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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

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

For the fiscal year ended December 31, 2001

Commission File Number 000 - 32983

CBRE HOLDING, INC.
(Exact name of Registrant as specified in its charter)

(213) 613-3226
(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Securities registered pursuant to Section 12(g) of the Act:
Class A common stock, $0.01 par value per share
Options to purchase Class A common stock

        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 ý    No o.

        Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to the Form 10-K.    o

        The number of shares of Class A and Class B common stock outstanding at February 28, 2002 was 1,710,109 and 12,624,813, respectively. The aggregate market value of such shares held by non-affiliates of the Registrant was $0.

PART I

Item 1. Business

Company Overview

        Organization.    CBRE Holding, Inc., a Delaware corporation, was incorporated on February 20, 2001 as Blum CB Holding Corporation. On March 26, 2001, Blum CB Holding Corporation changed its name to CBRE Holding, Inc. (the Company). The Company and its former wholly owned subsidiary, Blum CB Corporation (Blum CB), a Delaware corporation, were created to acquire all of the outstanding shares of CB Richard Ellis Services, Inc. (CBRE), an international real estate services firm. Prior to July 20, 2001, the Company was a wholly owned subsidiary of RCBA Strategic Partners, L.P. (RCBA Strategic), and is an affiliate of Richard C. Blum, a director of the Company and CBRE.

        On July 20, 2001, the Company acquired CBRE (the merger) pursuant to an Amended and Restated Agreement and Plan of Merger, dated May 31, 2001, among the Company, CBRE and Blum CB. Blum CB was merged with and into CBRE, with CBRE being the surviving corporation. The operations of the Company after the merger are substantially the same as the operations of CBRE prior to the merger. In addition, the Company has no substantive operations other than its investment in CBRE. Information regarding this transaction is included in the "Liquidity and Capital Resources" section of "Management's Discussion and Analysis of Financial Condition and Results of Operations" and within Note 2 of the Notes to Consolidated Financial Statements, which are incorporated herein by reference.

        Nature of Operations.    CBRE Holding, Inc. is a holding company that conducts its operations primarily through direct and indirect operating subsidiaries. In the United States (US), the Company operates through CB Richard Ellis, Inc. and L.J. Melody, in the United Kingdom (UK) through CB Hillier Parker and in Canada through CB Richard Ellis Limited. CB Richard Ellis Investors, L.L.C. (CBRE Investors) and its foreign affiliates conduct business in the US, Europe and Asia. The Company operates through various subsidiaries in approximately 47 countries and pursuant to cooperation agreements in several additional countries. Approximately 75% of the Company's revenue is generated from the US and 25% is generated from the rest of the world. See Note 19 of the Notes to Consolidated Financial Statements for financial data relating to the Company's domestic and foreign operations, which are incorporated herein by reference.

        A significant portion of the Company's revenue is seasonal. Historically, this seasonality has caused its revenue, operating income, net income and cash flow from operating activities to be lower in the first two quarters and higher in the third and fourth quarters of each year. The concentration of earnings and cash flow in the fourth quarter is due to an industry-wide focus of completing transactions by year-end, while incurring constant, non-variable expenses throughout the year. This has historically resulted in lower profits or a loss in the first and second quarters, with profits growing in each subsequent quarter.

Business Segments

        Subsequent to the merger, the Company reorganized its business segments as part of its efforts to reduce costs and streamline its operations. The Company now conducts and reports its operations through three geographically organized segments: (1) The Americas, (2) Europe, Middle East, and Africa (EMEA), and (3) Asia Pacific. The Americas consist of the US, Canada, Mexico, and operations located in Central and South America. EMEA mainly consists of Europe, while Asia Pacific includes the operations in Asia, Australia and New Zealand. Previously, the Company operated and reported its segments based on the applicable type of revenue transaction. This included the Transaction Management, Financial Services and Management Services segments.

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        Information regarding revenue and operating income or loss, attributable to each of the Company's business segments, is included in "Segment Operations" within the "Management's Discussion and Analysis of Financial Condition and Results of Operations" and within Note 19 of the Notes to Consolidated Financial Statements, which are incorporated herein by reference. Information concerning the identifiable assets of each of the Company's business segments is set forth in Note 19 of the Notes to Consolidated Financial Statements, which is incorporated herein by reference.

Americas

        The Americas is the largest business segment in terms of revenue, earnings and cash flow. It includes the following major lines of businesses:

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The Brokerage Services line of business provides sales, leasing and consulting services relating to commercial real estate. This line of business is built upon relationships that the Company establishes with customers. This business does not require significant capital expenditures on a recurring basis. However, due to the low barriers to entry and strong competition, the Company strives to retain top producers through an attractive compensation program that motivates its sales force to achieve higher revenue production. Therefore, the most significant cost is commission expense. In addition, the Company believes that the CB Richard Ellis brand provides it with a competitive operating advantage. This line of business employs approximately 2,165 individuals in offices located in most of the largest metropolitan areas in the US and approximately 475 individuals in Canada and Latin America.



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The Investment Properties line of business provides brokerage services primarily involving commercial, multi-housing and hotel real estate property marketed for sale to institutional and private investors. This line of business employs approximately 480 individuals in offices mainly located in North America.



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The Corporate Services line of business focuses on building relationships with large corporate clients. The objective is to establish long-term relationships with clients that could benefit from utilizing Corporate Service's broad suite of services and/or global presence. These clients are offered the opportunity to be relieved of the burden of managing their commercial real estate activities at a lower cost than they could achieve by managing these activities themselves. Corporate services include research and consulting, structured finance, project management, lease administration and transaction management. These services can be delivered on a bundled or unbundled basis involving other lines of business in single or multiple markets. This business line employs approximately 400 individuals primarily within North America.



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The Commercial Mortgage business line provides commercial loan origination and loan servicing through our wholly-owned subsidiary, L.J. Melody. The Commercial Mortgage business focuses on the origination of commercial mortgages without incurring principal risk. As part of its activities, L.J. Melody has established correspondent relationships and conduit arrangements with investment banking firms, national banks, credit companies, insurance companies, pension funds and government agencies.



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The Valuation line of business provides valuation and appraisal services, and market research. These services include market value appraisals, litigation support, discounted cash flow analysis and feasibility and fairness opinions. The Valuation business line is one of the largest in its industry in the United States. At December 31, 2001, this business line had nearly 200 employees on staff in the Americas. It has developed proprietary technology for preparing and delivering valuation reports to its clients, which provides a competitive advantage over its rivals.



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The Investment Management line of business provides investment management services through our wholly-owned subsidiary, CBRE Investors. CBRE Investors focuses on pension plans,

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investment funds, insurance companies and other organizations seeking to generate returns through investment in real estate related assets. CBRE Investors often "co-invests" with its clients for a percentage of the total fund. These co-investments range from 2-10% of the fund.

        Operationally, each investment strategy is executed by a dedicated team with the requisite skill sets. The US presently has four dedicated teams: Fiduciary Services (low risk/return strategies), Strategic Partners, L.P. (a value-added fund), Corporate Partners, LLC (corporate real estate strategies), and Global Innovation Partners (technology driven real estate and entity level strategies). Each team's compensation is driven largely by the investment performance of its particular strategy/team. This organizational structure is designed to align the interests of team members with those of its investor clients/partners and enhance accountability and performance.

        Dedicated teams share resources such as accounting, financial controls, information technology, investor services and research. In addition to the research within the CB Richard Ellis platform, which focuses primarily on market conditions and forecasts, CBRE Investors has an in-house team of research professionals that focuses on investment strategy and underwriting. CBRE Investors has approximately 120 employees located in its Los Angeles headquarters and in regional offices in Boston.

        The Company believes that this business line provides strategic benefits to all of its lines of business, utilizing the full range of services that the Company offers, including brokerage, mortgage lending and property management.

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The Asset Services line of business provides value-added asset and related services for income-producing properties owned by local, regional and institutional investors and, at December 31, 2001, managed approximately 208.0 million square feet of commercial space in the Americas. Asset Services include property management, construction management, marketing, leasing, accounting and financial services for investor-owned properties, including office, industrial and retail properties. Asset Services works closely with its clients to implement their specific goals and objectives, focusing on the enhancement of property values. Asset Services markets its services primarily to long-term institutional owners of large commercial real estate assets. An Asset Services agreement puts the Company in a position to provide other services for the owner including refinancing, appraisal and lease and sales brokerage services. Asset Services employs more than 1,000 individuals in the US, Canada and Latin America, part of whose compensation is reimbursed by the client. Most asset services are performed by management teams located on-site or in the vicinity of the properties they manage. This provides property owners and tenants with immediate and easily accessible service, enhancing client awareness of manager accountability. All personnel are trained and are encouraged to continue their education through both internally-sponsored and outside training. The Company provides each local office with centralized corporate resources including investments in computer software and hardware. Asset Services personnel generally utilize state-of-the-art technology to deliver marketing, operations and accounting services.



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The Facilities Management line of business specializes in the administration, management and maintenance of properties that are occupied by large corporations and institutions, including corporate headquarters, regional offices, administrative offices and manufacturing and distribution facilities, as well as tenant representation, capital asset disposition, project management, strategic real estate consulting and other ancillary services for corporate clients. At December 31, 2001, Facilities Management had approximately 115.1 million square feet under management in the Americas. The Facilities Management business line employs over 1,000 individuals in the Americas, most of whose compensation is reimbursed by the client. The Facilities Management operations in the US are organized into three geographic regions in the Eastern, Western and Central areas, with each geographic region comprised of consulting,

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corporate services and management team professionals who provide corporate service clients with a broad array of financial, real estate, technological and general business skills. In addition to providing a full range of corporate services in a contractual relationship, the Facilities Management group will respond to client requests generated by the Company's other business lines for significant, single-assignment acquisition, disposition and consulting assignments that may lead to long-term relationships.

EMEA

        The EMEA division has 48 offices spread over 22 countries, with its largest operations located in the UK, France, Spain, the Netherlands and Germany. This division produced $161.3 million in revenue during 2001, and managed over 80 million square feet of commercial space within Europe. Operations within the various countries typically provide, at a minimum, the following services: Brokerage, Investment Properties, Corporate Advisory, Asset Services, Facilities Management and Valuation/Appraisal services. Certain countries also provide Financial and Investment Management services. These services are provided to a wide range of clients and cover office, retail, leisure, industrial, logistics, biotechnology, telecommunications and residential property assets.

        The Company, operating as CB Hillier Parker in the UK, is one of the leading real estate services companies in this country. It provides a broad range of commercial property real estate services to investment, commercial and corporate clients located in London, as well as through its four regional offices in Birmingham, Manchester, Edinburgh and Glasgow. In France, the Company is a key market leader in Paris and provides a complete range of services to the commercial property sector, as well as some services to the residential property market. Headquartered in Madrid, the Company provides extensive coverage in Spain, operating through its offices in Barcelona, Valencia, Malaga, Marbella and Palma de Mallorca. The Company's Netherlands business is based in Amsterdam, while its German operations are located in Frankfurt, Munich, Berlin and Hamburg. With the exception of Investment Management, these countries provide a full range of services to the commercial property sector, with some residential property services. As of December 31, 2001, there were approximately 1,300 professional and support staff employed, of which about 700 were in the UK.

Asia Pacific

        The Asia Pacific division has 29 offices spread over 11 countries. The Company is one of only a few companies that can provide a full range of real estate services to large corporations throughout the region, including the following: Brokerage, Investment Management (in Japan only), Corporate Advisory, Valuation/Appraisal, Asset Services and Facilities Management, with approximately 150 million square feet under management. The CB Richard Ellis brand name is recognized throughout this region as one of the leading worldwide commercial real estate services firms. This division employs approximately 1,465 individuals. In Asia, the Company's principal operations are located in China (including Hong Kong), Singapore, South Korea and Japan. The Pacific includes Australia and New Zealand with principal offices located in Brisbane, Melbourne, Sydney, Auckland and Wellington.

Competitive Environment

        The market for the Company's commercial real estate business is both highly fragmented and competitive. Thousands of local commercial real estate brokerage firms and hundreds of regional commercial real estate brokerage firms have offices throughout the world. Most of the Company's competitors in Brokerage, and to a significant extent, Asset Services, are local or regional firms that are substantially smaller on an overall basis, but in some cases may be larger locally. The Company believes that the following companies have the ability to compete with it on a national, and in some cases, international basis: Jones Lang Lasalle Incorporated, Trammell Crow Company, Cushman and Wakefield, Inc., Grubb and Ellis and Insignia Financial Group.

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        The Company has several competitive advantages which have established it as a leader in the commercial real estate services industry. These advantages include:

        Global brand name.    The Company's reputation as one of the leading worldwide commercial real estate services firms is a major advantage for it in winning new business and further expanding its existing client base. The Company believes that generally large corporations, institutional owners and users of real estate recognize it as a provider of high quality, professional and multi-functional real estate services.

        Global presence.    Many corporations, based both in the US and internationally, have pursued growth opportunities on a global basis. As a result, these corporations favor real estate providers who are capable of providing services around the world. With approximately 221 offices in 47 countries around the world, the Company combines global reach with localized knowledge that enables it to provide world-class service to its numerous multi-national clients.

        Resources that empower.    The Company's proprietary data network gives its professionals instant access to the local and global market knowledge to meet its clients' needs. It also enables professionals to build cross-functional teams to work collaboratively on projects. With real-time access to state-of-the-art information systems, its professionals are empowered to support clients in achieving their own business goals.

        Full Service Provider.    The Company provides a full range of real estate services to meet the needs of its clients. These services include commercial real estate brokerage services, investment properties, corporate services, mortgage banking, investment management, valuation and appraisal services, real estate market research, property management/asset services and facilities management. The Company can combine a variety of services to expand and execute real estate strategies that meet and satisfy the needs of a diverse client base. The Company believes its combination of significant local market presence and diversified line of business platforms differentiates it from its competitors and provides it with a competitive advantage.

        Strong Relationships with Established Customers.    The Company has long-standing relationships with a number of major real estate investors, including Equity Residential Trust, Lend Lease, MetLife and RREEF. The Company's broad national and international presence has enabled it to develop extensive relationships with many leading corporations, including Ford Motor Company, GE Capital, JP Morgan Chase, Kodak, Lucent Technologies and Washington Mutual. In addition, the Company is well positioned to generate recurring revenue through the turnover of leases and properties for which it has previously acted as transaction manager. The Company's many years of strong local market presence have allowed it to develop significant repeat client relationships which are responsible for a large part of its business.

        L.J. Melody competes in the US with a large number of mortgage banking firms and institutional lenders as well as regional and national investment banking firms and insurance companies in providing its mortgage banking services. Appraisal and valuation services are provided by other international, national, local and regional appraisal firms and some international, national and regional accounting firms. CBRE Investors has numerous competitors including other real estate investment managers and investment banks.

        The Company's management services business competes for the right to manage properties controlled by third parties. The competitor may be the owner of the property, who is trying to decide the efficiency of outsourcing, or another management services company. Increasing competition in recent years has resulted in increased pressure to provide additional services at lower rates. The Company has mitigated that pressure by reducing the cost of delivery. The Company seeks to grow the management services business through assignments that provide synergies with the Company's other lines of business.

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Risk Factors

The success of the Company's business is significantly related to general economic conditions, and accordingly, its business could be harmed in the event of an economic slowdown or recession.

        During 2001, the Company was adversely affected by a slowdown in the global economy resulting in a deterioration of the commercial real estate market. This led to a decline in sales and leasing activities within the US, as well as lower than expected revenues in Europe and Asia. In addition, the Company's results were negatively impacted by merger-related costs, severance expenses related to the implementation of the Company's cost savings strategies, and the write-off of various e-investments. While these factors have been partially offset by a reduction in commission and operating expenses, the Company has experienced a measurable decline in operating income, cash flow and profitability during the twelve months ended December 31, 2001, relative to the same period of 2000.

        Moreover, in part because of the terrorist attacks on September 11, 2001 and the subsequent outbreak of hostilities, the economic climate in the US and abroad remains uncertain, which may have a further adverse effect on commercial real estate market conditions and, in turn, the Company's operating results.

        Periods of economic slowdown or recession in the United States and in other countries, rising interest rates or declining demand for real estate, or the public perception that any of these events may occur, can harm many segments of the Company's business. These economic conditions could result in a general decline in rents, which in turn would reduce revenue from property management fees and brokerage commissions derived from property sales and leases. In addition, these conditions could lead to a decline in sales prices as well as a decline in demand for funds invested in commercial real estate and related assets. An economic downturn or a significant increase in interest rates also may reduce the amount of loan originations and related servicing by the commercial mortgage banking business. If brokerage and mortgage banking businesses are negatively impacted, it is likely that the other lines of business will also suffer, due to the relationship among the various business lines. Further, as a result of the Company's debt level and the terms of the debt instruments entered into in connection with the merger and related transactions, the Company's vulnerability to adverse general economic conditions has become heightened.

The Company's substantial leverage and debt service obligations could harm its ability to operate the business, remain in compliance with debt covenants and make payments on the notes.

        The Company is highly leveraged after the closing of the merger and related transactions and has significant debt service obligations. For the year ended December 31, 2001, after giving effect to the merger and related transactions, on a pro forma basis, the Company's interest expense would have been $61.9 million. The Company's substantial level of indebtedness increases the possibility that it may be unable to generate cash sufficient to pay when due the principal of, interest on or other amounts due in respect to its indebtedness. In addition, the Company may incur additional debt from time to time to finance strategic acquisitions, investments, joint ventures or for other purposes, subject to the restrictions contained in the documents governing its indebtedness. If the Company incurs additional debt, the risks associated with its substantial leverage, including its ability to service its debt, would increase.

        The Company's substantial debt could have other important consequences, including the following:

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The Company will be required to use a substantial portion, if not all, of its free cash flow from operations to pay principal and interest on its debt, and its level of debt may restrict it from raising additional financing on satisfactory terms to fund working capital, strategic acquisitions, investments, joint ventures and other general corporate requirements.

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The interest expense of the Company could increase if interest rates in general increase, because all of its debt under its new credit agreement, including $230.3 million in term loans and a revolving credit facility of up to $90 million, bear interest at floating rates, generally between LIBOR plus 3.25% and LIBOR plus 3.75% or between ABR plus 2.25% and ABR plus 2.75%.



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The Company's substantial leverage will increase its vulnerability to general economic downturns and adverse competitive and industry conditions and could place it at a competitive disadvantage compared to those of its competitors that are less leveraged.



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The Company's debt service obligations could limit its flexibility in planning for, or reacting to, changes in its business and in the real estate services industry generally.



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The Company's failure to comply with the financial and other restrictive covenants in the documents governing its indebtedness, which require it to maintain specified financial ratios and limit its ability to incur debt and sell assets, could result in an event of default that, if not cured or waived, could harm its business or prospects and could result in its filing for bankruptcy.

        The Company cannot be certain that its earnings will be sufficient to allow it to pay principal and interest on its debt, and meet its other obligations. If the Company does not have sufficient earnings, it may be required to refinance all or part of its existing debt, sell assets, borrow more money or sell more securities. The Company cannot guarantee that it will be able to refinance its debt, sell assets, borrow money or sell more securities.

If the properties that the Company manages fail to perform, then its financial condition and results of operations could be harmed.

        The revenue the Company generates from its property and facilities management lines of business is generally a percentage of aggregate rent collections from properties, with many management agreements providing for a specified minimum management fee. Accordingly, the Company's success will be dependent in part upon the performance of the properties it manages and the performance of these properties will depend upon the following factors, among others, many of which are partially or completely outside of the Company's control:

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the Company's ability to attract and retain creditworthy tenants;



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the magnitude of defaults by tenants under their respective leases;



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the Company's ability to control operating expenses;



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governmental regulations, local rent control or stabilization ordinances which are or may be put into effect;



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various uninsurable risks;



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financial conditions prevailing generally and in the areas in which these properties are located;



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the nature and extent of competitive properties; and



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the real estate market generally.

The Company has numerous significant competitors, some of which may have greater financial resources than it does.

        The Company competes across a variety of business disciplines within the commercial real estate industry, including investment management, tenant representation, corporate services, construction and development management, property management, agency leasing, valuation and mortgage banking. In general, with respect to each of its business disciplines, the Company cannot assure that it will be able to continue to compete effectively, maintain its current fee arrangements or margin levels or not encounter increased competition. Each of the business disciplines in which it competes is highly

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competitive on an international, national, regional and local level. Although the Company is one of the largest real estate services firms in the world, its relative competitive position varies significantly across product and service categories and geographic areas. Depending on the product or service, the Company faces competition from other real estate service providers, institutional lenders, insurance companies, investment banking firms, investment managers and accounting firms. Many of its competitors are local or regional firms, which are substantially smaller than the Company. However, they may be substantially larger on a local or regional basis. The Company is also subject to competition from other large national and multinational firms.

        In addition to the Company's historical competitors, the advent of the Internet has introduced new ways of providing real estate services, as well as new competitors to the industry. The Company cannot currently predict who these competitors will be, nor can it predict what its response to them will be. The Company's response to competitive pressures could require significant capital resources, changes in the organization or technological changes. If the Company is not successful in developing a strategy to address the risks and to capture the related opportunities presented by technological changes and the emergence of e-business, its business, financial condition or results of operations could be harmed.

The Company's international operations subject it to social, political and economic risks of doing business in foreign countries.

        The Company conducts a substantial portion of its business, and a substantial number of its employees are located, outside of the US. In 2001, the Company generated approximately 25% of its revenue from operations outside the US. The international scope of its operations may lead to volatile financial results and difficulties in managing its businesses. Circumstances and developments related to international operations that could negatively affect its business, financial condition or results of operations include the following factors:

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difficulties and costs of staffing and managing international operations;



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currency restrictions, such as those in Brazil and Malaysia, which may prevent the transferring of capital and profits to the US;



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unexpected changes in regulatory requirements;



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potentially adverse tax consequences;



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the burden of complying with multiple and potentially conflicting laws;



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the impact of regional or country-specific business cycles and economic instability;



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the geographic, time zone, language and cultural differences among personnel in different areas of the world;



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greater difficulty in collecting accounts receivable in some geographic regions such as Asia, where many countries have underdeveloped insolvency laws and clients often are slow to pay, and Europe, where clients in some countries also tend to delay payments;



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political instability; and



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foreign ownership restrictions with respect to operations in countries such as China.

        The Company has committed additional resources to expand its worldwide sales and marketing activities, to globalize its service offerings and products in selected markets and to develop local sales and support channels. If the Company is unable to successfully implement these plans, to maintain adequate long-term strategies which successfully manage the risks associated with its global business or to adequately manage operational fluctuations, its business, financial condition or results of operations could be harmed.

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        In addition, the Company's international operations and, specifically, the ability of its non-US subsidiaries to dividend or otherwise to transfer cash among its subsidiaries, including transfers of cash to pay interest and principal on its senior notes, may be affected by limitations on imports, currency exchange control regulations, transfer pricing regulations and potentially adverse tax consequences, among other things.

The Company's revenue and earnings may be adversely affected by foreign currency fluctuations.

        The Company's revenue from non-US operations has been primarily denominated in the local currency where the associated revenue was earned. During its fiscal year ended December 31, 2001, approximately 25% of its business was transacted in currencies of foreign countries, the majority of which included the Euro, the British Pound Sterling, the Hong Kong Dollar, the Singapore Dollar and the Australian Dollar. Thus, the Company may experience significant fluctuations in revenues and earnings because of corresponding fluctuations in foreign currency exchange rates.

        The Company has made significant acquisitions of non-US companies and may acquire additional foreign companies in the future. As the Company increases its foreign operations, fluctuations in the value of the US Dollar relative to the other currencies in which the Company may generate earnings could materially adversely affect its business, operating results and financial condition. In addition, fluctuations in currencies relative to the US Dollar may make it more difficult to perform period-to-period comparisons of its reported results of operations. Due to the constantly changing currency exposures to which the Company will be subject and the volatility of currency exchange rates, it cannot assure that it will not experience currency losses in the future, nor can it predict the effect of exchange rate fluctuations upon future operating results.

        The Company's management may decide to use currency hedging instruments including foreign currency forward contracts, purchased currency options where applicable and borrowings in foreign currency. Economic risks associated with these hedging instruments include unexpected fluctuations in inflation rates impacting cash flow relative to paying down debt, and unexpected changes in the underlying net asset position. These hedging activities may not be effective.

The Company's growth has depended significantly upon acquisitions.

        A significant component of the Company's growth has occurred through acquisitions. Any future growth through acquisitions will be partially dependent upon the continued availability of suitable acquisition candidates at favorable prices and upon advantageous terms and conditions. However, future acquisitions may not be available at advantageous prices or upon favorable terms and conditions. In addition, acquisitions involve risks that the businesses acquired will not perform in accordance with expectations and that business judgments concerning the value, strengths and weaknesses of businesses acquired will prove incorrect.

        The Company has had, and may experience in the future, significant difficulties in integrating operations acquired from other companies, including the diversion of management's attention from other business concerns and the potential loss of its key employees or those of the acquired operations. The Company believes that most acquisitions will have an adverse impact on operating income and net income during the first six months following the acquisition. In addition, during this time period, the Company believes that generally there will be significant one-time costs related to integrating information technology, accounting and management services and rationalizing personnel levels. Accordingly, the Company may not be able to effectively manage acquired businesses and some acquisitions may not have an overall benefit.

        The Company has numerous different accounting systems, each of which reports results in a different currency. If the Company is unable to fully integrate the accounting and other systems of the businesses it owns, it may not be able to effectively manage its acquired businesses. Moreover, the

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integration process itself may be disruptive to business as it requires coordination of geographically diverse organizations and implementation of new accounting and information technology systems.

A significant portion of the Company's operations are concentrated in California and its business could be harmed if an economic downturn occurs in the California real estate market.

        For the year ended December 31, 2001, approximately $223.0 million, or 29%, of the $768.2 million in total sales and lease revenue, including revenue from investment property sales, was generated from transactions originated in the State of California. As a result of the geographic concentration in California, a material downturn in the California commercial real estate markets or in the local economies in San Diego, Los Angeles or Orange County could harm the results of operations.

The Company's co-investment activities subject it to real estate investment risks which could cause fluctuations in earnings and cash flow.

        An important part of the strategy for the investment management business involves investing the Company's capital in certain real estate investments with its clients. As of December 31, 2001, the Company had committed an additional $36.1 million to fund future co-investments. Participation in real estate transactions through co-investment activity could increase fluctuations in earnings and cash flow. Other risks associated with these activities include:

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loss of investments;



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difficulties associated with international co-investment described in "—The Company's international operations subject it to social, political and economic risks of doing business in foreign countries" and "—The Company's revenues and earnings may be adversely affected by foreign currency fluctuations"; and



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potential lack of control over the disposition of any co-investments and the timing of the recognition of gains, losses or potential incentive participation fees.

The Company may incur liabilities related to its subsidiaries being general partners of numerous general and limited partnerships.

        The Company has subsidiaries which are general partners in numerous general and limited partnerships that invest in or manage real estate assets in connection with its co-investments, including several partnerships involved in the acquisition, rehabilitation, subdivision and sale of multi-tenant industrial business parks. Any subsidiary that is a general partner is potentially liable to its partners and for the obligations of its partnership, including those obligations related to environmental contamination of properties owned or managed by the partnership. If the Company's exposure as a general partner is not limited, or if the exposure as a general partner expands in the future, any resulting losses may harm the Company's business, financial condition or results of operations. The Company owns its general partnership interests through special purpose subsidiaries. The Company believes this structure will limit its exposure to the total amount it has invested in and the amount of notes from, or advances and commitments to, these special purpose subsidiaries. However, this limited exposure may be expanded in the future based upon, among other things, changes in operating practices, changes in applicable laws or the application of additional laws to the Company's business.

The Company's joint venture activities involve unique risks that are often outside of its control which, if realized, could harm its business.

        The Company has utilized joint ventures for large commercial investments, initiatives in Internet-related technology and local brokerage partnerships. In the future, the Company may acquire interests in additional limited and general partnerships and other joint ventures formed to own or develop real property or interests in real property. The Company has acquired and may acquire minority interests in joint ventures and may also acquire interests as a passive investor without rights to actively participate

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in management of the joint ventures. Investments in joint ventures involve additional risks, including the following:

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the other participants may become bankrupt or have economic or other business interests or goals which are inconsistent with the Company's; and



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the Company may not have the right or power to direct the management and policies of the joint ventures and other participants may take action contrary to the Company's instructions or requests and against the Company's policies and objectives.

        If a joint venture participant acts contrary to the Company's interest, it could harm the Company's business, results of operations and financial condition.

The Company's success depends upon the retention of its senior management, as well as its ability to attract and retain qualified and experienced employees.

        The Company's continued success is highly dependent upon the efforts of its executive officers and key employees. The only members of senior management that are parties to employment agreements are Raymond Wirta, the Chief Executive Officer, and Brett White, the President. If any of the key employees leave and the Company is unable to quickly hire and integrate a qualified replacement, business and results of operations may suffer. In addition, the growth of the business is largely dependent upon the Company's ability to attract and retain qualified personnel in all areas of the business, including brokerage and property management personnel. If the Company is unable to attract and retain these qualified personnel (particularly in foreign countries where there is limited operating history and brand recognition), growth may be limited, and business and operating results could suffer.

If the Company fails to comply with laws and regulations applicable to real estate brokerage and mortgage transactions and other segments of its business, it may incur significant financial penalties.

        Due to the broad geographic scope of the Company's operations and the numerous forms of real estate services performed, the Company is subject to numerous federal, state and local laws and regulations specific to the services performed. For example, the brokerage of real estate sales and leasing transactions requires the Company to maintain brokerage licenses in each state in which the Company operates. If the Company fails to maintain its licenses or conducts brokerage activities without a license, it may be required to pay fines or return commissions received or have licenses suspended. In addition, because the size and scope of real estate sale transactions has increased significantly during the past several years, both the difficulty of ensuring compliance with the numerous state licensing regimes and the possible loss resulting from non-compliance have increased. Further, the laws and regulations applicable to the Company's business, both in the US and in foreign countries, also may change in ways that materially increase the costs of compliance.

The Company may have liabilities in connection with real estate brokerage and property management activities.

        As a licensed real estate broker, the Company, and its licensed employees, are subject to statutory due diligence, disclosure and standard-of-care obligations in connection with brokerage transactions. Failure to fulfill these obligations could subject the Company or its employees to litigation from parties who purchased, sold or leased properties they brokered or managed. The Company may become subject to claims by participants in real estate sales claiming that it did not fulfill the statutory obligations as a broker.

        In addition, in the Company's property management business, it hires and supervises third party contractors to provide construction and engineering services for its properties. While the Company's role is limited to that of a supervisor, it may be subjected to claims for construction defects or other similar actions. Adverse outcomes of property management litigation could negatively impact the Company's business, financial condition or results of operations.

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Employees

        At December 31, 2001, the Company had approximately 9,300 employees. The Company believes that relations with its employees are good.

Item 2. Properties

        The Company leases the following offices:

        The Company does not own any offices, which is consistent with its strategy to lease instead of own. In general, these offices are fully utilized. There is adequate alternative office space available at acceptable rental rates to meet the Company's needs, although rental rates in some markets may negatively affect its profits in those markets.

Item 3. Legal Proceedings

        Between November 12 and December 6, 2000, five putative class actions were filed in the Court of Chancery of the State of Delaware in and for New Castle County by various of CBRE's stockholders against the Company, CBRE, its directors and the buying group which has taken CBRE private. A similar action was also filed on November 17, 2000 in the Superior Court of the State of California in and for the County of Los Angeles. These actions all alleged that the offering price for shares of CBRE's common stock was unfair and inadequate and sought injunctive relief or rescission of the transaction and, in the alternative, money damages.

        The five Delaware actions were subsequently consolidated and a lead counsel appointed. As of October 2, 2001, the parties to the Delaware litigation entered into a settlement agreement that was filed with the appropriate court in Delaware. On November 26, 2001, the Delaware court approved the settlement of the Delaware litigation, however, it reduced the fees payable to the lawyers for the plaintiffs. The lawyers for the plaintiffs have filed an appeal solely from the award of fees, resulting in a final judgment as to the dismissal of the claims of the plaintiffs and barring further prosecution of such claims or the commencement of other actions based on such claims. The actions in Delaware and California have been completely resolved, with the appeal from the Delaware award of fees being dismissed on February 1, 2002 and the California action being dismissed with prejudice on February 8, 2002.

        The Company is a party to a number of pending or threatened lawsuits arising out of, or incident to, its ordinary course of business. Based on available cash and anticipated cash flows, the Company believes that the ultimate outcome of these lawsuits will not have an impact on the Company's ability to carry on its operations. Management believes that any liability that may result from disposition of these lawsuits will not have a material effect on the Company's consolidated financial position or results of operations.

Item 4. Submission of Matters to a Vote of Security Holders

        Not Applicable.

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PART II

Item 5. Market for Registrant's Common Equity and Related Stockholder Matters

        (1)  The Company's common stock is not publicly traded on any exchange or in any market. At February 28, 2002, the Company had 73 record holders of its Class A common stock and nine record holders of its Class B common stock. The Company has not declared any cash dividends on its common stock. The Company's existing credit agreement restricts its ability to pay dividends on its common stock, and the Company does not expect to pay dividends in the near future.

        (2)  The following information pertains to CB Richard Ellis Services, Inc. (CBRE) common stock prior to the merger transaction with the Company. On July 20, 2001, the date of the merger, CBRE stockholders, except for a certain group of shareholders, received $16.00 in cash for each share of CBRE common stock that they owned. Refer to Note 2 of the Notes to Consolidated Financial Statements. CBRE's common stock commenced trading on the New York Stock Exchange (NYSE) on November 7, 1997 under the symbol "CBG." However, on July 20, 2001, following the merger, the common stock of CBRE was delisted from the NYSE. The following table sets forth, for the periods indicated, the high and low sales price per share of the common stock on the NYSE:

(3)

Since the incorporation of CBRE in March 1989, there have been no cash dividends declared on its common stock.

Item 6. Selected Financial Data

        The following selected financial data has been derived from the consolidated financial statements. The information set forth below is not necessarily indicative of results of future operations, and should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results

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of Operations" and the consolidated financial statements and related notes thereto included elsewhere in this Form 10-K.

SELECTED CONSOLIDATED FINANCIAL INFORMATION
(Dollars in thousands except share data)

(1)

The results include the activities of CB Richard Ellis Services, Inc., from July 20, 2001, the date of the merger.

(2)

The results include the activities of Koll from August 28, 1997, REI from April 17, 1998 and Hillier Parker from July 7, 1998. For the year ended December 31, 1998, basic and diluted loss per share include a deemed dividend of $32.3 million on the repurchase of the Company's preferred stock.

(3)

EPS represents earnings (loss) per share. See Per Share Information in Note 14 of Notes to Consolidated Financial Statements.

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(4)

The 7,845,004 and the 7,909,797 represent the weighted average shares outstanding for basic and diluted earnings per share, respectively, from inception of the Company through December 31, 2001. These balances take into consideration the lower number of shares outstanding prior to the merger with CBRE. The 14,380,414 represents the outstanding number of shares at December 31, 2001.

(5)

EBITDA, excluding merger-related and other nonrecurring charges, represents earnings before interest expense, income taxes, depreciation and amortization of intangible assets relating to acquisitions, merger-related and other nonrecurring charges. Management believes that the presentation of EBITDA, excluding merger-related and other nonrecurring charges, will enhance a reader's understanding of the Company's operating performance and ability to service debt as it provides a measure of cash generated (subject to the payment of interest and income taxes) that can be used to service debt and for other required or discretionary purposes. Net cash that will be available for discretionary purposes represents remaining cash, after debt service and other cash requirements, such as capital expenditures, are deducted from EBITDA, excluding merger-related and other nonrecurring charges. EBITDA, excluding merger-related and other nonrecurring charges, should not be considered as an alternative to (i) operating income determined in accordance with GAAP or (ii) operating cash flow determined in accordance with GAAP. The Company's calculation of EBITDA, excluding merger-related and other nonrecurring charges, may not be comparable to similarly titled measures reported by other companies.

        EBITDA, excluding merger-related and other nonrecurring charges is calculated as follows (dollars in thousands):

(6)

The Company has not declared any cash dividends on its common stock for the periods shown.

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations

Introduction

        Management's discussion and analysis of financial condition, results of operations, liquidity and capital resources contained within this report on Form 10-K is more clearly understood when read in conjunction with the Notes to the Consolidated Financial Statements. The Notes to the Consolidated Financial Statements elaborate on certain terms that are used throughout this discussion and provide information about our Company and the basis of presentation used in this report on Form 10-K.

        The Company is one of the world's largest global commercial real estate services firms in terms of revenue, offering a full range of services to commercial real estate occupiers, owners, lenders and investors. Operations are conducted through 221 offices located in 47 countries with approximately 9,300 employees. The Company has worldwide capabilities to assist buyers in the purchase and sellers in the disposition of commercial property, assist tenants in finding available space and owners in finding qualified tenants, provide valuation and appraisals for real estate property, assist in the placement of financing for commercial real estate, provide commercial loan servicing, provide research and consulting services, help institutional investors manage commercial real estate portfolios, provide

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property and facilities management service and serve as the outsource service provider to corporations seeking to be relieved of the burden of managing their real estate operations.

        A significant portion of the Company's revenue is seasonal. Historically, this seasonality has caused the revenue, operating income, net income and cash flow from operating activities to be lower in the first two quarters and higher in the third and fourth quarters of each year. The concentration of earnings and cash flow in the fourth quarter is due to an industry-wide focus of completing transactions at year-end while incurring constant, non-variable expenses throughout the year. This has led to lower profits or a loss in the first and second quarters, with profits growing in each subsequent quarter. In addition, the Company's operations are directly affected by actual and perceived trends in various national and economic conditions, including interest rates, the availability of credit to finance commercial real estate transactions and the impact of tax laws. The international operations are subject to political instability, currency fluctuations, and changing regulatory environments. To date, the Company does not believe that general inflation has had a material impact upon its operations. Revenue, commissions and other variable costs related to revenue are primarily affected by real estate market supply and demand rather than general inflation.

        On July 20, 2001, the Company acquired CB Richard Ellis Services, Inc. (CBRE), (the merger), pursuant to an Amended and Restated Agreement and Plan of Merger, dated May 31, 2001 (the merger agreement), among the Company, CBRE and Blum CB Corp. (Blum CB), a wholly owned subsidiary of the Company. Blum CB was merged with and into CBRE, with CBRE being the surviving corporation. At the effective time of the merger, CBRE became a wholly owned subsidiary of the Company.

        The results of operations, including the segment operations and cash flows, for the year ended December 31, 2001 have been derived by combining the results of operations and cash flows of the Company for the period from February 20, 2001 (inception) to December 31, 2001 with the results of operations and cash flows of CBRE, prior to the merger, from January 1, 2001 to July 20, 2001, the date of the merger, and are hereafter referred to as the Combined Company. In addition, the results of operations and cash flows of CBRE prior to the merger incorporated in the following discussion are the historical results and cash flows of CBRE, the predecessor to the Company. These CBRE results do not reflect any purchase accounting adjustments included in the results of the Combined Company after the merger and are thus not directly comparable. Due to the effects of purchase accounting applied as a result of the merger and the additional interest expense associated with the debt incurred to finance the merger, the results of operations of the Combined Company are not comparable in all respects to the results of operations prior to the merger. However, the Company's management believes a discussion of the operations is more meaningful by combining the results of the Company and CBRE since the Company's operating revenues and expenses have not been affected by the merger and splitting up the results between pre-and post-merger periods would make comparisons of the operating trends to the prior year not meaningful.

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Results of Operations

        The following table sets forth items derived from the consolidated statements of operations for the years ended December 31, 2001, 2000 and 1999, presented in dollars and as a percentage of revenue: