CBRE Group Reports Financial Results for Q4 and Full Year 2022

DALLAS–(BUSINESS WIRE)–CBRE Group, Inc. (NYSE:CBRE) today reported financial results for the fourth quarter and year ended December 31, 2022.

Consolidated Financial Results Overview

The following table presents highlights of CBRE performance (dollars in millions, except per share data; totals may not add due to rounding):

“Although core earnings declined significantly in the fourth quarter, they slightly exceeded the estimate we provided last quarter. This outcome was driven by better-than-expected growth in several of the more cyclically resilient elements of our business like outsourcing and others that are secularly favored like project management and the logistics asset class – offset by a slightly larger-than-expected decline in transactional revenue,” said Bob Sulentic, CBRE’s president and chief executive officer.

“For all of 2022, we achieved a solid, 7% growth rate in core earnings-per-share despite the more than doubling of long-term interest rates, sharp equity market decline and the credit crunch that constrained investment activity for most of the second half.

For 2023, we expect core earnings-per-share to decline by low- to mid-double digits, but still to be the third-highest in CBRE’s history. While the macro environment can certainly change, we expect core earnings-per-share to grow strongly in 2024, exceeding the 2022 peak and reaching a record level in just the first year after a recession.”

Advisory Services Segment

The following table presents highlights of the Advisory Services segment performance (dollars in millions; totals may not add due to rounding):

Note: all percent changes cited are vs. fourth-quarter 2021, except where noted.

Property Leasing

• Global leasing revenue declined 7% (3% local currency).
• The decline was driven by the Americas, where revenue fell 7% (same in local currency).
• Foreign currency headwinds masked growth in overseas markets. Combined EMEA/APAC leasing revenue was up 7% in local currency, but down 6% in U.S. dollars. Before currency effects, growth was notably strong in North Asia, Pacific and the United Kingdom.
• Global leasing revenue declined across all major property types, except retail.

Capital Markets

• A highly constrained capital environment and difficult comparisons with fourth-quarter 2021 caused global sales revenue to fall 47% (44% local currency).
• Investment activity weakness was broad-based. Combined EMEA/APAC sales revenue dropped 33% (23% in local currency); however, China, India and Japan showed strong growth before currency effects.
• In the Americas, sales revenue was down 53% (same local currency) below last year’s robust level. Americas sales revenue increased 90% in fourth-quarter of 2021 versus fourth-quarter 2020, making the current quarter comparison particularly challenging.
• Global sales revenue was down significantly across all major property types.
• Most debt capital sources remained on the sidelines throughout the quarter. As a result, global mortgage origination revenue declined 42% (41% local currency).

Other Advisory Business Lines

• Loan servicing revenue fell 19% (18% local currency), reflecting lower prepayment fees, which were unusually elevated in last year’s fourth quarter. Excluding prepayment fees, loan servicing revenue increased 2%, compared with fourth-quarter 2021. The servicing portfolio ended the year at $381 billion, up 9% from third-quarter 2022 and 16% for the year.
• Property management net revenue rose 4% (10% local currency), paced by the Americas, Continental Europe, and Pacific.
• Valuations revenue rose 4% in local currency but declined 3% in U.S. dollars.

Global Workplace Solutions (GWS) Segment

The following table presents highlights of the GWS segment performance (dollars in millions; totals may not add due to rounding):

Note: all percent changes cited are vs. fourth-quarter 2021, except where noted.

• GWS revenue increased 7% (13% local currency), excluding revenue from Turner & Townsend (60% interest acquired on November 1, 2021).
• Net revenue increased 6% (12% local currency), excluding Turner & Townsend.
• Project management net revenue growth was particularly strong even before the Turner & Townsend contributions, rising 14% (21% local currency).
• Facilities management net revenue rose 3% (9% local currency), supported by significant growth from technology and healthcare clients.
• The Turner & Townsend business continued to perform ahead of expectations.
• The GWS new business pipeline increased, driven by a diversified mix of prospects in the financial and professional services, industrial and technology sectors.
• Excluding contributions from Turner & Townsend, GWS segment operating profit rose 17% (25% local currency) reflecting strong top-line growth, prudent cost management actions and the benefit of one-time items.

Real Estate Investments (REI) Segment

The following table presents highlights of the REI segment performance (dollars in millions):

Note: all percent changes cited are vs. fourth-quarter 2021, except where noted.

Real Estate Development

• Operating loss ⁽⁸⁾ totaled $6 million compared with a $122 million profit in fourth-quarter 2021.
• The result reflects sharply lower U.S. asset dispositions versus last year’s robust fourth quarter, as anticipated, as well as losses on development activities in the U.K. and Continental Europe.
• For full-year 2022, development operating profit of $333 million was the second-highest in company history.
• The in-process portfolio ended the year at $16.9 billion, down $2.6 billion from third-quarter 2022, reflecting deferred timing of certain new projects in light of market conditions.
• Industrial and multifamily assets comprised more than two thirds of the in-process portfolio.

Investment Management

• Revenue edged up 3% in local currency but fell 6% in U.S. dollars to $140 million.
• Asset management fees, up 2% (12% local currency), were the primary growth catalyst.
• Operating profit decreased 42% (39% local currency) to $24 million, in part due to co-investment losses versus a gain in fourth-quarter 2021.
• Assets Under Management (AUM) increased $5.4 billion from third-quarter 2022 to $149.3 billion, a record high for the company. The increase was attributable to net inflows of capital and positive currency movement. In local currency, AUM was down $0.5 billion, reflecting lower property values.

Corporate and Other Segment

• Non-core operating loss totaled $167 million, primarily due to the lower fair-value of the company’s investment in Altus Power, Inc. (NYSE:AMPS), reflecting a decline in the share price during the quarter. Fourth-quarter 2021 non-core operating profit was $169 million, primarily due to a one-time gain recognized upon the merger of CBRE Acquisitions Holdings, Inc. with Altus Power.
• Corporate overhead expenses decreased by roughly $35 million (24.6%), driven by lower stock compensation, bonus expense and corporate donations, partially offset by higher salary and benefits expenses.

Capital Allocation Overview

• Free Cash Flow – During the fourth quarter of 2022, free cash flow was $715 million. This reflected cash provided by operating activities of $814 million, less total capital expenditures of $99 million. Net capital expenditures totaled $97 million. ⁽⁹⁾
• Stock Repurchase Program – The company repurchased approximately 6.1 million shares for $451 million ($73.84 average price per share) during the fourth quarter of 2022, and 22.9 million shares for $1.9 billion ($81.31 average price per share) during all of 2022. There was approximately $2.1 billion of capacity remaining under the company’s authorized stock repurchase program as of December 31, 2022.
• Acquisitions and Investments – CBRE completed two in-fill acquisitions totaling $114 million in cash and deferred consideration during the fourth quarter.

Leverage and Financing Overview

• Leverage – CBRE’s net leverage ratio (net debt ⁽¹⁰⁾ to trailing twelve-month Core EBITDA) was 0.14x as of December 31, 2022, which is substantially below the company’s primary debt covenant of 4.25x. The net leverage ratio is computed as follows (dollars in millions):

• Liquidity – As of December 31, 2022, the company had approximately $4.8 billion of total liquidity, consisting of approximately $1.3 billion in cash, plus the ability to borrow an aggregate of approximately $3.5 billion under its revolving credit facilities, net of any outstanding letters of credit.

About CBRE Group, Inc.

CBRE Group, Inc. (NYSE:CBRE), a Fortune 500 and S&P 500 company headquartered in Dallas, is the world’s largest commercial real estate services and investment firm (based on 2022 revenue). The company has approximately 115,000 employees (excluding Turner & Townsend employees) serving clients in more than 100 countries. CBRE serves a diverse range of clients with an integrated suite of services, including facilities, transaction and project management; property management; investment management; appraisal and valuation; property leasing; strategic consulting; property sales; mortgage services and development services. Please visit our website at www.cbre.com. We routinely post important information on our website, including corporate and investor presentations and financial information. We intend to use our website as a means of disclosing material, non-public information and for complying with our disclosure obligations under Regulation FD. Such disclosures will be included in the Investor Relations section of our website at https://ir.cbre.com. Accordingly, investors should monitor such portion of our website, in addition to following our press releases, Securities and Exchange Commission filings and public conference calls and webcasts.