CBRE GROUP INC
For the period ended Jun 30, 2024. Filed Jul 25, 2024.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Jun 30, 2024 · Filed Jul 25, 2024
CBRE$135.51-0.6%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-03-31; filed 2024-05-03.
0001138118-24-000014
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-06-30; filed 2024-07-25.
0001138118-24-000023
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 152 previous paragraphs and 184 current paragraphs.
105 unchanged; 41 reworded; 29 added; 6 removed; 0 previous and 9 current paragraphs rearranged.
Tables are not compared: 9 previous and 10 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (29)
Current report
The overall operating environment for commercial real estate is improving. While the borrowing costs are still high, liquidity has improved across multiple sources of funding amid lower interest rate volatility. The decline in investment sales slowed in the second quarter. Capital has begun to return to real estate, and pipelines suggest increased opportunities to harvest gains from real estate development and investment management portfolios. Office leasing markets have continued to improve reflecting a resilient economy, coupled with many occupiers moving forward with expansion plans.
Current report
Capital Allocation
Current report
We invested approximately $339.3 million in the quarter in M&A and share repurchases, most notably our acquisition of a firm that specializes in delivering highly specialized facilities management services to data center owners and operators, while maintaining substantial liquidity to finance future growth. In the quarter, the company announced plans to combine its project management business with its Turner & Townsend subsidiary. The combined business, which the company will report as a separate business segment beginning in 2025, will create a premier provider of project, program and cost management services with more than 20,000 employees serving clients in over 60 countries.
Current report
Depreciation and amortization expense increased by 4.4% during the quarter, reflecting higher amortization expense related to intangibles from recent acquisitions such as J&J Worldwide Services.
Current report
We reported consolidated net income of $256.2 million for the six months ended June 30, 2024 on revenue of $16.3 billion as compared to consolidated net income of $318.3 million on revenue of $15.1 billion for the six months ended June 30, 2023.
Current report
Foreign currency translation had a 0.3% negative impact on total revenue during the six months ended June 30, 2024, primarily driven by weakness in the Argentina peso and Japanese yen, partially offset by strength in the British pound sterling.
Current report
Operating, administrative and other expenses were relatively flat as compared to the same period last year. The company incurred approximately $109.6 million in restructuring and indirect tax settlement related charges this year. This was partially offset by bonus expense reversal as part of the restructuring activities and lower bonus expense related to the REI segment to align with overall expected segment performance. Foreign currency translation had a 0.1% positive impact on total operating expenses during the six months ended June 30, 2024. Operating expenses as a percentage of revenue decreased to 14.1% from 15.2%, given operating expenses were relatively flat and the overall revenue grew.
Current report
Other income increased to $15.3 million from $8.1 million, reflecting positive fair value adjustments on certain financial instruments related to our investment in Industrious this year as compared to the same period last year.
Current report
On June 24, 2024, we announced plans to combine our project management business with our Turner & Townsend subsidiary and expect this transaction to close early 2025. We intend to organize our operations around, and publicly report our financial results on, four reportable segments in 2025. For the remainder of 2024, we will continue to report our financial results under our existing reportable segments given this is how the chief operating decision maker currently manages the business.
Current report
Revenue increased 8.6% during the quarter. Global leasing revenue rose 8.7%, driven by Americas which grew 12.4%, including 13.3% in the United States and Asia-Pacific (APAC), which grew 2.8%, with solid growth across most of the region. Property sales revenue was down 3.1%, reflecting continued high interest rates and difficult credit conditions. The company’s loan origination business benefited from 20% higher loan origination fees driven by increased refinancing activity from debt funds and a significant increase in interest earnings on escrow balances. Property management also grew solidly, fueled by the onboarding of the Brookfield 65 million sq. ft. U.S. office portfolio. Foreign currency translation had a 0.7% negative impact on total revenue during the quarter, primarily driven by weakness in the Japanese yen, partially offset by strength in the British pound sterling.
Current report
Cost of revenue increased 10.1%, primarily reflecting business growth, higher pass-through costs in property management, higher professional compensation as bonuses reset and higher commission expense due to producers entering higher commission tranches. Foreign currency translation had a 0.7% positive impact on total cost of revenue. Cost of revenue increased to 61.3% of total revenue from 60.4% in the 2023 second-quarter, primarily due to producers earning commission at higher tranches and increased pass through costs related to growth in the property management line of business.
Current report
Operating, administrative and other expenses increased by 3.4%, primarily due to incentive compensation expense reset in the current quarter to align with business performance. Foreign currency translation had a 0.5% positive impact on total operating expenses.
Current report
Depreciation and amortization expense decreased 11.1% primarily due to lower amortization of mortgage servicing rights as described above.
Current report
Operating, administrative and other expenses slightly decreased by 0.9% for the six months ended June 30, 2024 as compared to the same period in 2023. The Advisory Services segment recorded significant restructuring expenses during the six months ended June 30, 2023, as the segment went through rapid cost take out that did not recur this year at the same rate. Foreign currency translation also had a 0.2% positive impact on total operating expenses.
Current report
Operating, administrative and other expenses increased 15.6%, primarily due to restructuring and severance charges related to cost savings initiatives this quarter. Foreign currency translation had a 0.5% positive impact on total operating expenses during the quarter.
Current report
Depreciation and amortization expense increased 23.2% reflecting higher amortization expense related to intangibles from recent acquisitions such as J&J Worldwide Services.
Current report
Revenue increased 9.2% for the six months ended June 30, 2024 as compared to the same period in 2023, reflecting a double-digit increase in facilities management, led by the Local business and growth in project management due to continued strong growth from Turner & Townsend. Foreign currency translation had a 0.2% negative impact on total revenue, primarily driven by weakness in the Argentina peso, partially offset by strength in the British pound sterling.
Current report
Cost of revenue increased 9.4%, driven by higher pass-through costs, higher indirect reimbursed costs, and increased professional compensation to support the growth in the business. Foreign currency translation had a 0.3% positive impact on total cost of revenue. Cost of revenue was 90.7% of total revenue, slightly changed from 90.5% for the six months ended June 30, 2023, primarily due to a slight shift in composition of revenue with more revenue coming from facilities management, supported by the J&J acquisition, which generally has lower margin as compared to project management.
Current report
Operating, administrative and other expenses increased 3.5%, primarily due to restructuring charges incurred related to cost savings initiatives and the inclusion of J&J’s operating results since acquisition at the end of February 2024. Foreign currency translation also had a 0.3% positive impact on total operating expenses during the six months ended June 30, 2024.
Current report
Depreciation and amortization expense increased 17.6% primarily due to increased amortization expense on intangibles related to the J&J and certain other in-fill acquisitions.
Current report
Revenue decreased 9.2% for the current quarter. This reflected lower development and construction fees, and lower asset management revenue, partially offset by higher carried interest. Foreign currency translation had a negligible impact on total revenue.
Current report
Cost of revenue increased 11.5%, and was 24.7% of total revenue – up from 20.1% in the same period in 2023. We incurred higher costs related to real estate development as compared to the same period in 2023 despite a decline in revenue. Foreign currency translation had a 1.3% negative impact on total cost of revenue during the quarter.
Current report
We recorded equity income from unconsolidated subsidiaries of approximately $4.3 million versus equity loss of $3.4 million in the 2023 second quarter, primarily due to higher co-investment returns in investment management. Gain on disposition of real estate decreased by $9.5 million compared with second-quarter 2023 given limited disposition activity.
Current report
Cost of revenue increased 11.5% for the six months ended June 30, 2024 as compared to the same period in 2023 due to higher costs incurred on our real estate development and construction projects. Foreign currency translation had a 2.6% negative impact on total cost of revenue during the six months ended June 30, 2024.
Current report
Operating, administrative and other expenses decreased 16.6%, primarily due to lower bonus expense to align with overall segment performance, and $21.0 million in charges associated with the company’s efficiency and cost-reduction initiatives incurred during the six months ended June 30, 2023 with no such cost in 2024, partially offset by higher stock incentive compensation expense to align with overall consolidated CBRE performance. Foreign currency translation had a 0.4% negative impact on total operating expenses during the six months ended June 30, 2024.
Current report
Operating, administrative and other expenses for our core corporate functions rose 41.7% to $152.7 million for the second quarter of 2024, mainly due to increased charges associated with employee separation and certain one-time charges related to strategic projects. In addition, we recorded higher incentive compensation expense primarily due to a resetting of incentive compensation which had been reduced in prior year's second quarter.
Current report
Core corporate
Current report
Other (non-core)
Current report
We recorded equity loss of $92.7 million, reflecting the lower value of our investment in Altus. This compares with a $32.2 million loss during the same period in 2023, reflecting the market value of our Altus ownership interest. We recorded positive fair value adjustment on our investment portfolio in Industrious which partially offset the losses from Altus and generated positive other income of $9.2 million.
Removed paragraphs (6)
Previous report
The operating environment for commercial real estate remains challenging. Higher borrowing costs and uncertainty over the direction of interest rates continue to inhibit investment and financing activities as well as opportunities to harvest gains from our real estate development and investment management portfolios. Office leasing markets have improved this year reflecting a resilient economy and progress on occupiers’ return-to-office plans.
Previous report
We invested approximately $820.2 million in M&A and other strategic investments in the quarter, while maintaining a leverage ratio substantially below the midpoint of our target range, giving us substantial liquidity to finance future growth.
Previous report
Other income increased to $9.5 million from $2.5 million, reflecting increased values on the trading investment portfolio in our wholly owned captive insurance company.
Previous report
Operating, administrative and other expenses decreased by 5.0% due to significant restructuring charges in first-quarter 2023, which was partially offset by certain other one-time charges this quarter. Foreign currency translation had a 0.1% negative impact on total operating expenses.
Previous report
Operating, administrative and other expenses fell 8.1%, primarily because first-quarter 2023 restructuring charges were not repeated in the 2024 period. Foreign currency translation had a 0.1% positive impact on total operating expenses during the quarter.
Previous report
Cost of revenue increased 11.4%, and was 18.8% of total revenue – up from 17.2% in the same period in 2023. We generated more revenue from the global development business which has higher cost of revenue associated with it. Foreign currency translation had a 4.2% negative impact on total cost of revenue during the quarter.
Reworded paragraphs (41)
Previous wording
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. The MD&A in this Quarterly Report on Form 10-Q (Quarterly Report) for CBRE Group, Inc. for the three months ended March 31, 2024 should be read in conjunction with our consolidated financial statements and related notes included in our 2023 Annual Report on Form 10-K (2023 Annual Report) as well as the unaudited financial statements included elsewhere in this Quarterly Report.
Current wording
Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A) provides the reader with management’s perspective on our financial condition, results of operations, liquidity and certain other factors that may affect future results. The MD&A in this Quarterly Report on Form 10-Q (Quarterly Report) for CBRE Group, Inc. for the three and six months ended June 30, 2024 should be read in conjunction with our consolidated financial statements and related notes included in our 2023 Annual Report on Form 10-K (2023 Annual Report) as well as the unaudited financial statements included elsewhere in this Quarterly Report.
Previous wording
The following table sets forth items derived from our consolidated statements of operations for the three months ended March 31, 2024 and 2023 (dollars in millions):
Current wording
The following table sets forth items derived from our consolidated statements of operations for the three and six months ended June 30, 2024 and 2023 (dollars in millions):
Previous wording
We reported consolidated net income of $126.2 million for the quarter, an increase of 8.0% from $116.9 million in the same period in 2023. Over the same time period, revenue rose 7.1% to $7.9 billion.
Current wording
We reported consolidated net income of $130.0 million for the quarter, a decrease of 35.5% from $201.4 million in the same period in 2023. Over the same time period, revenue rose 8.7% to $8.4 billion.
Previous wording
The revenue increase reflected increased leasing activity, particularly for office space, and continued strong growth in the Global Workplace Solutions (GWS) segment. High interest rates continued to weigh on property sales in the Advisory Services segment and investment activities in the Real Estate Investments segment, both of which are sensitive to market cycles. Overall, revenue from our resilient business (comprised of the entire GWS segment, property management, loan servicing, asset management fees in our investment management business and valuations), which generally grow across market cycles increased 8% in the quarter. Our transactional businesses (sales, leasing, mortgage origination, carried interest and incentive fees in our investment management business, and development fees), which are subject to market cycles, saw revenue edge up 1% in the quarter. We expect our transactional businesses to return to growth when the market cycle turns.
Current wording
The revenue increase reflected an increase across all lines of businesses in the Advisory Services segment, except sales, with strong growth in leasing, commercial mortgage origination, and property management, as well as continued strong growth in the Global Workplace Solutions (GWS) segment. Overall, revenue from our Resilient Businesses (comprised of facilities management, project management, property management, loan servicing, asset management fees in our investment management business and valuations), which generally grow across market cycles, increased approximately 9.5% in the quarter. Our Transactional Businesses (sales, leasing, mortgage origination, carried interest and incentive fees in our investment management business, and development fees), which are subject to market cycles, saw revenue edge up 5.2% in the quarter. Higher interest rates continued to weigh on property sales in the Advisory Services segment and investment and development activities in the Real Estate Investments (REI) segment, both of which are sensitive to market cycles.
Previous wording
Foreign currency translation had a 0.2% positive impact on revenue, reflecting the strength in the British pound sterling and euro partially offset by weakness in the Argentina peso and Japanese yen.
Current wording
Foreign currency translation had a 0.7% negative impact on revenue, reflecting the weakness in the Argentina peso and Japanese yen, partially offset by strength in the British pound sterling.
Previous wording
Cost of revenue increased 7.8% during the quarter, due to higher pass through costs, higher compensation, and indirect reimbursed costs. Foreign currency translation had a 0.2% negative impact on total cost of revenue. Cost of revenue increased to 81.6% of total revenue from 81.0% in the first-quarter 2023, driven by higher cost to support growth in GWS revenues and a decline of higher-margin property sales in our Advisory Services segment.
Current wording
Cost of revenue increased 9.9% during the quarter due to higher pass-through costs, higher compensation, and higher indirect reimbursed costs. Foreign currency translation had a 0.8% positive impact on total cost of revenue. Cost of revenue increased to 81.0% of total revenue from 80.0% in the second-quarter 2023, driven by higher cost to support growth in GWS revenues and a decline of higher-margin property sales in our Advisory Services segment.
Previous wording
Operating, administrative and other expenses decreased by 8.1%, primarily because first-quarter 2023 included $139.0 million of restructuring charges (employee separation benefits, contract termination fees, consulting charges, etc.) versus just $29.3 million in the 2024 first-quarter. In addition, we recorded lower bonus expense during the 2024 quarter, which partially offset incremental staff compensation in the GWS segment as well as first-quarter 2023 credits for reduced incentive compensation in the Advisory segment and for insurance and benefits that did not recur in the current quarter. Foreign currency translation had a 0.2% negative impact on total operating, administrative and other expenses during the quarter. Operating expenses as a percentage of revenue decreased to 14.0% in the first-quarter 2024 from 16.3% in the 2023 quarter, reflecting lower incentive compensation expense in REI segment and higher operating expenses recorded last year under our cost management initiatives.
Current wording
Operating, administrative and other expenses increased by 9.3%, primarily due to $80.3 million of restructuring charges (employee separation benefits, contract termination fees, consulting charges, etc.) and indirect tax settlement accrual in the second quarter of 2024 versus $3.0 million recorded in the same period in the prior year. In addition, we recorded higher incentive compensation expense than the same quarter in the prior year to align with improved business performance. Foreign currency translation had a 0.4% positive impact on total operating, administrative and other expenses during the quarter. Operating expenses as a percentage of revenue slightly increased to 14.2% in the second-quarter 2024 from 14.1% in the 2023 quarter, reflecting higher operating expenses related to restructuring charges.
Previous wording
Interest expense, net of interest income, increased by 28.3%, compared with the first-quarter 2023. This increase was primarily due to the impact of higher interest rates, increased borrowings on the revolving credit facilities, and the issuance of new debt during 2023 and the first quarter of 2024.
Current wording
Interest expense, net of interest income, increased by 45.6%, compared with the second-quarter 2023. This increase was primarily due to the impact of higher interest rates, increased borrowings on the revolving credit facilities, and the issuance of new debt in 2024 and in late second-quarter 2023.
Previous wording
Depreciation and amortization expense decreased by 2.5% during the quarter, reflecting higher accelerated depreciation expense on certain assets as part of the cost savings initiatives.
Current wording
Depreciation and amortization expense increased by 0.9% during the six months ended June 30, 2024 as compared to the same period in 2023, reflecting higher accelerated depreciation expense on certain assets as part of the cost savings initiative and increased amortization expense on intangibles related to the J&J acquisition.
Previous wording
We incurred an equity loss of $58.3 million versus equity income of $141.7 million in last year’s first-quarter. This was mainly due to an unusually large development asset disposition in first-quarter 2023 that did not recur this quarter. In addition, we recorded higher unrealized loss related to our non-core strategic equity investment in Altus Power, Inc. (Altus) this quarter.
Current wording
We incurred an equity loss of $73.2 million versus equity income of $134.2 million during the six months ended June 30, 2024 as compared to the same period in 2023. This was mainly due to an unusually large development asset disposition in first-quarter 2023 that did not recur in 2024. In addition, we recorded higher unrealized loss related to our non-core strategic equity investment in Altus Power, Inc. (Altus).
Previous wording
Our benefit from income taxes on a consolidated basis was $28.9 million for the three months ended March 31, 2024 as compared to a provision for income taxes of $28.0 million for the three months ended March 31, 2023. The decrease of $56.9 million is primarily related to the reversal of certain unrecognized tax positions in addition to a decrease in the company’s pretax earnings. Our effective tax rate fell to (24.3)% for the three months ended March 31, 2024 from 18.3% for the three months ended March 31, 2023. Our effective tax rate for the three months ended March 31, 2024 was different than the U.S. federal statutory tax rate of 21.0%, primarily due to the reversal of unrecognized tax positions, U.S. state taxes, and favorable permanent book tax differences.
Current wording
Our provision for income taxes on a consolidated basis was $3.4 million for the six months ended June 30, 2024 as compared to a provision for income taxes of $84.0 million for the six months ended June 30, 2023. The decrease of $80.6 million is primarily related to a decrease in earnings and the reversal of unrecognized tax positions. Our effective tax rate decreased to 1.1% for the six months ended June 30, 2024 from 20.1% for the six months ended June 30, 2023. Our effective tax rate for the six months ended June 30, 2024 was different than the U.S. federal statutory tax rate of 21.0% primarily due to the reversal of unrecognized tax positions, U.S. state taxes, and favorable permanent book tax differences.
Previous wording
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.
Current wording
As of June 30, 2024, we organize our operations around, and publicly report our financial results on, three global business segments: (1) Advisory Services; (2) Global Workplace Solutions; and (3) Real Estate Investments.
Previous wording
The following table summarizes our results of operations for our Advisory Services operating segment for the three months ended March 31, 2024 and 2023 (dollars in millions):
Current wording
The following table summarizes our results of operations for our Advisory Services operating segment for the three and six months ended June 30, 2024 and 2023 (dollars in millions):
Previous wording
For the three months ended March 31, 2024, MSRs contributed $12.6 million to operating income, offset by $34.5 million of amortization of related intangible assets. The MSR contribution to first-quarter 2023 operating income was $16.7 million and amortization totaled $36.5 million. The decline in MSRs reflected lower origination activity.
Current wording
For the three months ended June 30, 2024, MSRs contributed $23.3 million to operating income, offset by $33.5 million of amortization of related intangible assets. The MSR contribution to second-quarter 2023 operating income was $21.1 million and amortization totaled $37.1 million.
Previous wording
Revenue increased 2.7% during the quarter. Global leasing revenue rose 4%, driven by Asia-Pacific (APAC) which grew 9%, led by Australia, India and South Korea as well as continued growth in Japan, despite an especially difficult first-quarter 2023 comparison for that country. Leasing revenue was up 5% in the U.S. Global office leasing growth improved compared with first-quarter 2023. Conversely, property sales revenue was down 11.2%, reflecting continued high interest rates and difficult credit conditions. The company’s loan origination business benefited from higher loan fees and a significant increase in interest earnings on escrow balances. Property management also grew solidly. Foreign currency translation had a 0.2% negative impact on total revenue during the quarter, primarily driven by weakness in the Japanese yen and Australian dollar partially offset by strength in the British pound sterling and euro.
Current wording
Revenue increased 5.8% for the six months ended June 30, 2024 as compared to the six months ended June 30, 2023. Global leasing revenue rose 6.6%, driven by Americas which grew 8.3%, including 9.5% in the United States and APAC, which grew 5.3%, with solid growth across most of the region. Property sales revenue was down 7.0%, reflecting continued high interest rates and difficult credit conditions. The company’s loan origination business benefited from higher loan fees and a significant increase in interest earnings on escrow balances. Property management also grew solidly and was up 11.5%. Foreign currency translation had a 0.4% negative impact on total revenue during the six months ended June 30, 2024, primarily driven by weakness in Japanese yen, partially offset by strength in the British pound sterling.
Previous wording
Cost of revenue increased 1.9%, primarily reflecting business growth partially offset by lower commission expense. Foreign currency translation had a 0.1% positive impact on total cost of revenue. Cost of revenue dipped to 60.3% of total revenue from 60.8% in the 2023 first-quarter.
Current wording
Cost of revenue increased 6.2%, primarily reflecting business growth, higher pass-through costs, higher professional compensation and higher commission expense. Foreign currency translation had a 0.4% positive impact on total cost of revenue. Cost of revenue slightly increased to 60.9% of total revenue from 60.6% for the same period in 2023.
Previous wording
Depreciation and amortization expense decreased 12.6% due to accelerated depreciation recorded during first-quarter 2023 as part of cost savings initiatives.
Current wording
Depreciation and amortization expense decreased 11.9% primarily due to lower amortization of mortgage servicing rights as described above and due to accelerated depreciation expense recorded during the six months ended June 30, 2023, as part of cost savings initiatives that did not recur this year.
Previous wording
The following table summarizes our results of operations for our Global Workplace Solutions (GWS) operating segment for the three months ended March 31, 2024 and 2023 (dollars in millions):
Current wording
The following table summarizes our results of operations for our Global Workplace Solutions (GWS) operating segment for the three and six months ended June 30, 2024 and 2023 (dollars in millions):
Previous wording
(1)During the three months ended March 31, 2024, integration and other costs related to acquisitions include $17.5 million in deal and integration costs, offset by reversal of $21.7 million in previously recognized transaction-related bonus expense due to change in estimate.
Current wording
(1)During the first quarter of 2024, we incurred integration and other costs related to acquisitions of $17.5 million in deal and integration costs, offset by reversal of $21.7 million in previously recognized transaction-related bonus expense due to change in estimate.
Previous wording
Revenue increased 8.8%, reflecting a double-digit increase in facilities management, led by the Local business, but slower growth in project management, which had an especially difficult comparison with first-quarter 2023, when revenue growth was robust. Foreign currency translation had a 0.3% positive impact on total revenue during the quarter, primarily driven by strength in the British pound sterling partially offset by weakness in the Argentina peso.
Current wording
Revenue increased 9.5%, reflecting a double-digit increase in facilities management, led by the Local business and growth in project management due to continued strong growth from Turner & Townsend. Foreign currency translation had a 0.8% negative impact on total revenue during the quarter, primarily driven by weakness in the Argentina peso, partially offset by strength in the British pound sterling.
Previous wording
Cost of revenue increased 9.0%, driven by higher pass-through costs and professional compensation. Foreign currency translation had a 0.3% negative impact on total cost of revenue. Cost of revenue was 90.8% of total revenue, only slightly changed from 90.7% in first-quarter 2023.
Current wording
Cost of revenue increased 9.8%, driven by higher pass-through costs and increased professional compensation. Foreign currency translation had a 0.8% positive impact on total cost of revenue. Cost of revenue was 90.4% of total revenue, slightly changed from 90.3% in second-quarter 2023.
Previous wording
The following table summarizes our results of operations for our Real Estate Investments (REI) operating segment for the three months ended March 31, 2024 and 2023 (dollars in millions):
Current wording
The following table summarizes our results of operations for our Real Estate Investments (REI) operating segment for the three and six months ended June 30, 2024 and 2023 (dollars in millions):
Previous wording
Operating, administrative and other expenses decreased 25.1%, primarily because of restructuring charges incurred in first-quarter 2023 and lower incentive compensation expense in the current quarter. Foreign currency translation had a 0.7% negative impact on total operating expenses.
Current wording
Operating, administrative and other expenses decreased 4.5% primarily because of lower profit share expense, partially offset by higher equity incentive compensation expense in the current quarter. Foreign currency translation had a 0.1% positive impact on total operating expenses.
Previous wording
Revenue increased 1.9% for the current quarter. This reflected slightly higher development and construction fees and incentive fees in investment management, and flat asset management revenue. Foreign currency translation had a 1.4% positive impact on total revenue, primarily driven by strength in the British pound sterling.
Current wording
Revenue decreased 4.1% for the six months ended June 30, 2024 as compared to the same period in 2023. This reflected lower development and construction fees and lower asset management revenue, partially offset by higher carried interest and incentive fees in investment management. Foreign currency translation had a 0.6% positive impact on total revenue during the six months ended June 30, 2024, primarily driven by strength in the British pound sterling, partially offset by weakness in the Japanese yen.
Previous wording
We recorded an equity loss from unconsolidated subsidiaries of approximately $10.6 million versus equity income of $166.7 million in the 2023 first-quarter, which included an unusually large gain on a development portfolio asset sale. Gain on disposition of real estate increased by $10.4 million compared with first-quarter 2023.
Current wording
We recorded equity income from unconsolidated subsidiaries of approximately $14.9 million versus equity income of $163.2 million during the six months ended June 30, 2024 as compared to the same period in 2023, which included an unusually large gain on a development portfolio asset sale. Gain on disposition of real estate increased by $0.8 million compared to the same period in 2023.
Previous wording
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, 2024 and 2023 (dollars in millions):
Current wording
Our Corporate segment primarily consists of corporate overhead costs. Other consists of activities from strategic non-core non-controlling equity investments and is considered an operating segment but does not meet the aggregation criteria for presentation as a separate reportable segment and is, therefore, combined with our core Corporate function and reported as Corporate and other. The following table summarizes our results of operations for our core Corporate and other segment for the three and six months ended June 30, 2024 and 2023 (dollars in millions):
Previous wording
We recorded an equity loss of $70.7 million, reflecting the lower value of our investment in publicly traded Altus Power, Inc. (NYSE:AMPS). This compares with a $26.3 million loss in first-quarter 2023, reflecting the market value of our Altus ownership interest.
Current wording
We recorded an equity loss of $22.0 million, reflecting the lower value of our investment in publicly traded Altus Power, Inc. (Altus). This compares with a $5.9 million loss in second-quarter 2023, reflecting the market value of our Altus ownership interest. We recorded a positive fair value adjustment on our investment portfolio in Industrious which partially offset the losses from Altus and generated positive other income of $9.5 million.
Previous wording
Operating, administrative and other expenses for our core corporate functions rose 15.7% to $128.4 million for the first quarter of 2024, due to increased charges associated with employee separation and certain one-time charges related to strategic projects.
Current wording
Operating, administrative and other expenses for our core corporate functions rose 28.5% to $281.1 million for the six months ended June 30, 2024, due to increased charges associated with employee separation and certain one-time charges related to strategic projects. In addition, we recorded higher incentive compensation expense primarily due to a resetting of incentive compensation which had been reduced in prior year's second quarter.
Previous wording
We believe that we can satisfy our working capital and funding requirements with internally generated cash flow and, as necessary, borrowings under our revolving credit facilities. Our expected capital requirements for 2024 include up to $331.4 million of anticipated capital expenditures, net of tenant concessions. During the three months ended March 31, 2024, we incurred $60.5 million of capital expenditures, net of tenant concessions received. As of March 31, 2024, we had aggregate future commitments of $175.7 million related to co-investments funds in our Real Estate Investments segment, $79.8 million of which is expected to be funded in 2024. Additionally, as of March 31, 2024, we are committed to fund additional capital of $190.3 million and $54.3 million to consolidated and unconsolidated projects, respectively, within our Real Estate Investments segment. As of March 31, 2024, we had $2.8 billion of borrowings available under our revolving credit facilities (under both the Revolving Credit Agreement, as described below, and the Turner & Townsend revolving credit facility) and $1.0 billion of cash and cash equivalents.
Current wording
We believe that we can satisfy our working capital and funding requirements with internally generated cash flow and, as necessary, borrowings under our revolving credit facilities. Our expected capital requirements for 2024 include up to $329.1 million of anticipated capital expenditures, net of tenant concessions. During the six months ended June 30, 2024, we incurred $121.4 million of capital expenditures, net of tenant concessions received. As of June 30, 2024, we had aggregate future commitments of $157.9 million related to co-investments funds in our REI segment, $76.2 million of which is expected to be funded in 2024. Additionally, as of June 30, 2024, we are committed to fund additional capital of $168.0 million and $68.7 million to consolidated and unconsolidated projects, respectively, within our REI segment. As of June 30, 2024, we had $2.7 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 $927.7 million of cash and cash equivalents.
Previous wording
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, 2024 and December 31, 2023, we had accrued deferred purchase and contingent consideration totaling $536.1 million ($265.0 million of which was a current liability) and $530.2 million ($264.1 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.
Current wording
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 June 30, 2024 and December 31, 2023, we had accrued deferred purchase and contingent consideration totaling $538.9 million ($267.6 million of which was a current liability) and $530.2 million ($264.1 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.
Previous wording
The third, as described in Note 12 of the Notes to Consolidated Financial Statements (Unaudited) set forth in Item 1 of this Quarterly Report, in November 2021, our board of directors authorized a program for the company to repurchase up to $2.0 billion of our Class A common stock over five years, effective November 19, 2021 (the 2021 program). In August 2022, our board of directors authorized an additional $2.0 billion, bringing the total authorized repurchase amount under the 2021 program to a total of $4.0 billion. During the three months ended March 31, 2024, we did not repurchase any shares of our Class A common stock. During the period April 1, 2024 thru April 30, 2024, we repurchased 158,380 shares of our Class A common stock with an average price of $86.63 per share using cash on hand for an aggregate of $13.7 million. As of both March 31, 2024 and April 30, 2024, we had $1.5 billion of capacity remaining under the 2021 program.
Current wording
The third, as described in Note 12 of the Notes to Consolidated Financial Statements (Unaudited) set forth in Item 1 of this Quarterly Report, in November 2021, our board of directors authorized a program for the company to repurchase up to $2.0 billion of our Class A common stock over five years, effective November 19, 2021 (the 2021 program). In August 2022, our board of directors authorized an additional $2.0 billion, bringing the total authorized repurchase amount under the 2021 program to a total of $4.0 billion. We did not repurchase any shares of our Class A common stock during the three months ended March 31, 2024. During the three months ended June 30, 2024, we repurchased 554,741 shares of our Class A common stock with an average price of $87.25 per share using cash on hand for an aggregate of $48.4 million. During the period July 1, 2024 thru July 22, 2024, we repurchased 79,879 shares of our Class A common stock with an average price of $87.63 per share using cash on hand for an aggregate of $7.0 million. As of both June 30, 2024 and July 22, 2024, we had $1.4 billion of capacity remaining under the 2021 program.
Previous wording
Net cash used in operating activities totaled $491.9 million for the three months ended March 31, 2024 as compared to $744.8 million during the three months ended March 31, 2023. The primary drivers that contributed to the lower usage were as follows: (1) net inflow from working capital; the net working capital change was mainly due to higher collection of receivables, which lagged in the prior year, partially offset by higher outflows related to accounts payable and accrued expenses, (2) higher non-cash charges for share-based compensation expense, (3) higher net distribution of equity income from unconsolidated subsidiaries, and (4) elevated operating performance.
Current wording
Net cash used in operating activities totaled $204.8 million for the six months ended June 30, 2024 as compared to $755.6 million during the six months ended June 30, 2023. The primary drivers that contributed to the lower usage were as follows: (1) net inflow from working capital; the net positive working capital change was mainly due to lower accounts receivable due to better collection which lagged during the six months ended June 30, 2023, partially offset by lesser outflows related to accounts payable and accrued expenses, (2) lower outflow related to certain real estate development activities given the strained economic conditions, (3) higher non-cash charges for share-based compensation expense, and (4) add back of equity loss from unconsolidated subsidiaries net of lower distribution of income, partially offset by subdued operating performance.
Previous wording
Net cash used in investing activities totaled $899.7 million for the three months ended March 31, 2024, an increase of $784.7 million as compared to the three months ended March 31, 2023. The increase was primarily due to the acquisition of J&J Worldwide Services in February 2024 and outflows associated with our real estate projects compared to 2023.
Current wording
Net cash used in investing activities totaled $1.3 billion for the six months ended June 30, 2024, an increase of $937.8 million as compared to the six months ended June 30, 2023. The increase was primarily due to the acquisition of J&J Worldwide Services in February 2024 and Direct Line Global in June 2024.
Previous wording
Net cash provided by financing activities totaled $1.2 billion for the three months ended March 31, 2024 as compared to $761.0 million for the three months ended March 31, 2023. The increased inflow was primarily driven by net proceeds of $494.9 million from the issuance of our 5.500% senior notes in first-quarter 2024 and no share repurchase activity as compared to first-quarter 2023. This was partially offset by higher net outflow on the revolver.
Current wording
Net cash provided by financing activities totaled $1.2 billion for the six months ended June 30, 2024 as compared to $1.1 billion for the six months ended June 30, 2023. The increased inflow was primarily driven by net proceeds from the revolver, lower outflow related to share repurchases and deferred purchase considerations, partially offset by higher net distributions to non-controlling interest, lower fixed term debt financing, and increased payment of taxes on equity awards.
Previous wording
On July 10, 2023, CBRE Group, Inc., CBRE Services, Inc. (CBRE Services) and Relam Amsterdam Holdings B.V., a wholly-owned subsidiary of CBRE Services, entered into a new 5-year senior unsecured Credit Agreement (2023 Credit Agreement) maturing on July 10, 2028, which refinanced and replaced the previous credit agreement. The 2023 Credit Agreement provides for a senior unsecured term loan credit facility comprised of (i) tranche A Euro-denominated term loans in an aggregate principal amount of €366.5 million and (ii) tranche A U.S. Dollar-denominated term loans in an aggregate principal amount of $350.0 million with weighted average interest rate of 5.8% as of March 31, 2024, both requiring quarterly principal payments beginning on December 31, 2024 and continuing through maturity on July 10, 2028. The proceeds of the term loans under the 2023 Credit Agreement were applied to the repayment of all remaining outstanding senior term loans, approximately $437.5 million, under the previous credit agreement, the payment of related fees and expenses and other general corporate purposes.
Current wording
On July 10, 2023, CBRE Group, Inc., CBRE Services, Inc. (CBRE Services) and Relam Amsterdam Holdings B.V., a wholly-owned subsidiary of CBRE Services, entered into a new 5-year senior unsecured Credit Agreement (2023 Credit Agreement) maturing on July 10, 2028, which refinanced and replaced the previous credit agreement. The 2023 Credit Agreement provides for a senior unsecured term loan credit facility comprised of (i) tranche A Euro-denominated term loans in an aggregate principal amount of €366.5 million and (ii) tranche A U.S. Dollar-denominated term loans in an aggregate principal amount of $350.0 million with weighted average interest rate of 5.7% as of June 30, 2024, both requiring quarterly principal payments beginning on December 31, 2024 and continuing through maturity on July 10, 2028. The proceeds of the term loans under the 2023 Credit Agreement were applied to the repayment of all remaining outstanding senior term loans, approximately $437.5 million, under the previous credit agreement, the payment of related fees and expenses and other general corporate purposes.
Previous wording
As of March 31, 2024, $820.0 million was outstanding under the Revolving Credit Agreement. $10.0 million of letters of credit were outstanding as of March 31, 2024. As of April 30, 2024, $895.0 million was outstanding under the Revolving Credit Agreement. Letters of credit are issued in the ordinary course of business and would reduce the amount we may borrow under the Revolving Credit Agreement.
Current wording
As of June 30, 2024, $940.0 million was outstanding under the Revolving Credit Agreement. $10.0 million of letters of credit were outstanding as of June 30, 2024. Letters of credit are issued in the ordinary course of business and would reduce the amount we may borrow under the Revolving Credit Agreement.
Previous wording
In addition, Turner & Townsend maintains a £120.0 million revolving credit facility pursuant to a credit agreement dated March 31, 2022, with an additional accordion option of £20.0 million, that matures on March 31, 2027. As of March 31, 2024, no amount was outstanding under this revolving credit facility. As of April 30, 2024, $25.0 million (£20.0 million) was outstanding under this revolving credit facility bearing interest at SONIA plus 0.73%.
Current wording
In addition, Turner & Townsend maintains a £120.0 million revolving credit facility pursuant to a credit agreement dated March 31, 2022, with an additional accordion option of £20.0 million, that matures on March 31, 2027. As of June 30, 2024, no amount was outstanding under this revolving credit facility.
Previous wording
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, integration and other costs related to acquisitions, and provision associated with Telford’s fire safety remediation efforts. 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.
Current wording
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 settlement, and integration and other costs related to acquisitions. 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.
Previous wording
(1)During the three months ended March 31, 2024, integration and other costs related to acquisitions include $17.5 million in deal and integration costs, offset by reversal of $21.7 million in previously recognized transaction-related bonus expense due to change in estimate.
Current wording
(1)During the first quarter of 2024, we incurred integration and other costs related to acquisitions of $17.5 million in deal and integration costs, offset by reversal of $21.7 million in previously recognized transaction-related bonus expense due to change in estimate.
Previous wording
•our ability to attract new user and investor clients;
Current wording
•our ability to attract new occupier and investor clients;
Showing the first 40 of 41 pairs. Open the source sections for the rest.
Rearranged current paragraphs (9)
Current report — wording carried from elsewhere
We incurred an equity loss of $14.9 million versus an equity loss of $7.5 million in last year’s second quarter. This was mainly due to higher unrealized losses related to our non-core strategic equity investment in Altus Power, Inc. (Altus) this quarter.
Current report — wording carried from elsewhere
Our provision for income taxes on a consolidated basis was $32.2 million for the three months ended June 30, 2024 as compared to a provision for income taxes of $55.4 million for the three months ended June 30, 2023. The decrease of $23.2 million is primarily related to a decrease in earnings. Our effective tax rate decreased to 18.5% for the three months ended June 30, 2024 from 21.2% for the three months ended June 30, 2023. Our effective tax rate for the three months ended June 30, 2024 was 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.
Current report — wording carried from elsewhere
The revenue increase reflected growth in leasing activity, particularly for office space, commercial mortgage origination, property management, loan servicing, and continued strong growth in the GWS segment. High interest rates continued to weigh on property sales in the Advisory Services segment and investment and development activities in the REI segment, both of which are sensitive to market cycles. Overall, revenue from our Resilient Businesses increased 8.8% for the period. Our Transactional Businesses saw revenue edge up 3.5%.
Current report — wording carried from elsewhere
Cost of revenue increased 8.9% during the six months ended June 30, 2024 as compared to the same period in 2023 due to higher pass-through costs, higher compensation, and higher indirect reimbursed costs. Foreign currency translation had a 0.2% positive impact on total cost of revenue. Cost of revenue increased to 81.2% of total revenue from 80.5%, driven by higher cost to support growth in GWS revenues and a decline of high-margin property sales in our Advisory Services segment.
Current report — wording carried from elsewhere
Interest expense, net of interest income, increased by 38.7% for the six months ended June 30, 2024 as compared to the same period in 2023. This increase was primarily due to the impact of higher interest rates, increased borrowings on the revolving credit facilities, and the issuance of new debt during the first quarter of 2024 and in late second-quarter 2023.
Current report — wording carried from elsewhere
The Organization for Economic Co-operation & Development (OECD) Pillar Two Model Rules established a minimum global effective tax rate of 15% on country-by-country profits for large multinational companies. European Union member states along with many other countries have adopted, or expect to adopt, the OECD Pillar Two Model effective January 1, 2024 or thereafter. The OECD and other countries continue to publish guidelines and legislation which include transition and safe harbor rules. The Pillar Two top-up taxes are not expected to have a material impact to our financial statements for 2024. However, we continue to monitor new legislative changes and assess the global impact of the Pillar Two Model Rules.
Current report — wording carried from elsewhere
For the six months ended June 30, 2024, MSRs contributed $35.9 million to operating income, offset by $68.0 million of amortization of related intangible assets. For the six months ended June 30, 2023, MSRs contributed $37.8 million to operating income, offset by $73.7 million of amortization of related intangible assets. The decline was associated with lower origination activity given the higher cost of debt.
Current report — wording carried from elsewhere
A roll forward of our AUM by product type for the six months ended June 30, 2024 is as follows (dollars in billions):
Current report — wording carried from elsewhere
We describe above how we calculate AUM. Also, as noted above, our calculation of AUM may differ from the calculations of other asset managers, and as a result, this measure may not be comparable to similar measures presented by other asset managers.