cbre-20210331

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2021


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Transition Period from _______________ to _______________

Commission File Number

001-32205

___________________________________________________________

CBRE GROUP, INC.

(Exact name of registrant as specified in its charter)

___________________________________________________________


Delaware		94-3391143
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification No.)
2100 McKinney Avenue, Suite 1250
Dallas, Texas		75201
(Address of principal executive offices)		(Zip Code)
	(214) 979-6100
	(Registrant's telephone number, including area code)

_____________________________________________________________________________________

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Class A Common Stock, $0.01 par value per share	“CBRE”	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

The number of shares of Class A common stock outstanding at April 23, 2021 was 335,657,390.

T a b l e o f c o n t e n t s

FORM 10-Q

March 31, 2021

TABLE OF CONTENTS


PART I – FINANCIAL INFORMATION		Page

Item 1.	Financial Statements (Unaudited)	1

	Consolidated Balance Sheets at March 31, 2021 and December 31, 2020	1

	Consolidated Statements of Operations for the three months ended March 31, 2021 and 2020	2

	Consolidated Statements of Comprehensive Income for the three months ended March 31, 2021 and 2020	3

	Consolidated Statements of Cash Flows for the three months ended March 31, 2021 and 2020	4

	Consolidated Statements of Equity for the three months ended March 31, 2021 and 2020	6

	Notes to Consolidated Financial Statements	7

Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	25

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	44

Item 4.	Controls and Procedures	45

PART II – OTHER INFORMATION

Item 1.	Legal Proceedings	46

Item 1A.	Risk Factors	46

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	46

Item 6.	Exhibits	47

Signatures		48

T a b l e o f c o n t e n t s

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

CBRE GROUP, INC.

CONSOLIDATED BALANCE SHEETS

(Unaudited)

(Dollars in thousands, except share data)


	March 31, 2021		December 31, 2020
ASSETS
Current Assets:
Cash and cash equivalents	$	1,910,326	$	1,896,188
Restricted cash	91,381		143,059
Receivables, less allowance for doubtful accounts of $88,972 and $95,533 at March 31, 2021 and December 31, 2020, respectively	4,232,561		4,394,954
Warehouse receivables	686,317		1,411,170
Prepaid expenses	281,658		294,992
Contract assets	313,648		318,191
Income taxes receivable	71,681		93,756
Other current assets	318,719		293,321
Total Current Assets	7,906,291		8,845,631
Property and equipment, net	774,301		815,009
Goodwill	3,804,678		3,821,609
Other intangible assets, net of accumulated amortization of $1,603,208 and $1,556,537 at March 31, 2021 and December 31, 2020, respectively	1,370,484		1,367,913
Operating lease assets	1,000,729		1,020,352
Investments in unconsolidated subsidiaries (with $309,749 and $116,314 at fair value at March 31, 2021 and December 31, 2020, respectively)	682,559		452,365
Non-current contract assets	135,587		153,636
Real estate under development	295,494		277,630
Non-current income taxes receivable	37,130		43,555
Deferred tax assets, net	90,320		91,529
Investments held in trust - special purpose acquisition company	402,507		402,501
Other assets, net	748,648		747,413
Total Assets	$	17,248,728	$	18,039,143
LIABILITIES AND EQUITY
Current Liabilities:
Accounts payable and accrued expenses	$	2,469,434	$	2,692,939
Compensation and employee benefits payable	1,353,219		1,287,383
Accrued bonus and profit sharing	657,552		1,183,786
Operating lease liabilities	206,772		208,526
Contract liabilities	174,413		162,045
Income taxes payable	64,105		57,892
Warehouse lines of credit (which fund loans that U.S. Government Sponsored Enterprises have committed to purchase)	675,473		1,383,964
Other short-term borrowings	5,425		5,330
Current maturities of long-term debt	1,402		1,514
Other current liabilities	165,008		160,604
Total Current Liabilities	5,772,803		7,143,983
Long-term debt, net of current maturities	1,848,346		1,380,202
Non-current operating lease liabilities	1,090,740		1,116,795
Non-current tax liabilities	93,885		87,954
Non-current income taxes payable	54,761		54,761
Deferred tax liabilities, net	123,562		124,485
Other liabilities	608,848		625,303
Total Liabilities	9,592,945		10,533,483
Commitments and contingencies	—		—
Non-controlling interest subject to possible redemption - special purpose acquisition company	384,399		385,573
Equity:
CBRE Group, Inc. Stockholders’ Equity:
Class A common stock; $0.01 par value; 525,000,000 shares authorized; 335,918,173 and 335,561,345 shares issued and outstanding at March 31, 2021 and December 31, 2020, respectively	3,359		3,356
Additional paid-in capital	1,013,287		1,074,639
Accumulated earnings	6,796,259		6,530,057
Accumulated other comprehensive loss	(582,535)		(529,726)
Total CBRE Group, Inc. Stockholders’ Equity	7,230,370		7,078,326
Non-controlling interests	41,014		41,761
Total Equity	7,271,384		7,120,087
Total Liabilities and Equity	$	17,248,728	$	18,039,143

The accompanying notes are an integral part of these consolidated financial statements.

T a b l e o f c o n t e n t s

CBRE GROUP, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

(Dollars in thousands, except share and per share data)


	Three Months Ended March 31,
	2021		2020
Revenue	$	5,938,879	$	5,889,168
Costs and expenses:
Cost of revenue	4,719,546		4,712,674
Operating, administrative and other	828,327		790,066
Depreciation and amortization	122,078		113,794
Asset impairments	—		75,171
Total costs and expenses	5,669,951		5,691,705
Gain on disposition of real estate	156		22,827
Operating income	269,084		220,290
Equity income from unconsolidated subsidiaries	83,594		20,631
Other income (loss)	2,732		(193)
Interest expense, net of interest income	10,106		16,016

Income before provision for income taxes	345,304		224,712
Provision for income taxes	76,327		51,182
Net income	268,977		173,530
Less: Net income attributable to non-controlling interests	2,775		1,335
Net income attributable to CBRE Group, Inc.	$	266,202	$	172,195
Basic income per share:
Net income per share attributable to CBRE Group, Inc.	$	0.79	$	0.51
Weighted average shares outstanding for basic income per share	335,860,494		334,969,826
Diluted income per share:
Net income per share attributable to CBRE Group, Inc.	$	0.78	$	0.51
Weighted average shares outstanding for diluted income per share	339,580,504		339,737,911

The accompanying notes are an integral part of these consolidated financial statements.

T a b l e o f c o n t e n t s

CBRE GROUP, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

(Dollars in thousands)


	Three Months Ended March 31,
	2021		2020
Net income	$	268,977	$	173,530
Other comprehensive loss:
Foreign currency translation loss	(52,346)		(172,374)
Amounts reclassified from accumulated other comprehensive loss to interest expense, net of tax	107		114

Unrealized holding (losses) gains on available for sale debt securities, net of tax	(678)		909

Total other comprehensive loss	(52,917)		(171,351)
Comprehensive income	216,060		2,179
Less: Comprehensive income attributable to non-controlling interests	2,667		1,275
Comprehensive income attributable to CBRE Group, Inc.	$	213,393	$	904

The accompanying notes are an integral part of these consolidated financial statements.

Table of Contents

CBRE GROUP, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(Dollars in thousands)


	Three Months Ended March 31,
	2021		2020
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	268,977	$	173,530
Adjustments to reconcile net income to net cash used in operating activities:
Depreciation and amortization	122,078		113,794
Amortization of financing costs	1,609		1,501
Gains related to mortgage servicing rights, premiums on loan sales and sales of other assets	(72,045)		(52,373)
Asset impairments	—		75,171
Net realized and unrealized (gains) losses, primarily from investments	(2,732)		193
Provision for doubtful accounts	731		9,059
Net compensation expense (reversal) for equity awards	35,786		(1,239)
Equity income from unconsolidated subsidiaries	(83,594)		(20,631)
Distribution of earnings from unconsolidated subsidiaries	32,986		29,185
Proceeds from sale of mortgage loans	4,643,685		3,595,631
Origination of mortgage loans	(3,909,261)		(3,859,407)
(Decrease) increase in warehouse lines of credit	(708,491)		281,657
Tenant concessions received	1,578		13,292
Purchase of equity securities	(2,398)		(3,559)
Proceeds from sale of equity securities	3,017		4,925
(Increase) decrease in real estate under development	(15,901)		7,742
Decrease in receivables, prepaid expenses and other assets (including contract and lease assets)	161,221		52,796
Decrease in accounts payable and accrued expenses and other liabilities (including contract and lease liabilities)	(245,522)		(27,089)
Decrease in compensation and employee benefits payable and accrued bonus and profit sharing	(469,213)		(605,950)
Decrease in net income taxes receivable/payable	41,660		108,609
Other operating activities, net	2,381		(25,610)
Net cash used in operating activities	(193,448)		(128,773)
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures	(29,597)		(62,241)
Acquisition of businesses, including net assets acquired, intangibles and goodwill, net of cash acquired	(2,726)		(25,897)
Contributions to unconsolidated subsidiaries	(168,392)		(32,155)
Distributions from unconsolidated subsidiaries	6,795		18,994
Other investing activities, net	16		9,068
Net cash used in investing activities	(193,904)		(92,231)

The accompanying notes are an integral part of these consolidated financial statements.

Table of Contents

CBRE GROUP, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)

(Unaudited)

(Dollars in thousands)


	Three Months Ended March 31,
	2021		2020
CASH FLOWS FROM FINANCING ACTIVITIES:


Proceeds from revolving credit facility	—		331,671
Repayment of revolving credit facility	—		(331,701)
Proceeds from notes payable on real estate	23,737		—

Proceeds from issuance of 2.500% senior notes	492,255		—
Repurchase of common stock	(61,108)		(50,028)
Acquisition of businesses (cash paid for acquisitions more than three months after purchase date)	(512)		(6,230)
Units repurchased for payment of taxes on equity awards	(34,883)		(36,873)
Non-controlling interest contributions	72		622
Non-controlling interest distributions	(2,652)		(497)
Other financing activities, net	(14,943)		(8,377)
Net cash provided by (used in) financing activities	401,966		(101,413)
Effect of currency exchange rate changes on cash and cash equivalents and restricted cash	(52,154)		(38,633)
NET DECREASE IN CASH AND CASH EQUIVALENTS AND RESTRICTED CASH	(37,540)		(361,050)
CASH AND CASH EQUIVALENTS AND RESTRICTED CASH, AT BEGINNING OF PERIOD	2,039,247		1,093,745
CASH AND CASH EQUIVALENTS AND RESTRICTED CASH, AT END OF PERIOD	$	2,001,707	$	732,695
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest	$	15,080	$	27,290
Income tax payments (refunds), net	$	38,508	$	(55,897)

The accompanying notes are an integral part of these consolidated financial statements.

Table of Contents

CBRE GROUP, INC.

CONSOLIDATED STATEMENTS OF EQUITY

(Unaudited)

(Dollars in thousands)


	CBRE Group, Inc. Stockholders'
	Class A common stock		Additional paid-in capital		Accumulated earnings		Accumulated other comprehensive loss		Non- controlling interests		Total
Balance at December 31, 2020	$	3,356	$	1,074,639	$	6,530,057	$	(529,726)	$	41,761	$	7,120,087
Net income	—		—		266,202		—		2,775		268,977
Net compensation expense for equity awards	—		35,786		—		—		—		35,786
Units repurchased for payment of taxes on equity awards	—		(34,883)		—		—		—		(34,883)
Repurchase of common stock	(8)		(64,134)		—		—		—		(64,142)
Foreign currency translation loss	—		—		—		(52,238)		(108)		(52,346)
Amounts reclassified from accumulated other comprehensive loss to interest expense, net of tax	—		—		—		107		—		107
Unrealized holding losses on available for sale debt securities, net of tax	—		—		—		(678)		—		(678)
Contributions from non-controlling interests	—		—		—		—		72		72
Distributions to non-controlling interests	—		—		—		—		(2,652)		(2,652)
Other	11		1,879		—		—		(834)		1,056
Balance at March 31, 2021	$	3,359	$	1,013,287	$	6,796,259	$	(582,535)	$	41,014	$	7,271,384


	CBRE Group, Inc. Stockholders'
	Class A common stock		Additional paid-in capital		Accumulated earnings		Accumulated other comprehensive loss		Non- controlling interests		Total
Balance at December 31, 2019	$	3,348	$	1,115,944	$	5,793,149	$	(679,748)	$	40,419	$	6,273,112
Net income	—		—		172,195		—		1,335		173,530
Net compensation reversal for equity awards	—		(1,239)		—		—		—		(1,239)
Units repurchased for payment of taxes on equity awards	—		(36,873)		—		—		—		(36,873)
Repurchase of common stock	—		(50,028)		—		—		—		(50,028)
Foreign currency translation loss	—		—		—		(172,314)		(60)		(172,374)
Amounts reclassified from accumulated other comprehensive loss to interest expense, net of tax	—		—		—		114		—		114

Unrealized holding gains on available for sale debt securities, net of tax	—		—		—		909		—		909
Contributions from non-controlling interests	—		—		—		—		622		622
Distributions to non-controlling interests	—		—		—		—		(497)		(497)

Other	3		(1,036)		(15,081)		—		(1,615)		(17,729)
Balance at March 31, 2020	$	3,351	$	1,026,768	$	5,950,263	$	(851,039)	$	40,204	$	6,169,547

The accompanying notes are an integral part of these consolidated financial statements.

Table of contents

CBRE GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. Basis of Presentation

Readers of this Quarterly Report on Form 10-Q (Quarterly Report) should refer to the audited financial statements and notes to consolidated financial statements of CBRE Group, Inc., a Delaware corporation (which may be referred to in these financial statements as “the company,” “we,” “us” and “our”), for the year ended December 31, 2020, which are included in our 2020 Annual Report on Form 10-K (2020 Annual Report), filed with the United States Securities and Exchange Commission (SEC) and also available on our website (www.cbre.com), since we have omitted from this Quarterly Report certain footnote disclosures which would substantially duplicate those contained in such audited financial statements. You should also refer to Note 2, Significant Accounting Policies, in the notes to consolidated financial statements in our 2020 Annual Report for further discussion of our significant accounting policies and estimates.

Considerations Related to the Covid-19 Pandemic

The Covid-19 pandemic has primarily impacted the Advisory Services segment, chiefly property sales and leasing. Many property owners and occupiers have put transactions on hold and withdrawn existing mandates, sharply reducing sales and leasing volumes. Although progress has been made with the distribution of vaccines and economic conditions in some parts of the world, chiefly the U.S. and China, have been improving, we expect operating challenges to continue, as Covid-19 caseloads remain high, business travel and face-to-face business dealings are limited and the majority of workers remain out of their offices.

See Note 5 (Fair Value Measurements) and Note 10 (Commitments and Contingencies) for further discussion of Covid-19 considerations.

Financial Statement Preparation

The accompanying consolidated financial statements have been prepared in accordance with the rules applicable to quarterly reports on Form 10-Q and include all information and footnotes required for interim financial statement presentation, but do not include all disclosures required under accounting principles generally accepted in the United States (U.S.), or GAAP, for annual financial statements. In our opinion, all adjustments (consisting of normal recurring adjustments, except as otherwise noted) considered necessary for a fair presentation have been included. The preparation of financial statements in conformity with GAAP requires us to make estimates and assumptions about future events, including the impact Covid-19 may have on our business. These estimates and the underlying assumptions affect the amounts of assets and liabilities reported and reported amounts of revenue and expenses. Such estimates include the value of goodwill, intangibles and other long-lived assets, real estate assets, accounts receivable, contract assets, operating lease assets, investments in unconsolidated subsidiaries and assumptions used in the calculation of income taxes, retirement and other post-employment benefits, among others. These estimates and assumptions are based on our best judgment. We evaluate our estimates and assumptions on an ongoing basis using historical experience and other factors, including consideration of the current economic environment, and adjust such estimates and assumptions when facts and circumstances dictate. As future events and their effects cannot be determined with precision, actual results could differ significantly from these estimates. Changes in these estimates resulting from continuing changes in the economic environment will be reflected in the financial statements in future periods.

Certain reclassifications have been made to the 2020 financial statements to conform with the 2021 presentation.

2. New Accounting Pronouncements

Recently Adopted Accounting Pronouncements

In December 2019, the Financial Accounting Standards Board (FASB) issued ASU 2019‑12, “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes.” This ASU removes specific exceptions to the general principles in Topic 740 and improves and simplifies financial statement preparers’ application of income tax-related guidance. This ASU is effective for fiscal years beginning after December 15, 2020, and interim periods within those years, with early adoption permitted. We adopted ASU 2019‑12 in the first quarter of 2021 and the adoption did not have a material impact on our consolidated financial statements and related disclosures.

Table of contents

CBRE GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

In January 2020, the FASB issued ASU 2020‑01, “Investments—Equity Securities (Topic 321), Investments—Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815).” This ASU, among other things, clarifies that a company should consider observable transactions that require a company to either apply or discontinue the equity method of accounting under Topic 323 and clarifies that, when determining the accounting for certain forward contracts and purchased options a company should not consider, whether upon settlement or exercise, if the underlying securities would be accounted for under the equity method or fair value option. This ASU is effective for fiscal years beginning after December 15, 2020, and interim periods within those years, with early adoption permitted. We adopted ASU 2020‑01 in the first quarter of 2021 and the adoption did not have a material impact on our consolidated financial statements and related disclosures.

In October 2020, the FASB issued ASU 2020-08, “Codification Improvements to Subtopic 310-20, Receivables — Nonrefundable Fees and Other Costs.” This ASU states that an entity should reevaluate whether a callable debt security is within the scope of the Accounting Standards Codification (ASC) 310-20-35-33 for each reporting period. The ASU is not expected to have a significant effect on current practice or create a large administrative cost for most entities. The amendments stated in this ASU are intended to make ASC 310-20 easier to understand and apply. This ASU is effective for fiscal years beginning after December 15, 2020, and interim periods within those years. Early application is not permitted. We adopted ASU 2020-08 in the first quarter of 2021 and the adoption did not have a material impact on our consolidated financial statements and related disclosures.

In October 2020, the FASB issued ASU 2020-09, “Debt (Topic 470): Amendments to SEC Paragraphs Pursuant to SEC Release No. 33-10762.” This ASU aligns the SEC paragraphs in the codification with the new SEC rules issued in March 2020 relating to changes to the disclosure requirements for certain debt securities. Certain glossary terms were superseded, and amendments were made to debt and other topics as a result of this update. On March 2, 2020, the SEC issued Release No. 33-10762, which made significant changes to its disclosure requirements relating to certain debt securities. The new rules impact disclosures related to registered securities that are guaranteed and those that are collateralized by the securities of an affiliate. The final rules became effective on January 4, 2021. Voluntary compliance with the final amendments in advance of January 4, 2021 is permitted, hence we elected early compliance with the new rules. Because the amendments made by the FASB in this ASU are to ensure alignment of the relevant SEC paragraphs in ASC 270, ASC 460, ASC 470 and ASC 505 with the amended rules in Release No. 33-10762, the amendments made by the FASB to these SEC paragraphs will not have a material impact on our disclosures, since we already elected early compliance with the amended rules in Release No. 33-10762.

In October 2020, the FASB issued ASU 2020-10, “Codification Improvements.” This ASU is intended to conform, clarify, simplify, and/or provide technical corrections to a wide variety of codification topics, including moving certain presentation and disclosure guidance to the appropriate codification section. This ASU is effective for fiscal years beginning after December 15, 2020, and interim periods within those years. Early application of the amendments is permitted for and varies based on the entity. The amendments should be applied retrospectively and at the beginning of the period that includes the adoption date. We adopted ASU 2020-10 in the first quarter of 2021 and the adoption did not have a material impact on our consolidated financial statements and related disclosures.

Recent Accounting Pronouncements Pending Adoption

In March 2020 and January 2021, the FASB issued ASU 2020-04, "Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting" and ASU 2021-01, "Reference Rate Reform: Scope", respectively. Together, the ASUs provide temporary optional expedients and exceptions to the U.S. GAAP guidance on contract modifications and hedge accounting to ease the financial reporting burdens related to the expected market transition from the London Interbank Offered Rate (LIBOR) and other interbank offered rates to alternative reference rates. This guidance is effective for a limited time for all entities through December 31, 2022. We are evaluating the effect that this guidance will have on our consolidated financial statements and related disclosures.

Table of contents

CBRE GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

3. Warehouse Receivables & Warehouse Lines of Credit

Our wholly-owned subsidiary CBRE Capital Markets, Inc. (CBRE Capital Markets) is a Federal Home Loan Mortgage Corporation (Freddie Mac) approved Multifamily Program Plus Seller/Servicer and an approved Federal National Mortgage Association (Fannie Mae) Aggregation and Negotiated Transaction Seller/Servicer. In addition, CBRE Capital Markets’ wholly-owned subsidiary CBRE Multifamily Capital, Inc. (CBRE MCI) is an approved Fannie Mae Delegated Underwriting and Servicing (DUS) Seller/Servicer and CBRE Capital Markets’ wholly-owned subsidiary CBRE HMF, Inc. (CBRE HMF) is a U.S. Department of Housing and Urban Development (HUD) approved Non-Supervised Federal Housing Authority (FHA) Title II Mortgagee, an approved Multifamily Accelerated Processing (MAP) lender and an approved Government National Mortgage Association (Ginnie Mae) issuer of mortgage-backed securities (MBS). Under these arrangements, before loans are originated through proceeds from warehouse lines of credit, we obtain either a contractual loan purchase commitment from either Freddie Mac or Fannie Mae or a confirmed forward trade commitment for the issuance and purchase of a Fannie Mae or Ginnie Mae MBS that will be secured by the loans. The warehouse lines of credit are generally repaid within a one-month period when Freddie Mac or Fannie Mae buys the loans or upon settlement of the Fannie Mae or Ginnie Mae MBS, while we retain the servicing rights. Loans are funded at the prevailing market rates. We elect the fair value option for all warehouse receivables. At March 31, 2021 and December 31, 2020, all of the warehouse receivables included in the accompanying consolidated balance sheets were either under commitment to be purchased by Freddie Mac or had confirmed forward trade commitments for the issuance and purchase of Fannie Mae or Ginnie Mae mortgage-backed securities that will be secured by the underlying loans.

A rollforward of our warehouse receivables is as follows (dollars in thousands):


Beginning balance at December 31, 2020	$	1,411,170
Origination of mortgage loans	3,909,261
Gains (premiums on loan sales)	25,696
Proceeds from sale of mortgage loans:
Sale of mortgage loans	(4,617,989)
Cash collections of premiums on loan sales	(25,696)
Proceeds from sale of mortgage loans	(4,643,685)
Net decrease in mortgage servicing rights included in warehouse receivables	(16,125)
Ending balance at March 31, 2021	$	686,317

Table of contents

CBRE GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

The following table is a summary of our warehouse lines of credit in place as of March 31, 2021 and December 31, 2020 (dollars in thousands):


			March 31, 2021				December 31, 2020
Lender	Current Maturity	Pricing	Maximum Facility Size		Carrying Value		Maximum Facility Size		Carrying Value
JP Morgan Chase Bank, N.A. (JP Morgan) (1)	10/18/2021	daily floating rate LIBOR plus 1.60%	$	985,000	$	370,054	$	1,585,000	$	561,726
JP Morgan	10/18/2021	daily floating rate LIBOR plus 2.75%	15,000		899		15,000		—
Fannie Mae Multifamily As Soon As Pooled Plus Agreement and Multifamily As Soon As Pooled Sale Agreement (ASAP) Program (5)	Cancelable anytime	daily one-month LIBOR plus 1.45%, with a LIBOR floor of 0.25%	650,000		85,530		450,000		132,692
TD Bank, N.A. (TD Bank) (2)	6/30/2021	daily floating rate LIBOR plus 1.15%	800,000		94,164		800,000		401,849
Bank of America, N.A. (BofA) (3)	5/26/2021	—	350,000		89,949		350,000		175,862
MUFG Union Bank, N.A. (Union Bank) (4)	6/28/2021	daily floating rate LIBOR plus 1.50% with a LIBOR floor of 0.25%	200,000		34,877		300,000		111,835
			$	3,000,000	$	675,473	$	3,500,000	$	1,383,964

_______________________________

(1)Effective October 19, 2020, this facility was amended and the maximum facility size was temporarily increased to $1,585.0 million, and reverted back to $985.0 million on January 18, 2021.

(2)Effective July 1, 2020, this facility was amended and provides for a maximum aggregate principal amount of $400.0 million, in addition to an uncommitted $400.0 million temporary line of credit. As of March 31, 2021, the uncommitted $400.0 million temporary line of credit was not utilized.

(3)The total commitment amount of $350.0 million includes a separate sublimit borrowing in the amount of $100.0 million, which can be utilized for specific purposes as defined within the agreement. As of March 31, 2021, the sublimit borrowing has not been utilized.

(4)On June 28, 2019, we added a new warehouse facility for $200.0 million that contains an accordion feature which allowed for temporary increases not to exceed an additional $150.0 million. If utilized, the additional borrowings must be in predefined multiples and are not to occur more than 3 times within 12 consecutive months. Effective August 4, 2020, this facility was amended and decreased the accordion feature from $150.0 million to $100.0 million, with no changes to the predefined borrowing multiples. On September 22, 2020, the temporary increase of $100.0 million was utilized and expired on January 20, 2021.

(5)Effective January 15, 2021, the maximum facility was temporarily increased to $650.0 million.

During the three months ended March 31, 2021, we had a maximum of $2.1 billion of warehouse lines of credit principal outstanding.

4. Variable Interest Entities (VIEs)

We hold variable interests in certain VIEs in our Real Estate Investments segment which are not consolidated as it was determined that we are not the primary beneficiary. Our involvement with these entities is in the form of equity co-investments and fee arrangements.

As of March 31, 2021 and December 31, 2020, our maximum exposure to loss related to VIEs which are not consolidated was as follows (dollars in thousands):


	March 31, 2021		December 31, 2020
Investments in unconsolidated subsidiaries	$	85,291	$	66,947
Other current assets	4,219		4,219
Co-investment commitments	50,291		47,957
Maximum exposure to loss	$	139,801	$	119,123

Table of contents

CBRE GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

5. Fair Value Measurements

Topic 820 of the FASB ASC defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Topic 820 also establishes a three-level fair value hierarchy that prioritizes the inputs used to measure fair value. This hierarchy requires entities to maximize the use of observable inputs and minimize the use of unobservable inputs. The three levels of inputs used to measure fair value are as follows:

•Level 1 – Quoted prices in active markets for identical assets or liabilities.

•Level 2 – Observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.

•Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. This includes certain pricing models, discounted cash flow methodologies and similar techniques that use significant unobservable inputs.

There have been no significant changes to the valuation techniques and inputs used to develop the recurring fair value measurements from those disclosed in our 2020 Annual Report.

The following tables present the fair value of assets measured at fair value on a recurring basis as of March 31, 2021 and December 31, 2020 (dollars in thousands):


	As of March 31, 2021
	Fair Value Measured and Recorded Using
	Level 1		Level 2		Level 3		Total
Assets
Available for sale securities:
Debt securities:
U.S. treasury securities	$	7,115	$	—	$	—	$	7,115
Debt securities issued by U.S. federal agencies	—		9,489		—		9,489
Corporate debt securities	—		50,514		—		50,514
Asset-backed securities	—		3,791		—		3,791
Collateralized mortgage obligations	—		1,369		—		1,369
Total available for sale debt securities	7,115		65,163		—		72,278
Equity securities	44,592		—		—		44,592
Investments in unconsolidated subsidiaries	—		—		216,939		216,939
Warehouse receivables	—		686,317		—		686,317
Total assets at fair value	$	51,707	$	751,480	$	216,939	$	1,020,126

Table of contents

CBRE GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)


	As of December 31, 2020
	Fair Value Measured and Recorded Using
	Level 1		Level 2		Level 3		Total
Assets
Available for sale securities:
Debt securities:
U.S. treasury securities	$	7,270	$	—	$	—	$	7,270
Debt securities issued by U.S. federal agencies	—		10,216		—		10,216
Corporate debt securities	—		51,244		—		51,244
Asset-backed securities	—		3,801		—		3,801
Collateralized mortgage obligations	—		1,369		—		1,369
Total available for sale debt securities	7,270		66,630		—		73,900
Equity securities	43,334		—		—		43,334
Investments in unconsolidated subsidiaries	—		—		50,000		50,000
Warehouse receivables	—		1,411,170		—		1,411,170
Total assets at fair value	$	50,604	$	1,477,800	$	50,000	$	1,578,404

We classify one investment as level 3 in the fair value hierarchy which represents an investment in a non-public entity where we elected the fair value option. The carrying value is deemed to approximate the fair value of this investment due to the proximity of the investment date to the balance sheet dates as well as investee-level performance updates. As of March 31, 2021, and December 31, 2020, investments in unconsolidated subsidiaries at fair value using NAV were $92.8 million and $66.3 million, respectively. These investments fall under practical expedient rules that do not require them to be included in the fair value hierarchy and as a result have been excluded from the tables above.

There were no significant non-recurring fair value measurements recorded during the three months ended March 31, 2021.

The following non-recurring fair value measurements were recorded for the three months ended March 31, 2020 (dollars in thousands):


	Net Carrying Value as of March 31, 2020		Fair Value Measured and Recorded Using						Total Impairment Charges for the Three Months Ended March 31, 2020
			Level 1		Level 2		Level 3
Property and equipment	$	10,185	$	—	$	—	$	10,185	$	21,663
Goodwill	418,861		—		—		418,861		25,000
Other intangible assets	13,403		—		—		13,403		28,508
Total	$	442,449	$	—	$	—	$	442,449	$	75,171

During the three months ended March 31, 2020, we recorded $50.2 million of non-cash asset impairment charges in our Global Workplace Solutions segment and a non-cash goodwill impairment charge of $25.0 million in our Real Estate Investments segment. Primarily as a result of the recent global economic disruption and uncertainty due to Covid-19, we deemed there to be triggering events in the first quarter of 2020 that required testing of goodwill and certain assets for impairment at that time. Based on these tests, we recorded the aforementioned non-cash impairment charges, which were primarily driven by lower anticipated cash flows in certain businesses directly resulting from a downturn in forecasts as well as increased forecast risk due to Covid-19 and changes in our business going forward. These asset impairment charges were included within the line item “Asset impairments” in the accompanying consolidated statements of operations. The fair value measurements employed for our impairment evaluations were based on a discounted cash flow approach. Inputs used in these evaluations included risk-free rates of return, estimated risk premiums, terminal growth rates, working capital assumptions, income tax rates as well as other economic variables.

Table of contents

CBRE GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

FASB ASC Topic 825, “Financial Instruments” requires disclosure of fair value information about financial instruments, whether or not recognized in the accompanying consolidated balance sheets. Our financial instruments are as follows:

•Cash and Cash Equivalents and Restricted Cash – These balances include cash and cash equivalents as well as restricted cash with maturities of less than three months. The carrying amount approximates fair value due to the short-term maturities of these instruments.

•Receivables, less Allowance for Doubtful Accounts – Due to their short-term nature, fair value approximates carrying value.

•Warehouse Receivables – These balances are carried at fair value. The primary source of value is either a contractual purchase commitment from Freddie Mac or a confirmed forward trade commitment for the issuance and purchase of a Fannie Mae or Ginnie Mae MBS (see Note 3).

•Investments in Unconsolidated Subsidiaries – A portion of these investments are carried at fair value as discussed above.

•Available for Sale Debt Securities – Primarily held by our wholly-owned captive insurance company, these investments are carried at their fair value.

•Equity Securities – Primarily held by our wholly-owned captive insurance company, these investments are carried at their fair value.

•Investments Held in Trust - special purpose acquisition company – Funds received as part of the initial public offering of CBRE Acquisition Holdings, Inc. have been deposited in an interest-bearing U.S. based trust account. The funds will be invested only in specified U.S. government treasury bills with a maturity of 180 days or less or in money market funds. The carrying amount approximates fair value due to the short-term maturities of these instruments.

•Short-Term Borrowings – The majority of this balance represents outstanding amounts under our warehouse lines of credit of our wholly-owned subsidiary, CBRE Capital Markets, and our revolving credit facility. Due to the short-term nature and variable interest rates of these instruments, fair value approximates carrying value (see Notes 3 and 8).

•Senior Term Loans – Based upon information from third-party banks (which falls within Level 2 of the fair value hierarchy), the estimated fair value of our senior term loans was approximately $757.3 million and $772.2 million at March 31, 2021 and December 31, 2020, respectively. Their actual carrying value, net of unamortized debt issuance costs, totaled $766.3 million and $785.7 million at March 31, 2021 and December 31, 2020, respectively (see Note 8).

•Senior Notes – Based on dealers’ quotes (which falls within Level 2 of the fair value hierarchy), the estimated fair value of our 4.875% senior notes was $681.1 million and $702.5 million at March 31, 2021 and December 31, 2020, respectively. The actual carrying value of our 4.875% senior notes, net of unamortized debt issuance costs and discount, totaled $594.8 million and $594.5 million at March 31, 2021 and December 31, 2020, respectively. The estimated fair value of our 2.500% senior notes was $475.6 million as of March 31, 2021. The actual carrying value of our 2.500% senior notes, net of unamortized debt issuance costs and discount, totaled $487.3 million at March 31, 2021. On December 28, 2020, we redeemed the $425.0 million aggregate outstanding principal amount of our 5.25% senior notes in full (See Note 8).

6. Goodwill

We test each of our reporting units for goodwill impairment annually at October 1st, or upon a triggering event, in accordance with ASC Topic 350, “Intangibles – Goodwill and Other.” As of January 1, 2021, we underwent an internal reorganization in our Advisory Services and Global Workplace Solutions reportable segments (see Note 14 for further discussion). This changed the composition of our reporting units which resulted in the reallocation of $101.4 million of goodwill from our Advisory Services to our Global Workplace Solutions reportable segments as of January 1, 2021. Additionally, the change in composition of our reporting units was considered a triggering event for a quantitative test as of January 1, 2021. We determined that no impairment existed as the estimated fair values of our reporting units were in excess of their respective carrying values.

Table of contents

CBRE GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

7. Investments in Unconsolidated Subsidiaries

Investments in unconsolidated subsidiaries are accounted for under the equity method of accounting. Our investment ownership percentages in equity method investments vary, generally ranging up to 50.0%.

Combined condensed financial information for the entities accounted for using the equity method is as follows (dollars in thousands):


	Three Months Ended March 31,
	2021		2020
Revenue	$	555,856	$	411,251
Operating income	275,462		174,534
Net income	368,217		104,528

The company made a $50.0 million non-controlling investment in Industrious National Management Company LLC (“Industrious”) in the fourth quarter of 2020. On February 19, 2021, the company made an additional non-controlling investment in Industrious, for approximately $150.0 million in exchange for primary and secondary shares, as well as shares issued in anticipation of Industrious closing on the integration of Hana in the second quarter of 2021. Following this transaction, CBRE holds a 35% interest in Industrious. In addition, CBRE has entered into a series of agreements to acquire additional shares, whereby the company will increase its interest in Industrious from 35% to 40%.

Table of contents

CBRE GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

8. Long-Term Debt and Short-Term Borrowings

Long-Term Debt

Long-term debt consists of the following (dollars in thousands):


	March 31, 2021		December 31, 2020
Senior term loans, with interest ranging from 0.75% to 1.15%, due quarterly through 2024	$	769,098	$	788,759
4.875% senior notes due in 2026, net of unamortized discount	597,579		597,470

2.500% senior notes due in 2031, net of unamortized discount	492,279		—
Other	1,402		1,514
Total long-term debt	1,860,358		1,387,743
Less: current maturities of long-term debt	1,402		1,514
Less: unamortized debt issuance costs	10,610		6,027
Total long-term debt, net of current maturities	$	1,848,346	$	1,380,202

We maintain credit facilities with third-party lenders, which we use for a variety of purposes. On March 4, 2019, CBRE Services, Inc. (CBRE Services) entered into an incremental assumption agreement with respect to its credit agreement, dated October 31, 2017 (such agreement, as amended by a December 20, 2018 incremental loan assumption agreement and such March 4, 2019 incremental assumption agreement, collectively, the 2019 Credit Agreement), which (i) extended the maturity of the U.S. dollar tranche A term loans under such credit agreement, (ii) extended the termination date of the revolving credit commitments available under such credit agreement and (iii) made certain changes to the interest rates and fees applicable to such tranche A term loans and revolving credit commitments under such credit agreement. The proceeds from the new tranche A term loan facility under the 2019 Credit Agreement were used to repay the $300.0 million of tranche A term loans outstanding under the credit agreement in effect prior to the entry into the 2019 incremental assumption agreement.

The 2019 Credit Agreement is a senior unsecured credit facility that is jointly and severally guaranteed by us and certain of our subsidiaries. As of March 31, 2021, the 2019 Credit Agreement provided for the following: (1) a $2.8 billion incremental revolving credit facility, which includes the capacity to obtain letters of credit and swingline loans and terminates on March 4, 2024; (2) a $300.0 million incremental tranche A term loan facility maturing on March 4, 2024, requiring quarterly principal payments unless our leverage ratio (as defined in the 2019 Credit Agreement) is less than or equal to 2.50 to 1.00 on the last day of the fiscal quarter immediately preceding any such payment date and (3) a €400.0 million term loan facility due and payable in full at maturity on December 20, 2023.

On August 13, 2015, CBRE Services issued $600.0 million in aggregate principal amount of 4.875% senior notes due March 1, 2026 at a price equal to 99.24% of their face value. The 4.875% senior notes are unsecured obligations of CBRE Services, senior to all of its current and future subordinated indebtedness, but effectively subordinated to all of its current and future secured indebtedness. The 4.875% senior notes are jointly and severally guaranteed on a senior basis by us and each domestic subsidiary of CBRE Services that guarantees our 2019 Credit Agreement. Interest accrues at a rate of 4.875% per year and is payable semiannually in arrears on March 1 and September 1.

On March 18, 2021, CBRE Services issued $500.0 million in aggregate principal amount of 2.500% senior notes due April 1, 2031 at a price equal to 98.451% of their face value (the 2.500% senior notes). The 2.500% senior notes are unsecured obligations of CBRE Services, senior to all of its current and future subordinated indebtedness, but effectively subordinated to all of its current and future secured indebtedness. 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. The 2.500% senior notes are redeemable at our option, in whole or in part, on or after January 1, 2031 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 January 1, 2031, 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 January 1, 2031, assuming the notes matured on January 1, 2031, discounted to the date of redemption on a semi-annual basis at an adjusted rate equal to the treasury rate plus 20 basis points, minus accrued and unpaid interest to, but excluding, the date of redemption, plus, in either case, accrued and unpaid interest, if any, to, but not including the redemption date. The amount of the 2.500% senior notes, net of unamortized discount and unamortized debt issuance costs, included in the accompanying consolidated balance sheet was $487.3 million at March 31, 2021.

Table of contents

CBRE GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

The indentures governing our 4.875% senior notes and 2.500% senior notes contain restrictive covenants that, among other things, limit our ability to create or permit liens on assets securing indebtedness, enter into sale/leaseback transactions and enter into consolidations or mergers. In addition, these indentures require that the 4.875% senior notes and 2.500% senior notes be jointly and severally guaranteed on a senior basis by CBRE Group, Inc. and each domestic subsidiary of CBRE Services that guarantees our 2019 Credit Agreement. In addition, our 2019 Credit Agreement also requires us to maintain a minimum coverage ratio of consolidated EBITDA (as defined in the 2019 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 2019 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 2019 Credit Agreement), 4.75x) as of the end of each fiscal quarter. On this basis, our coverage ratio of consolidated EBITDA to consolidated interest expense was 30.61x for the trailing twelve months ended March 31, 2021, and our leverage ratio of total debt less available cash to consolidated EBITDA was 0.07x as of March 31, 2021.

Short-Term Borrowings

Revolving Credit Facility

The revolving credit facility under the 2019 Credit Agreement allows for borrowings outside of the U.S., with a $200.0 million sub-facility available to CBRE Services, one of our Canadian subsidiaries, one of our Australian subsidiaries and one of our New Zealand subsidiaries and a $300.0 million sub-facility available to CBRE Services and one of our U.K. subsidiaries. Borrowings under the revolving credit facility bear interest at varying rates, based at our option, on either (1) the applicable fixed rate plus 0.680% to 1.075% or (2) the daily rate plus 0.0% to 0.075%, in each case as determined by reference to our Credit Rating (as defined in the 2019 Credit Agreement). The 2019 Credit Agreement requires us to pay a fee based on the total amount of the revolving credit facility commitment (whether used or unused). As of March 31, 2021, no amount was outstanding under the revolving credit facility other than letters of credit totaling $2.0 million. These letters of credit, which reduce the amount we may borrow under the revolving credit facility, were primarily issued in the ordinary course of business.

Warehouse Lines of Credit

CBRE Capital Markets has warehouse lines of credit with third-party lenders for the purpose of funding mortgage loans that will be resold, and a funding arrangement with Fannie Mae for the purpose of selling a percentage of certain closed multifamily loans to Fannie Mae. These warehouse lines are recourse only to CBRE Capital Markets and are secured by our related warehouse receivables. See Note 3 for additional information.

Table of contents

CBRE GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

9. Leases

We are the lessee in contracts for our office space tenancies, for leased vehicles and for our wholly-owned subsidiary Hana. These arrangements account for the significant portion of our lease liabilities and right-of-use assets. We monitor our service arrangements to evaluate whether they meet the definition of a lease.

Supplemental balance sheet information related to our leases is as follows (dollars in thousands):


Category	Classification	March 31, 2021		December 31, 2020
Assets
Operating	Operating lease assets	$	1,000,729	$	1,020,352
Financing	Other assets, net	114,503		117,805
Total leased assets		$	1,115,232	$	1,138,157
Liabilities
Current:
Operating	Operating lease liabilities	$	206,772	$	208,526
Financing	Other current liabilities	35,896		39,298
Non-current:
Operating	Non-current operating lease liabilities	1,090,740		1,116,795
Financing	Other liabilities	78,473		78,881
Total lease liabilities		$	1,411,881	$	1,443,500

Supplemental cash flow information and non-cash activity related to our operating and finance leases are as follows (dollars in thousands):


	Three Months Ended March 31,
	2021		2020
Right-of-use assets obtained in exchange for new operating lease liabilities	$	24,214	$	61,310
Right-of-use assets obtained in exchange for new financing lease liabilities	10,448		14,683
Other non-cash increases in operating lease right-of-use assets (1)	5,940		6,888
Other non-cash decreases in financing lease right-of-use assets (1)	(1,563)		(517)

_______________________________

(1)The non-cash activity in the right-of-use assets resulted from lease modifications and remeasurements.