Newmark’s Revenue Drops 22% Amid CRE Slowdown
A slowdown in leasing, sales and loans across the country’s real estate investment landscape is hitting brokerage firms hard, with Newmark reporting significant revenue and earnings depletion in the second quarter.
The brokerage’s total revenues in the second quarter came to $585.8M, Newmark executives said during its earnings call Friday. That marks a 22.4% drop from the same period last year, but a 12.5% increase from this year's first quarter.
The company reported earnings before interest, taxes, depreciation and amortization of $72.9M, down from $159.5M in Q2 2022, a decrease of more than 50%.
Newmark Chief Financial Officer Mike Rispoli pointed to a 63% drop in U.S. investment sales and a 52% fall in industrywide originations. Rising rates have taken their toll on the market, with the Federal Reserve lifting the rate by another 25 basis points last week, the 11th increase since last year.
Newmark is now forecasting its 2023 revenues and adjusted EBITDA to be around $2.5B and $425M, respectively, generating $300M to $350M of cash from the business.
“While our 2023 outlook for adjusted EBITDA is 29% lower compared with 2021, Newmark's stock has declined over 60% since then or by more than double,” Rispoli said. “We believe our incredibly strong growth prospects and low valuation make Newmark a compelling investment opportunity.”
Newmark's release comes two days after CBRE posted a negative cash flow of $86M in the second quarter, down from a positive cash flow of $400M during the same time last year.
Newmark CEO Barry Gosin acknowledged that he sees “headwinds,” but he said the industry is on the “cusp of a new market.” He expects a recovery to begin later this year, followed by a “robust” second half of 2024.
“The resurgence of our higher-margin capital markets business, combined with our strong leasing, recurring revenue businesses and the investments we have made in expanding our platform will drive significant revenue and earnings growth,” he said. “We expect a significant portion of debt maturities to be resolved not only through refinancings, which will help our mortgage brokerage and origination businesses, but through more complex and sophisticated restructurings and recapitalization.”
Newmark’s major deals of the quarter include arranging a $947M loan for the Park La Brea multifamily complex in Los Angeles. Since March, the company has been shopping $60B of Signature Bank loans on behalf of the Federal Deposit Insurance Corp.
