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

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

Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A) is designed to provide the reader of our financial statements with a narrative from the perspective of management on our financial condition, results of operations, liquidity and certain other factors that may affect future results. The MD&A in this Quarterly Report on Form 10-Q (Quarterly Report) for CBRE Group, Inc. for the three and nine months ended September 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, project management).

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 we are less dependent on cyclical property sales and lease transaction revenue than we were a decade or more ago. 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 rapidly raised interest rates since 2022. The high rate environment and expectation that rates will remain higher for longer, 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 and value of asset and fund monetization within our investment management and development businesses and our ability to source new debt capital to fund 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 September 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 and a “higher for longer” rate environment, coupled with 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 reduce high inflation by rapidly raising interest rates has sharply increased the cost of debt capital and limited its availability, resulting in a significant decline in sales and financing transaction activity and affected the timing of asset monetization in our investment management and development businesses. 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, geopolitical events 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 high 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 and continued them in 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 in-fill acquisitions 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 nine months of 2023, we completed eleven in-fill acquisitions, including five in the Advisory Services segment and six in the Global Workplace Solutions segment totaling $216.7 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 September 30, 2023, we have accrued deferred purchase and contingent considerations totaling $495.6 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 investment management 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 segment derives significant revenue and earnings in foreign currencies, such as the euro and British pound sterling. Our business has been impacted this year 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 wars in Ukraine and in the Middle East (or the perception that such disruptions may occur).

During the three and nine months ended September 30, 2023, approximately 45.6% and 45.0% of our revenue was transacted in foreign currencies. The following table sets forth our revenue derived from our most significant currencies (dollars in thousands):


	Three Months Ended September 30,								Nine Months Ended September 30,
	2023				2022				2023				2022
United States dollar	$	4,276,666	54.4	%	$	4,320,235	57.4	%	$	12,641,769	55.0	%	$	12,887,747	56.9	%
British pound sterling	1,100,462		14.0	%	970,307		12.9	%	3,151,875		13.7	%	3,002,798		13.3	%
Euro	745,552		9.5	%	690,675		9.2	%	2,125,266		9.2	%	2,085,971		9.2	%
Canadian dollar	285,277		3.6	%	297,266		3.9	%	865,100		3.8	%	940,042		4.2	%
Australian dollar	222,384		2.8	%	196,313		2.6	%	632,974		2.8	%	558,456		2.5	%
Indian rupee	165,229		2.1	%	129,506		1.7	%	478,280		2.1	%	376,992		1.7	%
Chinese yuan	125,395		1.6	%	127,952		1.7	%	371,877		1.6	%	367,875		1.6	%
Japanese yen	113,932		1.4	%	84,702		1.1	%	342,986		1.5	%	297,604		1.3	%
Swiss franc	110,282		1.4	%	96,821		1.3	%	307,144		1.3	%	289,394		1.3	%
Singapore dollar	98,508		1.3	%	90,069		1.2	%	294,092		1.3	%	258,129		1.1	%
Other currencies (1)	624,359		7.9	%	525,700		7.0	%	1,787,662		7.7	%	1,568,749		6.9	%
Total revenue	$	7,868,046	100.0	%	$	7,529,546	100.0	%	$	22,999,025	100.0	%	$	22,633,757	100.0	%

(1)Approximately 45 and 46 currencies comprise 7.9% and 7.7% of our revenue for the three and nine months ended September 30, 2023, respectively. Approximately 47 and 48 currencies comprise 7.0% and 6.9% of our revenue for the three and nine months ended September 30, 2022, respectively.

Although we operate globally, we report our results in U.S. dollars. As a result, the strengthening or weakening of the U.S. dollar 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 nine months ended September 30, 2023, the net impact would have been a decrease in pre-tax income of $3.5 million. Had the euro-to-U.S. dollar exchange rates been 10% higher during the nine months ended September 30, 2023, the net impact would have been an increase in pre-tax income of $10.1 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 nine months ended September 30, 2023 and 2022 (dollars in thousands):


	Three Months Ended September 30,								Nine Months Ended September 30,
	2023				2022				2023				2022
Revenue:
Net revenue:
Facilities management	$	1,454,840	18.5	%	$	1,281,525	17.0	%	$	4,289,292	18.7	%	$	3,807,804	16.8	%
Property management	444,369		5.6	%	439,125		5.8	%	1,344,789		5.9	%	1,321,669		5.8	%
Project management	776,503		9.9	%	674,671		9.0	%	2,277,134		9.9	%	1,970,850		8.7	%
Valuation	163,101		2.1	%	177,198		2.4	%	508,433		2.2	%	554,879		2.5	%
Loan servicing	80,672		1.0	%	77,744		1.0	%	237,501		1.0	%	236,401		1.0	%
Advisory leasing	827,498		10.5	%	989,615		13.1	%	2,350,103		10.2	%	2,732,045		12.1	%
Capital markets:
Advisory sales	369,819		4.7	%	600,527		8.0	%	1,134,971		4.9	%	1,936,073		8.6	%
Commercial mortgage origination	106,785		1.4	%	130,425		1.7	%	268,010		1.2	%	435,678		1.9	%
Investment management	136,797		1.7	%	146,695		1.9	%	435,614		1.9	%	454,816		2.0	%
Development services	73,578		0.9	%	111,043		1.5	%	254,265		1.1	%	363,960		1.6	%
Corporate, other and eliminations	(3,849)		0.0	%	(5,732)		(0.1)	%	(11,700)		(0.1)	%	(12,751)		(0.1)	%
Total net revenue	4,430,113		56.3	%	4,622,836		61.3	%	13,088,412		56.9	%	13,801,424		60.9	%
Pass through costs also recognized as revenue	3,437,933		43.7	%	2,906,710		38.7	%	9,910,613		43.1	%	8,832,333		39.1	%
Total revenue	7,868,046		100.0	%	7,529,546		100.0	%	22,999,025		100.0	%	22,633,757		100.0	%
Costs and expenses:
Cost of revenue	6,396,824		81.3	%	5,934,490		78.8	%	18,582,733		80.8	%	17,740,668		78.4	%
Operating, administrative and other	1,058,043		13.4	%	1,080,316		14.3	%	3,355,758		14.6	%	3,335,131		14.7	%
Depreciation and amortization	149,161		1.9	%	142,136		1.9	%	465,038		2.0	%	453,527		2.0	%
Asset impairments	—		0.0	%	—		0.0	%	—		0.0	%	36,756		0.2	%
Total costs and expenses	7,604,028		96.6	%	7,156,942		95.0	%	22,403,529		97.4	%	21,566,082		95.3	%
Gain on disposition of real estate	5,417		0.1	%	1,746		0.0	%	17,738		0.1	%	200,564		0.9	%
Operating income	269,435		3.4	%	374,350		5.0	%	613,234		2.8	%	1,268,239		5.6	%
Equity (loss) income from unconsolidated subsidiaries	(13,361)		(0.2)	%	233,972		3.1	%	120,817		0.5	%	396,011		1.7	%
Other income (loss)	13,628		0.2	%	7,844		0.1	%	21,714		0.1	%	(13,529)		(0.1)	%
Interest expense, net of interest income	38,206		0.5	%	19,957		0.3	%	109,603		0.5	%	51,301		0.1	%
Write-off of financing costs on extinguished debt	—		0.0	%	1,862		0.0	%	—		0.0	%	1,862		0.0	%
Income before provision for income taxes	231,496		2.9	%	594,347		7.9	%	646,162		2.8	%	1,597,558		7.1	%
Provision for income taxes	30,551		0.4	%	142,667		1.9	%	113,991		0.5	%	259,691		1.1	%
Net income	200,945		2.6	%	451,680		6.0	%	532,171		2.3	%	1,337,867		6.0	%
Less: Net income attributable to non-controlling interests	10,392		0.1	%	5,041		0.1	%	23,322		0.1	%	11,609		0.1	%
Net income attributable to CBRE Group, Inc.	$	190,553	2.4	%	$	446,639	5.9	%	$	508,849	2.2	%	$	1,326,258	5.9	%

Core EBITDA	$	435,602	5.5	%	$	605,839	8.0	%	$	1,471,714	6.4	%	$	2,256,494	10.0	%

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

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

We use core EBITDA as an indicator of the company’s operating financial performance. Core EBITDA represents earnings before the portion attributable to non-controlling interests, net interest expense, write-off of financing costs on extinguished debt, income taxes, depreciation and amortization, asset impairments, adjustments related to certain carried interest incentive compensation expense to align with the timing of associated revenue, fair value adjustments to real estate assets acquired in the Telford acquisition (purchase accounting) that were sold in the period, costs incurred related to legal entity restructuring, 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 September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Net income attributable to CBRE Group, Inc.	$	190,553	$	446,639	$	508,849	$	1,326,258
Net income attributable to non-controlling interests	10,392		5,041		23,322		11,609
Net income	200,945		451,680		532,171		1,337,867
Adjustments:
Depreciation and amortization	149,161		142,136		465,038		453,527
Asset impairments	—		—		—		36,756
Interest expense, net of interest income	38,206		19,957		109,603		51,301
Write-off of financing costs on extinguished debt	—		1,862		—		1,862
Provision for income taxes	30,551		142,667		113,991		259,691

Carried interest incentive compensation (reversal) expense to align with the timing of associated revenue	(8,570)		(6,161)		(2,050)		9,200
Impact of fair value adjustments to real estate assets acquired in the Telford acquisition (purchase accounting) that were sold in period	—		(1,300)		—		(4,447)
Costs incurred related to legal entity restructuring	3,650		893		3,649		12,814
Integration and other costs related to acquisitions	5,858		7,716		60,436		24,046


Costs associated with efficiency and cost-reduction initiatives	4,224		18,929		144,781		18,929
Provision associated with Telford’s fire safety remediation efforts	—		9,479		—		46,984
Net fair value adjustments on strategic non-core investments	11,577		(182,019)		44,095		7,964
Core EBITDA	$	435,602	$	605,839	$	1,471,714	$	2,256,494

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

We reported consolidated net income of $190.6 million for the three months ended September 30, 2023 on revenue of $7.9 billion as compared to consolidated net income of $446.6 million on revenue of $7.5 billion for the three months ended September 30, 2022.

Our revenue on a consolidated basis for the three months ended September 30, 2023 increased by $338.5 million, or 4.5%, as compared to the three months ended September 30, 2022. The revenue increase is primarily due to a 16.6% 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. This increase was partially offset by a 17.3% decline in our Advisory Services segment which has been significantly impacted by the current macroeconomic conditions driving down sales and lease revenue. These factors also impacted our Real Estate Investments (REI) segment which experienced an approximate 18.4% revenue decline during the quarter, primarily due to decreased development and construction revenue and lower investment management incentive and transaction fees. Foreign currency translation had a 1.1% positive impact on total revenue during the three months ended September 30, 2023, primarily driven by strength in the British pound sterling and euro partially offset by weakness in the Argentina peso.

Our cost of revenue on a consolidated basis increased by $462.3 million, or 7.8%, during the three months ended September 30, 2023 as compared to the same period in 2022. This increase was primarily due to higher costs associated with the revenue growth in our GWS 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 decrease in cost of revenue in our global development business in our REI segment. Foreign currency translation had a 1.2% negative impact on total cost of revenue during the three months ended September 30, 2023. Cost of revenue as a percentage of revenue increased to 81.3% for the three months ended September 30, 2023 as compared to 78.8% for the three months ended September 30, 2022. This was mainly due to revenue growth in our GWS segment that generally has a lower gross margin coupled with a decline in our Advisory Services segment, primarily sales, 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 $22.3 million, or 2.1%, during the three months ended September 30, 2023 as compared to the same period in 2022. The decrease was primarily due to lower incentive compensation expense, intentional tightening of certain discretionary spend, and lower restructuring-related costs this period as compared to the third quarter of 2022 when the company had launched cost reduction initiatives and was incurring employee separation charges. This was partially offset by incremental operating expenses in the GWS segment to support the growth, and higher legal settlement charges and bad debt expense in our Advisory segment. Foreign currency translation had a 1.3% negative impact on total operating, administrative and other expenses during the three months ended September 30, 2023. Operating expenses as a percentage of revenue decreased to 13.4% for the three months ended September 30, 2023 from 14.3% for the three months ended September 30, 2022, primarily due to variable nature of our incentive compensation expense in the Advisory Services and REI segments and our proactive cost management.

Our depreciation and amortization expense on a consolidated basis increased by $7.0 million, or 4.9%, during the three months ended September 30, 2023 as compared to the same period in 2022. This increase is primarily due to additional depreciation as the company continues to invest in capital assets.

We recorded equity loss of $13.4 million on unconsolidated subsidiaries for the three months ended September 30, 2023, as compared to equity income of $234.0 million during the three months ended September 30, 2022. This was mainly due to a decrease in the fair value adjustment of our non-core strategic equity investment in Altus Power, Inc (Altus) compared to an increase in the prior year.

Our other income on a consolidated basis was $13.6 million for the three months ended September 30, 2023 versus $7.8 million for the same period in the prior year. This was mainly due to certain ancillary activities in the Advisory Services segment this quarter.

Our consolidated interest expense, net of interest income, increased by $18.2 million, or 91.4%, for the three months ended September 30, 2023 as compared to the same period in 2022. This increase was primarily due to the impact of higher interest rates, increased borrowings on the revolving credit facilities, the issuance of new senior notes in the second quarter and the borrowing of new senior term loans in the third quarter of this year.

Our provision for income taxes on a consolidated basis was $30.6 million for the three months ended September 30, 2023 as compared to a provision for income taxes of $142.7 million for the three months ended September 30, 2022. The decrease of $112.1 million is primarily related to a decrease in earnings. Our effective tax rate decreased to 13.2% for the three months ended September 30, 2023 from 24.0% for the three months ended September 30, 2022. Our effective tax rate for the three months ended September 30, 2023 was different than the U.S. federal statutory tax rate of 21.0%, primarily due to U.S. state taxes, favorable permanent book tax differences and discrete tax benefits including tax return filings in various jurisdictions.

Nine Months Ended September 30, 2023 Compared to the Nine Months Ended September 30, 2022

We reported consolidated net income of $508.8 million for the nine months ended September 30, 2023 on revenue of $23.0 billion as compared to consolidated net income of $1.3 billion on revenue of $22.6 billion for the nine months ended September 30, 2022.

Our revenue on a consolidated basis for the nine months ended September 30, 2023 increased by $365.3 million, or 1.6%, as compared to the nine months ended September 30, 2022. The revenue increase reflects growth across our GWS segment, which increased by 12.7% 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 $1.4 billion, or 18.7%, as all lines of business, except property management and loan servicing, declined this period as compared to the same period in the prior year given the current macroeconomic conditions. Revenue in the REI segment was down 15.7% due to decreased development and construction revenue and lower real estate sales activities primarily in our international development markets. Foreign currency translation had a 1.2% negative impact on total revenue during the nine months ended September 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 $842.1 million, or 4.7%, during the nine months ended September 30, 2023 as compared to the same period in 2022. This increase was primarily due to higher costs associated with our GWS segment given the growth, partially offset by lower cost of revenue in our Advisory Services and REI segments given the variable nature of much of the cost of revenue components for these segments. Foreign currency translation had a 1.2% positive impact on total cost of revenue during the nine months ended September 30, 2023. Cost of revenue as a percentage of revenue increased to 80.8% for the nine months ended September 30, 2023 as compared to 78.4% for the nine months ended September 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. In addition, certain charges associated with our cost reduction and efficiency initiatives also contributed to an increase in cost of revenue this year.

Our operating, administrative and other expenses on a consolidated basis increased by $20.6 million, or 0.6%, for the nine months ended September 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, higher professional fees to support us as we continue to explore various capital allocation opportunities, certain legal settlement charges and higher bad debt expense as compared to the nine months ended September 30, 2022. This was partially offset by a decrease in overall incentive compensation expense tied to company performance. Foreign currency translation had a 1.1% positive impact on total operating expenses during the nine months ended September 30, 2023. Operating expenses as a percentage of revenue decreased slightly to 14.6% for the nine months ended September 30, 2023 from 14.7% for the nine months ended September 30, 2022, mainly due to the increase in revenue in the GWS segment outpacing the growth in operating expenses.

Our depreciation and amortization expense on a consolidated basis increased by $11.5 million, or 2.5%, during the nine months ended September 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 mainly in the first half of 2023, continued investment in capital assets, partially offset by lower amortization expense during the nine months ended September 30, 2023 as compared to September 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 nine months ended September 30, 2023. Our asset impairments on a consolidated basis totaled $36.8 million for the nine months ended September 30, 2022, of which $10.4 million related to our exit of the Advisory Services business in Russia and $26.4 million related to non-cash goodwill impairment charges in our REI segment for Telford Homes due to reduction in cash flows and profitability.

Our gain on disposition of real estate on a consolidated basis decreased by $182.8 million, during the nine months ended September 30, 2023 as compared to the same period in 2022 due to significant gains associated with property sales on consolidated deals within our REI 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 $275.2 million, or 69.5%, during the nine months ended September 30, 2023 as compared to the same period in 2022, primarily driven by a lower equity pickup and negative fair value adjustment in our non-core investment portfolio this year, primarily from Altus. In addition, we recorded higher equity earnings associated with property sales reported in our REI segment last year as compared to this year.

Our consolidated interest expense, net of interest income, increased by $58.3 million, or 113.6%, for the nine months ended September 30, 2023 as compared to the same period in 2022. This increase was primarily due to the impact of higher interest rates, increased borrowings on the revolving credit facilities, the issuance of new senior notes in the second quarter and borrowing of senior term loans in the third quarter of this year.

Our provision for income taxes on a consolidated basis was $114.0 million for the nine months ended September 30, 2023 as compared to a provision for income taxes of $259.7 million for the nine months ended September 30, 2022. The decrease of $145.7 million is primarily related to a decrease in earnings, offset by a one-time tax benefit in 2022 as a result of legal entity restructuring. Our effective tax rate increased to 17.6% for the nine months ended September 30, 2023 from 16.3% for the nine months ended September 30, 2022. Our effective tax rate for the nine months ended September 30, 2023 was different than the U.S. federal statutory tax rate of 21.0% primarily due to U.S. state taxes, favorable permanent book tax differences and discrete tax benefits including tax return filings in various jurisdictions.

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 nine months ended September 30, 2023 and 2022 (dollars in thousands):


	Three Months Ended September 30,								Nine Months Ended September 30,
	2023				2022				2023				2022
Revenue:
Net revenue:
Property management	$	444,369	22.1	%	$	439,125	18.0	%	$	1,344,789	22.8	%	$	1,321,669	18.2	%
Valuation	163,101		8.1	%	177,198		7.3	%	508,433		8.6	%	554,879		7.6	%
Loan servicing	80,672		4.0	%	77,744		3.2	%	237,501		4.0	%	236,401		3.3	%
Advisory leasing	827,498		41.1	%	989,615		40.7	%	2,350,103		39.8	%	2,732,045		37.6	%
Capital markets:
Advisory sales	369,819		18.4	%	600,527		24.7	%	1,134,971		19.2	%	1,936,073		26.6	%
Commercial mortgage origination	106,785		5.3	%	130,425		5.4	%	268,010		4.5	%	435,678		6.0	%
Total segment net revenue	1,992,244		99.0	%	2,414,634		99.3	%	5,843,807		98.9	%	7,216,745		99.3	%
Pass through costs also recognized as revenue	20,589		1.0	%	19,167		0.7	%	64,568		1.1	%	53,487		0.7	%
Total segment revenue	2,012,833		100.0	%	2,433,801		100.0	%	5,908,375		100.0	%	7,270,232		100.0	%
Costs and expenses:
Cost of revenue	1,253,382		62.3	%	1,501,276		61.7	%	3,613,727		61.2	%	4,368,039		60.1	%
Operating, administrative and other	496,641		24.7	%	516,270		21.2	%	1,517,565		25.7	%	1,510,937		20.8	%
Depreciation and amortization	65,151		3.2	%	72,867		3.0	%	215,293		3.6	%	227,170		3.1	%
Asset impairments	—		0.0	%	—		0.0	%	—		0.0	%	10,351		0.1	%
Total costs and expenses	1,815,174		90.2	%	2,090,413		85.9	%	5,346,585		90.5	%	6,116,497		84.1	%
Gain on disposition of real estate	3		0.0	%	21		0.0	%	6		0.0	%	21		0.0	%
Operating income	197,662		9.8	%	343,409		14.1	%	561,796		9.5	%	1,153,756		15.9	%
Equity income from unconsolidated subsidiaries	752		0.0	%	3,514		0.1	%	3,202		0.1	%	14,775		0.2	%
Other income	11,102		0.7	%	511		0.1	%	15,157		0.3	%	560		0.0	%
Add-back: Depreciation and amortization	65,151		3.2	%	72,867		3.0	%	215,293		3.6	%	227,170		3.1	%
Add-back: Asset impairments	—		0.0	%	—		0.0	%	—		0.0	%	10,351		0.1	%
Adjustments:





Costs associated with efficiency and cost-reduction initiatives	2,558		0.1	%	3,501		0.1	%	66,952		1.1	%	3,501		0.1	%
Segment operating profit and segment operating profit on revenue margin	$	277,225	13.8	%	$	423,802	17.4	%	$	862,400	14.6	%	$	1,410,113	19.4	%
Segment operating profit on net revenue margin			13.9	%			17.6	%			14.8	%			19.5	%

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

Revenue decreased by $421.0 million, or 17.3%, for the three months ended September 30, 2023 as compared to the three months ended September 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. Sales revenue was down 38.4%, mortgage origination revenue was down 18.1%, and leasing revenue declined 16.4%. The slowdown in the lending environment also affected appraisal revenue which was down 8.0%. This was partially offset by modest growth in the property management line of business, mainly in the U.S, and loan servicing revenue which is more contractual in nature. Foreign currency translation had a 0.3% positive impact on total revenue during the three months ended September 30, 2023, primarily driven by strength in the euro and British pound sterling partially offset by weakness in the Australian dollar and Japanese yen.

Cost of revenue decreased by $247.9 million, or 16.5%, for the three months ended September 30, 2023 as compared to the same period in 2022, primarily due to lower commission expense tied to a decline in our capital markets and leasing business. Foreign currency translation had a 0.3% negative impact on total cost of revenue during the three months ended September 30, 2023. Cost of revenue as a percentage of revenue slightly increased to 62.3% for the three months ended September 30, 2023 versus 61.7% 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 and loan servicing.

Operating, administrative and other expenses decreased by $19.6 million, or 3.8%, for the three months ended September 30, 2023 as compared to the three months ended September 30, 2022. This decrease was primarily due to results of our cost-reduction initiatives executed in second half 2022 and first half of 2023 and lower incentive compensation expense to align with expected segment and company performance. This was partially offset by certain legal settlement charges and increased bad debt expenses in the current quarter. Foreign currency translation had a 1.0% negative impact on total operating expenses during the three months ended September 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 September 30, 2023, MSRs contributed to operating income $22.2 million of gains recognized in conjunction with the origination and sale of mortgage loans, offset by $35.4 million of amortization of related intangible assets. For the three months ended September 30, 2022, MSRs contributed to operating income $34.7 million of gains recognized in conjunction with the origination and sale of mortgage loans, offset by $39.4 million of amortization of related intangible assets. 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 10.6%, during the three months ended September 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 compared to minimal activity in the current quarter.

Nine Months Ended September 30, 2023 Compared to the Nine Months Ended September 30, 2022

Revenue decreased by $1.4 billion, or 18.7%, for the nine months ended September 30, 2023 as compared to the nine months ended September 30, 2022, driven by decline in all lines of business except property management and loan servicing. The revenue decrease primarily reflects lower sales, down 41.4%, lower commercial mortgage origination revenue which was down 38.5%, and lower leasing revenue, down 14.0%, as well as lower valuation revenue driven by decreased revenue per assignment and lower demand given the market conditions. The current macroeconomic 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 2.5%. Foreign currency translation had a 1.1% negative impact on total revenue during the nine months ended September 30, 2023, primarily driven by weakness in Japanese yen, Australian dollar and Canadian dollar.

Cost of revenue decreased by $754.3 million, or 17.3%, for the nine months ended September 30, 2023 as compared to the same period in 2022, primarily due to our variable compensation structure leading to lower commission expense resulting from lower sales and leasing revenue. Foreign currency translation also had a 1.1% positive impact on total cost of revenue during the nine months ended September 30, 2023. Cost of revenue as a percentage of revenue increased to 61.2% for the nine months ended September 30, 2023 from 60.1% for the nine months ended September 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 during the nine months ended September 30, 2023 versus the same period last year offset by growth in property management and loan servicing at a lower margin.

Operating, administrative and other expenses slightly increased by $6.6 million, or 0.4%, for the nine months ended September 30, 2023 as compared to the nine months ended September 30, 2022. This increase was primarily due to elevated employee separation benefits and lease exit charges incurred under our efficiency and cost-reduction initiatives in first half of 2023, certain legal settlement charges, and increased bad debt expense, partially offset by lower incentive compensation expense to align with expected segment and company performance, as compared to the nine months ended September 30, 2022. Foreign currency translation also had a 1.2% positive impact on total operating expenses during the nine months ended September 30, 2023.

For the nine months ended September 30, 2023, MSRs contributed to operating income $60.1 million of gains recognized in conjunction with the origination and sale of mortgage loans, offset by $109.0 million of amortization of related intangible assets. For the nine months ended September 30, 2022, MSRs contributed to operating income $105.4 million of gains recognized in conjunction with the origination and sale of mortgage loans, offset by $125.1 million of amortization of related intangible assets. The decline was associated with lower origination activity given the higher cost of debt.

Depreciation expense increased by $4.1 million, or 4.3%, due to accelerated depreciation expense related to cost-reduction initiatives in the first half of 2023. Amortization expense during the nine months ended September 30, 2023 decreased by $15.9 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 (GWS) operating segment for the three and nine months ended September 30, 2023 and 2022 (dollars in thousands):


	Three Months Ended September 30,								Nine Months Ended September 30,
	2023				2022				2023				2022
Revenue:
Net revenue:
Facilities management	$	1,454,840	25.8	%	$	1,281,525	26.5	%	$	4,289,292	26.1	%	$	3,807,804	26.2	%
Project management	776,503		13.7	%	674,671		13.9	%	2,277,134		13.9	%	1,970,850		13.5	%
Total segment net revenue	2,231,343		39.5	%	1,956,196		40.4	%	6,566,426		40.0	%	5,778,654		39.7	%
Pass through costs also recognized as revenue	3,417,344		60.5	%	2,887,543		59.6	%	9,846,045		60.0	%	8,778,846		60.3	%
Total segment revenue	5,648,687		100.0	%	4,843,739		100.0	%	16,412,471		100.0	%	14,557,500		100.0	%
Costs and expenses:
Cost of revenue	5,103,834		90.3	%	4,360,311		90.0	%	14,843,627		90.4	%	13,177,844		90.5	%
Operating, administrative and other	302,304		5.4	%	281,783		5.8	%	931,834		5.7	%	776,131		5.3	%
Depreciation and amortization	66,937		1.2	%	57,105		1.2	%	196,057		1.2	%	189,933		1.3	%

Total costs and expenses	5,473,075		96.9	%	4,699,199		97.0	%	15,971,518		97.3	%	14,143,908		97.1	%
Operating income	175,612		3.1	%	144,540		3.0	%	440,953		2.7	%	413,592		2.9	%
Equity income from unconsolidated subsidiaries	329		0.0	%	645		0.0	%	1,050		0.0	%	1,108		0.0	%
Other income	867		0.0	%	2,690		0.1	%	2,776		0.0	%	5,049		0.0	%
Add-back: Depreciation and amortization	66,937		1.2	%	57,105		1.2	%	196,057		1.2	%	189,933		1.3	%

Adjustments:

Integration and other costs related to acquisitions	5,858		0.1	%	7,716		0.1	%	21,305		0.1	%	24,046		0.2	%
Costs associated with efficiency and cost-reduction initiatives	1,666		0.0	%	6,710		0.1	%	51,465		0.3	%	6,710		0.0	%
Segment operating profit and segment operating profit on revenue margin	$	251,269	4.4	%	$	219,406	4.5	%	$	713,606	4.3	%	$	640,438	4.4	%
Segment operating profit on net revenue margin			11.3	%			11.2	%			10.9	%			11.1	%

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

Revenue increased by $804.9 million, or 16.6%, for the three months ended September 30, 2023 as compared to the three months ended September 30, 2022. The GWS segment has experienced growth from new and existing clients across both facilities and project management services, specifically Turner & Townsend, and contributions from in-fill acquisitions. Foreign currency translation had a 1.5% positive impact on total revenue during the three months ended September 30, 2023, primarily driven by strength in the British pound sterling and euro.

Cost of revenue increased by $743.5 million, or 17.1%, for the three months ended September 30, 2023 as compared to the same period in 2022, driven by higher pass through costs and higher professional compensation to support growth. Foreign currency translation had a 1.4% negative impact on total cost of revenue during the three months ended September 30, 2023. Cost of revenue as a percentage of revenue remained relatively flat at 90.3% for the three months ended September 30, 2023 as compared to 90.0% for the same period in 2022.

Operating, administrative and other expenses increased by $20.5 million, or 7.3%, for the three months ended September 30, 2023 as compared to the three months ended September 30, 2022. This increase was attributable to higher compensation and related benefits from overall growth, charges associated with integration of acquisitions, and costs from acquired entities. Foreign currency translation had a 2.0% negative impact on total operating expenses during the three months ended September 30, 2023.

Nine Months Ended September 30, 2023 Compared to the Nine Months Ended September 30, 2022

Revenue increased by $1.9 billion, or 12.7%, for the nine months ended September 30, 2023 as compared to the nine months ended September 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 1.3% negative impact on total revenue during the nine months ended September 30, 2023, primarily driven by weakness in the British pound sterling and Canadian dollar.

Cost of revenue increased by $1.7 billion, or 12.6%, for the nine months ended September 30, 2023 as compared to the same period in 2022, driven by higher pass through costs and increased professional compensation. Foreign currency translation had a 1.3% positive impact on total cost of revenue during the nine months ended September 30, 2023. Cost of revenue as a percentage of revenue decreased slightly to 90.4% for the nine months ended September 30, 2023 from 90.5% for the nine months ended September 30, 2022, primarily due to increase in project management revenue which generally has higher margins.

Operating, administrative and other expenses increased by $155.7 million, or 20.1%, for the nine months ended September 30, 2023 as compared to the nine months ended September 30, 2022. The increase is due to higher compensation expense, certain investments in infrastructure to drive business growth, charges associated with the integration of strategic and in-fill acquisitions and costs from acquired entities. In addition, the GWS segment incurred approximately $51.5 million in charges related to employee separation benefits, lease exit and contract termination costs under our efficiency and cost-reduction initiatives in the first half of 2023 as compared to $6.7 million last year. Foreign currency translation also had a 1.6% positive impact on total operating expenses during the nine months ended September 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 nine months ended September 30, 2023 and 2022 (dollars in thousands):


	Three Months Ended September 30,								Nine Months Ended September 30,
	2023				2022				2023				2022
Revenue:
Investment management	$	136,797	65.0	%	$	146,695	56.9	%	$	435,614	63.1	%	$	454,816	55.5	%
Development services	73,578		35.0	%	111,043		43.1	%	254,265		36.9	%	363,960		44.5	%
Total segment revenue	210,375		100.0	%	257,738		100.0	%	689,879		100.0	%	818,776		100.0	%
Costs and expenses:
Cost of revenue	42,822		20.4	%	57,967		22.5	%	132,780		19.2	%	202,296		24.7	%
Operating, administrative and other	153,742		73.1	%	194,480		75.5	%	582,185		84.4	%	747,687		91.3	%
Depreciation and amortization	2,964		1.4	%	3,911		1.5	%	12,345		1.8	%	11,385		1.4	%
Asset impairments	—		0.0	%	—		0.0	%	—		0.0	%	26,405		3.2	%
Total costs and expenses	199,528		94.9	%	256,358		99.5	%	727,310		105.4	%	987,773		120.6	%
Gain on disposition of real estate	5,414		2.6	%	1,725		0.7	%	17,732		2.6	%	200,543		24.5	%
Operating income (loss)	16,261		7.7	%	3,105		1.2	%	(19,699)		(2.8)	%	31,546		3.9	%
Equity (loss) income from unconsolidated subsidiaries	(3,645)		(1.7)	%	50,300		19.5	%	159,589		23.1	%	380,726		46.5	%
Other loss	(395)		(0.2)	%	(493)		(0.2)	%	(398)		(0.1)	%	(1,388)		(0.2)	%
Add-back: Depreciation and amortization	2,964		1.4	%	3,911		1.5	%	12,345		1.8	%	11,385		1.4	%
Add-back: Asset impairments	—		0.0	%	—		0.0	%	—		0.0	%	26,405		3.2	%
Adjustments:
Carried interest incentive compensation (reversal) expense to align with the timing of associated revenue	(8,570)		(4.1)	%	(6,161)		(2.4)	%	(2,050)		(0.3)	%	9,200		1.1	%
Impact of fair value adjustments to real estate assets acquired in the Telford Acquisition (purchase accounting) that were sold in period	—		0.0	%	(1,300)		(0.5)	%	—		0.0	%	(4,447)		(0.5)	%



Costs associated with efficiency and cost-reduction initiatives	—		0.0	%	617		0.2	%	21,457		3.1	%	617		0.1	%
Provision associated with Telford’s fire safety remediation efforts	—		0.0	%	9,479		3.7	%	—		0.0	%	46,984		5.7	%
Segment operating profit and segment operating profit on revenue margin	$	6,615	3.1	%	$	59,458	23.0	%	$	171,244	24.8	%	$	501,028	61.2	%

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

Revenue decreased by $47.4 million, or 18.4%, for the three months ended September 30, 2023 as compared to the three months ended September 30, 2022, driven by a decline in real estate sales and lower development and construction fees globally. In addition, investment management experienced a large decline in incentive fee revenue. Foreign currency translation had a 2.5% positive impact on total revenue during the three months ended September 30, 2023, primarily driven by strength in the British pound sterling.

Cost of revenue decreased by $15.1 million, or 26.1%, for the three months ended September 30, 2023 as compared to the three months ended September 30, 2022. Cost of revenue as a percentage of revenue was 20.4% as compared to 22.5% during the same period in 2022. This decline was primarily due to a shift in the composition of overall revenue with higher revenue coming from the investment management line of business which has no associated cost of revenue. Foreign currency translation had a 4.1% negative impact on total cost of revenue during the three months ended September 30, 2023.

Operating, administrative and other expenses decreased by $40.7 million, or 20.9%, for the three months ended September 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 $9.5 million in Telford's fire safety provision last year in the third quarter with no such provision in current quarter. Foreign currency translation had a 1.8% negative impact on total operating expenses during the three months ended September 30, 2023.

We recorded equity loss from unconsolidated subsidiaries of approximately $3.6 million for the three months ended September 30, 2023 compared to an equity income of $50.3 million for the same period in 2022. The losses were mainly due to lower co-investment returns on our unconsolidated funds and projects.

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


	Funds		Separate Accounts		Securities		Total
Balance at June 30, 2023	$	64.8	$	72.9	$	9.9	$	147.6
Inflows	0.9		1.8		0.1		2.8
Outflows	(0.6)		(0.9)		(0.5)		(2.0)
Market depreciation	(0.9)		(2.5)		(0.8)		(4.2)
Balance at September 30, 2023	$	64.2	$	71.3	$	8.7	$	144.2

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

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

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

Nine Months Ended September 30, 2023 Compared to the Nine Months Ended September 30, 2022

Revenue decreased by $128.9 million, or 15.7%, for the nine months ended September 30, 2023 as compared to the nine months ended September 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, and lower incentive fees. Foreign currency translation had a 1.0% negative impact on total revenue during the nine months ended September 30, 2023, primarily driven by weakness in the British pound sterling.

Cost of revenue decreased by $69.5 million, or 34.4%, for the nine months ended September 30, 2023 as compared to the nine months ended September 30, 2022. Cost of revenue as a percentage of revenue was 19.2% for the nine months ended September 30, 2023 as compared to 24.7% for the nine months ended September 30, 2022. This decline was primarily due to a shift in the composition of overall revenue with a higher proportion of revenue coming from the investment management line of business which has no associated cost of revenue. This was partially offset by cost overruns on certain U.K. construction projects. Foreign currency translation had a 1.5% positive impact on total cost of revenue during the nine months ended September 30, 2023.

Operating, administrative and other expenses decreased by $165.5 million, or 22.1%, for the nine months ended September 30, 2023 as compared to the same period in 2022, primarily due to lower incentive compensation expense to align with business performance and $47.0 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 offset by $21.0 million in charges associated with company's efficiency and cost-reduction initiatives incurred during the nine months ended September 30, 2023. Foreign currency translation had a 0.8% positive impact on total operating expenses during the nine months ended September 30, 2023.

Our equity income from unconsolidated subsidiaries decreased by $221.1 million, or 58.1%, during the nine months ended September 30, 2023 as compared to the same period in 2022 due to lower net sales of our equity interests to our joint venture partners. Gain on disposition of real estate decreased by $182.8 million during the nine months ended September 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 nine months ended September 30, 2022 when we had significant asset sales, primarily land sales.

A roll forward of our AUM by product type for the nine months ended September 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	2.7		5.4		0.9		9.0
Outflows	(2.4)		(2.9)		(1.5)		(6.8)
Market depreciation	(2.3)		(4.4)		(0.6)		(7.3)
Balance at September 30, 2023	$	64.2	$	71.3	$	8.7	$	144.2

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 nine months ended September 30, 2023 and 2022 (dollars in thousands):


	Three Months Ended September 30, (1)				Nine Months Ended September 30, (1)
	2023		2022		2023		2022
Elimination of inter-segment revenue	$	(3,849)	$	(5,732)	$	(11,700)	$	(12,751)
Costs and expenses:
Cost of revenue (2)	(3,214)		14,936		(7,401)		(7,511)
Operating, administrative and other	105,356		87,783		324,174		300,376
Depreciation and amortization	14,109		8,253		41,343		25,039

Total costs and expenses	116,251		110,972		358,116		317,904

Operating loss	(120,100)		(116,704)		(369,816)		(330,655)
Equity (loss) income from unconsolidated subsidiaries	(10,797)		179,513		(43,024)		(598)
Other income (loss)	2,054		5,136		4,179		(17,750)
Add-back: Depreciation and amortization	14,109		8,253		41,343		25,039

Adjustments:


Integration and other costs related to acquisitions	—		—		39,131		—
Costs incurred related to legal entity restructuring	3,650		893		3,649		12,814
Costs associated with efficiency and cost-reduction initiatives	—		8,101		4,907		8,101
Segment operating (loss) profit	$	(111,084)	$	85,192	$	(319,631)	$	(303,049)

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

(2)Primarily relates to inter-segment eliminations.

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

Core corporate

Operating, administrative and other expenses for our core corporate function were approximately $105.1 million for the three months ended September 30, 2023, as compared to $87.8 million for the three months ended September 30, 2022, an increase of $17.3 million or 19.8%. This was due to charges associated with employee separation benefits in the quarter. In addition, certain roles that were embedded in the business segments last year were moved to Corporate this year causing a small shift in compensation expense from business segments to Corporate.

Other (non-core)

We recorded equity loss from unconsolidated subsidiaries of approximately $10.8 million for the three months ended September 30, 2023 from unfavorable fair value adjustments related to our investment in Altus Power Inc. and certain non-core investments as compared to a $179.5 million net favorable adjustment recorded during the three months ended September 30, 2022 primarily related to Altus.

Nine Months Ended September 30, 2023 Compared to the Nine Months Ended September 30, 2022

Core corporate

Operating, administrative and other expenses for our core corporate function were approximately $323.9 million for the nine months ended September 30, 2023, an increase of $24.5 million, or 8.2%, as compared to the nine months ended September 30, 2022. This was primarily due to higher professional fees incurred this period as compared to same period last year as we explore various capital allocation opportunities, compensation expense associated with certain roles that were

embedded within the business segments last year but were moved to Corporate this year. This was partially offset by higher legal entity restructure charges incurred last year, and lower stock based compensation expense this year.

Other income was approximately $5.0 million for the nine months ended September 30, 2023 versus a loss of $11.3 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 $43.0 million during the nine months ended September 30, 2023 as compared to a loss of $0.6 million during the nine months ended September 30, 2022 from unfavorable fair value adjustments related to our investment in Altus Power Inc., partially offset by gains on certain other 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 $313.5 million of anticipated capital expenditures, net of tenant concessions. During the nine months ended September 30, 2023, we incurred $203.5 million of capital expenditures, net of tenant concessions received. As of September 30, 2023, we had aggregate future commitments of $116.9 million related to co-investments funds in our Real Estate Investments segment, $11.0 million of which is expected to be funded in 2023. Additionally, as of September 30, 2023, we are committed to fund additional capital of $200.7 million and $95.5 million to consolidated and unconsolidated projects, respectively, within our Real Estate Investments segment. As of September 30, 2023, we had $3.0 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 5-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 (as described below), 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.

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 September 30, 2023 and December 31, 2022, we had accrued deferred purchase consideration totaling $495.6 million ($32.8 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. During the three months ended September 30, 2023, we repurchased 6,213,921 shares of our Class A common stock with an average price of $83.03 per share using cash on hand for an aggregate of $515.9 million. During the nine months ended September 30, 2023, we repurchased 7,582,094 shares of our Class A common stock with an average price of $83.11 per share using cash on hand for an aggregate of $630.2 million. As of September 30, 2023, we had $1.5 billion of capacity remaining under the 2021 program.

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

Historical Cash Flows

Operating Activities

Net cash used in operating activities totaled $373.4 million for the nine months ended September 30, 2023 as compared to $814.8 million in net cash provided by operating activities during the nine months ended September 30, 2022. The primary driver was significantly lower earnings this period as compared to the same period last year. The other key drivers that contributed to the higher usage were as follows: (1) net outflow associated with net working capital; the net working capital change was mainly due to higher outflow related to accounts payable and accrued expenses, 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, (2) certain non-cash charges (such as share-based compensation expense and asset impairment) that either contributed to the cash inflow last year and did not recur this year or were lower this year than last year, and (3) lower net proceeds from sale of equity securities. These were partially offset by higher net equity distribution from unconsolidated subsidiaries in the current period as compared to same period in 2022.

Investing Activities

Net cash used in investing activities totaled $537.1 million for the nine months ended September 30, 2023, a decrease of $66.6 million as compared to the nine months ended September 30, 2022. This decrease was primarily driven by lower net contributions to unconsolidated subsidiaries as compared to the nine months ended September 30, 2022 and net investment in View the Space, Inc. (VTS) last year that did not recur this year. This was partially offset by higher capital expenditures compared to 2022, higher spend on strategic in-fill acquisitions, and net outflows associated with our real estate projects, during this period as compared to the nine months ended September 30, 2022.

Financing Activities

Net cash provided by financing activities totaled $906.3 million for the nine months ended September 30, 2023 as compared to net cash used in financing activities of $1.2 billion for the nine months ended September 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, higher net inflow from our revolving credit facility, and net inflows from issuance of new senior term loans and payment of prior euro term loan, this period as compared to the same period last year. This was partially offset by $95.1 million in increased outflow related to acquisitions where cash was paid after 90 days of the acquisition date and net outflows related to our short term borrowings.

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 10, 2023, CBRE Group, Inc., CBRE Services, Inc. (CBRE Services) and Relam Amsterdam Holdings B.V., a wholly-owned subsidiary of CBRE Services, entered into a new 5-year senior unsecured Credit Agreement (the 2023 Credit Agreement) maturing on July 10, 2028, which refinanced and replaced the 2022 Credit Agreement (as described below). 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, both requiring quarterly principal payments beginning on December 31, 2024 and continuing through maturity on July 10, 2028. 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 entered into a cross currency swap to hedge the associated foreign currency exposure related to this transaction.

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 U.S. 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 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). As of September 30, 2023, we had (i) $387.1 million of euro term loan borrowings outstanding under the 2023 Credit Agreement (at an interest rate of 1.25% plus EURIBOR) and (ii) $348.1 million of U.S. Dollar term loan borrowings outstanding under the 2023 Credit Agreement (at an interest rate of 1.35% plus Term SOFR), net of unamortized debt issuance costs, included in the accompanying consolidated balance sheets.

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. We were in compliance with the covenants under this agreement as of September 30, 2023.

The 2022 Credit Agreement was a senior unsecured credit facility that was guaranteed by CBRE Group, Inc. and CBRE Services. The 2022 Credit Agreement provided for a €400.0 million term loan facility which would have been due and payable in full at maturity on December 20, 2023. 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). 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 at which time the 2022 Credit Agreement was repaid in full and terminated.

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 (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.

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 is 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):


	September 30, 2023		December 31, 2022
Balance Sheet Data:
Current assets	$	3,106	$	8,628
Non-current assets	11,066		13,002
Total assets	$	14,172	$	21,630

Current liabilities	$	704,058	$	206,026
Non-current liabilities (1)	2,749,091		1,804,975
Total liabilities (1)	$	3,453,149	$	2,011,001


	Nine Months Ended September 30,
	2023		2022
Statement of Operations Data:
Revenue	$	—	$	—
Operating loss	(770)		(1,787)
Net (loss) income	(49,236)		8,116

(1)Includes $688.4 million and $719.3 million of intercompany loan payables to non-guarantor subsidiaries as of September 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 September 30, 2023, $673.0 million was outstanding under the Revolving Credit Agreement. No letters of credit were outstanding as of September 30, 2023. As of October 23, 2023, $533.0 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 September 30, 2023, no amount was 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.

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