CBRE Group, Inc. — FY 2022 Form 10-K
Reporting period: Fiscal year ended December 31, 2022. This is an annual report, not a standalone fourth-quarter filing. CBRE is a global commercial real estate services and investment firm operating in more than 100 countries, with approximately 115,000 employees excluding Turner & Townsend.
Financial results and liquidity
| Metric | FY 2022 | FY 2021 | Change |
|---|---|---|---|
| Total revenue | $30.83 billion | $27.75 billion | +11.1% |
| Net revenue, excluding pass-through costs | $18.78 billion | $17.01 billion | +10.4% |
| Operating income | $1.51 billion | $1.64 billion | Down 7.7% |
| Net income attributable to CBRE | $1.41 billion | $1.84 billion | Down 23.4% |
| Diluted EPS | $4.29 | $5.41 | Down 20.7% |
| Cash from operating activities | $1.63 billion | $2.36 billion | Down $735 million |
| Core EBITDA (non-GAAP) | $2.92 billion | $2.86 billion | +2.1% |
| Adjusted EBITDA (non-GAAP) | $2.75 billion | $3.07 billion | Down 10.6% |
Total-revenue operating margin was 4.9%, versus 5.9% in 2021; the filing notes that pass-through revenue generally carries little or no margin. Net income was affected by lower equity income and the prior-year Altus Power transaction gain, as well as current-year charges. The effective tax rate fell to 14.1% from 23.6%, principally due to a tax benefit associated with legal-entity restructuring.
At year-end, cash and cash equivalents were $1.32 billion. CBRE reported $3.5 billion of borrowing availability under revolving credit facilities. Long-term debt was $1.52 billion gross, including $427.8 million due in 2023; short-term borrowings were $668.8 million, mainly warehouse lines used to fund mortgage loans. Separately, CBRE disclosed $1.7 billion of debt excluding warehouse lines and generally non-recourse real estate notes. Net operating cash flow declined, in part because working-capital outflows increased. The company repurchased $1.8 billion of shares during 2022.
Business trends and changes versus 2021
- Global Workplace Solutions: Revenue rose 16.1%, led by project management and a full year of Turner & Townsend contribution; the acquisition contributed approximately $1.3 billion of 2022 revenue. Segment operating profit, a company-defined non-GAAP measure, increased to $899 million from $708 million.
- Advisory Services: Revenue increased 3.2%. Leasing, valuation and property management grew, while property sales and commercial mortgage origination weakened as higher rates and tighter credit constrained transactions. Segment operating profit declined to $1.91 billion from $2.06 billion.
- Real Estate Investments: Revenue increased 1.6%; growth in investment management fees was offset by lower carried interest and development activity. Assets under management reached $149.3 billion, up from $141.9 billion. Segment operating profit was broadly flat at $518 million.
- Foreign-currency translation reduced total revenue by approximately 4.2%. Approximately 43% of revenue was transacted in foreign currencies.
Outlook, risks and unusual items
- Management did not provide specific revenue or earnings guidance in the supplied filing text. It expects operating cash flow and revolving facilities to meet anticipated cash requirements for at least the next 12 months, absent extraordinary events or a large acquisition. Expected 2023 capital expenditures were up to approximately $327 million.
- Management cited rapidly rising interest rates, inflation, reduced credit availability and lower transaction activity in the second half of 2022. It began cost-reduction measures in 2022 and said efforts would continue in 2023. Inflation also increased compensation and development costs.
- CBRE recorded a $185.9 million provision for Telford Homes fire-safety remediation obligations in the U.K. The estimate is subject to substantial uncertainty as building assessments and remediation costs develop. This was a critical audit matter.
- Other notable charges included $58.7 million of impairments, including impairment of Telford goodwill and trade name and costs associated with exiting most Russian advisory operations, plus $117.5 million of efficiency and cost-reduction charges. The filing also identifies $574.3 million of accrued deferred acquisition consideration.
- Key risks include commercial real estate and credit-market weakness, further rate changes, currency movements, acquisition integration, cybersecurity and data protection, litigation and regulatory exposure, and development guarantees. The filing describes ordinary-course litigation; management said excess losses beyond accrued amounts were not expected to be significant, while noting litigation uncertainty.
Important facts for investors to verify
- How the Telford remediation estimate changes as the scope, number of buildings and verified costs are determined.
- Whether transaction volumes, mortgage origination and capital availability recover or remain pressured by rates and financing conditions.
- Cash conversion and working-capital trends, including the impact of repurchases and upcoming debt maturities.
- How much reported growth and margin performance reflects Turner & Townsend, pass-through revenue, foreign exchange and non-GAAP adjustments.
- CBRE reported unqualified audit opinions on its financial statements and internal controls; management said the previously reported GWS EMEA control weaknesses were remediated in 2022.