our ability to comply with laws and regulations related to our global operations, including real estate licensure, tax, labor and employment laws and regulations, as well as data privacy and protection regulations, and the anti-corruption laws and trade sanctions of the U.S. and other countries;
changes in applicable tax or accounting requirements;
any inability for us to implement and maintain effective internal controls over financial reporting;
the effect of implementation of new accounting rules and standards or the impairment of our goodwill and intangible assets;
the performance of our equity investments in companies we do not control; and
the other factors described elsewhere in this Quarterly Report on Form 10-Q, included under the headings “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies,” “Quantitative and Qualitative Disclosures About Market Risk” and Part II, Item 1A, “Risk Factors” or as described in our 2021 Annual Report, in particular in Part II, Item 1A “Risk Factors”, or as described in the other documents and reports we file with the Securities and Exchange Commission (SEC).

Forward-looking statements speak only as of the date the statements are made. You should not put undue reliance on any forward-looking statements. We assume no obligation to update forward-looking statements to reflect actual results, changes in assumptions or changes in other factors affecting forward-looking information, except to the extent required by applicable securities laws. If we do update one or more forward-looking statements, no inference should be drawn that we will make additional updates with respect to those or other forward-looking statements. Additional information concerning these and other risks and uncertainties is contained in our other periodic filings with the SEC.

Investors and others should note that we routinely announce financial and other material information using our Investor Relations website (https://ir.cbre.com), SEC filings, press releases, public conference calls and webcasts. We use these channels of distribution to communicate with our investors and members of the public about our company, our services and other items of interest. Information contained on our website is not part of this Quarterly Report or our other filings with the SEC.

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