Edgar Filing: CB RICHARD ELLIS GROUP INC

Form 10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2010

¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Transition Period from to

Commission File Number 001 – 32205

CB RICHARD ELLIS GROUP, INC.

(Exact name of Registrant as specified in its charter)


Delaware		94-3391143
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification Number)

11150 Santa Monica Boulevard, Suite 1600 Los Angeles, California		90025
(Address of principal executive offices)		(Zip Code)

(310) 405-8900
(Registrant’s telephone number, including area code)		(Former name, former address and former fiscal year if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨.

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨.

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer x Accelerated filer ¨ Non-accelerated filer ¨ Smaller reporting company ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x.

The number of shares of Class A common stock outstanding at October 29, 2010 was 322,894,272.

FORM 10-Q

September 30, 2010

TABLE OF CONTENTS


		Page
	PART I—FINANCIAL INFORMATION
Item 1.	Financial Statements
	Consolidated Balance Sheets at September 30, 2010 (Unaudited) and December 31, 2009		3
	Consolidated Statements of Operations for the three and nine months ended September 30, 2010 and 2009 (Unaudited)		4
	Consolidated Statements of Cash Flows for the nine months ended September 30, 2010 and 2009 (Unaudited)		5
	Consolidated Statement of Equity for the nine months ended September 30, 2010 (Unaudited)		6
	Notes to Consolidated Financial Statements (Unaudited)		7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		36
Item 3.	Quantitative and Qualitative Disclosures About Market Risk		61
Item 4.	Controls and Procedures		62

	PART II—OTHER INFORMATION
Item 1.	Legal Proceedings		63
Item 1A.	Risk Factors		63
Item 6.	Exhibits		75
Signatures			77

CB RICHARD ELLIS GROUP, INC.

CONSOLIDATED BALANCE SHEETS

(Dollars in thousands, except share data)


	September 30, 2010			December 31, 2009
	(Unaudited)
ASSETS
Current Assets:
Cash and cash equivalents	$	768,675		$	741,557
Restricted cash		51,497			46,797
Receivables, less allowance for doubtful accounts of $53,297 and $41,397 at September 30, 2010 and December 31, 2009, respectively		818,030			775,929
Warehouse receivables		264,819			315,033
Income taxes receivable		61,874			163,032
Prepaid expenses		88,821			99,309
Deferred tax assets, net		73,983			75,330
Real estate and other assets held for sale		5,671			7,109
Other current assets		44,217			42,629

Total Current Assets		2,177,587			2,266,725
Property and equipment, net		154,157			178,975
Goodwill		1,316,843			1,306,372
Other intangible assets, net of accumulated amortization of $157,904 and $138,244 at September 30, 2010 and December 31, 2009, respectively		331,748			322,904
Investments in unconsolidated subsidiaries		132,388			135,596
Deferred tax assets, net		11,365			3,395
Real estate under development		131,424			160,164
Real estate held for investment		701,790			526,169
Available for sale securities		31,791			32,016
Other assets, net		85,970			107,090

Total Assets	$	5,075,063		$	5,039,406

LIABILITIES AND EQUITY
Current Liabilities:
Accounts payable and accrued expenses	$	405,800		$	458,510
Compensation and employee benefits payable		305,860			240,536
Accrued bonus and profit sharing		274,265			278,444
Short-term borrowings:
Warehouse lines of credit		260,112			312,872
Revolving credit facility		17,893			21,050
Other		2,016			5,850

Total short-term borrowings		280,021			339,772
Current maturities of long-term debt		108,233			138,682
Notes payable on real estate		215,030			159,921
Liabilities related to real estate and other assets held for sale		4,342			1,267
Other current liabilities		16,317			11,909

Total Current Liabilities		1,609,868			1,629,041
Long-Term Debt:
Senior secured term loans		1,360,548			1,545,490
11.625% senior subordinated notes, net of unamortized discount of $12,627 and $13,498 at September 30, 2010 and December 31, 2009, respectively		437,373			436,502
Other long-term debt		141			129

Total Long-Term Debt		1,798,062			1,982,121
Pension liability		63,128			64,945
Non-current tax liabilities		78,359			73,462
Notes payable on real estate		460,253			390,181
Other liabilities		108,429			115,361

Total Liabilities		4,118,099			4,255,111
Commitments and contingencies		—			—
Equity:
CB Richard Ellis Group, Inc. Stockholders’ Equity:
Class A common stock; $0.01 par value; 525,000,000 shares authorized; 322,980,362 and 321,767,407 shares issued and outstanding at September 30, 2010 and December 31, 2009, respectively		3,230			3,218
Additional paid-in capital		792,013			755,989
Accumulated earnings (deficit)		90,193			(15,008	)
Accumulated other comprehensive loss		(112,039	)		(115,077	)

Total CB Richard Ellis Group, Inc. Stockholders’ Equity		773,397			629,122
Non-controlling interests		183,567			155,173

Total Equity		956,964			784,295

Total Liabilities and Equity	$	5,075,063		$	5,039,406

The accompanying notes are an integral part of these consolidated financial statements.

CB RICHARD ELLIS GROUP, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

(Dollars in thousands, except share data)


	Three Months Ended September 30,						Nine Months Ended September 30,
	2010			2009			2010			2009
Revenue	$	1,266,218		$	1,023,205		$	3,464,020		$	2,869,321
Costs and expenses:
Cost of services		735,393			606,470			2,029,301			1,726,720
Operating, administrative and other		374,815			338,062			1,085,554			972,892
Depreciation and amortization		25,605			24,445			79,516			74,003

Total costs and expenses		1,135,813			968,977			3,194,371			2,773,615
Gain on disposition of real estate		174			2,766			3,797			5,691

Operating income		130,579			56,994			273,446			101,397
Equity income (loss) from unconsolidated subsidiaries		3,682			(6,312	)		11,333			(18,252	)
Interest income		1,463			1,248			6,374			4,790
Interest expense		49,755			54,075			149,822			136,291
Write-off of financing costs		—			—			—			29,255

Income (loss) from continuing operations before provision for income taxes		85,969			(2,145	)		141,331			(77,611	)
Provision for income taxes		38,075			8,498			72,078			1,157

Income (loss) from continuing operations		47,894			(10,643	)		69,253			(78,768	)
Income from discontinued operations, net of income taxes		7,821			—			14,961			—

Net income (loss)		55,715			(10,643	)		84,214			(78,768	)
Less: Net loss attributable to non-controlling interests		(1,323	)		(23,020	)		(20,987	)		(47,819	)

Net income (loss) attributable to CB Richard Ellis Group, Inc.	$	57,038		$	12,377		$	105,201		$	(30,949	)

Basic income (loss) per share attributable to CB Richard Ellis Group, Inc. shareholders
Income (loss) from continuing operations attributable to CB Richard Ellis Group, Inc.	$	0.17		$	0.04		$	0.31		$	(0.11	)
Income from discontinued operations attributable to CB Richard Ellis Group, Inc.		0.01			—			0.03			—

Net income (loss) attributable to CB Richard Ellis Group, Inc.	$	0.18		$	0.04		$	0.34		$	(0.11	)

Weighted average shares outstanding for basic income (loss) per share		313,791,661			282,732,848			313,197,421			270,214,427

Diluted income (loss) per share attributable to CB Richard Ellis Group, Inc. shareholders
Income (loss) from continuing operations attributable to CB Richard Ellis Group, Inc.	$	0.17		$	0.04		$	0.30		$	(0.11	)
Income from discontinued operations attributable to CB Richard Ellis Group, Inc.		0.01			—			0.03			—

Net income (loss) attributable to CB Richard Ellis Group, Inc.	$	0.18		$	0.04		$	0.33		$	(0.11	)

Weighted average shares outstanding for diluted income (loss) per share		319,353,359			285,923,601			318,278,968			270,214,427

Amounts attributable to CB Richard Ellis Group, Inc. shareholders
Income (loss) from continuing operations, net of tax	$	55,563		$	12,377		$	96,215		$	(30,949	)
Discontinued operations, net of tax		1,475			—			8,986			—

Net income (loss)	$	57,038		$	12,377		$	105,201		$	(30,949	)

The accompanying notes are an integral part of these consolidated financial statements.

CB RICHARD ELLIS GROUP, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(Dollars in thousands)


	Nine Months Ended September 30,
	2010			2009
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)	$	84,214		$	(78,768	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization		79,717			74,003
Amortization and write-off of financing costs		8,305			35,850
Write-down of impaired real estate and other assets		2,592			29,315
Gain on sale of loans, servicing rights and other assets		(47,782	)		(14,144	)
Gain on disposition of real estate held for investment		(16,945	)		(2,721	)
Equity (income) loss from unconsolidated subsidiaries		(11,333	)		18,252
Provision for doubtful accounts		13,997			135
Compensation expense related to stock options and non-vested stock awards		35,353			26,608
Distribution of earnings from unconsolidated subsidiaries		14,065			7,838
Tenant concessions received		4,588			2,296
(Increase) decrease in receivables		(51,268	)		100,410
Decrease in deferred compensation assets		—			217,079
Decrease in prepaid expenses and other assets		22,561			16,122
Decrease (increase) in real estate held for sale and under development		23,331			(2,674	)
Increase (decrease) in accounts payable and accrued expenses		4,109			(42,843	)
Increase (decrease) in compensation and employee benefits payable and accrued bonus and profit sharing		58,521			(133,458	)
Decrease in income taxes receivable		103,036			53,273
Decrease in other liabilities, including deferred compensation liabilities		(1,657	)		(245,282	)
Other operating activities, net		(480	)		(7,840	)

Net cash provided by operating activities		324,924			53,451

CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures		(17,885	)		(12,647	)
Acquisition of businesses, including net assets acquired, intangibles and goodwill		(68,620	)		(28,263	)
Contributions to unconsolidated subsidiaries		(22,646	)		(41,666	)
Distributions from unconsolidated subsidiaries		19,243			4,762
Net proceeds from disposition of real estate held for investment		76,504			3,408
Additions to real estate held for investment		(22,861	)		(22,952	)
Proceeds from the sale of servicing rights and other assets		22,522			6,963
Increase in restricted cash		(5,726	)		(6,384	)
Other investing activities, net		(1,386	)		(1,126	)

Net cash used in investing activities		(20,855	)		(97,905	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of senior secured term loans		(214,880	)		(429,250	)
Proceeds from revolving credit facility		16,349			800,928
Repayment of revolving credit facility		(19,190	)		(752,210	)
Proceeds from 11.625% senior subordinated notes, net		—			435,928
Proceeds from notes payable on real estate held for investment		18,981			13,764
Repayment of notes payable on real estate held for investment		(79,555	)		(5,432	)
Proceeds from notes payable on real estate held for sale and under development		3,603			48,640
Repayment of notes payable on real estate held for sale and under development		(9,953	)		(34,968	)
Repayment of short-term borrowings and other loans, net		(4,048	)		(4,193	)
Proceeds from issuance of common stock, net		—			146,361
Proceeds from exercise of stock options		578			14,735
Non-controlling interests contributions		27,367			20,470
Non-controlling interests distributions		(6,725	)		(12,501	)
Payment of financing costs		(6,066	)		(38,698	)
Other financing activities, net		518			(1,329	)

Net cash (used in) provided by financing activities		(273,021	)		202,245
Effect of currency exchange rate changes on cash and cash equivalents		(3,930	)		9,431

NET INCREASE IN CASH AND CASH EQUIVALENTS		27,118			167,222
CASH AND CASH EQUIVALENTS, AT BEGINNING OF PERIOD		741,557			158,823

CASH AND CASH EQUIVALENTS, AT END OF PERIOD	$	768,675		$	326,045

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid (received) during the period for:
Interest	$	122,631		$	100,310

Income tax refunds, net	$	(26,808	)	$	(53,918	)

The accompanying notes are an integral part of these consolidated financial statements.

CB RICHARD ELLIS GROUP, INC.

CONSOLIDATED STATEMENT OF EQUITY

(Unaudited)

(Dollars in thousands)


	CB Richard Ellis Group, Inc. Shareholders
	Class A common stock		Additional paid-in capital		Accumulated (deficit) earnings			Accumulated other comprehensive loss			Non-controlling interests			Total
Balance at December 31, 2009	$	3,218	$	755,989	$	(15,008	)	$	(115,077	)	$	155,173		$	784,295
Net income (loss)		—		—		105,201			—			(20,987	)		84,214
Adoption of Accounting Standards Update 2009-17 (See Note 2)		—		—		—			—			29,534			29,534
Compensation expense for stock options and non-vested stock awards		—		35,353		—			—			—			35,353
Foreign currency translation gain (loss)		—		—		—			641			(44	)		597
Unrealized gains on interest rate swaps and interest rate caps, net of tax		—		—		—			382			—			382
Contributions from non-controlling interests		—		—		—			—			27,367			27,367
Distributions to non-controlling interests		—		—		—			—			(6,725	)		(6,725	)
Other		12		671		—			2,015			(751	)		1,947

Balance at September 30, 2010	$	3,230	$	792,013	$	90,193		$	(112,039	)	$	183,567		$	956,964

The accompanying notes are an integral part of these consolidated financial statements.

CB RICHARD ELLIS GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. Basis of Presentation

The accompanying consolidated financial statements of CB Richard Ellis Group, Inc. (which may be referred to in these financial statements as “we,” “us,” and “our”) have been prepared in accordance with the rules applicable to Form 10-Q and include all information and footnotes required for interim financial statement presentation, but do not include all disclosures required under accounting principles generally accepted in the United States (GAAP) for annual financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments, except as otherwise noted) considered necessary for a fair presentation have been included. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions about future events. These estimates and the underlying assumptions affect the amounts of assets and liabilities reported, and reported amounts of revenue and expenses. Such estimates include the value of real estate assets, accounts receivable, investments in unconsolidated subsidiaries and assumptions used in the calculation of income taxes, retirement and other post-employment benefits, among others. These estimates and assumptions are based on management’s best judgment. Management evaluates its estimates and assumptions on an ongoing basis using historical experience and other factors, including consideration of the current economic environment, and adjusts such estimates and assumptions when facts and circumstances dictate. Illiquid credit markets, volatility in equity prices and foreign currency exchange rates, among other things, have combined to increase the uncertainty inherent in such estimates and assumptions. As future events and their effects cannot be determined with precision, actual results could differ significantly from these estimates. Changes in these estimates resulting from continuing changes in the economic environment will be reflected in the financial statements in future periods.

In 2008 and most of 2009, worldwide commercial real estate fundamentals and transaction activity weakened significantly due to the credit crisis and severe global recession. High unemployment rates, sharply reduced global trade, curtailed corporate spending and weak consumer confidence negatively impacted office, industrial and retail real estate markets as companies shrank their occupancy, placed excess space on the market for sublease and deferred occupancy decisions. Property sales transactions declined sharply due to constrained liquidity in the capital markets as many lenders tightened underwriting standards for commercial real estate. Capitalization rates increased as potential investors re-evaluated commercial real estate versus other asset classes. Occupancy and rent levels weakened significantly for the primary property types that we service, develop or own. Property values have remained under pressure, but appear to be stabilizing, especially for core assets, and occupancy and rental rates appear to be bottoming out. In the first nine months of 2010, improved economic and credit market conditions led to a rebound in sales and leasing velocity from a very depressed level in 2009. A return to positive economic growth in the United States (U.S.) in late 2009 and in 2010 has moderately improved commercial real estate fundamentals. The recoverability of our investments in unconsolidated subsidiaries and our investments in real estate has been impacted by the overall downturn in the global economy. The assumptions utilized in our recoverability analysis of these investments reflected our outlook for the commercial real estate industry and the impact on our business. This outlook incorporated our belief that market conditions had deteriorated and that these challenging conditions could persist for some time. If conditions in the broader economy, commercial real estate industry, specific markets or property types in which we operate worsen, we could have additional impairment charges.

The results of operations for the three and nine months ended September 30, 2010 are not necessarily indicative of the results of operations to be expected for the year ending December 31, 2010. The consolidated financial statements and notes to consolidated financial statements should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2009, which contains the latest available audited consolidated financial statements and notes thereto, which are as of and for the year ended December 31, 2009.

CB RICHARD ELLIS GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

2. Consolidated Variable Interest Entities

In December 2009, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2009-17, “Consolidations (Topic 810): Improvements to Financial Reporting by Enterprises Involved with Variable Interest Entities.” This ASU incorporates Statement of Financial Accounting Standards No. 167, “Amendments to FASB Interpretation No. 46(R),” issued by the FASB in June 2009. The amendments in this ASU replace the quantitative-based risks and rewards calculation for determining which reporting entity, if any, has a controlling financial interest in a variable interest entity with an approach focused on identifying which reporting entity has the power to direct the activities of a variable interest entity that most significantly impact such entity’s economic performance and (i) the obligation to absorb losses of such entity or (ii) the right to receive benefits from such entity. ASU 2009-17 also requires additional disclosures about a reporting entity’s involvement in variable interest entities, which enhances the information provided to users of financial statements. We adopted ASU 2009-17 effective January 1, 2010 and as a result, we began consolidating certain variable interest entities that were not previously consolidated by us.

A consolidated subsidiary (the Venture) sponsored investments by third-party investors in eight commercial properties through the formation of tenant-in-common limited liability companies and Delaware Statutory Trusts (collectively referred to as “the Entities”) that are owned by the third-party investors. The Venture also formed and is a member of a limited liability company for each property that serves as master tenant (Master Tenant). Each Master Tenant leases the property from the Entities through a master lease agreement. Pursuant to the master lease agreements, the Master Tenant has the power to direct the day-to-day asset management activities that most significantly impact the economic performance of the Entities. As a result, the Entities were deemed to be variable interest entities since the third-party investors holding the equity investment at risk in the Entities do not direct the day-to-day activities that most significantly impact the economic performance of the properties held by the Entities.

The Venture has made and may continue to make voluntary contributions to each of these properties to support their operations beyond the cash flow generated by the properties themselves. As of the most recent reconsideration date, such financial support has been significant enough that the Venture was deemed to be the primary beneficiary of each entity. During the nine months ended September 30, 2010, the Venture funded $0.9 million of financial support to the Entities.

The Entities were initially consolidated by the Venture upon adoption of ASU 2009-17 on January 1, 2010. The Entities’ assets and associated mortgage notes payable aggregated $251.0 million and $221.5 million, respectively, and were recorded based on their fair value at adoption. We did not recognize a gain or loss on the initial consolidation of these Entities. The assets of the Entities are the sole collateral for the mortgage notes payable and other liabilities of the Entities and as such, the creditors and equity investors of these Entities have no recourse to our assets held outside of these Entities.

For the three and nine months ended September 30, 2010, aggregate revenue of $9.4 million and $25.0 million, respectively, and operating expenses of $5.6 million and $14.8 million, respectively, relating to the operating activities of the Entities are included in the accompanying consolidated statements of operations. The aggregate losses of the Entities for the three and nine months ended September 30, 2010 were $3.5 million and $9.0 million, respectively, and were all attributable to non-controlling interests.

Investments in real estate of $245.4 million and non-recourse mortgage notes payable of $222.7 million ($34.9 million of which is current) are included in real estate assets held for investment and notes payable on real estate, respectively, in the accompanying consolidated balance sheets as of September 30, 2010. In addition, non-controlling interests of $24.4 million in the accompanying consolidated balance sheets as of September 30, 2010 are attributable to the Entities.

CB RICHARD ELLIS GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

3. New Accounting Pronouncements

In January 2010, the FASB issued ASU 2010-06, “Improving Disclosures about Fair Value Measurements,” which provides amendments to the FASB ASC Subtopic 820-10 that require new disclosures regarding (i) transfers in and out of Level 1 and Level 2 fair value measurements and (ii) activity in Level 3 fair value measurements. ASU 2010-06 also clarifies existing disclosures regarding (i) the level of asset and liability disaggregation and (ii) fair value measurement inputs and valuation techniques. As required, we adopted the new disclosures and clarifications of existing disclosure requirements, except for the disclosures about purchases, sales, issuances and settlements in the roll forward of activity in Level 3 fair value measurements. Those disclosures are effective for fiscal years beginning after December 15, 2010, and for interim periods within those fiscal years. We are currently evaluating the disclosure impact of adoption on our consolidated financial statements, but do not expect it to have a material impact.

4. Fair Value Measurements

The “Fair Value Measurements and Disclosures” Topic of the FASB ASC (Topic 820) defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or 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. The fair value measurements employed for our impairment evaluations were generally based on a discounted cash flow approach and/or review of comparable activities in the market place. Inputs used in these evaluations included risk-free rates of return, estimated risk premiums as well as other economic variables.

CB RICHARD ELLIS GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

The following non-recurring fair value measurements were recorded during the three and nine months ended September 30, 2010 and 2009 (dollars in thousands):


	Net Carrying Value as of September 30, 2010		Fair Value Measured and Recorded Using						Total Impairment Charges for the Three Months Ended September 30, 2010
	Net Carrying Value as of September 30, 2010		Level 1		Level 2		Level 3
Investments in unconsolidated subsidiaries	$	20,494	$	—	$	—	$	20,494	$	1,594
Real estate	$	11,219	$	—	$	—	$	11,219		2,342
Notes receivable	$	—	$	—	$	—	$	—		250

Total impairment charges									$	4,186


	Net Carrying Value as of September 30, 2009		Fair Value Measured and Recorded Using						Total Impairment Charges for the Three Months Ended September 30, 2009
	Net Carrying Value as of September 30, 2009		Level 1		Level 2		Level 3
Investments in unconsolidated subsidiaries	$	37,396	$	—	$	—	$	37,396	$	5,270
Real estate	$	58,045	$	—	$	—	$	58,045		17,232

Total impairment charges									$	22,502


	Net Carrying Value as of September 30, 2010		Fair Value Measured and Recorded Using						Total Impairment Charges for the Nine Months Ended September 30, 2010
	Net Carrying Value as of September 30, 2010		Level 1		Level 2		Level 3
Investments in unconsolidated subsidiaries	$	33,612	$	—	$	—	$	33,612	$	8,541
Real estate	$	11,219	$	—	$	—	$	11,219		2,342
Note receivable	$	—	$	—	$	—	$	—		250

Total impairment charges									$	11,133


	Net Carrying Value as of September 30, 2009		Fair Value Measured and Recorded Using						Total Impairment Charges for the Nine Months Ended September 30, 2009
	Net Carrying Value as of September 30, 2009		Level 1		Level 2		Level 3
Investments in unconsolidated subsidiaries	$	65,155	$	—	$	—	$	65,155	$	15,952
Real estate	$	79,299	$	—	$	—	$	79,299		23,455
Notes receivable	$	—	$	—	$	—	$	—		5,860

Total impairment charges									$	45,267

Investments in Unconsolidated Subsidiaries

During the three and nine months ended September 30, 2010, we recorded write-downs of $1.6 million and $8.5 million, respectively, of which $0.1 million and $2.6 million, respectively, were attributable to non-controlling interests. During the three and nine months ended September 30, 2010, $1.3 million and $7.2 million, respectively, of the investments write-downs were reported in our Global Investment Management

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segment and driven by a decrease in the estimated holding period of certain assets. In addition, during the nine months ended September 30, 2010 we incurred an additional $1.0 million of impairment charges in our Global Investment Management segment and during the three and nine months ended September 30, 2010, we incurred write-downs of $0.3 million in our Development Services segment, all driven by a decline in value of several investments attributable to continued capital market disruption.

During the three and nine months ended September 30, 2009, we recorded investment write-downs of $5.3 million and $16.0 million, respectively, of which $2.7 million and $5.7 million, respectively, were attributable to non-controlling interests. During the three and nine months ended September 30, 2009, $2.8 million and $6.3 million, respectively, of the investment write-downs were reported in our Global Investment Management segment and were primarily driven by a decrease in the estimated holding period of certain assets. During the three and nine months ended September 30, 2009, we incurred an additional $2.5 million and $9.7 million, respectively, of impairment charges, mainly attributable to declines in value of several investments, primarily as a result of significant capital market turmoil. Of the additional impairment charges noted, $7.2 million were reported in our Global Investment Management segment for the nine months ended September 30, 2009 and $2.5 million were reported in our Development Services segment for the three and nine months ended September 30, 2009.

All of our impairment charges related to investments in unconsolidated subsidiaries were included in equity income (loss) from unconsolidated subsidiaries in the accompanying consolidated statements of operations. When we performed our impairment analysis, the assumptions utilized reflected our outlook for the commercial real estate industry and the impact on our business. This outlook incorporated our belief that market conditions deteriorated and that these challenging conditions could persist for some time.

Real Estate

During the three and nine months ended September 30, 2010, we recorded impairment charges of $2.3 million related to real estate held for investment, $1.6 million of which were attributable to non-controlling interests. These write-downs were primarily attributable to a decrease in the estimated holding period of one project and continued capital market disruption.

During the three and nine months ended September 30, 2009, we recorded charges of $17.2 million and $23.5 million, respectively, including impairment charges on real estate held for investment and a provision for loss on real estate held for sale. Of these amounts, $15.7 million and $20.3 million, respectively, were attributable to non-controlling interests. During the three and nine months ended September 30, 2009, we recorded impairment charges of $17.2 million and $20.3 million, respectively, related to eight projects where the carrying value was not recoverable primarily due to a decrease in the estimated holding periods of the projects. Additionally, during the nine months ended September 30, 2009, we recorded a provision for loss on real estate held for sale of $3.2 million to reduce the carrying value of a condominium project to its fair value less cost to sell, primarily due to reduced unit selling prices resulting from market conditions.

All of the abovementioned charges were included in operating, administrative and other expenses in the accompanying consolidated statements of operations within our Development Services segment. If conditions in the broader economy, commercial real estate industry, specific markets or product types in which we operate worsen and/or markets remain illiquid, we may be required to evaluate additional projects or re-evaluate previously impaired projects for potential impairment. These evaluations could result in additional impairment charges, which may be material.

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Notes Receivable

During the three and nine months ended September 30, 2010 we recorded a $0.3 million impairment charge on a note receivable secured by real estate, due to a decrease in value of the borrower’s real estate project, the proceeds from the sale of which would be used to repay the note receivable. During the nine months ended September 30, 2009, we also recorded a $5.9 million impairment charge, $5.4 million of which was attributable to non-controlling interests, on two notes receivable secured by real estate as a result of the borrower defaulting on the notes. These defaults resulted from the borrowers’ noncompliance with certain terms of the note agreements. As a result, we accepted assignment of the underlying real estate assets in lieu of foreclosing under our security deeds. The impairment charge we recorded represented the difference between the carrying amounts of the notes and the fair value of the real estate assets acquired. For the nine months ended September 30, 2009, this also resulted in a non-cash reclassification of $17.3 million from notes receivable to real estate held for investment. All of our impairment charges associated with notes receivable were included in operating, administrative and other expenses in the accompanying consolidated statement of operations within our Development Services segment.

We do not have any material assets or liabilities that are required to be recorded at fair value on a recurring basis.

Topic 820 also requires disclosure of fair value information about financial instruments, whether or not recognized in the accompanying consolidated balance sheets, 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: Due to their short-term nature, fair value approximates carrying value. Fair value is determined based on the terms and conditions of funded mortgage loans and generally reflects the values of the warehouse lines of credit outstanding for our wholly-owned subsidiary, CBRE Capital Markets.

Available for Sale Securities: These investments are carried at their fair value.

Short-Term Borrowings: The majority of this balance represents our revolving credit facility and our warehouse lines of credit outstanding for CBRE Capital Markets. Due to the short-term nature and variable interest rates of these instruments, fair value approximates carrying value.

Senior Secured Term Loans: Based upon information from third-party banks, the estimated fair value of our senior secured term loans was approximately $1.5 billion at September 30, 2010, which approximates their actual carrying value at September 30, 2010 (See Note 9).

11.625% Senior Subordinated Notes: Based on dealers’ quotes, the estimated fair value of our 11.625% senior subordinated notes was $509.5 million at September 30, 2010. Their actual carrying value totaled $437.4 million at September 30, 2010.

Notes Payable on Real Estate: As of September 30, 2010, the carrying value of our notes payable on real estate was $679.6 million (See Note 8). These borrowings mostly have floating interest rates at spreads over a

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market rate index. It is likely that some portion of our notes payable on real estate have fair values lower than actual carrying values. Given our volume of notes payable and the cost involved in estimating their fair value, we determined it was not practicable to do so. Additionally, only $3.5 million of these notes payable are recourse to us as of September 30, 2010.

5. Investments in Unconsolidated Subsidiaries

Investments in unconsolidated subsidiaries are accounted for under the equity method of accounting. Combined condensed financial information for these entities is as follows (dollars in thousands):


	Three Months Ended September 30,						Nine Months Ended September 30,
	2010			2009			2010			2009
Development Services:
Revenue	$	32,509		$	24,448		$	85,070		$	62,566
Operating (loss) income	$	(4,419	)	$	5,735		$	30,650		$	21,305
Net loss	$	(17,295	)	$	(4,685	)	$	(3,831	)	$	(332	)

Global Investment Management:
Revenue	$	137,453		$	162,978		$	413,277		$	451,713
Operating loss	$	(125,640	)	$	(141,971	)	$	(481,362	)	$	(537,953	)
Net loss	$	(214,204	)	$	(157,606	)	$	(576,419	)	$	(661,779	)

Other:
Revenue	$	14,354		$	43,692		$	75,248		$	114,524
Operating income	$	4,823		$	5,312		$	12,327		$	13,821
Net income	$	4,975		$	5,457		$	12,750		$	14,089

Total:
Revenue	$	184,316		$	231,118		$	573,595		$	628,803
Operating loss	$	(125,236	)	$	(130,924	)	$	(438,385	)	$	(502,827	)
Net loss	$	(226,524	)	$	(156,834	)	$	(567,500	)	$	(648,022	)

During the three months ended September 30, 2010 and 2009 and the nine months ended September 30, 2010 and 2009, we recorded non-cash write-downs of investments of $1.6 million, $5.3 million, $8.5 million and $16.0 million, respectively, within our Global Investment Management and Development Services segments (See Note 4).

Our Global Investment Management segment involves investing our own capital in certain real estate investments with clients. We have provided investment management, property management, brokerage and other professional services in connection with these real estate investments on an arm’s length basis and earned revenues from these unconsolidated subsidiaries. We have also provided development, property management and brokerage services to certain of our unconsolidated subsidiaries in our Development Services segment on an arm’s length basis and earned revenues from these unconsolidated subsidiaries.

6. Real Estate and Other Assets Held for Sale and Related Liabilities

Real estate and other assets held for sale include completed real estate projects or land for sale in their present condition that have met all of the “held for sale” criteria of the “Property, Plant and Equipment” Topic of

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the FASB ASC (Topic 360) and other assets directly related to such projects. Liabilities related to real estate and other assets held for sale have been included as a single line item in the accompanying consolidated balance sheets.

Real estate and other assets held for sale and related liabilities were as follows (dollars in thousands):


	September 30, 2010		December 31, 2009
Assets:
Real estate held for sale (See Note 7)	$	5,671	$	7,101
Other current assets		—		8

Total real estate and other assets held for sale		5,671		7,109
Liabilities:
Notes payable on real estate held for sale (see Note 8)		4,341		1,175
Accounts payable and accrued expenses		1		92

Total liabilities related to real estate and other assets held for sale		4,342		1,267

Net real estate and other assets held for sale	$	1,329	$	5,842

7. Real Estate

We provide build-to-suit services for our clients and also develop or purchase certain projects which we intend to sell to institutional investors upon project completion or redevelopment. Therefore, we have ownership of real estate until such projects are sold or otherwise disposed. Additionally, effective January 1, 2010, we adopted ASU 2009-17 and began consolidating certain variable interest entities that hold investments in real estate (See Note 2). Certain real estate assets secure the outstanding balances of underlying mortgage or construction loans. Our real estate is reported in our Development Services and Global Investment Management segments and consisted of the following (dollars in thousands):


	September 30, 2010		December 31, 2009
Real estate included in assets held for sale (See Note 6)	$	5,671	$	7,101
Real estate under development (non-current)		131,424		160,164
Real estate held for investment (1)		701,790		526,169

Total real estate (2)	$	838,885	$	693,434

(1)	Net of accumulated depreciation of $37.5 million and $26.7 million at September 30, 2010 and December 31, 2009, respectively.

(2)

Includes balances for lease intangibles and tenant origination costs of $18.2 million and $4.1 million, respectively, at September 30, 2010 and $20.4 million and $5.9 million, respectively, at December 31, 2009. We record lease intangibles and tenant origination costs upon acquiring real estate projects with in-place leases. The balances are shown net of amortization, which is recorded as an increase to, or a reduction of, rental income for lease intangibles and as amortization expense for tenant origination costs.

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In the first quarter of 2010, one of our consolidated real estate projects was sold to an affiliate of the project’s lender at a foreclosure auction. The related real estate note payable was nonrecourse to us. As a result of this transaction, we recorded the following non-cash activity (dollars in thousands):


	Debit (Credit)
Assets:
Real estate held for investment	$	(16,221	)
Restricted cash		(279	)
Other current assets		(524	)

Total assets		(17,024	)


Liabilities:
Notes payable on real estate, current		16,520
Accounts payable and accrued expenses		504

Total liabilities	$	17,024

In the third quarter of 2010, we deeded a consolidated real estate portfolio to the lender, in lieu of foreclosure. The related real estate note payable was nonrecourse to us. As a result of this transaction, we recorded a gain on disposition of real estate of $2.8 million and the following non-cash activity (dollars in thousands):


	Debit (Credit)
Assets:
Real estate held for investment	$	(13,422	)
Restricted cash		(125	)
Receivables		(975	)
Other current assets		(396	)
Other assets		(423	)

Total assets		(15,341	)


Liabilities:
Notes payable on real estate, current		15,821
Accounts payable and accrued expenses		2,052
Other liabilities		266

Total liabilities	$	18,139

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

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In the third quarter of 2010, one of our consolidated real estate projects was sold to an affiliate of the project’s lender at a foreclosure auction. The related real estate note payable was nonrecourse to us. As a result of this transaction, we recorded a gain on disposition of real estate of $0.2 million and the following non-cash activity (dollars in thousands):


	Debit (Credit)
Assets:
Real estate held for investment	$	(6,684	)


Liabilities:
Notes payable on real estate, current		6,400
Accounts payable and accrued expenses		447

Total liabilities	$	6,847

In the third quarter of 2010, we purchased our partner’s interest in one of our equity method subsidiaries. As a result of the purchase of our partner’s interest, we consolidated the subsidiary and recorded the following non-cash activity (dollars in thousands):


	Debit (Credit)
Assets:
Real estate held for sale	$	14,800
Investments in unconsolidated subsidiaries		(450	)
Other assets		(500	)

Total assets		13,850


Liabilities:
Notes payable on real estate held for sale		(9,736	)
Accounts payable and accrued expenses		(4,114	)

Total liabilities	$	(13,850	)

During the three months ended September 30, 2010 and 2009 and the nine months ended September 30, 2010 and 2009, we recorded impairment charges of $2.3 million, $17.2 million, $2.3 million and $20.3 million, respectively, on real estate held for investment within our Development Services segment. In addition, during the nine months ended September 30, 2009, we recorded a provision for loss on real estate held for sale of $3.2 million within our Development Services segment. See Note 4 for additional information.

8. Notes Payable on Real Estate

We had loans secured by real estate, which consisted of the following (dollars in thousands):


	September 30, 2010		December 31, 2009
Current portion of notes payable on real estate	$	215,030	$	159,921
Notes payable on real estate included in liabilities related to real estate and other assets held for sale (See Note 6)		4,341		1,175

Total notes payable on real estate, current portion		219,371		161,096
Notes payable on real estate, non-current portion		460,253		390,181

Total notes payable on real estate	$	679,624	$	551,277

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At September 30, 2010 and December 31, 2009, $3.5 million of the non-current portion of notes payable on real estate were recourse to us, beyond being recourse to the single-purpose entity that held the real estate asset and was the primary obligor on the note payable.

9. Debt

Since 2001, we have maintained a credit agreement with Credit Suisse Group AG (CS) and other lenders to fund strategic acquisitions and to provide for our working capital needs. On March 24, 2009, we entered into a second amendment and restatement to our credit agreement (Credit Agreement) with a syndicate of banks led by CS, as administrative and collateral agent, amending and restating our amended and restated credit agreement dated December 20, 2006. In connection with this amendment and restatement, we wrote off financing costs of $29.3 million during the nine months ended September 30, 2009, which included the write-off of $18.1 million of unamortized deferred financing costs and $11.2 million of Credit Agreement amendment fees paid in March 2009. On August 24, 2009, we entered into a loan modification agreement to our Credit Agreement, which included the conversion of $41.9 million of amounts outstanding under our revolving credit facility to term loans. On both February 5, 2010 and March 29, 2010, we entered into additional loan modification agreements to our Credit Agreement to further extend debt maturities and amortization schedules.

Subsequent to the March 29, 2010 loan modification, our Credit Agreement includes the following: (1) a $558.1 million revolving credit facility, including revolving credit loans, letters of credit and a swingline loan facility, with tranche 1 in the amount of $225.1 million maturing on June 24, 2011 and tranche 2 in the amount of $333.0 million maturing on June 24, 2013; (2) a $579.8 million A term loan facility, which is further broken down as follows: i) a $135.9 million tranche A term loan facility requiring quarterly principal payments beginning December 31, 2010 through September 30, 2011, with the balance payable on December 20, 2011; ii) a $48.6 million tranche A-1 term loan facility payable on December 20, 2013; iii) a $203.2 million tranche A-2 term loan facility, requiring quarterly principal payments of $8.7 million beginning September 30, 2012 and continuing through March 31, 2013, with the balance payable on June 24, 2013; iv) a $167.5 million tranche A-3 term loan facility payable on December 20, 2013; v) a $24.1 million tranche A-3A term loan facility, requiring quarterly principal payments of $0.06 million since June 30, 2010 and continuing through September 30, 2013, with the balance payable on December 20, 2013; and vi) a $0.5 million tranche A-4 term loan facility payable on December 20, 2011, and (3) a $1,053.0 million B term loan facility, which is further broken down as follows: i) a $642.8 million tranche B term loan facility requiring quarterly principal payments of $1.9 million through September 30, 2013, with the balance payable on December 20, 2013; ii) a $295.2 million tranche B-1 term loan facility payable on December 20, 2015; and iii) a $115.0 million tranche B-1A term loan facility payable on December 20, 2015.

During the nine months ended September 30, 2010, we repaid the following amounts: $50.7 million of our tranche A term loan facility, which was applied to the required 2010 principal repayments; $7.2 million of our tranche A-1 term loan facility, which was applied against the balance due at maturity; $0.1 million of our tranche A-3A term loan facility, which covered the required quarterly principal payments due June 30, 2010 and September 30, 2010; $0.5 million of our tranche A-4 term loan facility, which repaid the entire outstanding balance; $153.8 million of our tranche B term loan facility, part of which covered a portion of the balance due at maturity and which also covered the 2010 required quarterly principal payments through September 30, 2010; $2.0 million of our tranche B-1 term loan facility, which covered a portion of the balance due at maturity; and $0.6 million of our tranche B-1A term loan facility, which covered a portion of the balance due at maturity.

The revolving credit facility allows for borrowings outside of the U.S., with sub-facilities of $5.0 million available to one of our Canadian subsidiaries, $35.0 million in aggregate available to one of our Australian and

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one of our New Zealand subsidiaries and $50.0 million available to one of our United Kingdom (U.K.) subsidiaries. Additionally, outstanding borrowings under these sub-facilities may be up to 5.0% higher as allowed under the currency fluctuation provision in the Credit Agreement. Borrowings under the revolving credit facility as of September 30, 2010 bear interest at varying rates, based at our option, on either the applicable fixed rate plus 2.25% to 4.00% or the daily rate plus 1.25% to 3.00% for the tranche 1 facility, and on either the applicable fixed rate plus 2.50% to 4.75% or the daily rate plus 1.50% to 3.75% for the tranche 2 facility, in all cases as determined by reference to our ratio of total debt less available cash to EBITDA (as defined in the Credit Agreement). As of September 30, 2010 and December 31, 2009, we had $17.9 million ($12.0 million under tranche 1 and $5.9 million under tranche 2) and $21.1 million ($13.1 million under tranche 1 and $8.0 million under tranche 2), respectively, of revolving credit facility principal outstanding with related weighted average interest rates of 5.0% and 5.3%, respectively, which are included in short-term borrowings in the accompanying consolidated balance sheets. As of September 30, 2010, letters of credit totaling $21.3 million were outstanding under the revolving credit facility. These letters of credit were primarily issued in the normal course of business as well as in connection with certain insurance programs and reduce the amount we may borrow under the revolving credit facility.

Borrowings under the term loan facilities as of September 30, 2010 bear interest, based at our option, on the following: for the tranche A term loan facility, on either the applicable fixed rate plus 2.75% to 4.50% or the daily rate plus 1.75% to 3.50%; for the tranche A-1 term loan facility, on either the applicable fixed rate plus 3.50% to 4.50% or the daily rate plus 2.50% to 3.50%; for the tranche A-2 term loan facility, on either the applicable fixed rate plus 3.25% to 5.50% or the daily rate plus 2.25% to 4.50%; and for the tranche A-3 and A-3A term loan facilities, on either the applicable fixed rate plus 4.00% to 5.00% or the daily rate plus 3.00% to 4.00%. Effective July 1, 2010, in connection with the $150.0 million prepayment of our tranche B term loan facility, borrowings under the term B loan facility bear interest, based on our option, on the following: for the tranche B term loan facility, on either the applicable fixed rate plus 3.50% to 4.50% or the daily rate plus 2.50% to 3.50%; and for the tranche B-1 and B-1A term loan facilities, on either the applicable fixed rate plus 4.00% to 5.00% or the daily rate plus 3.00% to 4.00%. For all term loan facilities, both the fixed rate and daily rate options are determined by reference to our ratio of total debt less available cash to EBITDA (as defined in the Credit Agreement). The tranche A-1, A-2, A-3, B-1 and B-1A term loan facilities include a targeted outstanding amount (as defined in the Credit Agreement) provision that will increase the interest rate by 2% if the outstanding balance exceeds the targeted outstanding amount at the end of each quarter. As of September 30, 2010 and December 31, 2009, the outstanding balance did not exceed the targeted outstanding amount. As of September 30, 2010 and December 31, 2009, we had $135.9 million and $326.3 million of tranche A term loan facility principal outstanding, respectively, $41.4 million and $48.6 million of tranche A-1 term loan facility principal outstanding, respectively, $203.2 million of tranche A-2 term loan facility principal outstanding, $167.5 million of tranche A-3 term loan facility principal outstanding, $489.1 million and $642.8 million of tranche B term loan facility principal outstanding, respectively, and $293.2 million and $295.2 million of tranche B-1 term loan facility principal outstanding, respectively, which are included in the accompanying consolidated balance sheets. As of September 30, 2010, we also had $24.0 million of tranche A-3A term loan facility principal outstanding and $114.4 million of tranche B-1A term loan facility principal outstanding, which are also included in the accompanying consolidated balance sheets.

The Credit Agreement is jointly and severally guaranteed by us and substantially all of our domestic subsidiaries. Borrowings under our Credit Agreement are secured by a pledge of substantially all of the capital stock of our U.S. subsidiaries and 65% of the capital stock of certain non-U.S. subsidiaries, and by a security interest in substantially all of the personal property of the U.S. subsidiaries. Also, the Credit Agreement requires us to pay a fee based on the total amount of the revolving credit facility commitment.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

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Our Credit Agreement and the indenture governing our 11.625% senior subordinated notes contain numerous restrictive covenants that, among other things, limit our ability to incur additional indebtedness, pay dividends or make distributions to stockholders, repurchase capital stock or debt, make investments, sell assets or subsidiary stock, create or permit liens on assets, engage in transactions with affiliates, enter into sale/leaseback transactions, issue subsidiary equity and enter into consolidations or mergers. Our Credit Agreement also currently requires us to maintain a minimum coverage ratio of EBITDA (as defined in the Credit Agreement) to total interest expense of 2.00x through March 31, 2011 and 2.25x thereafter and a maximum leverage ratio of total debt less available cash to EBITDA (as defined in the Credit Agreement) of 4.25x through March 31, 2011 and 3.75x thereafter. Our coverage ratio of EBITDA to total interest expense was 6.57x for the trailing twelve months ended September 30, 2010 and our leverage ratio of total debt less available cash to EBITDA was 1.27x as of September 30, 2010.

On April 19, 2010, we entered into a Receivables Purchase Agreement (RPA), which allows us to transfer an undivided interest in a designated pool of U.S. accounts receivable, on an ongoing basis, to provide collateral for borrowings up to a maximum of $55.0 million. Borrowings under this arrangement generally bear interest at the commercial paper rate plus 2.75% and this agreement expires on April 18, 2011. As of September 30, 2010, there were no amounts outstanding under this agreement.

10. Commitments and Contingencies

We are a party to a number of pending or threatened lawsuits arising out of, or incident to, our ordinary course of business, as well as investigations relating to the Foreign Corrupt Practices Act. Our management believes that any liability imposed on us that may result from disposition of these lawsuits or investigations will not have a material effect on our business, consolidated financial position, cash flows or results of operations.

We had outstanding letters of credit totaling $29.0 million as of September 30, 2010, excluding letters of credit for which we have outstanding liabilities already accrued on our consolidated balance sheet related to our subsidiaries’ outstanding reserves for claims under certain insurance programs as well as letters of credit related to operating leases. These letters of credit are primarily executed by us in the normal course of business as well as in connection with certain insurance programs. The letters of credit expire at varying dates through October 2011.

We had guarantees totaling $11.7 million as of September 30, 2010, excluding guarantees related to pension liabilities, consolidated indebtedness and other obligations for which we have outstanding liabilities already accrued on our consolidated balance sheet as well as operating leases. The $11.7 million primarily consists of guarantees of obligations of unconsolidated subsidiaries, which expire at varying dates through October 2013.

In addition, as of September 30, 2010, we had numerous completion and budget guarantees relating to development projects. These guarantees are made by us in the normal course of our Development Services business. Each of these guarantees requires us to complete construction of the relevant project within a specified timeframe and/or within a specified budget, with us potentially being liable for costs to complete in excess of such timeframe or budget. However, we generally have “guaranteed maximum price” contracts with reputable general contractors with respect to projects for which we provide these guarantees. These contracts are intended to pass the risk to such contractors. While there can be no assurance, we do not expect to incur any material losses under these guarantees.

From time to time, we act as a general contractor with respect to construction projects. We do not consider these activities to be a material part of our business. In connection with these activities, we seek to subcontract

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construction work for certain projects to reputable subcontractors. Should construction defects arise relating to the underlying projects, we could potentially be liable to the client for the costs to repair such defects, although we would generally look to the subcontractor that performed the work to remedy the defect and also look to insurance policies that cover this work. While there can be no assurance, we do not expect to incur material losses with respect to construction defects.

In January 2008, CBRE Multifamily Capital, Inc. (CBRE MCI), a wholly-owned subsidiary of CBRE Capital Markets, Inc., entered into an agreement with Fannie Mae, under Fannie Mae’s Delegated Underwriting and Servicing (DUS) Lender Program (DUS Program), to provide financing for multifamily housing with five or more units. Under the DUS Program, CBRE MCI originates, underwrites, closes and services loans without prior approval by Fannie Mae, and in selected cases, is subject to sharing up to one-third of any losses on loans originated under the DUS Program. CBRE MCI has funded loans subject to such loss sharing arrangements with unpaid principal balances of $1.7 billion at September 30, 2010. Additionally, CBRE MCI has funded loans under the DUS Program that are not subject to loss sharing arrangements with unpaid principal balances of approximately $435.3 million at September 30, 2010. CBRE MCI, under its agreement with Fannie Mae, must post cash reserves under formulas established by Fannie Mae to provide for sufficient capital in the event losses occur. As of September 30, 2010 and December 31, 2009, CBRE MCI had $1.7 million and $1.2 million, respectively, of cash deposited under this reserve arrangement, and had provided approximately $3.2 million and $2.0 million, respectively, of loan loss accruals. Fannie Mae’s recourse under the DUS Program is limited to the assets of CBRE MCI.

An important part of the strategy for our Global Investment Management business involves investing our capital in certain real estate investments with our clients. These co-investments typically range from 2% to 5% of the equity in a particular fund. As of September 30, 2010, we had aggregate commitments of $20.3 million to fund future co-investments.

Additionally, an important part of our Development Services business strategy is to invest in unconsolidated real estate subsidiaries as a principal (in most cases co-investing with our clients). As of September 30, 2010, we had committed to fund $27.2 million of additional capital to these unconsolidated subsidiaries.

CB RICHARD ELLIS GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

11. Income (Loss) Per Share

Basic income (loss) per share attributable to CB Richard Ellis Group, Inc. is computed by dividing net income (loss) attributable to CB Richard Ellis Group, Inc. shareholders by the weighted average number of common shares outstanding during each period. The computation of diluted income (loss) per share attributable to CB Richard Ellis Group, Inc. generally further assumes the dilutive effect of potential common shares, which include stock options and certain contingently issuable shares. Contingently issuable shares consist of non-vested stock awards. For the nine months ended September 30, 2009, all stock options and contingently issuable shares were anti-dilutive, since we reported a net loss for the period. As a result, basic and diluted loss per share was the same for the nine months ended September 30, 2009. The following is a calculation of income (loss) per share attributable to CB Richard Ellis Group, Inc. (dollars in thousands, except share data):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2010		2009		2010		2009
Computation of basic income (loss) per share attributable to CB Richard Ellis Group, Inc. shareholders:
Net income (loss) attributable to CB Richard Ellis Group, Inc. shareholders	$	57,038	$	12,377	$	105,201	$	(30,949	)
Weighted average shares outstanding for basic income (loss) per share		313,791,661		282,732,848		313,197,421		270,214,427

Basic income (loss) per share attributable to CB Richard Ellis Group, Inc. shareholders	$	0.18	$	0.04	$	0.34	$	(0.11	)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2010		2009		2010		2009
Computation of diluted income (loss) per share attributable to CB Richard Ellis Group, Inc. shareholders:
Net income (loss) attributable to CB Richard Ellis Group, Inc. shareholders	$	57,038	$	12,377	$	105,201	$	(30,949	)
Weighted average shares outstanding for basic income (loss) per share		313,791,661		282,732,848		313,197,421		270,214,427
Dilutive effect of stock options		2,673,719		2,770,300		2,554,348		—
Dilutive effect of contingently issuable shares		2,887,979		420,453		2,527,199		—

Weighted average shares outstanding for diluted income (loss) per share		319,353,359		285,923,601		318,278,968		270,214,427

Diluted income (loss) per share attributable to CB Richard Ellis Group, Inc. shareholders	$	0.18	$	0.04	$	0.33	$	(0.11	)

For the three and nine months ended September 30, 2010, options to purchase 597,547 shares of common stock and 1,651,677 of contingently issuable shares were excluded from the computation of diluted earnings per share because their inclusion would have had an anti-dilutive effect.

For the three months ended September 30, 2009, options to purchase 3,394,143 shares of common stock and 7,738,345 of contingently issuable shares were excluded from the computation of diluted earnings per share because their inclusion would have had an anti-dilutive effect. Had we reported net income for the nine months

CB RICHARD ELLIS GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

ended September 30, 2009, options to purchase 4,767,349 shares of common stock would have been included in the computation of diluted earnings per share, while options to purchase 3,394,143 shares of common stock would have been excluded from the computation of diluted earnings per share as their inclusion would have had an anti-dilutive effect. Additionally, had we reported net income for the nine months ended September 30, 2009, 2,512,590 of contingently issuable shares would have been included in the computation of diluted earnings per share, while 7,738,345 of contingently issuable shares would have been excluded from the computation of diluted earnings per share as their inclusion would have had an anti-dilutive effect.

12. Comprehensive Income (Loss)

The following table provides a summary of comprehensive income (loss) (dollars in thousands):


	Three Months Ended September 30,						Nine Months Ended September 30,
	2010			2009			2010			2009
Net income (loss)	$	55,715		$	(10,643	)	$	84,214		$	(78,768	)
Other comprehensive income:
Foreign currency translation gain		61,191			9,653			597			40,261
Unrealized gains on interest rate swaps and interest rate caps, net		86			1,972			382			7,818
Other, net		(198	)		630			2,015			816

Total other comprehensive income		61,079			12,255			2,994			48,895
Comprehensive income (loss)		116,794			1,612			87,208			(29,873	)
Comprehensive loss attributable to non-controlling interests		(643	)		(21,392	)		(21,031	)		(46,766	)

Comprehensive income attributable to CB Richard Ellis Group, Inc.	$	117,437		$	23,004		$	108,239		$	16,893

13. Pensions

We have two contributory defined benefit pension plans in the U.K., which we acquired in connection with previous acquisitions. Our subsidiaries based in the U.K. maintain the plans to provide retirement benefits to existing and former employees participating in these plans. During 2007, we reached agreements with the active members of these plans to freeze future pension plan benefits. In return, the active members became eligible to enroll in the CBRE Group Personal Pension Plan, a defined contribution plan in the U.K.

Net periodic pension cost consisted of the following (dollars in thousands):


	Three Months Ended September 30,						Nine Months Ended September 30,
	2010			2009			2010			2009
Interest cost	$	4,050		$	3,721		$	11,997		$	10,566
Expected return on plan assets		(3,757	)		(3,230	)		(11,133	)		(9,174	)
Amortization of unrecognized net loss		552			271			1,637			769

Net periodic pension cost	$	845		$	762		$	2,501		$	2,161

We contributed $0.9 million and $2.5 million to fund our pension plans during the three and nine months ended September 30, 2010, respectively. We expect to contribute a total of $3.5 million to fund our pension plans for the year ending December 31, 2010.

CB RICHARD ELLIS GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

14. Discontinued Operations

In the ordinary course of business, we dispose of real estate assets, or hold real estate assets for sale, that may be considered components of an entity in accordance with Topic 360. If we do not have, or expect to have, significant continuing involvement with the operation of these real estate assets after disposition, we are required to recognize operating profits or losses and gains or losses on disposition of these assets as discontinued operations in our consolidated statements of operations in the periods in which they occur. Real estate operations and dispositions accounted for as discontinued operations for the three and nine months ended September 30, 2010 were reported in our Development Services segment as follows (dollars in thousands):


	Three Months Ended September 30, 2010		Nine Months Ended September 30, 2010
Revenue	$	704	$	1,682
Costs and expenses:
Operating, administrative and other		500		856
Depreciation and amortization		33		201

Total costs and expenses		533		1,057
Gain on disposition of real estate		8,520		20,399

Operating income		8,691		21,024
Interest income		—		1
Interest expense		372		1,087

Income from discontinued operations, before provision for income taxes		8,319		19,938
Provision for income taxes		498		4,977

Income from discontinued operations, net of income taxes		7,821		14,961
Less: Income from discontinued operations attributable to non-controlling interests		6,346		5,975

Income from discontinued operations attributable to CB Richard Ellis Group, Inc.	$	1,475	$	8,986

15. Guarantor and Nonguarantor Financial Statements

The following condensed consolidating financial information includes:

(1) Condensed consolidating balance sheets as of September 30, 2010 and December 31, 2009; condensed consolidating statements of operations for the three and nine months ended September 30, 2010 and 2009; and condensed consolidating statements of cash flows for the nine months ended September 30, 2010 and 2009, of (a) CB Richard Ellis Group, Inc. as the parent, (b) CB Richard Ellis Services, Inc. (CBRE) as the subsidiary issuer, (c) the guarantor subsidiaries, (d) the nonguarantor subsidiaries and (e) CB Richard Ellis Group, Inc. on a consolidated basis; and

(2) Elimination entries necessary to consolidate CB Richard Ellis Group, Inc. as the parent, with CBRE and its guarantor and nonguarantor subsidiaries.

Investments in consolidated subsidiaries are presented using the equity method of accounting. The principal elimination entries eliminate investments in consolidated subsidiaries and inter-company balances and transactions.

CB RICHARD ELLIS GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

CONDENSED CONSOLIDATING BALANCE SHEET

AS OF SEPTEMBER 30, 2010

(Dollars in thousands)


	Parent		CBRE		Guarantor Subsidiaries		Nonguarantor Subsidiaries		Elimination			Consolidated Total
Current Assets:
Cash and cash equivalents	$	4	$	243,029	$	366,107	$	159,535	$	—		$	768,675
Restricted cash		—		4,823		15,989		30,685		—			51,497
Receivables, net		—		4		342,269		475,757		—			818,030
Warehouse receivables (a)		—		—		264,819		—		—			264,819
Income taxes receivable		18,279		77,711		—		11,032		(45,148	)		61,874
Prepaid expenses		—		417		38,088		50,316		—			88,821
Deferred tax assets, net		—		—		50,873		23,110		—			73,983
Real estate and other assets held for sale		—		—		—		5,671		—			5,671
Other current assets		—		—		27,012		17,205		—			44,217

Total Current Assets		18,283		325,984		1,105,157		773,311		(45,148	)		2,177,587
Property and equipment, net		—		—		91,075		63,082		—			154,157
Goodwill		—		—		800,228		516,615		—			1,316,843
Other intangible assets, net		—		—		302,754		28,994		—			331,748
Investments in unconsolidated subsidiaries		—		—		74,730		57,658		—			132,388
Investments in consolidated subsidiaries		990,635		2,737,305		967,235		—		(4,695,175	)		—
Intercompany loan receivable		—		—		635,000		119,352		(754,352	)		—
Deferred tax assets, net		—		—		—		33,219		(21,854	)		11,365
Real estate under development		—		—		—		131,424		—			131,424
Real estate held for investment		—		—		4,705		697,085		—			701,790
Available for sale securities		—		—		31,791		—		—			31,791
Other assets, net		—		24,400		22,095		39,475		—			85,970

Total Assets	$	1,008,918	$	3,087,689	$	4,034,770	$	2,460,215	$	(5,516,529	)	$	5,075,063

Current Liabilities:
Accounts payable and accrued expenses	$	—	$	16,854	$	126,193	$	262,753	$	—		$	405,800
Compensation and employee benefits payable		—		626		178,499		126,735		—			305,860
Accrued bonus and profit sharing		—		—		144,236		130,029		—			274,265
Income taxes payable		—		—		45,148		—		(45,148	)		—
Short-term borrowings:
Warehouse lines of credit (a)		—		—		260,112		—		—			260,112
Revolving credit facility		—		10,209		—		7,684		—			17,893
Other		—		—		16		2,000		—			2,016

Total short-term borrowings		—		10,209		260,128		9,684		—			280,021
Current maturities of long-term debt		—		108,182		—		51		—			108,233
Notes payable on real estate		—		—		—		215,030		—			215,030
Liabilities related to real estate and other assets held for sale		—		—		—		4,342		—			4,342
Other current liabilities		—		—		13,733		2,584		—			16,317

Total Current Liabilities		—		135,871		767,937		751,208		(45,148	)		1,609,868
Long-Term Debt:
Senior secured term loans		—		1,360,548		—		—		—			1,360,548
11.625% senior subordinated notes, net		—		437,373		—		—		—			437,373
Other long-term debt		—		—		—		141		—			141
Intercompany loan payable		235,521		163,262		355,569		—		(754,352	)		—

Total Long-Term Debt		235,521		1,961,183		355,569		141		(754,352	)		1,798,062
Deferred tax liabilities, net		—		—		21,854		—		(21,854	)		—
Pension liability		—		—		—		63,128		—			63,128
Non-current tax liabilities		—		—		78,359		—		—			78,359
Notes payable on real estate		—		—		—		460,253		—			460,253
Other liabilities		—		—		73,746		34,683		—			108,429

Total Liabilities		235,521		2,097,054		1,297,465		1,309,413		(821,354	)		4,118,099
Commitments and contingencies		—		—		—		—		—			—
Equity:
CB Richard Ellis Group, Inc. Stockholders’ Equity		773,397		990,635		2,737,305		967,235		(4,695,175	)		773,397
Non-controlling interests		—		—		—		183,567		—			183,567

Total Equity		773,397		990,635		2,737,305		1,150,802		(4,695,175	)		956,964

Total Liabilities and Equity	$	1,008,918	$	3,087,689	$	4,034,770	$	2,460,215	$	(5,516,529	)	$	5,075,063

(a)

Although CBRE Capital Markets is included among our domestic subsidiaries, which jointly and severally guarantee our 11.625% senior subordinated notes and our Credit Agreement, a substantial majority of warehouse receivables funded under the JP Morgan Chase Bank, N.A. (JP Morgan), Fannie Mae As Soon As Pooled (ASAP) and Bank of America (BofA) lines of credit are pledged to JP Morgan, Fannie Mae and BofA, and accordingly, are not included as collateral for these notes or our other outstanding debt.

CB RICHARD ELLIS GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

CONDENSED CONSOLIDATING BALANCE SHEET

AS OF DECEMBER 31, 2009

(Dollars in thousands)


	Parent		CBRE		Guarantor Subsidiaries		Nonguarantor Subsidiaries		Elimination			Consolidated Total
Current Assets:
Cash and cash equivalents	$	4	$	242,586	$	283,251	$	215,716	$	—		$	741,557
Restricted cash		—		—		13,786		33,011		—			46,797
Receivables, net		—		2		297,717		478,210		—			775,929
Warehouse receivables (a)		—		—		315,033		—		—			315,033
Income taxes receivable		14,062		171,549		—		23,046		(45,625	)		163,032
Prepaid expenses		—		—		44,148		55,161		—			99,309
Deferred tax assets, net		—		—		54,183		21,147		—			75,330
Real estate and other assets held for sale		—		—		—		7,109		—			7,109
Other current assets		—		4,660		26,236		11,733		—			42,629

Total Current Assets		14,066		418,797		1,034,354		845,133		(45,625	)		2,266,725
Property and equipment, net		—		—		106,488		72,487		—			178,975
Goodwill		—		—		797,142		509,230		—			1,306,372
Other intangible assets, net		—		—		293,886		29,018		—			322,904
Investments in unconsolidated subsidiaries		—		—		68,144		67,452		—			135,596
Investments in consolidated subsidiaries		811,588		2,535,355		903,699		—		(4,250,642	)		—
Intercompany loan receivable		—		—		635,000		47,271		(682,271	)		—
Deferred tax assets, net		—		—		—		34,162		(30,767	)		3,395
Real estate under development		—		—		—		160,164		—			160,164
Real estate held for investment		—		—		4,680		521,489		—			526,169
Available for sale securities		—		—		31,796		220		—			32,016
Other assets, net		—		25,914		40,671		40,505		—			107,090

Total Assets	$	825,654	$	2,980,066	$	3,915,860	$	2,327,131	$	(5,009,305	)	$	5,039,406

Current Liabilities:
Accounts payable and accrued expenses	$	—	$	5,905	$	126,319	$	326,286	$	—		$	458,510
Compensation and employee benefits payable		—		626		118,310		121,600		—			240,536
Accrued bonus and profit sharing		—		—		128,133		150,311		—			278,444
Income taxes payable		—		—		45,625		—		(45,625	)		—
Short-term borrowings:
Warehouse lines of credit (a)		—		—		312,872		—		—			312,872
Revolving credit facility		—		10,501		—		10,549		—			21,050
Other		—		—		350		5,500		—			5,850

Total short-term borrowings		—		10,501		313,222		16,049		—			339,772
Current maturities of long-term debt		—		138,120		232		330		—			138,682
Notes payable on real estate		—		—		—		159,921		—			159,921
Liabilities related to real estate and other assets held for sale		—		—		—		1,267		—			1,267
Other current liabilities		1,190		—		8,946		1,773		—			11,909

Total Current Liabilities		1,190		155,152		740,787		777,537		(45,625	)		1,629,041
Long-Term Debt:
Senior secured term loans		—		1,545,490		—		—		—			1,545,490
11.625% senior subordinated notes, net		—		436,502		—		—		—			436,502
Other long-term debt		—		—		—		129		—			129
Intercompany loan payable		195,342		31,334		455,595		—		(682,271	)		—

Total Long-Term Debt		195,342		2,013,326		455,595		129		(682,271	)		1,982,121
Deferred tax liabilities, net		—		—		30,767		—		(30,767	)		—
Pension liability		—		—		—		64,945		—			64,945
Non-current tax liabilities		—		—		73,462		—		—			73,462
Notes payable on real estate		—		—		—		390,181		—			390,181
Other liabilities		—		—		79,894		35,467		—			115,361

Total Liabilities		196,532		2,168,478		1,380,505		1,268,259		(758,663	)		4,255,111
Commitments and contingencies		—		—		—		—		—			—
Equity:
CB Richard Ellis Group, Inc. Stockholders’ Equity		629,122		811,588		2,535,355		903,699		(4,250,642	)		629,122
Non-controlling interests		—		—		—		155,173		—			155,173

Total Equity		629,122		811,588		2,535,355		1,058,872		(4,250,642	)		784,295

Total Liabilities and Equity	$	825,654	$	2,980,066	$	3,915,860	$	2,327,131	$	(5,009,305	)	$	5,039,406

(a)

Although CBRE Capital Markets is included among our domestic subsidiaries, which jointly and severally guarantee our 11.625% senior subordinated notes and our Credit Agreement, a substantial majority of warehouse receivables funded under the JP Morgan, BofA and the Fannie Mae ASAP lines of credit are pledged to JP Morgan, BofA and Fannie Mae, and accordingly, are not included as collateral for these notes or our other outstanding debt.

CB RICHARD ELLIS GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2010

(Dollars in thousands)


	Parent			CBRE			Guarantor Subsidiaries			Nonguarantor Subsidiaries			Elimination			Consolidated Total
Revenue	$	—		$	—		$	745,374		$	520,844		$	—		$	1,266,218
Costs and expenses:
Cost of services		—			—			449,176			286,217			—			735,393
Operating, administrative and other		12,851			1,592			189,778			170,594			—			374,815
Depreciation and amortization		—			—			13,510			12,095			—			25,605

Total costs and expenses		12,851			1,592			652,464			468,906			—			1,135,813
Gain on disposition of real estate		—			—			68			106			—			174

Operating (loss) income		(12,851	)		(1,592	)		92,978			52,044			—			130,579
Equity income (loss) from unconsolidated subsidiaries		—			—			5,182			(1,500	)		—			3,682
Interest income		—			44			644			912			(137	)		1,463
Interest expense		—			37,194			1,975			10,723			(137	)		49,755
Royalty and management service (income) expense		—			—			(5,819	)		5,819			—			—
Income from consolidated subsidiaries		64,785			88,138			24,366			—			(177,289	)		—

Income from continuing operations before (benefit of) provision for income taxes		51,934			49,396			127,014			34,914			(177,289	)		85,969
(Benefit of) provision for income taxes		(5,104	)		(15,389	)		38,876			19,692			—			38,075

Net income from continuing operations		57,038			64,785			88,138			15,222			(177,289	)		47,894
Income from discontinued operations, net of income taxes		—			—			—			7,821			—			7,821

Net income		57,038			64,785			88,138			23,043			(177,289	)		55,715
Less: Net loss attributable to non-controlling interests		—			—			—			(1,323	)		—			(1,323	)

Net income attributable to CB Richard Ellis Group, Inc.	$	57,038		$	64,785		$	88,138		$	24,366		$	(177,289	)	$	57,038

CB RICHARD ELLIS GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2009

(Dollars in thousands)


	Parent			CBRE			Guarantor Subsidiaries			Nonguarantor Subsidiaries			Elimination			Consolidated Total
Revenue	$	—		$	—		$	604,949		$	418,256		$	—		$	1,023,205
Costs and expenses:
Cost of services		—			—			367,623			238,847			—			606,470
Operating, administrative and other		9,708			1,001			168,796			158,557			—			338,062
Depreciation and amortization		—			—			13,522			10,923			—			24,445

Total costs and expenses		9,708			1,001			549,941			408,327			—			968,977
Gain on disposition of real estate		—			—			—			2,766			—			2,766

Operating (loss) income		(9,708	)		(1,001	)		55,008			12,695			—			56,994
Equity loss from unconsolidated subsidiaries		—			—			(664	)		(5,648	)		—			(6,312	)
Interest income		—			8			1,609			7			(376	)		1,248
Interest expense		—			45,927			572			7,952			(376	)		54,075
Royalty and management service (income) expense		—			—			(6,432	)		6,432			—			—
Income from consolidated subsidiaries		18,212			46,718			4,088			—			(69,018	)		—

Income (loss) before (benefit of) provision for income taxes		8,504			(202	)		65,901			(7,330	)		(69,018	)		(2,145	)
(Benefit of) provision for income taxes		(3,873	)		(18,414	)		19,183			11,602			—			8,498

Net income (loss)		12,377			18,212			46,718			(18,932	)		(69,018	)		(10,643	)
Less: Net loss attributable to non-controlling interests		—			—			—			(23,020	)		—			(23,020	)

Net income attributable to CB Richard Ellis Group, Inc.	$	12,377		$	18,212		$	46,718		$	4,088		$	(69,018	)	$	12,377

CB RICHARD ELLIS GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2010

(Dollars in thousands)


	Parent			CBRE			Guarantor Subsidiaries			Nonguarantor Subsidiaries			Elimination			Consolidated Total
Revenue	$	—		$	—		$	2,018,598		$	1,445,422		$	—		$	3,464,020
Costs and expenses:
Cost of services		—			—			1,213,866			815,435			—			2,029,301
Operating, administrative and other		33,961			4,106			554,257			493,230			—			1,085,554
Depreciation and amortization		—			—			42,244			37,272			—			79,516

Total costs and expenses		33,961			4,106			1,810,367			1,345,937			—			3,194,371
Gain on disposition of real estate		—			—			3,381			416			—			3,797

Operating (loss) income		(33,961	)		(4,106	)		211,612			99,901			—			273,446
Equity income (loss) from unconsolidated subsidiaries		—			—			13,989			(2,656	)		—			11,333
Interest income		—			147			2,130			4,583			(486	)		6,374
Interest expense		—			116,783			2,214			31,311			(486	)		149,822
Royalty and management service (income) expense		—			—			(16,916	)		16,916			—			—
Income from consolidated subsidiaries		125,673			198,456			46,220			—			(370,349	)		—

Income from continuing operations before (benefit of) provision for income taxes		91,712			77,714			288,653			53,601			(370,349	)		141,331
(Benefit of) provision for income taxes		(13,489	)		(47,959	)		90,197			43,329			—			72,078

Net income from continuing operations		105,201			125,673			198,456			10,272			(370,349	)		69,253
Income from discontinued operations, net of income taxes		—			—			—			14,961			—			14,961

Net income		105,201			125,673			198,456			25,233			(370,349	)		84,214
Less: Net loss attributable to non-controlling interests		—			—			—			(20,987	)		—			(20,987	)

Net income attributable to CB Richard Ellis Group, Inc.	$	105,201		$	125,673		$	198,456		$	46,220		$	(370,349	)	$	105,201

CB RICHARD ELLIS GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2009

(Dollars in thousands)


	Parent			CBRE			Guarantor Subsidiaries			Nonguarantor Subsidiaries			Elimination			Consolidated Total
Revenue	$	—		$	—		$	1,732,103		$	1,137,218		$	—		$	2,869,321
Costs and expenses:
Cost of services		—			—			1,068,677			658,043			—			1,726,720
Operating, administrative and other		24,674			3,789			513,342			431,087			—			972,892
Depreciation and amortization		—			—			41,039			32,964			—			74,003

Total costs and expenses		24,674			3,789			1,623,058			1,122,094			—			2,773,615
Gain on disposition of real estate		—			—			—			5,691			—			5,691

Operating (loss) income		(24,674	)		(3,789	)		109,045			20,815			—			101,397
Equity loss from unconsolidated subsidiaries		—			—			(4,934	)		(13,318	)		—			(18,252	)
Interest income		—			36			3,676			2,492			(1,414	)		4,790
Interest expense		—			113,270			795			23,640			(1,414	)		136,291
Write-off of financing costs		—			29,255			—			—			—			29,255
Royalty and management service (income) expense		—			—			(12,420	)		12,420			—			—
(Loss) income from consolidated subsidiaries		(16,118	)		72,311			2,956			—			(59,149	)		—

(Loss) income before (benefit of) provision for income taxes		(40,792	)		(73,967	)		122,368			(26,071	)		(59,149	)		(77,611	)
(Benefit of) provision for income taxes		(9,843	)		(57,849	)		50,057			18,792			—			1,157

Net (loss) income		(30,949	)		(16,118	)		72,311			(44,863	)		(59,149	)		(78,768	)
Less: Net loss attributable to non-controlling interests		—			—			—			(47,819	)		—			(47,819	)

Net (loss) income attributable to CB Richard Ellis Group, Inc.	$	(30,949	)	$	(16,118	)	$	72,311		$	2,956		$	(59,149	)	$	(30,949	)

CB RICHARD ELLIS GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(Unaudited)

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2010

(Dollars in thousands)


	Parent			CBRE			Guarantor Subsidiaries			Nonguarantor Subsidiaries			Consolidated Total
CASH FLOWS PROVIDED BY OPERATING ACTIVITIES:	$	10,731		$	43,624		$	196,197		$	74,372		$	324,924

CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures		—			—			(11,193	)		(6,692	)		(17,885	)
Acquisition of businesses including net assets acquired, intangibles and goodwill		—			—			(2,340	)		(66,280	)		(68,620	)
Contributions to unconsolidated subsidiaries		—			—			(19,329	)		(3,317	)		(22,646	)
Distributions from unconsolidated subsidiaries		—			—			18,102			1,141			19,243
Net proceeds from disposition of real estate held for investment		—			—			—			76,504			76,504
Additions to real estate held for investment		—			—			—			(22,861	)		(22,861	)
Proceeds from the sale of servicing rights and other assets		—			—			20,775			1,747			22,522
Increase in restricted cash		—			—			(2,201	)		(3,525	)		(5,726	)
Other investing activities, net		—			—			(1,386	)		—			(1,386	)

Net cash provided by (used in) investing activities		—			—			2,428			(23,283	)		(20,855	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of senior secured term loans		—			(214,880	)		—			—			(214,880	)
Proceeds from revolving credit facility		—			—			—			16,349			16,349
Repayment of revolving credit facility		—			—			—			(19,190	)		(19,190	)
Proceeds from notes payable on real estate held for investment		—			—			—			18,981			18,981
Repayment of notes payable on real estate held for investment		—			—			—			(79,555	)		(79,555	)
Proceeds from notes payable on real estate held for sale and under development		—			—			—			3,603			3,603
Repayment of notes payable on real estate held for sale and under development		—			—			—			(9,953	)		(9,953	)
Repayment of short-term borrowings and other loans, net		—			—			(548	)		(3,500	)		(4,048	)
Proceeds from exercise of stock options		578			—			—			—			578
Non-controlling interests contributions		—			—			—			27,367			27,367
Non-controlling interests distributions		—			—			—			(6,725	)		(6,725	)
Payment of financing costs		—			(5,191	)		—			(875	)		(6,066	)
(Increase) decrease in intercompany receivables, net		(12,110	)		176,890			(115,221	)		(49,559	)		—
Other financing activities, net		801			—			—			(283	)		518

Net cash used in financing activities		(10,731	)		(43,181	)		(115,769	)		(103,340	)

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