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Fair Value Measurements
 3 Months Ended
Mar. 31, 2022
Fair Value Disclosures [Abstract]  
Fair Value Measurements Fair Value Measurements
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.
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 2021 Annual Report.
The following tables present the fair value of assets and liabilities measured at fair value on a recurring basis as of March 31, 2022 and December 31, 2021 (dollars in thousands):
As of March 31, 2022
Fair Value Measured and Recorded Using
Level 1Level 2Level 3Total
Assets
Available for sale securities:
Debt securities:
U.S. treasury securities$6,832 $— $— $6,832 
Debt securities issued by U.S. federal agencies— 10,146 — 10,146 
Corporate debt securities— 47,806 — 47,806 
Asset-backed securities— 3,193 — 3,193 
Collateralized mortgage obligations— 592 — 592 
Total available for sale debt securities6,832 61,737 — 68,569 
Equity securities42,488 — — 42,488 
Investments in unconsolidated subsidiaries163,460 14,965 367,855 546,280 
Warehouse receivables— 1,194,800 — 1,194,800 
Total assets at fair value$212,780 $1,271,502 $367,855 $1,852,137 
Liabilities
Other liabilities— — 1,322 1,322 
Total liabilities at fair value$— $— $1,322 $1,322 
As of December 31, 2021
Fair Value Measured and Recorded Using
Level 1Level 2Level 3Total
Assets
Available for sale securities:
Debt securities:
U.S. treasury securities$7,002 $— $— $7,002 
Debt securities issued by U.S. federal agencies— 9,276 — 9,276 
Corporate debt securities— 50,897 — 50,897 
Asset-backed securities— 3,428 — 3,428 
Collateralized mortgage obligations— 725 — 725 
Total available for sale debt securities7,002 64,326 — 71,328 
Equity securities69,880 — — 69,880 
Investments in unconsolidated subsidiaries229,900 23,741 406,690 660,331 
Warehouse receivables— 1,303,717 — 1,303,717 
Total assets at fair value$306,782 $1,391,784 $406,690 $2,105,256 
Liabilities
Other liabilities— — 10,700 10,700 
Total liabilities at fair value$— $— $10,700 $10,700 
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.
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 fair values of the warehouse receivables are primarily calculated based on already locked in purchase prices. At March 31, 2022 and December 31, 2021, 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 Note 4). These assets are classified as Level 2 in the fair value hierarchy as a substantial majority of inputs are readily observable.
As of March 31, 2022 and December 31, 2021, investments in unconsolidated subsidiaries at fair value using NAV were $167.6 million and $152.7 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 thousands):
Investment in Unconsolidated SubsidiariesOther liabilities
Balance as of December 31, 2021$406,690 $10,700 
Transfer in— — 
Net change in fair value(38,835)— 
Purchases/ Additions— (9,378)
Balance as of March 31, 2022$367,855 $1,322 
Net change in fair value, included in the table above, is reported in Net income as follows:
Category of Assets/Liabilities using Unobservable InputsConsolidated Statements of Operations
Investments in unconsolidated subsidiariesEquity income from unconsolidated subsidiaries
Other liabilitiesOther income
The table below presents information about the significant unobservable inputs used for recurring fair value measurements for certain Level 3 instruments:
Valuation TechniqueUnobservable InputRange
Investment in unconsolidated subsidiariesDiscounted cash flowDiscount rate
14% - 25%
Monte CarloVolatility69 %
Risk free interest rate2.4 %
Other liabilitiesDiscounted cash flowDiscount rate25.0 %
During the three months ended March 31, 2022, the company exited its Advisory Services business in Russia in response to the Ukraine conflict. We recorded $10.4 million in non-cash asset impairment charges (primarily comprised of receivables), on a pretax basis, related to the expected disposal of the net assets and anticipated release of non-cash cumulative foreign currency translation losses associated with the disposal group.
There were no significant non-recurring fair value measurements recorded during the three months ended March 31, 2022 and 2021.
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 Note 4).
•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. Private placement warrants related to Altus are considered level 2 and measured at fair value using observable inputs for similar assets 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 a Monte Carlo and a discounted cash flow approach, respectively. The valuation of Altus’ common shares, private placement warrants 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 liabilities - Represents the net fair value of the commitment related to a revolving facility in our Advisory Services segment. 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.
•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 facilities. Due to the short-term nature and variable interest rates of these instruments, fair value approximates carrying value (see Notes 4 and 8).
•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 $440.4 million and $451.8 million at March 31, 2022 and December 31, 2021, respectively. Their actual carrying value, net of unamortized debt issuance costs, totaled $442.1 million and $454.5 million at March 31, 2022 and December 31, 2021, respectively (see Note 8).
•Senior Notes – Based on dealers’ quotes (which falls within Level 2 of the fair value hierarchy), the estimated fair value of our 4.875% senior notes was $628.1 million and $671.7 million at March 31, 2022 and December 31, 2021, respectively. The actual carrying value of our 4.875% senior notes, net of unamortized debt issuance costs and discount, totaled $595.7 million and $595.5 million at March 31, 2022 and December 31, 2021, respectively. The estimated fair value of our 2.500% senior notes was $445.5 million and $502.1 million at March 31, 2022 and December 31, 2021. The actual carrying value of our 2.500% senior notes, net of unamortized debt issuance costs and discount, totaled $488.4 million and $488.1 million at March 31, 2022 and December 31, 2021.
•Notes Payable on Real Estate - As of March 31, 2022 and December 31, 2021, the carrying value of our notes payable on real estate, net of unamortized debt issuance costs, was $53.6 million and $48.2 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.