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Fair Value Measurements

12 Months Ended

Dec. 31, 2023

Topic 820 of the FASB ASC defines fair value as the price that would be received to sell an asset or paid to transfer a 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.

The following tables present the fair value of assets and liabilities measured at fair value on a recurring basis as of December 31, 2023 and 2022 (dollars in millions):


	December 31, 2023
	Fair Value Measured and Recorded Using
	Level 1		Level 2		Level 3		Total
Assets
Available for sale debt securities:
U.S. treasury securities	$	12	$	—	$	—	$	12
Debt securities issued by U.S. federal agencies	—		11		—		11
Corporate debt securities	—		44		—		44
Asset-backed securities	—		1		—		1

Total available for sale debt securities	12		56		—		68
Equity securities	41		—		—		41
Investments in unconsolidated subsidiaries	168		—		477		645
Warehouse receivables	—		675		—		675
Other assets	—		—		16		16
Total assets at fair value	$	221	$	731	$	493	$	1,445

Liabilities
Derivative liabilities	—		5		—		5

Total liabilities at fair value	$	—	$	5	$	—	$	5


	December 31, 2022
	Fair Value Measured and Recorded Using
	Level 1		Level 2		Level 3		Total
Assets
Available for sale securities:
Debt securities:
U.S. treasury securities	$	6	$	—	$	—	$	6
Debt securities issued by U.S. federal agencies	—		9		—		9
Corporate debt securities	—		44		—		44
Asset-backed securities	—		3		—		3

Total available for sale debt securities	6		56		—		62
Equity securities	34		—		—		34
Investments in unconsolidated subsidiaries	160		—		461		621
Warehouse receivables	—		455		—		455
Other assets	—		—		14		14
Total assets at fair value	$	200	$	511	$	475	$	1,186

There were no liabilities measured at fair value on a recurring basis as of December 31, 2022.

Fair value measurements for our available for sale debt securities are obtained from independent pricing services which utilize observable market data that may include quoted market prices, dealer quotes, market spreads, cash flows, the U.S. treasury yield curve, trading levels, market consensus prepayment speeds, credit information and the instrument’s terms and conditions.

During the year ended December 31, 2023, we recorded a gain of $34.1 million associated with remeasuring our 50% investment in a previously unconsolidated subsidiary to fair value as of the date we acquired the remaining 50% controlling interest. Fair value of this investment in unconsolidated subsidiary at acquisition date was $37.4 million, based upon the purchase price paid for the remaining 50% interest acquired, which falls under Level 3 of the fair value hierarchy. Such gain was reflected in other income in our Advisory Services segment in the accompanying consolidated statements of operations for the year ended December 31, 2023.

The equity securities are generally valued at the last reported sales price on the day of valuation or, if no sales occurred on the valuation date, at the mean of the bid and ask prices on such date. The above tables do not include our $142.8 million and $104.2 million as of December 31, 2023 and 2022, respectively, for capital investments in certain non-public entities as they are non-marketable equity investments accounted for under the measurement alternative, defined as cost minus impairment. These investments are included in “other assets, net” in the accompanying consolidated balance sheets.

The fair values of the warehouse receivables are primarily calculated based on already locked in purchase prices. At December 31, 2023 and 2022, 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 (See Notes 2 and 5). These assets are classified as Level 2 in the fair value hierarchy as a substantial majority of inputs are readily observable.

As of December 31, 2023 and 2022, investments in unconsolidated subsidiaries at fair value using NAV were $352.3 million and $353.0 million, respectively. These investments fall under practical expedient rules that do not require them to be included in the fair value hierarchy and as a result have been excluded from the tables above.

The tables below present a reconciliation for assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) (dollars in millions):


	Investment in Unconsolidated Subsidiaries		Other assets
Balance as of December 31, 2021	$	407	$	(11)
Transfer in (out)	(15)		—
Net change in fair value	(38)		3
Purchases/ Additions	107		22
Balance as of December 31, 2022	461		14
Transfer in (out)	—		(10)
Net change in fair value	16		5
Purchases/ Additions	—		7
Balance as of December 31, 2023	$	477	$	16

Net change in fair value, included in the table above, is reported in Net income as follows:


Category of Assets/Liabilities using Unobservable Inputs						Consolidated Statements of Operations
Investments in unconsolidated subsidiaries						Equity income from unconsolidated subsidiaries
Other assets (liabilities)						Other income (loss)

The table below presents information about the significant unobservable inputs used for recurring fair value measurements for certain Level 3 instruments as of December 31, 2023:


	Valuation Technique	Unobservable Input	Range		Weighted Average
Investment in unconsolidated subsidiaries	Discounted cash flow	Discount rate	25	%	—

	Monte Carlo	Volatility	45% - 69%		51	%
		Risk free interest rate	4	%	—
		Discount Yield	25	%	—

Other assets	Discounted cash flow	Discount rate	25	%	—

There were no asset impairment charges or other significant non-recurring fair value measurements recorded during the years ended December 31, 2023 and December 31, 2021.

During the year ended December 31, 2022, we recorded non-cash asset impairment charges of $58.7 million. Approximately $10.4 million of such charges related to the exit of our Advisory Services business in Russia (primarily comprised of receivables), and $26.4 million and $21.9 million related to goodwill and trade name impairment charges, respectively. The goodwill and the trade name impairment charges represent a full impairment of such assets associated with the Telford Homes business in our Real Estate Investments segment. The charges were attributable to the effects of elevated inflation on construction, materials and labor costs which increased Telford Homes’ risk as the contractor and reduced the profitability of current projects. The fair value measurements employed for our impairment evaluation of goodwill were based on a discounted cash flow approach and a relief from royalty fair value method for the trade name. Significant inputs used in the evaluation included a risk-free rate of return, estimated risk premium, terminal growth rates, working capital assumptions, royalty rate, income tax rates as well as other economic variables. These asset impairment charges were included within the line item “Asset impairments” in the accompanying consolidated statements of operations.

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. The primary source of value is either a contractual purchase commitment from Freddie Mac or a confirmed forward trade commitment for the issuance and purchase of a Fannie Mae or Ginnie Mae MBS (see Notes 2 and 5).

•Investments in Unconsolidated Subsidiaries – A portion of these investments are carried at fair value as discussed above. It includes our equity investment and related interests in both public and non-public entities. Our ownership of common shares in Altus Power, Inc. (Altus) is considered level 1 and is measured at fair value using a quoted price in an active market. Our ownership of alignment shares of Altus and our investment in Industrious and certain other non-controlling equity investments are considered level 3 which are measured at fair value using Monte Carlo and discounted cash flows. The valuation of Altus’ common shares and alignment shares are dependent on its stock price which could be volatile and subject to wide fluctuations in response to various market conditions.

•Available for Sale Debt Securities – Primarily held by our wholly-owned captive insurance company, these investments are carried at their fair value.

•Equity Securities – Primarily held by our wholly-owned captive insurance company, these investments are carried at their fair value.

•Other assets / liabilities – Represents the fair value of the unfunded commitment related to a revolving facility. Valuations are based on discounted cash flow techniques, for which the significant inputs are the amount and timing of expected future cash flows, market comparables and recovery assumptions. As of December 31, 2022, it also included approximately $10 million of investment in a non-public entity which was transferred out of level 3 during 2023 and remeasured at December 31, 2023 using the measurement alternative as discussed above.

•Derivative liability - The fair value of cross-currency swaps, executed in 2023, reflects the net present value of expected payments and receipts under the swap agreement based on the market's expectation of future foreign currency exchange rates. Additional inputs to the net present value calculation may include the contract terms, counterparty credit risk, and discount rates.

•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/or variable interest rates of these instruments, fair value approximates carrying value (see Notes 5 and 11).

•Senior Term Loans – Based on dealers’ quotes (which falls within Level 2 of the fair value hierarchy), the estimated fair value of our senior term loans (comprised of tranche A Euro-denominated term loans and U.S. Dollar-denominated term loans issued in July 2023) was approximately $746.5 million and actual carrying value was $752.0 million at December 31, 2023. The above senior term loans were used to repay the prior euro term loan which had a fair value of $424.6 million and carrying value of $427.8 million at December 31, 2022. The above carrying values are net of unamortized debt issuance costs (see Note 11).

•Senior Notes – Based on dealers’ quotes (which falls within Level 2 of the fair value hierarchy), the estimated fair value of our 5.950% senior notes was $1.0 billion at December 31, 2023. The actual carrying value of our 5.950% senior notes, net of unamortized debt issuance costs and discount, totaled $973.7 million at December 31, 2023. The estimated fair value of our 4.875% senior notes was $600.2 million and $595.2 million at December 31, 2023 and 2022, respectively. The actual carrying value of our 4.875% senior notes, net of unamortized debt issuance costs and discount, totaled $597.5 million and $596.4 million at December 31, 2023 and 2022, respectively. The estimated fair value of our 2.500% senior notes was $424.0 million and $396.8 million at December 31, 2023 and 2022, respectively. The actual carrying value of our 2.500% senior notes, net of unamortized debt issuance costs and discount, totaled $490.4 million and $489.3 million at December 31, 2023 and 2022, respectively (See Note 11).

•Notes Payable on Real Estate – As of December 31, 2023 and 2022, the carrying value of our notes payable on real estate, net of unamortized debt issuance costs, was $36.3 million and $52.7 million, respectively. These notes payable were not recourse to CBRE Group, Inc., except for being recourse to the single-purpose entities that held the real estate assets and were the primary obligors on the notes payable. These borrowings have either fixed interest rates or floating interest rates at spreads added to a market index. Although it is possible that certain portions of our notes payable on real estate may have fair values that differ from their carrying values, based on the terms of such loans as compared to current market conditions, or other factors specific to the borrower entity, we do not believe that the fair value of our notes payable is significantly different than their carrying value.

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

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