Cbre Group, Inc.: Form 10-Q for the period ended Mar 31, 2025

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 months ended March 31, 2025 should be read in conjunction with our consolidated financial statements and related notes included in our 2024 Annual Report on Form 10-K (2024 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 improved in the first quarter of 2025, continuing the recovery that began in 2024. This was evident in real estate leasing, notably demand for office space in the U.S. Improved liquidity and investor sentiment also led to a continued increase in real estate sales and financing activity. Outsourcing services continued to gain favor with major corporations and other large occupiers of space, boosting demand for facilities and project management services. The business outlook, however, has been clouded by the extreme market volatility triggered by the imposition of sharply increased tariffs on U.S. trading partners and the rapid changes in U.S. trade policy. We continue to assess the impact of market volatility on our clients’ investment, occupancy and capital deployment decisions and on general economic growth in the U.S. and globally.

Capital Allocation

We repurchased approximately $407 million worth of shares in the first quarter and nearly $600 million this year through April 21, 2025, 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 months ended March 31, 2025 and 2024 (dollars in millions):

(1) Calculated as a percentage of Total Revenue

Three Months Ended March 31, 2025 Compared to the Three Months Ended March 31, 2024

We reported consolidated net income of $163 million for the quarter, on revenue of $8.9 billion as compared to consolidated net income of $126 million on revenue of $7.9 billion in the prior year.

The revenue increase reflected growth in leasing activity, particularly for office space, commercial mortgage origination, property sales, and continued growth in the Business, Operations & Experience (BOE) segment, which benefited from strong new business activity, contract expansions and acquisitions. Revenue from our Project Management segment increased driven by continued strong performance from Turner & Townsend and higher management fees. Revenue increased in the REI segment, driven by higher incentive fees.

Foreign currency translation had a 1.9% negative impact on revenue, reflecting the weakness in the euro, Canadian dollar and British pound sterling.

Cost of revenue increased 12.2% during the quarter as compared to the same period in 2024 due primarily to revenue growth consisting of higher pass-through costs, higher commission expense, and higher indirect reimbursed costs. Foreign currency translation had a 1.9% positive impact on total cost of revenue. Cost of revenue decreased slightly to 81.5% of total revenue from 81.6%.

Operating, administrative and other expenses increased 7.3% as compared to the same period in prior year. The increase was driven by an increase in third-party fees related to acquisitions and integrations activities. Foreign currency translation had a 1.8% positive impact on total operating expenses during the quarter. Operating expenses as a percentage of revenue decreased to 13.4% in the first quarter 2025 from 14.0% in the first quarter 2024, as operating expenses grew slower than revenue.

Depreciation and amortization expense increased by 12.0% during the quarter, as compared to the same period in 2024, reflecting higher depreciation and amortization expense related to assets acquired from recent acquisitions such as Industrious and J&J Worldwide Services.

We reported equity income of $16 million in the current quarter versus equity loss of $58 million in last year’s first quarter. This was primarily driven by net unrealized gains related to equity investments recognized in the current period compared to unrealized equity losses in the prior quarter, driven by a fair value adjustment related to our non-core strategic equity investment in Altus Power, Inc. (Altus).

Interest expense, net of interest income, increased by 38.9%, compared with the first quarter 2024. This increase was primarily due to the impact of increased commercial paper borrowings and the issuance of senior term loans.

Our provision for income taxes on a consolidated basis was $52 million for the three months ended March 31, 2025 as compared to a benefit from income taxes of $29 million for the three months ended March 31, 2024. The increase of $81 million is primarily related to an increase in current year earnings and a prior year benefit for the reversal of unrecognized tax positions. Our effective tax rate increased to 21.4% for the three months ended March 31, 2025 from (24.3)% for the three months ended March 31, 2024. Our effective tax rate for the three months ended March 31, 2025 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 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. We continue to monitor new legislative changes and assess the global impact of the Pillar Two Model Rules.

Segment Operations

In January 2025, we combined our project management business with our Turner & Townsend majority-owned subsidiary and created a fourth reportable segment, Project Management. In addition, on January 16, 2025, we acquired full ownership of Industrious, a provider of premium flexible workplace solutions, and established a new business segment, BOE, comprised of enterprise and local facilities management, property management and flexible workplace solutions.

In connection with the transactions described above, we organized our operations around, and publicly report our financial results on, four reportable business segments: (1) Advisory Services; (2) Building Operations & Experience (BOE); (3) Project Management; and (4) Real Estate Investments (REI).

Advisory Services provides a comprehensive range of services globally, including property leasing, capital markets (property sales and loan origination), loan servicing, property management, and valuation. BOE provides a broad suite of integrated, contractually based outsourcing services to occupiers and owners of real estate, including facilities management and property management. Our Project Management business delivers program management, project management and cost consultancy services across commercial real estate, infrastructure and natural resources sectors. REI is a major real assets developer, investor and operator and is comprised of two businesses: investment management and real estate development.

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 15 – Segments 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 months ended March 31, 2025 and 2024 (dollars in millions):

(1) Calculated as a percentage of Total Revenue

Three Months Ended March 31, 2025 Compared to the Three Months Ended March 31, 2024

Revenue increased 13.4% during the quarter compared to the same period in 2024. Global leasing revenue rose 17.6%, driven by Americas which grew 21.4%, including 23.8% in the United States and the United Kingdom, which grew 9.3%. Property sales revenue was up 10.8%. Foreign currency translation had a 1.8% negative impact on total revenue during the quarter, primarily driven by weakness in the euro and Canadian dollar.

Cost of revenue increased 14.0%, primarily reflecting business growth and higher commission expense. Foreign currency translation had a 1.8% positive impact on total cost of revenue. Cost of revenue increased to 57.1% of total revenue from 56.8% for the same period in 2024, primarily due to escalating commission payouts driven by strong revenue growth.

Operating, administrative and other expenses increased by 2.9%, as compared to the same period in 2024, driven by higher marketing and software expense. Foreign currency translation had a 2.4% positive impact on total operating expenses.

In connection with the origination and sale of mortgage loans with servicing rights retained, we record servicing assets or liabilities based on the fair value of 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). Our MSRs are initially recorded at fair value. Subsequent to the initial recording, MSRs are amortized in proportion to and over the period that the servicing income is expected to be received based on projections and timing of estimated future net cash flows and assessed for impairment based on the fair value each reporting period.

For the three months ended March 31, 2025, MSRs contributed $22 million to operating income, offset by $35 million of amortization of related intangible assets. The MSR contribution to first quarter 2024 operating income was $13 million and amortization totaled $34 million. The increase was associated with higher origination activity given an increase in financing activities.

Depreciation and amortization expense increased 3.1% primarily due to higher amortization of mortgage servicing rights as described above.

Building Operations & Experience

The following table summarizes our results of operations for our Building Operations & Experience (BOE) operating segment for the three months ended March 31, 2025 and 2024 (dollars in millions):

(1) Calculated as a percentage of Total Revenue

Three Months Ended March 31, 2025 Compared to the Three Months Ended March 31, 2024

Revenue increased 13.9%, reflecting a double-digit increase in property management and facilities management, primarily due to growth in clients driving increased management fees. Foreign currency translation had a 2.0% negative impact on total revenue during the quarter, primarily driven by weakness in the euro, Canadian dollar and British pound sterling.

Cost of revenue increased 13.5%, driven by higher pass-through costs. Foreign currency translation had a 2.0% positive impact on total cost of revenue. Cost of revenue was 90.5% of total revenue, slightly down from 90.8% in the first quarter 2024.

Operating, administrative and other expenses increased 2.1%, primarily due to higher compensation and benefits costs. Foreign currency translation had a 1.7% positive impact on total operating expenses during the quarter.

Depreciation and amortization expense increased 52.2%, reflecting higher amortization expense related to intangibles from recent acquisitions such as Industrious and J&J Worldwide Services.

Project Management

The following table summarizes our results of operations for our Project Management operating segment for the three months ended March 31, 2025 and 2024 (dollars in millions):

(1) Calculated as a percentage of Total Revenue

Three Months Ended March 31, 2025 Compared to the Three Months Ended March 31, 2024

Revenue increased 7.4% due to continued strong performance from Turner & Townsend and higher management fees. Foreign currency translation had a 1.9% negative impact on total revenue during the quarter, primarily driven by weakness in the euro.

Cost of revenue increased 7.5%, driven by higher pass-through costs and increased professional compensation. Foreign currency translation had a 2.0% positive impact on total cost of revenue. Cost of revenue was 86.3% of total revenue, slightly up from 86.2% in the first quarter 2024.

Operating, administrative and other expenses increased 35.2%, primarily due to higher employee compensation expenses. Foreign currency translation had a 3.4% positive impact on total operating expenses during the quarter.

Depreciation and amortization expense fell 13.8%, reflecting lower amortization expense.

Real Estate Investments

The following table summarizes our results of operations for our Real Estate Investments (REI) operating segment for the three months ended March 31, 2025 and 2024 (dollars in millions):

(1) Calculated as a percentage of Total Revenue

(2) In early 2025, management made the decision to wind-down Telford Homes’ legacy construction business. A new Telford entity, Telford Living, is developing residential housing in the UK under a new business model under which the company does not self-perform general contracting.

Three Months Ended March 31, 2025 Compared to the Three Months Ended March 31, 2024

Revenue increased 2.2% for the current quarter primarily due to higher incentive fees in our investment management services line of business. Foreign currency translation had a 1.7% negative impact on total revenue during the quarter primarily driven by weakness in the euro and British pound sterling.

Cost of revenue increased 9.3% in the quarter as compared to the same period in 2024 due to higher construction costs incurred on our real estate development projects. Foreign currency translation had a negligible impact on total cost of revenue during the quarter.

Operating, administrative and other expenses decreased 12.2% primarily due to a decrease in variable incentive compensation in our investment management line of business. Foreign currency translation had a 1.6% positive impact on total operating expenses.

We recorded equity loss from unconsolidated subsidiaries of approximately $7 million versus equity income of $11 million in the first quarter 2024, primarily due to net negative co-investment returns in the current quarter. Gain on disposition of real estate decreased by $13 million compared with first quarter 2024.

A roll forward of our AUM by product type for the three months ended March 31, 2025 is as follows (dollars in billions):

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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 to be 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.

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 months ended March 31, 2025 and 2024 (dollars in millions):

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

(2) Primarily relates to inter-segment eliminations.

Three Months Ended March 31, 2025 Compared to the Three Months Ended March 31, 2024

Core corporate

Operating, administrative and other expenses for our core corporate functions rose 43.0% to $183 million for the first quarter of 2025, mainly due to higher costs related to M&A deal and integrations.

Other (non-core)

We recorded equity income of $21 million, reflecting the higher value of our investment in publicly traded Altus. This compares with a $71 million loss in first-quarter 2024, reflecting the lower valuation of our investment in Altus. Altus was acquired by a third party on April 16, 2025.

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 and commercial paper program. Our expected capital requirements for 2025 include up to $381 million of anticipated capital expenditures, net of tenant concessions. During the three months ended March 31, 2025, we incurred $64 million of capital expenditures. As of March 31, 2025, we had aggregate future commitments of $183 million related to co-investments funds in our REI segment, $63 million of which is expected to be funded in 2025. Additionally, as of March 31, 2025, we are committed to fund additional capital of $345 million and $54 million to consolidated and unconsolidated projects, respectively, within our REI segment. As of March 31, 2025, we had $2.1 billion of borrowings available under our revolving credit facilities (under both the Revolving Credit Agreement, as described below, and the Turner & Townsend revolving credit facility) and $1.4 billion of cash and cash equivalents. We intend to maintain available commitments under the Revolving Credit Agreement in an amount at least equal to the amount of commercial paper notes outstanding from time to time. As of March 31, 2025 and December 31, 2024, we had $1.6 billion and $175 million, respectively, in outstanding borrowings under the commercial paper program.

We have historically relied on our internally generated cash flow, our revolving credit facilities and commercial paper program 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, our revolving credit facilities and commercial paper program 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.

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 March 31, 2025 and December 31, 2024, we had accrued deferred purchase consideration totaling $313 million ($204 million of which was a current liability) and $292 million ($199 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.

Lastly, as described in Note 13 – Income Per Share and Stockholders’ Equity of the Notes to Consolidated Financial Statements (Unaudited) set forth in Item 1 of this Quarterly Report, in November 2024, our Board of Directors (Board) authorized an additional $5.0 billion to our existing $4.0 billion share repurchase program (as amended, the 2024 program) bringing the total authorized amount under the 2024 program to a total of $9.0 billion as of March 31, 2025. The Board also extended the term of the 2024 program through December 31, 2029. During the three months ended March 31, 2025, we repurchased 3,061,972 shares of our Class A common stock with an average price of $132.94 per share using cash on hand for an aggregate of $407 million. During the period April 1, 2025 through April 21, 2025, we repurchased 1,510,751 shares of our Class A common stock with an average price of $117.93 per share using cash on hand for an aggregate of $178 million. As of March 31, 2025 and April 21, 2025, we had $5.4 billion and $5.2 billion, respectively, of capacity remaining under the 2024 program.

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

Historical Cash Flows

Operating Activities

Net cash used in operating activities totaled $546 million for the three months ended March 31, 2025 as compared to net cash used in operating activities of $492 million during the three months ended March 31, 2024. The primary drivers that contributed to the increase in net cash used in operating activities were as follows: (1) working capital movements, driven by higher outflows related to accounts payable and accrued expenses due to the timing of payments, partially offset by (2) lower accounts receivable due to better collections which lagged during the three months ended March 31, 2024 and higher net cash flows from operations, driven by revenue growth.

Investing Activities

Net cash used in investing activities totaled $462 million for the three months ended March 31, 2025, a decrease of $438 million as compared to the three months ended March 31, 2024. The decrease was primarily due to lower cash outflows from acquisitions in the current quarter (primarily consisting of the acquisition of Industrious), compared to the prior period when we acquired J&J Worldwide Services.

Financing Activities

Net cash provided by financing activities totaled $1,256 million for the three months ended March 31, 2025 as compared to $1,192 million for the three months ended March 31, 2024. The increased cash inflow was primarily driven by net proceeds from the issuance of commercial paper and senior term loans, partially offset by cash paid to repurchase common stock and settlement of the amount outstanding on the revolving credit facility.

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 (Relam Borrower), 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 (Tranche A (Euro) Loans) and (ii) tranche A U.S. Dollar-denominated term loans in an aggregate principal amount of $350 million (Tranche A (USD) Loans) with weighted average interest rate of 4.4% as of March 31, 2025, both requiring quarterly principal payments beginning on December 31, 2024 and continuing through maturity on July 10, 2028. The proceeds of these 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 March 13, 2025, CBRE Group, Inc., CBRE Services and Relam Borrower entered into Amendment No. 1 to the 2023 Credit Agreement, which provided for, among other things, the ability of Relam Borrower to obtain incremental commitments and loans under the 2023 Credit Agreement in an aggregate principal amount of $750 million (or the Euro equivalent). On March 14, 2025, CBRE Group, Inc., CBRE Services and Relam Borrower entered into Amendment No. 2 and Incremental Assumption Agreement to the 2023 Credit Agreement, pursuant to which Relam Borrower incurred incremental term loans (i) denominated in Euros in the aggregate principal amount of €425 million (Incremental Euro Term Loans) and (ii) denominated in U.S. Dollars in the aggregate principal amount of $125 million (Incremental USD Term Loans). The Incremental Euro Term Loans have the same terms applicable to, and constitute the same class as, the Tranche A (Euro) Loans, and the Incremental USD Term Loans have the same terms applicable to, and constitute the same class as, the Tranche A (USD) Loans under the 2023 Credit Agreement. The proceeds of the Incremental Euro Term Loans and the Incremental USD Term Loans were used for working capital and other general corporate purposes (including the partial repayment of borrowings under the commercial paper program) and to pay fees and expenses incurred in connection with entering into the amendments to the 2023 Credit Agreement.

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

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.

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.

Our 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):

(1) Includes $3.4 billion and $3.3 billion of intercompany loan payables to non-guarantor subsidiaries as of March 31, 2025 and December 31, 2024, 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 – Long-Term Debt and Short-Term Borrowings of the Notes to Consolidated Financial Statements set forth in Item 8 included in our 2024 Annual Report and Note 9 – Long-Term Debt and Short-Term Borrowings 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. The Revolving Credit Agreement is fully and unconditionally guaranteed by CBRE Group, Inc.

As of March 31, 2025, no amount was outstanding under the revolving credit facility provided for by the Revolving Credit Agreement. No letters of credit were outstanding as of March 31, 2025. As of December 31, 2024, $132 million was outstanding under this revolving credit facility. Letters of credit are issued in the ordinary course of business and would reduce the amount we may borrow under this revolving credit facility.

On December 2, 2024, CBRE Services established a commercial paper program pursuant to which we may issue and sell up to $3.5 billion of short-term, unsecured and unsubordinated commercial paper notes with up to 397-day maturities, under the exemption from registration contained in Section 4(a)(2) of the Securities Act of 1933, as amended. Amounts available under the program may be borrowed, repaid and re-borrowed from time to time. Payment of the commercial paper notes is guaranteed on an unsecured and unsubordinated basis by CBRE Group, Inc. The program notes and the guarantee will rank pari passu with all other unsecured and unsubordinated indebtedness. The proceeds from issuances under the program may be used for general corporate purposes. The company intends to maintain available commitments under the Revolving Credit Agreement in an amount at least equal to the amount of commercial paper notes outstanding from time to time. As of March 31, 2025, we had $1.6 billion in outstanding borrowings under the commercial paper program with a weighted average annual interest rate of 4.75%. As of April 21, 2025 and December 31, 2024, we had $2.0 billion and $175 million, respectively, in outstanding borrowings under the commercial paper program.

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 March 31, 2025, no amount was outstanding under this revolving credit facility. As of December 31, 2024, $44 million (£35 million) was outstanding under this revolving credit facility.

For additional information on all of our short-term borrowings, see Note 5 – Warehouse Receivables & Warehouse Lines of Credit and Note 11 – Long-Term Debt and Short-Term Borrowings of the Notes to Consolidated Financial Statements set forth in Item 8 included in our 2024 Annual Report and Note 4 – Warehouse Receivables & Warehouse Lines of Credit and Note 9 – Long-Term Debt and Short-Term Borrowings 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 – Warehouse Receivables & Warehouse Lines of Credit 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 11 – Commitments and Contingencies 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 2024 Annual Report. There have been no material changes to these policies and estimates as of March 31, 2025.

New Accounting Pronouncements

See Note 2 – New Accounting Pronouncements 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, core EBITDA, core adjusted net income and core earnings per diluted share (or core EPS) 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, core EBITDA, core adjusted net income and core EPS 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 is passed through to the client generally with 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 audits and settlements, integration and other costs related to acquisitions, and net results related to the wind-down of certain businesses. 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):

(1) In early 2025, management made the decision to wind-down Telford Homes’ legacy construction business. A new Telford entity, Telford Living, is developing residential housing in the UK under a new business model under which the company does not self-perform general contracting.

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 businesses we may acquire;
• integration challenges arising out of companies we may acquire;
• increases in unemployment and general slowdowns in economic and 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 user and investor clients;
• our ability to retain major clients and renew related contracts;
• our ability to leverage our global services platform to maximize and sustain long-term cash flow;
• our ability to continue investing in our platform and client service offerings;
• our ability to maintain expense discipline;
• the emergence of disruptive business models and technologies;
• negative publicity or harm to our brand and reputation;
• the failure by third parties to comply with service level agreements or regulatory or legal requirements;
• the ability of our investment management business to maintain and grow assets under management and achieve desired investment returns for our investors, and any potential related litigation, liabilities or reputational harm possible if we fail to do so;
• our ability to manage fluctuations in net earnings and cash flow, which could result from poor performance in our investment programs, including our participation as a principal in real estate investments;
• the ability of our indirect wholly-owned subsidiary 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. Government Sponsored Enterprises, 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, sustainability 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 2024 Annual Report on Form 10-K (2024 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.

The information in this section should be read in connection with the information on market risk related to changes in interest rates and non-U.S. currency exchange rates in Part II, Item 7A, “Quantitative and Qualitative Disclosures About Market Risk” in our 2024 Annual Report.

Our exposure to market risk primarily consists of foreign currency exchange rate fluctuations related to our international operations and changes in interest rates on debt obligations. We manage such risk primarily by managing the amount, sources, and duration of our debt funding and by using derivative financial instruments. We apply Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 815, “Derivatives and Hedging,” when accounting for derivative financial instruments. In all cases, we view derivative financial instruments as a risk management tool and, accordingly, do not use derivatives for trading or speculative purposes.

International Operations

We conduct a significant portion of our business and employ a substantial number of people outside the U.S. As a result, we are subject to risks associated with doing business globally. Our Investment Management business has significant euro and British pound denominated assets under management (AUM), as well as associated revenue and earnings in Europe. In addition, our Building Operations & Experience (BOE) and Project Management business also derives significant revenue and earnings in foreign currencies, such as the euro and British pound sterling. Fluctuations in foreign currency exchange rates may continue to produce corresponding changes in our AUM, revenue and earnings.

Our foreign operations expose us to fluctuations in foreign exchange rates. These fluctuations may impact the value of our cash receipts and payments in terms of our functional (reporting) currency, which is the U.S. dollar.

Our businesses could suffer from adverse effects of rapid and unpredictable changes to trade policy, disputes with countries that have close trading ties with the U.S., high interest rates, limited access to debt capital or liquidity constraints, downturns in general macroeconomic conditions, regulatory or financial market uncertainty, public health crises and geopolitical conflicts (or the perception that any such events may occur).

During the three months ended March 31, 2025, approximately 42.0% of our revenue was transacted in foreign currencies. The following table sets forth our revenue derived from our most significant currencies (dollars in millions):

(1) Approximately 46 currencies comprise 7.4% of our revenue for the three months ended March 31, 2025, and approximately 44 currencies comprise 7.8% of our revenue for the three months ended March 31, 2024.

Although we operate globally, we report our results in U.S. dollars. As a result, the strengthening or weakening of the U.S. dollar will negatively or positively impact our reported results. A hypothetical 10% increase in the value of the U.S. dollar relative to the British pound sterling during the three months ended March 31, 2025, would have decreased pre-tax income by $4 million. A hypothetical 10% increase in the value of the U.S. dollar relative to the euro would have increased pre-tax income by $5 million. These hypothetical calculations estimate the impact of translating results into U.S. dollars and do not include an estimate of the impact that a 10% change in the U.S. dollar against other currencies would have had on our foreign operations.

Fluctuations in foreign currency exchange rates may result in corresponding fluctuations in revenue and earnings as well as the assets under management for our investment management business, which could have a material adverse effect on our business, financial condition and operating results. Due to the constantly changing currency exposures to which we are subject and the volatility of currency exchange rates, we cannot predict the effect of exchange rate fluctuations upon future operating results. In addition, fluctuations in currencies relative to the U.S. dollar may make it more difficult to perform period-to-period comparisons of our reported results of operations. Our international operations also are subject to, among other things, political instability and changing tax, trade and regulatory environments, which affect the currency markets and which as a result may adversely affect our future financial condition and results of operations. We routinely monitor these risks and related costs and evaluate the appropriate amount of oversight to allocate towards business activities in foreign countries where such risks and costs are particularly significant.

Interest Rates

We manage our interest expense by using a combination of fixed and variable rate debt. We have entered into interest rate swap agreements to attempt to hedge the variability of future interest payments due to changes in interest rates.

The estimated fair value of our senior term loans was approximately $1.3 billion at March 31, 2025. Based on dealers’ quotes, the estimated fair values of our 5.950% senior notes, 5.500% senior notes, 4.875% senior notes and 2.500% senior notes were $1.0 billion, $513 million, $600 million and $436 million, respectively, at March 31, 2025.

We utilize sensitivity analyses to assess the potential effect on our variable rate debt. If interest rates were to increase 100 basis points on our outstanding variable rate debt as of March 31, 2025, the net impact of the additional interest cost would be a decrease of $7 million on pre-tax income for the three months ended March 31, 2025.

Disclosure Controls and Procedures

Rule 13a-15(e) and 15d-15(e) of the Securities and Exchange Act of 1934, as amended, requires that we conduct an evaluation of the effectiveness of our disclosure controls and procedures as of the end of the period covered by this Quarterly Report, and we have a disclosure policy in furtherance of the same. This evaluation is designed to ensure that all corporate disclosure is complete and accurate in all material respects. The evaluation is further designed to ensure that all information required to be disclosed in our SEC reports is accumulated and communicated to management to allow timely decisions regarding required disclosures and recorded, processed, summarized and reported within the time periods and in the manner specified in the SEC’s rules and forms. Any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. Our Chief Executive Officer and Chief Financial Officer supervise and participate in this evaluation, and they are assisted by members of our Disclosure Committee. Our Disclosure Committee consists of our General Counsel, our Chief Accounting Officer, our Senior Officers of significant business lines and other select employees.

We conducted the required evaluation, and our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures (as defined by Securities Exchange Act Rule 13a-15(e)) were effective as of March 31, 2025 to accomplish their objectives at the reasonable assurance level.

Changes in Internal Control Over Financial Reporting

There have been no changes in our internal control over financial reporting during the fiscal quarter ended March 31, 2025 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.