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UNITED STATES
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, 2002
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:
N.A.

        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. ý

        Indicate by check mark whether the Registrant is an accelerated filer (as defined in Rule 12b-2 of the Act). Yes o        No ý

        As of June 28, 2002, the aggregate market value of Class A and Class B common stock held by non-affiliates of the Registrant was $0.

        As of February 28, 2003, the number of shares of Class A and Class B commons stock outstanding was 1,724,949 and 12,624,813, respectively.

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 Blum Strategic Partners, LP (Blum Strategic), formerly known as RCBA Strategic Partners, LP, which is an affiliate of Richard C. Blum, a director of the Company and CBRE.

        On July 20, 2001, the Company acquired CBRE (the 2001 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 2001 Merger are substantially the same as the operations of CBRE prior to the 2001 Merger. In addition, the Company has no substantive operations other than its investment in CBRE. Information regarding the 2001 Merger 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 3 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, LLC (CBRE Investors) and its foreign affiliates conduct business in the US, Europe and Asia. The Company operates in 47 countries through various subsidiaries and pursuant to cooperation agreements. Approximately 73% of the Company's revenue is generated from the US and 27% is generated from the rest of the world. See Note 21 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.

Recent Developments

        On February 17, 2003, the Company, CBRE, Apple Acquisition Corp. (the Merger Sub) and Insignia Financial Group, Inc. (Insignia) entered into an Agreement and Plan of Merger (the Insignia Acquisition Agreement). Pursuant to the terms and subject to the conditions of the Insignia Acquisition Agreement, the Merger Sub will merge with and into Insignia, the separate existence of the Merger Sub will cease and Insignia will continue its existence as a wholly owned subsidiary of CBRE (the Insignia Acquisition).

        When the Insignia Acquisition becomes effective, each outstanding share of common stock of Insignia (other than the cancelled shares, dissenting shares and shares held by wholly owned subsidiaries of Insignia) will be converted into the right to receive $11.00 in cash, without interest, from the Merger Sub, subject to adjustments as provided in the Insignia Acquisition Agreement. At the same time, each outstanding share of common stock of the Merger Sub will be converted into one share of common stock of the surviving entity in the Insignia Acquisition.

        As of February 17, 2003, the the transaction was valued at approximately $415.0 million, including the repayment of net debt and the redemption of preferred stock. In addition to Insignia shareholder approval, the transaction, which is expected to close in June 2003, is subject to the receipt of financing and regulatory approvals. The sale by Insignia on March 14, 2003 of its residential real estate services

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subsidiaries, Insignia Douglas Elliman LLC and Insignia Residential Group, Inc., to Montauk Battery Realty, LLC and Insignia's receipt of the cash proceeds from such sale will not affect the consideration to be paid in the Insignia Acquisition.

Business Segments

        In the third quarter of 2001, subsequent to the 2001 Merger transaction, the Company reorganized its business segments as part of its efforts to reduce costs and streamline its operations. The Company reports its operations through three geographically organized segments: (1) Americas, (2) Europe, Middle East and Africa (EMEA) and (3) Asia Pacific. The Americas consists of operations located in the US, Canada, Mexico, and Central and South America. EMEA mainly consists of operations in Europe, while Asia Pacific includes operations in Asia, Australia and New Zealand. Previously, the Company operated and reported its segments based on the applicable type of revenue transaction.

        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" section and within Note 21 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 21 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 clients. 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 2,120 individuals in offices located in most of the largest metropolitan areas in the US and approximately 410 individuals in Canada and Latin America.



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The Investment Properties line of business provides similar brokerage services primarily for 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 Services' broad array of services and/or global presence. These clients are offered the opportunity to be relieved of the responsibility of managing their commercial real estate activities at a lower cost than they could achieve by managing these activities themselves. Corporate Services includes 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 420 individuals, primarily within North America.



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The Commercial Mortgage line of business provides commercial loan origination and loan servicing through the Company's wholly owned subsidiary, L.J. Melody. The Commercial

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Mortgage business line 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. Additionally, L.J. Melody participates in a partnership whereby costs are shared in the servicing of its loan portfolios, which allows for significant cost savings. This business line employs approximately 325 individuals in the US.

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The Valuation line of business provides valuation, appraisal and market research services. These services include market value appraisals, litigation support, discounted cash flow analyses, and feasibility and fairness opinions. The Company believes that the valuation business line is one of the largest in its industry domestically. At December 31, 2002, this business line had over 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 the Company's wholly owned subsidiary, CBRE Investors. CBRE Investors' clients include pension plans, investment funds, insurance companies and other organizations seeking to generate returns and diversification through investment in real estate. CBRE Investors sponsors funds and investment programs that span the risk/return spectrum. In higher yield strategies, CBRE Investors "co-invests" with its clients/partners. These co-investments typically range from 2% to 5% of the equity in a particular fund. CBRE Investors is organized into three general client focused groups according to investment strategy, which include: Managed Accounts (low risk), Strategic Partners (value added funds) and Special Situations (higher yield and highly focused strategies). Operationally, a dedicated investment team with the requisite skill sets and location executes each investment strategy. Each team's compensation is driven largely by the investment performance of its particular strategy/fund. This organizational structure is designed to align the interests of team members with those of the firm and its investor clients/partners and to 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 who focus on investment strategy and underwriting. CBRE Investors has approximately 110 employees located in its Los Angeles headquarters and in a regional office in Boston.



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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. At December 31, 2002, it managed approximately 216.8 million square feet of commercial space in the Americas. Asset Services includes property management, construction management, marketing, leasing, and accounting and financial services for investor-owned properties, including office, industrial and retail properties. Asset Services markets its services primarily to long-term institutional owners of large commercial real estate assets. Asset Services' contractual relationships put 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 1,010 individuals in the US, Canada and Latin America, part of whose compensation is reimbursed by clients. 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 encouraged to continue their education through both internally-sponsored and outside training. Asset Services personnel 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, maintenance and project management of properties that are occupied by large corporations and institutions. At December 31, 2002, Facilities Management had approximately 113.1 million square feet under management in the Americas, comprised of corporate headquarters, regional offices, administrative offices and manufacturing and distribution facilities. The Facilities Management business line employs over 820 individuals in the Americas, most of whose compensation is reimbursed by clients. In addition to providing a full range of corporate services through contractual relationships, the Facilities Management group responds to client requests generated by the Company's other business lines for significant, single-assignment acquisition, disposition and strategic real estate consulting assignments that may lead to long-term relationships.

EMEA

        The EMEA division has 44 offices located in 27 countries, with its largest operations located in the UK, France, Spain, the Netherlands and Germany. Operations within the various countries typically provide, at a minimum, the following services: Brokerage, Investment Properties, Corporate Services, Valuation/Appraisal Services, Asset Services and Facilities Management, with approximately 83.7 million square feet under management. 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 that country. It provides a range of commercial property real estate services to investment, commercial and corporate clients located in London. The Company also has 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. In Spain, the Company provides extensive coverage operating through its offices in Madrid, 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. The Company's operations in these countries generally provide a full range of services to the commercial property sector, along with some residential property services. As of December 31, 2002, there were over 1,300 professional and support staff employed, of which approximately 700 were in the UK.

Asia Pacific

        The Asia Pacific division has 26 offices located in 11 countries. The Company believes it is one of only a few companies that can provide a full range of real estate services to large corporations throughout the region, including: Brokerage, Investment Management (in Japan only), Corporate Services, Valuation/Appraisal Services, Asset Services and Facilities Management, with approximately 140.0 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 over 2,000 individuals. In Asia, the Company's principal operations are located in China (including Hong Kong), Singapore, South Korea and Japan. The Pacific region includes Australia and New Zealand with principal offices located in Auckland, Brisbane, Melbourne, Perth and Sydney.

Competitive Strengths

        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 the Brokerage and Asset Services lines of business are local or regional firms that are

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substantially smaller than the Company on an overall basis, but in some cases may be larger locally. In addition, there are several national, and in some cases international, real estate brokerage firms with whom the Company competes. The Company believes it has a variety of competitive advantages that have helped to establish its strong, global leadership position within the commercial real estate industry. These advantages include the following:

        Global Brand Name and Presence.    The Company is of the largest commercial real estate services providers in the world in terms of revenue and, together with its predecessors, has been in existence for 97 years. The Company operates over 200 offices in 47 countries around the world. The Company believes that it is among the leading commercial real estate services firms in several major US markets including New York, Los Angeles, Chicago, Houston, Dallas/Fort Worth and Phoenix as well as in many other important real estate markets around the world including Hong Kong, London and Paris. The Company's extensive global reach combined with its localized knowledge enables it to provide world-class service to its numerous multi-regional and multi-national clients. Furthermore, as a result of its global brand recognition and geographic reach, the Company believes that large corporations, institutional owners and users of real estate recognize it as the pre-eminent provider of high quality, professional, multi-functional real estate services.

        Market Leader and 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, Asset Services and Facilities Management. The Company believes that its combination of significant local market presence, strong client relationships and its scalable, 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, and its broad national and international presence has enabled it to develop extensive relationships with many leading corporations.

        Recurring Revenue Stream.    The Company believes it 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 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.

        Attractive Business Model.    The Company's business model features a diversified revenue base, a variable cost structure and low capital requirements.

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Diversified Revenue Base.    The Company's global operations, multiple service lines and extensive customer relationships provide it with a diversified revenue base. Approximately 27% of the Company's 2002 revenue was generated outside the US while over 25% of its 2002 revenue was generated from its non-brokerage businesses.



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Variable Cost Structure.    The Company's sales and leasing producers are generally paid on a commission and bonus basis, which correlates with the Company's revenue performance. This flexible cost structure allows the Company to maintain its operating margins in a variety of economic conditions.



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Low Capital Requirements.    The Company's business model is structured to provide high value added services with low capital intensity. In 2002, the Company's capital expenditures remained low at approximately 1.4% of 2002 revenue.

        Empowered Resources.    The Company's proprietary data network gives its professionals instant access to local and global market knowledge to meet its clients' needs. It also enables the Company's

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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 business goals.

        Strong Senior Management with a Significant Equity Stake.    The Company's senior management team consists of a number of highly respected executives, most of whom have over 20 years of broad experience in the real estate industry. The Company's senior management team beneficially owns approximately 5% of the Company's outstanding common stock.

        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, regional and local 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 Asset Services and Facilities Management lines of business compete for the right to manage properties controlled by third parties. The competitor may be the owner of the property who is trying to decide upon 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 through automation and by providing services that generate premium fees. One way the Company seeks to grow the Asset Services and Facilities Management lines of business is through assignments that provide synergies with the Company's other lines of business.

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 2002, the Company continued to be adversely affected by the slowdown in the global economy, which negatively impacted the commercial real estate market. This caused a decline in leasing activities within the US, which was partially offset by improved overall revenues in Europe and Asia.

        Moreover, in part because of the terrorist attacks on September 11, 2001 and the subsequent outbreak of hostilities as well as the conflict with Iraq and the risk of conflict with North Korea, 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 US and in other countries, rising interest rates, a 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 the brokerage and mortgage banking businesses are negatively impacted, it is likely that the other lines of business would 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 2001 Merger and related transactions, the Company's exposure to adverse general economic conditions is heightened.

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

        The revenue the Company generates from its Asset Services and Facilities Management lines of business is generally a percentage of aggregate rent collections from properties, although many management agreements provide for a specified minimum management fee. Accordingly, the Company's success partially depends upon the performance of the properties it manages. 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 in, 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's growth has depended significantly upon acquisitions, which may not be available in the future and may not perform as the Company expected.

        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 the 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 continue to experience, difficulties in integrating operations and accounting systems acquired from other companies. These difficulties include 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 initially have an adverse impact on operating and net income. In addition, the Company generally believes that there will be significant 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 several different accounting systems as a result of acquisitions it has made. 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 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.

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 outstanding debt.

        The Company is highly leveraged and has significant debt service obligations. For the year ended December 31, 2002, the Company's interest expense was $60.5 million. The Company's substantial level

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of indebtedness increases the possibility that it may be unable to generate sufficient cash to pay the principal of, interest on or other amounts due in respect of 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, which include but are not limited to the following:

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The Company could 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; additionally, 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 increase because all of its debt under its Senior Credit Facility, including $221.0 million in term loans and a revolving credit facility of up to $90.0 million, bear interest at floating rates, generally between three-month LIBOR plus 3.25% and three-month LIBOR plus 3.75% or between the Alternate Base Rate (ABR) plus 2.25% and ABR plus 2.75%. The ABR is the higher of (1) Credit Suisse First Boston's prime rate or (2) the Federal Funds Effective Rate plus one-half of one percent.



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The Company's substantial leverage could increase its vulnerability to general economic downturns and adverse competitive and industry conditions placing it at a 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.



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The Company's failure to comply with the financial and other restrictive covenants in the documents governing its indebtedness, which, among others, require it to maintain specified financial ratios and limit its ability to incur additional 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, none of which the Company can guarantee it will be able to do.

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 competitive on an international, national, regional and local level. Although the Company is one of the largest real estate services firms in the world in terms of revenue, 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,

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they may be substantially larger on a local or regional basis. The Company is also subject to competition from other large national and multi-national firms.

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

        The Company conducts a portion of its business and employs a substantial number of employees outside the US. In 2002, the Company generated approximately 27% of its revenue from operations outside the US. Circumstances and developments related to international operations that could negatively affect its business, financial condition or results of operations include, but are not limited to, the following factors:

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difficulties and costs of staffing and managing international operations;



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currency restrictions, which may prevent the transfer 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 responsibility 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 in some European countries, where clients 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 that 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.

        In addition, the Company's international operations and, specifically, the ability of its non-US subsidiaries to dividend or otherwise transfer cash among its subsidiaries (including transfers of cash to pay interest and principal on its senior notes) may be affected by 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, 2002, approximately 27% 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

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could adversely affect its business, operating results and financial condition. Due to the constantly changing currency exposures to which the Company is subject and the volatility of currency exchange rates, it cannot predict the effect of exchange rate fluctuations upon future operating results. In addition, fluctuations in currencies relative to the US dollar may make it more difficult to perform period-to-period comparisons of the Company's reported results of operations.

        From time to time, the Company's management uses currency hedging instruments, including foreign currency forward and option contracts and borrows in foreign currency. Economic risks associated with these hedging instruments include unexpected fluctuations in inflation rates, which impact cash flow relative to paying down debt and unexpected changes in the underlying net asset position. These hedging activities may also not be effective.

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

        For the year ended December 31, 2002, approximately $215.3 million, or 29%, of the $745.8 million in total sales and lease revenue, including revenue from investment property sales, was generated from transactions originating in the State of California. As a result of the geographic concentration in California, a continuation of the economic downturn in the California commercial real estate markets and in the local economies in San Diego, Los Angeles or Orange County could further 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, 2002, the Company had committed an additional $22.6 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, but are not limited to, the following:

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loss from investments;



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difficulties associated with international co-investments 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 revenue 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 that 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 the 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.

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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 general and limited partnerships and other joint ventures formed to own or develop real property or interests in real property. The Company has acquired and may continue to acquire minority interests in joint ventures. Additionally, it may also acquire interests as a passive investor without rights to actively participate in management of the joint ventures. Investments in joint ventures involve additional risks, including, but not limited to, the following:

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



•

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; Brett White, the President; and Kenneth Kay, the Chief Financial Officer. 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, 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, return commissions received or have licenses suspended. In addition, because the size and scope of real estate sales transactions have 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. Furthermore, the laws and regulations applicable to the Company's business, both in the US and in foreign countries, 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. Failure to fulfill these obligations could subject the Company or its employees to litigation from parties who purchased, sold or leased

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properties they brokered or managed. The Company could become subject to claims by participants in real estate sales claiming that it did not fulfill its 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 managed 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.

The Company's results of operations vary significantly among quarters, which makes comparison of its quarterly results difficult.

        A significant portion of the Company's revenue is seasonal. Historically, this seasonality has caused the Company's 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 on completing transactions toward the fiscal year-end while incurring constant, non-variable expenses throughout the year.

Employees

        At December 31, 2002, the Company had approximately 9,500 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 the Company's profits in those markets.

Item 3. Legal Proceedings

        The Company is a party to a number of pending or threatened lawsuits arising out of, or incident to, its ordinary course of business. 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

        There were no matters submitted to a vote of security holders during the fourth quarter of 2002.

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PART II

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

        The Company's common stock is not publicly traded on any exchange or in any market. At February 28, 2003, the Company had seventy-eight record holders of its Class A common stock and ten 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.

        From November 7, 1997 to July 20, 2001, the common stock of CB Richard Ellis Services, Inc. (CBRE) traded on the New York Stock Exchange (NYSE) under the symbol "CBG." On July 20, 2001, CBRE merged with a subsidiary of the Company, with CBRE as the surviving corporation, and the common stock of CBRE was delisted from the NYSE. The Company owns all of the issued and outstanding capital stock of CBRE. CBRE has never declared any cash dividends on its capital stock.

        The following table sets forth information as of December 31, 2002 with respect to compensation plans under which equity securities of the Company are authorized for issuance:

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

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

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

(1)

The results include the activities of CB Richard Ellis Services, Inc. (CBRE), from July 20, 2001, the date of the 2001 Merger.

(2)

The results include the activities of 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 CBRE's preferred stock.

(3)

EPS represents earnings (loss) per share. See Earnings Per Share Information in Note 16 of Notes to Consolidated Financial Statements.

(4)

For the period from February 20, 2001 (inception) through December 31, 2001 the 7,845,004 and the 7,909,797 represent the weighted average shares outstanding for basic and diluted earnings per share, respectively. 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.

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(5)

EBITDA, excluding merger-related and other nonrecurring charges, represents earnings before net interest expense, income taxes, depreciation and amortization and excludes the impact of merger-related and other nonrecurring charges, if any. 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. Additionally, many of the Company's debt covenants are based upon EBITDA, excluding merger-related and other nonrecurring charges. Net cash that will be available to the Company 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 accounting principles generally accepted in the United States of America or (ii) operating cash flow determined in accordance with accounting principles generally accepted in the United States of America. 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:

(6)

Nonrecurring charges are primarily comprised of the write-off of assets, primarily e-business investments, as well as severance costs.

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 the 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 in 47 countries through 206 offices with approximately 9,500 employees. The Company has worldwide capabilities to assist buyers in the purchase and sellers in the disposition of commercial property, to assist tenants in finding available space and owners in finding qualified tenants, to provide valuation and appraisals for real estate property, to assist in the placement of financing for commercial real estate, to provide commercial loan servicing, to provide research and consulting services, to help institutional investors manage commercial real estate portfolios, to provide property and facilities management services and to serve as the outsource service provider to corporations seeking to be relieved of the responsibility for managing their real estate operations.

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        A significant portion of the Company's revenue is seasonal. Historically, this seasonality has caused the Company's 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 on completing transactions toward the fiscal year-end while incurring constant, non-variable expenses throughout the year. 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 2001 Merger), pursuant to an Amended and Restated Agreement and Plan of Merger, dated May 31, 2001 (the 2001 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 2001 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 2001 Merger, from January 1, 2001 through July 20, 2001, the date of the 2001 Merger. The results of operations and cash flows of CBRE prior to the 2001 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, which are included in the results of the Company subsequent to the 2001 Merger. Due to the effects of purchase accounting applied as a result of the 2001 Merger and the additional interest expense associated with the debt incurred to finance the 2001 Merger, the results of operations of the Company may not be comparable in all respects to the results of operations for CBRE prior to the 2001 Merger. However, the Company's management believes a discussion of the 2001 operations is more meaningful by combining the results of the Company with the results of CBRE.

        On February 17, 2003, the Company entered into a merger agreement with Insignia Financial Group, Inc. Additional 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."

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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, 2002, 2001 and 2000: