CBRE Group, Inc. Reports Strong Revenue and Earnings Growth for First-Quarter 2019

GAAP EPS of $0.48, up 9%
Adjusted EPS of $0.79, up 46%
Revenue
up 10% and Fee Revenue up 7%

LOS ANGELES–(BUSINESS WIRE)–CBRE Group, Inc. (NYSE:CBRE) today reported strong financial results for
the first quarter ended March 31, 2019.

“CBRE had an excellent start to 2019, as the positive momentum we
experienced last year carried over into the first quarter,” said Bob
Sulentic, president and chief executive officer of CBRE. “Strong
operating leverage across each of our three business segments drove
impressive bottom-line growth. Importantly, the organizational changes
we announced last year are improving our lines of business and helping
to make us a more efficient, client-focused company.”

“The macro market drivers and CBRE’s inherent competitive advantages
remain intact. As always, we caution against reading too much into first
quarter results, as this is our seasonally smallest period,” Mr.
Sulentic added.

First-Quarter 2019 Results

• Revenue for the first quarter totaled $5.1 billion, an increase of 10%
  (13% local currency¹). Fee revenue² rose 7% (10%
  local currency) to $2.4 billion. Organic fee revenue²
  growth was 5% (8% local currency).
• On a GAAP basis, net income and earnings per diluted share both
  increased 9% to $164.4 million and $0.48 per diluted share,
  respectively. Adjusted net income³ for the first quarter of
  2019 rose 44% to $267.5 million, while adjusted earnings per diluted
  share improved 46% to $0.79 per share.

• First-quarter 2019 adjustments to GAAP net income had a net impact of
  $103.1 million, including:
  • Pre-tax adjustments of:
    • $89.0 million non-cash intangible asset impairment in the Real
      Estate Investments segment related to the securities
      investment management business, which has been impacted in
      part by the industry-wide shift in investor preference for
      passive investment programs;
    • $22.2 million of non-cash acquisition-related depreciation and
      amortization;
    • $15.8 million of expenses associated with the company
      reorganization, including related cost-savings initiatives;
    • $7.3 million of net carried interest incentive compensation
      expense to align with the timing of associated revenue, and
    • $2.6 million write-off of re-financing costs.
  • Offset by a $33.8 million net tax adjustment associated with the
    aforementioned pre-tax adjustments.
• EBITDA⁴ increased 19% (20% local currency) to $426.9
  million and adjusted EBITDA⁴ increased 29% (31% local
  currency) to $450.0 million. Adjusted EBITDA margin on fee revenue⁴
  was 18.5% for the three months ended March 31, 2019 – up 320 basis
  points from first-quarter 2018.

First-Quarter 2019 Segment⁵
and Business Line Review

The following tables present highlights of CBRE segment performance
during the first quarter of 2019 (dollars in thousands):

Advisory Services Segment

Advisory Services produced revenue growth of 8% (11% local currency) and
fee revenue growth of 8% (10% local currency). Growth was notably strong
in France, Greater China, Japan and the U.S. Advisory Services adjusted
EBITDA surged 22% (23% local currency).

• Advisory leasing revenue rose 20% (22% local currency) and growth was
  almost entirely organic. In the U.S., revenue increased 28% with solid
  demand from multiple sectors, including consumer products, energy and
  technology. International markets also had very strong growth, led by
  France, Germany, India, Japan and the Netherlands.

• Loan servicing revenue continued to grow briskly, rising 10% (same
  local currency). The portfolio increased to $210 billion – up 15% from
  first-quarter 2018.
• Capital markets revenue, which includes both property sales and
  commercial mortgage origination, declined 3% (1% local currency)
  globally, reflecting meaningful gains in market share.
  • Commercial mortgage origination revenue rose 13% (same local
    currency), fueled by robust activity with the U.S.
    Government-Sponsored Enterprises as well as banks.
  • Advisory property sales revenue declined 7% (5% local currency).
    This reflected a tepid macro environment for market-wide property
    sales volume in all three global regions as well as a difficult
    comparison with first-quarter 2018. A modest U.S. sales revenue
    decline of 1% reflects significant market share gains, as
    estimated market volumes decreased 8%, according to Real Capital
    Analytics.
• Property and advisory project management revenue increased 7% (11%
  local currency) and fee revenue rose 6% (10% local currency), with
  strong growth in Australia, Greater China, India, Spain, the U.K. and
  the U.S.
• Valuation revenue rose 3% (7% local currency), driven by France,
  Germany and the U.K.

Global Workplace Solutions Segment
(Occupier Outsourcing Services)

Global Workplace Solutions achieved a 12% (16% local currency) increase
in revenue and an 8% (12% local currency) rise in fee revenue. This
segment’s adjusted EBITDA surged 20% (23% local currency), reflecting
strong operating leverage.

Continued strong revenue and earnings increases reflect CBRE’s ability
to capture a large share of the growing market for real estate
outsourcing and account-based client service. Enhanced technology and
service capabilities from the June 2018 FacilitySource acquisition also
contributed to account wins and expansions in the quarter.

Real Estate Investments Segment
(Development, Investment Management and Flexible-Space Solutions)

Revenue declined 8% (5% local currency). However, adjusted revenue –
which includes both equity earnings and gains from real estate sales,
net of controlling interests – rose 21% (23% local currency). This
segment’s adjusted EBITDA surged 74% (76% local currency).

The robust adjusted EBITDA growth was fueled by the timing of several
large development asset sales and gains from investment management
co-investments, partially offset by costs associated with starting up
the flexible-space solutions enterprise.

• The in-process development portfolio increased to a record $9.7
  billion, up $0.7 billion from year-end 2018, reflecting the continued
  conversion of pipeline activity. The pipeline declined by $0.9 billion
  during the first quarter to $2.8 billion.
• Investment management assets under management (AUM) totaled $107.2
  billion, up $1.7 billion ($2.0 billion local currency) from year-end
  2018. Over the past 12 months, AUM has increased $3.0 billion ($7.8
  billion local currency).

Conference Call Details

The company’s first quarter earnings conference call will be held today
(Wednesday, May 8, 2019) at 8:30 a.m. Eastern Time. A webcast, along
with an associated slide presentation, will be accessible through the
Investor Relations section of the company’s website at www.cbre.com/investorrelations.

The direct dial-in number for the conference call is 877-407-8037 for
U.S. callers and 201-689-8037 for international callers. A replay of the
call will be available starting at 1:00 p.m. Eastern Time on May 8, 2019
and will be available for one week following the event. The dial-in
number for the replay is 877-660-6853 for U.S. callers and 201-612-7415
for international callers. The access code for the replay is 13689185#.
A transcript of the call will be available on the company’s Investor
Relations website at www.cbre.com/investorrelations.

About CBRE Group, Inc.

CBRE Group, Inc. (NYSE:CBRE), a Fortune 500 and S&P 500 company
headquartered in Los Angeles, is the world’s largest commercial real
estate services and investment firm (based on 2018 revenue). The company
has more than 90,000 employees (excluding affiliates) and serves real
estate investors and occupiers through more than 480 offices (excluding
affiliates) worldwide. CBRE offers a broad range of integrated 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.

The information contained in, or accessible through, the company’s
website is not incorporated into this press release.

This press release contains forward-looking statements within the
meaning of the “safe harbor” provisions of the Private Securities
Litigation Reform Act of 1995, including statements regarding our future
growth momentum, operations, financial performance, market share,
investment levels and business outlook. These forward-looking statements
involve known and unknown risks, uncertainties and other factors that
may cause the company’s actual results and performance in future periods
to be materially different from any future results or performance
suggested in forward-looking statements in this press release. Any
forward-looking statements speak only as of the date of this press
release and, except to the extent required by applicable securities
laws, the company expressly disclaims any obligation to update or revise
any of them to reflect actual results, any changes in expectations or
any change in events. If the company does update one or more
forward-looking statements, no inference should be drawn that it will
make additional updates with respect to those or other forward-looking
statements. Factors that could cause results to differ materially
include, but are not limited to: 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 the United Kingdom’s withdrawal from the European
Union, including concerns relating to the economic impact of such
withdrawal on businesses within the United Kingdom and Europe; 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; the emergence of
disruptive business models and technologies; 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 investment management line of 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 our wholly-owned
subsidiary, CBRE Capital Markets, Inc., 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 line of business within our Real
Estate Investments segment; 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; negative publicity or actions
by our employees, regulators, media, activists, competitors or others
that harm our reputation or brand; changes in applicable tax or
accounting requirements, including the impact of any subsequent
additional regulation or guidance associated with the Tax Cuts and Jobs
Act (which was enacted into law on December 22, 2017); and the effect of
implementation of new accounting rules and standards.

Additional information concerning factors that may influence the
company’s financial information is discussed under “Risk Factors,”
“Management’s Discussion and Analysis of Financial Condition and Results
of Operations,” “Quantitative and Qualitative Disclosures About Market
Risk” and “Cautionary Note on Forward-Looking Statements” in our Annual
Report on Form 10-K for the year ended December 31, 2018, as well as in
the company’s press releases and other periodic filings with the
Securities and Exchange Commission (SEC). Such filings are available
publicly and may be obtained on the company’s website at www.cbre.com
or upon written request from CBRE’s Investor Relations Department at [email protected].

The terms “fee revenue,” “organic fee revenue,” “adjusted revenue,”
“adjusted net income,” “adjusted earnings per diluted share” (or
adjusted EPS), “EBITDA,” “adjusted EBITDA” and “adjusted EBITDA on fee
revenue margin,” all of which CBRE uses in this press release, are
non-GAAP financial measures under SEC guidelines, and you should refer
to the footnotes below as well as the “Non-GAAP Financial Measures”
section in this press release for a further explanation of these
measures. We have also included in that section reconciliations of these
measures in specific periods to their most directly comparable financial
measure calculated and presented in accordance with GAAP for those
periods.

¹ Local currency percentage change is calculated by comparing
current-period results at prior-period exchange rates versus
prior-period results.

² 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. Organic
fee revenue for the three months ended March 31, 2019 further excludes
contributions from all acquisitions completed after first-quarter 2018.

³ Adjusted net income and adjusted earnings per diluted share
(or adjusted EPS) exclude the effect of select items from GAAP net
income and GAAP earnings per diluted share as well as adjust the
provision for income taxes for such charges. Adjustments during the
periods presented included intangible asset impairment, non-cash
depreciation and amortization expense related to certain assets
attributable to acquisitions, costs associated with our reorganization,
including cost-savings initiatives, certain carried interest incentive
compensation expense (reversal) to align with the timing of associated
revenue and the write-off of financing costs on extinguished debt.
Adjustments for the three months ended March 31, 2018 also included an
update to the provisional estimated tax impact of U.S. tax reform
initially recorded in the fourth quarter of 2017.

⁴ EBITDA represents earnings before net interest expense,
write-off of financing costs on extinguished debt, income taxes,
depreciation, amortization and intangible asset impairments. Amounts
shown for adjusted EBITDA further remove (from EBITDA) costs associated
with our reorganization, including cost-savings initiatives, and certain
carried interest incentive compensation expense (reversal) to align with
the timing of associated revenue. Adjusted EBITDA on fee revenue margin
represents adjusted EBITDA divided by fee revenue.

⁵ Our new organizational structure became effective on
January 1, 2019. Under the new structure, we organize our operations
around, and publicly report our financial results on, three global
business segments: (1) Advisory Services; (2) Global Workspace
Solutions; and (3) Real Estate Investments. Prior period results have
been presented in conformity with the new structure.

⁶ Revenue in the Real Estate Investments segment does not
include equity income from unconsolidated subsidiaries and gain on
disposition of real estate, net of non-controlling interests. Adjusted
revenue for the Real Estate Investments segment reflects revenue for
this segment with equity income from unconsolidated subsidiaries and
gain on disposition of real estate, net of non-controlling interests,
included. EBITDA includes equity income from unconsolidated subsidiaries
and gain on disposition of real estate, net of non-controlling
interests, and the associated compensation expense.

Contacts

For further information:

Brad Burke
Investor Relations
215.921.7436

Steve Iaco
Media Relations
212.984.6535

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