CBRE GROUP, INC.

10-Q 1 cbg-10q_20180630.htm 10-Q HTML PUBLIC "-//W3C//DTD HTML 4.01 Transitional//EN" "http://www.w3.org/TR/html4/loose.dtd" cbg-10q_20180630.htm NG Converter v5.0.18157.137

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended June 30, 2018

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

For the Transition Period from __ to __

Commission File Number 001 – 32205

CBRE GROUP, INC.

(Exact name of Registrant as specified in its charter)

Delaware	94-3391143
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification Number)
400 South Hope Street, 25th Floor Los Angeles, California	90071
(Address of principal executive offices)	(Zip Code)
(213) 613-3333	Not applicable
(Registrant's telephone number, including area code)	(Former name, former address and former fiscal year, if changed since last report)

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

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

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

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

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

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

The number of shares of Class A common stock outstanding at July 31, 2018 was 339,798,242.

FORM 10-Q

June 30, 2018

TABLE OF CONTENTS

		Page
PART I – FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited)
	Consolidated Balance Sheets at June 30, 2018 and December 31, 2017	1
	Consolidated Statements of Operations for the three and six months ended June 30, 2018 and 2017	2
	Consolidated Statements of Comprehensive Income for the three and six months ended June 30, 2018 and 2017	3
	Consolidated Statements of Cash Flows for the six months ended June 30, 2018 and 2017	4
	Consolidated Statement of Equity for the six months ended June 30, 2018	5
	Notes to Consolidated Financial Statements	6
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	38
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	59
Item 4.	Controls and Procedures	60
PART II – OTHER INFORMATION
Item 1.	Legal Proceedings	60
Item 1A.	Risk Factors	60
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	60
Item 6.	Exhibits	61
Signatures		62

PART I – FINANCI AL INFORMATION

ITEM 1. Financial Statements

CBRE GROUP, INC.

CONSOLIDATED BALANCE SHEETS

(Unaudited)

(Dollars in thousands, except share data)

	June 30, — 2018	2017
		(As Adjusted)
ASSETS
Current Assets:
Cash and cash equivalents	$ 531,481	$	751,774
Restricted cash	71,865		73,045
Receivables, less allowance for doubtful accounts of $55,753 and $46,789 at June 30, 2018 and December 31, 2017, respectively	3,324,522		3,112,289
Warehouse receivables	1,488,324		928,038
Prepaid expenses	268,226		215,336
Contract assets	109,272		273,053
Income taxes receivable	47,752		49,628
Other current assets	265,268		227,421
Total Current Assets	6,106,710		5,630,584
Property and equipment, net	705,469		617,739
Goodwill	3,407,169		3,254,740
Other intangible assets, net of accumulated amortization of $1,106,169 and $1,000,738 at June 30, 2018 and December 31, 2017, respectively	1,448,284		1,399,112
Investments in unconsolidated subsidiaries	233,889		238,001
Deferred tax assets, net	97,890		98,746
Other assets, net	536,046		479,474
Total Assets	$ 12,535,457	$	11,718,396
LIABILITIES AND EQUITY
Current Liabilities:
Accounts payable and accrued expenses	$ 1,642,030	$	1,573,672
Compensation and employee benefits payable	870,626		904,434
Accrued bonus and profit sharing	629,044		1,078,345
Contract liabilities	76,216		100,615
Income taxes payable	21,918		70,634
Short-term borrowings:
Warehouse lines of credit (which fund loans that U.S. Government Sponsored Enterprises have committed to purchase)	1,471,591		910,766
Revolving credit facility	598,000		—
Other	16		16
Total short-term borrowings	2,069,607		910,782
Current maturities of long-term debt	1,466		8
Other current liabilities	70,228		74,454
Total Current Liabilities	5,381,135		4,712,944
Long-term debt, net of current maturities	1,762,885		1,999,603
Deferred tax liabilities, net	187,062		147,218
Non-current tax liabilities	140,050		140,792
Other liabilities	547,454		543,225
Total Liabilities	8,018,586		7,543,782
Commitments and contingencies	—		—
Equity:
CBRE Group, Inc. Stockholders’ Equity:
Class A common stock; $0.01 par value; 525,000,000 shares authorized; 339,793,072 and 339,459,138 shares issued and outstanding at June 30, 2018 and December 31, 2017, respectively	3,398		3,395
Additional paid-in capital	1,278,251		1,220,508
Accumulated earnings	3,820,420		3,443,007
Accumulated other comprehensive loss	(648,492	)	(552,414	)
Total CBRE Group, Inc. Stockholders’ Equity	4,453,577		4,114,496
Non-controlling interests	63,294		60,118
Total Equity	4,516,871		4,174,614
Total Liabilities and Equity	$ 12,535,457	$	11,718,396

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

CBRE GROUP, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

(Dollars in thousands, except share data)

	Three Months Ended		Six Months Ended
	June 30,		June 30,
	2018	2017	2018	2017
		(As Adjusted)		(As Adjusted)
Revenue	$ 5,111,434	$ 4,439,571	$ 9,785,386	$	8,490,537
Costs and expenses:
Cost of services	3,958,748	3,409,540	7,578,709		6,556,017
Operating, administrative and other	826,282	712,615	1,558,517		1,319,241
Depreciation and amortization	113,399	100,386	221,564		194,423
Total costs and expenses	4,898,429	4,222,541	9,358,790		8,069,681
Gain on disposition of real estate	12,311	11,298	12,329		12,683
Operating income	225,316	228,328	438,925		433,539
Equity income from unconsolidated subsidiaries	96,021	75,384	136,200		90,402
Other income (loss)	4,009	3,186	(271	)	7,301
Interest income	1,489	1,427	5,110		3,838
Interest expense	26,885	35,430	55,743		69,440
Write-off of financing costs on extinguished debt	—	—	27,982		—
Income before provision for income taxes	299,950	272,895	496,239		465,640
Provision for income taxes	70,319	69,887	116,483		123,706
Net income	229,631	203,008	379,756		341,934
Less: Net income attributable to non-controlling interests	964	1,231	801		3,137
Net income attributable to CBRE Group, Inc.	$ 228,667	$ 201,777	$ 378,955	$	338,797
Basic income per share:
Net income per share attributable to CBRE Group, Inc.	$ 0.67	$ 0.60	$ 1.12	$	1.01
Weighted average shares outstanding for basic income per share	339,081,556	336,975,149	338,986,354		336,941,681
Diluted income per share:
Net income per share attributable to CBRE Group, Inc.	$ 0.67	$ 0.59	$ 1.10	$	1.00
Weighted average shares outstanding for diluted income per share	343,471,513	340,882,603	343,031,189		340,214,246

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

CBRE GROUP, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

(Dollars in thousands)

	Three Months Ended
	June 30,			June 30,
	2018	2017		2018		2017
		(As Adjusted)				(As Adjusted)
Net income	$ 229,631	$	203,008	$	379,756	$	341,934
Other comprehensive (loss) income:
Foreign currency translation (loss) gain	(165,926	)	88,649		(99,894	)	139,837
Adoption of Accounting Standards Update 2016-01, net of tax	—		—		(3,964	)	—
Amounts reclassified from accumulated other comprehensive loss to interest expense, net of tax	628		1,380		1,383		2,888
Unrealized gains (losses) on interest rate swaps, net of tax	214		(217	)	817		77
Unrealized holding (losses) gains on available for sale debt securities, net of tax	(122	)	977		(627	)	1,900
Other, net	−		(10	)	5,528		(16	)
Total other comprehensive (loss) income	(165,206	)	90,779		(96,757	)	144,686
Comprehensive income	64,425		293,787		282,999		486,620
Less: Comprehensive income attributable to non-controlling interests	480		1,390		122		3,317
Comprehensive income attributable to CBRE Group, Inc.	$ 63,945	$	292,397	$	282,877	$	483,303

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

CBRE GROUP, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(Dollars in thousands)

	Six Months Ended
	June 30,
	2018	2017
		(As Adjusted)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$ 379,756	$	341,934
Adjustments to reconcile net income to net cash used in operating activities:
Depreciation and amortization	221,564		194,423
Amortization and write-off of financing costs on extinguished debt	31,646		4,912
Gains related to mortgage servicing rights, premiums on loan sales and sales of other assets	(98,707	)	(80,893	)
Gains on disposition of real estate held for investment	(3,197	)	—
Net realized and unrealized losses (gains) from investments	271		(7,301	)
Equity income from unconsolidated subsidiaries	(136,200	)	(90,402	)
Provision for doubtful accounts	11,809		5,578
Compensation expense for equity awards	61,675		48,283
Proceeds from sale of mortgage loans	7,019,614		7,071,928
Origination of mortgage loans	(7,552,229	)	(6,848,102	)
Increase (decrease) in warehouse lines of credit	560,825		(199,683	)
Distribution of earnings from unconsolidated subsidiaries	131,395		85,952
Tenant concessions received	16,130		7,436
Purchase of equity securities	(41,389	)	(43,525	)
Proceeds from sale of equity securities	37,715		34,476
(Increase) decrease in receivables, prepaid expenses and other assets (including contract assets)	(198,469	)	15,995
Decrease in real estate held for sale and under development	701		9,787
Increase (decrease) in accounts payable and accrued expenses and other liabilities (including contract liabilities)	9,543		(115,288	)
Decrease in compensation and employee benefits payable and accrued bonus and profit sharing	(496,292	)	(494,205	)
Increase in net income taxes receivable/payable	(41,830	)	(47,384	)
Other operating activities, net	(6,393	)	(11,358	)
Net cash used in operating activities	(92,062	)	(117,437	)
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures	(107,482	)	(59,863	)
Acquisition of businesses, including net assets acquired, intangibles and goodwill, net of cash acquired	(264,702	)	(25,326	)
Contributions to unconsolidated subsidiaries	(21,042	)	(32,660	)
Distributions from unconsolidated subsidiaries	28,235		23,970
Net proceeds from disposition of real estate held for investment	14,174		—
Purchase of equity securities	(13,718	)	(9,280	)
Proceeds from sale of equity securities	8,889		9,428
Purchase of available for sale debt securities	(18,723	)	(10,454	)
Proceeds from the sale of available for sale debt securities	4,121		7,849
Other investing activities, net	(6,384	)	2,279
Net cash used in investing activities	(376,632	)	(94,057	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from senior term loans	550,000		—
Proceeds from revolving credit facility	2,000,000		911,000
Repayment of revolving credit facility	(1,402,000	)	(911,000	)
Repayment of 5.00% senior notes (including premium)	(820,000	)	—
Proceeds from notes payable on real estate held for investment	52		—
Repayment of notes payable on real estate held for investment	(13,028	)	—
Proceeds from notes payable on real estate held for sale and under development	1,101		2,137
Repayment of notes payable on real estate held for sale and under development	(2,991	)	(9,189	)
Acquisition of businesses (cash paid for acquisitions more than three months after purchase date)	(11,183	)	(15,126	)
Repayment of debt assumed in acquisition of FacilitySource	(26,295	)	—
Units repurchased for payment of taxes on equity awards	(4,630	)	(1,900	)
Non-controlling interest contributions	2,744		1,941
Non-controlling interest distributions	(7,652	)	(3,904	)
Other financing activities, net	(76	)	(3,666	)
Net cash provided by (used in) financing activities	266,042		(29,707	)
Effect of currency exchange rate changes on cash and cash equivalents and restricted cash	(18,821	)	20,190
NET DECREASE IN CASH AND CASH EQUIVALENTS AND RESTRICTED CASH	(221,473	)	(221,011	)
CASH AND CASH EQUIVALENTS AND RESTRICTED CASH, AT BEGINNING OF PERIOD	824,819		831,412
CASH AND CASH EQUIVALENTS AND RESTRICTED CASH, AT END OF PERIOD	$ 603,346	$	610,401
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest	$ 59,337	$	59,490
Income taxes, net	$ 159,833	$	163,885

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

CBRE GROUP, INC.

CONSOLIDATED STATEMENT OF EQUITY

(Unaudited)

(Dollars in thousands)

	CBRE Group, Inc. Shareholders — Class A common stock	Additional paid-in capital	Accumulated earnings		Accumulated other comprehensive loss			Non- controlling interests	Total
Balance at December 31, 2017 (As Adjusted)	$ 3,395	$ 1,220,508	$	3,443,007	$	(552,414	)	$ 60,118	$	4,174,614
Net income	—	—		378,955		—		801		379,756
Adoption of Accounting Standards Update 2016-01, net of tax (see Note 3)	—	—		3,964		(3,964	)	—		—
Compensation expense for equity awards	—	61,675		—		—		—		61,675
Units repurchased for payment of taxes on equity awards	—	(4,630	)	—		—		—		(4,630	)
Foreign currency translation loss	—	—		—		(99,215	)	(679	)	(99,894	)
Amounts reclassified from accumulated other comprehensive loss to interest expense, net of tax	—	—		—		1,383		—		1,383
Unrealized gains on interest rate swaps, net of tax	—	—		—		817		—		817
Unrealized holding losses on available for sale debt securities, net of tax	—	—		—		(627	)	—		(627	)
Contributions from non-controlling interests	—	—		—		—		2,744		2,744
Distributions to non-controlling interests	—	—		—		—		(7,652	)	(7,652	)
Other	3	698		(5,506	)	5,528		7,962		8,685
Balance at June 30, 2018	$ 3,398	$ 1,278,251	$	3,820,420	$	(648,492	)	$ 63,294	$	4,516,871

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

CBRE GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Basis of Prese ntation

Readers of this Quarterly Report on Form 10-Q (Quarterly Report) should refer to the audited financial statements and notes to consolidated financial statements of CBRE Group, Inc., a Delaware corporation (which may be referred to in these financial statements as “the company,” “we,” “us” and “our”), for the year ended December 31, 2017, which are included in our 2017 Annual Report on Form 10-K (2017 Annual Report), filed with the United States Securities and Exchange Commission (SEC) and also available on our website (www.cbre.com), since we have omitted from this Quarterly Report certain footnote disclosures which would substantially duplicate those contained in such audited financial statements. You should also refer to Note 2, Significant Accounting Policies, in the notes to consolidated financial statements in our 2017 Annual Report for further discussion of our significant accounting policies and estimates.

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

Certain restatements have been made to the 2017 financial statements to conform with the 2018 presentation in connection with our adoption of new revenue recognition guidance (as further described in notes 2, 3 and 12). In addition, certain reclassifications have been made to the 2017 financial statements to conform with the 2018 presentation. Such reclassifications primarily relate to the adoption of Accounting Standards Update (ASU) 2016‑01, ASU 2016-15 and ASU 2016-18 as further described in Note 3.

The results of operations for the three and six months ended June 30, 2018 are not necessarily indicative of the results of operations to be expected for the year ending December 31, 2018.

Significant Accounting Policies Update

Revenue Recognition

We account for revenue in accordance with Accounting Standards Codification (ASC) Topic 606, “ Revenue from Contracts with Customers .” Topic 606 also includes Subtopic 340-40, “ Other Assets and Deferred Costs – Contracts with Customers ,” which requires deferral of incremental costs to obtain and fulfill a contract with a customer. We adopted new revenue recognition guidance on January 1, 2018, using the full retrospective method (see Note 3). Revenue is recognized when or as control of the promised services is transferred to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those services.

The following is a description of principal activities – separated by reportable segments – from which we generate revenue. For more detailed information about our reportable segments, see Notes 12 and 13.

CBRE GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

The Americas, Europe, Middle East and Africa (EMEA), and Asia Pacific

The Americas segment is our largest segment of operations and provides a comprehensive range of services throughout the United States (U.S.), in the largest regions of Canada and in key markets in Latin America. The primary services offered consist of the following: property leasing, property sales, mortgage services, appraisal and valuation, occupier outsourcing and property management services.

Our EMEA and Asia Pacific segments generally provide services similar to the Americas business segment. The EMEA segment has operations primarily in Europe, while the Asia Pacific segment has operations in Asia, Australia and New Zealand.

Property Leasing and Property Sales

Through our Advisory & Transaction Services business line, we provide strategic advice and execution to owners, investors, and occupiers of real estate in connection with the leasing of office, industrial and retail space. We also offer clients fully integrated property sales services under the CBRE Capital Markets brand. We are compensated for our services in the form of a commission and, in some instances may earn various forms of variable incentive consideration. Our commission is paid upon the occurrence of certain contractual event(s) which may be contingent. For example, a portion of our leasing commission may be paid upon signing of the lease by the tenant, with the remaining paid upon occurrence of another future contingent event (e.g. payment of first month’s rent or tenant move-in). For sales, our commission is typically paid at the closing of the sale. We typically satisfy our performance obligation at a point in time when control is transferred; generally, at the time of the first contractual event where there is a present right to payment. We look to history, experience with a customer, and deal specific considerations to support our judgement that the second contingency (if applicable) will be met. Therefore, we typically accelerate the recognition of the revenue associated with the second contingent event.

In addition to our commission, we may recognize other forms of variable consideration which can include, but are not limited to, commissions subject to concession or claw back and volume based discounts or rebates. We assess variable consideration on a contract by contract basis, and when appropriate, recognize revenue based on our assessment of the outcome (using the most likely outcome approach or weighted probability) and historical results, if comparable and representative. We recognize variable consideration if it is deemed probable that there will not be significant reversal in the future.

Mortgage Originations and Loan Sales

Under the CBRE Capital Markets brand, we offer clients fully integrated commercial mortgage and structured financing services. Fees from services within our mortgage brokerage business that are in the scope of Topic 606 include fees earned for the brokering of commercial mortgage loans primarily through relationships established with investment banking firms, national and regional banks, credit companies, insurance companies and pension funds. We are compensated for our brokerage services via a fee paid upon successful placement of a commercial mortgage borrower with a lender who will provide financing. The fee earned is contingent upon the funding of the loan. We typically satisfy our performance obligation when control is transferred at the point in time of the funding of the loan.

We also earn fees from the origination and sale of commercial mortgage loans for which the company retains the servicing rights. These fees are governed by the “ Fair Value Measurements and Disclosures ” topic (Topic 820) and “ Transfers and Servicing ” topic (Topic 860) of the FASB ASC. Upon origination of a mortgage loan held for sale, the fair value of the mortgage servicing rights (MSR) to be retained is included in the forecasted proceeds from the anticipated loan sale and results in a net gain (which is reflected in revenue). Upon sale, we record a servicing asset or liability based on the fair value of the retained MSR associated with the transferred loan. Subsequent to the initial recording, MSRs are amortized and carried at the lower of amortized cost or fair value in other intangible assets in the accompanying consolidated balance sheets. They are amortized in proportion to and over the estimated period that the servicing income is expected to be received.

CBRE GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Appraisal and Valuation

We provide valuation services that include market-value appraisals, litigation support, discounted cash flow analyses, feasibility studies as well as consulting services such as property condition reports, hotel advisory and environmental consulting. We are compensated for valuation services in the form of a fee, which is payable on the occurrence of certain events (e.g., a portion on the delivery of a draft report with the remaining on the delivery of the final report). For consulting services, we may be paid based on the occurrence of time or event-based milestones (such as the delivery of draft reports). We typically satisfy our performance obligation as services are rendered over time.

Occupier Outsourcing Services

We provide a broad suite of services to occupiers of real estate, including facilities management, project management, transaction management and strategic consulting. We report facilities and project management as well as strategic consulting activities in our occupier outsourcing revenue line and transaction management in our lease and sales revenue lines.

Facilities management involves the day-to-day management of client-occupied space and includes headquarter buildings, regional offices, administrative offices, data centers and other critical facilities, manufacturing and laboratory facilities, distribution facilities and retail space. Contracts for facilities management services are often structured so we are reimbursed for client-dedicated personnel costs and subcontracted vendor costs as well as associated overhead expenses plus a monthly fee, and, in some cases, annual incentives tied to agreed-upon performance targets, with any penalties typically capped. Facilities management services represent a series of distinct daily services rendered over time.

Project management services are often provided on a portfolio wide or programmatic basis. Revenues from project management services generally includes fixed management fees, variable fees, and incentive fees if certain agreed-upon performance targets are met. Revenues from project management may also include reimbursement of payroll and related costs for personnel providing the services and subcontracted vendor costs. Project management services represent a series of distinct daily services rendered over time.

The amount of revenue recognized is presented gross for any services provided by our employees, as we control them. This is evidenced by our obligation for their performance and our ability to direct and redirect their work, as well as negotiate the value of such services. The amount of revenue recognized related to the majority of facilities management contracts and certain project management arrangements is presented gross (with offsetting expense recorded in cost of services) for reimbursements of costs of third-party services because we control those services that are delivered to the client. In the instances when we do not control third-party services delivered to the client, we report revenues net of the third-party reimbursements.

In addition to our management fee, we receive various types of variable consideration which can include, but is not limited to; key performance indicator bonuses or penalties which may be linked to subcontractor performance, gross maximum price, glidepaths, savings guarantees, shared savings, or fixed fee structures. We assess variable consideration on a contract by contract basis, and when appropriate, recognize revenue based on our assessment of the outcome (using the most likely outcome approach or weighted probability) and historical results, if comparable and representative. Using management assessment and historical results and statistics, we accelerate revenue if it is deemed probable there will not be significant reversal in the future.

Property Management

We provide property management services on a contractual basis for owners of and investors in office, industrial and retail properties. These services include construction management, marketing, building engineering, accounting and financial services. We are compensated for our services through a monthly management fee earned based on either a specified percentage of the monthly rental income, rental receipts generated from the property under management or a fixed fee. We are also often reimbursed for our administrative and payroll costs directly attributable to the properties under management. Property management services represent a series of distinct daily

CBRE GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

services rendered over time. The amount of revenue recogniz ed is presented gross for any services provided by our employees, as we control them. We generally do not control third-party services delivered to property management clients. As such, we report revenues net of third-party reimbursements.

Global Investment Management

Our Global Investment Management business segment provides investment management services to pension funds, insurance companies, sovereign wealth funds, foundations, endowments and other institutional investors seeking to generate returns and diversification through investment in real estate. We sponsor investment programs that span the risk/return spectrum in: North America, Europe, Asia and Australia. We are typically compensated in the form of a base management fee, disposition fees, acquisition fees and incentive fees in the form of performance fees or carried interest based on fund type (open or closed ended, respectively). For the base management fee, we typically satisfy the performance obligation as service is rendered over time pursuant to the series guidance. For acquisition and disposition services, we typically satisfy the performance obligation at a point in time (at acquisition or upon disposition). For contracts with contingent fees, including performance fees, incentive fees and carried interest, we assess variable consideration on a contract by contract basis, and when appropriate, recognize revenue based on our assessment of the outcome (using the most likely outcome approach or weighted probability) and historical results, if comparable and representative. Revenue associated with performance fees and carried interest are typically constrained due to volatility in the real estate market, a broad range of possible outcomes, and other factors in the market that are outside of our control.

Development Services

Our Development Services business segment consists of real estate development and investment activities primarily in the United States to users of and investors in commercial real estate, as well as for our own account. We pursue opportunistic, risk-mitigated development and investment in commercial real estate across a wide spectrum of property types, including: industrial, office and retail properties; healthcare facilities of all types (medical office buildings, hospitals and ambulatory surgery centers); and residential/mixed-use projects. We pursue development and investment activity on behalf of our clients on a fee basis with no, or limited, ownership interest in a property, in partnership with our clients through co-investment – either on an individual project basis or through programs with certain strategic capital partners or for our own account with 100% ownership. Development services represent a series of distinct daily services rendered over time. Fees are typically payable monthly over the service term or upon contractual defined events, like project milestones. In addition to development fee revenue, we receive various types of variable consideration which can include, but is not limited to, contingent lease-up bonuses, cost saving incentives, profit sharing on sales and at-risk fees. We assess variable consideration on a contract by contract basis, and when appropriate, recognize revenue based on our assessment of the outcome (using the most likely outcome approach or weighted probability) and historical results, if comparable and representative. We accelerate revenue if it is deemed probable there will not be significant reversal in the future.

Accounts Receivable and Allowance for Doubtful Accounts

We record accounts receivable for our unconditional rights to consideration arising from our performance under contracts with customers. The carrying value of such receivables, net of the allowance for doubtful accounts, represents their estimated net realizable value. We estimate our allowance for doubtful accounts for specific accounts receivable balances based on historical collection trends, the age of outstanding accounts receivables and existing economic conditions associated with the receivables. Past-due accounts receivable balances are written off when our internal collection efforts have been unsuccessful. As a practical expedient, we do not adjust the promised amount of consideration for the effects of a significant financing component when we expect, at contract inception, that the period between our transfer of a promised service to a customer and when the customer pays for that service will be one year or less. We do not typically include extended payment terms in our contracts with customers.

Remaining Performance Obligations

Remaining performance obligations represent the aggregate transaction prices for contracts where our performance obligations have not yet been satisfied. As of June 30, 2018, the aggregate amount of transaction price

CBRE GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

allocated to re maining performance obligations in our property leasing business was not significant. We apply the practical expedient related to remaining performance obligations that are part of a contract that has an original expected duration of one year or less and t he practical expedient related to variable consideration from remaining performance obligations pursuant to the series guidance. All of our remaining performance obligations apply to one of these practical expedients.

Contract Assets and Contract Liabilities

Contract assets represent assets for revenue that has been recognized in advance of billing the customer and for which the right to bill is contingent upon something other than the passage of time. This is common for contingent portions of commissions in brokerage and incentive fees present in various businesses. Billing requirements vary by contract but are generally structured around fixed monthly fees, reimbursement of employee and other third-party costs, and the achievement or completion of certain contingent events.

When we receive consideration, or such consideration is unconditionally due, from a customer prior to transferring services to the customer under the terms of the services contract, we record deferred revenue, which represents a contract liability. Such deferred revenue typically results from milestone payments pertaining to future services not yet rendered. We recognize the contract liability as revenue once we have transferred control of service to the customer and all revenue recognition criteria are met.

Contract assets and contract liabilities are determined for each contract on a net basis. For contract assets, we classify the short-term portion as a separate line item within current assets and the long-term portion within other assets, long-term in the accompanying consolidated balance sheets. For contract liabilities, we classify the short-term portion as a separate line item within current liabilities and the long-term portion within other liabilities, long-term in the accompanying consolidated balance sheets.

Contract Costs

Contract costs primarily consist of upfront costs incurred to obtain or to fulfill a contract. These costs are typically found within our Occupier Outsourcing business line. Such costs relate to transition costs to fulfill contracts prior to services being rendered and are included within other intangible assets in the accompanying consolidated balance sheets. Capitalized transition costs are amortized based on the transfer of services to which the assets relate which can vary on a contract by contract basis, and are included in cost of services in the accompanying consolidated statement of operations. For contract costs that are recognized as assets, we periodically review for impairment.

Applying the contract cost practical expedient, we recognize the incremental costs of obtaining contracts as an expense when incurred if the amortization period of the assets that we otherwise would have recognized is one year or less.

Income Taxes

On December 22, 2017, the Tax Cuts and Jobs Act (Tax Act) was signed into law making significant changes to the Internal Revenue Code, including, but not limited to: (i) a U.S. corporate tax rate decrease from 35% to 21%, effective for tax years beginning after December 31, 2017; (ii) the transition of U.S. international taxation from a worldwide tax system to a territorial system; and (iii) a one-time transition tax (i.e. toll charge) on the mandatory deemed repatriation of cumulative foreign earnings as of December 31, 2017. In December 2017, the SEC staff issued Staff Accounting Bulletin No. 118 (SAB 118), “ Income Tax Accounting Implications of the Tax Cuts and Jobs Act,” which allows us to record provisional amounts during a measurement period not to extend beyond one year of the enactment date. In March 2018, the Financial Accounting Standards Board (FASB) issued ASU 2018-05, “ Income Taxes (Topic 740): Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 118 ,” which added SEC guidance related to SAB 118. On August 1st, 2018, the Treasury Department released proposed regulations regarding the one-time transition tax on the pre-2018 earnings of certain non-U.S. subsidiaries. We are evaluating the impact of the proposed regulations as part of our overall analysis of the impacts of the Tax Act pursuant to SAB 118.

CBRE GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Our provision for income taxes for 2017 included a provisional amount related to our estimate of the U.S. federal and state tax impact of the transition tax and other components of the Tax Act. In the fi rst quarter of 2018, we obtained additional information affecting the provisional amount initially recorded for the transition tax. As a result, we recorded an immaterial adjustment to the transition tax in the tax provision for the six months ended June 3 0, 2018. Provisional amounts that have been recorded are based upon our best estimate of the impact of the Tax Act in accordance with our understanding of the Tax Act and the related guidance available. Additional work is necessary on the provisional amoun t related to the transition tax, which includes performing a more detailed analysis of historic foreign earnings and tax pools and potential corresponding adjustments.

See Note 2 of the Notes to Consolidated Financial Statements set forth in Item 8 included in our Annual Report on Form 10-K for the year ended December 31, 2017 for a summary of our other significant accounting policies.

New Accounting Pronouncements

Recently Adopted Accounting Pronouncements

The FASB previously issued five ASUs related to revenue recognition (“new revenue recognition guidance”). The ASUs issued were: (1) in May 2014, ASU 2014‑09, “Revenue from Contracts with Customers (Topic 606);” (2) i n March 2016, ASU 2016‑08, “Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net);” (3) in April 2016, ASU 2016‑10, “ Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing;” (4) in May 2016, ASU 2016‑12, “ Revenue from Contracts with Customers (Topic 606): Narrow-scope Improvements and Practical Expedients;” and (5) in December 2016, ASU 2016‑20, “Technical Corrections and Improvements to Topic 606, Revenue From Contracts with Customers.” As mentioned in Note 2, we adopted the new revenue recognition guidance in the first quarter of 2018 using the full retrospective transition method. This resulted in a cumulative adjustment of $94.6 million to the accumulated earnings balance reflected in the accompanying consolidated balance sheets at December 31, 2017, including an $87.9 million impact of adoption effective January 1, 2016 as well as the impact from restatements of full year statements of operations for the years ended December 31, 2017 and 2016 resulting in adjustments of $5.6 million and $1.1 million, respectively. The impact of the application of the new revenue recognition guidance resulted in an acceleration of revenues that were based, in part, on future contingent events. For example, some leasing commission revenues in various countries where we operate were recognized earlier. Under former GAAP, a portion of these lease commission revenues was deferred until a future contingency was resolved (e.g., tenant move-in or payment of first month’s rent). Under the new revenue guidance, our performance obligation will be typically satisfied at lease signing and therefore the portion of the commission that is contingent on a future event has been recognized earlier if deemed probable that there will not be significant reversal in the future. The acceleration of the timing of revenue recognition also resulted in the acceleration of expense recognition relating to direct commissions payable to brokers. In addition, the acceleration of these revenues and expenses resulted in an increase in total assets and liabilities to reflect contract assets and accrued commissions payable.

We evaluated the impact of the updated principal versus agent guidance on our consolidated financial statements. Under former GAAP, certain third-party costs associated with our facilities and project management contracts were accounted for on a net basis because the contracts include provisions such as “pay when paid” that mitigate payment risk with respect to services provided by third parties to our clients. Under the new revenue recognition guidance, control of the services before transfer to the client is the primary factor in determining principal versus agent assessments. Payment risk is no longer a determining factor under Topic 606. We have determined that we control the services provided by third parties on behalf of certain of our facilities and project management clients. Accordingly, under the new guidance, we are accounting for the cost of services provided by third parties and the related reimbursement revenue on a gross basis.

CBRE GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

The following table presents the effects of the adoption of the new revenue recognition guidance on our consolidated balance sheet as of December 31, 2017 (dollars in thousands):

Receivables	As Reported — $ 3,207,285	$	(94,996	)	As Adjusted — $ 3,112,289
Contract assets	—		273,053		273,053
Total current assets	5,452,527		178,057		5,630,584
Other assets, net	422,965		56,509		479,474
Total assets	11,483,830		234,566		11,718,396
Accounts payable and accrued expenses	1,674,287		(100,615	)	1,573,672
Compensation and employee benefits payable	803,504		100,930		904,434
Accrued bonus and profit sharing	1,072,976		5,369		1,078,345
Contract liabilities	—		100,615		100,615
Total current liabilities	4,606,645		106,299		4,712,944
Deferred tax liabilities, net	114,017		33,201		147,218
Total liabilities	7,404,282		139,500		7,543,782
Accumulated earnings	3,348,385		94,622		3,443,007
Accumulated other comprehensive loss	(552,858	)	444		(552,414	)
Total CBRE Group, Inc. stockholders' equity	4,019,430		95,066		4,114,496
Total liabilities and equity	11,483,830		234,566		11,718,396

The following tables present the effects of the adoption of the new revenue recognition guidance on our consolidated statements of operations for the three and six months ended June 30, 2017 (dollars in thousands, except share amounts):

	Three Months Ended June 30, 2017 — As Reported	Adoption of New Revenue Recognition Guidance	As Adjusted
Revenue	$ 3,342,215	$ 1,097,356	$ 4,439,571
Cost of services	2,318,562	1,090,978	3,409,540
Operating, administrative and other	712,374	241	712,615
Operating income	222,191	6,137	228,328
Income before provision for income taxes	266,758	6,137	272,895
Provision for income taxes	68,362	1,525	69,887
Net income	198,396	4,612	203,008
Net income attributable to CBRE Group, Inc.	197,165	4,612	201,777
Earnings per share:
Basic income per share	$ 0.59	$ 0.01	$ 0.60
Diluted income per share	0.58	0.01	0.59

	Six Months Ended June 30, 2017 — As Reported	Adoption of New Revenue Recognition Guidance	As Adjusted
Revenue	$ 6,323,419	$ 2,167,118	$ 8,490,537
Cost of services	4,405,641	2,150,376	6,556,017
Operating, administrative and other	1,318,605	636	1,319,241
Operating income	417,433	16,106	433,539
Income before provision for income taxes	449,534	16,106	465,640
Provision for income taxes	119,635	4,071	123,706
Net income	329,899	12,035	341,934
Net income attributable to CBRE Group, Inc.	326,762	12,035	338,797
Earnings per share:
Basic income per share	$ 0.97	$ 0.04	$ 1.01
Diluted income per share	0.96	0.04	1.00

CBRE GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

See Note 2 for further discussion of the effects of the adoption of ASU 2014-09 on our significant accounting policies.

In January 2016, the FASB issued ASU 2016‑01, “Financial Instruments – Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities.” This ASU 2016-01 states that entities will have to measure equity investments (except those accounted for under the equity method, those that result in consolidation of the investee and certain other investments) at fair value and recognize any changes in fair value in net income. Under the new guidance, entities will measure equity investments in the scope of the guidance at the end of each reporting period. We will no longer be able to classify equity investments as trading or available for sale, and will no longer recognize unrealized holding gains and losses on equity securities previously classified as available for sale in other comprehensive income (loss). However, the guidance for classifying and measuring investments in debt securities and loans is unchanged. We adopted ASU 2016‑01 in the first quarter of 2018, which resulted in a cumulative adjustment to accumulated earnings of $4.0 million on January 1, 2018, representing the accumulated unrealized gains (net of tax) reported in accumulated other comprehensive loss for available for sale equity securities on December 31, 2017.

In August 2016, the FASB issued ASU 2016‑15, “Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments.” This ASU addressed eight specific cash flow issues with the objective of reducing the existing diversity in practice. We adopted ASU 2016‑15 in the first quarter of 2018. This resulted in changes to our consolidated statement of cash flows included in the accompanying consolidated financial statements, including:

• An accounting policy election was made in the first quarter of 2018 to classify distributions from all of our equity method investments based on the “nature of distribution method”. Under this approach, we classify the distributions based on the nature of the activities of the investee that generated the distribution. This resulted in $73.0 million of distributions from equity method investments being reclassified from cash flows from investing activities to cash flows from operating activities for the first six months of 2017;

• Purchase price payments made related to acquisitions more than three months after the acquisition closed are to be reflected as cash flows from financing activities (assuming they do not exceed the amount recorded in the initial measurement period). If we record an increase to the estimated purchase price liability post-measurement period, then such increase (i.e. amounts we pay out above and beyond initial estimate of liability) would get recorded as an operating cash flow. This resulted in $15.1 million of cash paid for acquisitions being reclassified from cash used in investing activities to cash used in financing activities for the first six months of 2017;

• Payments for debt prepayment or debt extinguishment costs, including third-party costs, premiums paid, and other fees paid to lenders that are directly related to the debt prepayment or debt extinguishment are to be reflected as cash used in financing activities. During the six months ended June 30, 2018, we paid a $20.0 million premium in connection with the early redemption of our 5.00% senior notes (see Note 9). Such premium has been reflected in cash used in financing activities in the consolidated statement of cash flows for the six months ended June 30, 2018.

In November 2016, the FASB issued ASU 2016‑18, “Statement of Cash Flows (Topic 230): Restricted Cash.” This ASU requires that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash. We adopted ASU 2016-18 in the first quarter of 2018 and, as a result, restricted cash has been included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows.

Recent Accounting Pronouncements Pending Adoption

The FASB previously issued two ASUs related to leases. The ASUs issued were: (1) in February 2016, ASU 2016-02, “Leases (Topic 842)” and (2) in July 2018, ASU 2018-10, “Codification Improvements to Topic 842, Leases.” ASU 2016-02 requires lessees to recognize most leases on the balance sheet as liabilities, with corresponding right-of-use assets. For income statement recognition purposes, leases will be classified as either a finance or operating lease in a manner similar to the requirements under the current lease accounting literature, but without relying upon the bright-line tests. The amendments in ASU 2018-10 affect narrow aspects of the guidance

CBRE GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

issued in the amendments in ASU 2016-02. These ASUs are effective for annual period s in fiscal years beginning after December 15, 2018. We plan to adopt these ASUs in the first quarter of 2019. While we are continuing to evaluate the full magnitude of these ASU adoptions on our consolidated financial statements for our existing lease c ontracts, we have made progress toward completing the evaluation of adoption impacts. For instance, preliminary findings indicate embedded leases in service contracts are not material. Furthermore, we have decided to elect certain practical expedients affo rded by the ASU, including the expedient to forego separating lease and non-lease components in our lessee contracts, which will increase the magnitude of our balance sheet gross-up.

In June 2016, the FASB issued ASU 2016‑13, “Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.” This ASU is intended to improve financial reporting by requiring timelier recording of credit losses on loans and other financial instruments held by financial institutions and other organizations. This ASU is effective for fiscal years beginning after December 15, 2019, and interim periods within those years, with early adoption permitted. We are evaluating the effect that ASU 2016‑13 will have on our consolidated financial statements and related disclosures.

In January 2017, the FASB issued ASU 2017‑04, “Intangibles – Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment.” This ASU eliminates Step 2 from the goodwill impairment test. This ASU also eliminates the requirements for any reporting unit with a zero or negative carrying amount to perform a qualitative assessment. This ASU is effective for fiscal years beginning after December 15, 2019, and interim periods within those years, with early adoption permitted. We are evaluating the effect that ASU 2017‑04 will have on our goodwill assessment process, but do not believe the adoption of ASU 2017‑04 will have a material impact on our consolidated financial statements and related disclosures.

In March 2017, the FASB issued ASU 2017‑08, “Receivables – Nonrefundable Fees and Other Costs (Subtopic 310-20), Premium Amortization on Purchased Callable Debt Securities.” This ASU requires the premium to be amortized to the earliest call date. This ASU does not require an accounting change for securities held at a discount; the discount continues to be amortized to maturity. This ASU is effective for fiscal years beginning after December 15, 2018, and interim periods within those years, with early adoption permitted. We are evaluating the effect that ASU 2017‑08 will have on our consolidated financial statements and related disclosures.

In August 2017, the FASB issued ASU 2017‑12, “Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities.” This ASU refines and expands hedge accounting for both financial and commodity risks. This ASU is effective for fiscal years beginning after December 15, 2018, and interim periods within those years, with early adoption permitted. We are evaluating the effect that ASU 2017‑12 will have on our consolidated financial statements and related disclosures.

In February 2018, the FASB issued ASU 2018‑02, “Income Statement—Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income.” This ASU provides an option to reclassify stranded tax effects within accumulated other comprehensive income to retained earnings in each period in which the effect of the change in the U.S. federal corporate income tax rate in the Tax Act (or portion thereof) is recorded. This ASU is effective for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years, with early adoption permitted. We are evaluating the effect that ASU 2018‑02 will have on our consolidated financial statements and related disclosures, but do not expect it to have a material impact.

In July 2018, the FASB issued ASU 2018‑09, “Codification Improvements.” The amendments in ASU 2018-09 represent changes to clarify, correct errors in, or make minor improvements to the Codification, eliminating inconsistencies and providing clarifications in current guidance. This ASU is effective for fiscal years beginning after December 15, 2018. We are evaluating the effect that ASU 2018‑09 will have on our consolidated financial statements and related disclosures, but do not expect it to have a material impact.

CBRE GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

FacilitySource Acquisition

On June 12, 2018, CBRE Jason Acquisition LLC (Merger Sub), our wholly-owned subsidiary, and FacilitySource Holdings, LLC (FacilitySource), WP X Finance, LP and Warburg Pincus X Partners, LP (collectively, the Stockholders) entered into a stock purchase agreement and plan of merger (the Merger Agreement). As part of the Merger Agreement, (i) we purchased from the Stockholders all the outstanding shares of capital stock of FS WP Holdco, Inc (Blocker Corp), which owned 1,686,013 Class A units (the Blocker Units) and (ii) immediately following the acquisition of Blocker Corp, Merger Sub merged with FacilitySource, with FacilitySource continuing as the surviving company and our wholly-owned subsidiary within our Americas segment (the FacilitySource Acquisition), with the remaining Blocker Units not held by Blocker Corp. cancelled and converted into the right to receive cash consideration as set forth in the Merger Agreement. The estimated net initial purchase price was approximately $265.5 million, wi th $262.0 million paid in cash, plus adjustments for working capital and other items. We financed the transaction with cash on hand and borrowings under our revolving credit facility. We completed the FacilitySource Acquisition to help us (i) build a tech-enabled supply chain capability that is unique for the occupier outsourcing industry and (ii) drive meaningfully differentiated outcomes for leading occupiers of real estate.

The following represents a summary of the excess purchase price over the estimated fair value of net assets acquired (dollars in thousands):

Estimated purchase price	$
Less: Estimated fair value of net assets acquired (see table below)	(69,719	)
Excess purchase price over estimated fair value of net assets acquired	$ 195,746

The preliminary purchase accounting related to the FacilitySource Acquisition has been recorded in the accompanying consolidated financial statements. The excess purchase price over the estimated fair value of net assets acquired has been recorded to goodwill. The goodwill arising from the FacilitySource Acquisition consists largely of the synergies and economies of scale expected from combining the operations acquired from FacilitySource with ours. We are currently assessing if any portion of the goodwill recorded in connection with the FacilitySource Acquisition will be deductible for tax purposes. Given the complexity of the transaction, the calculation of the fair value of certain assets and liabilities acquired, primarily intangible assets, computer software and income tax items, is still preliminary. The purchase price allocation is expected to be completed as soon as practicable, but no later than one year from the acquisition date. The following table summarizes the aggregate estimated fair values of the assets acquired and the liabilities assumed in the FacilitySource Acquisition (dollars in thousands):

Assets Acquired:
Cash and cash equivalents	$ 2,627
Receivables, net	37,902
Prepaid expenses	477
Property and equipment	60,530
Other intangible assets	89,000
Other assets	114
Total assets acquired	190,650
Liabilities Assumed:
Accounts payable and accrued expenses	47,663
Compensation and employee benefits payable	1,800
Accrued bonus and profit sharing	5,036
Line of credit and term loan	26,295
Deferred tax liability	39,009
Other liabilities	1,128
Total liabilities assumed	120,931
Estimated Fair Value of Net Assets Acquired	$ 69,719

CBRE GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

The following is a summary of the preliminary estimate of the amortizable intangible assets and depreciable computer software acquired in connection with the FacilitySource Acquisition (dollars in thousands):

Asset Class	Weighted Average Amortization/ Depreciation Period	Amount Assigned at Acquisition Date	At June 30, 2018 — Accumulated Amortization and Depreciation	Net Carrying Value
Intangibles:
Trade names	20 years	$ 50,400	$ 105	$ 50,295
Customer relationships	6.67 years	38,600	241	38,359
Total amortizable intangible assets acquired	14.22 years	$ 89,000	$ 346	$ 88,654
Property and Equipment:
Computer software	10 years	$ 57,650	$ 240	$ 57,410

Upon close of the FacilitySource Acquisition, we immediately repaid the line of credit and term loan assumed from FacilitySource.

The accompanying consolidated statement of operations for the three and six months ended June 30, 2018 include revenue, an operating loss and a net loss of $12.6 million, ($0.2) million and ($0.2) million, respectively, attributable to the FacilitySource Acquisition. This does not include direct transaction and integration costs of $0.2 million and depreciation and amortization expense of $0.6 million related to computer software and intangible assets acquired, all of which were incurred during both the three and six months ended June 30, 2018 in connection with the FacilitySource Acquisition.

Unaudited pro forma results, assuming the FacilitySource Acquisition had occurred as of January 1, 2017 for purposes of the pro forma disclosures for the three and six months ended June 30, 2018 and 2017, are presented below. They include certain adjustments for increased depreciation and amortization expense related to acquired computer software and intangible assets as well as increased interest expense associated with borrowings under our revolving credit facility used to fund the acquisition, as follows (dollars in thousands):

	Three Months Ended — June 30,		Six Months Ended — June 30,
	2018	2017	2018	2017
Depreciation expense	$ 1,201	$ 1,235	$ 2,642	$ 2,469
Amortization expense	1,731	2,078	3,809	4,155
Interest expense	1,224	1,525	2,748	3,049

Pro forma adjustments also include the removal of $0.2 million of direct costs incurred by us during the three and six months ended June 30, 2018 as well as the tax impact of all pro forma adjustments for all periods presented. These unaudited pro forma results have been prepared for comparative purposes only and do not purport to be indicative of what operating results would have been had the FacilitySource Acquisition occurred on January 1, 2017 and may not be indicative of future operating results (dollars in thousands, except share data):

	Three Months Ended — June 30,		Six Months Ended — June 30,
	2018	2017	2018	2017
Revenue	$ 5,141,339	$ 4,476,952	$ 9,852,160	$ 8,565,300
Operating income	218,988	220,565	424,689	418,015
Net income attributable to CBRE Group, Inc.	222,941	195,874	366,083	326,993
Basic income per share:
Net income per share attributable to CBRE Group, Inc.	$ 0.66	$ 0.58	$ 1.08	$ 0.97
Weighted average shares outstanding for basic income per share	339,081,556	336,975,149	338,986,354	336,941,681
Diluted income per share:
Net income per share attributable to CBRE Group, Inc.	$ 0.65	$ 0.57	$ 1.07	$ 0.96
Weighted average shares outstanding for diluted income per share	343,471,513	340,882,603	343,031,189	340,214,246

CBRE GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Warehouse Receivables & Warehouse Lines of Credit

Our wholly-owned subsidiary CBRE Capital Markets, Inc. (CBRE Capital Markets) is a Federal Home Loan Mortgage Corporation (Freddie Mac) approved Multifamily Program Plus Seller/Servicer and an approved Federal National Mortgage Association (Fannie Mae) Aggregation and Negotiated Transaction Seller/Servicer. In addition, CBRE Capital Markets’ wholly-owned subsidiary CBRE Multifamily Capital, Inc. (CBRE MCI) is an approved Fannie Mae Delegated Underwriting and Servicing (DUS) Seller/Servicer and CBRE Capital Markets’ wholly-owned subsidiary CBRE HMF, Inc. (CBRE HMF) is a U.S. Department of Housing and Urban Development (HUD) approved Non-Supervised Federal Housing Authority (FHA) Title II Mortgagee, an approved Multifamily Accelerated Processing (MAP) lender and an approved Government National Mortgage Association (Ginnie Mae) issuer of mortgage-backed securities (MBS). Under these arrangements, before loans are originated through proceeds from warehouse lines of credit, we obtain either a contractual loan purchase commitment from either Freddie Mac or Fannie Mae or a confirmed forward trade commitment for the issuance and purchase of a Fannie Mae or Ginnie Mae MBS that will be secured by the loans. The warehouse lines of credit are generally repaid within a one-month period when Freddie Mac or Fannie Mae buys the loans or upon settlement of the Fannie Mae or Ginnie Mae MBS, while we retain the servicing rights. Loans are funded at the prevailing market rates. We elect the fair value option for all warehouse receivables. At June 30, 2018 and December 31, 2017, all of the warehouse receivables included in the accompanying consolidated balance sheets were either under commitment to be purchased by Freddie Mac or had confirmed forward trade commitments for the issuance and purchase of Fannie Mae or Ginnie Mae mortgage-backed securities that will be secured by the underlying loans.

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

Beginning balance at December 31, 2017	$
Origination of mortgage loans	7,552,229
Gains (premiums on loan sales)	25,890
Proceeds from sale of mortgage loans:
Sale of mortgage loans	(6,993,724	)
Cash collections of premiums on loan sales	(25,890	)
Proceeds from sale of mortgage loans	(7,019,614	)
Net increase in mortgage servicing rights included in warehouse receivables	1,781
Ending balance at June 30, 2018	$ 1,488,324

The following table is a summary of our warehouse lines of credit in place as of June 30, 2018 and December 31, 2017 (dollars in thousands):

			June 30, 2018		December 31, 2017
			Maximum		Maximum
Lender	Current Maturity	Pricing	Facility Size	Carrying Value	Facility Size	Carrying Value
JP Morgan Chase Bank, N.A. (JP Morgan)	10/23/2018	daily one-month LIBOR plus 1.45%	$ 1,000,000	$ 725,150	$ 1,000,000	$ 192,180
JP Morgan	10/23/2018	daily one-month LIBOR plus 2.75%	25,000	—	25,000	5,800
Fannie Mae Multifamily As Soon As Pooled Plus Agreement and Multifamily As Soon As Pooled Sale Agreement (ASAP) Program	Cancelable anytime	daily one-month LIBOR plus 1.35%, with a LIBOR floor of 0.35%	450,000	15,338	450,000	205,827
TD Bank, N.A. (TD Bank) (1)	6/30/2019	daily one-month LIBOR plus 1.20%	400,000	366,043	800,000	225,416
Bank of America, N.A. (BofA) (2)	9/4/2018	daily one-month LIBOR plus 1.40%	225,000	225,303	337,500	130,443
Capital One, N.A. (Capital One) (3)	7/27/2018	daily one-month LIBOR plus 1.40%	200,000	139,757	387,500	151,100
			$ 2,300,000	$ 1,471,591	$ 3,000,000	$ 910,766

(1) Line was temporarily increased from $400.0 million to $800.0 million to accommodate year-end volume. Maximum facility reverted back to $400.0 million on February 1, 2018. During July 2018, to accommodate increased volume, line was increased to $800.0 million, which

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

will continue until maturity date unless we elect to adjust. Our arrangement with TD Bank allows us to increase or decrease the line with two-week notice.

(2) Line was temporarily increased from $225.0 million to $337.5 million to accommodate year-end volume. Maximum facility reverted back to $225.0 million on January 27, 2018. Effective July 2, 2018, line was temporarily increased from $225.0 million to $337.5 million to accommodate projected volume in July. Maximum facility will revert back to $225.0 million on August 18, 2018.

(3) Line was temporarily increased from $200.0 million to $387.5 million to accommodate year-end volume. Maximum facility reverted back to $200.0 million on January 9, 2018. During July 2018, to accommodate increased volume, the line was temporarily increased from $200.0 million to $375.0 million and will revert back to $200.0 million on October 1, 2018. Additionally, in July 2018 the maturity date of the warehouse line with Capital One was extended for one year.

During the six months ended June 30, 2018, we had a maximum of $1.5 billion of warehouse lines of credit principal outstanding.

Variable Interest Entities (VIEs)

We hold variable interests in certain VIEs in our Global Investment Management and Development Services segments which are not consolidated as it was determined that we are not the primary beneficiary. Our involvement with these entities is in the form of equity co-investments and fee arrangements.

As of June 30, 2018 and December 31, 2017, our maximum exposure to loss related to the VIEs which are not consolidated was as follows (dollars in thousands):

	June 30,	December 31,
	2018	2017
Investments in unconsolidated subsidiaries	$ 25,160	$ 26,273
Co-investment commitments	4,266	2,364
Other current assets	3,475	3,401
Maximum exposure to loss	$ 32,901	$ 32,038

Fair Value Measurements

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

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

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

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

There were no significant transfers in or out of Level 1 and Level 2 during the three and six months ended June 30, 2018 and 2017. There have been no significant changes to the valuation techniques and inputs used to develop the recurring fair value measurements from those disclosed in our 2017 Annual Report.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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The following tables present the fair value of assets and liabilities measured at fair valu e on a recurring basis as of June 30, 2018 and December 31, 2017 (dollars in thousands):

	As of June 30, 2018
	Fair Value Measured and Recorded Using
	Level 1	Level 2	Level 3	Total
Assets
Available for sale debt securities:
U.S. treasury securities	$ 3,626	$ —	$ —	$ 3,626
Debt securities issued by U.S. federal agencies	—	10,134	—	10,134
Corporate debt securities	—	27,845	—	27,845
Asset-backed securities	—	3,965	—	3,965
Collateralized mortgage obligations	—	2,288	—	2,288
Total available for sale debt securities	3,626	44,232	—	47,858
Equity securities	140,035	—	—	140,035
Warehouse receivables	—	1,488,324	—	1,488,324
Total assets at fair value	$ 143,661	$ 1,532,556	$ —	$ 1,676,217
Liabilities
Interest rate swaps	$ —	$ 2,091	$ —	$ 2,091
Securities sold, not yet purchased	3,556	—	—	3,556
Total liabilities at fair value	$ 3,556	$ 2,091	$ —	$ 5,647

	As of December 31, 2017
	Fair Value Measured and Recorded Using
	Level 1	Level 2	Level 3	Total
Assets
Available for sale debt securities:
U.S. treasury securities	$ 3,820	$ —	$ —	$ 3,820
Debt securities issued by U.S. federal agencies	—	4,901	—	4,901
Corporate debt securities	—	20,023	—	20,023
Asset-backed securities	—	3,577	—	3,577
Collateralized mortgage obligations	—	2,366	—	2,366
Total available for sale debt securities	3,820	30,867	—	34,687
Equity securities	133,595	—	—	133,595
Warehouse receivables	—	928,038	—	928,038
Total assets at fair value	$ 137,415	$ 958,905	$ —	$ 1,096,320
Liabilities
Interest rate swaps	$ —	$ 4,766	$ —	$ 4,766
Securities sold, not yet purchased	3,431	—	—	3,431
Foreign currency exchange forward contracts	—	55	—	55
Total liabilities at fair value	$ 3,431	$ 4,821	$ —	$ 8,252

There were no significant non-recurring fair value measurements recorded during the three and six months ended June 30, 2018 and 2017.

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

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

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

• Warehouse Receivables – These balances are carried at fair value based on market prices at the balance sheet date.

• Debt & Equity Securities – These investments are carried at their fair value.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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• Foreign Currency Exchange Forward Contracts – These assets and liabilities are carried at their fair value as calculated by using widely accepted valuation techniques including discounted cash flow analysis on the expected cash flows of each deri vative.

• Securities Sold, not yet Purchased – These liabilities are carried at their fair value.

• Short-Term Borrowings – The majority of this balance represents outstanding amounts under our warehouse lines of credit of our wholly-owned subsidiary, CBRE Capital Markets, and our revolving credit facility. Due to the short-term nature and variable interest rates of these instruments, fair value approximates carrying value (see Notes 5 and 9).

• Senior Term Loans – Based upon information from third-party banks (which falls within Level 2 of the fair value hierarchy), the estimated fair value of our senior term loans was approximately $742.5 million at June 30, 2018 and $199.9 million at December 31, 2017. Their actual carrying value, net of unamortized debt issuance costs, totaled $743.7 million and $193.5 million at June 30, 2018 and December 31, 2017, respectively (see Note 9).

• Interest Rate Swaps – These liabilities are carried at their fair value as calculated by using widely-accepted valuation techniques including discounted cash flow analysis on the expected cash flows of each derivative.

• Senior Notes – Based on dealers’ quotes (which falls within Level 2 of the fair value hierarchy), the estimated fair values of our 4.875% senior notes and 5.25% senior notes were $622.5 million and $447.0 million, respectively, at June 30, 2018 and $645.7 million and $468.0 million, respectively, at December 31, 2017. The actual carrying value of our 4.875% senior notes and 5.25% senior notes, net of unamortized debt issuance costs as well as unamortized discount or premium, if applicable, totaled $592.4 million and $422.6 million, respectively, at June 30, 2018 and $592.0 million and $422.4 million, respectively, at December 31, 2017. In March 2018, we redeemed our 5.00% senior notes in full (see Note 9). At December 31, 2017, the estimated fair value (based on dealers’ quotes) and actual carrying value (net of unamortized debt issuance costs) of our 5.00% senior notes was $823.8 million and $791.7 million, respectively.

Investments in Unconsolidated Subsidiaries

Investments in unconsolidated subsidiaries are accounted for under the equity method of accounting. Our investment ownership percentages in equity method investments vary, generally ranging up to 5.0% in our Global Investment Management segment, up to 10.0% in our Development Services segment, and up to 50.0% in our other business segments.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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

	Three Months Ended — June 30,		Six Months Ended — June 30,
	2018	2017	2018	2017
Global Investment Management
Revenue	$ 361,317	$ 237,907	$ 625,287	$ 505,058
Operating income	206,206	76,410	277,362	91,888
Net income	138,954	60,307	173,291	64,397
Development Services
Revenue	$ 31,329	$ 27,477	$ 54,005	$ 49,003
Operating income	24,560	157,296	83,137	177,857
Net income	17,117	150,055	70,313	166,152
Other
Revenue	$ 52,384	$ 44,145	$ 108,937	$ 70,003
Operating income	5,415	8,800	11,890	10,979
Net income	5,757	11,510	12,220	13,658
Total
Revenue	$ 445,030	$ 309,529	$ 788,229	$ 624,064
Operating income	236,181	242,506	372,389	280,724
Net income	161,828	221,872	255,824	244,207

Long-Term Debt and Short-Term Borrowings

Long-Term Debt

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

	June 30, — 2018	2017
Senior term loans, with interest ranging from 2.51% to 3.07%, due quarterly through 2022	$ 750,000	$	200,000
4.875% senior notes due in 2026, net of unamortized discount	596,460		596,273
5.25% senior notes due in 2025, net of unamortized premium	426,226		426,317
5.00% senior notes, redeemed in full in March 2018	—		800,000
Other	5,711		8
Total long-term debt	1,778,397		2,022,598
Less: current maturities of long-term debt	(1,466	)	(8	)
Less: unamortized debt issuance costs	(14,046	)	(22,987	)
Total long-term debt, net of current maturities	$ 1,762,885	$	1,999,603

We maintain credit facilities with third-party lenders, which we use for a variety of purposes. On October 31, 2017, CBRE Services, Inc. (CBRE Services), our wholly-owned subsidiary, entered into a Credit Agreement (the 2017 Credit Agreement), which refinanced and replaced our prior credit agreement (the 2015 Credit Agreement). We used $200.0 million of borrowings from the tranche A term loan facility and $83.0 million of revolving credit facility borrowings under the 2017 Credit Agreement, in addition to cash on hand, to repay all amounts outstanding under the 2015 Credit Agreement.

The 2017 Credit Agreement is a senior unsecured credit facility that is jointly and severally guaranteed by us and certain of our subsidiaries. As of June 30, 2018, the 2017 Credit Agreement provided for the following: (1) a $2.8 billion revolving credit facility, which includes the capacity to obtain letters of credit and swingline loans and matures on October 31, 2022 and (2) a $750.0 million delayed draw tranche A term loan facility, requiring quarterly principal payments, which began on March 5, 2018 and continue through maturity on October 31, 2022, provided that in the event that our leverage ratio (as defined in the 2017 Credit Agreement) is less than or equal to 2.50 to 1.00 on the last day of the fiscal quarter immediately preceding any such payment date, no such quarterly principal payment shall be required on such date.

On March 14, 2013, CBRE Services issued $800.0 million in aggregate principal amount of 5.00% senior notes due March 15, 2023. The 5.00% senior notes were unsecured obligations of CBRE Services, senior to all of its

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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current and future subordinated indebtedness, but effectively subordinated to all of its current and future secured indebtedness. The 5.00% senior notes were jointly and se verally guaranteed on a senior basis by us and each domestic subsidiary of CBRE Services that guaranteed our 2017 Credit Agreement. Interest accrued at a rate of 5.00% per year and was payable semi-annually in arrears on March 15 and September 15. The 5.00 % senior notes were redeemable at our option, in whole or in part, on March 15, 2018 at a redemption price of 102.5% of the principal amount on that date. We redeemed these notes in full on March 15, 2018 and incurred charges of $28.0 million, including a premium of $20.0 million and the write-off of $8.0 million of unamortized deferred financing costs. We funded this redemption with $550.0 million of borrowings from our tranche A term loan facility and borrowings from our revolving credit facility under ou r 2017 Credit Agreement. The amount of the 5.00% senior notes, net of unamortized debt issuance costs, included in the accompanying consolidated balance sheets was $791.7 million at December 31, 2017.

The indentures governing our 4.875% senior notes and 5.25% senior notes contain restrictive covenants that, among other things, limit our ability to create or permit liens on assets securing indebtedness, enter into sale/leaseback transactions and enter into consolidations or mergers. In addition, our 2017 Credit Agreement also requires us to maintain a minimum coverage ratio of consolidated EBITDA (as defined in the 2017 Credit Agreement) to consolidated interest expense of 2.00x and a maximum leverage ratio of total debt less available cash to consolidated EBITDA (as defined in the 2017 Credit Agreement) of 4.25x (and in the case of the first four full fiscal quarters following consummation of a qualified acquisition (as defined in the 2017 Credit Agreement), 4.75x) as of the end of each fiscal quarter. On this basis, our coverage ratio of consolidated EBITDA to consolidated interest expense was 16.97x for the trailing twelve months ended June 30, 2018, and our leverage ratio of total debt less available cash to consolidated EBITDA was 1.05x as of June 30, 2018.

Short-Term Borrowings

Revolving Credit Facility

As of June 30, 2018, letters of credit totaling $2.0 million were outstanding under our revolving credit facility under our 2017 Credit Agreement. These letters of credit, which reduce the amount we may borrow under the revolving credit facility, were primarily issued in the ordinary course of business. As of June 30, 2018, $598.0 million was outstanding under the revolving credit facility. As of December 31, 2017, no amounts were outstanding under the revolving credit facility other than letters of credit totaling $2.0 million.

Warehouse Lines of Credit

CBRE Capital Markets has warehouse lines of credit with third-party lenders for the purpose of funding mortgage loans that will be resold, and a funding arrangement with Fannie Mae for the purpose of selling a percentage of certain closed multifamily loans to Fannie Mae. These warehouse lines are recourse only to CBRE Capital Markets and are secured by our related warehouse receivables. See Note 5 for additional information.

Commitments and Contingencies

We are a party to a number of pending or threatened lawsuits arising out of, or incident to, our ordinary course of business. We believe that any losses in excess of the amounts accrued therefor as liabilities on our financial statements are unlikely to be significant, but litigation is inherently uncertain and there is the potential for a material adverse effect on our financial statements if one or more matters are resolved in a particular period in an amount materially in excess of what we anticipated.

In January 2008, CBRE MCI, a wholly-owned subsidiary of CBRE Capital Markets, entered into an agreement with Fannie Mae under Fannie Mae’s Delegated Underwriting and Servicing Lender Program (DUS Program), to provide financing for multifamily housing with five or more units. Under the DUS Program, CBRE MCI originates, underwrites, closes and services loans without prior approval by Fannie Mae, and typically, is subject to sharing up to one-third of any losses on loans originated under the DUS Program. CBRE MCI has funded loans subject to such loss sharing arrangements with unpaid principal balances of $21.3 billion at June 30,

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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CBRE MCI, under its agreement with Fannie Mae, must post cash reserves or oth er acceptable collateral under formulas established by Fannie Mae to provide for sufficient capital in the event losses occur. As of June 30, 2018 and December 31, 2017, CBRE MCI had a $60.0 million and a $58.0 million, respectively, letter of credit under this reserve arrangement, and had recorded a liability of approximately $33.9 million and $32.9 million, respectively, for its loan loss guarantee obligation under such arrangement. Fannie Mae’s recourse under the DUS Program is limited to the assets of C BRE MCI, which assets totaled approximately $734.0 million (including $491.1 million of warehouse receivables, a substantial majority of which are pledged against warehouse lines of credit and are therefore not available to Fannie Mae) at June 30, 2018.

CBRE Capital Markets participates in Freddie Mac’s Multifamily Small Balance Loan (SBL) Program. Under the SBL program, CBRE Capital Markets has certain repurchase and loss reimbursement obligations. These obligations are for the period from origination of the loan to the securitization date. CBRE Capital Markets must post a cash reserve or other acceptable collateral to provide for sufficient capital in the event the obligations are triggered. As of June 30, 2018 and December 31, 2017, CBRE Capital Markets had posted a $5.0 million letter of credit under this reserve arrangement.

We had outstanding letters of credit totaling $71.2 million as of June 30, 2018, excluding letters of credit for which we have outstanding liabilities already accrued on our consolidated balance sheet related to our subsidiaries’ outstanding reserves for claims under certain insurance programs as well as letters of credit related to operating leases. The CBRE Capital Markets letters of credit totaling $65.0 million as of June 30, 2018 referred to in the preceding paragraphs represented the majority of the $71.2 million outstanding letters of credit as of such date. The remaining letters of credit are primarily executed by us in the ordinary course of business and expire at varying dates through June 2019.

We had guarantees totaling $56.3 million as of June 30, 2018, excluding guarantees related to pension liabilities, consolidated indebtedness and other obligations for which we have outstanding liabilities already accrued on our consolidated balance sheet, and excluding guarantees related to operating leases. The $56.3 million primarily represents guarantees executed by us in the ordinary course of business, including various guarantees of management and vendor contracts in our operations overseas, which expire at the end of each of the respective agreements.

In addition, as of June 30, 2018, we had issued numerous non-recourse carveout, completion and budget guarantees relating to development projects for the benefit of third parties. These guarantees are commonplace in our industry and are made by us in the ordinary course of our Development Services business. Non-recourse carveout guarantees generally require that our project-entity borrower not commit specified improper acts, with us potentially liable for all or a portion of such entity’s indebtedness or other damages suffered by the lender if those acts occur. Completion and budget guarantees generally require us to complete construction of the relevant project within a specified timeframe and/or within a specified budget, with us potentially being liable for costs to complete in excess of such timeframe or budget. However, we generally use “guaranteed maximum price” contracts with reputable, bondable general contractors with respect to projects for which we provide these guarantees. These contracts are intended to pass the risk to such contractors. While there can be no assurance, we do not expect to incur any material losses under these guarantees.

An important part of the strategy for our Global Investment Management business involves investing our capital in certain real estate investments with our clients. These co-investments generally total up to 2.0% of the equity in a particular fund. As of June 30, 2018, we had aggregate commitments of $36.5 million to fund future co-investments.

Additionally, an important part of our Development Services business strategy is to invest in unconsolidated real estate subsidiaries as a principal (in most cases co-investing with our clients). As of June 30, 2018, we had committed to fund $23.5 million of additional capital to these unconsolidated subsidiaries.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

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Income Per Share Information

The calculations of basic and diluted income per share attributable to CBRE Group, Inc. shareholders are as follows (dollars in thousands, except share data):

	Three Months Ended — June 30,		Six Months Ended — June 30,
	2018	2017	2018	2017
		(As Adjusted) (1)		(As Adjusted) (1)
Basic Income Per Share
Net income attributable to CBRE Group, Inc. shareholders	$ 228,667	$ 201,777	$ 378,955	$ 338,797
Weighted average shares outstanding for basic income per share	339,081,556	336,975,149	338,986,354	336,941,681
Basic income per share attributable to CBRE Group, Inc. shareholders	$ 0.67	$ 0.60	$ 1.12	$ 1.01
Diluted Income Per Share
Net income attributable to CBRE Group, Inc. shareholders	$ 228,667	$ 201,777	$ 378,955	$ 338,797
Weighted average shares outstanding for diluted income per share:
Weighted average shares outstanding for basic income per share	339,081,556	336,975,149	338,986,354	336,941,681
Dilutive effect of contingently issuable shares	4,389,957	3,905,498	4,044,050	3,267,556
Dilutive effect of stock options	—	1,956	785	5,009
Weighted average shares outstanding for diluted income per share	343,471,513	340,882,603	343,031,189	340,214,246
Diluted income per share attributable to CBRE Group, Inc. shareholders	$ 0.67	$ 0.59	$ 1.10	$ 1.00

For the three and six months ended June 30, 2018, 75,851 and 51,946, respectively, of contingently issuable shares were excluded from the computation of diluted income per share because their inclusion would have had an anti-dilutive effect.

For the three and six months ended June 30, 2017, 1,317,651 and 2,037,886, respectively, of contingently issuable shares were excluded from the computation of diluted income per share because their inclusion would have had an anti-dilutive effect.

Revenue from Contracts with Customers

Disaggregated Revenue

The following tables represent a disaggregation of revenue from contracts with customers for the three and six months ended June 30, 2018 and 2017 by type of service and/or region (dollars in thousands):

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

	Three Months Ended June 30, 2018 — Americas	EMEA	APAC	Global Investment Management	Development Services	Consolidated
Topic 606 Revenue:
Occupier outsourcing	$ 1,923,585	$ 995,265	$ 264,717	$ —	$ —	$ 3,183,567
Leasing	536,660	106,295	100,186	—	839	743,980
Sales	269,636	98,081	68,883	—	—	436,600
Property management	172,343	60,706	69,466	—	2,106	304,621
Valuation	64,346	43,256	30,765	—	—	138,367
Commercial mortgage origination (1)	27,090	1,214	343	—	—	28,647
Investment management	—	—	—	98,947	—	98,947
Development services	—	—	—	—	15,463	15,463
Topic 606 Revenue	2,993,660	1,304,817	534,360	98,947	18,408	4,950,192
Out of Scope of Topic 606 Revenue:
Commercial mortgage origination	91,167	—	—	—	—	91,167
Loan servicing	41,327	2,360	221	—	—	43,908
Other revenue	14,273	8,275	3,619	—	—	26,167
Total Out of Scope of Topic 606 Revenue	146,767	10,635	3,840	—	—	161,242
Total revenue	$ 3,140,427	$ 1,315,452	$ 538,200	$ 98,947	$ 18,408	$ 5,111,434

	Three Months Ended June 30, 2017 (As Adjusted) (2) — Americas	EMEA	APAC	Global Investment Management	Development Services	Consolidated
Topic 606 Revenue:
Occupier outsourcing	$ 1,742,122	$ 726,890	$ 236,274	$ —	$ —	$ 2,705,286
Leasing	450,208	88,076	81,606	—	26	619,916
Sales	261,710	94,055	78,303	—	165	434,233
Property management	161,116	59,249	56,560	—	3,098	280,023
Valuation	61,599	37,229	30,940	—	—	129,768
Commercial mortgage origination (1)	29,883	1,985	915	—	—	32,783
Investment management	—	—	—	92,763	—	92,763
Development services	—	—	—	—	13,677	13,677
Topic 606 Revenue	2,706,638	1,007,484	484,598	92,763	16,966	4,308,449
Out of Scope of Topic 606 Revenue:
Commercial mortgage origination	71,727	—	—	—	—	71,727
Loan servicing	37,190	2,682	—	—	—	39,872
Other revenue	11,368	5,854	2,301	—	—	19,523
Total Out of Scope of Topic 606 Revenue	120,285	8,536	2,301	—	—	131,122
Total revenue	$ 2,826,923	$ 1,016,020	$ 486,899	$ 92,763	$ 16,966	$ 4,439,571

(1) We earn fees for arranging financing for borrowers with third-party lender contacts. Such fees are in scope of Topic 606.

(2) We adopted new revenue recognition guidance in the first quarter of 2018. Certain restatements have been made to the 2017 financial statements to conform with the 2018 presentation. See Notes 2 and 3 for more information.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

	Six Months Ended June 30, 2018 — Americas	EMEA	APAC	Global Investment Management	Development Services	Consolidated
Topic 606 Revenue:
Occupier outsourcing	$ 3,717,732	$ 1,889,082	$ 530,832	$ —	$ —	$ 6,137,646
Leasing	936,858	206,884	171,765	—	959	1,316,466
Sales	537,311	176,321	128,118	—	418	842,168
Property management	346,171	118,917	139,496	—	3,661	608,245
Valuation	123,412	84,319	56,854	—	—	264,585
Commercial mortgage origination (1)	48,917	2,437	394	—	—	51,748
Investment management	—	—	—	222,637	—	222,637
Development services	—	—	—	—	36,695	36,695
Topic 606 Revenue	5,710,401	2,477,960	1,027,459	222,637	41,733	9,480,190
Out of Scope of Topic 606 Revenue:
Commercial mortgage origination	175,360	—	—	—	—	175,360
Loan servicing	80,853	4,648	221	—	—	85,722
Other revenue	24,037	14,098	5,979	—	—	44,114
Total Out of Scope of Topic 606 Revenue	280,250	18,746	6,200	—	—	305,196
Total revenue	$ 5,990,651	$ 2,496,706	$ 1,033,659	$ 222,637	$ 41,733	$ 9,785,386

	Six Months Ended June 30, 2017 (As Adjusted) (2) — Americas	EMEA	APAC	Global Investment Management	Development Services	Consolidated
Topic 606 Revenue:
Occupier outsourcing	$ 3,406,476	$ 1,393,584	$ 442,699	$ —	$ —	$ 5,242,759
Leasing	844,073	163,007	142,134	—	180	1,149,394
Sales	495,506	161,355	130,471	—	695	788,027
Property management	322,513	113,989	111,239	—	5,008	552,749
Valuation	118,780	69,738	57,705	—	—	246,223
Commercial mortgage origination (1)	49,701	3,805	1,454	—	—	54,960
Investment management	—	—	—	182,329	—	182,329
Development services	—	—	—	—	25,300	25,300
Topic 606 Revenue	5,237,049	1,905,478	885,702	182,329	31,183	8,241,741
Out of Scope of Topic 606 Revenue:
Commercial mortgage origination	134,274	—	—	—	—	134,274
Loan servicing	70,724	5,558	—	—	—	76,282
Other revenue	24,082	9,615	4,543	—	—	38,240
Total Out of Scope of Topic 606 Revenue	229,080	15,173	4,543	—	—	248,796
Total revenue	$ 5,466,129	$ 1,920,651	$ 890,245	$ 182,329	$ 31,183	$ 8,490,537

(1) We earn fees for arranging financing for borrowers with third-party lender contacts. Such fees are in scope of Topic 606.

Contract Assets and Liabilities

We had contract assets totaling $169.3 million ($109.3 million of which was current) and $330.9 million ($273.1 million of which was current) as of June 30, 2018 and December 31, 2017, respectively. During the six months ended June 30, 2018, our contract assets decreased by $161.7 million, primarily due to contract assets moving to accounts receivable in our occupier outsourcing business (due to at-risk and incentive fees becoming billable per the contract terms) and in our leasing business (billing of commissions).

We had contract liabilities totaling $86.8 million ($76.2 million of which was current) and $100.6 million (all of which was current) as of June 30, 2018 and December 31, 2017, respectively. During the six months ended June 30, 2018, we recognized revenue of $64.1 million that was included in the contract liability balance at December 31, 2017.

CBRE GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Contract Costs

Within our Occupier Outsourcing business line, we incur transition costs to fulfil contracts prior to services being rendered. We capitalized $13.4 million and $23.0 million, respectively, of transition costs during the three and six months ended June 30, 2018, and $5.8 million and $14.7 million, respectively, of transition costs during the three and six months ended June 30, 2017. We recorded amortization of transition costs of $6.2 million and $12.2 million, respectively, during the three and six months ended June 30, 2018 and $3.6 million and $7.2 million, respectively, during the three and six months ended June 30, 2017. No impairment loss in relation to the costs capitalized was recorded during the three and six months ended June 30, 2018 or 2017.

Segments

We report our operations through the following segments: (1) Americas; (2) Europe, Middle East and Africa (EMEA); (3) Asia Pacific; (4) Global Investment Management; and (5) Development Services.

Summarized financial information by segment is as follows (dollars in thousands):

	Three Months Ended — June 30,		Six Months Ended — June 30,
	2018	2017	2018	2017
		(As Adjusted) (1)		(As Adjusted) (1)
Revenue
Americas	$ 3,140,427	$ 2,826,923	$ 5,990,651	$ 5,466,129
EMEA	1,315,452	1,016,020	2,496,706	1,920,651
Asia Pacific	538,200	486,899	1,033,659	890,245
Global Investment Management	98,947	92,763	222,637	182,329
Development Services	18,408	16,966	41,733	31,183
Total revenue	$ 5,111,434	$ 4,439,571	$ 9,785,386	$ 8,490,537
Adjusted EBITDA
Americas	$ 258,353	$ 233,711	$ 484,196	$ 458,936
EMEA	66,519	70,293	103,465	105,748
Asia Pacific	42,861	44,556	76,741	67,832
Global Investment Management	15,901	23,910	45,593	49,769
Development Services	55,673	46,216	77,119	49,578
Total Adjusted EBITDA	$ 439,307	$ 418,686	$ 787,114	$ 731,863

Adjusted EBITDA is the measure reported to the chief operating decision maker for purposes of making decisions about allocating resources to each segment and assessing performance of each segment. EBITDA represents earnings before net interest expense, write-off of financing costs on extinguished debt, income taxes, depreciation and amortization. Amounts shown for adjusted EBITDA further remove (from EBITDA) the impact of certain cash and non-cash charges related to acquisitions and certain carried interest incentive compensation reversal to align with the timing of associated revenue.

CBRE GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Adjusted EBITDA is calculated as follows (dollars in thousands):

	Three Months Ended
	June 30,		June 30,
	2018	2017	2018		2017
		(As Adjusted) (1)			(As Adjusted) (1)
Net income attributable to CBRE Group, Inc.	$ 228,667	$ 201,777	$	378,955	$	338,797
Add:
Depreciation and amortization	113,399	100,386		221,564		194,423
Interest expense	26,885	35,430		55,743		69,440
Write-off of financing costs on extinguished debt	—	—		27,982		—
Provision for income taxes	70,319	69,887		116,483		123,706
Less:
Interest income	1,489	1,427		5,110		3,838
EBITDA	437,781	406,053		795,617		722,528
Adjustments:
Carried interest incentive compensation expense (reversal) to align with the timing of associated revenue	1,526	(2,775	)	(8,503	)	(18,016	)
Integration and other costs related to acquisitions	—	15,408		—		27,351
Adjusted EBITDA	$ 439,307	$ 418,686	$	787,114	$	731,863

Geographic Information

Revenue in the table below is allocated based upon the country in which services are performed (dollars in thousands):

	Three Months Ended — June 30,		Six Months Ended — June 30,
	2018	2017	2018	2017
		(As Adjusted) (1)		(As Adjusted) (1)
Revenue
United States	$ 2,908,185	$ 2,644,445	$ 5,582,402	$ 5,116,851
United Kingdom	634,264	518,988	1,214,781	991,143
All other countries	1,568,985	1,276,138	2,988,203	2,382,543
Total revenue	$ 5,111,434	$ 4,439,571	$ 9,785,386	$ 8,490,537

Guarantor and Nonguarantor Financial Statements

The following condensed consolidating financial information (dollars in thousands) includes condensed consolidating balance sheets as of June 30, 2018 and December 31, 2017 and condensed consolidating statements of operations and condensed consolidating statements of comprehensive income (loss) for the three and six months ended June 30, 2018 and 2017 and condensed consolidating statements of cash flows for the six months ended June 30, 2018 and 2017 of:

• CBRE Group, Inc., as the parent; CBRE Services, as the subsidiary issuer; the guarantor subsidiaries; the nonguarantor subsidiaries;

• Elimination entries necessary to consolidate CBRE Group, Inc., as the parent, with CBRE Services and its guarantor and nonguarantor subsidiaries; and

• CBRE Group, Inc., on a consolidated basis.

Investments in consolidated subsidiaries are presented using the equity method of accounting. The principal elimination entries eliminate investments in consolidated subsidiaries and intercompany balances and transactions.

CBRE GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Condensed Consolidating Balance Sheets

	As of June 30, 2018 — Parent	CBRE Services	Guarantor Subsidiaries	Nonguarantor Subsidiaries	Eliminations		Consolidated Total
ASSETS
Current Assets:
Cash and cash equivalents	$ 7	$ 8,404	$ 78,760	$ 444,310	$ —		$ 531,481
Restricted cash	—	—	2,034	69,831	—		71,865
Receivables, net	—	—	1,361,023	1,963,499	—		3,324,522
Warehouse receivables (1)	—	—	964,915	523,409	—		1,488,324
Prepaid expenses	—	—	119,201	149,025	—		268,226
Contract assets	—	—	69,537	39,735	—		109,272
Income taxes receivable	3,173	3,744	6,635	41,116	(6,916	)	47,752
Other current assets	—	—	67,968	197,300	—		265,268
Total Current Assets	3,180	12,148	2,670,073	3,428,225	(6,916	)	6,106,710
Property and equipment, net	—	—	508,976	196,493	—		705,469
Goodwill	—	—	1,958,448	1,448,721	—		3,407,169
Other intangible assets, net	—	—	821,779	626,505	—		1,448,284
Investments in unconsolidated subsidiaries	—	—	192,203	41,686	—		233,889
Investments in consolidated subsidiaries	5,972,519	5,585,138	3,126,655	—	(14,684,312	)	—
Intercompany loan receivable	—	2,732,714	700,000	—	(3,432,714	)	—
Deferred tax assets, net	—	—	5,300	101,859	(9,269	)	97,890
Other assets, net	—	20,639	415,638	99,769	—		536,046
Total Assets	$ 5,975,699	$ 8,350,639	$ 10,399,072	$ 5,943,258	$ (18,133,211	)	$ 12,535,457
LIABILITIES AND EQUITY
Current Liabilities:
Accounts payable and accrued expenses	$ —	$ 18,763	$ 524,878	$ 1,098,389	$ —		$ 1,642,030
Compensation and employee benefits payable	—	626	504,909	365,091	—		870,626
Accrued bonus and profit sharing	—	—	353,632	275,412	—		629,044
Contract liabilities	—	—	35,149	41,067	—		76,216
Income taxes payable	—	—	12,327	16,507	(6,916	)	21,918
Short-term borrowings:					—
Warehouse lines of credit (which fund loans that U.S. Government Sponsored Enterprises have committed to purchase) (1)	—	—	955,246	516,345	—		1,471,591
Revolving credit facility	—	598,000	—	—	—		598,000
Other	—	—	16	—	—		16
Total short-term borrowings	—	598,000	955,262	516,345	—		2,069,607
Current maturities of long-term debt	—	—	59	1,407	—		1,466
Other current liabilities	—	—	55,886	14,342	—		70,228
Total Current Liabilities	—	617,389	2,442,102	2,328,560	(6,916	)	5,381,135
Long-Term Debt, net:
Long-term debt, net	—	1,758,640	29	4,216	—		1,762,885
Intercompany loan payable	1,522,122	—	1,849,837	60,755	(3,432,714	)	—
Total Long-Term Debt, net	1,522,122	1,758,640	1,849,866	64,971	(3,432,714	)	1,762,885
Deferred tax liabilities, net	—	—	70,996	125,335	(9,269	)	187,062
Non-current tax liabilities	—	—	136,320	3,730	—		140,050
Other liabilities	—	2,091	314,650	230,713	—		547,454
Total Liabilities	1,522,122	2,378,120	4,813,934	2,753,309	(3,448,899	)	8,018,586
Commitments and contingencies	—	—	—	—	—		—
Equity:
CBRE Group, Inc. Stockholders’ Equity	4,453,577	5,972,519	5,585,138	3,126,655	(14,684,312	)	4,453,577
Non-controlling interests	—	—	—	63,294	—		63,294
Total Equity	4,453,577	5,972,519	5,585,138	3,189,949	(14,684,312	)	4,516,871
Total Liabilities and Equity	$ 5,975,699	$ 8,350,639	$ 10,399,072	$ 5,943,258	$ (18,133,211	)	$ 12,535,457

(1) Although CBRE Capital Markets is included among our domestic subsidiaries that jointly and severally guarantee our 4.875% senior notes, 5.25% senior notes and our 2017 Credit Agreement, a substantial majority of warehouse receivables funded under JP Morgan, TD Bank, BofA, Capital One and Fannie Mae ASAP lines of credit are pledged to JP Morgan, TD Bank, BofA, Capital One and Fannie Mae.

CBRE GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Condensed Consolidating Balance Sheets

	As of December 31, 2017 (As Adjusted) (1) — Parent	CBRE Services	Guarantor Subsidiaries	Nonguarantor Subsidiaries	Eliminations		Consolidated Total
ASSETS
Current Assets:
Cash and cash equivalents	$ 7	$ 15,604	$ 112,048	$ 624,115	$ —		$ 751,774
Restricted cash	—	—	2,095	70,950	—		73,045
Receivables, net	—	—	990,923	2,121,366	—		3,112,289
Warehouse receivables (2)	—	—	479,628	448,410	—		928,038
Prepaid expenses	—	—	81,106	134,230	—		215,336
Contract assets	—	—	263,756	9,297	—		273,053
Income taxes receivable	2,162	—	—	49,628	(2,162	)	49,628
Other current assets	—	—	50,556	176,865	—		227,421
Total Current Assets	2,169	15,604	1,980,112	3,634,861	(2,162	)	5,630,584
Property and equipment, net	—	—	431,755	185,984	—		617,739
Goodwill	—	—	1,774,529	1,480,211	—		3,254,740
Other intangible assets, net	—	—	751,930	647,182	—		1,399,112
Investments in unconsolidated subsidiaries	—	—	197,395	40,606	—		238,001
Investments in consolidated subsidiaries	5,551,781	4,930,109	3,066,303	—	(13,548,193	)	—
Intercompany loan receivable	—	2,621,330	700,000	—	(3,321,330	)	—
Deferred tax assets, net	—	—	5,300	98,746	(5,300	)	98,746
Other assets, net	—	22,810	348,191	108,473	—		479,474
Total Assets	$ 5,553,950	$ 7,589,853	$ 9,255,515	$ 6,196,063	$ (16,876,985	)	$ 11,718,396
LIABILITIES AND EQUITY
Current Liabilities:
Accounts payable and accrued expenses	$ —	$ 29,708	$ 404,367	$ 1,139,597	$ —		$ 1,573,672
Compensation and employee benefits payable	—	626	479,306	424,502	—		904,434
Accrued bonus and profit sharing	—	—	590,534	487,811	—		1,078,345
Contract liabilities	—	—	42,994	57,621	—		100,615
Income taxes payable	—	3,314	13,704	55,778	(2,162	)	70,634
Short-term borrowings:					—
Warehouse lines of credit (which fund loans that U.S. Government Sponsored Enterprises have committed to purchase) (2)	—	—	474,195	436,571	—		910,766
Other	—	—	16	—	—		16
Total short-term borrowings	—	—	474,211	436,571	—		910,782
Current maturities of long-term debt	—	—	—	8	—		8
Other current liabilities	—	55	56,260	18,139	—		74,454
Total Current Liabilities	—	33,703	2,061,376	2,620,027	(2,162	)	4,712,944
Long-Term Debt, net:
Long-term debt, net	—	1,999,603	—	—	—		1,999,603
Intercompany loan payable	1,439,454	—	1,798,550	83,326	(3,321,330	)	—
Total Long-Term Debt, net	1,439,454	1,999,603	1,798,550	83,326	(3,321,330	)	1,999,603
Deferred tax liabilities, net	—	—	29,785	122,733	(5,300	)	147,218
Non-current tax liabilities	—	—	135,396	5,396	—		140,792
Other liabilities	—	4,766	300,299	238,160	—		543,225
Total Liabilities	1,439,454	2,038,072	4,325,406	3,069,642	(3,328,792	)	7,543,782
Commitments and contingencies	—	—	—	—	—		—
Equity:
CBRE Group, Inc. Stockholders’ Equity	4,114,496	5,551,781	4,930,109	3,066,303	(13,548,193	)	4,114,496
Non-controlling interests	—	—	—	60,118	—		60,118
Total Equity	4,114,496	5,551,781	4,930,109	3,126,421	(13,548,193	)	4,174,614
Total Liabilities and Equity	$ 5,553,950	$ 7,589,853	$ 9,255,515	$ 6,196,063	$ (16,876,985	)	$ 11,718,396

(2) Although CBRE Capital Markets is included among our domestic subsidiaries that jointly and severally guarantee our 5.00% senior notes, 4.875% senior notes, 5.25% senior notes and our 2017 Credit Agreement, a substantial majority of warehouse receivables funded under TD Bank, Fannie Mae ASAP, JP Morgan, Capital One and BofA lines of credit are pledged to TD Bank, Fannie Mae, JP Morgan, Capital One and BofA, and accordingly, are not included as collateral for these notes or our other outstanding debt.

CBRE GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Condensed Consolidating Statements of Operations

	Three Months Ended June 30, 2018 — Parent	CBRE Services		Guarantor Subsidiaries		Nonguarantor Subsidiaries		Eliminations		Consolidated Total
Revenue	$ —	$	—	$	2,848,854	$	2,262,580	$ —		$ 5,111,434
Costs and expenses:
Cost of services	—		—		2,265,206		1,693,542	—		3,958,748
Operating, administrative and other	7,039		246		430,122		388,875	—		826,282
Depreciation and amortization	—		—		68,334		45,065	—		113,399
Total costs and expenses	7,039		246		2,763,662		2,127,482	—		4,898,429
Gain on disposition of real estate	—		—		11,212		1,099	—		12,311
Operating (loss) income	(7,039	)	(246	)	96,404		136,197	—		225,316
Equity income from unconsolidated subsidiaries	—		—		94,755		1,266	—		96,021
Other income	—		—		1,189		2,820	—		4,009
Interest income	—		34,946		1,336		153	(34,946	)	1,489
Interest expense	—		26,078		32,260		3,493	(34,946	)	26,885
Royalty and management service (income) expense	—		—		(2,370	)	2,370	—		—
Income from consolidated subsidiaries	233,952		227,472		98,642		—	(560,066	)	—
Income before (benefit of) provision for income taxes	226,913		236,094		262,436		134,573	(560,066	)	299,950
(Benefit of) provision for income taxes	(1,754	)	2,142		34,964		34,967	—		70,319
Net income	228,667		233,952		227,472		99,606	(560,066	)	229,631
Less: Net income attributable to non-controlling interests	—		—		—		964	—		964
Net income attributable to CBRE Group, Inc.	$ 228,667	$	233,952	$	227,472	$	98,642	$ (560,066	)	$ 228,667

	Three Months Ended June 30, 2017 (As Adjusted) (1) — Parent	CBRE Services		Guarantor Subsidiaries		Nonguarantor Subsidiaries		Eliminations		Consolidated Total
Revenue	$ —	$	—	$	2,590,186	$	1,849,385	$ —		$ 4,439,571
Costs and expenses:
Cost of services	—		—		2,054,829		1,354,711	—		3,409,540
Operating, administrative and other	1,046		538		387,951		323,080	—		712,615
Depreciation and amortization	—		—		58,695		41,691	—		100,386
Total costs and expenses	1,046		538		2,501,475		1,719,482	—		4,222,541
Gain on disposition of real estate	—		—		2		11,296	—		11,298
Operating (loss) income	(1,046	)	(538	)	88,713		141,199	—		228,328
Equity income from unconsolidated subsidiaries	—		—		74,960		424	—		75,384
Other income	—		1		612		2,573	—		3,186
Interest income	—		30,698		892		535	(30,698	)	1,427
Interest expense	—		34,364		22,468		9,296	(30,698	)	35,430
Royalty and management service (income) expense	—		—		(897	)	897	—		—
Income from consolidated subsidiaries	202,422		205,012		88,198		—	(495,632	)	—
Income before (benefit of) provision for income taxes	201,376		200,809		231,804		134,538	(495,632	)	272,895
(Benefit of) provision for income taxes	(401	)	(1,613	)	26,792		45,109	—		69,887
Net income	201,777		202,422		205,012		89,429	(495,632	)	203,008
Less: Net income attributable to non-controlling interests	—		—		—		1,231	—		1,231
Net income attributable to CBRE Group, Inc.	$ 201,777	$	202,422	$	205,012	$	88,198	$ (495,632	)	$ 201,777

CBRE GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Condensed Consolidating Statements of Operations

	Six Months Ended June 30, 2018 — Parent	CBRE Services		Guarantor Subsidiaries		Nonguarantor Subsidiaries		Eliminations			Consolidated Total
Revenue	$ —	$	—	$	5,466,548	$	4,318,838	$	—		$ 9,785,386
Costs and expenses:
Cost of services	—		—		4,322,819		3,255,890		—		7,578,709
Operating, administrative and other	12,743		731		802,467		742,576		—		1,558,517
Depreciation and amortization	—		—		132,643		88,921		—		221,564
Total costs and expenses	12,743		731		5,257,929		4,087,387		—		9,358,790
Gain on disposition of real estate	—		—		11,230		1,099		—		12,329
Operating (loss) income	(12,743	)	(731	)	219,849		232,550		—		438,925
Equity income from unconsolidated subsidiaries	—		—		134,047		2,153		—		136,200
Other income (loss)	—		—		2,899		(3,170	)	—		(271	)
Interest income	—		67,632		3,788		1,322		(67,632	)	5,110
Interest expense	—		53,953		59,291		10,131		(67,632	)	55,743
Write-off of financing costs on extinguished debt	—		27,982		—		—		—		27,982
Royalty and management service (income) expense	—		—		(1,672	)	1,672		—		—
Income from consolidated subsidiaries	388,525		399,815		159,054		—		(947,394	)	—
Income before (benefit of) provision for income taxes	375,782		384,781		462,018		221,052		(947,394	)	496,239
(Benefit of) provision for income taxes	(3,173	)	(3,744	)	62,203		61,197		—		116,483
Net income	378,955		388,525		399,815		159,855		(947,394	)	379,756
Less: Net income attributable to non-controlling interests	—		—		—		801		—		801
Net income attributable to CBRE Group, Inc.	$ 378,955	$	388,525	$	399,815	$	159,054	$	(947,394	)	$ 378,955

	Six Months Ended June 30, 2017 (As Adjusted) (1) — Parent	CBRE Services		Guarantor Subsidiaries		Nonguarantor Subsidiaries		Eliminations		Consolidated Total
Revenue	$ —	$	—	$	5,008,786	$	3,481,751	$ —		$ 8,490,537
Costs and expenses:
Cost of services	—		—		3,975,517		2,580,500	—		6,556,017
Operating, administrative and other	762		887		703,760		613,832	—		1,319,241
Depreciation and amortization	—		—		115,425		78,998	—		194,423
Total costs and expenses	762		887		4,794,702		3,273,330	—		8,069,681
Gain on disposition of real estate	—		—		228		12,455	—		12,683
Operating (loss) income	(762	)	(887	)	214,312		220,876	—		433,539
Equity income from unconsolidated subsidiaries	—		—		89,330		1,072	—		90,402
Other income	—		1		1,026		6,274	—		7,301
Interest income	—		60,599		2,539		1,299	(60,599	)	3,838
Interest expense	—		67,510		44,616		17,913	(60,599	)	69,440
Royalty and management service (income) expense	—		—		(6,699	)	6,699	—		—
Income from consolidated subsidiaries	339,267		344,076		133,717		—	(817,060	)	—
Income before (benefit of) provision for income taxes	338,505		336,279		403,007		204,909	(817,060	)	465,640
(Benefit of) provision for income taxes	(292	)	(2,988	)	58,931		68,055	—		123,706
Net income	338,797		339,267		344,076		136,854	(817,060	)	341,934
Less: Net income attributable to non-controlling interests	—		—		—		3,137	—		3,137
Net income attributable to CBRE Group, Inc.	$ 338,797	$	339,267	$	344,076	$	133,717	$ (817,060	)	$ 338,797

CBRE GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Condensed Consolidating Statements of Comprehensive Income (Loss)

	Three Months Ended June 30, 2018 — Parent	CBRE Services	Guarantor Subsidiaries	Nonguarantor Subsidiaries			Eliminations		Consolidated Total
Net income	$ 228,667	$ 233,952	$ 227,472	$	99,606		$ (560,066	)	$ 229,631
Other comprehensive income (loss):
Foreign currency translation loss	—	—	—		(165,926	)	—		(165,926	)
Amounts reclassified from accumulated other comprehensive loss to interest expense, net	—	628	—		—		—		628
Unrealized gains on interest rate swaps, net	—	214	—		—		—		214
Unrealized holding losses on available for sale debt securities, net	—	—	(122	)	—		—		(122	)
Total other comprehensive income (loss)	—	842	(122	)	(165,926	)	—		(165,206	)
Comprehensive income (loss)	228,667	234,794	227,350		(66,320	)	(560,066	)	64,425
Less: Comprehensive income attributable to non-controlling interests	—	—	—		480		—		480
Comprehensive income (loss) attributable to CBRE Group, Inc.	$ 228,667	$ 234,794	$ 227,350	$	(66,800	)	$ (560,066	)	$ 63,945

	Three Months Ended June 30, 2017 (As Adjusted) (1) — Parent	CBRE Services	Guarantor Subsidiaries		Nonguarantor Subsidiaries		Eliminations		Consolidated Total
Net income	$ 201,777	$ 202,422	$	205,012	$	89,429	$ (495,632	)	$ 203,008
Other comprehensive income:
Foreign currency translation gain	—	—		—		88,649	—		88,649
Amounts reclassified from accumulated other comprehensive loss to interest expense, net	—	1,380		—		—	—		1,380
Unrealized losses on interest rate swaps, net	—	(217	)	—		—	—		(217	)
Unrealized holding gains on available for sale debt securities, net	—	—		896		81	—		977
Other, net	3	—		(13	)	—	—		(10	)
Total other comprehensive income	3	1,163		883		88,730	—		90,779
Comprehensive income	201,780	203,585		205,895		178,159	(495,632	)	293,787
Less: Comprehensive income attributable to non-controlling interests	—	—		—		1,390	—		1,390
Comprehensive income attributable to CBRE Group, Inc.	$ 201,780	$ 203,585	$	205,895	$	176,769	$ (495,632	)	$ 292,397

CBRE GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Condensed Consolidating Statements of Comprehensive Income (Loss)

	Six Months Ended June 30, 2018 — Parent	CBRE Services	Guarantor Subsidiaries	Nonguarantor Subsidiaries		Eliminations			Consolidated Total
Net income	$ 378,955	$ 388,525	$ 399,815	$	159,855	$	(947,394	)	$ 379,756
Other comprehensive income (loss):
Foreign currency translation loss	—	—	—		(99,894	)	—		(99,894	)
Adoption of Accounting Standards Update 2016-01, net	—	—	(3,964	)	—		—		(3,964	)
Amounts reclassified from accumulated other comprehensive loss to interest expense, net	—	1,383	—		—		—		1,383
Unrealized gains on interest rate swaps, net	—	817	—		—		—		817
Unrealized holding losses on available for sale debt securities, net	—	—	(627	)	—		—		(627	)
Other, net	—	—	20		5,508		—		5,528
Total other comprehensive income (loss)	—	2,200	(4,571	)	(94,386	)	—		(96,757	)
Comprehensive income	378,955	390,725	395,244		65,469		(947,394	)	282,999
Less: Comprehensive income attributable to non-controlling interests	—	—	—		122		—		122
Comprehensive income attributable to CBRE Group, Inc.	$ 378,955	$ 390,725	$ 395,244	$	65,347	$	(947,394	)	$ 282,877

	Six Months Ended June 30, 2017 (As Adjusted) (1) — Parent	CBRE Services		Guarantor Subsidiaries	Nonguarantor Subsidiaries		Eliminations		Consolidated Total
Net income	$ 338,797	$	339,267	$ 344,076	$	136,854	$ (817,060	)	$ 341,934
Other comprehensive (loss) income:
Foreign currency translation gain	—		—	—		139,837	—		139,837
Amounts reclassified from accumulated other comprehensive loss to interest expense, net	—		2,888	—		—	—		2,888
Unrealized gains on interest rate swaps, net	—		77	—		—	—		77
Unrealized holding gains on available for sale debt securities, net	—		—	1,725		175	—		1,900
Other, net	(2	)	—	(14	)	—	—		(16	)
Total other comprehensive (loss) income	(2	)	2,965	1,711		140,012	—		144,686
Comprehensive income	338,795		342,232	345,787		276,866	(817,060	)	486,620
Less: Comprehensive income attributable to non-controlling interests	—		—	—		3,317	—		3,317
Comprehensive income attributable to CBRE Group, Inc.	$ 338,795	$	342,232	$ 345,787	$	273,549	$ (817,060	)	$ 483,303

CBRE GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Condensed Consolidating Statements of Cash Flows

	Six Months Ended June 30, 2018 — Parent	CBRE Services		Guarantor Subsidiaries			Nonguarantor Subsidiaries		Consolidated Total
CASH FLOWS PROVIDED BY (USED IN) OPERATING ACTIVITIES:	$ 51,094	$	2,234	$	(56,141	)	$ (89,249	)	$ (92,062	)
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures	—		—		(65,676	)	(41,806	)	(107,482	)
Acquisition of businesses, including net assets acquired, intangibles and goodwill, net of cash acquired	—		—		(259,338	)	(5,364	)	(264,702	)
Contributions to unconsolidated subsidiaries	—		—		(17,030	)	(4,012	)	(21,042	)
Distributions from unconsolidated subsidiaries	—		—		24,986		3,249		28,235
Net proceeds from disposition of real estate held for investment	—		—		−		14,174		14,174
Purchase of equity securities	—		—		(13,718	)	—		(13,718	)
Proceeds from sale of equity securities	—		—		8,889		—		8,889
Purchase of available for sale debt securities	—		—		(18,723	)	—		(18,723	)
Proceeds from the sale of available for sale debt securities	—		—		4,121		—		4,121
Other investing activities, net	—		—		(6,454	)	70		(6,384	)
Net cash used in investing activities	—		—		(342,943	)	(33,689	)	(376,632	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from senior term loans	—		550,000		—		—		550,000
Proceeds from revolving credit facility	—		2,000,000		—		—		2,000,000
Repayment of revolving credit facility	—		(1,402,000	)	—		—		(1,402,000	)
Repayment of 5.00% senior notes (including premium)	—		(820,000	)	—		—		(820,000	)
Proceeds from notes payable on real estate held for investment	—		—		—		52		52
Repayment of notes payable on real estate held for investment	—		—		—		(13,028	)	(13,028	)
Proceeds from notes payable on real estate held for sale and under development	—		—		—		1,101		1,101
Repayment of notes payable on real estate held for sale and under development	—		—		—		(2,991	)	(2,991	)
Acquisition of businesses (cash (paid) received for acquisitions more than three months after purchase date)	—		—		(13,166	)	1,983		(11,183	)
Repayment of debt assumed in acquisition of FacilitySource	—		—		(26,295	)	—		(26,295	)
Units repurchased for payment of taxes on equity awards	(4,630	)	—		—		—		(4,630	)
Non-controlling interest contributions	—		—		—		2,744		2,744
Non-controlling interest distributions	—		—		—		(7,652	)	(7,652	)
(Increase) decrease in intercompany receivables, net	(46,622	)	(337,235	)	405,196		(21,339	)	—
Other financing activities, net	158		(199	)	—		(35	)	(76	)
Net cash (used in) provided by financing activities	(51,094	)	(9,434	)	365,735		(39,165	)	266,042
Effect of currency exchange rate changes on cash and cash equivalents and restricted cash	—		—		—		(18,821	)	(18,821	)
NET DECREASE IN CASH AND CASH EQUIVALENTS AND RESTRICTED CASH	—		(7,200	)	(33,349	)	(180,924	)	(221,473	)
CASH AND CASH EQUIVALENTS AND RESTRICTED CASH, AT BEGINNING OF PERIOD	7		15,604		114,143		695,065		824,819
CASH AND CASH EQUIVALENTS AND RESTRICTED CASH, AT END OF PERIOD	$ 7	$	8,404	$	80,794		$ 514,141		$ 603,346
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest	$ —	$	58,814	$	—		$ 523		$ 59,337
Income taxes, net	$ —	$	—	$	77,076		$ 82,757		$ 159,833

CBRE GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Condensed Consolidating Statements of Cash Flows

	Six Months Ended June 30, 2017 (As Adjusted) (1) — Parent	CBRE Services		Guarantor Subsidiaries			Nonguarantor Subsidiaries		Consolidated Total
CASH FLOWS PROVIDED BY (USED IN) OPERATING ACTIVITIES:	$ 49,436	$	16,131	$	(162,159	)	$ (20,845	)	$ (117,437	)
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures	—		—		(39,925	)	(19,938	)	(59,863	)
Acquisition of businesses, including net assets acquired, intangibles and goodwill, net of cash acquired	—		—		(20,584	)	(4,742	)	(25,326	)
Contributions to unconsolidated subsidiaries	—		—		(23,752	)	(8,908	)	(32,660	)
Distributions from unconsolidated subsidiaries	—		—		19,333		4,637		23,970
Purchase of equity securities	—		—		(9,280	)	—		(9,280	)
Proceeds from sale of equity securities	—		—		9,428		—		9,428
Purchase of available for sale debt securities	—		—		(10,454	)	—		(10,454	)
Proceeds from the sale of available for sale debt securities	—		—		7,849		—		7,849
Other investing activities, net	—		—		2,486		(207	)	2,279
Net cash used in investing activities	—		—		(64,899	)	(29,158	)	(94,057	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from revolving credit facility	—		911,000		—		—		911,000
Repayment of revolving credit facility	—		(911,000	)	—		—		(911,000	)
Proceeds from notes payable on real estate held for sale and under development	—		—		—		2,137		2,137
Repayment of notes payable on real estate held for sale and under development	—		—		—		(9,189	)	(9,189	)
Acquisition of businesses (cash paid for acquisitions more than three months after purchase date)	—		—		(11,196	)	(3,930	)	(15,126	)
Units repurchased for payment of taxes on equity awards	(1,900	)	—		—		—		(1,900	)
Non-controlling interest contributions	—		—		—		1,941		1,941
Non-controlling interest distributions	—		—		—		(3,904	)	(3,904	)
(Increase) decrease in intercompany receivables, net	(47,896	)	(20,114	)	46,854		21,156		—
Other financing activities, net	360		—		(3,145	)	(881	)	(3,666	)
Net cash (used in) provided by financing activities	(49,436	)	(20,114	)	32,513		7,330		(29,707	)
Effect of currency exchange rate changes on cash and cash equivalents and restricted cash	—		—		—		20,190		20,190
NET DECREASE IN CASH AND CASH EQUIVALENTS AND RESTRICTED CASH	—		(3,983	)	(194,545	)	(22,483	)	(221,011	)
CASH AND CASH EQUIVALENTS AND RESTRICTED CASH, AT BEGINNING OF PERIOD	7		16,889		271,088		543,428		831,412
CASH AND CASH EQUIVALENTS AND RESTRICTED CASH, AT END OF PERIOD	$ 7	$	12,906	$	76,543		$ 520,945		$ 610,401
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest	$ —	$	59,446	$	—		$ 44		$ 59,490
Income taxes, net	$ —	$	—	$	82,017		$ 81,868		$ 163,885

CBRE GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Unaudited)

Subsequent Event

I n June 2016, CBRE was named as a defendant in a class action lawsuit relating to its role as property manager of certain real estate investment properties owned by the plaintiffs in Florida. CBRE started managing these various properties between July 2005 and March 2007, and CBRE ceased managing these properties in January 2011. The third-party sponsors of such investment properties inappropriately managed funds for the plaintiffs which resulted in losses, used some of these funds for personal purposes, and were imprisoned for their conduct. Since the third-party sponsors could not answer financially for the resulting losses to the plaintiffs, the plaintiffs made claims against CBRE generally alleging that CBRE should have prevented the fraud perpetuated by the third-party sponsors with respect to the properties managed by CBRE. On August 3, 2018, we reached a tentative settlement agreement regarding this proceeding, which agreement is subject to negotiation of definitive settlement documentation and court approval, including the payment of $100 million to the plaintiffs. We expect that such settlement payment will be funded principally by insurance coverage .

ITEM 2. Management’s Discussion and Analysis o f Financial Condition and Results of Operations

This Quarterly Report on Form 10-Q (Quarterly Report) for CBRE Group, Inc. for the three months ended June 30, 2018 represents an update to the more detailed and comprehensive disclosures included in our Annual Report on Form 10‑K for the year ended December 31, 2017. Accordingly, you should read the following discussion in conjunction with the information included in our Annual Report on Form 10-K for the year ended December 31, 2017 as well as the unaudited financial statements included elsewhere in this Quarterly Report.

In addition, the statements and assumptions in this Quarterly Report that are not statements of historical fact are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 or Section 21E of the Securities Exchange Act of 1934, each as amended, including, in particular, statements about our plans, strategies and prospects as well as estimates of industry growth for the next quarter and beyond. For important information regarding these forward-looking statements, please see the discussion below under the caption “Cautionary Note on Forward-Looking Statements.”

Overview

CBRE Group, Inc. is a Delaware corporation. References to “the company,” “we,” “us” and “our” refer to CBRE Group, Inc. and include all of its consolidated subsidiaries, unless otherwise indicated or the context requires otherwise.

We are the world’s largest commercial real estate services and investment firm, based on 2017 revenue, with leading global market positions in our leasing, property sales, occupier outsourcing and valuation businesses. As of December 31, 2017, we operated in more than 450 offices worldwide with over 80,000 employees, excluding independent affiliates.

Our business is focused on providing services to both occupiers of and investors in real estate. For occupiers, we provide facilities management, project management, transaction (both property sales and tenant leasing) and consulting services, among others. For investors, we provide capital markets (property sales, commercial mortgage brokerage, loan origination and servicing), leasing, investment management, property management, valuation and development services, among others. We provide commercial real estate services under the “CBRE” brand name, investment management services under the “CBRE Global Investors” brand name and development services under the “Trammell Crow Company” brand name.

Our revenue mix has shifted in recent years toward more contractual revenue as occupiers and investors increasingly prefer to purchase integrated, account-based services from firms that meet the full spectrum of their needs nationally and globally. We believe we are well-positioned to capture a growing share of this business. We generate revenue from both management fees (large multi-year portfolio and per-project contracts) and commissions on transactions. Our contractual, fee-for-services businesses generally involve occupier outsourcing (including facilities and project management), property management, investment management, appraisal/valuation and loan servicing). In addition, our leasing services business line is largely recurring in nature over time.

In 2017, we generated revenue from a highly diversified base of clients, including more than 90 of the Fortune 100 companies. We have been an S&P 500 company since 2006 and in 2017 we were ranked #214 on the Fortune 500. We have been voted the most recognized commercial real estate brand in a Lipsey Company survey for 17 years in a row (including 2018). We have also been rated a World’s Most Ethical Company by the Ethisphere Institute for five consecutive years.

Critical Accounting Policies

Our consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States, or GAAP, which require us to make estimates and assumptions that affect reported amounts. The estimates and assumptions are based on historical experience and on other factors that we believe to be reasonable. Actual results may differ from those estimates. Critical accounting policies represent the areas where more significant judgments and estimates are used in the preparation of our consolidated financial statements. A

discussion of such critical accounting policies, which include revenue rec ognition, goodwill and other intangible assets, and income taxes can be found in our Annual Report on Form 10-K for the year ended December 31, 2017. There have been no material changes to these policies as of June 30, 2018, except for the adoption of new revenue recognition guidance in the first quarter of 2018 and an update to our estimate of the U.S. federal and state tax impact of the transition tax related to the Tax Cuts and Jobs Act (the Tax Act). For a detailed discussion of our new revenue recognit ion policies and updates to income taxes, see Note 2 of the Notes to Consolidated Financial Statements (Unaudited) set forth in Item 1 of this Quarterly Report.

New Accounting Pronouncements

See Note 3 of the Notes to Consolidated Financial Statements (Unaudited) set forth in Item 1 of this Quarterly Report.

Seasonality

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 tend 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.

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. However, to date, we do not believe that general inflation has had a material impact upon our operations.

Items Affecting Comparability

When you read our financial statements and the information included in this Quarterly Report, you should consider that we have experienced, and continue to experience, several material trends and uncertainties 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; 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 effect of difficult market conditions on our operating margins 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. Nevertheless, adverse global and regional economic trends could pose significant risks to the performance of our operations and our financial condition.

Commercial real estate markets in the United States have gene rally been marked by increased demand for space, falling vacancies and higher rents since 2010. During this time, healthy U.S. property sales activity has been sustained by gradually improving market fundamentals, including higher occupancy rates and rents , broad, low-cost credit availability and increased institutional capital allocations to commercial real estate. Following years of strong growth, U.S. property sales volumes slowed in 2016 and 2017, but edged up modestly in the first half of 2018 as signi ficant capital continues to target commercial real estate. Commercial mortgage markets also have remained highly active, driven by relatively low interest rates, a favorable lending environment and improved market fundamentals. The U.S. Government Sponsore d Enterprises continue to be a significant source of debt capital for multi-family properties.

European countries began to emerge from recession in 2013, with economic growth accelerating in 2017. Sales and leasing activity has improved steadily across most of continental Europe for more than three years, though market volumes dipped slightly in the first half of 2018. Since the United Kingdom’s June 2016 referendum to leave the European Union (EU), sentiment in that country has improved. While steady progress continues to be made regarding the United Kingdom’s long-term relationship with the EU, the absence of an agreement as the March 2019 deadline draws closer has contributed to uncertainty more recently.

In Asia Pacific, real estate leasing and investment markets have remained highly active since late 2016. Asia Pacific investors also continue to be a significant source of real estate investment both in the region and across other parts of the world.

Real estate investment management and property development markets have been generally favorable with abundant debt and equity capital flows into commercial real estate. Actively managed real estate equity strategies have been pressured by a shift in investor preferences from active to passive portfolio strategies and concerns about potentially higher interest rates.

The performance of our global real estate services and real estate investment businesses depends on sustained economic growth and job creation; stable, healthy global credit markets; and continued positive business and investor sentiment.

Effects of Acquisitions

We historically have made significant use of strategic acquisitions to add and enhance service competencies around the world. On June 12, 2018, CBRE Jason Acquisition LLC (Merger Sub), our wholly-owned subsidiary, and FacilitySource Holdings, LLC (FacilitySource), WP X Finance, LP and Warburg Pincus X Partners, LP (collectively, the Stockholders) entered into a stock purchase agreement and plan of merger (the Merger Agreement). As part of the Merger Agreement, (i) we purchased from the Stockholders all the outstanding shares of capital stock of FS WP Holdco, Inc (Blocker Corp), which owned 1,686,013 Class A units (the Blocker Units) and (ii) immediately following the acquisition of Blocker Corp, Merger Sub merged with FacilitySource, with FacilitySource continuing as the surviving company and our wholly-owned subsidiary within our Americas segment (the FacilitySource Acquisition), with the remaining Blocker Units not held by Blocker Corp. cancelled and converted into the right to receive cash consideration as set forth in the Merger Agreement. The estimated net initial purchase price was approximately $265.5 million, with $262.0 million paid in cash, plus adjustments for working capital and other items. We financed the transaction with cash on hand and borrowings under our revolving credit facility. We completed the FacilitySource Acquisition to help us (i) build a tech-enabled supply chain capability that is unique for the occupier outsourcing industry and (ii) drive meaningfully differentiated outcomes for leading occupiers of real estate.

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 in which, in some cases, we held a small equity interest. During 2017, we completed 11 in-fill acquisitions, including two leading Software as a Service (SaaS) platforms – one that produces scalable interactive visualization technologies for commercial real estate and one that provides technology solutions for facilities management operations, a healthcare-focused project manager in Australia, a full-service brokerage and management boutique in South Florida, a technology-enabled national boutique commercial real estate finance and consulting firm in the United States, a retail consultancy in France, a majority interest in a Toronto-based investment management

business specializing in private infrastructure and private equity investments, a San Francisco-based technology-focused boutique real estate brokerage firm, a project management and design engineering firm operating across the United States, a Washington, D.C.-bas ed retail brokerage operation and a leading technical engineering services provider in Italy. During the six months ended June 30, 2018, we acquired a retail leasing and property management firm in Australia and our affiliate in Israel. In addition, in Jul y 2018, we completed the acquisition of a local facilities management provider in Israel.

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

Our acquisition structures often include deferred and/or contingent purchase price payments in future periods that are subject to the passage of time or achievement of certain performance metrics and other conditions. As of June 30, 2018, we have accrued deferred consideration totaling $88.2 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 1 of this Quarterly Report.

International Operations

We are monitoring the economic and political developments related to the United Kingdom’s referendum to leave the European Union and the potential impact on our businesses in the United Kingdom and the rest of Europe, including, in particular, sales and leasing activity in the United Kingdom, as well as any associated currency volatility impact on our results of operations.

As we continue to increase our international operations through either acquisitions or organic growth, fluctuations in the value of the U.S. dollar relative to the other currencies in which we may generate earnings could adversely affect our business, financial condition and operating results. Our Global Investment Management business has a significant amount of euro-denominated assets under management, or AUM, 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 the 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.

During the six months ended June 30, 2018, approximately 43% of our business was transacted in non-U.S. dollar currencies, the majority of which included the Australian dollar, Brazilian real, British pound sterling, Canadian dollar, Chinese yuan, Danish krone, euro, Hong Kong dollar, Indian rupee, Japanese yen, Korean won, Mexican peso, Polish zloty, Singapore dollar, Swedish krona, Swiss franc and Thai baht. The following table sets forth our revenue derived from our most significant currencies (U.S. dollars in thousands):

	Three Months Ended June 30, — 2018		2017		Six Months Ended June 30, — 2018		2017
			(As Adjusted) (1)				(As Adjusted) (1)
United States dollar	$ 2,908,185	56.9 %	$ 2,644,445	59.5 %	$ 5,582,402	57.0 %	$ 5,116,851	60.3 %
British pound sterling	634,264	12.4 %	518,988	11.7 %	1,214,781	12.4 %	991,143	11.7 %
Euro	560,352	11.0 %	405,563	9.1 %	1,056,298	10.8 %	754,835	8.9 %
Canadian dollar	181,075	3.5 %	139,683	3.1 %	341,957	3.5 %	270,254	3.2 %
Australian dollar	128,376	2.5 %	119,025	2.7 %	229,933	2.3 %	211,877	2.5 %
Indian rupee	103,651	2.0 %	94,347	2.1 %	207,245	2.1 %	172,166	2.0 %
Chinese yuan	69,284	1.4 %	57,691	1.3 %	131,659	1.3 %	108,126	1.3 %
Singapore dollar	68,273	1.3 %	64,792	1.5 %	128,506	1.3 %	121,970	1.4 %
Japanese yen	62,491	1.2 %	66,457	1.5 %	127,659	1.3 %	113,845	1.3 %
Brazilian real	44,455	0.9 %	33,909	0.8 %	85,151	0.9 %	69,216	0.8 %
Swiss franc	44,066	0.9 %	34,503	0.8 %	87,314	0.9 %	71,584	0.8 %
Hong Kong dollar	39,169	0.8 %	34,226	0.8 %	74,355	0.8 %	65,497	0.8 %
Mexican peso	34,387	0.7 %	29,369	0.7 %	66,998	0.7 %	49,455	0.6 %
Polish zloty	21,509	0.4 %	14,555	0.3 %	38,947	0.4 %	27,119	0.3 %
Danish krone	18,608	0.4 %	18,705	0.4 %	41,931	0.4 %	37,165	0.4 %
Thai baht	18,438	0.4 %	14,533	0.3 %	38,363	0.4 %	28,066	0.3 %
Swedish krona	16,674	0.3 %	16,195	0.4 %	36,094	0.4 %	31,108	0.4 %
Korean won	12,559	0.2 %	12,719	0.3 %	26,085	0.3 %	22,628	0.3 %
Other currencies	145,618	2.8 %	119,866	2.7 %	269,708	2.8 %	227,632	2.7 %
Total revenue	$ 5,111,434	100.0 %	$ 4,439,571	100.0 %	$ 9,785,386	100.0 %	$ 8,490,537	100.0 %

(1) We adopted new revenue recognition guidance in the first quarter of 2018. Certain restatements have been made to the 2017 financial statements to conform with the 2018 presentation. See Notes 2 and 3 of the Notes to Consolidated Financial Statements (Unaudited) set forth in Item 1 of this Quarterly Report for more information.

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 six months ended June 30, 2018, the net impact would have been an increase in pre-tax income of $1.7 million. Had the euro-to-U.S. dollar exchange rates been 10% higher during the six months ended June 30, 2018, the net impact would have been an increase in pre-tax income of $5.3 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.

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 affects 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.

Results of Operations

The following table sets forth items derived from our consolidated statements of operations for the three and six months ended June 30, 2018 and 2017 (dollars in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2018		2017		2018			2017
			(As Adjusted) (1)					(As Adjusted) (1)
Revenue:
Fee revenue:
Occupier outsourcing	$ 762,173	14.9 %	$ 613,372	13.8 %	$ 1,474,694		15.1 %	$ 1,180,712	13.9 %
Property management	150,181	2.9 %	133,315	3.0 %	298,310		3.0 %	259,062	3.1 %
Valuation	138,367	2.7 %	129,768	2.9 %	264,585		2.7 %	246,223	2.9 %
Loan servicing	43,908	0.9 %	39,872	0.9 %	85,722		0.9 %	76,282	0.9 %
Investment management	98,947	1.9 %	92,763	2.1 %	222,637		2.3 %	182,329	2.1 %
Leasing	743,980	14.6 %	619,916	14.0 %	1,316,466		13.5 %	1,149,394	13.5 %
Capital Markets:
Sales	436,600	8.5 %	434,233	9.8 %	842,168		8.6 %	788,027	9.3 %
Commercial mortgage origination	119,814	2.3 %	104,510	2.4 %	227,108		2.3 %	189,234	2.2 %
Other:
Development services	15,463	0.3 %	13,677	0.3 %	36,695		0.4 %	25,300	0.3 %
Other	26,167	0.6 %	19,523	0.4 %	44,114		0.4 %	38,240	0.5 %
Total fee revenue	2,535,600	49.6 %	2,200,949	49.6 %	4,812,499		49.2 %	4,134,803	48.7 %
Pass through costs also recognized as revenue	2,575,834	50.4 %	2,238,622	50.4 %	4,972,887		50.8 %	4,355,734	51.3 %
Total revenue	5,111,434	100.0 %	4,439,571	100.0 %	9,785,386		100.0 %	8,490,537	100.0 %
Costs and expenses:
Cost of services	3,958,748	77.4 %	3,409,540	76.8 %	7,578,709		77.4 %	6,556,017	77.2 %
Operating, administrative and other	826,282	16.2 %	712,615	16.1 %	1,558,517		15.9 %	1,319,241	15.5 %
Depreciation and amortization	113,399	2.2 %	100,386	2.2 %	221,564		2.3 %	194,423	2.3 %
Total costs and expenses	4,898,429	95.8 %	4,222,541	95.1 %	9,358,790		95.6 %	8,069,681	95.0 %
Gain on disposition of real estate	12,311	0.2 %	11,298	0.2 %	12,329		0.1 %	12,683	0.1 %
Operating income	225,316	4.4 %	228,328	5.1 %	438,925		4.5 %	433,539	5.1 %
Equity income from unconsolidated subsidiaries	96,021	1.9 %	75,384	1.7 %	136,200		1.4 %	90,402	1.1 %
Other income (loss)	4,009	0.1 %	3,186	0.1 %	(271	)	0.0 %	7,301	0.1 %
Interest income	1,489	0.0 %	1,427	0.0 %	5,110		0.1 %	3,838	0.0 %
Interest expense	26,885	0.5 %	35,430	0.8 %	55,743		0.6 %	69,440	0.8 %
Write-off of financing costs on extinguished debt	—	0.0 %	—	0.0 %	27,982		0.3 %	—	0.0 %
Income before provision for income taxes	299,950	5.9 %	272,895	6.1 %	496,239		5.1 %	465,640	5.5 %
Provision for income taxes	70,319	1.4 %	69,887	1.5 %	116,483		1.2 %	123,706	1.5 %
Net income	229,631	4.5 %	203,008	4.6 %	379,756		3.9 %	341,934	4.0 %
Less: Net income attributable to non-controlling interests	964	0.0 %	1,231	0.1 %	801		0.0 %	3,137	0.0 %
Net income attributable to CBRE Group, Inc.	$ 228,667	4.5 %	$ 201,777	4.5 %	$ 378,955		3.9 %	$ 338,797	4.0 %
EBITDA	$ 437,781	8.6 %	$ 406,053	9.1 %	$ 795,617		8.1 %	$ 722,528	8.5 %
Adjusted EBITDA	$ 439,307	8.6 %	$ 418,686	9.4 %	$ 787,114		8.0 %	$ 731,863	8.6 %

Fee revenue, EBITDA and adjusted EBITDA are not recognized measurements under 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 charges that may obscure trends in the underlying performance of our business. Because not all companies use identical calculations, our presentation of fee revenue, EBITDA and adjusted EBITDA may not be comparable to similarly titled measures of other companies.

Fee revenue is gross revenue less both client reimbursed costs largely associated with employees that are dedicated to client facilities and subcontracted vendor work performed for clients. We believe that i nvestors may find this measure useful to analyze the company’s overall financial performance because it excludes costs reimbursable by clients, and as such provides greater visibility into the underlying performance of our business.

EBITDA represents earnings before net interest expense, write-off of financing costs on extinguished debt, income taxes, depreciation and amortization. Amounts shown for adjusted EBITDA further remove (from EBITDA) the impact of certain cash and non-cash charges related to acquisitions and certain carried interest incentive compensation reversal to align with the timing of associated revenue. 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.

EBITDA and adjusted EBITDA are not intended to be measures of free cash flow for our discretionary use because they do not consider certain cash requirements such as tax and debt service payments. These measures may also differ from the amounts calculated under similarly titled definitions in our debt instruments, which amounts 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 and making certain restricted payments. We also use adjusted EBITDA as a significant component when measuring our operating performance under our employee incentive compensation programs.

EBITDA and adjusted EBITDA are calculated as follows (dollars in thousands):

	Three Months Ended
	June 30,		June 30,
	2018	2017	2018		2017
		(As Adjusted) (1)			(As Adjusted) (1)
Net income attributable to CBRE Group, Inc.	$ 228,667	$ 201,777	$	378,955	$	338,797
Add:
Depreciation and amortization	113,399	100,386		221,564		194,423
Interest expense	26,885	35,430		55,743		69,440
Write-off of financing costs on extinguished debt	—	—		27,982		—
Provision for income taxes	70,319	69,887		116,483		123,706
Less:
Interest income	1,489	1,427		5,110		3,838
EBITDA	437,781	406,053		795,617		722,528
Adjustments:
Carried interest incentive compensation expense (reversal) to align with the timing of associated revenue	1,526	(2,775	)	(8,503	)	(18,016	)
Integration and other costs related to acquisitions	—	15,408		—		27,351
Adjusted EBITDA	$ 439,307	$ 418,686	$	787,114	$	731,863

Three Months Ended June 30, 2018 Compared to the Three Months Ended June 30, 2017

We reported consolidated net income of $228.7 million for the three months ended June 30, 2018 on revenue of $5.1 billion as compared to consolidated net income of $201.8 million on revenue of $4.4 billion for the three months ended June 30, 2017.

Our revenue on a consolidated basis for the three months ended June 30, 2018 increased by $671.9 million, or 15.1%, as compared to the three months ended June 30, 2017. The revenue increase reflects strong organic growth fueled by higher occupier outsourcing revenue (up 14.9%) and property management revenue (up 6.5%) as well as increased leasing (up 18.4%) and commercial mortgage origination activity (up 14.6%). In addition, foreign currency translation had a $110.4 million positive impact on total revenue during the three months ended June 30, 2018, primarily driven by strength in the British pound sterling and euro.

Our cost of services on a consolidated basis increased by $549.2 million, or 16.1%, during the three months ended June 30, 2018 as compared to the same period in 2017. This increase was primarily due to higher costs associated with our occupier outsourcing business. In addition, our sales professionals generally are paid on a commission basis, which substantially correlates with our leasing revenue perfo rmance. Lastly, foreign currency translation had a $83.8 million negative impact on total cost of services during the three months ended June 30, 2018. Cost of services as a percentage of revenue increased to 77.4% for the three months ended June 30, 2018 versus 76.8% for the three months ended June 30, 2017. This increase was primarily driven by outsourcing revenue, which has a lower margin than sales and lease transaction revenue, comprising a higher percentage of our consolidated revenue during the three months ended June 30, 2018 as compared to the second quarter of 2017.

Our operating, administrative and other expenses on a consolidated basis increased by $113.7 million, or 16.0%, during the three months ended June 30, 2018 as compared to the same period in 2017. The increase was mostly driven by higher payroll-related costs (including increases in bonus and stock compensation expense) as well as increases in consulting, marketing and occupancy costs. Foreign currency translation also had a $19.5 million negative impact on total operating expenses during the three months ended June 30, 2018. Operating expenses as a percentage of revenue was consistent at 16.2% for the three months ended June 30, 2018 and 16.1% for the three months ended June 30, 2017.

Our depreciation and amortization expense on a consolidated basis increased by $13.0 million, or 13.0%, during the three months ended June 30, 2018 as compared to the same period in 2017. This increase was primarily attributable to a rise in depreciation expense of $7.0 million during the three months ended June 30, 2018 driven by technology-related capital expenditures. Higher amortization expense associated with mortgage servicing rights and intangibles acquired in acquisitions also contributed to the increase.

Our equity income from unconsolidated subsidiaries on a consolidated basis increased by $20.6 million, or 27.4%, during the three months ended June 30, 2018 as compared to the same period in 2017, primarily driven by higher equity earnings associated with gains on property sales reported in our Development Services segment.

Our consolidated interest expense decreased by $8.5 million, or 24.1%, for the three months ended June 30, 2018 as compared to the three months ended June 30, 2017. This decrease was primarily driven by the early redemption, in full, of the $800.0 million aggregate outstanding principal amount of our 5.00% senior notes in the first quarter of 2018.

Our provision for income taxes on a consolidated basis was $70.3 million for the three months ended June 30, 2018 as compared to $69.9 million for the same period in 2017. Our effective tax rate, after adjusting pre-tax income to remove the portion attributable to non-controlling interests, decreased to 23.5% for the three months ended June 30, 2018 compared to 25.7% for the three months ended June 30, 2017. We benefited from a lower U.S. corporate tax rate, with such rate being 35% in 2017 versus 21% in 2018. The effect of the decrease in the U.S. corporate tax rate was partially offset by discrete tax benefits for the three months ended June 30, 2017 from the re-measurement of income tax exposures relating to prior periods with no similar items for the three months ended June 30, 2018.

Six Months Ended June 30, 2018 Compared to the Six Months Ended June 30, 2017

We reported consolidated net income of $379.0 million for the six months ended June 30, 2018 on revenue of $9.8 billion as compared to consolidated net income of $338.8 million on revenue of $8.5 billion for the six months ended June 30, 2017.

Our revenue on a consolidated basis for the six months ended June 30, 2018 increased by $1.3 billion, or 15.3%, as compared to the six months ended June 30, 2017. The revenue increase reflects strong organic growth fueled by higher occupier outsourcing revenue (up 13.4%) and property management revenue (up 6.8%), increased leasing (up 12.3%), sales (up 4.0%) and commercial mortgage origination activity (up 19.9%) and higher revenue from our Global Investment Management segment (up 15.5%). In addition, foreign currency translation had a $281.2 million positive impact on total revenue during the six months ended June 30, 2018, primarily driven by strength in the British pound sterling and euro.

Our cost of services on a consolidated basis increase d by $1.0 billion, or 15.6%, during the six months ended June 30, 2018 as compared to the same period in 2017. This increase was primarily due to higher costs associated with our occupier outsourcing business. In addition, our sales professionals generally are paid on a commission basis, which substantially correlates with our transaction revenue performance. Lastly, foreign currency translation had a $215.3 million negative impact on total cost of services during the six months ended June 30, 2018. Cost of services as a percentage of revenue was relatively consistent at 77.4% for the six months ended June 30, 2018 versus 77.2% for the six months ended June 30, 2017.

Our operating, administrative and other expenses on a consolidated basis increased by $239.3 million, or 18.1%, during the six months ended June 30, 2018 as compared to the same period in 2017. The increase was mostly driven by higher payroll-related costs (including increases in bonus and stock compensation expense), higher carried interest expense and increases in consulting, marketing and occupancy costs. Foreign currency translation also had a $50.8 million negative impact on total operating expenses during the six months ended June 30, 2018. These items contributed to operating expenses as a percentage of revenue increasing from 15.5% for the six months ended June 30, 2017 to 15.9% for the six months ended June 30, 2018.

Our depreciation and amortization expense on a consolidated basis increased by $27.1 million, or 14.0%, during the six months ended June 30, 2018 as compared to the same period in 2017. This increase was primarily attributable to higher amortization expense associated with mortgage servicing rights and intangibles acquired in acquisitions. A rise in depreciation expense of $12.4 million during the six months ended June 30, 2018 driven by technology-related capital expenditures also contributed to the increase.

Our equity income from unconsolidated subsidiaries on a consolidated basis increased by $45.8 million, or 50.7%, during the six months ended June 30, 2018 as compared to the same period in 2017, primarily driven by higher equity earnings associated with gains on property sales reported in our Development Services segment.

Our consolidated interest expense decreased by $13.7 million, or 19.7%, for the six months ended June 30, 2018 as compared to the six months ended June 30, 2017. This decrease was primarily driven by the early redemption, in full, of the $800.0 million aggregate outstanding principal amount of our 5.00% senior notes in the first quarter of 2018.

Our write-off of financing costs on extinguished debt on a consolidated basis was $28.0 million for the six months ended June 30, 2018. These costs included a $20.0 million premium paid and the write-off of $8.0 million of unamortized deferred financing costs in connection with the early redemption, in full, of the $800.0 million aggregate outstanding principal amount of our 5.00% senior notes.

Our provision for income taxes on a consolidated basis was $116.5 million for the six months ended June 30, 2018 as compared to $123.7 million for the same period in 2017. Our effective tax rate, after adjusting pre-tax income to remove the portion attributable to non-controlling interests, decreased to 23.5% for the six months ended June 30, 2018 compared to 26.7% for the six months ended June 30, 2017. We benefited from a lower U.S. corporate tax rate, with such rate being 35% in 2017 versus 21% in 2018. The effect of the decrease in the U.S. corporate tax rate was partially offset by discrete tax benefits for the six months ended June 30, 2017 from the re-measurement of income tax exposures relating to prior periods with no similar items for the six months ended June 30, 2018.

Segment Operations

We report our operations through the following segments: (1) Americas; (2) Europe, Middle East and Africa (EMEA); (3) Asia Pacific; (4) Global Investment Management; and (5) Development Services. The Americas consists of operations located in the United States, Canada and key markets in Latin America. EMEA mainly consists of operations in Europe, while Asia Pacific includes operations in Asia, Australia and New Zealand. The Global Investment Management business consists of investment management operations in North America, Europe and Asia Pacific. The Development Services business consists of real estate development and investment activities primarily in the United States.

Americas

The following table summarizes our results of operations for our Americas operating segment for the three and six months ended June 30, 2018 and 2017 (dollars in thousands):

	Three Months Ended June 30, — 2018		2017		Six Months Ended June 30, — 2018		2017
			(As Adjusted) (1)				(As Adjusted) (1)
Revenue:
Fee revenue:
Occupier outsourcing	$ 310,901	9.9 %	$ 273,044	9.7 %	$ 619,286	10.3 %	$ 524,660	9.6 %
Property management	77,433	2.5 %	69,310	2.5 %	155,533	2.6 %	137,450	2.5 %
Valuation	64,346	2.0 %	61,599	2.2 %	123,412	2.1 %	118,780	2.2 %
Loan servicing	41,327	1.3 %	37,190	1.3 %	80,853	1.3 %	70,724	1.3 %
Leasing	536,660	17.1 %	450,208	15.9 %	936,858	15.6 %	844,073	15.4 %
Capital Markets:
Sales	269,636	8.6 %	261,710	9.3 %	537,311	9.0 %	495,506	9.1 %
Commercial mortgage origination	118,257	3.8 %	101,610	3.6 %	224,277	3.7 %	183,975	3.4 %
Other	14,273	0.4 %	11,368	0.3 %	24,037	0.5 %	24,082	0.4 %
Total fee revenue	1,432,833	45.6 %	1,266,039	44.8 %	2,701,567	45.1 %	2,399,250	43.9 %
Pass through costs also recognized as revenue	1,707,594	54.4 %	1,560,884	55.2 %	3,289,084	54.9 %	3,066,879	56.1 %
Total revenue	3,140,427	100.0 %	2,826,923	100.0 %	5,990,651	100.0 %	5,466,129	100.0 %
Costs and expenses:
Cost of services	2,506,171	79.8 %	2,255,569	79.8 %	4,781,022	79.8 %	4,361,928	79.8 %
Operating, administrative and other	384,626	12.2 %	350,937	12.4 %	739,897	12.4 %	673,305	12.3 %
Depreciation and amortization	80,693	2.6 %	71,724	2.5 %	158,674	2.6 %	140,293	2.6 %
Operating income	168,937	5.4 %	148,693	5.3 %	311,058	5.2 %	290,603	5.3 %
Equity income from unconsolidated subsidiaries	7,534	0.2 %	5,222	0.2 %	11,533	0.2 %	9,862	0.2 %
Other income	1,189	0.0 %	612	0.0 %	2,931	0.1 %	1,039	0.0 %
Less: Net income attributable to non- controlling interests	—	0.0 %	1	0.0 %	—	0.0 %	—	0.0 %
Add-back: Depreciation and amortization	80,693	2.6 %	71,724	2.5 %	158,674	2.6 %	140,293	2.6 %
EBITDA	$ 258,353	8.2 %	$ 226,250	8.0 %	$ 484,196	8.1 %	$ 441,797	8.1 %
Adjusted EBITDA	$ 258,353	8.2 %	$ 233,711	8.3 %	$ 484,196	8.1 %	$ 458,936	8.4 %

Three Months Ended June 30, 2018 Compared to the Three Months Ended June 30, 2017

Revenue increased by $313.5 million, or 11.1%, for the three months ended June 30, 2018 compared to the three months ended June 30, 2017. The revenue increase reflects strong organic growth fueled by higher occupier outsourcing and property management revenue as well as improved sales, leasing and commercial mortgage origination activity. Foreign currency translation also had a $0.4 million positive impact on total revenue during the three months ended June 30, 2018, primarily driven by strength in the Canadian dollar largely offset by weakness in the Argentine peso and Brazilian real.

Cost of services increased by $250.6 million, or 11.1%, for the three months ended June 30, 2018 as compared to the same period in 2017, primarily due to higher costs associated with our occupier outsourcing business. Also contributing to the variance was higher commission expense resulting from improved sales and lease transaction revenue. Foreign currency translation had a $0.1 million positive impact on total cost of services during the three months ended June 30, 2018. Cost of services as a percentage of revenue was consistent at 79.8% for both the three months ended June 30, 2018 and 2017.

Operating, administrative a nd other expenses increased by $33.7 million, or 9.6%, for the three months ended June 30, 2018 as compared to the three months ended June 30, 2017. The increase was partly driven by higher payroll-related costs (including an increase in stock compensation expense) as well as increases in consulting, marketing and occupancy costs. Foreign currency translation also had a $0.3 million positive impact on total operating expenses during the three months ended June 30, 2018.

We earn fees from the origination and sale of commercial mortgage loans for which the company retains the servicing rights. Upon origination of a mortgage loan held for sale, the fair value of the mortgage servicing rights (MSR) to be retained is included in the forecasted proceeds from the anticipated loan sale and results in a net gain (which is reflected in revenue). Upon sale, we record a servicing asset or liability based on the fair value of the retained MSR associated with the transferred loan. Subsequent to the initial recording, MSRs are amortized (within amortization expense) and carried at the lower of amortized cost or fair value in other intangible assets in the accompanying consolidated balance sheets. They are amortized in proportion to and over the estimated period that the servicing income is expected to be received. For the three months ended June 30, 2018, MSRs contributed to operating income $39.2 million of gains recognized in conjunction with the origination and sale of mortgage loans, offset by $26.6 million of amortization of related intangible assets. For the three months ended June 30, 2017, MSRs contributed to operating income $32.6 million of gains recognized in conjunction with the origination and sale of mortgage loans, offset by $24.4 million of amortization of related intangible assets.

Six Months Ended June 30, 2018 Compared to the Six Months Ended June 30, 2017

Revenue increased by $524.5 million, or 9.6%, for the six months ended June 30, 2018 compared to the six months ended June 30, 2017. The revenue increase reflects strong organic growth fueled by higher occupier outsourcing and property management revenue as well as improved sales, leasing and commercial mortgage origination activity. Foreign currency translation also had an $8.2 million positive impact on total revenue during the six months ended June 30, 2018, primarily driven by strength in the Canadian dollar partially offset by weakness in the Argentine peso and Brazilian real.

Cost of services increased by $419.1 million, or 9.6%, for the six months ended June 30, 2018 as compared to the same period in 2017, primarily due to higher costs associated with our occupier outsourcing business. Also contributing to the variance was higher commission expense resulting from improved sales and lease transaction revenue. Foreign currency translation had a $6.0 million negative impact on total cost of services during the six months ended June 30, 2018. Cost of services as a percentage of revenue was consistent at 79.8% for both the six months ended June 30, 2018 and 2017.

Operating, administrative and other expenses increased by $66.6 million, or 9.9%, for the six months ended June 30, 2018 as compared to the six months ended June 30, 2017. The increase was partly driven by higher payroll-related costs (including an increase in stock compensation expense) as well as increases in consulting, marketing and occupancy costs. Foreign currency translation also had a $0.7 million negative impact on total operating expenses during the six months ended June 30, 2018.

For the six months ended June 30, 2018, MSRs contributed to operating income $71.4 million of gains recognized in conjunction with the origination and sale of mortgage loans, offset by $53.5 million of amortization of related intangible assets. For the six months ended June 30, 2017, MSRs contributed to operating income $60.6 million of gains recognized in conjunction with the origination and sale of mortgage loans, offset by $46.7 million of amortization of related intangible assets.

EMEA

The following table summarizes our results of operations for our EMEA operating segment for the three and six months ended June 30, 2018 and 2017 (dollars in thousands):

	Three Months Ended June 30,						Six Months Ended June 30,
	2018			2017			2018			2017
				(As Adjusted) (1)						(As Adjusted) (1)
Revenue:
Fee revenue:
Occupier outsourcing	$ 377,527		28.7 %	$ 280,665		27.6 %	$ 712,465		28.5 %	$ 539,997		28.1 %
Property management	47,612		3.6 %	40,920		4.0 %	92,815		3.7 %	76,823		4.0 %
Valuation	43,256		3.3 %	37,229		3.7 %	84,319		3.4 %	69,738		3.6 %
Loan servicing	2,360		0.2 %	2,682		0.3 %	4,648		0.2 %	5,558		0.3 %
Leasing	106,295		8.1 %	88,076		8.7 %	206,884		8.3 %	163,007		8.5 %
Capital Markets:
Sales	98,081		7.5 %	94,055		9.3 %	176,321		7.1 %	161,355		8.4 %
Commercial mortgage origination	1,214		0.1 %	1,985		0.2 %	2,437		0.1 %	3,805		0.2 %
Other	8,275		0.5 %	5,854		0.5 %	14,098		0.5 %	9,615		0.5 %
Total fee revenue	684,620		52.0 %	551,466		54.3 %	1,293,987		51.8 %	1,029,898		53.6 %
Pass through costs also recognized as revenue	630,832		48.0 %	464,554		45.7 %	1,202,719		48.2 %	890,753		46.4 %
Total revenue	1,315,452		100.0 %	1,016,020		100.0 %	2,496,706		100.0 %	1,920,651		100.0 %
Costs and expenses:
Cost of services	1,048,971		79.7 %	789,693		77.7 %	2,009,618		80.5 %	1,518,217		79.0 %
Operating, administrative and other	200,728		15.3 %	164,540		16.2 %	384,975		15.4 %	307,482		16.0 %
Depreciation and amortization	20,277		1.5 %	18,845		1.9 %	39,123		1.6 %	34,415		1.8 %
Operating income	45,476		3.5 %	42,942		4.2 %	62,990		2.5 %	60,537		3.2 %
Equity income from unconsolidated subsidiaries	238		0.1 %	318		0.1 %	476		0.0 %	819		0.0 %
Other (loss) income	(27	)	0.0 %	24		0.0 %	62		0.0 %	23		0.0 %
Less: Net loss attributable to non-controlling interests	(555	)	0.0 %	(503	)	0.0 %	(814	)	0.0 %	(160	)	0.0 %
Add-back: Depreciation and amortization	20,277		1.5 %	18,845		1.9 %	39,123		1.6 %	34,415		1.8 %
EBITDA	$ 66,519		5.1 %	$ 62,632		6.2 %	$ 103,465		4.1 %	$ 95,954		5.0 %
Adjusted EBITDA	$ 66,519		5.1 %	$ 70,293		6.9 %	$ 103,465		4.1 %	$ 105,748		5.5 %

Three Months Ended June 30, 2018 Compared to the Three Months Ended June 30, 2017

Revenue increased by $299.4 million, or 29.5%, for the three months ended June 30, 2018 as compared to the same period in 2017. We achieved strong organic growth fueled by higher occupier outsourcing revenue as well as higher leasing activity. Foreign currency translation also had a $93.7 million positive impact on total revenue during the three months ended June 30, 2018, primarily driven by strength in the British pound sterling and euro.

Cost of services increased by $259.3 million, or 32.8%, for the three months ended June 30, 2018 as compared to the same period in 2017, primarily due to higher costs associated with our occupier outsourcing business. In addition, foreign currency translation had a $75.2 million negative impact on total cost of services during the three months ended June 30, 2018. Cost of services as a percentage of revenue increased from 77.7% for the three months ended June 30, 2017 to 79.7% for the three months ended June 30, 2018, primarily driven by our revenue mix, with outsourcing revenue, which has a lower margin than sales and lease revenue, comprising a higher percentage of revenue than in the prior year.

Operating, administrative and other expenses increased by $36.2 million, or 22.0%, for the three months ended June 30, 2018 as compared to the same period in 2017. This increase was primarily driven by higher payroll-related costs (including increases in bonus and stock compensation expense) as well as increases in consulting, marketing and occupancy costs. Foreign currency translation also had a $14.0 million negative impact on total operating expenses during the three months ended June 30, 2018.

Six Months Ended June 30, 2018 Compared to the Six Months Ended June 30, 2017

Revenue increased by $576.1 million, or 30.0%, for the six months ended June 30, 2018 as compared to the same period in 2017. We achieved strong organic growth fueled by higher occupier outsourcing revenue as well as higher leasing activity. Foreign currency translation also had a $224.4 million positive impact on total revenue during the six months ended June 30, 2018, primarily driven by strength in the British pound sterling and euro.

Cost of services increased by $491.4 million, or 32.4%, for the six months ended June 30, 2018 as compared to the same period in 2017, primarily due to higher costs associated with our occupier outsourcing business. In addition, foreign currency translation had a $180.6 million negative impact on total cost of services during the six months ended June 30, 2018. Cost of services as a percentage of revenue increased from 79.0% for the six months ended June 30, 2017 to 80.5% for the six months ended June 30, 2018, primarily driven by our revenue mix, with outsourcing revenue, which has a lower margin than sales and lease revenue, comprising a higher percentage of revenue than in the prior year.

Operating, administrative and other expenses increased by $77.5 million, or 25.2%, for the six months ended June 30, 2018 as compared to the same period in 2017. This increase was primarily driven by higher payroll-related costs (including increases in bonus and stock compensation expense) and increases in consulting, marketing and occupancy costs. Foreign currency translation also had a $34.9 million negative impact on total operating expenses during the six months ended June 30, 2018.

Asia Pacific

The following table summarizes our results of operations for our Asia Pacific operating segment for the three and six months ended June 30, 2018 and 2017 (dollars in thousands):

	Three Months Ended June 30,					Six Months Ended June 30,
	2018		2017			2018		2017
			(As Adjusted) (1)					(As Adjusted) (1)
Revenue:
Fee revenue:
Occupier outsourcing	$ 73,745	13.7 %	$ 59,663		12.3 %	$ 142,943	13.8 %	$ 116,055	13.0 %
Property management	23,030	4.3 %	19,987		4.1 %	46,301	4.5 %	39,781	4.5 %
Valuation	30,765	5.7 %	30,940		6.4 %	56,854	5.5 %	57,705	6.5 %
Loan servicing	221	0.0 %	—		0.0 %	221	0.0 %	—	0.0 %
Leasing	100,186	18.6 %	81,606		16.8 %	171,765	16.6 %	142,134	16.0 %
Capital Markets:
Sales	68,883	12.8 %	78,303		16.1 %	128,118	12.4 %	130,471	14.7 %
Commercial mortgage origination	343	0.1 %	915		0.2 %	394	0.0 %	1,454	0.2 %
Other	3,619	0.7 %	2,301		0.3 %	5,979	0.7 %	4,543	0.4 %
Total fee revenue	300,792	55.9 %	273,715		56.2 %	552,575	53.5 %	492,143	55.3 %
Pass through costs also recognized as revenue	237,408	44.1 %	213,184		43.8 %	481,084	46.5 %	398,102	44.7 %
Total revenue	538,200	100.0 %	486,899		100.0 %	1,033,659	100.0 %	890,245	100.0 %
Costs and expenses:
Cost of services	403,606	75.0 %	364,278		74.8 %	788,069	76.2 %	675,872	75.9 %
Operating, administrative and other	91,768	17.1 %	78,332		16.1 %	169,078	16.4 %	147,009	16.5 %
Depreciation and amortization	4,989	0.9 %	4,389		0.8 %	9,670	0.9 %	8,703	0.9 %
Operating income	37,837	7.0 %	39,900		8.3 %	66,842	6.5 %	58,661	6.7 %
Equity income (loss) from unconsolidated subsidiaries	35	0.1 %	(19	)	0.0 %	229	0.0 %	50	0.0 %
Add-back: Depreciation and amortization	4,989	0.9 %	4,389		0.8 %	9,670	0.9 %	8,703	0.9 %
EBITDA	$ 42,861	8.0 %	$ 44,270		9.1 %	$ 76,741	7.4 %	$ 67,414	7.6 %
Adjusted EBITDA	$ 42,861	8.0 %	$ 44,556		9.2 %	$ 76,741	7.4 %	$ 67,832	7.6 %

Three Months Ended June 30, 2018 Compared to the Three Months Ended June 30, 2017

Revenue increased by $51.3 million, or 10.5%, for the three months ended June 30, 2018 as compared to the three months ended June 30, 2017. The revenue increase reflects strong organic growth, fueled by higher occupier outsourcing and property management revenue as well as improved leasing activity. In addition, foreign currency translation had an $11.6 million positive impact on total revenue during the three months ended June 30, 2018, primarily driven by strength in the Chinese yuan and Singapore dollar.

Cost of services increased by $39.3 million, or 10.8%, for the three months ended June 30, 2018 as compared to the same period in 2017, driven by higher costs associated with our occupier outsourcing business. In addition, foreign currency translation had a $8.7 million negative impact on total cost of services during the three months ended June 30, 2018. Cost of services as a percentage of revenue was relatively consistent at 75.0% for the three months ended June 30, 2018 versus 74.8% for the three months ended June 30, 2017.

Operating, administrative and other expenses increased by $13.4 million, or 17.2%, for the three months ended June 30, 2018 as compared to the same period in 2017. We incurred higher payroll-related costs (including increased stock compensation and bonus expense) as well as increases in marketing, occupancy and travel costs during the three months ended June 30, 2018. Foreign currency translation also had a $2.0 million negative impact on total operating expenses for the three months ended June 30, 2018.

Six Months Ended June 30, 2018 Compared to the Six Months Ended June 30, 2017

Revenue increased by $143.4 million, or 16.1%, for the six months ended June 30, 2018 as compared to the six months ended June 30, 2017. The revenue increase reflects strong organic growth, fueled by higher occupier outsourcing and property management revenue as well as improved leasing activity. In addition, foreign currency translation had a $36.5 million positive impact on total revenue during the six months ended June 30, 2018, primarily driven by strength in the Australian dollar, Chinese yuan, Japanese yen and Singapore dollar.

Cost of services increased by $112.2 million, or 16.6%, for the six months ended June 30, 2018 as compared to the same period in 2017, driven by higher costs associated with our occupier outsourcing business. In addition, foreign currency translation had a $28.7 million negative impact on total cost of services during the six months ended June 30, 2018. Cost of services as a percentage of revenue increased from 75.9% for the six months ended June 30, 2017 to 76.2% for the six months ended June 30, 2018, primarily driven by our revenue mix, with outsourcing revenue, which has a lower margin than sales and lease revenue, comprising a higher percentage of revenue than in the prior year.

Operating, administrative and other expenses increased by $22.1 million, or 15.0%, for the six months ended June 30, 2018 as compared to the same period in 2017. We incurred higher payroll-related costs (including increased stock compensation and bonus expense) as well as increases in marketing, occupancy and travel costs during the six months ended June 30, 2018. Foreign currency translation also had a $5.8 million negative impact on total operating expenses for the six months ended June 30, 2018.

Global Investment Management

The following table summarizes our results of operations for our Global Investment Management operating segment for the three and six months ended June 30, 2018 and 2017 (dollars in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2018		2017		2018				2017
			(As Adjusted) (1)						(As Adjusted) (1)
Revenue	$ 98,947	100.0 %	$ 92,763	100.0 %	$ 222,637		100.0	%	$ 182,329	100.0 %
Costs and expenses:
Operating, administrative and other	88,891	89.8 %	71,309	76.9 %	167,206		75.1	%	122,831	67.4 %
Depreciation and amortization	7,257	7.4 %	4,885	5.2 %	13,484		6.1	%	9,924	5.4 %
Operating income	2,799	2.8 %	16,569	17.9 %	41,947		18.8	%	49,574	27.2 %
Equity income from unconsolidated subsidiaries	2,461	2.4 %	4,419	4.9 %	3,336		1.5	%	5,292	3.0 %
Other income (loss)	2,847	2.9 %	2,550	2.7 %	(3,264	)	(1.5	%)	6,239	3.4 %
Less: Net income attributable to non-controlling interests	989	1.0 %	1,738	1.9 %	1,407		0.6	%	3,244	1.8 %
Add-back: Depreciation and amortization	7,257	7.4 %	4,885	5.2 %	13,484		6.1	%	9,924	5.4 %
EBITDA	$ 14,375	14.5 %	$ 26,685	28.8 %	$ 54,096		24.3	%	$ 67,785	37.2 %
Adjusted EBITDA	$ 15,901	16.1 %	$ 23,910	25.8 %	$ 45,593		20.5	%	$ 49,769	27.3 %

Three Months Ended June 30, 2018 Compared to the Three Months Ended June 30, 2017

Revenue increased by $6.2 million, or 6.7%, for the three months ended June 30, 2018 as compared to the three months ended June 30, 2017, primarily driven by higher asset management fees, partially offset by lower carried interest revenue. Foreign currency translation also had a $4.7 million positive impact on total revenue during the three months ended June 30, 2018, primarily driven by strength in the British pound sterling and euro.

Operating, administrative and other expenses increased by $17.6 million, or 24.7%, for the three months ended June 30, 2018 as compared to the same period in 2017, primarily driven by higher payroll-related costs (including bonuses). Foreign currency translation also had a $3.8 million negative impact on total operating expenses during the three months ended June 30, 2018.

A roll forward of our AUM by product type for the three months ended June 30, 2018 is as follows (dollars in billions):

	Funds	Accounts		Securities		Total
Balance at March 31, 2018	$ 33.8	$	57.1	$	13.3	$	104.2
Inflows	0.9		1.1		0.6		2.6
Outflows	(1.3	)	(0.6	)	(1.5	)	(3.4	)
Market (depreciation) appreciation	(0.2	)	(2.0	)	0.5		(1.7	)
Balance at June 30, 2018	$ 33.2	$	55.6	$	12.9	$	101.7

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.

Six Months Ended June 30, 2018 Compared to the Six Months Ended June 30, 2017

Revenue increased by $40.3 million, or 22.1%, for the six months ended June 30, 2018 as compared to the six months ended June 30, 2017, primarily driven by higher asset management fees as well as higher carried interest revenue. Foreign currency translation also had a $12.1 million positive impact on total revenue during the six months ended June 30, 2018, primarily driven by strength in the British pound sterling and euro.

Operating, administrative and other expenses increased by $44.4 million, or 36.1%, for the six months ended June 30, 2018 as compared to the same period in 2017, primarily driven by higher carried interest expense as well as higher payroll-related costs (including bonuses). Foreign currency translation also had a $9.4 million negative impact on total operating expenses during the six months ended June 30, 2018.

A roll forward of our AUM by product type for the six months ended June 30, 2018 is as follows (dollars in billions):

	Funds	Accounts		Securities		Total
Balance at December 31, 2017	$ 31.7	$	56.7	$	14.8	$	103.2
Inflows	2.6		2.1		1.0		5.7
Outflows	(2.0	)	(2.6	)	(2.5	)	(7.1	)
Market appreciation (depreciation)	0.9		(0.6	)	(0.4	)	(0.1	)
Balance at June 30, 2018	$ 33.2	$	55.6	$	12.9	$	101.7

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.

Development Services

The following table summarizes our results of operations for our Development Services operating segment for the three and six months ended June 30, 2018 and 2017 (dollars in thousands):

	Three Months Ended June 30,								Six Months Ended June 30,
	2018				2017				2018				2017
					(As Adjusted) (1)								(As Adjusted) (1)
Revenue:
Property management	$ 2,106		11.4	%	$ 3,098		18.3	%	$ 3,661		8.8	%	$ 5,008		16.1	%
Leasing	839		4.6	%	26		0.1	%	959		2.3	%	180		0.6	%
Capital Markets:
Sales	—		0.0	%	165		1.0	%	418		1.0	%	695		2.2	%
Other:
Development services	15,463		84.0	%	13,677		80.6	%	36,695		87.9	%	25,300		81.1	%
Total revenue	18,408		100.0	%	16,966		100.0	%	41,733		100.0	%	31,183		100.0	%
Costs and expenses:
Operating, administrative and other	60,269		327.4	%	47,497		280.0	%	97,361		233.3	%	68,614		220.0	%
Depreciation and amortization	183		1.0	%	543		3.2	%	613		1.5	%	1,088		3.5	%
Gain on disposition of real estate	12,311		66.9	%	11,298		66.6	%	12,329		29.6	%	12,683		40.6	%
Operating loss	(29,733	)	(161.5	%)	(19,776	)	(116.6	%)	(43,912	)	(105.2	%)	(25,836	)	(82.9	%)
Equity income from unconsolidated subsidiaries	85,753		465.8	%	65,444		385.8	%	120,626		289.0	%	74,379		238.6	%
Less: Net income (loss) attributable to non-controlling interests	530		2.9	%	(5	)	0.0	%	208		0.5	%	53		0.2	%
Add-back: Depreciation and amortization	183		1.0	%	543		3.2	%	613		1.5	%	1,088		3.5	%
EBITDA and Adjusted EBITDA	$ 55,673		302.4	%	$ 46,216		272.4	%	$ 77,119		184.8	%	$ 49,578		159.0	%

Three Months Ended June 30, 2018 Compared to the Three Months Ended June 30, 2017

Revenue increased by $1.4 million, or 8.5%, for the three months ended June 30, 2018 as compared to the three months ended June 30, 2017, primarily driven by higher development fees during the three months ended June 30, 2018.

Operating, administrative and other expenses increased by $12.8 million, or 26.9%, for the three months ended June 30, 2018 as compared to the same period in 2017. This increase was primarily driven by higher payroll-related costs, particularly increased bonus expense during the three months ended June 30, 2018 due to improved performance (property sales reflected in equity income from unconsolidated subsidiaries were significantly higher during the three months ended June 30, 2018).

As of June 30, 2018, development projects in process totaled $8.0 billion, up $0.3 billion from first quarter 2018. The pipeline decreased by $0.2 billion during the second quarter of 2018.

Six Months Ended June 30, 2018 Compared to the Six Months Ended June 30, 2017

Revenue increased by $10.6 million, or 33.8%, for the six months ended June 30, 2018 as compared to the six months ended June 30, 2017, primarily driven by higher development and incentive fees during the six months ended June 30, 2018.

Operating, administrative and other expenses increased by $28.7 million, or 41.9%, for the six months ended June 30, 2018 as compared to the same period in 2017. This increase was primarily driven by higher payroll-related costs, particularly increased bonus expense during the six months ended June 30, 2018 due to improved performance (property sales reflected in equity income from unconsolidated subsidiaries were significantly higher during the six months ended June 30, 2018).

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 2018 include up to approximately $190 million of anticipated capital expenditures, net of tenant concessions. During the six months ended June 30, 2018, we incurred $91.4 million of capital expenditures, net of tenant concessions received. As of June 30, 2018, we had aggregate commitments of $36.5 million to fund future co-investments in our Global Investment Management business, $14.2 million of which is expected to be funded in 2018. Additionally, as of June 30, 2018, we are committed to fund $23.5 million of additional capital to unconsolidated subsidiaries within our Development Services business, which we may be required to fund at any time. As of June 30, 2018, we had $2.2 billion of borrowings available under our $2.8 billion revolving credit facility.

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. 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.

In March 2018, we redeemed the $800.0 million aggregate outstanding principal amount of our 5.00% senior notes in full. We funded this redemption with $550.0 million of borrowings from our tranche A term loan facility and borrowings from our revolving credit facility under our credit agreement.

As noted above, we believe that any future significant acquisit ions that 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 a ble 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 two elements. The first is the repayment of the outstanding and anticipated principal amounts of our long-term indebtedness. We are unable to project with certainty whether our long-term cash flow from operations will be sufficient to repay our long-term debt when it comes due. If our cash flow is insufficient, 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 price payments in future periods that are subject to the passage of time or achievement of certain performance metrics and other conditions. As of June 30, 2018 and December 31, 2017, we had accrued $88.2 million ($49.5 million of which was a current liability) and $83.6 million ($23.2 million of which was a current liability), respectively, of deferred purchase consideration, 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.

In addition, on October 27, 2016, we announced that our board of directors had authorized the company to repurchase up to an aggregate of $250.0 million of our Class A common stock over three years. The timing of the repurchase and the actual amount repurchased will depend on a variety of factors, including the market price of our common stock, general market and economic conditions and other factors. We intend to fund the repurchases, if any, with cash on hand or borrowings under our revolving credit facility. As of June 30, 2018, the authorization remained unused.

Historical Cash Flows

Operating Activities

Net cash used in operating activities totaled $92.1 million for the six months ended June 30, 2018, a decrease of $25.4 million as compared to the six months ended June 30, 2017. The decrease in net cash used in operating activities was primarily due to improved operating performance as well as a higher distribution of earnings from unconsolidated subsidiaries in the current year.

Investing Activities

Net cash used in investing activities totaled $376.6 million for the six months ended June 30, 2018, an increase of $282.6 million as compared to the six months ended June 30, 2017. The increase in cash used in investing activities was primarily driven by higher amounts paid for acquisitions driven by the FacilitySource Acquisition in the six months ended June 30, 2018.

Financing Activities

Net cash provided by financing activities totaled $266.0 million for the six months ended June 30, 2018, as compared to net cash used in financing activities of $29.7 million for the six months ended June 30, 2017. This variance was primarily due to $550.0 million of borrowings from our tranche A term loan facility as well as higher net borrowings under our revolving credit facility during the six months ended June 30, 2018. These items were largely offset by the full redemption of the $800.0 million aggregate outstanding principal amount of our 5.00% senior notes (including premium) as well as the repayment of $26.3 million of debt assumed in the FacilitySource Acquisition in the current year.

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 October 31, 2017, CBRE Services, Inc. entered into a Credit Agreement (the 2017 Credit Agreement), which refinanced and replaced our prior credit agreement (the 2015 Credit Agreement). We used $200.0 million of borrowings from the tranche A term loan facility and $83.0 million of revolving credit facility borrowings under the 2017 Credit Agreement, in addition to cash on hand, to repay all amounts outstanding under the 2015 Credit Agreement.

The 2017 Credit Agreement is a senior unsecured credit facility that is jointly and severally guaranteed by us and certain of our subsidiaries. The 2017 Credit Agreement currently provides for the following: (1) a $2.8 billion revolving credit facility, which includes the capacity to obtain letters of credit and swingline loans and matures on October 31, 2022 and (2) a $750.0 million delayed draw tranche A term loan facility, requiring quarterly principal payments, which began on March 5, 2018 and continue through maturity on October 31, 2022, provided that in the event that our leverage ratio (as defined in the 2017 Credit Agreement) is less than or equal to 2.50 to 1.00 on the last day of the fiscal quarter immediately preceding any such payment date, no such quarterly principal payment shall be required on such date.

As previously mentioned, in March 2018, we redeemed the $800.0 million aggregate outstanding principal amount of our 5.00% senior notes in full. In connection with this early redemption, we incurred charges of $28.0 million, including a premium of $20.0 million and the write-off of $8.0 million of unamortized deferred financing costs.

In prior years, we also issued 4.875% and 5.25% senior notes that are due in 2026 and 2025, respectively. 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 included in our Annual Report on Form 10‑K for the year ended December 31, 2017 and Note 9 of the Notes to Consolidated Financial Statements (Unaudited) set forth in Item 1 of this Quarterly Report.

Short-Term Borrowings

We maintain a $2.8 billion revolving credit facility under the 2017 Credit Agreement and warehouse lines of credit with certain third-party lenders. For additional information on all of our short-term borrowings, see Note 11 of the Notes to Consolidated Financial Statements set forth in Item 8 included in our Annual Report on Form 10‑K for the year ended December 31, 2017 and Notes 5 and 9 of the Notes to Consolidated Financial Statements (Unaudited) set forth in Item 1 of this Quarterly Report.

Interest Rate Swap Agreements

In March 2011, we entered into five interest rate swap agreements, all with effective dates in October 2011, and immediately designated them as cash flow hedges in accordance with Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 815, “ Derivatives and Hedging .” The purpose of these interest rate swap agreements is to attempt to hedge potential changes to our cash flows due to the variable interest nature of our senior term loan facilities. A notional amount of $200.0 million of these interest rate swap agreements expired in October 2017. The remaining total notional amount of these interest rate swap agreements at June 30, 2018 was $200.0 million, which expire in September 2019. As of June 30, 2018 and December 31, 2017, the fair values of such interest rate swap agreements were reflected as a $2.1 million liability and a $4.8 million liability, respectively, and were included in other long-term liabilities in the accompanying consolidated balance sheets set forth in Item 1 of this Quarterly Report.

In July 2015, we entered into three interest rate swap agreements with an aggregate notional amount of $300.0 million, all with effective dates in August 2015, and designated the m as cash flow hedges in accordance with FASB ASC Topic 815. In August 2015, we elected to terminate these agreements and paid a $6.2 million cash settlement, which has been recorded to accumulated other comprehensive loss in the accompanying consolidated balance sheets set forth in Item 1 of this Quarterly Report. This settlement fee is being amortized to interest expense throughout the remaining term of the terminated hedge transaction until August 2025.

Off –Balance Sheet Arrangements

Our off-balance sheet arrangements are described in Note 10 of the Notes to Consolidated Financial Statements (Unaudited) set forth in Item 1 of this Quarterly Report and are incorporated by reference herein.

Cautionary Note on Forward-Looking Statements

This Quarterly Report includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. The words “anticipate,” “believe,” “could,” “should,” “propose,” “continue,” “estimate,” “expect,” “intend,” “may,” “plan,” “predict,” “project,” “will” and similar terms and phrases are used in this Quarterly Report to identify forward-looking statements. Except for historical information contained herein, the matters addressed in this Quarterly Report are forward-looking statements. These statements relate to analyses and other information based on forecasts of future results and estimates of amounts not yet determinable. These statements also relate to our future prospects, developments and business strategies.

These forward-looking statements are made based on our management’s expectations and beliefs concerning future events affecting us and are subject to uncertainties and factors relating to our operations and business environment, all of which are difficult to predict and many of which are beyond our control. These uncertainties and factors could cause our actual results to differ materially from those matters expressed in or implied by these forward-looking statements.

The following factors are among those, but are not only those, that may cause actual results to differ materially from the forward-looking statements:

• disruptions in general economic and business conditions, particularly in geographies where our business may be concentrated;

• volatility and disruption of the securities, capital and credit markets, interest rate increases, the cost and availability of capital for investment in real estate, clients’ willingness to make real estate or long-term contractual commitments and other factors affecting the value of real estate assets, inside and outside the United States;

• increases in unemployment and general slowdowns in commercial activity;

• trends in pricing and risk assumption for commercial real estate services;

• the effect of significant movements in average cap rates across different property types;

• a reduction by companies in their reliance on outsourcing for their commercial real estate needs, which would affect our revenues and operating performance;

• client actions to restrain project spending and reduce outsourced staffing levels;

• declines in lending activity of U.S. Government Sponsored Enterprises, regulatory oversight of such activity and our mortgage servicing revenue from the commercial real estate mortgage market;

• our ability to diversify our revenue model to offset cyclical economic trends in the commercial real estate industry;

• our ability to attract new user and investor clients;

• our ability to retain major clients and renew related contracts;

• our ability to leverage our global services platform to maximize and sustain long-term cash flow;

• our ability to maintain EBITDA and adjusted EBITDA margins that enable us to continue investing in our platform and client service offerings;

• our ability to control costs relative to revenue growth;

• economic volatility and market uncertainty globally related to uncertainty surrounding the implementation and effect of the United Kingdom’s referendum to leave the European Union, including uncertainty in relation to the legal and regulatory framework that would apply to the United Kingdom and its relationship with the remaining members of the European Union;

• foreign currency fluctuations;

• our ability to retain and incentivize key personnel;

• our ability to compete globally, or in specific geographic markets or business segments that are material to us;

• our ability to identify, acquire and integrate synergistic and accretive businesses;

• costs and potential future capital requirements relating to businesses we may acquire;

• integration challenges arising out of companies we may acquire;

• the ability of our Global Investment Management business to maintain and grow assets under management and achieve desired investment returns for our investors, and any potential related litigation, liabilities or reputational harm possible if we fail to do so;

• our ability to manage fluctuations in net earnings and cash flow, which could result from poor performance in our investment programs, including our participation as a principal in real estate investments;

• our leverage under our debt instruments as well as the limited restrictions therein on our ability to incur additional debt, and the potential increased borrowing costs to us from a credit-ratings downgrade;

• the ability of CBRE Capital Markets to periodically amend, or replace, on satisfactory terms, the agreements for its warehouse lines of credit;

• variations in historically customary seasonal patterns that cause our business not to perform as expected;

• litigation and its financial and reputational risks to us;

• our exposure to liabilities in connection with real estate advisory and property management activities and our ability to procure sufficient insurance coverage on acceptable terms;

• liabilities under guarantees, or for construction defects, that we incur in our Development Services business;

• our and our employees’ ability to execute on, and adapt to, information technology strategies and trends;

• cybersecurity threats, including the potential misappropriation of assets or sensitive information, corruption of data or operational disruption;

• changes in domestic and international law and regulatory environments (including relating to anti-corruption, anti-money laundering, trade sanctions, tariffs, currency controls and other trade control laws), particularly in Russia, Eastern Europe and the Middle East, due to the level of political instability in those regions;

• our ability to comply with laws and regulations related to our global operations, including real estate licensure, tax, labor and employment laws and regulations, as well as the anti-corruption laws and trade sanctions of the U.S. and other countries;

• our ability to maintain our effective tax rate, including during 2018 as we continue to assess the provisional amount recorded based upon our best estimate of the tax impact of the Tax Act (which was

enacted into law on December 22, 2017) in accordance with our understanding of th e Tax Act and the related guidance available;

• changes in applicable tax or accounting requirements, including the impact of any subsequent additional regulation or guidance associated with the Tax Act;

• the effect of implementation of new accounting rules and standards (including new lease accounting guidance which will be effective in the first quarter of 2019); and

• the other factors described elsewhere in this Quarterly Report on Form 10-Q, included under the headings “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies,” “Quantitative and Qualitative Disclosures About Market Risk” and Part II, Item 1A, “Risk Factors” or as described in our Annual Report on Form 10-K for the year ended December 31, 2017, in particular in Part II, Item 1A “Risk Factors”, or as described in the other documents and reports we file with the Securities and Exchange Commission (SEC).

Forward-looking statements speak only as of the date the statements are made. You should not put undue reliance on any forward-looking statements. We assume no obligation to update forward-looking statements to reflect actual results, changes in assumptions or changes in other factors affecting forward-looking information, except to the extent required by applicable securities laws. If we do update one or more forward-looking statements, no inference should be drawn that we will make additional updates with respect to those or other forward-looking statements. Additional information concerning these and other risks and uncertainties is contained in our other periodic filings with the SEC.

ITEM 3. Quantitative and Qualitative Disclosures About Market Risk

The information in this section should be read in connection with the information on market risk related to changes in interest rates and non-U.S. currency exchange rates in Part II, Item 7A, “Quantitative and Qualitative Disclosures About Market Risk” in our Annual Report on Form 10-K for the year ended December 31, 2017.

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

Exchange Rates

Our foreign operations expose us to fluctuations in foreign exchange rates. These fluctuations may impact the value of our cash receipts and payments in terms of our functional (reporting) currency, which is U.S. dollars. See the discussion of international operations, which is included in Item 2. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” under the caption “Items Affecting Comparability—International Operations” and is incorporated by reference herein.

Interest Rates

We manage our interest expense by using a combination of fixed and variable rate debt. We enter into interest rate swap agreements to attempt to hedge the variability of future interest payments due to changes in interest rates. See discussion of our interest rate swap agreements, which is included in Item 2. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” under the caption “Liquidity and Capital Resources—Indebtedness—Interest Rate Swap Agreements” and is incorporated by reference herein.

The estimated fair value of our senior term loans was approximately $742.5 million at June 30, 2018. Based on dealers’ quotes, the estimated fair values of our 4.875% senior notes and 5.25% senior notes were $622.5 million and $447.0 million, respectively, at June 30, 2018.

We utilize sensitivity analyses to assess the potenti al effect of our variable rate debt. If interest rates were to increase 100 basis points on our outstanding variable rate debt at June 30, 2018, excluding notes payable on real estate, the net impact of the additional interest cost would be a decrease of $ 5.7 million on pre-tax income and an increase of $5.7 million in cash used in operating activities for the six months ended June 30, 2018.

ITEM 4. Controls and Procedures

Disclosure Controls and Procedures

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

We conducted the required evaluation, and our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures (as defined by Securities Exchange Act Rule 13a-15(e)) were effective as of June 30, 2018 to accomplish their objectives at the reasonable assurance level.

Changes in Internal Control Over Financial Reporting

No changes in our internal control over financial reporting occurred during the fiscal quarter ended June 30, 2018 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II – OTHER INFORMATION

ITEM 1. Legal Proceedings

There have been no material changes to our legal proceedings as previously disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2017.

Item 1A. Risk Factors

There have been no material changes to our risk factors as previously disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2017.

ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds

As permitted by our director compensation policy, two of our non-employee directors elected to receive shares of our Class A common stock as consideration for their service as directors in lieu of cash payments during the three months ended June 30, 2018. Director fees are allocated in quarterly installments, and the non-employee directors participating in the “stock in lieu of cash” program were issued 64 shares on May 7, 2018 in lieu of $3,000 in accrued director fees. The number of shares issued was based on the closing price on the NYSE of our Class A common stock on the date of issuance. The issuance of these securities qualified for an exemption from registration under the Securities Act of 1933, as amended, or the Securities Act, pursuant to Section 4(a)(2) of the Securities Act because the issuance did not involve a public offering.

ITEM 6. E xhibi ts

Exhibit No.	Exhibit Description	Form	SEC File No.	Exhibit	Filing Date	Filed Herewith
3.1	Amended and Restated Certificate of Incorporation of CBRE Group, Inc.	8-K	001-32205	3.1	05/23/2018
3.2	Amended and Restated By-Laws of CBRE Group, Inc.	8-K	001-32205	3.2	05/23/2018
11	Statement concerning Computation of Per Share Earnings (filed as Note 11 of the Consolidated Financial Statements)					X
31.1	Certification of Chief Executive Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to §302 of the Sarbanes-Oxley Act of 2002					X
31.2	Certification of Chief Financial Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to §302 of the Sarbanes-Oxley Act of 2002					X
32	Certifications of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002					X
101.INS	XBRL Instance Document					X
101.SCH	XBRL Taxonomy Extension Schema Document					X
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document					X
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document					X
101.LAB	XBRL Taxonomy Extension Label Linkbase Document					X
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document					X

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SIGNAT URES

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	CBRE GROUP, INC.
Date: August 9, 2018	/s/ James R. Groch
	James R. Groch
	Chief Financial Officer (Principal Financial Officer)
Date: August 9, 2018	/ s/ Dara A. Bazzano
	Dara A. Bazzano
	Chief Accounting Officer (Principal Accounting Officer)

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