CBRE GROUP, INC. (CBRE) FY 2021 MD&A

Item 7.    Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A) is designed to provide the reader of our financial statements with a narrative from the perspective of management on our financial condition, results of operations, liquidity and certain other factors that may affect future results. This MD&A should be read in conjunction with our consolidated financial statements and related notes included elsewhere in this Annual Report. Discussion regarding our financial condition and results of operations for the year ended December 31, 2019 and comparisons between the years ended December 31, 2020 and 2019 is included in Part II, Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the company’s Annual Report filed with the SEC on February 24, 2021.

Overview

We are the world’s largest commercial real estate services and investment firm, based on 2021 revenue, with leading global market positions in our leasing, property sales, occupier outsourcing and valuation businesses. As of December 31, 2021, the company has more than 105,000 employees (excluding Turner & Townsend employees) serving clients in more than 100 countries.

We provide services to real estate investors and occupiers. For investors, our services include capital markets (property sales, mortgage origination, sales and servicing), property leasing, investment management, property management, valuation and development services, among others. For occupiers, our services include facilities management, project management, transaction (both property sales and leasing) and consulting services, among others. We provide services under the following brand names: “CBRE” (real estate advisory and outsourcing services); “CBRE Investment Management” (investment management); “Trammell Crow Company” (U.S. development); “Telford Homes” (U.K. development); and “Turner & Townsend Holdings Limited”. During 2020, CBRE sponsored a special purpose acquisition company, or SPAC, CBRE Acquisition Holdings, Inc., which merged with and into Altus Power, Inc., a leading provider of solar energy for commercial and industrial properties. Altus Power Inc. (Altus) began trading on the New York Stock Exchange (NYSE) on December 10, 2021 under the ticker symbol “AMPS.”

We generate revenue from both stable, recurring (large multi-year portfolio and per project contracts) and more cyclical, non-recurring sources, including commissions on transactions. Our revenue mix has become heavily weighted towards stable revenue sources, particularly occupier outsourcing, with our dependence on highly cyclical property sales and lease transaction revenue declining markedly. We believe we are well-positioned to capture a substantial and growing share of market opportunities at a time when investors and occupiers increasingly prefer to purchase integrated, account-based services on a national and global basis.

In 2021, we generated revenue from a highly diversified base of clients, including more than 93 of the Fortune 100 companies. We have been an S&P 500 company since 2006 and in 2021 we were ranked #122 on the Fortune 500. We have been voted the most recognized commercial real estate brand in the Lipsey Company survey for 21 years in a row (including 2021). We have also been rated a World’s Most Ethical Company by the Ethisphere Institute for eight consecutive years (including 2021, the most recent year the award has been announced), and included in the Dow Jones World Sustainability Index for three years in a row and the Bloomberg Gender-Equality Index for three years in a row.

Critical Accounting Policies

Our consolidated financial statements have been prepared in accordance with 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.

Revenue Recognition

To recognize revenue in a transaction with a customer, we evaluate the five steps of the Accounting Standards Codification (ASC) Topic 606 revenue recognition framework: (1) identify the contract; (2) identify the performance obligations(s) in the contract; (3) determine the transaction price; (4) allocate the transaction price to the performance obligation(s) and (5) recognize revenue when (or as) the performance obligations are satisfied.

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Our revenue recognition policies are consistent with this five step framework. Understanding the complex terms of agreements and determining the appropriate time, amount, and method to recognize revenue for each transaction requires significant judgement. These significant judgements include: (i) determining what point in time or what measure of progress depicts the transfer of control to the customer; (ii) applying the series guidance to certain performance obligations satisfied over time; (iii) estimating how and when contingencies, or other forms of variable consideration, will impact the timing and amount of recognition of revenue and (iv) determining whether we control third party services before they are transferred to the customer in order to appropriately recognize the associated fees on either a gross or net basis. The timing and amount of revenue recognition in a period could vary if different judgments were made. Our revenues subject to the most judgment are brokerage commission revenue, incentive-based management fees, development fees and third party fees associated with our occupier outsourcing and property management services. For a detailed discussion of our revenue recognition policies, see the Revenue Recognition section within Note 2 of the Notes to Consolidated Financial Statements set forth in Item 8 of this Annual Report.

Business Combinations, Goodwill and Other Intangible Assets

Our acquisitions require the application of purchase accounting, which results in tangible and identifiable intangible assets and liabilities of the acquired entity being recorded at fair value. The difference between the purchase price and the fair value of net assets acquired is recorded as goodwill. Deferred consideration arrangements granted in connection with a business combination are evaluated to determine whether all or a portion is, in substance, additional purchase price or compensation for services. Additional purchase price is added to the fair value of consideration transferred in the business combination and compensation is included in operating expenses in the period it is incurred. In determining the fair values of assets and liabilities acquired in a business combination, we use a variety of valuation methods including present value, depreciated replacement cost, market values (where available) and selling prices less costs to dispose. We are responsible for determining the valuation of assets and liabilities and for the allocation of purchase price to assets acquired and liabilities assumed.

Assumptions must often be made in determining fair values, particularly where observable market values do not exist. Assumptions may include discount rates, growth rates, cost of capital, royalty rates, tax rates and remaining useful lives. These assumptions can have a significant impact on the value of identifiable assets and accordingly can impact the value of goodwill recorded. Different assumptions could result in different values being attributed to assets and liabilities. Since these values impact the amount of annual depreciation and amortization expense, different assumptions could also impact our statement of operations and could impact the results of future asset impairment reviews.

We are required to test goodwill and other intangible assets deemed to have indefinite useful lives for impairment at least annually, or more often if circumstances or events indicate a change in the impairment status, in accordance with ASC Topic 350, “Intangibles – Goodwill and Other” (Topic 350). We have the option to perform a qualitative assessment with respect to any of our reporting units to determine whether a quantitative impairment test is needed. We are permitted to assess based on qualitative factors whether it is more likely than not that a reporting unit’s fair value is less than its carrying amount before applying the quantitative goodwill impairment test. If it is more likely than not that the fair value of a reporting unit is less than its carrying amount, we would conduct a quantitative goodwill impairment test. If not, we do not need to apply the quantitative test. The qualitative test is elective and we can go directly to the quantitative test rather than making a more-likely-than-not assessment based on an evaluation of qualitative factors. When performing a quantitative test, we use a discounted cash flow approach to estimate the fair value of our reporting units. Management’s judgment is required in developing the assumptions for the discounted cash flow model. These assumptions include revenue growth rates, profit margin percentages, discount rates, etc. Due to the many variables inherent in the estimation of a business’s fair value and the relative size of our goodwill, if different assumptions and estimates were used, it could have an adverse effect on our impairment analysis.

For additional information on goodwill and intangible asset impairment testing, see Notes 2 and 9 of the Notes to Consolidated Financial Statements set forth in Item 8 of this Annual Report.

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Income Taxes

Income taxes are accounted for under the asset and liability method in accordance with the “Accounting for Income Taxes,” Topic of the FASB ASC (Topic 740). Deferred tax assets and liabilities are determined based on temporary differences between the financial reporting and tax basis of assets and liabilities and operating loss and tax credit carry forwards. Deferred tax assets and liabilities are measured by applying enacted tax rates and laws and are released in the years in which the temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Valuation allowances are provided against deferred tax assets when it is more likely than not that some portion or all of the deferred tax asset will not be realized.

Accounting for tax positions requires judgments, including estimating reserves for potential uncertainties. We also assess our ability to utilize tax attributes, including those in the form of carryforwards, for which the benefits have already been reflected in the financial statements. We do not record valuation allowances for deferred tax assets that we believe will be realized in future periods. While we believe the resulting tax balances as of December 31, 2021 and 2020 are appropriately accounted for in accordance with Topic 740, as applicable, the ultimate outcome of such matters could result in favorable or unfavorable adjustments to our consolidated financial statements and such adjustments could be material.

Our future effective tax rate could be adversely affected by earnings being lower than anticipated in countries that have lower statutory rates and higher than anticipated in countries that have higher statutory rates, changes in the valuation of our deferred tax assets or liabilities, or changes in tax laws, regulations, or accounting principles, as well as certain discrete items.

See Note 15 of the Notes to Consolidated Financial Statements set forth in Item 8 of this Annual Report for further information regarding income taxes.

New Accounting Pronouncements

See New Accounting Pronouncements discussion within Note 3 of the Notes to Consolidated Financial Statements set forth in Item 8 of this Annual Report.

The SEC issued Release No. 33-10890 “Management’s Discussion and Analysis, Selected Financial Data, Supplementary Financial Information” which became fully effective on August 9, 2021. This release was adopted to modernize, simplify, and enhance certain financial disclosure requirements in Regulation S-K. Specifically, the requirement for Selected Financial Data was eliminated, the requirement to disclose Supplementary Financial Information was streamlined, and certain elements of required MD&A disclosures were amended. These amendments are intended to eliminate duplicative disclosures and modernize and enhance MD&A disclosures for the benefit of investors, while simplifying compliance efforts for registrants.

With our adoption of this release, we have applied the required amendments where applicable to form 10-K for the year ended December 31, 2021.

Seasonality

In a typical year, a significant portion of our revenue is seasonal, which an investor should keep in mind when comparing our financial condition and results of operations on a quarter-by-quarter basis. Historically, our revenue, operating income, net income and cash flow from operating activities have tended to be lowest in the first quarter and highest in the fourth quarter of each year. Revenue, earnings and cash flow have generally been concentrated in the fourth calendar quarter due to the focus on completing sales, financing and leasing transactions prior to year-end. The ongoing impact of the Covid-19 pandemic may cause seasonality to deviate from historical patterns.

Inflation

Our commissions and other variable costs related to revenue are primarily affected by commercial real estate market supply and demand, which may be affected by inflation. For example, input costs for construction materials in our development business have increased as a result of inflation related to supply chain issues and worker shortages, respectively. However, these increases have been more than offset by rising property values. We believe that our business has significant inherent protections against inflation, and to date, general inflation has not had a material impact upon our operations. The company continues to monitor inflation, potential monetary policy changes in response to high inflation and potentially adverse effects to our business from either higher inflation or interest rates, or both.

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Items Affecting Comparability

When you read our financial statements and the information included in this Annual Report, you should consider that we have experienced, and continue to experience, several material trends and uncertainties (particularly those caused or exacerbated by Covid-19) that have affected our financial condition and results of operations that make it challenging to predict our future performance based on our historical results. We believe that the following material trends and uncertainties are crucial to an understanding of the variability in our historical earnings and cash flows and the potential for continued variability in the future.

Macroeconomic Conditions

Economic trends and government policies affect global and regional commercial real estate markets as well as our operations directly. These include overall economic activity and employment growth, with specific sensitivity to growth in office-based employment; interest rate levels and changes in interest rates; the cost and availability of credit; and the impact of tax and regulatory policies. Periods of economic weakness or recession, significantly rising interest rates, fiscal uncertainty, declining employment levels, decreasing demand for commercial real estate, falling real estate values, disruption to the global capital or credit markets, or the public perception that any of these events may occur, will negatively affect the performance of our business.

Compensation is our largest expense and our sales and leasing professionals generally are paid on a commission and/or bonus basis that correlates with their revenue production. As a result, the negative effects on our operating margins of difficult market conditions, such as the environment that prevailed in the early months of the Covid-19 pandemic, are partially mitigated by the inherent variability of our compensation cost structure. In addition, when negative economic conditions have been particularly severe, like during the current Covid-19 pandemic, we have moved decisively to lower operating expenses to improve financial performance. Additionally, our contractual revenue has increased primarily as a result of growth in our outsourcing business, and we believe this contractual revenue should help offset the negative impacts that macroeconomic deterioration could have on other parts of our business. We also believe that we have significantly improved the resiliency of our business through a four-dimension diversification strategy that expanded the business strategically across asset types, clients, geographies and lines of business. Nevertheless, adverse global and regional economic trends could pose significant risks to the performance of our consolidated operations and financial condition.

Effects of Acquisitions and Investments

We have historically made significant use of strategic acquisitions to add and enhance service capabilities around the world. On November 1, 2021, we acquired a 60% controlling ownership interest in Turner & Townsend Holdings Limited (Turner & Townsend). We believe that this partnership will help us advance our diversification strategy across four dimensions including asset types, lines of business, clients, and geographies. Turner & Townsend is a leading professional services company specializing in program management, project management, cost and commercial management and advisory services across the real estate, infrastructure and natural resources sectors, and is consolidated and reported in our Global Workplace Solutions segment. Turner & Townsend was acquired for £960.0 million, or $1.3 billion along with the acquisition of $44.0 million (£32.2 million) in cash. The Turner & Townsend Acquisition was funded with cash on hand and gross deferred purchase consideration of $591.2 million (£432.0 million).

Strategic in-fill acquisitions have also played a key role in strengthening our service offerings. The companies we acquired have generally been regional or specialty firms that complement our existing platform, or independent affiliates, which, in some cases, we held a small equity interest. In early 2022, we acquired a Spanish project management company.

During 2021, we completed eight in-fill acquisitions: a U.S. firm that provides construction and project management services, a professional service advisory firm in Australia, a U.S. firm focused on investment banking and investment sales in the global gaming real estate market, a leading facilities management firm in the Netherlands, a workplace interior design and project management company in Singapore, a property management firm in France, a residential brokerage in the Netherlands, and an occupancy management company based in the U.S.

During 2020, we completed six in-fill acquisitions: leading local facilities management firms in Spain and Italy, a U.S. firm that helps companies reduce telecommunications costs, a technology-focused project management firm based in Florida, a firm specializing in performing real estate valuations in South Korea, and a facilities management and technical maintenance firm in Australia.

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Also, during 2021, we made an incremental investment in Industrious, a leading provider of premium flexible workplace solutions in the U.S., bringing its current non-controlling ownership stake to 40%. As part of this investment, we contributed Hana, our legacy flexible office space business, into Industrious. During the fourth quarter of 2021, our company-sponsored SPAC merged with and into Altus Power, Inc. Our investment in common shares of Altus and related interests were approximately $368 million at December 31, 2021.

We believe strategic acquisitions can significantly decrease the cost, time and resources necessary to attain a meaningful competitive position – or expand our capabilities – within targeted markets or business lines. In general, however, most acquisitions will initially have an adverse impact on our operating income and net income as a result of transaction-related expenditures, including severance, lease termination, transaction and deferred financing costs, as well as costs and charges associated with integrating the acquired business and integrating its financial and accounting systems into our own.

Our acquisition structures often include deferred and/or contingent purchase consideration in future periods that are subject to the passage of time or achievement of certain performance metrics and other conditions. As of December 31, 2021, we have accrued deferred purchase and contingent considerations totaling $630.1 million, which is included in “Accounts payable and accrued expenses” and in “Other long-term liabilities” in the accompanying consolidated balance sheets set forth in Item 8 of this Annual Report.

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International Operations

We conduct a significant portion of our business and employ a substantial number of people outside of the U.S. As a result, we are subject to risks associated with doing business globally. Our Real Estate Investments business has a significant amount of euro-denominated assets under management, as well as associated revenue and earnings in Europe. In addition, our Global Workplace Solutions business also has a significant amount of its revenue and earnings denominated in foreign currencies, such as the euro and British pound sterling. Fluctuations in foreign currency exchange rates have resulted and may continue to result in corresponding fluctuations in our AUM, revenue and earnings.

Our businesses could suffer from the effects of public health crises (such as the ongoing Covid-19 pandemic), political or economic disruptions (or the perception that such disruptions may occur) that affect interest rates or liquidity or create financial, market or regulatory uncertainty.

During the year ended December 31, 2021, approximately 43% of our revenue was transacted in foreign currencies. The following table sets forth our revenue derived from our most significant currencies (dollars in thousands):

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(1)Approximately 48 currencies comprise 7.0% of our revenue for the year ended December 31, 2021, and approximately 40 currencies comprise 6.9% of our revenue for the year ended December 31, 2020.

Although we operate globally, we report our results in U.S. dollars. As a result, the strengthening or weakening of the U.S. dollar may positively or negatively impact our reported results. For example, we estimate that had the British pound sterling-to-U.S. dollar exchange rates been 10% higher during the year ended December 31, 2021, the net impact would have been an increase in pre-tax income of $8.3 million. Had the euro-to-U.S. dollar exchange rates been 10% higher during the year ended December 31, 2021, the net impact would have been an increase in pre-tax income of $18.1 million. These hypothetical calculations estimate the impact of translating results into U.S. dollars and do not include an estimate of the impact that a 10% change in the U.S. dollar against other currencies would have had on our foreign operations.

Fluctuations in foreign currency exchange rates may result in corresponding fluctuations in revenue and earnings as well as the 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 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.

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Results of Operations

The following table sets forth items derived from our consolidated statements of operations for the years ended December 31, 2021 and 2020 (dollars in thousands):

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(1)See discussion in segment operations for organization changes effective January 1, 2021. Prior period results have been recast to conform with these changes.

(2)In conjunction with the acquisition of a 60% interest in Turner & Townsend in the fourth quarter of 2021, we modified our definition of Consolidated Adjusted EBITDA and Segment Operating Profit (SOP) to be inclusive of net income attributable to non-controlling interests and have recast prior periods to conform to this definition. The attribution of Adjusted EBITDA and SOP to non-controlling interests for prior periods was deemed to be materially the same as net income attributable to non-controlling interests in such periods.

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

Net revenue is gross revenue less costs largely associated with subcontracted vendor work performed for clients and generally has no margin. Prior to 2021, the company utilized fee revenue to analyze the overall financial performance. Fee revenue excluded additional reimbursed costs, primarily related to employees dedicated to clients, some of which included minimal margin.

We use consolidated adjusted EBITDA as an indicator of consolidated financial performance. It represents earnings before the portion attributable to non-controlling interests, net interest expense, write-off of financing costs on extinguished debt, income taxes, depreciation and amortization, asset impairments, adjustments related to certain carried interest incentive compensation expense (reversal) to align with the timing of associated revenue, fair value adjustments to real estate assets acquired in the Telford acquisition (purchase accounting) that were sold in the period, costs incurred related to legal entity restructuring, costs associated with workforce optimization, transformation initiatives and integration and other costs related to acquisitions. We believe that investors may find these measures useful in evaluating our operating performance compared to that of other companies in our industry because their calculations generally eliminate the effects of acquisitions, which would include impairment charges of goodwill and intangibles created from acquisitions, the effects of financings and income taxes and the accounting effects of capital spending.

Consolidated adjusted EBITDA is not intended to be a measure of free cash flow for our discretionary use because it does not consider certain cash requirements such as tax and debt service payments. This measure may also differ from the amounts calculated under similarly titled definitions in our credit facilities and debt instruments, which are further adjusted to reflect certain other cash and non-cash charges and are used by us to determine compliance with financial covenants therein and our ability to engage in certain activities, such as incurring additional debt. We also use consolidated adjusted EBITDA as a significant component when measuring our operating performance under our employee incentive compensation programs.

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Consolidated adjusted EBITDA is calculated as follows (dollars in thousands):

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(1)During 2020, management began the implementation of certain transformation initiatives to enable the company to reduce costs, streamline operations and support future growth. The majority of expenses incurred were cash in nature and primarily related to employee separation benefits, lease termination costs and professional fees. See Note 21 of our Notes to Consolidated Financial Statements set forth in Item 8 of this Annual Report.

(2)Primarily represents costs incurred related to workforce optimization initiated and executed in the second quarter of 2020 as part of management’s cost containment efforts in response to the Covid-19 pandemic. The charges are cash expenditures primarily for severance costs incurred related to this effort. Of the total costs, $7.4 million was included within the “Cost of revenue” line item and $30.2 million was included in the “Operating, administrative, and other” line item in the accompanying consolidated statements of operations for the year ended December 31, 2020.

Year Ended December 31, 2021 Compared to Year Ended December 31, 2020

We reported consolidated net income of $1.8 billion for the year ended December 31, 2021 on revenue of $27.7 billion as compared to consolidated net income of $752.0 million on revenue of $23.8 billion for the year ended December 31, 2020.

Our revenue on a consolidated basis for the year ended December 31, 2021 increased by $3.9 billion, or 16.5%, as compared to the year ended December 31, 2020. Overall revenue generated by the Advisory Services segment increased by 32.7%, primarily due to a notable rebound in sales and lease revenue as we continue to recover from the impacts of the pandemic across our major markets. The increase was also due to an uptick in revenue from our commercial mortgage origination and loan servicing line of business primarily driven by an active private lending market. Revenue generated by our Global Workplace Solutions segment increased 8.2% as compared to 2020 led by growth in our facilities management line of business, driven by its contractual nature, and also in the project management space supported by Turner & Townsend which contributed approximately $194.0 million in total revenue. Our Asset Under Management (AUM) portfolio grew substantially during the year contributing to an increase in asset management fees in our Real Estate Investments segment. Revenue generated from sales in our development service line of business increased dramatically this year as we continue to recover from market activity that was generally suppressed due to the pandemic last year. Foreign currency translation had a 2.0% positive impact on total revenue during the year ended December 31, 2021, primarily driven by strength in the Canadian dollar, British pound sterling and euro, partially offset by weakness in the Argentine peso and Brazilian real.

Our cost of revenue on a consolidated basis increased by $2.5 billion, or 13.3%, during the year ended December 31, 2021 as compared to the same period in 2020. This increase was primarily due to higher costs associated with our Global Workplace Solutions segment due to growth in our facilities management and project management business and higher costs associated with our Advisory Services segment primarily due to significant growth in our sales and leasing business. Foreign currency translation had a 2.0% negative impact on total cost of revenue during the year ended December 31, 2021. Cost of revenue as a percentage of revenue decreased from 79.9% for the year ended December 31, 2020 to 77.8% for the year ended December 31, 2021. This was primarily driven by an increase in the Real Estate Investment segment investment management

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fees due to growth in AUM that does not have an associated cost of revenue as well as a shift in the overall composition of revenue with Advisory Services contributing more to current year revenue than it did last year.

Our operating, administrative and other expenses on a consolidated basis increased by $768.0 million, or 23.2%, during the year ended December 31, 2021 as compared to the same period in 2020. Operating expenses as a percentage of revenue increased from 13.9% for the year ended December 31, 2020 to 14.7% for the year ended December 31, 2021. The increase was primarily due to higher integration and other acquisition costs (primarily due to the Turner & Townsend Acquisition), higher expenses associated with maintenance of our operational infrastructure, and an increase in overall compensation expense, including support staff compensation and related benefits, overall bonus accrual, and stock compensation expense which are primarily tied to significant improvement in the business performance for the year ended December 31, 2021 as compared to the year ended December 31, 2020. This was partially offset by lower expenses associated with bad debt write off and associated provision expenses. Foreign currency translation also had a 2.1% negative impact on total operating expenses during the year ended December 31, 2021.

Our depreciation and amortization expense on a consolidated basis increased by $24.1 million, or 4.8%, during the year ended December 31, 2021 as compared to the same period in 2020. This increase was primarily attributable to accelerated amortization of mortgage servicing rights due to early loan payoffs in our loan servicing business line. In addition, we recorded approximately $19.7 million in depreciation and amortization expense primarily related to definite-lived intangibles identified as part of the Turner & Townsend Acquisition.

We did not record any asset impairments during the year ended December 31, 2021. Our asset impairments on a consolidated basis totaled $88.7 million during the year ended December 31, 2020 and consisted of a $50.2 million of non-cash asset impairment charges in our Global Workplace Solutions segment, a non-cash goodwill impairment charge of $25.0 million and non-cash asset impairment charges of $13.5 million in our Real Estate Investments segment. These impairments were recorded primarily due to triggering events associated with Covid-19.

Our gain on disposition of real estate on a consolidated basis decreased by $16.8 million, or 19.1%, during the year ended December 31, 2021 as compared to the same period in 2020. These gains resulted from decreased activity related to property sales on consolidated deals within our Real Estate Investments segment.

Our equity income from unconsolidated subsidiaries on a consolidated basis increased by $492.5 million, or 390.4%, during the year ended December 31, 2021 as compared to the same period in 2020, primarily driven by higher equity earnings associated with property sales reported in our Real Estate Investments segment, our positive fair value adjustment related to our investment in Industrious and higher equity earnings associated with certain non-controlling equity investments reported in our Corporate and other segment.

Our other income on a consolidated basis was $203.6 million for the year ended December 31, 2021 versus $17.4 million for the same period in the prior year. The increase was primarily due to a non-cash gain of $187.5 million that was recorded as part of the deconsolidation of CBRE Acquisition Holdings upon its merger with and into Altus Power, Inc. at which point we recorded our equity investment and related interests in Altus at fair value.

Our consolidated interest expense, net of interest income, decreased by $17.4 million, or 25.7%, for the year ended December 31, 2021 as compared to the same period in 2020. This decrease was primarily due to interest expense associated with the 5.25% senior note which was fully paid off in December 31, 2020, and offset by interest expense associated with a favorable term 2.500% senior note issued in March 2021.

We did not incur any write-off of financing costs on extinguished debt on a consolidated basis for the year ended December 31, 2021 as compared to $75.6 million for the year ended December 31, 2020. The costs for the year ended December 31, 2020 included a $73.6 million premium paid and the write-off of $2.0 million of unamortized premium and debt issuance costs in connection with the redemption, in full, of the $425.0 million aggregate outstanding principal amount of our 5.25% senior notes.

Our provision for income taxes on a consolidated basis was $567.5 million for the year ended December 31, 2021 as compared to $214.1 million for the same period in 2020. Our effective tax rate increased from 22.0% for the year ended December 31, 2020 to 23.6% for the year ended December 31, 2021. The increase is primarily due to an increase in the provision for state income taxes, net of federal benefit, and a decrease of tax credits in 2021.

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Segment Operations

We organize our operations around, and publicly report our financial results on, three global business segments: (1) Advisory Services; (2) Global Workplace Solutions; and (3) Real Estate Investments. For additional information on our segments, see Note 19 of the Notes to Consolidated Financial Statements set forth in Item 8 of this Annual Report.

Advisory Services

The following table summarizes our results of operations for our Advisory Services operating segment for the years ended December 31, 2021 and 2020 (dollars in thousands):

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(1)During 2020, management began the implementation of certain transformation initiatives to enable the company to reduce costs, streamline operations and support future growth. The majority of expenses incurred were cash in nature and primarily related to employee separation benefits, lease termination costs and professional fees. See Note 21 of our Notes to Consolidated Financial Statements set forth in Item 8 of this Annual Report.

(2)Primarily represents costs incurred related to workforce optimization initiated and executed in the second quarter of 2020 as part of management’s cost containment efforts in response to the Covid-19 pandemic. The charges are cash expenditures primarily for severance costs incurred related to this effort. Of the total costs, $6.3 million was included within the “Cost of revenue” line item and $6.4 million was included in the “Operating, administrative, and other” line item in the accompanying consolidated statements of operations for the year ended December 31, 2020.

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Year Ended December 31, 2021 Compared to Year Ended December 31, 2020

Revenue increased by $2.4 billion, or 32.7%, for the year ended December 31, 2021 as compared to the year ended December 31, 2020. The revenue increase consisted of following - leasing revenue increased 34.4%, sales revenue increased 67.6%, commercial mortgage origination and loan servicing income increased an average of 24.5%, and valuation revenue increased 19.4%. Sales and lease revenue grew across all geographies with a dramatic increase in sales revenue in the Americas which was up 79.6% as compared to the prior year. Growth in industrial leasing and continued recovery in demand for office space were key contributors to the increase in leasing revenue. Industrial and multifamily sales, particularly in the US, have increased as capital inflows continue. Our loan servicing portfolio grew 23% as compared to last year resulting in an elevated loan servicing income. In addition, we recorded higher mortgage origination revenue as we experienced a robust increase in mortgage volume led by private lending. Valuation revenue was up during the year, primarily due to increased activities in the Americas and the Asia Pacific regions, due to ongoing improvement in the market conditions and higher average fees fueled by demand. Foreign currency translation had a 1.9% positive impact on total revenue during the year ended December 31, 2021, primarily driven by strength in British pound sterling, euro and Canadian dollar, partially offset by weakness in the Argentine peso and Brazilian real.

Cost of revenue increased by $1.3 billion, or 30.8%, for the year ended December 31, 2021 as compared to the same period in 2020, primarily due to increased commission expense resulting from higher sales and leasing revenue and increased professional compensation to support the growth in the business. Additionally, we recorded $39.3 million in employee separation benefits as cost of revenue as part of the workforce optimization and transformation initiatives during 2020. Foreign currency translation had a 2.0% negative impact on total cost of revenue during the year ended December 31, 2021. Cost of revenue as a percentage of revenue decreased to 58.9% for the year ended December 31, 2021 versus 59.9% for the same period in 2020.

Operating, administrative and other expenses increased by $216.5 million, or 13.0%, for the year ended December 31, 2021 as compared to the year ended December 31, 2020. This increase was primarily due to higher overall compensation expense primarily influenced by solid segment performance this year as compared to last year. This includes higher bonus expense, stock compensation expense and other incentive compensation expense. In addition, salaries and related benefits for the support staff was up this year to sustain the growth in the business. This was partially offset by lower occupancy expense and severance expense that were significant last year as part of the company’s transformation initiatives and workspace rationalization measures. There was also an increase in consulting expense as we hired third party service providers to assist us with transition of certain back office processes to our shared service centers which is expected to drive future efficiencies. Foreign currency translation had a 2.0% negative impact on total operating expenses during the year ended December 31, 2021.

For the year ended December 31, 2021, mortgage servicing rights (MSRs) contributed to operating income $185.1 million of gains recognized in conjunction with the origination and sale of mortgage loans, offset by $172.3 million of amortization of related intangible assets. For the year ended December 31, 2020, MSRs contributed $207.8 million of gains recognized in conjunction with the origination and sale of mortgage loans, offset by $134.3 million of amortization of related intangible assets. The increase in amortization of MSRs was primarily due to accelerated amortization related to early payoff of underlying loans during the year.

Equity income from unconsolidated subsidiaries was up $20.3 million primarily driven by a positive fair value mark up on equity investments. Other income (loss) decreased by $12.7 million during the current year. This loss was primarily due to negative valuation adjustment recorded on a revolving facility extended to an unconsolidated subsidiary.

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Global Workplace Solutions

The following table summarizes our results of operations for our Global Workplace Solutions operating segment for the years ended December 31, 2021 and 2020 (dollars in thousands):

_______________

(1)During 2020, management began the implementation of certain transformation initiatives to enable the company to reduce costs, streamline operations and support future growth. The majority of expenses incurred were cash in nature and primarily related to employee separation benefits, lease termination costs and professional fees. See Note 21 of our Notes to Consolidated Financial Statements set forth in Item 8 of this Annual Report.

(2)Primarily represents costs incurred related to workforce optimization initiated and executed in the second quarter of 2020 as part of management’s cost containment efforts in response to the Covid-19 pandemic. The charges are cash expenditures primarily for severance costs incurred related to this effort. Of the total costs, $1.1 million was included within the “Cost of revenue” line item and $3.8 million was included in the “Operating, administrative, and other” line item in the accompanying consolidated statements of operations for the year ended December 31, 2020.

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Year Ended December 31, 2021 Compared to Year Ended December 31, 2020

Revenue increased by $1.3 billion, or 8.2%, for the year ended December 31, 2021 as compared to the year ended December 31, 2020. The revenue increase was primarily attributable to growth in our project management line of business, which increased 18% (excluding Turner & Townsend), supplemented by a moderate growth in facilities management revenue. We recorded approximately $194.0 million in revenue from our acquisition of Turner & Townsend in November 2021. The remaining growth in project management was primarily due to an elevated demand as we emerge from the pandemic. In 2021, we were responsible for implementing project management contracts, excluding Turner & Townsend, valued at approximately $133.0 billion versus $93.0 billion last year. Foreign currency translation had a 2.0% positive impact on total revenue during the year ended December 31, 2021, primarily driven by weakness in the Argentine peso and Brazilian real partially offset by strength in the British pound sterling and euro.

Cost of revenue increased by $1.0 billion, or 7.0%, for the year ended December 31, 2021 as compared to the same period in 2020, driven by higher revenue leading to higher pass through costs and increased professional compensation. Foreign currency translation had a 1.9% negative impact on total cost of revenue during the year ended December 31, 2021. Cost of revenue as a percentage of revenue decreased slightly at 91.2% for the year ended December 31, 2021 versus 92.3% for the same period in 2020 as the business continues to manage related costs. Additionally, we recorded $10.0 million in employee separation benefits last year as part of the workforce optimization and transformation initiatives that did not recur this year.

Operating, administrative and other expenses increased by $143.9 million, or 20.7%, for the year ended December 31, 2021 as compared to the year ended December 31, 2020. This increase was due to operating expenses recorded from our consolidation of Turner & Townsend, $44.6 million related to acquisition and integration costs related to Turner & Townsend deal, higher bonus accrual tied to improved segment and consolidated results, stock compensation expense and continued investments to sustain the growth in the business in form of office management and administrative salaries. These increases were partially offset by minimal severance expense this year as compared to last when the company was executing programs such as workforce optimization and transformation initiatives. In addition, we recorded lower write-offs related to trade receivables and lower provisions. Foreign currency translation also had a 2.4% negative impact on total operating expenses during the year ended December 31, 2021.

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Real Estate Investments

The following table summarizes our results of operations for our Real Estate Investments (REI) operating segment for the years ended December 31, 2021 and 2020 (dollars in thousands):

_______________

(1)Primarily represents costs incurred related to workforce optimization initiated and executed in the second quarter of 2020 as part of management’s cost containment efforts in response to the Covid-19 pandemic. The charges are cash expenditures primarily for severance costs incurred related to this effort and were included in the “Operating, administrative and other” line in the accompanying consolidated statements of operations for the year ended December 31, 2020.

(2)During 2020, management began the implementation of certain transformation initiatives to enable the company to reduce costs, streamline operations and support future growth. The majority of expenses incurred were cash in nature and primarily related to employee separation benefits, lease termination costs and professional fees. See Note 21 of our Notes to Consolidated Financial Statements set forth in Item 8 of this Annual Report.

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Year Ended December 31, 2021 Compared to Year Ended December 31, 2020

Revenue increased by $260.2 million, or 31.3%, for the year ended December 31, 2021 as compared to the year ended December 31, 2020, primarily driven by an increase in real estate sales in our development services line of business, primarily in the U.K. as we bounce back from the pandemic, and an increase in investment management fees related to growth in AUM, slightly muted by lower carried interest than the year before. Foreign currency translation had a 4.3% positive impact on total revenue during the year ended December 31, 2021 primarily driven by strength in the British pound sterling and euro.

Cost of revenue increased by $175.9 million, or 101.4%, for the year ended December 31, 2021 as compared to the year ended December 31, 2020, primarily driven by an increase in real estate development which is consistent with an increase in sales in our development service line of business. Foreign currency translation had a 7.7% negative impact on total cost of revenue during the year ended December 31, 2021.

Operating, administrative and other expenses increased by $287.3 million, or 47.2%, for the year ended December 31, 2021 as compared to the same period in 2020, primarily due to an increase in general compensation and related benefits, incentive compensation and bonuses in our development services and investment management line of business consistent with higher revenue growth. Foreign currency translation had a 2.8% negative impact on total operating expenses during the year ended December 31, 2021.

Equity income from unconsolidated subsidiaries increased by $431.8 million, or 349.5%, during the year ended December 31, 2021 as compared to the same period in 2020, primarily driven by higher equity earnings associated with property sales reported in the Development line of business.

A roll forward of our AUM by product type for the year ended December 31, 2021 is as follows (dollars in billions):

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

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

•the net asset value of our managed securities portfolios, including investments (which may be comprised of committed but uncalled capital) in private real estate funds under our fund of funds investments.

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

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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 Corporate and reported as Corporate and other. The following table summarizes our results of operations for our Corporate and other segment for the years ended December 31, 2021 and 2020 (dollars in thousands):

_______________

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

(2)Primarily represents costs incurred related to workforce optimization initiated and executed in the second quarter of 2020 as part of management’s cost containment efforts in response to the Covid-19 pandemic. The charges are cash expenditures primarily for severance costs incurred related to this effort and were included in the “Operating, administrative and other” line in the accompanying consolidated statements of operations for the year ended December 31, 2020.

(3)During 2020, management began the implementation of certain transformation initiatives to enable the company to reduce costs, streamline operations and support future growth. The majority of expenses incurred were cash in nature and primarily related to employee separation benefits, lease termination costs and professional fees. See Note 21 of our Notes to Consolidated Financial Statements set forth in Item 8 of this Annual Report.

Operating, administrative and other expenses were approximately $452.4 million during the year ended December 31, 2021, an increase of 36.2% as compared to the prior year. This was primarily due to an increase in general compensation and related benefits, as well as in stock compensation expense, bonus and other incentive compensation expense primarily tied to the overall profitability of the organization. In addition, operating expenses associated with our sponsorship of CBRE Acquisitions Holdings, Inc. (now known as Altus Power, Inc.) up until its merger with and into Altus on December 9, 2021 were also recorded in this segment.

Equity income from unconsolidated subsidiaries was approximately $36.9 million, as compared to the year ended December 31, 2020. This was primarily due to elevated capital markets activity coupled with mark to market adjustments for investments where the fair value option has been elected. We recorded favorable fair value adjustments on our non-controlling investments, including a $6.5 million fair value adjustment on our equity investment and related interests in Altus from the merger date through December 31, 2021. The valuation of common shares, private placement warrants and alignment shares are dependent on Altus’ stock price which could be volatile and subject to wide fluctuations in response to various market conditions.

Other income of $205.8 million is primarily comprised of $187.5 million in non-cash gain that was recorded as part of our deconsolidation of CBRE Acquisition Holdings, Inc. upon it merging with and into Altus. As part of this transaction, we recorded our interest in Altus’ alignment shares and private placement warrants at fair value which factored into the recognition of the above gain. The remaining activity relates to unrealized and realized gain/loss on equity and available for sale debt securities owned by our wholly-owned captive insurance company and our non-controlling interest in additional equity securities.

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Liquidity and Capital Resources

We believe that we can satisfy our working capital and funding requirements with internally generated cash flow and, as necessary, borrowings under our revolving credit facility. Our expected capital requirements for 2022 include up to approximately $305 million of anticipated capital expenditures, net of tenant concessions. During the year ended December 31, 2021, we incurred $178.7 million of capital expenditures, net of tenant concessions received, which includes approximately $36.3 million related to technology enablement. As of December 31, 2021, we had aggregate commitments of $127.1 million to fund future co-investments in our Real Estate Investments business, $42.6 million of which is expected to be funded in 2022. Additionally, as of December 31, 2021, we are committed to fund additional capital of $40.7 million and $141.6 million to unconsolidated subsidiaries and to consolidated projects, respectively, within our Real Estate Investments business. As of December 31, 2021, we had $3.2 billion of borrowings available under our revolving credit facility and $2.3 billion of cash and cash equivalents available for general corporate use.

We have historically relied on our internally generated cash flow and our revolving credit facility to fund our working capital, capital expenditure and general investment requirements (including strategic in-fill acquisitions) and have not sought other external sources of financing to help fund these requirements. In the absence of extraordinary events or a large strategic acquisition, we anticipate that our cash flow from operations and our revolving credit facility would be sufficient to meet our anticipated cash requirements for the foreseeable future, and at a minimum for the next 12 months. Given compensation is our largest expense and our sales and leasing professionals are generally paid on a commission and/or bonus basis that correlates with their revenue production, the negative effect of difficult market conditions is partially mitigated by the inherent variability of our compensation cost structure. In addition, when negative economic conditions have been particularly severe, we have moved decisively to lower operating expenses to improve financial performance, and then have restored certain expenses as economic conditions improved. We may seek to take advantage of market opportunities to refinance existing debt instruments, as we have done in the past, with new debt instruments at interest rates, maturities and terms we deem attractive. We may also, from time to time in our sole discretion, purchase, redeem, or retire our existing senior notes, through tender offers, in privately negotiated or open market transactions, or otherwise.

On December 28, 2020, we redeemed the $425.0 million aggregate outstanding principal amount of our 5.25% senior notes due 2025 in full. We funded this redemption using cash on hand. In March 2021, we took advantage of favorable market conditions and low interest rates and conducted a new issuance for $500.0 million in aggregate principal amount of 2.500% senior notes due 2031. On November 23, 2021, we redeemed the $300.0 million aggregate outstanding principal amount of our tranche A term loan facility due 2024 in full. We funded this redemption using cash on hand.

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 if we decide to make any further significant acquisitions.

Our long-term liquidity needs, other than those related to ordinary course obligations and commitments such as operating leases, are generally comprised of three elements. The first is the repayment of the outstanding and anticipated principal amounts of our long-term indebtedness. If our cash flow is insufficient to repay our long-term debt when it comes due, then we expect that we would need to refinance such indebtedness or otherwise amend its terms to extend the maturity dates. We cannot make any assurances that such refinancing or amendments would be available on attractive terms, if at all.

The second long-term liquidity need is the payment of obligations related to acquisitions. Our acquisition structures often include deferred and/or contingent purchase consideration in future periods that are subject to the passage of time or achievement of certain performance metrics and other conditions. As of December 31, 2021 and 2020, we had accrued deferred purchase consideration totaling $630.1 million ($32.0 million of which was a current liability) and $82.5 million ($14.3 million of which was a current liability), respectively, which was included in “Accounts payable and accrued expenses” and in “Other liabilities” in the accompanying consolidated balance sheets set forth in Item 8 of this Annual Report.

Lastly, as described in Note 16 of the Notes to Consolidated Financial Statements set forth in Item 8 of this Annual Report, in February 2019, our board of directors authorized a program for the repurchase of up to $500.0 million of our Class A common stock over three years (the 2019 program). During the year ended December 31, 2021, we repurchased 3,122,054 shares of our Class A common stock at an average price of $92.03 per share for $287.3 million under the 2019 program. As of December 31, 2021, we had $62.7 million of capacity remaining under the 2019 program.

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In November 2021, our board of directors authorized a new program for the company to repurchase up to $2.0 billion of our Class A common stock over five years, effective November 19, 2021 (the 2021 program). During the year ended December 31, 2021, we spent $85.6 million to repurchase 832,315 shares of our Class A common stock at an average price of $102.82 per share using cash on hand. As of December 31, 2021, we had $1.9 billion of capacity remaining under the 2021 program for a total capacity of approximately $1.98 billion. As of February 17, 2022, we had $1.91 billion of total capacity remaining under the above programs.

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

Year Ended December 31, 2021 Compared to Year Ended December 31, 2020

Operating Activities

Net cash provided by operating activities totaled $2.4 billion for the year ended December 31, 2021, an increase of $0.5 billion as compared to the year ended December 31, 2020. The primary drivers that contributed to the net increase were as follows - the company’s net income more than doubled in 2021 as compared to 2020. This was partially muted by certain key non-cash items such as a $187.5 million gain recognized upon deconsolidation of CBRE Acquisition Holdings, Inc., and higher equity income than distributions received from unconsolidated subsidiaries. In addition, there were some non-cash charges during 2020 that did not occur in 2021, such as $88.7 million in asset impairment, that are offsetting the net increase in operating cash activities for 2021. We also experienced a drag on our working capital which negatively impacted the overall increase in operating cash flows by approximately $362.4 million. This was primarily due to a significant increase in our trade receivables fueled by revenue growth but our cash collection efforts fell behind. This was mitigated to some extent by an increase in accrued commission as our brokerage professionals are generally not paid until cash has been collected on the transaction. Additionally, a smaller change in our real estate under development asset balance this year as compared to previous year contributed to the overall positive change in operating cash flow.

Investing Activities

Net cash used in investing activities totaled $1.3 billion for the year ended December 31, 2021, an increase of $536.8 million as compared to the year ended December 31, 2020. This increase was primarily driven by (i) our investment in Industrious, (ii) a significant increase in mergers and acquisitions related activities with the major one being Turner & Townsend, and (iii) an investment of $220.0 million in Altus’ common shares. The increase in net cash used in investing activities was partially offset by an outflow from purchase of marketable securities from the SPAC trust account in 2020 of $402.5 million versus a $212.7 million inflow of proceeds from sale of marketable securities from the SPAC trust account in 2021.

Financing Activities

Net cash used in financing activities totaled $490.6 million for the year ended December 31, 2021, an increase of $267.9 million as compared to the year ended December 31, 2020. The increase was primarily due to an additional $318.6 million that was used to repurchase shares during the year ended December 31, 2021 as compared to December 31, 2020, as well as, in 2021, a repayment of senior term loans of $300.0 million, and net payments of notes payable on real estate of $96.9 million. This was partially offset by the net proceeds of $492.3 million from the issuance of our 2.500% senior notes during 2021. Net cash used in financing activities during 2021 was also impacted by the payment of $205.1 million for redemption of non-controlling interest for CBRE Acquisition Holdings, Inc. and payment of deferred underwriting costs related to its initial public offering. Net cash used in financing in 2020 was impacted by our redemption in full of 5.25% senior notes in December 2020, partially offset by $393.7 million in proceeds from the sale of non-controlling interest from the SPAC.

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Summary of Contractual Obligations and Other Commitments

The following is a summary of our various contractual obligations and other commitments as of December 31, 2021 (dollars in thousands):

The table above excludes estimated payment obligations for our qualified defined benefit pension plans. For information about our future estimated payment obligations for these plans, see Note 14 of our Notes to the Consolidated Financial Statements set forth in Item 8 of this Annual Report.

_______________

(1)Reflects gross outstanding long-term debt balances as of December 31, 2021, assumed to be paid at maturity, excluding unamortized discount, premium and deferred financing costs. See Note 11 of our Notes to the Consolidated Financial Statements set forth in Item 8 of this Annual Report. Figures do not include scheduled interest payments. Assuming each debt obligation is held until maturity, we estimate that we will make $244.1 million of interest payments, $45.2 million of which will be made in 2022.

(2)The majority of this balance represents our warehouse lines of credit, which are recourse only to our wholly-owned subsidiary CBRE Capital Markets, Inc. (CBRE Capital Markets) and are secured by our related warehouse receivables. See Notes 5 and 11 of our Notes to the Consolidated Financial Statements set forth in Item 8 of this Annual Report.

(3)See Note 12 of our Notes to the Consolidated Financial Statements set forth in Item 8 of this Annual Report.

(4)Reflects gross outstanding notes payable on real estate as of December 31, 2021 (none of which is recourse to us, beyond being recourse to the single-purpose entity that held the real estate asset and was the primary obligor on the note payable), assumed to be paid at maturity, excluding unamortized deferred financing costs. Amounts do not include scheduled interest payments. The notes have either fixed or variable interest rates, ranging from 2.00% to 3.33% at December 31, 2021.

(5)Represents deferred obligations related to previous acquisitions, which are included in accounts payable and accrued expenses and other long-term liabilities in the consolidated balance sheets at December 31, 2021 set forth in Item 8 of this Annual Report.

(6)Represents outstanding reserves for claims under certain insurance programs, which are included in other current and other long-term liabilities in the consolidated balance sheets at December 31, 2021 set forth in Item 8 of this Annual Report. Due to the nature of this item, payments could be due at any time upon the occurrence of certain events. Accordingly, the entire balance has been reflected as expiring in less than one year.

(7)As of December 31, 2021, we have a remaining federal tax liability of $54.8 million associated with the Transition Tax on mandatory deemed repatriation of cumulative foreign earnings as of December 31, 2017. We are paying the federal tax liability for the Transition Tax in annual interest-free installments over a period of eight years through 2025 as allowed by the Tax Act. The next installment is due in 2023.

In addition, as of December 31, 2021, our gross unrecognized tax benefits, totaled $191.9 million. Of this amount, we can reasonably estimate that none will require cash settlement in less than one year. We are unable to reasonably estimate the timing of the effective settlement of tax positions for the remaining $191.9 million. See Note 15 of our Notes to Consolidated Financial Statements set forth in Item 8 of this Annual Report.

(8)See Note 13 of our Notes to the Consolidated Financial Statements set forth in Item 8 of this Annual Report.

(9)Includes $127.1 million to fund future co-investments in our Real Estate Investments segment, $42.6 million of which is expected to be funded in 2022, and $40.7 million committed to invest in unconsolidated real estate subsidiaries, which is callable at any time. This amount does not include capital committed to consolidated projects of $141.6 million as of December 31, 2021.

(10)Due to the nature of guarantees, payments could be due at any time upon the occurrence of certain triggering events, including default. Accordingly, all guarantees are reflected as expiring in less than one year.

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Indebtedness

Our level of indebtedness increases the possibility that we may be unable to pay the principal amount of our indebtedness and other obligations when due. In addition, we may incur additional debt from time to time to finance strategic acquisitions, investments, joint ventures or for other purposes, subject to the restrictions contained in the documents governing our indebtedness. If we incur additional debt, the risks associated with our leverage, including our ability to service our debt, would increase.

Long-Term Debt

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 term 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 a 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. On July 9, 2021, CBRE Services entered into an additional incremental assumption agreement with respect to the 2019 Credit Agreement for purposes of increasing the revolving credit commitments available under the 2019 Credit Agreement by an aggregate principal amount of $350.0 million (the 2019 Credit Agreement, as amended by the July 9, 2021 incremental assumption agreement is collectively referred to in this Annual Report as the 2021 Credit Agreement). On December 10, 2021, CBRE Services and certain of the other borrowers entered into an amendment of the 2021 Credit Agreement which (i) changed the interest rate applicable to revolving borrowings denominated in Sterling from a LIBOR-based rate to a rate based on the Sterling Overnight Index Average (SONIA) and (ii) changed the interest rate applicable to revolving borrowings denominated in Euros from a LIBOR-based rate to a rate based on EURIBOR. The revised interest rates effect described above went into effect as of January 1, 2022. We are evaluating the effect that this guidance will have on our consolidated financial statements and related disclosures.

The 2021 Credit Agreement is a senior unsecured credit facility that is guaranteed by us. On May 21, 2021, we entered into a definitive agreement whereby our subsidiary guarantors were released as guarantors from the 2021 Credit Agreement. As of December 31, 2021, the 2021 Credit Agreement provided for the following: (1) a $3.15 billion 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 tranche A term loan facility maturing on March 4, 2024, requiring quarterly principal payments unless our leverage ratio (as defined in the 2021 Credit Agreement) is less than or equal to 2.50x 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 November 23, 2021, we repaid our $300.0 million tranche A term loan facility under the 2021 Credit Agreement.

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 treasury rate plus 20 basis points 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 $488.1 million at December 31, 2021.

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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 semi-annually in arrears on March 1 and September 1.

On September 26, 2014, CBRE Services issued $300.0 million in aggregate principal amount of 5.25% senior notes due March 15, 2025. On December 12, 2014, CBRE Services issued an additional $125.0 million in aggregate principal amount of 5.25% senior notes due March 15, 2025 at a price equal to 101.5% of their face value, plus interest deemed to have accrued from September 26, 2014. The 5.25% senior notes were 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 5.25% senior notes were jointly and severally guaranteed on a senior basis by us and each domestic subsidiary of CBRE Services that guaranteed our 2019 Credit Agreement. Interest accrued at a rate of 5.25% per year and was payable semi-annually in arrears on March 15 and September 15.  We redeemed these notes in full on December 28, 2020 and incurred charges of $75.6 million, including a premium of $73.6 million and the write-off of $2.0 million of unamortized premium and debt issuance costs. We funded this redemption using cash on hand.

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.

On May 21, 2021, we released all existing subsidiary guarantors from their guarantees of our 2021 Credit Agreement, 4.875% senior notes and 2.500% senior notes. Our 2021 Credit Agreement, 4.875% senior notes and 2.500% senior notes remain fully and unconditionally guaranteed by CBRE Group, Inc. Combined summarized financial information for CBRE Group, Inc. (parent) and CBRE Services (subsidiary issuer) is as follows (dollars in thousands):

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(1)Amounts include activity related to our subsidiaries that were still listed as guarantors for the period presented.

(2)Includes $25.3 million and $360.0 million of intercompany loan receivables from non-guarantor subsidiaries as of December 31, 2021 and 2020, respectively. All intercompany balances and transactions between CBRE Group, Inc., and CBRE Services have been eliminated.

For additional information on all of our long-term debt, see Note 11 of the Notes to Consolidated Financial Statements set forth in Item 8 of this Annual Report.

Short-Term Borrowings

We maintain a $3.15 billion revolving credit facility under the 2021 Credit Agreement and warehouse lines of credit with certain third-party lenders. For additional information on all of our short-term borrowings, see Notes 5 and 11 of the Notes to Consolidated Financial Statements set forth in Item 8 of this Annual Report.

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