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 ended March 31, 2023 should be read in conjunction with our consolidated financial statements and related notes included in our 2022 Annual Report on Form 10-K (2022 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 2022 revenue, with leading global market positions in our leasing, property sales, occupier outsourcing and valuation businesses. As of December 31, 2022, the company had approximately 115,000 employees (excluding Turner & Townsend Holdings Limited 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 and mortgage origination), mortgage 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 (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” (primarily U.S. development); “Telford Homes” (U.K. development); and “Turner & Townsend Holdings Limited” (Turner & Townsend).

We generate revenue from stable, recurring sources (large multi-year portfolio and per project contracts) and from cyclical, non-recurring sources, including commissions on transactions. Our revenue mix has become more weighted towards stable revenue sources, particularly occupier outsourcing, and our dependence on cyclical property sales and lease transaction revenue has declined. 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.

In 2022, we generated revenue from a highly diversified base of clients, including more than 95 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 22 years in a row (including 2023). We have also been rated a World’s Most Ethical Company by the Ethisphere Institute for ten consecutive years (including 2023), and included in the Dow Jones World Sustainability Index for four years in a row and the Bloomberg Gender-Equality Index for four years in a row (including 2023).

The macroeconomic environment remains challenging as central banks continue to rapidly raise interest rates. The rising rate environment, coupled with certain bank failures in the first quarter of 2023, has limited credit availability to all asset classes, including commercial real estate. Less available and more expensive debt capital has had 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 of and proceeds generated from asset sales within our investment management and development businesses and our ability to obtain debt capital to begin new development projects.

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, business combinations, goodwill and other intangible assets, income

taxes, contingencies, and investments in unconsolidated subsidiaries – fair value option can be found in our 2022 Annual Report. There have been no material changes to these policies and estimates as of March 31, 2023.

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 is seasonal, 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 of each year. Revenue, earnings and cash flow have generally been concentrated in the fourth calendar quarter due to the focus on completing sales, financing and leasing transactions prior to year-end. The sharp rise in interest rates to combat inflation and resultant banking sector stress and economic uncertainty may cause seasonality to deviate from historical patterns.

Inflation

Our business continues to be affected by high inflation in 2023. Most notably, moves by a number of countries’ central banks to tame high inflation by rapidly raising interest rates sharply increased the cost of debt and dramatically constrained its availability, resulting in a significant decline in sales and financing transaction activity. In addition, rising price levels across the economy have required us to increase compensation expense to retain top talent and our development businesses has incurred higher input costs for construction materials. On the other hand, we believe that parts of our business have protections against inflation. The company continues to monitor inflation, monetary policy changes in response to inflation and potentially adverse effects on our business.

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 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 flows 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; interest rate levels and changes in interest rates; the cost and availability of credit; and the impact of tax and regulatory policies. 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, disruption to the global capital or credit markets, 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 during difficult market conditions, such as the environment that prevailed in the early months of the Covid-19 pandemic or the current stressed capital markets environment, are 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. We began efforts in 2022 and have continued in 2023 to reduce expenses in light of macroeconomic challenges stemming from rapidly rising interest rates and the stressed banking sector. Additionally, our contractual revenue has increased primarily as a result of growth in our outsourcing business, and we believe this contractual revenue should partially 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 by expanding the business strategically across asset types, clients, geographies and lines of business. Nevertheless, adverse global and regional economic trends will pose significant risks to the performance of our consolidated operations 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. In-fill acquisitions have also 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 2022, we completed seven in-fill acquisitions in the Advisory Services segment and four in the Global Workplace Solutions segment totaling $205.8 million in cash and deferred consideration. During the first quarter of 2023, we completed one in-fill acquisition in the Advisory Services segment and four in the Global Workplace Solutions segment totaling $65.1 million in cash and deferred consideration.

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 March 31, 2023, we have accrued deferred purchase and contingent considerations totaling $542.4 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 significantly 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, geopolitical events (such as the war in Ukraine), economic disruptions (or the perception that such disruptions may occur), high interest rate levels, rapid changes in interest rates, decreased access to debt capital or liquidity constraints, downturns in the general macroeconomic backdrop, or regulatory or financial market uncertainty.

During the three months ended March 31, 2023, approximately 44.1% 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 March 31,
20232022
United States dollar$4,144,81055.9%$4,131,39756.3%
British pound sterling995,42813.4%985,99913.4%
Euro657,4818.9%681,9129.3%
Canadian dollar294,2514.0%318,5604.3%
Australian dollar190,8182.6%165,9392.3%
Indian rupee154,2502.1%119,8661.6%
Japanese yen115,7851.6%117,4711.6%
Chinese yuan110,7531.5%118,3431.6%
Swiss franc96,5281.3%95,5581.3%
Singapore dollar94,3651.3%83,1251.1%
Other currencies (1)556,6457.4%514,7637.2%
Total revenue$7,411,114100.0%$7,332,933100.0%

(1)Approximately 46 currencies comprise 7.4% of our revenue for the three months ended March 31, 2023, and approximately 48 currencies comprise 7.2% of our revenue for the three months ended March 31, 2022.

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 three months ended March 31, 2023, the net impact would have been a decrease in pre-tax income of $3.7 million. Had the euro-to-U.S. dollar exchange rates been 10% higher during the three months ended March 31, 2023, the net impact would have been an increase in pre-tax income of $1.5 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.

Fluctuations in foreign currency exchange rates may result in corresponding fluctuations in revenue and earnings as well as the AUM for our investment management business, which could have a material adverse effect on our business, financial condition and operating results. 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 months ended March 31, 2023 and 2022 (dollars in thousands):

Three Months Ended March 31,
20232022
Revenue:
Net revenue:
Facilities management$1,395,20318.8%$1,242,52916.9%
Property management441,1956.0%438,0946.0%
Project management734,7749.9%623,9618.5%
Valuation165,6122.2%181,1422.5%
Loan servicing77,4841.0%74,0151.0%
Advisory leasing708,6549.6%772,72210.5%
Capital markets:
Advisory sales367,4045.0%619,8278.5%
Commercial mortgage origination70,9401.0%144,8702.0%
Investment management147,4902.0%150,5672.1%
Development services76,3561.0%133,1901.8%
Corporate, other and eliminations(4,322)(0.1)%(4,888)(0.1)%
Total net revenue4,180,79056.4%4,376,02959.7%
Pass through costs also recognized as revenue3,230,32443.6%2,956,90440.3%
Total revenue7,411,114100.0%7,332,933100.0%
Costs and expenses:
Cost of revenue6,006,41381.0%5,752,19478.5%
Operating, administrative and other1,208,90416.3%1,065,99614.6%
Depreciation and amortization161,4912.2%149,0322.0%
Asset impairments—0.0%10,3510.1%
Total costs and expenses7,376,80899.5%6,977,57395.2%
Gain on disposition of real estate3,0590.0%21,5920.3%
Operating income37,3650.5%376,9525.1%
Equity income from unconsolidated subsidiaries141,6821.9%42,8710.5%
Other income (loss)2,4750.0%(14,464)(0.2)%
Interest expense, net of interest income28,4140.3%12,8260.1%
Income before provision for (benefit from) income taxes153,1082.1%392,5335.3%
Provision for (benefit from) income taxes28,0360.4%(3,738)(0.1)%
Net income125,0721.7%396,2715.4%
Less: Net income attributable to non-controlling interests8,1800.1%3,9740.1%
Net income attributable to CBRE Group, Inc.$116,8921.6%$392,2975.3%
Core EBITDA$532,5897.2%$732,06310.0%

Net revenue, segment operating profit on revenue margin, segment operating profit on net revenue margin, and core 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 and core 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 revenue margin is computed by dividing segment operating profit by revenue and provides a comparable profitability measure against our peers. 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 core EBITDA as an indicator of the company’s operating financial performance. Core EBITDA 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 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, and costs associated with efficiency and cost-reduction initiatives. Core EBITDA excludes 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.

Core EBITDA is not intended to be a measure of free cash flow for our discretionary use because it does not consider certain cash requirements such as tax and debt service payments. This measure 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 core EBITDA as a significant component when measuring our operating performance under our employee incentive compensation programs.

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

Three Months Ended March 31,
20232022
Net income attributable to CBRE Group, Inc.$116,892$392,297
Net income attributable to non-controlling interests8,1803,974
Net income125,072396,271
Adjustments:
Depreciation and amortization161,491149,032
Asset impairments—10,351
Interest expense, net of interest income28,41412,826
Provision for (benefit from) income taxes28,036(3,738)
Carried interest incentive compensation expense to align with the timing of associated revenue6,97822,856
Impact of fair value adjustments to real estate assets acquired in the Telford acquisition (purchase accounting) that were sold in period—(1,696)
Costs incurred related to legal entity restructuring—1,676
Integration and other costs related to acquisitions18,1348,121
Costs associated with efficiency and cost-reduction initiatives138,247—
Net fair value adjustments on strategic non-core investments26,217136,364
Core EBITDA$532,589$732,063

Three Months Ended March 31, 2023 Compared to the Three Months Ended March 31, 2022

We reported consolidated net income of $116.9 million for the three months ended March 31, 2023 on revenue of $7.4 billion as compared to consolidated net income of $392.3 million on revenue of $7.3 billion for the three months ended March 31, 2022.

Our revenue on a consolidated basis for the three months ended March 31, 2023 increased by $78.2 million, or 1.1%, as compared to the three months ended March 31, 2022. The revenue increase reflects growth in the Global Workplace Solutions (GWS) segment partially offset by a decline in revenue in the Advisory Services and in the Real Estate Investments (REI) segments. Revenue in our Global Workplace Solutions segment increased by $532.1 million or 11.1% due to new client wins, expansion of services to existing clients, and contributions from strategic in-fill acquisitions. Revenue in our Advisory Services segment decreased 17.5% and was significantly impacted by the current macroeconomic and fiscal environment driving down sale and lease revenue during the quarter. Revenue in the Real Estate Investments segment decreased 21.1% primarily due to decreased development and construction revenue and lower real estate sales activities in the international development markets. Foreign currency translation had a 3.3% negative impact on total revenue during the three months ended March 31, 2023, primarily driven by weakness in the British pound sterling, euro and Canadian dollar.

Our cost of revenue on a consolidated basis increased by $254.2 million, or 4.4%, during the three months ended March 31, 2023 as compared to the same period in 2022. 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, and approximately $18 million in charges associated with cost savings initiatives. This was partially offset by a decline in cost of revenue in our Advisory Services segment due to lower commission expense and by a decline in cost of revenue in our global development business in our Real Estate Investments segment. Foreign currency translation had a 3.4% positive impact on total cost of revenue during the three months ended March 31, 2023. Cost of revenue as a percentage of revenue increased to 81.0% for the three months ended March 31, 2023 as compared to 78.5% for the three months ended March 31, 2022. This was mainly due to growth in facilities management and project management services in our Global Workplace Solutions segment, in addition, to certain fixed cost of revenue in our Advisory Services segment.

Our operating, administrative and other expenses on a consolidated basis increased by $142.9 million, or 13.4%, during the three months ended March 31, 2023 as compared to the same period in 2022. The increase was primarily due to our efficiency and cost-reduction initiatives that started during the third quarter of 2022. As part of these initiatives, we incurred approximately $120.3 million in additional operating expenses, primarily in the form of employee separation benefits, contract termination fees and consulting costs, that did not occur during three months ended March 31, 2022. In addition, we also incurred higher professional fees to support us as we continue to explore various capital allocation opportunities. This increase was partially offset by lower overall stock compensation expense in the current period as compared to the same period in the prior year. Foreign currency translation had a 3.6% positive impact on total operating, administrative and other expenses during the three months ended March 31, 2023. Operating expenses as a percentage of revenue increased to 16.3% for the three months ended March 31, 2023 from 14.6% for the three months ended March 31, 2022, primarily due to significant costs incurred under our efficiency initiatives against a modest revenue increase.

Our depreciation and amortization expense on a consolidated basis increased by $12.5 million, or 8.4%, during the three months ended March 31, 2023 as compared to the same period in 2022. This increase was primarily attributable to accelerated depreciation expense recognition due to downward revision to the remaining useful lives of certain property, plant and equipment.

We recorded $10.4 million in asset impairments on a consolidated basis for the three months ended March 31, 2022 related to our exit of the Advisory Services business in Russia. We did not record any asset impairments for the three months ended March 31, 2023.

Our gain on disposition of real estate on a consolidated basis was $3.1 million for the three months ended March 31, 2023, which was a decrease of $18.5 million over the prior year period, due to fewer property sales of certain consolidated projects within our Real Estate Investments segment.

Our equity income from unconsolidated subsidiaries more than tripled this quarter as compared to the same period in 2022, an increase of $98.8 million. This was primarily driven by higher equity earnings associated with property sales reported in our Real Estate Investments segment and lower negative fair value adjustment of our non-core strategic equity investment in Altus Power, Inc. (Altus) as compared to first quarter 2022.

Our other income on a consolidated basis was $2.5 million for the three months ended March 31, 2023 versus a loss of $14.5 million for the same period in the prior year. Losses incurred last year were primarily due to sales of certain marketable equity securities.

Our consolidated interest expense, net of interest income, increased by $15.6 million, or 121.5%, for the three months ended March 31, 2023 as compared to the same period in 2022. This increase was primarily due to the impact of higher interest rates and increased borrowings on the revolving credit facilities.

Our provision for income taxes on a consolidated basis was $28.0 million for the three months ended March 31, 2023 as compared to a benefit from income taxes of $3.7 million for the three months ended March 31, 2022. The increase of $31.8 million is primarily related to a one-time tax benefit in 2022 as a result of legal entity restructuring, offset by a decrease from corresponding change in earnings. Our effective tax rate increased to 18.3% for the three months ended March 31, 2023 from (1.0)% for the three months ended March 31, 2022. Our effective tax rate for the three months ended March 31, 2023 was different than the U.S. federal statutory tax rate of 21.0%, primarily due to U.S. state taxes and favorable permanent book tax differences.

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, capital markets (property sales and mortgage origination), mortgage sales and servicing, 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 13 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 months ended March 31, 2023 and 2022 (dollars in thousands):

Three Months Ended March 31,
20232022
Revenue:
Net revenue:
Property management$441,19523.8%$438,09419.5%
Valuation165,6128.9%181,1428.1%
Loan servicing77,4844.2%74,0153.3%
Advisory leasing708,65438.2%772,72234.4%
Capital markets:
Advisory sales367,40419.8%619,82727.6%
Commercial mortgage origination70,9403.9%144,8706.3%
Total segment net revenue1,831,28998.8%2,230,67099.2%
Pass through costs also recognized as revenue22,5791.2%17,7780.8%
Total segment revenue1,853,868100.0%2,248,448100.0%
Costs and expenses:
Cost of revenue1,126,76160.8%1,312,29158.4%
Operating, administrative and other522,86628.2%480,25521.4%
Depreciation and amortization78,4434.2%74,8873.3%
Asset impairments—0.0%10,3510.4%
Total costs and expenses1,728,07093.2%1,877,78483.5%
Operating income125,7986.8%370,66416.5%
Equity income from unconsolidated subsidiaries1,0020.1%9,7560.5%
Other income (loss)1,9380.1%(4)0.0%
Add-back: Depreciation and amortization78,4434.2%74,8873.3%
Add-back: Asset impairments—0.0%10,3510.4%
Adjustments:
Costs associated with efficiency and cost-reduction initiatives62,5413.3%—0.0%
Segment operating profit and segment operating profit on revenue margin$269,72214.5%$465,65420.7%
Segment operating profit on net revenue margin14.7%20.9%

Three Months Ended March 31, 2023 Compared to the Three Months Ended March 31, 2022

Revenue decreased by $394.6 million, or 17.5%, for the three months ended March 31, 2023 as compared to the three months ended March 31, 2022. The current macroeconomic and fiscal environment has put significant stress on the lending environment making it difficult to access capital at a reasonable cost. Leasing revenue declined 8.3%, sales revenue was down 40.7% and mortgage origination revenue was down 51.0%. The slowdown in the lending environment also affected appraisal revenue which was down 8.6%. This was partially offset by a modest growth in the property management line of business, mainly in the U.S. Foreign currency translation had a 2.4% negative impact on total revenue during the three months ended March 31, 2023, primarily driven by weakness in the British pound sterling, Japanese yen and euro.

Cost of revenue decreased by $185.5 million, or 14.1%, for the three months ended March 31, 2023 as compared to the same period in 2022, primarily due to lower commission expense related to a decline in our leasing and capital markets business. Foreign currency translation had a 2.5% positive impact on total cost of revenue during the three months ended March 31, 2023. Cost of revenue as a percentage of revenue increased to 60.8% for the three months ended March 31, 2023 versus 58.4% for the same period in 2022. This was mainly due to 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 and growth in property management.

Operating, administrative and other expenses increased by $42.6 million, or 8.9%, for the three months ended March 31, 2023 as compared to the three months ended March 31, 2022. This increase was primarily due to elevated employee separation benefit and lease exit related charges incurred under our efficiency and cost-reduction initiatives, partially offset by lower incentive compensation expense to align with expected segment and company performance as compared to the three months ended March 31, 2022. Foreign currency translation had a 3.2% positive impact on total operating expenses during the three months ended March 31, 2023.

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 March 31, 2023, MSRs contributed to operating income $16.7 million of gains recognized in conjunction with the origination and sale of mortgage loans, offset by $36.5 million of amortization of related intangible assets. For the three months ended March 31, 2022, MSRs contributed to operating income $35.2 million of gains recognized in conjunction with the origination and sale of mortgage loans, offset by $41.0 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 $8.8 million, or 89.7%, during the three months ended March 31, 2023 as compared to the same period in 2022, due to lower net fair value adjustments on our strategic non-controlling equity investment portfolio.

Global Workplace Solutions

The following table summarizes our results of operations for our Global Workplace Solutions operating segment for the three months ended March 31, 2023 and 2022 (dollars in thousands):

Three Months Ended March 31,
20232022
Revenue:
Net revenue:
Facilities management$1,395,20326.1%$1,242,52925.9%
Project management734,77413.8%623,96112.9%
Total segment net revenue2,129,97739.9%1,866,49038.8%
Pass through costs also recognized as revenue3,207,74560.1%2,939,12661.2%
Total segment revenue5,337,722100.0%4,805,616100.0%
Costs and expenses:
Cost of revenue4,842,63990.7%4,373,96791.0%
Operating, administrative and other323,0606.1%239,3865.0%
Depreciation and amortization63,5561.2%61,9691.3%
Total costs and expenses5,229,25598.0%4,675,32297.3%
Operating income108,4672.0%130,2942.7%
Equity income from unconsolidated subsidiaries3410.0%8630.0%
Other income4900.0%1,4890.0%
Add-back: Depreciation and amortization63,5561.2%61,9691.3%
Adjustments:
Integration and other costs related to acquisitions7,4240.1%8,1210.2%
Costs associated with efficiency and cost-reduction initiatives49,3881.0%—0.0%
Segment operating profit and segment operating profit on revenue margin$229,6664.3%$202,7364.2%
Segment operating profit on net revenue margin10.8%10.9%

Three Months Ended March 31, 2023 Compared to the Three Months Ended March 31, 2022

Revenue increased by $532.1 million, or 11.1%, for the three months ended March 31, 2023 as compared to the three months ended March 31, 2022. 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 and contributions from certain strategic and in-fill acquisitions. Foreign currency translation had a 3.7% negative impact on total revenue during the three months ended March 31, 2023, primarily driven by weakness in the British pound sterling and euro.

Cost of revenue increased by $468.7 million, or 10.7%, for the three months ended March 31, 2023 as compared to the same period in 2022, driven by the higher revenue leading to higher pass through costs and higher professional compensation to support growth. Foreign currency translation had a 3.6% positive impact on total cost of revenue during the three months ended March 31, 2023. Cost of revenue as a percentage of revenue remained relatively flat at 90.7% for the three months ended March 31, 2023 as compared to 91.0% for the same period in 2022.

Operating, administrative and other expenses increased by $83.7 million, or 35.0%, for the three months ended March 31, 2023 as compared to the three months ended March 31, 2022. This increase was attributable to higher support staff compensation and related benefits from in-fill acquisitions, expenses related to efficiency and cost-reduction initiatives, contract termination fees, and diligence and integration costs associated with recent acquisitions. Foreign currency translation had a 5.6% positive impact on total operating expenses during the three months ended March 31, 2023.

Real Estate Investments

The following table summarizes our results of operations for our Real Estate Investments (REI) operating segment for the three months ended March 31, 2023 and 2022 (dollars in thousands):

Three Months Ended March 31,
20232022
Revenue:
Investment management$147,49065.9%$150,56753.1%
Development services76,35634.1%133,19046.9%
Total segment revenue223,846100.0%283,757100.0%
Costs and expenses:
Cost of revenue38,53817.2%70,05324.7%
Operating, administrative and other252,095112.6%246,75287.0%
Depreciation and amortization6,4602.9%3,8561.3%
Total costs and expenses297,093132.7%320,661113.0%
Gain on disposition of real estate3,0591.4%21,5927.6%
Operating loss(70,188)(31.3)%(15,312)(5.4)%
Equity income from unconsolidated subsidiaries166,67474.5%157,44055.5%
Other income (loss)1150.1%(92)0.0%
Add-back: Depreciation and amortization6,4602.9%3,8561.3%
Adjustments:
Carried interest incentive compensation expense to align with the timing of associated revenue6,9783.0%22,8568.1%
Impact of fair value adjustments to real estate assets acquired in the Telford Acquisition (purchase accounting) that were sold in period—0.0%(1,696)(0.6)%
Costs associated with efficiency and cost-reduction initiatives21,4599.5%—0.0%
Segment operating profit and segment operating profit on revenue margin$131,49858.7%$167,05258.9%

Three Months Ended March 31, 2023 Compared to the Three Months Ended March 31, 2022

Revenue decreased by $59.9 million, or 21.1%, for the three months ended March 31, 2023 as compared to the three months ended March 31, 2022, primarily driven by a decrease in real estate sales in the United Kingdom, and decreased development and construction fees. Investment management revenue remained relatively flat. Foreign currency translation had a 4.1% negative impact on total revenue during the three months ended March 31, 2023, primarily driven by weakness in the British pound sterling and euro.

Cost of revenue decreased by $31.5 million, or 45.0%, for the three months ended March 31, 2023 as compared to the three months ended March 31, 2022. Cost of revenue as a percentage of revenue was 17.2% as compared to 24.7% during the same period in 2022. This was primarily due to a shift in the composition of overall revenue with higher revenue coming from the investment management line of business which has no associated cost of revenue. Foreign currency translation had a 6.1% positive impact on total cost of revenue during the three months ended March 31, 2023.

Operating, administrative and other expenses increased by $5.3 million, or 2.2%, for the three months ended March 31, 2023 as compared to the same period in 2022, primarily due to increase in employee separation benefits and consulting charges incurred as part of the company's efficiency and cost-reduction initiatives, partially offset by lower incentive compensation expense to align with business performance. Foreign currency translation had a 3.4% positive impact on total operating expenses during the three months ended March 31, 2023.

Equity income from unconsolidated subsidiaries increased by $9.2 million, or 5.9%, during the three months ended March 31, 2023 as compared to the same period in 2022. Gain on disposition of real estate decreased by $18.5 million during the three months ended March 31, 2023 as compared to the same period in 2022. This was primarily due to fewer development sales of consolidated projects.

A roll forward of our AUM by product type for the three months ended March 31, 2023 is as follows (dollars in billions):

FundsSeparate AccountsSecuritiesTotal
Balance at December 31, 2022$66.2$73.2$9.9$149.3
Inflows1.42.40.34.1
Outflows(0.6)(1.2)(0.3)(2.1)
Market (depreciation) appreciation(1.0)(1.6)0.2(2.4)
Balance at March 31, 2023$66.0$72.8$10.1$148.9

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.

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 aggregation 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 months ended March 31, 2023 and 2022 (dollars in thousands):

Three Months Ended March 31, (1)
20232022
Elimination of inter-segment revenue$(4,322)$(4,888)
Costs and expenses:
Cost of revenue (2)(1,525)(4,117)
Operating, administrative and other110,88399,603
Depreciation and amortization13,0328,320
Operating loss(126,712)(108,694)
Equity loss from unconsolidated subsidiaries(26,335)(125,188)
Other loss(68)(15,857)
Add-back: Depreciation and amortization13,0328,320
Adjustments:
Integration and other costs related to acquisitions10,710—
Costs incurred related to legal entity restructuring—1,676
Costs associated with efficiency and cost-reduction initiatives4,859—
Segment operating loss$(124,514)$(239,743)

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

(2)Primarily relates to inter-segment eliminations.

Three Months Ended March 31, 2023 Compared to the Three Months Ended March 31, 2022

Core corporate

Operating, administrative and other expenses for our core corporate function were approximately $111.0 million for the three months ended March 31, 2023, as compared to $97 million for the three months ended March 31, 2022, an increase of $13.7 million or 14.0%. This was primarily due to professional fees incurred to support us as we explore various capital allocation opportunities, employee separation benefits and consulting charges under our efficiency and cost-reduction initiatives, partially offset by a decrease in incentive compensation to align with expected company performance.

Other loss was approximately $0.1 million for three months ended March 31, 2023 compared to $6.9 million in the same period last year. This is primarily comprised of net 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 in the first quarter of last year as compared to same period this year.

Other (non-core)

We recorded equity loss from unconsolidated subsidiaries of approximately $26.3 million for the three months ended March 31, 2023 from unfavorable fair value adjustments related to certain non-core investments as compared to a $125.2 million net unfavorable adjustment recorded during the three months ended March 31, 2022.

We recorded losses of approximately $8.9 million during three months ended March 31, 2022 due to the sale of certain marketable equity securities with no similar activity in first quarter of 2023.

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 2023 include up to approximately $334.5 million of anticipated capital expenditures, net of tenant concessions. During the three months ended March 31, 2023, we incurred $59.8 million of capital expenditures, net of tenant concessions received. As of March 31, 2023, we had aggregate future commitments of $93.1 million related to co-investments funds in our Real Estate Investments segment, $30.4 million of which is expected to be funded in 2023. Additionally, as of March 31, 2023, we are committed to fund additional capital of $135.3 million and $96.7 million to consolidated and unconsolidated projects, respectively, within our Real Estate Investments segment. As of March 31, 2023, we had $2.5 billion of borrowings available under our revolving credit facilities (under both the Revolving Credit Agreement, as described below, and the Turner & Townsend revolving credit facility) and $1.2 billion of cash and cash equivalents.

We have historically relied on our internally generated cash flow and our revolving credit facilities 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.

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 March 31, 2023 and December 31, 2022, we had accrued deferred purchase consideration totaling $542.4 million ($62.7 million of which was a current liability), and $574.3 million ($117.3 million of which was a current liability), respectively, 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.

In November 2021, our board of directors authorized a 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 March 31, 2023, we repurchased 1,368,173 shares of our Class A common stock with an average price of $83.48 per share using cash on hand for $114.2 million. As of both March 31, 2023 and April 24, 2023, we had $2.0 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.

Historical Cash Flows

Operating Activities

Net cash used in operating activities totaled $744.8 million for the three months ended March 31, 2023, an increase of $351.3 million as compared to the three months ended March 31, 2022. The primary driver was lower earnings this quarter as compared to a strong first quarter in 2022. The other key drivers that contributed to the higher usage were as follows: (1) lower net equity distribution from unconsolidated subsidiaries this quarter as compared to first quarter 2022, and (2) lower net proceeds from sale of equity securities this quarter as compared to first quarter 2022. These were partially offset by a positive net cash inflow associated with net working capital and real estate under development activities. This was mainly due to timing of certain cash tax payments and refunds that led to higher outflow last year, lower outflow related to accounts payable and accrued this year, partially offset by higher outflow related to net bonus payments, compensation and other employee benefits, increase in accounts receivable and changes in net income taxes receivable accounts.

Investing Activities

Net cash used in investing activities totaled $115.1 million for the three months ended March 31, 2023, an increase of $19.4 million as compared to the three months ended March 31, 2022. This increase was primarily driven by higher capital expenditures compared to 2022 to support various growth initiatives, and higher spend on strategic in-fill acquisitions during this period as compared to the three months ended March 31, 2022. This was partially offset by lower net contributions to unconsolidated subsidiaries as compared to the three months ended March 31, 2022.

Financing Activities

Net cash provided by financing activities totaled $761.0 million for the three months ended March 31, 2023 as compared to net cash used in financing activities of $209.0 million for the three months ended March 31, 2022. The increased inflow was primarily due to (1) $1.0 billion in net proceeds from our revolving credit facility received this period as compared to net proceeds of $210.0 million last year, and (2) lower share repurchase activity this quarter as compared to first quarter last year. This was partially offset by $46.5 million in increased outflow related to acquisitions where cash was paid after 90 days of the acquisition date.

Indebtedness

We use a variety of financing arrangements, both long-term and short-term, to fund our operations in addition to cash generated from operating activities. We also use several funding sources to avoid becoming overly dependent on one financing source, and to lower funding costs.

Long-Term Debt

On July 9, 2021, CBRE Services, Inc. (CBRE Services) entered into an additional incremental assumption agreement with respect to its credit agreement, dated October 31, 2017 (such agreement, as amended by a December 20, 2018 incremental term loan assumption agreement, a March 4, 2019 incremental assumption agreement and such July 9, 2021 incremental assumption agreement, collectively, the 2021 Credit Agreement) for purposes of increasing the revolving credit commitments previously available under the 2021 Credit Agreement by an aggregate principal amount of $350.0 million.

On May 21, 2021, we entered into a definitive agreement whereby our subsidiary guarantors were released as guarantors from the 2021 Credit Agreement.

On December 10, 2021, CBRE Services and certain of the other borrowers entered into a first amendment to the 2021 Credit Agreement which (i) changed the interest rate applicable to revolving borrowings denominated in Sterling from a LIBOR-based rate to a rate based on the Sterling Overnight Index Average (SONIA) and (ii) changed the interest rate applicable to revolving borrowings denominated in Euros from a LIBOR-based rate to a rate based on EURIBOR. The revised interest rates described above went into effect on January 1, 2022.

On 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 new administrative agent (the 2021 Credit Agreement, as amended by the first amendment and 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 March 31, 2023, 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 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 and are guaranteed on a senior basis by CBRE Group, Inc. Interest accrues at a rate of 2.500% per year and is payable semi-annually in arrears on April 1 and October 1 of each year, beginning on October 1, 2021.

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 and are guaranteed on a senior basis by CBRE Group, Inc. Interest accrues at a rate of 4.875% per year and is payable semi-annually in arrears on March 1 and September 1.

The indentures governing our 4.875% senior notes and 2.500% senior notes contain restrictive covenants that, among other things, limit our ability to create or permit liens on assets securing indebtedness, enter into sale/leaseback transactions and enter into consolidations or mergers.

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):

March 31, 2023December 31, 2022
Balance Sheet Data:
Current assets$276$8,628
Non-current assets12,34413,002
Total assets$12,620$21,630
Current liabilities$1,221,582$206,026
Non-current liabilities (1)1,543,3601,804,975
Total liabilities (1)$2,764,942$2,011,001
Three Months Ended March 31,
20232022
Statement of Operations Data:
Revenue$—$—
Operating loss(441)(540)
Net (loss) income(8,613)5,682

(1)Includes $457.1 million and $719.3 million of intercompany loan payables to non-guarantor subsidiaries as of March 31, 2023 and December 31, 2022, respectively. All intercompany balances and transactions between CBRE Group, Inc. and CBRE Services have been eliminated.

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 2022 Annual Report and Note 7 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 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 not to exceed $300.0 million in the aggregate.

As of March 31, 2023, $1.2 billion was outstanding under the Revolving Credit Agreement. No letters of credit were outstanding as of March 31, 2023. As of April 24, 2023, $1.4 billion 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 pursuant to a credit agreement dated March 31, 2022, with an additional accordion option of £20.0 million. As of March 31, 2023, $8.6 million (£7.0 million) was outstanding under this revolving credit facility and bears interest at SONIA plus 0.75%. No balance was outstanding as of April 24, 2023.

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 2022 Annual Report and Notes 3 and 7 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 3 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 9 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, 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;

  • 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 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, fire and safety building requirements and regulations, as well as data privacy and protection regulations, ESG matters, 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 2022 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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