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Fair Value Measurements
 9 Months Ended
Sep. 30, 2024
Fair Value Disclosures [Abstract]  
Fair Value Measurements Fair Value Measurements
FASB ASC Topic 820, “Fair Value Measurements and Disclosures,” (Topic 820) 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 2023 Annual Report.
The following tables present the fair value of assets and liabilities measured at fair value on a recurring basis as of September 30, 2024 and December 31, 2023 (dollars in millions):
As of September 30, 2024
Fair Value Measured and Recorded Using
Level 1Level 2Level 3Total
Assets
Available for sale debt securities:
U.S. treasury securities$3 $— $— $3 
Corporate debt securities— 33 — 33 
Asset-backed securities— 7 — 7 
Total available for sale debt securities3 40 — 43 
Equity securities17 — — 17 
Investments in unconsolidated subsidiaries78 — 468 546 
Warehouse receivables— 1,438 — 1,438 
Other assets— — 37 37 
Total assets at fair value$98 $1,478 $505 $2,081 
Liabilities
Contingent consideration— — 37 37 
Other liabilities— 14 — 14 
Total liabilities at fair value$— $14 $37 $51 
As of December 31, 2023
Fair Value Measured and Recorded Using
Level 1Level 2Level 3Total
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 securities12 56 — 68 
Equity securities41 — — 41 
Investments in unconsolidated subsidiaries168 — 477 645 
Warehouse receivables— 675 — 675 
Other assets— — 16 16 
Total assets at fair value$221 $731 $493 $1,445 
Liabilities
Contingent consideration— — 36 36 
Other liabilities— 5 — 5 
Total liabilities at fair value$— $5 $36 $41 
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 above tables do not include $143 million related to capital investments as of both September 30, 2024 and December 31, 2023 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 locked-in purchase prices. At September 30, 2024 and December 31, 2023, 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 September 30, 2024 and December 31, 2023, investments in unconsolidated subsidiaries at fair value using NAV were $384 million and $352 million, respectively, and investments at fair value using NAV which are not accounted for under the equity method were $20 million and $19 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 SubsidiariesOther AssetsContingent Consideration
Balance as of June 30, 2024$457 $31 $40 
Transfer in (out)— — — 
Net change in fair value11 2 1 
Purchases / Additions— 4 — 
Sales / Payments— — (4)
Balance as of September 30, 2024$468 $37 $37 
Balance as of December 31, 2023$477 $16 $36 
Transfer in (out)— — — 
Net change in fair value(9)12 (2)
Purchases / Additions— 9 9 
Sales / Payments— — (6)
Balance as of September 30, 2024$468 $37 $37 
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 Financial Statements
Investments in unconsolidated subsidiariesEquity (loss) income from unconsolidated subsidiaries
Other assets (liabilities)Other income
Contingent consideration (short-term)
Accounts payable and accrued expenses
Contingent consideration (long-term)
Other liabilities
The table below presents information about the significant unobservable inputs used for recurring fair value measurements for certain Level 3 instruments as of September 30, 2024:
Valuation TechniqueUnobservable InputRangeWeighted Average
Investment in unconsolidated subsidiariesDiscounted cash flowDiscount rate17 %— 
Monte CarloVolatility
35% - 61%
37 %
Discount rate25 %— 
Other assetsDiscounted cash flowDiscount rate17 %— 
Contingent considerationMonte CarloVolatility21 %— 
Discount rate
5 %— 
Discounted estimated payments
Discount rate
5% - 6%
6 %
During the three and nine months ended September 30, 2024, we recorded non-cash asset impairment charges of $9 million related to one of our equity method investments. There were no asset impairment charges or other significant non-recurring fair value measurement adjustments recorded during the three and nine months ended September 30, 2023.
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. 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. Transfer out activities from level 3 represents annual conversion of a portion of our alignment shares in Altus to its common shares (see Note 7).
•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 and Liabilities – Includes (i) the fair value of the unfunded commitment related to a revolving facility designated as Level 3. 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; (ii) the fair value of cross currency swaps reflects the net present value of expected payments and receipts under the swap agreement based on the market’s expectation of future spot foreign currency exchange rates. Additional inputs to the net present value calculation may include the contract terms, counterparty credit risk and discount rates. These are designated as Level 2.
•Contingent Consideration – The fair values of contingent consideration related to business acquisitions are estimated using Monte Carlo simulations or the probability-weighted present value of estimated future payments resulting from the achievement levels of financial targets.
•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/or variable interest rates of these instruments, fair value approximates carrying value (see Notes 4 and 8).
•Senior Term Loans and Senior Notes – The table below presents the estimated fair value and actual carrying value of our long-term debt as of September 30, 2024 and December 31, 2023 (dollars in millions). The estimated fair value is determined based on dealers’ quotes (which falls within Level 2 of the fair value hierarchy). The actual carrying value is presented net of unamortized debt issuance costs and discount (see Note 8).
Estimated Fair Value
Carrying Value
Financial instrument
September 30, 2024December 31, 2023September 30, 2024December 31, 2023
Senior term loans
$748 $746 $756 $752 
5.950% senior notes
1,073 1,049 975 974 
4.875% senior notes
603 600 598 597 
5.500% senior notes
522 — 495 — 
2.500% senior notes
437 424 491 490 
•Notes Payable on Real Estate – As of September 30, 2024 and December 31, 2023, the carrying value of our notes payable on real estate, net of unamortized debt issuance costs, was $182 million and $124 million, respectively. 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.