cbre-10q_20190930.htm

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.

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 October 29, 2019 was 334,751,698.

	September 30,			December 31,
	2019			2018
ASSETS
Current Assets:
Cash and cash equivalents	$	577,460		$	777,219
Restricted cash		124,845			86,725
Receivables, less allowance for doubtful accounts of $77,293 and $60,348 at September 30, 2019 and December 31, 2018, respectively		4,057,751			3,668,591
Warehouse receivables		987,923			1,342,468
Advance warehouse funding		376,707			—
Contract assets		348,615			307,020
Prepaid expenses		282,640			254,892
Income taxes receivable		38,615			71,684
Other current assets		264,279			245,611
Total Current Assets		7,058,835			6,754,210
Property and equipment, net		782,004			721,692
Goodwill		3,627,327			3,652,309
Other intangible assets, net of accumulated amortization of $1,299,958 and $1,180,393 at September 30, 2019 and December 31, 2018, respectively		1,325,603			1,441,308
Operating lease assets		980,337			—
Investments in unconsolidated subsidiaries		328,580			216,174
Deferred tax assets, net		142,918			51,703
Other assets, net		795,338			619,397
Total Assets	$	15,040,942		$	13,456,793
LIABILITIES AND EQUITY
Current Liabilities:
Accounts payable and accrued expenses	$	2,085,391		$	1,919,827
Compensation and employee benefits payable		1,231,075			1,121,179
Accrued bonus and profit sharing		869,256			1,189,395
Operating lease liabilities		162,866			—
Contract liabilities		110,911			82,227
Income taxes payable		30,968			68,100
Short-term borrowings:
Warehouse lines of credit (which fund loans that U.S. Government Sponsored Enterprises have committed to purchase)		1,348,610			1,328,761
Revolving credit facility		52,000			—
Other		4,058			—
Total short-term borrowings		1,404,668			1,328,761
Current maturities of long-term debt		1,897			3,146
Other current liabilities		130,938			90,745
Total Current Liabilities		6,027,970			5,803,380
Long-term debt, net of current maturities		1,748,264			1,767,260
Non-current operating lease liabilities		1,039,865			—
Non-current tax liabilities		207,845			172,626
Deferred tax liabilities, net		21,287			107,425
Other liabilities		436,731			596,200
Total Liabilities		9,481,962			8,446,891
Commitments and contingencies		—			—
Equity:
CBRE Group, Inc. Stockholders’ Equity:
Class A common stock; $0.01 par value; 525,000,000 shares authorized; 335,755,183 and 336,912,783 shares issued and outstanding at September 30, 2019 and December 31, 2018, respectively		3,358			3,369
Additional paid-in capital		1,140,021			1,149,013
Accumulated earnings		5,155,531			4,504,684
Accumulated other comprehensive loss		(787,081	)		(718,269	)
Total CBRE Group, Inc. Stockholders’ Equity		5,511,829			4,938,797
Non-controlling interests		47,151			71,105
Total Equity		5,558,980			5,009,902
Total Liabilities and Equity	$	15,040,942		$	13,456,793

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

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2019		2018		2019		2018
Revenue	$	5,925,101	$	5,260,954	$	16,774,684	$	15,046,340
Costs and expenses:
Cost of services		4,687,336		4,098,904		13,155,160		11,677,613
Operating, administrative and other		809,584		859,085		2,479,857		2,417,602
Depreciation and amortization		111,560		113,484		323,862		335,048
Intangible asset impairment		—		—		89,037		—
Total costs and expenses		5,608,480		5,071,473		16,047,916		14,430,263
Gain on disposition of real estate		9		236		19,266		12,565
Operating income		316,630		189,717		746,034		628,642
Equity income from unconsolidated subsidiaries		25,796		126,840		120,233		263,040
Other income		941		95,515		26,163		95,244
Interest expense, net of interest income		21,846		25,420		67,638		76,053
Write-off of financing costs on extinguished debt		—		—		2,608		27,982
Income before provision for income taxes		321,521		386,652		822,184		882,891
Provision for income taxes		63,468		94,963		169,867		211,446
Net income		258,053		291,689		652,317		671,445
Less: Net income attributable to non-controlling interests		1,454		1,220		7,578		2,021
Net income attributable to CBRE Group, Inc.	$	256,599	$	290,469	$	644,739	$	669,424
Basic income per share:
Net income per share attributable to CBRE Group, Inc.	$	0.76	$	0.86	$	1.92	$	1.97
Weighted average shares outstanding for basic income per share		336,203,747		339,477,316		336,149,719		339,151,807
Diluted income per share:
Net income per share attributable to CBRE Group, Inc.	$	0.75	$	0.85	$	1.89	$	1.95
Weighted average shares outstanding for diluted income per share		341,100,182		343,733,947		340,590,007		343,267,240

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

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2019			2018			2019			2018
Net income	$	258,053		$	291,689		$	652,317		$	671,445
Other comprehensive loss:
Foreign currency translation loss		(78,177	)		(30,985	)		(79,772	)		(130,879	)
Adoption of Accounting Standards Update 2016-01, net of tax		—			—			—			(3,964	)
Amounts reclassified from accumulated other comprehensive loss to interest expense, net of tax		377			570			1,212			1,953
Unrealized gains (losses) on interest rate swaps, net of tax		7			65			(104	)		882
Unrealized holding gains (losses) on available for sale debt securities, net of tax		881			22			2,341			(605	)
Other, net		7,377			(15	)		7,378			5,513
Total other comprehensive loss		(69,535	)		(30,343	)		(68,945	)		(127,100	)
Comprehensive income		188,518			261,346			583,372			544,345
Less: Comprehensive income attributable to non-controlling interests		1,340			1,357			7,445			1,479
Comprehensive income attributable to CBRE Group, Inc.	$	187,178		$	259,989		$	575,927		$	542,866

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

	Nine Months Ended
	September 30,
	2019			2018
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	652,317		$	671,445
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		323,862			335,048
Amortization and write-off of financing costs on extinguished debt		7,196			33,405
Gains related to mortgage servicing rights, premiums on loan sales and sales of other assets		(191,103	)		(156,973	)
Intangible asset impairment		89,037			—
Gain associated with remeasuring our investment in a joint venture entity to fair value at the date we acquired the remaining interest		—			(92,624	)
Gains on disposition of real estate held for investment		—			(3,197	)
Net realized and unrealized gains from investments		(26,163	)		(2,620	)
Provision for doubtful accounts		18,083			17,606
Compensation expense for equity awards		98,958			97,035
Equity income from unconsolidated subsidiaries		(120,233	)		(263,040	)
Distribution of earnings from unconsolidated subsidiaries		145,588			262,670
Proceeds from sale of mortgage loans		15,786,800			13,351,590
Origination of mortgage loans		(15,381,864	)		(13,979,299	)
Increase in warehouse lines of credit		19,849			668,974
Increase in advance warehouse funding		(376,707	)		—
Tenant concessions received		18,367			22,846
Purchase of equity securities		(81,369	)		(66,380	)
Proceeds from sale of equity securities		45,333			56,605
Increase in receivables, prepaid expenses and other assets (including contract and lease assets)		(647,942	)		(368,824	)
Increase in accounts payable and accrued expenses and other liabilities (including contract and lease liabilities)		158,708			85,648
Decrease in compensation and employee benefits payable and accrued bonus and profit sharing		(230,040	)		(136,257	)
Decrease in income taxes payable, net		(132,583	)		(21,642	)
Other operating activities, net		(36,793	)		(9,705	)
Net cash provided by operating activities		139,301			502,311
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures		(160,583	)		(151,893	)
Acquisition of businesses, including net assets acquired, intangibles and goodwill, net of cash acquired		(14,844	)		(313,560	)
Contributions to unconsolidated subsidiaries		(84,648	)		(31,026	)
Distributions from unconsolidated subsidiaries		20,960			53,720
Net proceeds from disposition of real estate held for investment		—			14,174
Purchase of equity securities		(10,160	)		(15,931	)
Proceeds from sale of equity securities		14,261			11,402
Purchase of available for sale debt securities		(4,219	)		(20,860	)
Proceeds from the sale of available for sale debt securities		2,392			5,432
Other investing activities, net		590			(5,557	)
Net cash used in investing activities		(236,251	)		(454,099	)

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

Delaware		94-3391143
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification Number)

400 South Hope Street, 25th Floor Los Angeles, California		90071
(Address of principal executive offices)		(Zip Code)

(213) 613-3333		Not applicable
(Registrant's telephone number, including area code)		(Former name, former address and former fiscal year, if changed since last report)

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

		Page

PART I – FINANCIAL INFORMATION

Item 1.	Financial Statements (Unaudited)

	Consolidated Balance Sheets at September 30, 2019 and December 31, 2018	1

	Consolidated Statements of Operations for the three and nine months ended September 30, 2019 and 2018	2

	Consolidated Statements of Comprehensive Income for the three and nine months ended September 30, 2019 and 2018	3

	Consolidated Statements of Cash Flows for the nine months ended September 30, 2019 and 2018	4

	Consolidated Statements of Equity for the three and nine months ended September 30, 2019 and 2018	6

	Notes to Consolidated Financial Statements	8

Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	35

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	54

Item 4.	Controls and Procedures	55

PART II – OTHER INFORMATION

Item 1.	Legal Proceedings	55

Item 1A.	Risk Factors	55

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	56

Item 6.	Exhibits	57

Signatures		58

	Nine Months Ended
	September 30,
	2019			2018
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from senior term loans		300,000			550,000
Repayment of senior term loans		(300,000	)		—
Proceeds from revolving credit facility		2,683,000			2,913,000
Repayment of revolving credit facility		(2,631,000	)		(2,772,000	)
Repayment of

Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐