Property brokerage Newmark Group Inc. said its earnings and revenue fell because of declines in its lending and real estate sales businesses as the industry struggles with higher interest rates.
But the firm, the second large commercial real estate broker to report second-quarter earnings, is holding to projections made in February that it expects $425 million in adjusted earnings before interest, taxes, depreciation and amortization and $2.5 billion in revenue for 2023 because it's betting that the steady increase in interest rates over the past year will ease.
"As interest rates stabilize, capital markets activity will begin to rebound towards the end of the year," Newmark CEO Barry Gosin Market told investors Friday during the company’s earnings presentation. "We expect there will be a robust back half of 2024."
That outlook is more bullish than projections by CBRE Group Inc., the world's biggest commercial property brokerage, which cut its forecast as earnings fell 57% in the second quarter. The outlooks from these companies offer a hint at what might come from other major publicly traded brokerages as they release earnings in coming weeks.
The results come after Newmark paid $114.8 million (£90.92 million) for United Kingdom real estate adviser Gerald Eve in March in a deal that let Newmark join the major league of commercial real estate advisers in the United Kingdom. Newmark gave no specific details about the acquisition's effect in the second quarter.
Newmark's revenue declined nearly 23% to $585.8 million in the second quarter from the prior year's quarter as revenue from investment sales slid almost 63% to $77.6 million from almost $210 million.
Earnings Decline
Net income fell 86% to $8.9 million from $63.4 million as costs for interest, acquisitions and staff recruitment all climbed.
Newmark touted its origination of a $947 million loan for the Park La Brea project in Los Angeles, one of the West Coast's largest apartment properties by number of units.
The transaction is the biggest single-property multifamily financing in the United States since 2019, Gosin said.
The brokerage also arranged the recapitalization of a 12-story life science complex under construction at in Boston's Seaport Innovation District set to house drugmaker Eli Lilly in one of the nation’s biggest largest life science transactions of 2023.
Newmark also served as a lead adviser to Blackstone Real Estate Income Trust on an agreement to sell its self-storage portfolio to Public Storage for $2.2 billion.