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) provides the reader with management’s perspective 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, 2024 should be read in conjunction with our consolidated financial statements and related notes included in our 2023 Annual Report on Form 10-K (2023 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.”

Business Environment

The operating environment for commercial real estate continued to improve in the third quarter of 2024. Most notably, office leasing activity accelerated in the third quarter as greater certainty about the economic outlook supports occupier decision making across primary and secondary markets, particularly in the U.S. and Europe. Increased liquidity, lower borrowing costs and improved investor sentiment resulted an increase in investment sales for the first time since 2022. As capital returns to real estate, opportunities to harvest gains from real estate development and investment management portfolios are expected to increase.

Capital Allocation

We used $62 million in the quarter for share repurchases, while maintaining substantial liquidity to finance future growth.

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, 2024 and 2023 (dollars in millions):


	Three Months Ended September 30,								Nine Months Ended September 30,
	2024				2023				2024				2023
Revenue:
Net revenue:
Facilities management	$	1,780	19.6	%	$	1,455	18.5	%	$	5,030	19.8	%	$	4,289	18.7	%
Property management	543		6.0	%	444		5.6	%	1,548		6.1	%	1,345		5.9	%
Project management	872		9.7	%	777		9.9	%	2,512		9.9	%	2,277		9.9	%
Valuation	178		2.0	%	163		2.1	%	528		2.1	%	508		2.2	%
Loan servicing	81		0.9	%	81		1.0	%	247		1.0	%	238		1.0	%
Advisory leasing	984		10.9	%	827		10.5	%	2,607		10.3	%	2,350		10.2	%
Capital markets:
Advisory sales	422		4.7	%	370		4.7	%	1,133		4.5	%	1,135		4.9	%
Commercial mortgage origination	163		1.8	%	107		1.4	%	383		1.5	%	268		1.2	%
Investment management	196		2.2	%	137		1.7	%	494		1.9	%	436		1.9	%
Development services	106		1.2	%	73		0.9	%	268		1.1	%	254		1.1	%
Corporate, other and eliminations	(7)		(0.1)	%	(4)		0.0	%	(16)		(0.1)	%	(12)		(0.1)	%
Total net revenue	5,318		58.9	%	4,430		56.3	%	14,734		58.1	%	13,088		56.9	%
Pass-through costs also recognized as revenue	3,718		41.1	%	3,438		43.7	%	10,629		41.9	%	9,911		43.1	%
Total revenue	9,036		100.0	%	7,868		100.0	%	25,363		100.0	%	22,999		100.0	%
Costs and expenses:
Cost of revenue	7,252		80.2	%	6,397		81.3	%	20,521		80.9	%	18,583		80.8	%
Operating, administrative and other	1,237		13.7	%	1,058		13.4	%	3,538		13.9	%	3,356		14.6	%
Depreciation and amortization	178		2.0	%	149		1.9	%	497		2.0	%	465		2.0	%

Total costs and expenses	8,667		95.9	%	7,604		96.6	%	24,556		96.8	%	22,404		97.4	%
(Loss) gain on disposition of real estate	(1)		0.0	%	5		0.1	%	12		0.0	%	18		0.1	%
Operating income	368		4.1	%	269		3.4	%	819		3.2	%	613		2.8	%
Equity (loss) income from unconsolidated subsidiaries	(4)		0.0	%	(13)		(0.2)	%	(77)		(0.3)	%	121		0.5	%
Other income	12		0.1	%	14		0.2	%	26		0.1	%	22		0.1	%
Interest expense, net of interest income	64		0.7	%	38		0.5	%	163		0.6	%	110		0.5	%

Income before provision for income taxes	312		3.5	%	232		2.9	%	605		2.4	%	646		2.8	%
Provision for income taxes	67		0.8	%	31		0.4	%	70		0.3	%	114		0.5	%
Net income	245		2.7	%	201		2.6	%	535		2.1	%	532		2.3	%
Less: Net income attributable to non-controlling interests	20		0.2	%	10		0.1	%	54		0.2	%	23		0.1	%
Net income attributable to CBRE Group, Inc.	$	225	2.5	%	$	191	2.4	%	$	481	1.9	%	$	509	2.2	%

Core EBITDA	$	688	7.6	%	$	436	5.5	%	$	1,618	6.4	%	$	1,472	6.4	%

Three Months Ended September 30, 2024 Compared to the Three Months Ended September 30, 2023

We reported consolidated net income of $225 million for the quarter, an increase of 17.8% from $191 million in the same period in 2023. Over the same time period, revenue increased 14.8% to $9.0 billion.

The revenue increase reflected an increase across all lines of businesses in the Advisory Services segment, with strong growth in leasing, particularly for office space, commercial mortgage origination, and property management, as well as continued strong growth in the Global Workplace Solutions (GWS) segment. Overall, revenue from our Resilient Businesses (comprised of facilities management, project management, property management, loan servicing, asset management fees in our investment management business and valuations), which generally grow across market cycles, increased approximately 12.6% in the quarter. Our Transactional Businesses (sales, leasing, mortgage origination, carried interest and incentive fees in our

investment management business, and development fees), which are subject to market cycles, saw revenue increase 25.7% in the quarter. Lower interest rates drove an increase in property sales and commercial mortgage origination, along with leasing, which was up 19.0%, in the Advisory Services segment and investment and development activities in the Real Estate Investments (REI) segment, both of which are sensitive to market cycles and interest rate fluctuations.

Foreign currency translation had a 0.6% negative impact on revenue, reflecting the weakness in the Brazilian real, Canadian dollar and Mexican peso partially offset by strength in the British pound sterling.

Cost of revenue increased 13.4% during the quarter due to the strong revenue growth noted previously, consisting of higher pass-through costs, higher compensation, higher transaction commissions, and higher indirect reimbursed costs. Foreign currency translation had a 0.5% positive impact on total cost of revenue. Cost of revenue decreased to 80.2% of total revenue from 81.3% in the third quarter 2023, driven by growth in our Advisory Services segment revenue that generally has higher gross margin.

Operating, administrative and other expenses increased by 16.9%, primarily due to $61 million of restructuring charges (employee separation benefits, contract termination fees, consulting charges, etc.) and an indirect tax accrual in the third quarter of 2024 versus $4 million recorded in the same period in the prior year. In addition, we recorded higher incentive compensation expense compared to the same quarter in the prior year to align with improved business performance. Foreign currency translation had a 0.3% positive impact on total operating, administrative and other expenses during the quarter. Operating expenses as a percentage of revenue slightly increased to 13.7% in the third quarter 2024 from 13.4% in the third quarter 2023, reflecting higher operating expenses related to restructuring charges and the indirect tax accrual.

Depreciation and amortization expense increased by 19.5% during the quarter, reflecting higher amortization expense related to intangibles from recent acquisitions such as J&J Worldwide Services.

We incurred an equity loss of $4 million versus an equity loss of $13 million in last year’s third quarter. This was mainly due to lower net unrealized losses related to equity investments.

Interest expense, net of interest income, increased by 68.4%, compared with the third quarter 2023. This increase was primarily due to the impact of higher interest rates, increased borrowings on the revolving credit facilities, and the issuance of new debt in 2024.

Our provision for income taxes on a consolidated basis was $67 million for the three months ended September 30, 2024 as compared to a provision for income taxes of $31 million for the three months ended September 30, 2023. The increase of $36 million is primarily related to an increase in earnings. Our effective tax rate increased to 21.5% for the three months ended September 30, 2024 from 13.2% for the three months ended September 30, 2023. Our effective tax rate for the three months ended September 30, 2024 is different than the U.S. federal statutory tax rate of 21.0%, primarily due to U.S. state taxes and favorable permanent book tax differences.

The Organization for Economic Co-operation & Development (OECD) Pillar Two Model Rules established a minimum global effective tax rate of 15% on country-by-country profits for large multinational companies. European Union member states along with many other countries have adopted, or expect to adopt, the OECD Pillar Two Model effective January 1, 2024 or thereafter. The OECD and other countries continue to publish guidelines and legislation which include transition and safe harbor rules. The Pillar Two top-up taxes are not expected to have a material impact to our financial statements for 2024. However, we continue to monitor new legislative changes and assess the global impact of the Pillar Two Model Rules, including the potential applicability and impact of the under-taxed profits rule that is effective in 2025.

Nine Months Ended September 30, 2024 Compared to the Nine Months Ended September 30, 2023

We reported consolidated net income of $481 million for the nine months ended September 30, 2024 on revenue of $25.4 billion as compared to consolidated net income of $509 million on revenue of $23.0 billion for the nine months ended September 30, 2023.

The revenue increase reflected growth in property management, leasing activity, particularly for office space, commercial mortgage origination, loan servicing, and continued strong growth in the GWS segment. Although we began to see an increase in property sales in our Advisory Services segment due to lower interest rates in the third quarter of 2024, higher interest rates for the first half of 2024 continued to weigh on property sales in the Advisory Services segment and investment

and development activities in the REI segment, both of which are sensitive to market cycles and interest rates. Overall, revenue from our Resilient Businesses increased 10.1% for the period. Our Transactional Businesses saw revenue edge up 11.0%.

Foreign currency translation had a 0.4% negative impact on total revenue during the nine months ended September 30, 2024, primarily driven by weakness in the Japanese yen, partially offset by strength in the British pound sterling.

Cost of revenue increased 10.4% during the nine months ended September 30, 2024 as compared to the same period in 2023 due to revenue growth, consisting of higher pass-through costs, higher compensation, and higher indirect reimbursed costs. Foreign currency translation had a 0.4% positive impact on total cost of revenue. Cost of revenue increased slightly to 80.9% of total revenue from 80.8%, driven by higher cost to support growth in GWS revenues.

Operating, administrative and other expenses increased 5.4% as compared to the same period last year. The company incurred approximately $171 million in restructuring and an indirect tax accrual this year versus $145 million recorded in the same period in the prior year, and higher compensation expense. This was partially offset by bonus expense reversal as part of the restructuring activities and lower bonus expense related to the REI segment to align with overall expected segment performance. Foreign currency translation had a 0.2% positive impact on total operating expenses during the nine months ended September 30, 2024. Operating expenses as a percentage of revenue decreased to 13.9% from 14.6%, as operating expenses grew slower than revenue.

Depreciation and amortization expense increased by 6.9% during the nine months ended September 30, 2024 as compared to the same period in 2023, reflecting higher depreciation and amortization expense related to assets acquired from recent acquisitions such as J&J Worldwide Services.

We incurred an equity loss of $77 million during the nine months ended September 30, 2024 compared to equity income of $121 million in the same period in 2023. This was mainly due to an unusually large development asset disposition in first-quarter 2023 that did not recur in 2024. In addition, we recorded higher unrealized losses related to our non-core strategic equity investment in Altus Power, Inc. (Altus) in the nine months ended September 30, 2024.

Other income increased to $26 million from $22 million, reflecting positive fair value adjustments on certain financial instruments related to our investment in Industrious this year as compared to the same period last year.

Interest expense, net of interest income, increased by 48.2% for the nine months ended September 30, 2024 as compared to the same period in 2023. This increase was primarily due to the impact of higher interest rates, during most of the period, increased borrowings on the revolving credit facilities, and the issuance of new debt during the first quarter of 2024 and in late second-quarter 2023.

Our provision for income taxes on a consolidated basis was $70 million for the nine months ended September 30, 2024 as compared to a provision for income taxes of $114 million for the nine months ended September 30, 2023. The decrease of $44 million is primarily related to the reversal of unrecognized tax positions. Our effective tax rate decreased to 11.6% for the nine months ended September 30, 2024 from 17.6% for the nine months ended September 30, 2023. Our effective tax rate for the nine months ended September 30, 2024 is different than the U.S. federal statutory tax rate of 21.0% primarily due to the reversal of unrecognized tax positions, U.S. state taxes, and favorable permanent book tax differences.

Segment Operations

On June 24, 2024, we announced plans to combine our project management business with our Turner & Townsend subsidiary and expect this transaction to close in early 2025. We intend to organize our operations around, and publicly report our financial results on, four reportable segments in 2025. For the remainder of 2024, we will continue to report our financial results under our existing reportable segments given this is how the chief operating decision maker currently manages the business.

As of September 30, 2024, 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 14 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, 2024 and 2023 (dollars in millions):


	Three Months Ended September 30,								Nine Months Ended September 30,
	2024				2023				2024				2023
Revenue:
Net revenue:
Property management	$	543	22.7	%	$	444	22.1	%	$	1,548	23.7	%	$	1,345	22.8	%
Valuation	178		7.4	%	163		8.1	%	528		8.1	%	508		8.6	%
Loan servicing	81		3.4	%	81		4.0	%	247		3.8	%	238		4.0	%
Advisory leasing	984		41.1	%	827		41.1	%	2,607		40.0	%	2,350		39.8	%
Capital markets:
Advisory sales	422		17.6	%	370		18.4	%	1,133		17.4	%	1,135		19.2	%
Commercial mortgage origination	163		6.8	%	107		5.3	%	383		5.9	%	268		4.5	%
Total segment net revenue	2,371		99.0	%	1,992		99.0	%	6,446		98.9	%	5,844		98.9	%
Pass-through costs also recognized as revenue	24		1.0	%	21		1.0	%	72		1.1	%	64		1.1	%
Total segment revenue	2,395		100.0	%	2,013		100.0	%	6,518		100.0	%	5,908		100.0	%
Costs and expenses:
Cost of revenue	1,478		61.7	%	1,253		62.3	%	3,985		61.1	%	3,613		61.2	%
Operating, administrative and other	517		21.6	%	497		24.7	%	1,529		23.5	%	1,518		25.7	%
Depreciation and amortization	70		2.9	%	66		3.2	%	202		3.1	%	215		3.6	%

Total costs and expenses	2,065		86.2	%	1,816		90.2	%	5,716		87.7	%	5,346		90.5	%

Operating income	330		13.8	%	197		9.8	%	802		12.3	%	562		9.5	%
Equity income from unconsolidated subsidiaries	1		0.0	%	1		0.0	%	1		0.0	%	3		0.1	%
Other income	—		0.0	%	11		0.7	%	2		0.0	%	15		0.3	%
Add-back: Depreciation and amortization	70		2.9	%	66		3.2	%	202		3.1	%	215		3.6	%

Adjustments:
Costs associated with efficiency and cost-reduction initiatives	13		0.6	%	2		0.1	%	13		0.2	%	67		1.1	%


Segment operating profit and segment operating profit on revenue margin	$	414	17.3	%	$	277	13.8	%	$	1,020	15.6	%	$	862	14.6	%
Segment operating profit on net revenue margin			17.5	%			13.9	%			15.8	%			14.8	%

Three Months Ended September 30, 2024 Compared to the Three Months Ended September 30, 2023

Revenue increased 19.0% during the quarter. Global leasing revenue rose 19.0%, driven by Americas which grew 19.9%, including 24.1% in the United States and the United Kingdom, which grew 31.3%. Property sales revenue was up 14.1%, reflecting the impact of lower interest rates and improving credit conditions. The company’s loan origination business benefited from higher loan origination fees driven by increased financing activity, resulting from lower interest rates. Property management grew 22.3% fueled by growth across regions and in the U.S. and continued growth from the Brookfield portfolio. Foreign currency translation had a 0.5% negative impact on total revenue during the quarter, primarily driven by weakness in the Brazilian real, partially offset by strength in the British pound sterling.

Cost of revenue increased 18.0%, primarily reflecting business growth, higher reimbursable expenses in property management and higher professional compensation as bonuses reset. Foreign currency translation had a 0.4% positive impact on total cost of revenue. Cost of revenue decreased to 61.7% of total revenue from 62.3% in the 2023 third quarter, primarily due to growth in leasing and sales, which have higher margins.

Operating, administrative and other expenses increased by 4.0%, primarily due to incentive compensation expense increases in the current quarter to align with business performance. Foreign currency translation had a 0.8% positive impact on total operating expenses.

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, 2024, MSRs contributed $38 million to operating income, offset by $36 million of amortization of related intangible assets. The MSR contribution to third quarter 2023 operating income was $22 million and amortization totaled $35 million.

Depreciation and amortization expense increased 6.1% primarily due to higher amortization of mortgage servicing rights as described above.

Nine Months Ended September 30, 2024 Compared to the Nine Months Ended September 30, 2023

Revenue increased 10.3% for the nine months ended September 30, 2024 as compared to the nine months ended September 30, 2023. Global leasing revenue rose 10.9%, driven by Americas which grew 12.4%, including 14.6% in the United States and the United Kingdom, which grew 10.6%. Property sales revenue was down 0.2%, reflecting high interest rates and difficult credit conditions in the first half of 2024, offset by an increase in property sales in the third quarter 2024, driven by lower interest rates. The company’s loan origination business benefited from higher loan fees and a significant increase in interest earnings on escrow balances. Property management also grew solidly, up 15.1%. Foreign currency translation had a 0.5% negative impact on total revenue during the nine months ended September 30, 2024, primarily driven by weakness in Japanese yen, partially offset by strength in the British pound sterling.

Cost of revenue increased 10.3%, primarily reflecting business growth, higher reimbursable expenses in property management, higher professional compensation and higher commission expense. Foreign currency translation had a 0.4% positive impact on total cost of revenue. Cost of revenue slightly decreased to 61.1% of total revenue from 61.2% for the same period in 2023 due to growth in leasing and improving sales.

Operating, administrative and other expenses slightly increased by 0.7% for the nine months ended September 30, 2024 as compared to the same period in 2023, driven by higher variable employee compensation costs. The increase was partially offset by lower restructuring expenses as the Advisory Services segment recorded significant restructuring expenses in the first half of 2023, as the segment went through rapid cost take out that did not recur this year. Foreign currency translation also had a 0.4% positive impact on total operating expenses.

For the nine months ended September 30, 2024, MSRs contributed $74 million to operating income, offset by $104 million of amortization of related intangible assets. For the nine months ended September 30, 2023, MSRs contributed $60 million to operating income, offset by $109 million of amortization of related intangible assets. The increase was associated with higher origination activity given an increase in financing activities in the third quarter of 2024.

Depreciation and amortization expense decreased 6.0% primarily due to lower amortization of mortgage servicing rights as described above and due to accelerated depreciation expense recorded in the first half of 2023, as part of cost savings initiatives that did not recur this 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, 2024 and 2023 (dollars in millions):


	Three Months Ended September 30,								Nine Months Ended September 30,
	2024				2023				2024				2023
Revenue:
Net revenue:
Facilities management	$	1,780	28.1	%	$	1,455	25.8	%	$	5,030	27.8	%	$	4,289	26.1	%
Project management	872		13.7	%	777		13.7	%	2,512		13.9	%	2,277		13.9	%
Total segment net revenue	2,652		41.8	%	2,232		39.5	%	7,542		41.7	%	6,566		40.0	%
Pass-through costs also recognized as revenue	3,694		58.2	%	3,417		60.5	%	10,557		58.3	%	9,847		60.0	%
Total segment revenue	6,346		100.0	%	5,649		100.0	%	18,099		100.0	%	16,413		100.0	%
Costs and expenses:
Cost of revenue	5,716		90.1	%	5,104		90.3	%	16,372		90.5	%	14,844		90.4	%
Operating, administrative and other	329		5.2	%	303		5.4	%	980		5.4	%	932		5.7	%
Depreciation and amortization	90		1.4	%	66		1.2	%	242		1.3	%	196		1.2	%

Total costs and expenses	6,135		96.7	%	5,473		96.9	%	17,594		97.2	%	15,972		97.3	%
Operating income	211		3.3	%	176		3.1	%	505		2.8	%	441		2.7	%
Equity (loss) income from unconsolidated subsidiaries	(9)		(0.1)	%	1		0.0	%	(5)		0.0	%	1		0.0	%
Other income	1		0.0	%	1		0.0	%	3		0.0	%	3		0.0	%
Add-back: Depreciation and amortization	90		1.4	%	66		1.2	%	242		1.3	%	196		1.2	%

Adjustments:
Integration and other costs related to acquisitions (1)	5		0.1	%	5		0.1	%	13		0.1	%	21		0.1	%
Costs associated with efficiency and cost-reduction initiatives	11		0.2	%	2		0.0	%	41		0.2	%	52		0.3	%
Impact of fair value non-cash adjustments related to unconsolidated equity investments	9		0.1	%	—		0.0	%	9		0.1	%	—		0.0	%
Segment operating profit and segment operating profit on revenue margin	$	318	5.0	%	$	251	4.4	%	$	808	4.5	%	$	714	4.3	%
Segment operating profit on net revenue margin			12.0	%			11.3	%			10.7	%			10.9	%

(1)During the first quarter of 2024, we incurred integration and other costs related to acquisitions of $18 million in deal and integration costs, offset by reversal of $22 million in previously recognized transaction-related bonus expense due to change in estimate.

Three Months Ended September 30, 2024 Compared to the Three Months Ended September 30, 2023

Revenue increased 12.3%, reflecting a double-digit increase in facilities management, led by the Enterprise and Local businesses, and growth in project management due to continued strong performance from Turner & Townsend. Foreign currency translation had a 0.7% negative impact on total revenue during the quarter, primarily driven by weakness in the Mexican peso, partially offset by strength in the British pound sterling.

Cost of revenue increased 12.0%, driven by higher pass-through costs and increased professional compensation. Foreign currency translation had a 0.6% positive impact on total cost of revenue. Cost of revenue was 90.1% of total revenue, slightly down from 90.3% in the third quarter 2023.

Operating, administrative and other expenses increased 8.6%, primarily due to higher employee compensation expenses, and restructuring expenses such as severance. Foreign currency translation had a negligible impact on total operating expenses during the quarter.

Depreciation and amortization expense increased 36.4%, reflecting higher amortization expense related to intangibles from recent acquisitions such as J&J Worldwide Services.

Nine Months Ended September 30, 2024 Compared to the Nine Months Ended September 30, 2023

Revenue increased 10.3% for the nine months ended September 30, 2024 as compared to the same period in 2023, reflecting a double-digit increase in facilities management, led by the Enterprise and Local business, and growth in project management due to continued strong growth from Turner & Townsend. Foreign currency translation had a 0.4% negative impact on total revenue, primarily driven by weakness in the Japanese yen, partially offset by strength in the British pound sterling.

Cost of revenue increased 10.3%, driven by higher pass-through costs, higher indirect reimbursed costs, and increased professional compensation to support the growth in the business. Foreign currency translation had a 0.4% positive impact on total cost of revenue. Cost of revenue was 90.5% of total revenue, a slight increase from 90.4% for the nine months ended September 30, 2023, primarily due to a shift in composition of revenue with more revenue coming from facilities management, supported by the J&J acquisition, which generally has lower margins as compared to project management.

Operating, administrative and other expenses increased 5.2%, primarily due to restructuring charges incurred related to cost savings initiatives and the inclusion of J&J’s operating results since acquisition at the end of February 2024. Foreign currency translation also had a 0.3% positive impact on total operating expenses during the nine months ended September 30, 2024.

Depreciation and amortization expense increased 23.5% primarily due to increased amortization expense on intangibles related to the J&J and certain other in-fill acquisitions.

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, 2024 and 2023 (dollars in millions):


	Three Months Ended September 30,								Nine Months Ended September 30,
	2024				2023				2024				2023
Revenue:
Investment management	$	196	64.9	%	$	137	65.0	%	$	494	64.8	%	$	436	63.1	%
Development services	106		35.1	%	73		35.0	%	268		35.2	%	254		36.9	%
Total segment revenue	302		100.0	%	210		100.0	%	762		100.0	%	690		100.0	%
Costs and expenses:
Cost of revenue	60		19.9	%	43		20.4	%	161		21.1	%	133		19.2	%
Operating, administrative and other	229		75.8	%	153		73.1	%	586		76.9	%	582		84.4	%
Depreciation and amortization	4		1.3	%	3		1.4	%	10		1.3	%	13		1.8	%

Total costs and expenses	293		97.0	%	199		94.9	%	757		99.3	%	728		105.4	%
(Loss) gain on disposition of real estate	(1)		(0.3)	%	5		2.6	%	12		1.6	%	18		2.6	%
Operating income (loss)	8		2.7	%	16		7.7	%	17		2.3	%	(20)		(2.8)	%
Equity income (loss) from unconsolidated subsidiaries	14		4.7	%	(4)		(1.7)	%	29		3.8	%	160		23.1	%
Other income (loss)	8		2.6	%	—		(0.2)	%	6		0.8	%	(1)		(0.1)	%
Add-back: Depreciation and amortization	4		1.3	%	3		1.4	%	10		1.3	%	13		1.8	%

Adjustments:
Carried interest incentive compensation (reversal) expense to align with the timing of associated revenue	(4)		(1.3)	%	(8)		(4.1)	%	12		1.6	%	(2)		(0.3)	%
Costs associated with efficiency and cost-reduction initiatives	4		1.3	%	—		0.0	%	4		0.5	%	21		3.1	%


Provision associated with Telford’s fire safety remediation efforts	33		10.9	%	—		0.0	%	33		4.3	%	—		0.0	%
Segment operating profit and segment operating profit on revenue margin	$	67	22.2	%	$	7	3.1	%	$	111	14.6	%	$	171	24.8	%

Three Months Ended September 30, 2024 Compared to the Three Months Ended September 30, 2023

Revenue increased 43.8% for the current quarter. This reflected an increase in incentive fees in our investment management and development services lines of business. Foreign currency translation had a negligible impact on total revenue.

Cost of revenue increased 39.5%, and was 19.9% of total revenue – down from 20.4% in the same period in 2023. We incurred higher construction costs related to real estate development as compared to the same period in 2023. Foreign currency translation had a negligible impact on total cost of revenue during the quarter.

Operating, administrative and other expenses increased 49.7% primarily due to an increase in incentive compensation in our development services and investment management line of business consistent with higher revenue growth. Foreign currency translation had a 0.7% negative impact on total operating expenses.

We recorded equity income from unconsolidated subsidiaries of approximately $14 million versus equity loss of $4 million in the third quarter 2023, primarily due to higher co-investment returns in investment management and sales of equity method investments in development services. Gain on disposition of real estate decreased by $6 million compared with third quarter 2023 given limited disposition activity.

A roll forward of our AUM by product type for the three months ended September 30, 2024 is as follows (dollars in billions):


	Funds		Separate Accounts		Securities		Total
Balance at June 30, 2024	$	64.5	$	69.1	$	8.9	$	142.5
Inflows	1.0		1.0		0.2		2.2
Outflows	(0.2)		(0.7)		(0.3)		(1.2)
Market appreciation	1.7		1.9		1.2		4.8
Balance at September 30, 2024	$	67.0	$	71.3	$	10.0	$	148.3

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, 2024 Compared to the Nine Months Ended September 30, 2023

Revenue increased 10.4% for the nine months ended September 30, 2024 as compared to the same period in 2023. This reflected an increase in incentive fees in our investment management and development services lines of business. The increase was partially offset by lower real estate development sales revenue. Foreign currency translation had a 0.4% positive impact on total revenue during the nine months ended September 30, 2024, primarily driven by strength in the British pound sterling, partially offset by weakness in the Japanese yen.

Cost of revenue increased 21.1% for the nine months ended September 30, 2024 as compared to the same period in 2023 due to higher construction costs incurred on our real estate development projects. Foreign currency translation had a 2.3% negative impact on total cost of revenue during the nine months ended September 30, 2024.

Operating, administrative and other expenses increased 0.7%, primarily due to an increase in incentive compensation in our development services and investment management line of business consistent with higher revenue growth, partially offset by lower bonus expense to align with overall segment performance, and $21 million in charges associated with the company’s efficiency and cost-reduction initiatives incurred during the nine months ended September 30, 2023 with no such cost in 2024. Foreign currency translation had a 0.5% negative impact on total operating expenses during the nine months ended September 30, 2024.

We recorded equity income from unconsolidated subsidiaries of approximately $29 million during the nine months ended September 30, 2024 as compared to equity income of $160 million in the same period in 2023, which included an unusually large gain on a development portfolio asset sale. Gain on disposition of real estate decreased by $6 million compared to the same period in 2023.

A roll forward of our AUM by product type for the nine months ended September 30, 2024 is as follows (dollars in billions):


	Funds		Separate Accounts		Securities		Total
Balance at December 31, 2023	$	65.3	$	72.8	$	9.4	$	147.5
Inflows	3.0		4.1		0.7		7.8
Outflows	(1.6)		(5.4)		(1.1)		(8.1)
Market appreciation (depreciation)	0.3		(0.2)		1.0		1.1
Balance at September 30, 2024	$	67.0	$	71.3	$	10.0	$	148.3

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, 2024 and 2023 (dollars in millions):


	Three Months Ended September 30, (1)				Nine Months Ended September 30, (1)
	2024		2023		2024		2023
Elimination of inter-segment revenue	$	(7)	$	(4)	$	(16)	$	(12)
Costs and expenses:
Cost of revenue (2)	(2)		(3)		3		(7)
Operating, administrative and other	162		105		443		324
Depreciation and amortization	14		14		43		41

Total costs and expenses	174		116		489		358

Operating loss	(181)		(120)		(505)		(370)
Equity loss from unconsolidated subsidiaries	(10)		(11)		(102)		(43)
Other income	3		2		15		5
Add-back: Depreciation and amortization	14		14		43		41

Adjustments:
Costs associated with efficiency and cost-reduction initiatives	13		—		79		5
Charges related to indirect tax audit / settlement	25		—		39		—
Costs incurred related to legal entity restructuring	—		4		2		4
Integration and other costs related to acquisitions	17		—		17		39
Segment operating loss	$	(119)	$	(111)	$	(412)	$	(319)

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

(2)Primarily relates to inter-segment eliminations.

Three Months Ended September 30, 2024 Compared to the Three Months Ended September 30, 2023

Core corporate

Operating, administrative and other expenses for our core corporate functions rose 54.3% to $162 million for the third quarter of 2024, mainly due to an increase in our provision related to indirect taxes, increased charges associated with employee separation and certain one-time charges related to acquisitions. In addition, we recorded higher incentive compensation expense due to improving earnings.

Other (non-core)

We recorded an equity loss of $10 million, reflecting the lower value of our investment in publicly traded Altus Power, Inc. (Altus), offset by equity income from investments in other unconsolidated subsidiaries. This compares with a $11 million loss in third-quarter 2023, reflecting the market value of our Altus ownership interest.

Nine Months Ended September 30, 2024 Compared to the Nine Months Ended September 30, 2023

Core corporate

Operating, administrative and other expenses for our core corporate functions rose 36.7% to $443 million for the nine months ended September 30, 2024, due to an increase in our provision related to indirect taxes, increased charges associated with employee separation and certain one-time charges related to acquisitions. In addition, we recorded higher incentive compensation expense due to improving earnings.

Other (non-core)

We recorded equity loss of $102 million, reflecting the lower value of our investment in Altus, offset by equity income from investments in other unconsolidated subsidiaries. This compares with a $43 million loss during the same period in 2023, reflecting the market value of our Altus ownership interest. We recorded positive fair value adjustment on our investment portfolio in Industrious which partially offset the losses from Altus and generated positive other income of $11 million.

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 facilities. Our expected capital requirements for 2024 include up to $312 million of anticipated capital expenditures, net of tenant concessions. During the nine months ended September 30, 2024, we incurred $193 million of capital expenditures, net of tenant concessions received. As of September 30, 2024, we had aggregate future commitments of $154 million related to co-investments funds in our REI segment, $36 million of which is expected to be funded in 2024. Additionally, as of September 30, 2024, we are committed to fund additional capital of $153 million and $51 million to consolidated and unconsolidated projects, respectively, within our REI segment. As of September 30, 2024, 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 $1.0 billion of cash and cash equivalents.

We have historically relied on our internally generated cash flow and our revolving credit facilities to fund our working capital, capital expenditure and general investment requirements (including in-fill acquisitions) and have not sought other external sources of financing to help fund these requirements. In the absence of extraordinary events, large strategic acquisitions or large returns of capital to shareholders, 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. We may seek to take advantage of market opportunities to refinance existing debt instruments, as we have done in the past, with new debt instruments at interest rates, maturities and terms we deem attractive. We may also, from time to time in our sole discretion, purchase, redeem, or retire our existing senior notes, through tender offers, in privately negotiated or open market transactions, or otherwise.

In February 2024, we conducted a new issuance for $500 million in aggregate principal amount of 5.500% senior notes due in 2029 (the 5.500% senior notes) generating net proceeds of $495 million which included debt issuance cost of $1 million related to this issuance.

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

Our long-term liquidity needs, other than those related to ordinary course obligations and commitments such as operating leases, are generally comprised of the following 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, 2024 and December 31, 2023, we had accrued deferred purchase and contingent consideration totaling $568 million ($283 million of which was a current liability) and $530 million ($264 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.

The third, as described in Note 12 of the Notes to Consolidated Financial Statements (Unaudited) 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, 2024, we repurchased 567,209 shares of our Class A common stock with an average price of $109.20 per share using cash on hand for an aggregate of $62 million. During the nine months ended September 30, 2024, we repurchased 1,121,950 shares of our Class A common stock with an average price of $98.35 per share using cash on hand for an aggregate of $110 million. During the period October 1, 2024 through October 21, 2024, we repurchased 21,324 shares of our Class A common stock with an average price of $119.48 per share using cash on hand for an aggregate of $3 million. As of both September 30, 2024 and October 21, 2024, we had $1.4 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 provided by operating activities totaled $368 million for the nine months ended September 30, 2024 as compared to net cash used in operating activities of $373 million during the nine months ended September 30, 2023. The primary drivers that contributed to the increase in net cash provided by operating activities were as follows: (1) working capital movements, driven by lesser outflows related to accounts payable and accrued expenses and lower accounts receivable due to better collections which lagged during the nine months ended September 30, 2023 and (2) higher net cash flows from operations, driven by revenue growth.

Investing Activities

Net cash used in investing activities totaled $1,494 million for the nine months ended September 30, 2024, an increase of $957 million as compared to the nine months ended September 30, 2023. The increase was primarily due to the acquisition of J&J Worldwide Services in February 2024 and Direct Line Global in June 2024.

Financing Activities

Net cash provided by financing activities totaled $927 million for the nine months ended September 30, 2024 as compared to $906 million for the nine months ended September 30, 2023. The increased inflow was primarily driven by lower outflow related to share repurchases, net proceeds from the revolver, and deferred purchase considerations, partially offset by lower fixed term debt financing, and higher payment of taxes on equity awards.

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 (2023 Credit Agreement) maturing on July 10, 2028, which refinanced and replaced the previous 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 €367 million and (ii) tranche A U.S. Dollar-denominated term loans in an aggregate principal amount of $350 million with weighted average interest rate of 5.3% as of September 30, 2024, 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 senior term loans, approximately $437 million, under the previous credit agreement, the payment of related fees and expenses and other general corporate purposes.

On February 23, 2024, CBRE Services issued $500 million in aggregate principal amount of 5.500% senior notes due April 1, 2029 (the 5.500% senior notes) at a price equal to 99.837% of their face value. The 5.500% 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 5.500% per year and is payable semi-annually in arrears on April 1 and October 1 of each year, beginning on October 1, 2024.

On June 23, 2023, CBRE Services issued $1.0 billion in aggregate principal amount of 5.950% senior notes due August 15, 2034 (the 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 and 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.

On March 18, 2021, CBRE Services issued $500 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.

On August 13, 2015, CBRE Services issued $600 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 of each year.

The indentures governing our 5.950% senior notes, 5.500% 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.

The term loan borrowings under the 2023 Credit Agreement are fully and unconditionally guaranteed by CBRE Group, Inc. and CBRE Services. Our Revolving Credit Agreement, 5.950% senior notes, 5.500% 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 millions):


	September 30, 2024		December 31, 2023
Balance Sheet Data:
Current assets	$	15	$	7
Non-current assets	1,732		1,733
Total assets	$	1,747	$	1,740

Current liabilities	$	759	$	48
Non-current liabilities (1)	3,642		2,994
Total liabilities (1)	$	4,401	$	3,042


	Nine Months Ended September 30,
	2024		2023
Statement of Operations Data:
Revenue	$	—	$	—
Operating loss	(2)		(1)
Net loss	(115)		(49)

(1)Includes $1.1 billion and $933 million of intercompany loan payables to non-guarantor subsidiaries as of September 30, 2024 and December 31, 2023, 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 2023 Annual Report and Note 8 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 commitments in an aggregate principal amount of up to $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 million in the aggregate.

As of September 30, 2024, $683 million was outstanding under the Revolving Credit Agreement, as well as $10 million of letters of credit. As of December 31, 2023, no amount was outstanding under the Revolving Credit Agreement. As of October 21, 2024, $640 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 million revolving credit facility pursuant to a credit agreement dated March 31, 2022, with an additional accordion option of £20 million, that matures on March 31, 2027. As of September 30, 2024, no amount was outstanding under this revolving credit facility. As of December 31, 2023, $10 million (£8 million) 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 2023 Annual Report and Notes 4 and 8 of the Notes to Consolidated Financial Statements (Unaudited) set forth in Item 1 of this Quarterly Report.

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

Off –Balance Sheet Arrangements

We do not have off-balance sheet arrangements that we believe could have a material current or future impact on our financial condition, liquidity or results of operations. Our off-balance sheet arrangements are described in Note 10 of the Notes to Consolidated Financial Statements (Unaudited) set forth in Item 1 of this Quarterly Report and are incorporated by reference herein.

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 2023 Annual Report. There have been no material changes to these policies and estimates as of September 30, 2024.

New Accounting Pronouncements

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

Non-GAAP Financial Measures

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 carried interest incentive compensation expense to align with the timing of associated revenue, costs incurred related to legal entity restructuring, efficiency and cost-reduction initiatives, charges related to indirect tax audit / settlement, integration and other costs related to acquisitions, provision associated with Telford’s fire safety remediation efforts, and the impact of fair value adjustments related to unconsolidated equity investments. We believe that investors may find this measure 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 measures 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 millions):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2024		2023		2024		2023
Net income attributable to CBRE Group, Inc.	$	225	$	191	$	481	$	509
Net income attributable to non-controlling interests	20		10		54		23
Net income	245		201		535		532
Adjustments:
Depreciation and amortization	178		149		497		465

Interest expense, net of interest income	64		38		163		110

Provision for income taxes	67		31		70		114
Costs associated with efficiency and cost-reduction initiatives	41		4		137		145
Charges related to indirect tax audit / settlement	25		—		39		—
Integration and other costs related to acquisitions (1)	22		5		30		60
Carried interest incentive compensation (reversal) expense to align with the timing of associated revenue	(4)		(8)		12		(2)
Costs incurred related to legal entity restructuring	—		4		2		4
Net fair value adjustments on strategic non-core investments	8		12		91		44
Impact of fair value non-cash adjustments related to unconsolidated equity investments	9		—		9		—
Provision associated with Telford’s fire safety remediation efforts	33		—		33		—
Core EBITDA	$	688	$	436	$	1,618	$	1,472

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,” “forecast,” “target,” 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 companies 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 we do business with 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;
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 and Estimates,” “Quantitative and Qualitative Disclosures About Market Risk” and Part II, Item 1A, “Risk Factors” or as described in our 2023 Annual Report, in particular in Part I, 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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