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 and six months ended June 30, 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 are currently ranked #135 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. We have also been rated a World’s Most Ethical Company by the Ethisphere Institute for ten consecutive years, and included in the Dow Jones World Sustainability Index for four years in a row (including 2022, the most recent year this ranking is available) and the Bloomberg Gender-Equality Index for four years in a row.

The macroeconomic environment remains challenging as central banks continue to rapidly raise interest rates. The rising rate environment, coupled with large bank failures in early 2023 and ongoing economic uncertainty, have limited credit availability to 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 June 30, 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 central banks to tame high inflation by rapidly raising interest rates has sharply increased the cost of debt and limited 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 business has incurred higher input costs for construction materials. On the other hand, we believe that parts of our business are insulated to some degree against inflation through the ability to raise prices, sometimes through provisions in our service contracts. 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 capital markets 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 during the depth of the Covid-19 pandemic or the current rapidly rising interest rate environment and stressed banking sector, 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 such cost reduction efforts in 2022 continuing into 2023. Additionally, our contractual revenue has increased primarily as a result of growth in our occupier 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 the first half of 2023, we completed nine in-fill acquisitions, including four in the Advisory Services segment and five in the Global Workplace Solutions segment totaling $208.4 million in cash and deferred consideration. 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.

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 June 30, 2023, we have accrued deferred purchase and contingent considerations totaling $565.8 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 impacted by the 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 rapid changes in and high levels of interest rates, reduced access to debt capital or liquidity constraints, downturns in general macroeconomic conditions, regulatory or financial market uncertainty, or unanticipated disruptions such as public health crises like Covid-19 and geopolitical events like the war in Ukraine (or the perception that such disruptions may occur).

During the three and six months ended June 30, 2023, approximately 45.3% and 44.7% 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 June 30,																								Six Months Ended June 30,
			2023												2022												2023												2022
United States dollar			$	4,220,293					54.7		%				$	4,436,115					57.1		%				$	8,365,103					55.3		%				$	8,567,512					56.7		%
British pound sterling			1,055,985						13.7		%				1,046,493						13.5		%				2,051,413						13.6		%				2,032,491						13.5		%
Euro			722,234						9.4		%				713,384						9.2		%				1,379,715						9.1		%				1,395,296						9.2		%
Canadian dollar			285,572						3.7		%				324,217						4.2		%				579,823						3.8		%				642,776						4.3		%
Australian dollar			219,772						2.8		%				196,204						2.5		%				410,590						2.7		%				362,143						2.4		%
Indian rupee			158,800						2.1		%				127,620						1.6		%				313,051						2.1		%				247,486						1.6		%
Chinese yuan			135,729						1.8		%				121,580						1.6		%				246,482						1.6		%				239,923						1.6		%
Japanese yen			113,270						1.5		%				95,431						1.2		%				229,055						1.5		%				212,902						1.4		%
Swiss franc			100,334						1.3		%				97,016						1.2		%				196,862						1.3		%				192,573						1.3		%
Singapore dollar			101,219						1.3		%				84,934						1.1		%				195,584						1.3		%				168,060						1.1		%
Other currencies (1)			606,655						7.7		%				528,284						6.8		%				1,163,299						7.7		%				1,043,049						6.9		%
Total revenue			$	7,719,863					100.0		%				$	7,771,278					100.0		%				$	15,130,977					100.0		%				$	15,104,211					100.0		%

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(1)Approximately 46 currencies comprise 7.7% of our revenue for the three and six months ended June 30, 2023, and approximately 48 currencies comprise 6.8% and 6.9% of our revenue for the three and six months ended June 30, 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 will 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 six months ended June 30, 2023, the net impact would have been a decrease in pre-tax income of $0.9 million. Had the euro-to-U.S. dollar exchange rates been 10% higher during the six months ended June 30, 2023, the net impact would have been an increase in pre-tax income of $5.8 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, geopolitical events and changing regulatory environments, which affect the currency markets and, as a result, may also 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 six months ended June 30, 2023 and 2022 (dollars in thousands):

			Three Months Ended June 30,																								Six Months Ended June 30,
			2023												2022												2023												2022
Revenue:
Net revenue:
Facilities management			$	1,439,249					18.6		%				$	1,283,749					16.5		%				$	2,834,451					18.7		%				$	2,526,279					16.7		%
Property management			459,223						5.9		%				444,450						5.7		%				900,419						6.0		%				882,544						5.9		%
Project management			765,857						9.9		%				672,218						8.7		%				1,500,631						9.9		%				1,296,180						8.6		%
Valuation			179,720						2.3		%				196,539						2.5		%				345,332						2.3		%				377,681						2.5		%
Loan servicing			79,344						1.0		%				84,642						1.1		%				156,829						1.0		%				158,657						1.1		%
Advisory leasing			813,952						10.5		%				969,708						12.5		%				1,522,605						10.1		%				1,742,430						11.5		%
Capital markets:
Advisory sales			397,748						5.2		%				715,719						9.2		%				765,152						5.1		%				1,335,546						8.8		%
Commercial mortgage origination			90,286						1.2		%				160,383						2.1		%				161,225						1.1		%				305,253						2.0		%
Investment management			151,327						2.0		%				157,554						2.0		%				298,817						2.0		%				308,121						2.0		%
Development services			104,330						1.4		%				119,727						1.5		%				180,686						1.2		%				252,917						1.7		%
Corporate, other and eliminations			(3,529)						0.0		%				(2,131)						0.0		%				(7,851)						(0.1)		%				(7,019)						0.0		%
Total net revenue			4,477,507						58.0		%				4,802,558						61.8		%				8,658,296						57.3		%				9,178,589						60.8		%
Pass through costs also recognized as revenue			3,242,356						42.0		%				2,968,720						38.2		%				6,472,681						42.7		%				5,925,622						39.2		%
Total revenue			7,719,863						100.0		%				7,771,278						100.0		%				15,130,977						100.0		%				15,104,211						100.0		%
Costs and expenses:
Cost of revenue			6,179,496						80.0		%				6,053,984						77.9		%				12,185,910						80.5		%				11,806,178						78.2		%
Operating, administrative and other			1,088,812						14.1		%				1,188,819						15.3		%				2,297,716						15.2		%				2,254,815						14.9		%
Depreciation and amortization			154,387						2.0		%				162,359						2.1		%				315,878						2.1		%				311,391						2.1		%
Asset impairments			—						0.0		%				26,405						0.3		%				—						0.0		%				36,756						0.2		%
Total costs and expenses			7,422,695						96.1		%				7,431,567						95.6		%				14,799,504						97.8		%				14,409,140						95.4		%
Gain on disposition of real estate			9,261						0.1		%				177,226						2.3		%				12,321						0.1		%				198,818						1.3		%
Operating income			306,429						4.0		%				516,937						6.7		%				343,794						2.3		%				893,889						5.9		%
Equity (loss) income from unconsolidated subsidiaries			(7,502)						(0.1)		%				119,168						1.5		%				134,181						0.9		%				162,039						1.1		%
Other income (loss)			5,612						0.1		%				(6,909)						(0.1)		%				8,086						0.1		%				(21,373)						(0.2)		%
Interest expense, net of interest income			42,982						0.6		%				18,518						0.2		%				71,396						0.5		%				31,344						0.2		%
Income before provision for income taxes			261,557						3.4		%				610,678						7.9		%				414,665						2.8		%				1,003,211						6.6		%
Provision for income taxes			55,404						0.7		%				120,762						1.6		%				83,439						0.6		%				117,024						0.8		%
Net income			206,153						2.7		%				489,916						6.3		%				331,226						2.2		%				886,187						5.8		%
Less: Net income attributable to non-controlling interests			4,750						0.1		%				2,594						0.0		%				12,931						0.1		%				6,568						0.0		%
Net income attributable to CBRE Group, Inc.			$	201,403					2.6		%				$	487,322					6.3		%				$	318,295					2.1		%				$	879,619					5.8		%
Core EBITDA			$	503,522					6.5		%				$	918,592					11.8		%				$	1,036,111					6.8		%				$	1,650,655					10.9		%

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, efficiency and cost-reduction initiatives, integration and other costs related to acquisitions and a provision associated with Telford's fire safety remediation efforts. 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 June 30,												Six Months Ended June 30,
			2023						2022						2023						2022
Net income attributable to CBRE Group, Inc.			$	201,403					$	487,322					$	318,295					$	879,619
Net income attributable to non-controlling interests			4,750						2,594						12,931						6,568
Net income			206,153						489,916						331,226						886,187
Adjustments:
Depreciation and amortization			154,387						162,359						315,878						311,391
Asset impairments			—						26,405						—						36,756
Interest expense, net of interest income			42,982						18,518						71,396						31,344
Provision for income taxes			55,404						120,762						83,439						117,024
Carried interest incentive compensation (reversal) expense to align with the timing of associated revenue			(459)						(7,495)						6,519						15,361
Impact of fair value adjustments to real estate assets acquired in the Telford acquisition (purchase accounting) that were sold in period			—						(1,451)						—						(3,147)
Costs incurred related to legal entity restructuring			—						10,245						—						11,921
Integration and other costs related to acquisitions			36,444						8,209						54,578						16,330
Costs associated with efficiency and cost-reduction initiatives			2,310						—						140,557						—
Provision associated with Telford’s fire safety remediation efforts			—						37,505						—						37,505
Net fair value adjustments on strategic non-core investments			6,301						53,619						32,518						189,983
Core EBITDA			$	503,522					$	918,592					$	1,036,111					$	1,650,655

Three Months Ended June 30, 2023 Compared to the Three Months Ended June 30, 2022

We reported consolidated net income of $201.4 million for the three months ended June 30, 2023 on revenue of $7.7 billion as compared to consolidated net income of $487.3 million on revenue of $7.8 billion for the three months ended June 30, 2022.

Our revenue on a consolidated basis for the three months ended June 30, 2023 decreased by $51.4 million, or 0.7%, as compared to the three months ended June 30, 2022. The revenue decrease is primarily due to a 21.4% decline in our Advisory Services segment which has been significantly impacted by the current macroeconomic conditions and fiscal environment driving down sales and lease revenue. These factors also impacted our Real Estate Investments (REI) segment which experienced an approximate 7.8% revenue decline during the quarter, primarily due to decreased development and construction revenue and lower real estate sales activities in the international development markets. This decline was partially offset by a 10.6% revenue increase in the Global Workplace Solutions (GWS) segment due to new client wins, expansion of services to existing clients, and contributions from strategic in-fill acquisitions. Foreign currency translation had a 1.4% negative impact on total revenue during the three months ended June 30, 2023, primarily driven by weakness in the British pound sterling, Australian dollar and Canadian dollar.

Our cost of revenue on a consolidated basis increased by $125.5 million, or 2.1%, during the three months ended June 30, 2023 as compared to the same period in 2022. This increase was primarily due to higher costs associated with the growth in our Global Workplace Solutions segment. 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 1.5% positive impact on total cost of revenue during the three months ended June 30, 2023. Cost of revenue as a percentage of revenue increased to 80.0% for the three months ended June 30, 2023 as compared to 77.9% for the three months ended June 30, 2022. This was mainly due to growth in our Global Workplace Solutions segment that generally has a lower gross margin coupled with a decline in Advisory Services that generally has a higher gross margin, thereby increasing the overall cost of revenue as a percentage of revenue and decreasing overall gross margin.

Our operating, administrative and other expenses on a consolidated basis decreased by $100.0 million, or 8.4%, during the three months ended June 30, 2023 as compared to the same period in 2022. The decrease was primarily due to lower incentive compensation expense, partially offset by higher professional fees to support us as we continue to explore various capital allocation opportunities and incremental operating expenses in the GWS segment to support the growth. Foreign currency translation had a 1.1% positive impact on total operating, administrative and other expenses during the three months ended June 30, 2023. Operating expenses as a percentage of revenue decreased to 14.1% for the three months ended June 30, 2023 from 15.3% for the three months ended June 30, 2022, primarily due to variable nature of our incentive compensation expense in the Advisory Services and REI segments.

Our depreciation and amortization expense on a consolidated basis decreased by $8.0 million, or 4.9%, during the three months ended June 30, 2023 as compared to the same period in 2022. This decrease is primarily due to accelerated amortization recorded in the prior year related to loan payoffs in the Capital Markets loan servicing business as compared to minimal such activity in the current quarter.

We did not record any asset impairments for the three months ended June 30, 2023. We recorded $26.4 million in asset impairments on a consolidated basis for the three months ended June 30, 2022 in our Real Estate Investment segment related to Telford Homes.

We recorded equity loss of $7.5 million on unconsolidated subsidiaries for the three months ended June 30, 2023, as compared to equity income of $119.2 million during the three months ended June 30, 2022. This was mainly due to some large unconsolidated deals in the Real Estate Investment segment that generated higher equity earnings in the prior year. Our gain on disposition of real estate on a consolidated basis was $9.3 million for the three months ended June 30, 2023, which was a decrease of $168.0 million over the prior year period, due to fewer property sales of certain consolidated projects within our Real Estate Investments segment.

Our other income on a consolidated basis was $5.6 million for the three months ended June 30, 2023 versus a loss of $6.9 million for the same period in the prior year. Losses incurred last year were primarily due to 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.

Our consolidated interest expense, net of interest income, increased by $24.5 million, or 132.1%, for the three months ended June 30, 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 $55.4 million for the three months ended June 30, 2023 as compared to a provision for income taxes of $120.8 million for the three months ended June 30, 2022. The decrease of $65.4 million is primarily related to a decrease in corresponding earnings. Our effective tax rate increased to 21.2% for the three months ended June 30, 2023 from 19.8% for the three months ended June 30, 2022. Our effective tax rate for the three months ended June 30, 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.

Six Months Ended June 30, 2023 Compared to the Six Months Ended June 30, 2022

We reported consolidated net income of $318.3 million for the six months ended June 30, 2023 on revenue of $15.1 billion as compared to consolidated net income of $879.6 million on revenue of $15.1 billion for the six months ended June 30, 2022.

Our revenue on a consolidated basis for the six months ended June 30, 2023 increased by $26.8 million, or 0.2%, as compared to the six months ended June 30, 2022. The revenue increase reflects growth across our Global Workplace Solutions segment, which increased by 10.8% primarily due to new client wins, expansion of services to existing clients, and contributions from strategic in-fill acquisitions. Advisory Services segment revenue decreased by $940.9 million or 19.5% as all lines of business, except property management, declined this period as compared to the same period in the prior year given the current macroeconomic conditions. Revenue in the Real Estate Investments services segment was down 14.5% due to decreased development and construction revenue and lower real estate sales activities primarily in the international development markets. Foreign currency translation had a 2.4% negative impact on total revenue during the six months ended June 30, 2023, primarily driven by weakness in the British pound sterling, Canadian dollar and Australian dollar.

Our cost of revenue on a consolidated basis increased by $379.7 million, or 3.2%, during the six months ended June 30, 2023 as compared to the same period in 2022. This increase was primarily due to higher costs associated with our Global Workplace Solutions segment given the growth, partially offset by lower cost of revenue in our Advisory Services and Real Estate Investments segments given the variable nature of much of the cost of revenue components for these segments. Foreign currency translation had a 2.4% positive impact on total cost of revenue during the six months ended June 30, 2023. Cost of revenue as a percentage of revenue increased to 80.5% for the six months ended June 30, 2023 as compared to 78.2% for the six months ended June 30, 2022 largely due to a shift in growth composition from the Advisory Services segment, which are generally higher gross margin, to the GWS segment, which is generally lower gross margin.

Our operating, administrative and other expenses on a consolidated basis increased by $42.9 million, or 1.9%, for the six months ended June 30, 2023 as compared to the same period in 2022. The increase was primarily due to an increase in overall expenses to support the growth in the GWS segment, charges associated with efficiency and cost-reduction initiatives as compared to the six months ended June 30, 2022, and higher professional fees to support us as we continue to explore various capital allocation opportunities. This was partially offset by a decrease in overall incentive compensation expense tied to overall company performance. Foreign currency translation also had a 2.3% positive impact on total operating expenses during the six months ended June 30, 2023. Operating expenses as a percentage of revenue increased slightly to 15.2% for the six months ended June 30, 2023 from 14.9% for the six months ended June 30, 2022, primarily due to investments made in the GWS segment in infrastructure to drive business growth.

Our depreciation and amortization expense on a consolidated basis increased by $4.5 million, or 1.4%, during the six months ended June 30, 2023 as compared to the same period in 2022. This increase was primarily due to accelerated depreciation expense as part of our efficiency and cost-reduction initiatives that occurred in first quarter 2023, partially offset by lower amortization expense during the six months ended June 30, 2023 as compared to June 30, 2022 due to accelerated amortization related to loan payoffs in our Capital Markets loan servicing business last year.

We did not record any asset impairments for the six months ended June 30, 2023. Our asset impairments on a consolidated basis totaled $36.8 million for the six months ended June 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 Investments segment during the second quarter of 2022 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.

Our gain on disposition of real estate on a consolidated basis decreased by $186.5 million, during the six months ended June 30, 2023 as compared to the same period in 2022 due to significant gains associated with certain property sales on consolidated deals within our Real Estate Investments segment last year as compared to this year which was affected by the economic uncertainty and higher interest rates.

Our equity income from unconsolidated subsidiaries on a consolidated basis decreased by $27.9 million, or 17.2%, during the six months ended June 30, 2023 as compared to the same period in 2022, 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 $40.1 million, or 127.8%, for the six months ended June 30, 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 $83.4 million for the six months ended June 30, 2023 as compared to a provision for income taxes of $117.0 million for the six months ended June 30, 2022. The decrease of $33.6 million is primarily related to a decrease from corresponding earnings, offset by a one-time tax benefit in 2022 as a result of legal entity restructuring. Our effective tax rate increased to 20.1% for the six months ended June 30, 2023 from 11.7% for the six months ended June 30, 2022. Our effective tax rate for the six months ended June 30, 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 and six months ended June 30, 2023 and 2022 (dollars in thousands):

			Three Months Ended June 30,																								Six Months Ended June 30,
			2023												2022												2023												2022
Revenue:
Net revenue:
Property management			$	459,223					22.5		%				$	444,450					17.2		%				$	900,419					23.1		%				$	882,544					18.3		%
Valuation			179,720						8.8		%				196,539						7.6		%				345,332						8.9		%				377,681						7.8		%
Loan servicing			79,344						3.9		%				84,642						3.3		%				156,829						4.0		%				158,657						3.3		%
Advisory leasing			813,952						39.9		%				969,708						37.5		%				1,522,605						39.2		%				1,742,430						36.0		%
Capital markets:
Advisory sales			397,748						19.5		%				715,719						27.7		%				765,152						19.6		%				1,335,546						27.6		%
Commercial mortgage origination			90,286						4.4		%				160,383						6.1		%				161,225						4.1		%				305,253						6.3		%
Total segment net revenue			2,020,273						99.0		%				2,571,441						99.4		%				3,851,562						98.9		%				4,802,111						99.3		%
Pass through costs also recognized as revenue			21,400						1.0		%				16,542						0.6		%				43,979						1.1		%				34,320						0.7		%
Total segment revenue			2,041,673						100.0		%				2,587,983						100.0		%				3,895,541						100.0		%				4,836,431						100.0		%
Costs and expenses:
Cost of revenue			1,233,594						60.4		%				1,554,472						60.1		%				2,360,346						60.6		%				2,866,763						59.3		%
Operating, administrative and other			498,060						24.4		%				514,412						19.9		%				1,020,924						26.2		%				994,667						20.6		%
Depreciation and amortization			71,699						3.5		%				79,416						3.1		%				150,142						3.9		%				154,303						3.2		%
Asset impairments			—						0.0		%				—						0.0		%				—						0.0		%				10,351						0.2		%
Total costs and expenses			1,803,353						88.3		%				2,148,300						83.1		%				3,531,412						90.7		%				4,026,084						83.3		%
Gain on disposition of real estate			3						0.0		%				—						0.0		%				3						0.0		%				—						0.0		%
Operating income			238,323						11.7		%				439,683						16.9		%				364,132						9.3		%				810,347						16.7		%
Equity income from unconsolidated subsidiaries			1,451						0.1		%				1,505						0.1		%				2,452						0.1		%				11,261						0.2		%
Other income			2,117						0.1		%				53						0.0		%				4,055						0.1		%				49						0.0		%
Add-back: Depreciation and amortization			71,699						3.5		%				79,416						3.1		%				150,142						3.9		%				154,303						3.2		%
Add-back: Asset impairments			—						0.0		%				—						0.0		%				—						0.0		%				10,351						0.2		%
Adjustments:
Costs associated with efficiency and cost-reduction initiatives			1,853						0.1		%				—						0.0		%				64,394						1.6		%				—						0.0		%
Segment operating profit and segment operating profit on revenue margin			$	315,443					15.5		%				$	520,657					20.1		%				$	585,175					15.0		%				$	986,311					20.3		%
Segment operating profit on net revenue margin									15.6		%										20.2		%										15.2		%										20.5		%

Three Months Ended June 30, 2023 Compared to the Three Months Ended June 30, 2022

Revenue decreased by $546.3 million, or 21.1%, for the three months ended June 30, 2023 as compared to the three months ended June 30, 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 and therefore capital markets transaction activity has significantly declined. Leasing revenue declined 16.1%, sales revenue was down 44.4% and mortgage origination revenue was down 43.7%. 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 across the globe. Foreign currency translation had a 1.2% negative impact on total revenue during the three months ended June 30, 2023, primarily driven by weakness in the Australian dollar, Japanese yen and Canadian dollar.

Cost of revenue decreased by $320.9 million, or 20.6%, for the three months ended June 30, 2023 as compared to the same period in 2022, primarily due to lower commission expense tied to a decline in our leasing and capital markets business. Foreign currency translation had a 1.2% positive impact on total cost of revenue during the three months ended June 30, 2023. Cost of revenue as a percentage of revenue slightly increased to 60.4% for the three months ended June 30, 2023 versus 60.1% 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 decreased by $16.4 million, or 3.2%, for the three months ended June 30, 2023 as compared to the three months ended June 30, 2022. This decrease was primarily due to results of our cost-reduction initiatives and lower incentive compensation expense to align with expected segment and company performance. Foreign currency translation had a 1.3% positive impact on total operating expenses during the three months ended June 30, 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 June 30, 2023, MSRs contributed to operating income $21.1 million of gains recognized in conjunction with the origination and sale of mortgage loans, offset by $37.1 million of amortization of related intangible assets. For the three months ended June 30, 2022, MSRs contributed to operating income $35.4 million of gains recognized in conjunction with the origination and sale of mortgage loans, offset by $44.6 million of amortization of related intangible assets. The decline in MSRs was associated with lower origination activity given the higher cost of debt.

Depreciation and amortization expense for the Advisory Services segment decreased by $7.7 million, or 9.7%, during the three months ended June 30, 2023 as compared to the same period in 2022. This decrease is primarily due to accelerated amortization recorded in prior year related to loan payoffs in the Capital Markets loan servicing business as compared to minimal such activity in the current quarter.

Six Months Ended June 30, 2023 Compared to the Six Months Ended June 30, 2022

Revenue decreased by $940.9 million, or 19.5%, for the six months ended June 30, 2023 as compared to the six months ended June 30, 2022, driven by decline in all lines of business except property management. The revenue decrease primarily reflects lower sales, down 42.7%, and leasing revenue, down 12.6%, as well as lower valuation revenue driven by decreased revenue per assignment and lower demand given the market conditions. Commercial mortgage origination revenue was down 47.2%. The current macroeconomic and fiscal environment has continued to put a significant stress on the lending environment making it difficult to access capital at a reasonable cost and therefore capital markets activity has significantly declined. Property management revenue was up 3.0%. Foreign currency translation had a 1.8% negative impact on total revenue during the six months ended June 30, 2023, primarily driven by weakness in Japanese yen, British pound sterling and Australian dollar.

Cost of revenue decreased by $506.4 million, or 17.7%, for the six months ended June 30, 2023 as compared to the same period in 2022, primarily due to variable compensation structure leading to lower commission expense resulting from lower sales and leasing revenue. Foreign currency translation also had a 1.8% positive impact on total cost of revenue during the six months ended June 30, 2023. Cost of revenue as a percentage of revenue increased to 60.6% for the six months ended June 30, 2023 from 59.3% for the six months ended June 30, 2022. This was due to a shift in the composition of total revenue where high margin capital markets revenue decreased as a percentage of total revenue this quarter versus the same period last year offset by growth in property management at a lower margin.

Operating, administrative and other expenses increased by $26.3 million, or 2.6%, for the six months ended June 30, 2023 as compared to the six months ended June 30, 2022. This increase was primarily due to elevated employee separation benefits and lease exit related charges incurred under our efficiency and cost-reduction initiatives in first quarter 2023, partially offset by lower incentive compensation expense to align with expected segment and company performance, as compared to the six months ended June 30, 2022. Foreign currency translation also had a 2.3% positive impact on total operating expenses during the six months ended June 30, 2023.

For the six months ended June 30, 2023, MSRs contributed to operating income $37.8 million of gains recognized in conjunction with the origination and sale of mortgage loans, offset by $73.7 million of amortization of related intangible assets. For the six months ended June 30, 2022, MSRs contributed to operating income $70.6 million of gains recognized in conjunction with the origination and sale of mortgage loans, offset by $85.7 million of amortization of related intangible assets. The decline was associated with lower origination activity given the higher cost of debt.

Depreciation expense increased by $8.3 million or 12.0% due to accelerated depreciation expense related to cost-reduction initiatives in first quarter 2023. Amortization expense during the six months ended June 30, 2023 decreased by $12.5 million, as compared to the same period in 2022, primarily due to accelerated amortization related to loan payoffs in the Capital Markets loan servicing business last year.

Global Workplace Solutions

The following table summarizes our results of operations for our Global Workplace Solutions operating segment for the three and six months ended June 30, 2023 and 2022 (dollars in thousands):

			Three Months Ended June 30,																								Six Months Ended June 30,
			2023												2022												2023												2022
Revenue:
Net revenue:
Facilities management			$	1,439,249					26.5		%				$	1,283,749					26.2		%				$	2,834,451					26.3		%				$	2,526,279					26.0		%
Project management			765,857						14.1		%				672,218						13.7		%				1,500,631						14.0		%				1,296,180						13.4		%
Total segment net revenue			2,205,106						40.6		%				1,955,967						39.9		%				4,335,082						40.3		%				3,822,459						39.4		%
Pass through costs also recognized as revenue			3,220,956						59.4		%				2,952,178						60.1		%				6,428,702						59.7		%				5,891,302						60.6		%
Total segment revenue			5,426,062						100.0		%				4,908,145						100.0		%				10,763,784						100.0		%				9,713,761						100.0		%
Costs and expenses:
Cost of revenue			4,897,144						90.3		%				4,443,566						90.5		%				9,739,793						90.5		%				8,817,533						90.8		%
Operating, administrative and other			306,470						5.6		%				254,962						5.2		%				629,530						5.8		%				494,348						5.0		%
Depreciation and amortization			65,565						1.2		%				70,859						1.5		%				129,120						1.2		%				132,828						1.4		%
Total costs and expenses			5,269,179						97.1		%				4,769,387						97.2		%				10,498,443						97.5		%				9,444,709						97.2		%
Operating income			156,883						2.9		%				138,758						2.8		%				265,341						2.5		%				269,052						2.8		%
Equity income (loss) from unconsolidated subsidiaries			379						0.0		%				(400)						0.0		%				721						0.0		%				463						0.0		%
Other income			1,420						0.0		%				870						0.0		%				1,909						0.0		%				2,359						0.0		%
Add-back: Depreciation and amortization			65,565						1.2		%				70,859						1.5		%				129,120						1.2		%				132,828						1.4		%
Adjustments:
Integration and other costs related to acquisitions			8,023						0.1		%				8,209						0.1		%				15,447						0.1		%				16,330						0.1		%
Costs associated with efficiency and cost-reduction initiatives			410						0.1		%				—						0.0		%				49,798						0.5		%				—						0.0		%
Segment operating profit and segment operating profit on revenue margin			$	232,680					4.3		%				$	218,296					4.4		%				$	462,336					4.3		%				$	421,032					4.3		%
Segment operating profit on net revenue margin									10.6		%										11.2		%										10.7		%										11.0		%

Three Months Ended June 30, 2023 Compared to the Three Months Ended June 30, 2022

Revenue increased by $517.9 million, or 10.6%, for the three months ended June 30, 2023 as compared to the three months ended June 30, 2022. The GWS segment has experienced growth from new and existing clients and contributions from certain strategic and in-fill acquisitions. Foreign currency translation had a 1.6% negative impact on total revenue during the three months ended June 30, 2023, primarily driven by weakness in the British pound sterling, Canadian dollar and Australian dollar.

Cost of revenue increased by $453.6 million, or 10.2%, for the three months ended June 30, 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 1.5% positive impact on total cost of revenue during the three months ended June 30, 2023. Cost of revenue as a percentage of revenue remained relatively flat at 90.3% for the three months ended June 30, 2023 as compared to 90.5% for the same period in 2022.

Operating, administrative and other expenses increased by $51.5 million, or 20.2%, for the three months ended June 30, 2023 as compared to the three months ended June 30, 2022. This increase was attributable to higher compensation and related benefits from overall growth, costs from acquired entities, and continued investment in overall infrastructure to support current and future growth. Foreign currency translation had a 1.8% positive impact on total operating expenses during the three months ended June 30, 2023.

Six Months Ended June 30, 2023 Compared to the Six Months Ended June 30, 2022

Revenue increased by $1.1 billion, or 10.8%, for the six months ended June 30, 2023 as compared to the six months ended June 30, 2022 due to new clients and expansion of services to existing clients, primarily in the project management space, in addition to growth from certain in-fill acquisitions. Foreign currency translation had a 2.6% negative impact on total revenue during the six months ended June 30, 2023, primarily driven by weakness in the British pound sterling.

Cost of revenue increased by $922.3 million, or 10.5%, for the six months ended June 30, 2023 as compared to the same period in 2022, driven by the higher revenue leading to higher pass through costs and increased professional compensation. Foreign currency translation had a 2.6% positive impact on total cost of revenue during the six months ended June 30, 2023. Cost of revenue as a percentage of revenue decreased slightly to 90.5% for the six months ended June 30, 2023 from 90.8% for the six months ended June 30, 2022, primarily due to increase in project management revenue which generally has higher margins.

Operating, administrative and other expenses increased by $135.2 million, or 27.3%, for the six months ended June 30, 2023 as compared to the six months ended June 30, 2022. The increase in compensation expense was attributable to investment in infrastructure to drive business growth. In addition, the GWS segment incurred approximately $50.0 million in charges related to employee separation benefits, lease exit and contract termination costs under our efficiency and cost-reduction initiatives in the first quarter 2023. Foreign currency translation also had a 3.6% positive impact on total operating expenses during the six months ended June 30, 2023.

Real Estate Investments

The following table summarizes our results of operations for our Real Estate Investments (REI) operating segment for the three and six months ended June 30, 2023 and 2022 (dollars in thousands):

			Three Months Ended June 30,																								Six Months Ended June 30,
			2023												2022												2023												2022
Revenue:
Investment management			$	151,327					59.2		%				$	157,554					56.8		%				$	298,817					62.3		%				$	308,121					54.9		%
Development services			104,330						40.8		%				119,727						43.2		%				180,686						37.7		%				252,917						45.1		%
Total segment revenue			255,657						100.0		%				277,281						100.0		%				479,503						100.0		%				561,038						100.0		%
Costs and expenses:
Cost of revenue			51,420						20.1		%				74,276						26.8		%				89,958						18.8		%				144,329						25.7		%
Operating, administrative and other			176,346						69.0		%				306,455						110.5		%				428,443						89.4		%				553,207						98.6		%
Depreciation and amortization			2,920						1.1		%				3,618						1.3		%				9,381						2.0		%				7,474						1.3		%
Asset impairments			—						0.0		%				26,405						9.5		%				—						0.0		%				26,405						4.7		%
Total costs and expenses			230,686						90.2		%				410,754						148.1		%				527,782						110.2		%				731,415						130.3		%
Gain on disposition of real estate			9,258						3.6		%				177,226						63.9		%				12,318						2.7		%				198,818						35.4		%
Operating income (loss)			34,229						13.4		%				43,753						15.8		%				(35,961)						(7.5)		%				28,441						5.1		%
Equity (loss) income from unconsolidated subsidiaries			(3,441)						(1.3)		%				172,986						62.4		%				163,234						34.0		%				330,426						58.9		%
Other loss			(118)						0.0		%				(803)						(0.3)		%				(3)						0.0		%				(895)						(0.2)		%
Add-back: Depreciation and amortization			2,920						1.1		%				3,618						1.3		%				9,381						2.0		%				7,474						1.3		%
Add-back: Asset impairments			—						0.0		%				26,405						9.5		%				—						0.0		%				26,405						4.7		%
Adjustments:
Carried interest incentive compensation (reversal) expense to align with the timing of associated revenue			(459)						(0.2)		%				(7,495)						(2.7)		%				6,519						1.4		%				15,361						2.7		%
Impact of fair value adjustments to real estate assets acquired in the Telford Acquisition (purchase accounting) that were sold in period			—						0.0		%				(1,451)						(0.5)		%				—						0.0		%				(3,147)						(0.5)		%
Costs associated with efficiency and cost-reduction initiatives			—						0.0		%				—						0.0		%				21,459						4.4		%				—						0.0		%
Provision associated with Telford’s fire safety remediation efforts			—						0.0		%				37,505						13.5		%				—						0.0		%				37,505						6.7		%
Segment operating profit and segment operating profit on revenue margin			$	33,131					13.0		%				$	274,518					99.0		%				$	164,629					34.3		%				$	441,570					78.7		%

Three Months Ended June 30, 2023 Compared to the Three Months Ended June 30, 2022

Revenue decreased by $21.6 million, or 7.8%, for the three months ended June 30, 2023 as compared to the three months ended June 30, 2022, driven by a decline in real estate sales and lower development and construction fees, primarily in the U.K. Asset management revenue increased 1% while incentive fee revenue experienced a large decline. Foreign currency translation had a 1.1% negative impact on total revenue during the three months ended June 30, 2023, primarily driven by weakness in the British pound sterling.

Cost of revenue decreased by $22.9 million, or 30.8%, for the three months ended June 30, 2023 as compared to the three months ended June 30, 2022. Cost of revenue as a percentage of revenue was 20.1% as compared to 26.8% 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. In addition, the mix of our development revenue shifted more towards development fees versus construction fees. This was partially offset by cost overruns on certain U.K. construction projects. Foreign currency translation had a 1.6% positive impact on total cost of revenue during the three months ended June 30, 2023.

Operating, administrative and other expenses decreased by $130.1 million, or 42.5%, for the three months ended June 30, 2023 as compared to the same period in 2022, primarily due to lower incentive compensation expense to align with business performance. In addition, we recorded $37.5 million in Telford's fire safety provision last year with no such provision in current quarter. Foreign currency translation had a 0.5% positive impact on total operating expenses during the three months ended June 30, 2023.

Equity income from unconsolidated subsidiaries declined by $176.4 million, or 102.0%, during the three months ended June 30, 2023 as compared to the same period in 2022. Gain on disposition of real estate decreased by $168.0 million during the three months ended June 30, 2023 as compared to the same period in 2022. This was primarily due to fewer development sales of consolidated projects affected by the current macroeconomic conditions and higher interest rates.

A roll forward of our AUM by product type for the three months ended June 30, 2023 is as follows (dollars in billions):

			Funds						Separate Accounts						Securities						Total
Balance at March 31, 2023			$	66.0					$	72.8					$	10.1					$	148.9
Inflows			0.4						1.2						0.5						2.1
Outflows			(1.2)						(0.8)						(0.7)						(2.7)
Market depreciation			(0.4)						(0.3)						—						(0.7)
Balance at June 30, 2023			$	64.8					$	72.9					$	9.9					$	147.6

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.

Six Months Ended June 30, 2023 Compared to the Six Months Ended June 30, 2022

Revenue decreased by $81.5 million, or 14.5%, for the six months ended June 30, 2023 as compared to the six months ended June 30, 2022, largely driven by a decrease in real estate sales and lower development and construction management fees in our development services line of business, primarily in the U.K. Foreign currency translation had a 2.6% negative impact on total revenue during the six months ended June 30, 2023, primarily driven by weakness in the British pound sterling.

Cost of revenue decreased by $54.4 million, or 37.7%, for the six months ended June 30, 2023 as compared to the six months ended June 30, 2022. Cost of revenue as a percentage of revenue was 18.8% for the six months ended June 30, 2023 as compared to 25.7% for the six months ended June 30, 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. In addition, the mix of our development revenue shifted more towards development fees versus construction fees. This was partially offset by cost overruns on certain U.K. construction projects. Foreign currency translation had a 3.8% positive impact on total cost of revenue during the six months ended June 30, 2023.

Operating, administrative and other expenses decreased by $124.8 million, or 22.6%, for the six months ended June 30, 2023 as compared to the same period in 2022, primarily due to lower incentive compensation expense to align with business performance, $37.5 million in estimated provision related to Telford's fire and building safety remediation work recorded last year with no such provision this year. This was partially off by $21.0 million in charges associated with company's efficiency and cost-reduction savings initiatives from the first quarter in 2023. Foreign currency translation had a 1.8% positive impact on total operating expenses during the six months ended June 30, 2023.

Our equity income from unconsolidated subsidiaries decreased by $167.2 million, or 50.6%, during the six months ended June 30, 2023 as compared to the same period in 2022. Gain on disposition of real estate decreased by $186.5 million during the six months ended June 30, 2023 as compared to the same period in 2022. This was primarily due to fewer development sales of consolidated projects this period compared to a strong six month ended June 30, 2022.

A roll forward of our AUM by product type for the six months ended June 30, 2023 is as follows (dollars in billions):

			Funds						Separate Accounts						Securities						Total
Balance at December 31, 2022			$	66.2					$	73.2					$	9.9					$	149.3
Inflows			1.8						3.6						0.8						6.2
Outflows			(1.8)						(2.0)						(1.0)						(4.8)
Market (depreciation) appreciation			(1.4)						(1.9)						0.2						(3.1)
Balance at June 30, 2023			$	64.8					$	72.9					$	9.9					$	147.6

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 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 and six months ended June 30, 2023 and 2022 (dollars in thousands):

			Three Months Ended June 30, (1)												Six Months Ended June 30, (1)
			2023						2022						2023						2022
Elimination of inter-segment revenue			$	(3,529)					$	(2,131)					$	(7,851)					$	(7,019)
Costs and expenses:
Cost of revenue (2)			(2,662)						(18,330)						(4,187)						(22,447)
Operating, administrative and other			107,936						112,990						218,819						212,593
Depreciation and amortization			14,203						8,466						27,234						16,786
Operating loss			(123,006)						(105,257)						(249,717)						(213,951)
Equity loss from unconsolidated subsidiaries			(5,891)						(54,923)						(32,226)						(180,111)
Other income (loss)			2,193						(7,029)						2,125						(22,886)
Add-back: Depreciation and amortization			14,203						8,466						27,234						16,786
Adjustments:
Integration and other costs related to acquisitions			28,421						—						39,131						—
Costs incurred related to legal entity restructuring			—						10,245						—						11,921
Costs associated with efficiency and cost-reduction initiatives			47						—						4,906						—
Segment operating loss			$	(84,033)					$	(148,498)					$	(208,547)					$	(388,241)

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

(2)Primarily relates to inter-segment eliminations.

Three Months Ended June 30, 2023 Compared to the Three Months Ended June 30, 2022

Core corporate

Operating, administrative and other expenses for our core corporate function were approximately $107.8 million for the three months ended June 30, 2023, as compared to $114.3 million for the three months ended June 30, 2022, a decrease of $6.5 million or 5.7%. This was primarily due to a provision associated with transfer taxes and costs related to previous legal entity restructures that was recorded in the second quarter of 2022 with no comparable activity this quarter, in addition to lower overall incentive compensation expense this quarter to align with expected company performance. This was partially offset by an increase in professional fees incurred as we continue to explore various capital allocation opportunities.

Other (non-core)

We recorded equity loss from unconsolidated subsidiaries of approximately $5.9 million for the three months ended June 30, 2023 from unfavorable fair value adjustments related to certain non-core investments as compared to a $54.9 million net unfavorable adjustment recorded during the three months ended June 30, 2022.

Six Months Ended June 30, 2023 Compared to the Six Months Ended June 30, 2022

Core corporate

Operating, administrative and other expenses for our core corporate function were approximately $218.8 million for the six months ended June 30, 2023, an increase of $7.2 million or 3.4% as compared to the six months ended June 30, 2022. This was primarily due to $4.9 million in charges associated with the efficiency and cost-reduction initiatives executed in the first quarter of 2023, higher professional fees incurred this period as compared to same period last year as we explore various capital allocation opportunities. This was partially offset by lower incentive compensation expense this year and a provision associated with transfer taxes and costs related to previous legal entity restructures recorded last year that did not recur this year.

Other income was approximately $2.4 million for the six months ended June 30, 2023 versus a loss of $13.9 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 last year.

Other (non-core)

We recorded equity loss of approximately $32.2 million during the six months ended June 30, 2023 as compared to a loss of $180.1 million during the six months ended June 30, 2022 from unfavorable fair value adjustments related to our investment in Altus Power Inc. and certain non-core investments.

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 $326.0 million of anticipated capital expenditures, net of tenant concessions. During the six months ended June 30, 2023, we incurred $128.5 million of capital expenditures, net of tenant concessions received. As of June 30, 2023, we had aggregate future commitments of $89.1 million related to co-investments funds in our Real Estate Investments segment, $23.5 million of which is expected to be funded in 2023. Additionally, as of June 30, 2023, we are committed to fund additional capital of $149.8 million and $78.4 million to consolidated and unconsolidated projects, respectively, within our Real Estate Investments segment. As of June 30, 2023, we had $3.1 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 $1.3 billion of cash and cash equivalents.

On July 10, 2023, CBRE Group, Inc., CBRE Services and Relam Amsterdam Holdings B.V., a wholly-owned subsidiary of CBRE Services, entered into a new five year senior unsecured Credit Agreement (the 2023 Credit Agreement). The 2023 Credit Agreement provides for a senior unsecured term loan credit facility comprised of (i) tranche A Euro-denominated term loans in an aggregate principal amount of €366.5 million and (ii) tranche A U.S. Dollar-denominated term loans in an aggregate principal amount of $350.0 million. The proceeds of the term loans under the 2023 Credit Agreement were applied to the repayment of all remaining outstanding loans under the 2022 Credit Agreement, the payment of related fees and expenses and other general corporate purposes.

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 facilities 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.

In June 2023, we conducted a new issuance for $1.0 billion in aggregate principal amount of 5.950% senior notes due in 2034 (the 5.950% senior notes) generating net proceeds of $975.3 million. In addition, we incurred debt issuance cost of $2.3 million related to this issuance.

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 June 30, 2023 and December 31, 2022, we had accrued deferred purchase consideration totaling $565.8 million ($68.7 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 long-term 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. We did not repurchase any of our common stock during the three months ended June 30, 2023 under the 2021 program. During the six months ended June 30, 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. During the period July 1, 2023 thru July 24, 2023, we repurchased 1,099,745 shares of our Class A common stock with an average price of $85.34 per share using cash on hand for $93.9 million. As of June 30, 2023 and July 24, 2023, we had $2.0 billion and $1.9 billion, respectively, 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 $755.6 million for the six months ended June 30, 2023 as compared to $60.9 million in net cash provided by operating activities during the six months ended June 30, 2022. The primary driver was significantly lower earnings this quarter as compared to a strong first half in 2022. The other key drivers that contributed to the higher usage were as follows: (1) lower net equity distribution from unconsolidated subsidiaries in the current period as compared to same period in 2022, (2) lower net proceeds from sale of equity securities, (3) certain non-cash charges that contributed to the cash inflow last year that did not recur this year, (4) and net outflow associated with net working capital and real estate under development activities. The net working capital change was mainly due to higher outflow related to accounts payable and accrueds, higher outflow related to net bonus payments, compensation and other employee benefits this year, changes in net income taxes receivable accounts, partially offset by lagged collection of receivables.

Investing Activities

Net cash used in investing activities totaled $369.3 million for the six months ended June 30, 2023, an increase of $40.4 million as compared to the six months ended June 30, 2022. This increase was primarily driven by higher capital expenditures compared to 2022, and higher spend on strategic in-fill acquisitions during this period as compared to the six months ended June 30, 2022. This was partially offset by lower net contributions to unconsolidated subsidiaries as compared to the six months ended June 30, 2022.

Financing Activities

Net cash provided by financing activities totaled $1.1 billion for the six months ended June 30, 2023 as compared to net cash used in financing activities of $760.5 million for the six months ended June 30, 2022. The increased inflow was primarily due to the net proceeds of $975.3 million from the issuance of our 5.950% senior notes, lower repurchase activities, and higher net inflow from our revolving credit facility this period as compared to the same period last year. This was partially offset by $39.8 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 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 Euro Interbank Offered Rate (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 and CBRE Services. As of June 30, 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 July 10, 2023, CBRE Group, Inc., CBRE Services and Relam Amsterdam Holdings B.V., a wholly-owned subsidiary of CBRE Services, entered into a new five year senior unsecured Credit Agreement (the 2023 Credit Agreement). The 2023 Credit Agreement provides for a senior unsecured term loan credit facility comprised of (i) tranche A Euro-denominated term loans in an aggregate principal amount of €366.5 million and (ii) tranche A U.S. Dollar-denominated term loans in an aggregate principal amount of $350.0 million. The proceeds of the term loans under the 2023 Credit Agreement were applied to the repayment of all remaining outstanding loans under the 2022 Credit Agreement, the payment of related fees and expenses and other general corporate purposes.

Borrowings denominated in euros under the 2023 Credit Agreement bear interest at a rate equal to (i) the applicable percentage plus (ii) at our option, either (1) the EURIBOR rate for the applicable interest period or (2) a rate determined by reference to Daily Simple Euro Short-Term Rate (ESTR). Borrowings denominated in dollars under the 2023 Credit Agreement bear interest at a rate equal to (i) the applicable percentage, plus (ii) at our option, either (1) the Term Secured Overnight Financing Rate (SOFR) rate for the applicable interest period plus 10 basis points or (2) a base rate determined by the reference to the greatest of (x) the prime rate, (y) the federal funds rate plus 1/2 of 1% and (z) the sum of (A) Term SOFR rate published by CME Group Benchmark Administration Limited for an interest period of one month and (B) 1.00%. The applicable rate for borrowings under the 2023 Credit Agreement are determined by reference to our Credit Rating (as defined in the 2023 Credit Agreement).

The term loan borrowings under the 2023 Credit Agreement are guaranteed on a senior basis by CBRE Group, Inc. and CBRE Services.

The 2023 Credit Agreement also requires us to maintain a minimum coverage ratio of consolidated EBITDA (as defined in the 2023 Credit Agreement) to consolidated interest expense of 2.00x and a maximum leverage ratio of total debt less available cash to consolidated EBITDA (as defined in the 2023 Credit Agreement) of 4.25x (and in the case of the first four full fiscal quarters following consummation of a qualified acquisition (as defined in the 2023 Credit Agreement), 4.75x) as of the end of each fiscal quarter. In addition, the 2023 Credit Agreement also contains other customary affirmative and negative covenants and events of default.

On June 23, 2023, CBRE Services issued $1.0 billion in aggregate principal amount of its 5.950% senior notes at a price equal to 98.174% of their face value. The 5.950% senior notes are unsecured obligations of CBRE Services, senior to all of its current and future subordinated indebtedness, but effectively subordinated to its current and future secured indebtedness indebtedness (if any) to the extent of the value of the assets securing such indebtedness. The 5.950% senior notes are guaranteed on a senior basis by CBRE Group, Inc. Interest accrues at a rate of 5.950% per year and is payable semi-annually in arrears on February 15 and August 15 of each year, beginning on February 15, 2024. The 5.950% senior notes are redeemable at our option, in whole or in part, on or after May 15, 2034 at a redemption price of 100% of the principal amount on that date, plus accrued and unpaid interest, if any, to, but excluding the date of redemption. At any time prior to May 15, 2034, we may redeem all or a portion of the notes at a redemption price equal to the greater of (1) 100% of the principal amount of the notes to be redeemed and (2) the sum of the present value at the date of redemption of the remaining scheduled payments of principal and interest thereon to May 15, 2034, assuming the notes matured on May 15, 2034, discounted to the date of redemption on a semi-annual basis at an adjusted rate equal to the treasury rate plus 40 basis points, minus accrued interest to the date of redemption, plus, in either case, accrued and unpaid interest, if any, to the redemption date. The amount of the 5.950% senior notes, net of unamortized discount and unamortized debt issuance costs, included in the accompanying consolidated balance sheet was $973.0 million at June 30, 2023.

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 5.950% senior notes, 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.

Our 2023 Credit Agreement and 2022 Credit Agreement are fully and unconditionally guaranteed by CBRE Group, Inc. and CBRE Services. Our Revolving Credit Agreement, 5.950% senior notes, 4.875% senior notes and 2.500% senior notes are 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):

			June 30, 2023						December 31, 2022
Balance Sheet Data:
Current assets			$	3,857					$	8,628
Non-current assets			11,705						13,002
Total assets			$	15,562					$	21,630
Current liabilities			$	598,864					$	206,026
Non-current liabilities (1)			2,250,270						1,804,975
Total liabilities (1)			$	2,849,134					$	2,011,001

			Six Months Ended June 30,
			2023						2022
Statement of Operations Data:
Revenue			$	—					$	—
Operating loss			(989)						(1,112)
Net (loss) income			(28,258)						7,875

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(1)Includes $190.5 million and $719.3 million of intercompany loan payables to non-guarantor subsidiaries as of June 30, 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 June 30, 2023, $583.0 million was outstanding under the Revolving Credit Agreement. No letters of credit were outstanding as of June 30, 2023. As of July 24, 2023, $303.0 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 pursuant to a credit agreement dated March 31, 2022, with an additional accordion option of £20.0 million. As of both June 30, 2023 and July 24, 2023, no amounts were outstanding under this revolving credit facility.

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 occupier 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.