UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


(Mark One)

☒

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

For the quarterly period ended March 31, 2018

OR

June 30, 2022

☐

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


For the transition period from to

Commission File Numbers: 001-38329

NEWMARK GROUP, INC.

(Exact name of Registrant as specified in its charter)

Delaware

6531

81-4467492

Delaware

81-4467492
(State or other Jurisdiction of


Incorporation or Organization)

(Primary Standard Industrial

Classification Code Number)

(I.R.S. Employer


Identification Number)

125 Park Avenue

New York, New York 10017

(212) 372-2000

(Address, including zip code, and telephone number, including area code, of Registrant’s principal executive offices)

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

Title of Each Class

Trading Symbol(s)

Name of Each Exchange on Which Registered

Class A Common Stock, $0.01 par value

NMRK

The NASDAQ Stock Market LLC

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

None

(Title of Class)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes  ☐    No  ☒

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.    Yes  ☐    No  ☒

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  ☒    No  ☐


Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  ☒    No  ☐

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-Q or any amendment to this Form 10-Q.  ☒


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

Large accelerated filer

☐

☒

Accelerated filer

☐

Non-accelerated filer

☒

☐

Smaller reporting company

☐

Emerging growth company

☐


If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.    ☐


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

As of June 30, 2017, the last business day of the registrant’s most recently completed second fiscal quarter, there was no trading market for the registrant’s Class A common stock. The registrant’s Class A common stock began trading on the NASDAQ Global Select Market on December 15, 2017.


Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date.

Class

Outstanding at May 11, 2018

August 2, 2022

Class A Common Stock, par value $0.01 per share

138,921,532

157,809,874 shares

Class B Common Stock, par value $0.01 per share

15,840,049

21,285,533 shares

1


NEWMARK GROUP, INC.


TABLE OF CONTENTS

Page

Page

PART I

- FINANCIAL INFORMATION

ITEM 1.

FINANCIAL STATEMENTS (unaudited)

5

6

Condensed consolidatedConsolidated Balance Sheets

5

6

Condensed consolidatedConsolidated Statements of Operations

6

7

Condensed consolidatedConsolidated Statements of Comprehensive Income (Loss)

7

8

Condensed consolidatedConsolidated Statements of Changes in Equity

8

9

Condensed consolidatedConsolidated Statements of Cash Flows

9

11

Notes to Condensed consolidatedConsolidated Financial Statements

11

13

ITEM 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

44

55

ITEM 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

76

93

ITEM 4.

CONTROLS AND PROCEDURES

77

94

PART II

- OTHER INFORMATION

ITEM 1.

LEGAL PROCEEDINGS

78

94

ITEM 1A.

RISK FACTORS

78

94

ITEM 2.

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

80

94

ITEM 3.

DEFAULTS UPON SENIOR SECURITIES

80

94

ITEM 4.

MINE SAFETY DISCLOSURES

80

94

ITEM 5.

OTHER INFORMATION

80

95

ITEM 6.

EXHIBITS

81

SIGNATURES95

82


2


SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

INFORMATION


This Quarterly Report on Form 10-Q (this “Form 10-Q”) contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended which we refer to as the(the “Securities Act,”Act”), and Section 21E of the Securities Exchange Act of 1934, as amended which we refer to as the(the “Exchange Act.”Act”). Such statements are based upon current expectations that involve risks and uncertainties. Any statements contained herein that are not statements of historical fact may be deemed to be forward-looking statements. For example, words such as “may,” “will,” “should,” “estimates,” “predicts,” “possible,” “potential,” “continue,” “strategy,” “believes,” “anticipates,” “plans,” “expects,” “intends,” and similar expressions are intended to identify forward-looking statements.


Our actual results and the outcome and timing of certain events may differ significantly from the expectations discussed in the forward-looking statements. Factors that might cause or contribute to such a discrepancy include, but are not limited to, the factors set forth below:

our relationship with Cantor, BGC Partners and their respective affiliates and any related conflicts of interest, competition for and retention of brokers•macroeconomic and other managerschallenges and key employees;

uncertainties resulting from the COVID-19 pandemic ("COVID-19"), the ongoing conflict in the Ukraine, inflation and the Federal Reserve's responses thereto, including increasing interest rates, the strengthening U.S. Dollar, changes in the economy, the commercial real estate services industry and the global financial markets, employment levels, and increasing energy costs, and including the effect on demand for commercial real estate including office space, levels of new lease activity and renewals, frequency of loan defaults and forbearance, and fluctuations in the mortgage-backed securities market;

•challenges relating to our repositioning of certain aspects of our business to adapt to and better address the timingneeds of our clients in the future as a result of the Distribution (as defined below)acceleration of pre-existing long-term social and whethereconomic trends, or emergence of new trends resulting from the Distribution will occur at all;

COVID-19 pandemic, and other legal, cultural and political events and conflicts, and governmental measures taken in response thereto, including changes in the mix of demand for commercial real estate space, including decreased demand for urban office and retail space generally, which may be offset in whole or in part by increased demand for suburban office, data storage, fulfillment, and distribution centers and life sciences facilities, that could materially reduce demand for commercial space and have a material adverse effect on the nature of and demand for our commercial real estate services, including the time and expense related to such repositioning, as well as risks related to our entry into new geographic markets or lines of business;
•the impact of the COVID-19 pandemic, including any successive waves or variants of the virus, the emergence of new viruses, the continued distribution of effective vaccines and governmental and public reactions thereto, and the impact of a return to office for our employees on our operations, as well as the cybersecurity risks of remote working, and our ability to continue providing on-site commercial property management services;

•market conditions, including trading volume and volatility,transaction volumes, possible disruptions in transactions, potential deterioration of equity and debt capital markets for commercial real estate and related services, supply chain issues and other factors, and our ability to access the capital markets;

markets as needed or on reasonable terms and conditions;

•pricing, commissions and fees, and market position with respect to any of our products and services and those of our competitors;

•the effect of industry concentration and reorganization, reduction of customers and consolidation;

•uncertainties related to integrating certain assets of Knotel, Inc. ("Knotel") and Space Management

(DBA “Deskeo”) as we build out our international flexible office business;

•liquidity, regulatory and clearing capital requirements and the impact of credit market events,

including the impact of COVID-19 and political events and conflicts and actions taken by governments and businesses in responses thereto on the credit markets and interest rates;
•our relationship and transactions with Cantor Fitzgerald, L.P. (“Cantor”) and its affiliates, Newmark’s structure, including Newmark Holdings, L.P. (“Newmark Holdings”), which is owned by Newmark, Cantor, Newmark’s employee partners and other partners, and our operating partnership, which is owned jointly by us and Newmark Holdings (which we refer to as “Newmark OpCo” ) any related transactions, conflicts of interest, or litigation, any loans to or from Newmark or Cantor, Newmark Holdings or Newmark OpCo, including the balances and interest rates thereof from time to time and any convertible or equity features of any such loans, repurchase agreements, joint ventures, and competition for and retention of brokers and other managers and key employees;
•the impact on our stock price from the reduction of our dividend and potential future changes in our capital deployment priorities, including repurchases of shares, purchases of limited partnership interests, and our dividend policy, and in Newmark Holdings distributions to partners and the related impact of such reductions, as well as the effect of layoffs, furloughs, salary cuts, and expected lower commissions or bonuses on the repayment of partner loans;
1

•market volatility as a result of the effects of COVID-19, global inflation rates, potential downturns including recessions, and similar effects, or other market conditions, which may not be sustainable or predictable in future periods;

risks associated•our ability to grow in other geographic regions and to manage our continued overseas growth and the impact of the COVID-19 pandemic on these regions and transactions;

•our ability to maintain or develop relationships with independently owned offices or affiliated businesses or partners in our business;
•the impact of any restructuring or similar transaction on our business and financial results in current or future periods, including with respect to any assumed liabilities or indemnification obligations with respect to such transactions, the integration of acquired businesses with any completed acquisitions and the use of proceeds of any completed dispositions;
•our other businesses;

ability to effectively deploy the proceeds of our Nasdaq, Inc. (“Nasdaq”) shares to repurchase shares or limited partnership interests, reduce our debt, and invest in growing our business;

•risks related to changes in our relationships with the Government Sponsored Enterprises (“GSEs”) and Housing and Urban Development (“HUD”), including the impact of COVID-19 and related changes in the credit markets, changes in prevailing interest rates and the risk of loss in connection with loan defaults;

•risks related to changes in the future of the GSEs, including changes in the terms of applicable conservatorships and changes in their capabilities;

•economic or geopolitical conditions or uncertainties, the actions of governments or central banks, including the impact of COVID-19 on the global markets and government responses, and restrictions on business and commercial activity, uncertainty regarding the nature, timing and consequences of the United Kingdom (“U.K.”)’s exit from the European Union (“EU”) following the referendumwithdrawal process, including potential reduction in investment in the U.K., and the pursuit of trade, border control or other related rulings,policies by the U.S. and/or other countries (including U.S. - China trade relations), rising political and other tensions between the U.S. and China, political and civil unrest in the U.S., including demonstrations, riots, boycotts, rising tensions with law enforcement, the impact of elections, or other social and political responses to governmental mandates and other restrictions related to COVID-19 in the U.S. or abroad, political and labor unrest in Hong Kong, China and other jurisdictions, conflict in the Middle East, Russia, Ukraine, or other jurisdictions, the impact of U.S. government shutdowns or impasses, the impact of terrorist acts, acts of war or other violence or political unrest, as well as natural disasters or weather-related or similar events, including hurricanes and heat waves as well as power failures, communication and transportation disruptions, and other interruptions of utilities or other essential services, (including hurricanes);

and the impact of pandemics and other international health incidents;
•risks inherent in doing business in international markets, and any failure to identify and manage those risks, as well as the impact of Russia's ongoing invasion of Ukraine and additional sanctions and regulations imposed by governments and related counter-sanctions;

•the effect on our business, our clients, the markets in which we operate, and the economy in general of recentinflationary pressures and the Federal Reserve's response thereto, infrastructure spending, changes in the U.S. and foreign tax and other laws, possible shutdownsincluding changes in tax rates, repatriation rules, and deductibility of the U.S. government,interest, potential policy and regulatory changes in Mexico and other countries, sequestrations, uncertainties regarding the debt ceiling and the federal budget, and future changes to tax policy and other potential political policies resulting from elections and impasses;

changes in governments;
•our dependence upon our key employees, our ability to build out successful succession plans, the impact of absence due to illness or leave of certain key executive officers or employees and our ability to attract, retain, motivate and integrate new employees, as well as the competing demands on the time of certain of our executive officers who also provide services to Cantor, BGC and various other ventures and investments sponsored by Cantor (throughout this document, unless otherwise stated, the term "employees" includes both our employees and those real estate professionals who qualify as statutory non-employees under Section 3408 of the Internal Revenue Code of 1986, as amended);

•the effect on our business of changes in interest rates, changes in benchmarks, including the transition away from LIBOR, the effect on our businesses and revenues of the strengthening U.S. Dollar, the transition to alternative benchmarks such as SOFR, and federal and state legislation relating thereto, the level of worldwide governmental debt issuances, austerity programs, government stimulus packages, including those related to COVID-19, increases and decreases in the federal funds interest rate and other actions to moderate inflation, increases or decreases in deficits and the impact of increased government tax rates, and other changes to monetary policy, and potential political impasses or regulatory requirements, including increased capital requirements for banks and other institutions or changes in legislation, regulations and priorities;

2

•extensive regulation of our businessesbusiness and customers,clients, changes in regulationregulations relating to commercial real estate and other industries, and risks relating to compliance matters, including regulatory examinations, inspections, investigations and enforcement actions, and any resulting costs, increased financial and capital requirements, enhanced oversight, remediation, fines, penalties, sanctions, and changes to ouror restrictions or limitations on specific activities, operations, compensatory arrangements, and growth opportunities, including acquisitions, hiring, and new businesses, products, or services, as well as risks related to our taking actionactions to ensure that we and Newmark Holdings are not deemed investment companies under the Investment Company Act of 1940 (the “Investment Company Act”);

1940;
•the impact of illness or governmental actions preventing a significant portion of our workforce or the workforce of our clients or third-party vendors from performing functions that can only be conducted in-person, including on-site tours and inspections of buildings;

•factors related to specific transactions or series of transactions as well as counterparty failure;

•costs and expenses of developing, maintaining and protecting our intellectual property, as well as employment, regulatory, and other litigation, proceedings and their related costs, including related to acquisitions and other matters, including judgments, fines, or settlements paid, or receivedreputational risk, and the impact thereof on our financial results and cash flow in any given period;

•our ability to obtain additionalmaintain continued access to credit and availability of financing necessary to support our ongoing business needs, including to refinance our indebtedness, and the risks ofassociated with the resulting leverage, as well as fluctuations in interest and currency rate fluctuations;

rates;

•certain other financial risks, including the possibility of future losses, indemnification obligations, assumed liabilities, reduced cash flowflows from operations, increased leverage, reduced availability under our various credit facilities, and the need for short-short or long-term borrowings, including from Cantor, the ability of Newmark to refinance our indebtedness, including in the credit markets, and our ability to satisfy eligibility criteria for government-sponsored loan programs and changes to interest rates and market liquidity or our access to other sources of cash relating to acquisitions, dispositions, or other matters, potential liquidity and other risks relating to

our ability to maintain continued access to credit and availability of financing necessary to support ongoing business needs on terms acceptable to us, if at all, and risks associated with the resulting leverage, including potentially causing a reduction in credit ratings and the associated outlooks and increased borrowing costs as well as interest rate and foreign currency exchange rate fluctuations;

our ability to obtain additional financing or refinancing of existing debt on terms acceptable to us, if at all, and risks of the resulting leverage, including potentially causing a reduction in our credit ratings and the associated outlooks and increased borrowing costs, including as a result of the Berkeley Point Acquisition (defined below), as well as interest rate and foreign currency exchange rate fluctuations;

•risks associated with the temporary or longer-term investment of our available cash, including in Newmark OpCo, defaults or impairments on ourthe Company’s investments (including investments in non-marketable securities), joint venture interests, stock loans or cash management vehicles and collectability of loan balances owed to us by partners, employees, Newmark OpCo or others;

•the impact of any reduction in the willingness of commercial property owners to outsource their property management needs;

•our ability to enter new markets or develop new products or services and to induce customersclients to use these products or services and to secure and maintain market share;

share, and the impact of COVID-19 generally and on the commercial real estate services business in particular;

•our ability to enter into marketing and strategic alliances, and business combinations, attract investors or partners or engage in, restructuring, rebranding or other transactions, including acquisitions, dispositions, reorganizations, partnering opportunities and joint ventures, the anticipated benefits of any such transactions, relationships or growth and the future impact of any such transactions, relationships or growth on other businesses and financial results for current or future periods, the integration of any completed transactions;

acquisitions and the use of proceeds of any completed dispositions, the impact of amendments and/or terminations of any strategic arrangements, and the value of any hedging entered into in connection with consideration received or to be received in connection with such dispositions and any transfers thereof;

•our estimates or determinations of potential value with respect to various assets or portions of ourthe Company’s business, including with respect to the accuracy of the assumptions or the valuation models or multiples used;

•the impact of near- or off-shoring on our business, including on our ability to manage turnover and hire, train, integrate and retain personnel, including brokers,brokerage professionals, salespeople, managers, and other professionals;

•our ability to effectively manage any growth that may be achieved, including outside of the U.S., while ensuring compliance with all applicable financial reporting, internal control, legal compliance, and regulatory requirements;

•our ability to identify and remediate any material weaknesses or significant deficiencies in our internal controls that could affect our ability to properly maintain books and records, prepare financial statements and reports in a timely manner, control our policies, practices and procedures, operations and assets, assess and manage ourthe
3

Company’s operational, regulatory and financial risks, and integrate our acquired businesses and brokers, salespeople, managers and other professionals; the effectiveness of our risk management policies and procedures, and
•the impact of unexpected market moves and similar events;

•information technology risks, including capacity constraints, failures, or disruptions in our systems or those of the clients, counterparties, or other parties with which we interact, increased demands on such systems and on the telecommunications infrastructure from remote working during the COVID-19 pandemic, including cybersecuritycyber-security risks and incidents, compliance with regulations requiring data minimization and protection and preservation of records of access and transfers of data, privacy risk and exposure to potential liability and regulatory focus;

•the impact of our reductions to our dividends and distributions and the timing and amounts of any future dividends or distributions and our increased stock and unit repurchase authorization, including our ability to meet expectations with respect to payment of dividends and repurchases of our common stock or purchases of Newmark Holdings limited partnership interests or other equity interests in our subsidiaries, including Newmark OpCo, including from BGC Partners, Cantor or our executive officers, other employees, partners and others and the effect on the market for and trading price of our Class A common stock as a result of any such transactions;

•the effectiveness of our governance, risks management, and oversight procedures and the impact of any potential transactions or relationships with related parties;
•the impact of our environmental, social and governance (“ESG”) or “sustainability” ratings on the decisions by clients, investors, potential clients and other parties with respect to our business, investments in us, our borrowing opportunities or the market for and trading price of Newmark Class A common stock or other matters;
•the fact that the prices at which shares of our Class A common stock are or may be sold in offerings or other transactions may vary significantly, and purchasers of shares in such offerings or other transactions, as well as existing stockholders, may suffer significant dilution if the price they paid for their shares is higher than the price paid by other purchasers in such offerings or transactions;

•the effect on the marketmarkets for and trading priceprices of our Class A common stock and ofdue to market factors, as well as on various offerings and other transactions, including offerings of our Class A common stock and convertible or exchangeable debt or other securities, the Separation, the IPO and the proposed Distribution, our repurchases of shares of our Class A common stock and purchases or redemptions of Newmark Holdings limited partnership interests or other equity interests in us or in ourits subsidiaries, any exchanges by Cantor of shares of our Class A common stock for shares of our Class B common stock, any exchanges or redemptions of limited partnership units and issuances of shares of Class A common stock in connection therewith, including in corporate or partnership restructurings, our payment of dividends on our Class A common stock and distributions on Newmark Holdings limited partnership interests of Newmark Holdings and Newmark OpCo, convertible arbitrage, hedging, and other transactions engaged in by us or holders of our outstanding shares, debt or other securities, share sales and stock pledge, stock loan,loans, and other financing transactions by holders of our shares or units (including by BGC Partners, Cantor executive officers, partners, employees or others), including of shares acquired pursuant to our employee benefit plans, unit exchanges and redemptions, corporate or partnership restructurings, acquisitions, conversions of shares of our Class B common stock and our other convertible securities into shares of our Class A common stock, stock pledge, stock loan,loans, or other financing transactions; and

transactions, distributions of our Class A common stock by Cantor to its partners, including deferred distribution rights shares.

other factors, including those that are discussed under “Risk Factors,” to the extent applicable.

The foregoing risks and uncertainties, as well as those risks and uncertainties set forth in this Quarterly Report on this Form 10-Q, may cause actual results and events to differ materially from the forward-looking statements. The information included herein is given as of the filing date of this Form 10-Q with the Securities and Exchange Commission (the “SEC”), and future results or events could differ significantly from these forward-looking statements. We do not undertake to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.


4


WHERE YOU CAN FIND MORE INFORMATION


We file annual, quarterly and current reports, proxy statements and other information with the Securities and Exchange Commission. You may read and copy any document we file at the SEC’s Public Reference Room located at One Station Place, 100 F Street, N.E., Washington, D.C. 20549. You can also request copies of the documents, upon payment of a duplicating fee, by writing the Public Reference Section of the SEC. Please call the SEC at 1-800-SEC-0330 for further information on the Public Reference Room. These filings are also available to the public from the SEC’s website at www.sec.gov.

www.sec.gov.


Our website address is www.ngkf.com.www.nmrk.com. Through our website, we make available, free of charge, the following documents as soon as reasonably practicable after they are electronically filed with, or furnished to, the SEC: our Annual Reports on Form 10-Q;10-K; our proxy statements for our annual and special stockholder meetings; our Quarterly Reports on Form 10-Q; our Current Reports on Form 8-K; Forms 3, 4 and 5 and Schedules 13D filed on behalf of Cantor Fitzgerald, L.P.Cantor., CF Group Management, Inc., BGC Partners, Inc., our directors and our executive officers; and amendments to those documents. Our website also contains additional information with respect to our industry and business. The information contained on, or that may be accessed through, our website is not part of, and is not incorporated into, this Quarterly Report on Form 10-Q.


5


PART I-FINANCIALI - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS


NEWMARK GROUP, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share data)

amounts)

(unaudited)

 

 

March 31, 2018

 

 

December 31, 2017

 

Assets:

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

48,069

 

 

$

121,027

 

Restricted cash

 

 

243,944

 

 

 

52,347

 

Marketable securities

 

 

8,622

 

 

 

57,623

 

Loans held for sale, at fair value

 

 

965,639

 

 

 

362,635

 

Receivables, net

 

 

293,148

 

 

 

210,471

 

Other current assets (see note 17)

 

 

36,499

 

 

 

20,994

 

Total current assets

 

 

1,595,921

 

 

 

825,097

 

Goodwill

 

 

474,990

 

 

 

477,532

 

Mortgage servicing rights, net

 

 

381,526

 

 

 

392,626

 

Loans, forgivable loans and other receivables from employees and partners, net

 

 

226,744

 

 

 

209,549

 

Fixed assets, net

 

 

64,565

 

 

 

64,822

 

Other intangible assets, net

 

 

25,896

 

 

 

24,921

 

Other assets (see note 17)

 

 

287,508

 

 

 

278,460

 

Total assets

 

$

3,057,150

 

 

$

2,273,007

 

Liabilities, Redeemable Partnership Interest, and Equity:

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Warehouse notes payable

 

$

950,479

 

 

$

360,440

 

Accrued compensation

 

 

205,732

 

 

 

205,395

 

Current portion of accounts payable, accrued expenses and other liabilities (see

   note 27)

 

 

165,746

 

 

 

124,961

 

Securities loaned

 

 

8,622

 

 

 

57,623

 

Current portion of payables to related parties

 

 

197,199

 

 

 

34,169

 

Total current liabilities

 

 

1,527,778

 

 

 

782,588

 

Long-term debt

 

 

400,000

 

 

 

670,710

 

Long-term debt payable to related parties

 

 

412,500

 

 

 

412,500

 

Other-long term liabilities (see note 27)

 

 

163,190

 

 

 

163,795

 

Total liabilities

 

 

2,503,468

 

 

 

2,029,593

 

Commitments and contingencies

 

 

 

 

 

 

 

 

Redeemable partnership interests

 

 

22,105

 

 

 

21,096

 

Equity:

 

 

 

 

 

 

 

 

Class A common stock, par value of $0.01 per share: 1,000,000 shares authorized;

   138,922 and 138,594 shares issued and outstanding as of March 31, 2018 and

   December 31, 2017, respectively

 

 

1,389

 

 

 

1,386

 

Class B common stock, par value of $0.01 per share: 500,000 shares authorized;

   15,840 shares issued and outstanding at March 31, 2018 and December 31, 2017

 

 

158

 

 

 

158

 

Additional paid-in capital

 

 

54,474

 

 

 

59,374

 

Retained earnings

 

 

238,096

 

 

 

199,492

 

Total stockholders’ equity

 

 

294,117

 

 

 

260,410

 

Noncontrolling interests

 

 

237,460

 

 

 

(38,092

)

Total equity

 

 

531,577

 

 

 

222,318

 

Total liabilities, redeemable partnership interest, and equity

 

$

3,057,150

 

 

$

2,273,007

 


June 30, 2022December 31, 2021
Assets:  
Current assets:  
Cash and cash equivalents$280,468 $191,332 
Restricted cash74,694 75,168 
Marketable securities— 524,569 
Loans held for sale, at fair value849,193 1,072,479 
Receivables, net516,504 569,206 
Receivables from related parties— 8,262 
Other current assets (see Note 19)79,315 83,337 
Total current assets1,800,174 2,524,353 
Goodwill705,199 657,131 
Mortgage servicing rights, net568,680 550,302 
Loans, forgivable loans and other receivables from employees and partners, net478,365 453,345 
Right-of-use assets635,770 606,634 
Fixed assets, net138,121 135,756 
Other intangible assets, net93,169 76,199 
Other assets (see Note 19)195,513 212,481 
Total assets$4,614,991 $5,216,201 
Liabilities, Redeemable Partnership Interests, and Equity:
Current liabilities: 
Warehouse facilities collateralized by U.S. Government Sponsored Enterprises$834,582 $1,050,693 
Accrued compensation385,630 462,533 
Accounts payable, accrued expenses and other liabilities (see Note 29)460,866 528,746 
Repurchase agreements and securities loaned— 140,007 
Payables to related parties11,387 10,762 
Total current liabilities1,692,465 2,192,741 
Long-term debt546,502 545,239 
Right-of-use liabilities612,900 586,069 
Other long-term liabilities (see Note 29)223,904 207,012 
Total liabilities3,075,771 3,531,061 
Commitments and contingencies (see Note 31)00
Redeemable partnership interests18,220 20,947 
Equity:
Class A common stock, par value of $0.01 per share: 1,000,000,000 shares authorized; 198,830,672 and
      194,046,885 shares issued at June 30, 2022 and December 31, 2021, respectively, and 160,002,640
      and 168,272,371 shares outstanding at June 30, 2022 and December 31, 2021, respectively
1,988 1,940 
Class B common stock, par value of $0.01 per share: 500,000,000 shares authorized; 21,285,533 shares issued
      and outstanding at June 30, 2022 and December 31, 2021, convertible into Class A common stock
212 212 
Additional paid-in capital523,504 487,447 
Retained earnings1,121,147 1,079,661 
Contingent Class A common stock1,572 1,572 
Treasury stock at cost: 38,828,032 and 25,774,514 shares of Class A common stock at June 30, 2022 and December 31, 2021, respectively(440,444)(290,174)
 Accumulated other comprehensive loss(9,116)(2,731)
Total stockholders’ equity1,198,863 1,277,927 
Noncontrolling interests322,137 386,266 
Total equity1,521,000 1,664,193 
Total liabilities, redeemable partnership interests, and equity$4,614,991 $5,216,201 

The accompanying Notes to the unaudited Condensed Consolidated Financial Statements are an integral part of these financial statements.


6


NEWMARK GROUP, INC.

(Prior to December 13, 2017 the Combined entities of Newmark Knight Frank)

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

(unaudited)

 

 

Three Months Ended March 31,

 

 

 

2018

 

 

2017

 

Revenues:

 

 

 

 

 

 

 

 

Commissions

 

$

260,735

 

 

$

204,958

 

Gains from mortgage banking activities/originations, net

 

 

38,914

 

 

 

45,262

 

Management services, servicing fees and other

 

 

130,811

 

 

 

82,362

 

Total revenues

 

 

430,460

 

 

 

332,582

 

Expenses:

 

 

 

 

 

 

 

 

Compensation and employee benefits

 

 

252,695

 

 

 

215,145

 

Allocations of net income and grant of exchangeability to limited partnership units

 

 

25,809

 

 

 

10,649

 

Total compensation and employee benefits

 

 

278,504

 

 

 

225,794

 

Operating, administrative and other

 

 

75,427

 

 

 

47,382

 

Fees to related parties

 

 

6,894

 

 

 

4,718

 

Depreciation and amortization

 

 

22,513

 

 

 

18,237

 

Total operating expenses

 

 

383,338

 

 

 

296,131

 

Other income (losses), net:

 

 

 

 

 

 

 

 

Other income (loss)

 

 

5,707

 

 

 

(593

)

Total other income (losses), net

 

 

5,707

 

 

 

(593

)

Income from operations

 

 

52,829

 

 

 

35,858

 

Interest (expense) income, net

 

 

(13,409

)

 

 

1,134

 

Income before income taxes and noncontrolling interests

 

 

39,420

 

 

 

36,992

 

Provision (benefit) for income taxes

 

 

6,933

 

 

 

(15

)

Consolidated net income

 

 

32,487

 

 

 

37,007

 

Less: Net income attributable to noncontrolling interests

 

 

12,490

 

 

 

296

 

Net income available to common stockholders

 

$

19,997

 

 

$

36,711

 

Per share data:

 

 

 

 

 

 

 

 

Basic earnings per share

 

 

 

 

 

 

 

 

Net income available to common stockholders

 

$

19,997

 

 

$

36,711

 

Basic earnings per share

 

$

0.13

 

 

N/A

 

Basic weighted-average shares of common stock outstanding

 

 

155,694

 

 

N/A

 

Fully diluted earnings per share

 

 

 

 

 

 

 

 

Net income available to common stockholders

 

$

30,286

 

 

N/A

 

Fully diluted earnings (loss) per share

 

$

0.12

 

 

N/A

 

Fully diluted weighted-average shares of common stock outstanding

 

 

246,834

 

 

N/A

 

Dividends declared per share of common stock

 

$

0.09

 

 

N/A

 

Dividends declared and paid per share of common stock

 

$

—

 

 

N/A

 


 Three Months Ended June 30,Six Months Ended June 30,
 2022202120222021
Revenues:
Management services, servicing fees and other$233,685 $219,509 $466,804 $407,259 
Leasing and other commissions212,825 184,346 411,778 331,779 
Investment sales209,053 142,233 361,167 243,778 
Commercial mortgage origination, net99,788 83,783 193,850 151,035 
Total revenues755,351 629,871 1,433,599 1,133,851 
Expenses:
Compensation and employee benefits426,617 541,397 809,201 830,471 
Equity-based compensation and allocations of net income to limited partnership units and FPUs41,988 267,532 58,886 281,780 
Total compensation and employee benefits468,605 808,929 868,087 1,112,251 
Operating, administrative and other136,629 135,008 274,500 242,183 
Fees to related parties6,748 5,782 13,577 12,032 
Depreciation and amortization38,925 30,868 74,400 51,921 
Total operating expenses650,907 980,587 1,230,564 1,418,387 
Other (loss) income, net(15,303)1,086,812 (101,304)1,084,602 
Income from operations89,141 736,096 101,731 800,066 
Interest expense, net(8,923)(8,723)(16,793)(17,536)
Income before income taxes and noncontrolling interests80,218 727,373 84,938 782,530 
Provision for income taxes18,426 142,182 22,430 152,761 
Consolidated net income61,792 585,191 62,508 629,769 
Less: Net income attributable to noncontrolling interests13,273 145,447 13,627 156,920 
Net income available to common stockholders$48,519 $439,744 $48,881 $472,849 
Per share data:
Basic earnings per share
Net income available to common stockholders (1)
$48,519 $435,178 $48,881 $466,642 
Basic earnings per share$0.26 $2.35 $0.26 $2.53 
Basic weighted-average shares of common stock outstanding183,948 185,114 186,401 184,190 
Fully diluted earnings per share
Net income for fully diluted shares$63,379 $583,745 $63,448 $626,472 
Fully diluted earnings per share$0.26 $2.13 $0.25 $2.30 
Fully diluted weighted-average shares of common stock outstanding247,985 273,555 250,458 272,303 

(1)Includes a reduction for dividends on preferred stock or EPUs in the amount of $4.6 million and $6.2 million for the three and six months ended June 30, 2021, respectively. (see Note 1 — “Organization and Basis of Presentation”).
The accompanying Notes to the unaudited Condensed Consolidated Financial Statements are an integral part of these financial statements.


7


NEWMARK GROUP, INC.

(Prior to December 13, 2017 the Combined entities of Newmark Knight Frank)

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands)

(unaudited)

 

 

Three Months Ended March 31,

 

 

 

2018

 

 

2017

 

Consolidated net income

 

$

32,487

 

 

$

37,007

 

Comprehensive income, net of tax

 

 

32,487

 

 

 

37,007

 

Less: Comprehensive income attributable to noncontrolling interests, net of tax

 

 

12,490

 

 

 

296

 

Comprehensive income available to common stockholders

 

$

19,997

 

 

$

36,711

 


 Three Months Ended June 30,Six Months Ended June 30,
 2022202120222021
Consolidated net income$61,792 $585,191 $62,508 $629,769 
Foreign currency translation adjustments(7,279)420 (7,591)(205)
Comprehensive income, net of tax54,513 585,611 54,917 629,564 
Less: Comprehensive income attributable to noncontrolling interests, net of tax13,273 145,447 13,627 156,920 
Comprehensive income available to common stockholders$41,240 $440,164 $41,290 $472,644 

The accompanying Notes to the unaudited Condensed Consolidated Financial Statements are an integral part of these financial statements.



8

NEWMARK GROUP, INC.

(Prior to December 13, 2017 the Combined entities of Newmark Knight Frank)

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(In thousands, except share and per share amounts)

(unaudited)

 

 

Class A

Common

Stock

 

 

Class B

Common

Stock

 

 

Additional

Paid-in

Capital

 

 

Retained

Earnings

 

 

BGC’s Net

Investment in

Newmark

 

 

Noncontrolling

Interests in

Subsidiaries

 

 

Total

 

Balance, January 1, 2017

 

$

—

 

 

$

—

 

 

$

—

 

 

$

245,877

 

 

$

735,899

 

 

$

2,007

 

 

$

983,783

 

Consolidated net income (loss)

 

 

—

 

 

 

—

 

 

 

—

 

 

 

144,492

 

 

 

—

 

 

 

604

 

 

 

145,096

 

Distributions

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(190,877

)

 

 

—

 

 

 

(71

)

 

 

(190,948

)

Purchase of noncontrolling

   interests

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

1,092

 

 

 

(1,092

)

 

 

—

 

Noncontrolling interests in an entity acquired

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

19,146

 

 

 

19,146

 

Debt assumed from BGC

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(1,387,500

)

 

 

—

 

 

 

(1,387,500

)

Contributions

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

368,418

 

 

 

—

 

 

 

368,418

 

Transfer of pre initial public offering (“IPO”)

   capital to redeemable partnership interests

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(21,096

)

 

 

—

 

 

 

(21,096

)

Issuance of shares in the Separation (Class A

   common stock, 115,593,787 shares); (Class B

   common stock, 15,840,049 shares)

 

 

1,156

 

 

 

158

 

 

 

(245,815

)

 

 

—

 

 

 

303,187

 

 

 

(58,686

)

 

 

—

 

Proceeds from IPO, net of underwriting

   discounts and other expenses (Class A

   common stock, 23,000,000 shares)

 

 

230

 

 

 

—

 

 

 

295,189

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

295,419

 

Equity-based compensation (Class A common

   stock, 600,000 shares)

 

 

—

 

 

 

—

 

 

 

10,000

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

10,000

 

Balance, December 31, 2017

 

$

1,386

 

 

$

158

 

 

$

59,374

 

 

$

199,492

 

 

$

—

 

 

$

(38,092

)

 

$

222,318

 

Consolidated net income

 

 

—

 

 

 

—

 

 

 

—

 

 

 

19,997

 

 

 

—

 

 

 

12,490

 

 

 

32,487

 

Cumulative effect of revenue standard adoption

 

 

—

 

 

 

—

 

 

 

—

 

 

 

16,463

 

 

 

—

 

 

 

2,342

 

 

 

18,805

 

Reduction of earnings distributions

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2,144

 

 

 

—

 

 

 

—

 

 

 

2,144

 

Distributions

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(100

)

 

 

(100

)

Equity-based compensation and related issuance

   of (Class A common stock, 327,746 shares)

 

 

3

 

 

 

—

 

 

 

(4,900

)

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(4,897

)

BGC's purchase of 16,600,000

   exchangeable limited partnership units

   in Newmark Holdings

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

241,960

 

 

 

241,960

 

Grant of exchangeability and redemption of

   limited partnership interests

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

19,869

 

 

 

19,869

 

Allocation of net income to redeemable

   partnership interests

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

(1,009

)

 

 

(1,009

)

Balance, March 31, 2018

 

$

1,389

 

 

$

158

 

 

$

54,474

 

 

$

238,096

 

 

$

—

 

 

$

237,460

 

 

$

531,577

 

 Class A
Common
Stock		Class B
Common
Stock		Additional
Paid-in
Capital		Contingent
Class A
Common Stock		Treasury
Stock		Retained
Earnings		Accumulated
Other
Comprehensive
Income (Loss)		Noncontrolling
Interests		Total
Balance, April 1, 2022$1,960 $212 $497,489 $1,572 $(316,708)$1,078,130 $(2,975)$358,182 $1,617,862 
Consolidated net income— — — — — 48,519 — 13,273 61,792 
Foreign currency translation adjustments— — — — — — (6,141)(1,138)(7,279)
Cantor purchase of Cantor units from Newmark Holdings
   upon redemption/ exchange of FPU's, 208,276 units
— — — — — — — 863 863 
Dividends to common stockholders— — — — — (5,502)— — (5,502)
Earnings distributions to limited partnership interests
   and other noncontrolling interests		— — — — — — — (33,861)(33,861)
Grant of exchangeability, redemption and issuance of
   Class A common stock, 2,715,924 shares
28 — 22,785 — — — — 5,543 28,356 
Contributions of capital to and from Cantor for
   equity-based compensation		— — 2,675 — — — — 479 3,154 
Repurchase of 11,370,647 shares of Class A Common Stock— — — — (123,736)— — (21,299)(145,035)
Restricted stock units compensation— — 555 — — — — 95 650 
Balance, June 30, 2022$1,988 $212 $523,504 $1,572 $(440,444)$1,121,147 $(9,116)$322,137 $1,521,000 

 Class A
Common
Stock		Class B
Common
Stock		Additional
Paid-in
Capital		Contingent
Class A
Common Stock		Treasury
Stock		Retained
Earnings		Accumulated
Other
Comprehensive
Income (Loss)		Noncontrolling
Interests		Total
Balance, January 1, 2022$1,940 $212 $487,447 $1,572 $(290,174)$1,079,661 $(2,731)$386,266 $1,664,193 
Consolidated net income— — — — — 48,881 — 13,627 62,508 
Foreign currency translation adjustments— — — — — — (6,385)(1,206)(7,591)
Cantor purchase of Cantor units from Newmark Holdings
   upon redemption/ exchange of FPU's, 208,276 units
— — — — — — — 863 863 
Dividends to common stockholders— — — — — (7,395)— — (7,395)
Earnings distributions to limited partnership interests
   and other noncontrolling interests		— — — — — — — (59,906)(59,906)
Grant of exchangeability, redemption and issuance of
   Class A common stock, 4,783,787 shares
48 — 30,994 — — — — 7,259 38,301 
Contributions of capital to and from Cantor for
   equity-based compensation		— — 1,089 — — — — 235 1,324 
Repurchase of 13,053,518 shares of Class A Common Stock— — — — (150,270)— — (25,658)(175,928)
Restricted stock units compensation— — 3,974 — — — — 657 4,631 
Balance, June 30, 2022$1,988 $212 $523,504 $1,572 $(440,444)$1,121,147 $(9,116)$322,137 $1,521,000 




9

NEWMARK GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (CONTINUED)
(In thousands, except share and per share amounts)
(unaudited)
 Class A
Common
Stock		Class B
Common
Stock		Additional
Paid-in
Capital		Contingent
Class A
Common Stock		Treasury
Stock		Retained
Earnings		Accumulated
Other
Comprehensive
Income (Loss)		Noncontrolling
Interests		Total
Balance, April 1, 2021$1,695 $212 $364,213 $1,572 $(48,221)$372,387 $(2,612)$281,427 $970,673 
Consolidated net income— — — — — 439,744 — 145,447 585,191 
Foreign currency translation adjustments— — — — — — 420 — 420 
Dividends to common stockholders— — �� — — (1,852)— — (1,852)
Preferred dividend on EPUs— — — — — (4,559)— 4,559 — 
Earnings distributions to limited partnership interests
   and other noncontrolling interests		— — — — — — — 7,238 7,238 
Grant of exchangeability, redemption and issuance of
   Class A common stock, 20,235,634 shares
77 — 119,275 — — — — 71,895 191,247 
Contributions of capital to and from Cantor for equity-based compensation— — 18,742 — — — — 8,429 27,171 
Repurchase of 3,613,098 shares of Class A Common Stock— — — — (39,719)— — (6,200)(45,919)
Restricted stock units compensation— — 3,847 — — — — 600 4,447 
Redemption of EPU's— — — — — — — (167,396)(167,396)
Balance, June 30, 2021$1,772 $212 $506,077 $1,572 $(87,940)$805,720 $(2,192)$345,999 $1,571,220 
 Class A
Common
Stock		Class B
Common
Stock		Additional
Paid-in
Capital		Contingent
Class A
Common Stock		Treasury
Stock		Retained
Earnings		Accumulated
Other
Comprehensive
Income (Loss)		Noncontrolling
Interests		Total
Balance, January 1, 2021$1,676 $212 $351,450 $1,572 $(40,531)$342,764 $(2,094)$266,098 $921,147 
Consolidated net income— — — — — 472,849 — 156,920 629,769 
Foreign currency translation adjustments— — — — — — (98)(107)(205)
Cantor purchase of Cantor units from Newmark upon redemption of FPU's, 1,008,731 units— — — — — — — 4,025 4,025 
Dividends to common stockholders— — — — — (3,693)— — (3,693)
Preferred dividend on EPUs— — — — — (6,200)— 6,200 — 
Earnings distributions to limited partnership interests
   and other noncontrolling interests		— — — — — — — 3,225 3,225 
Grant of exchangeability, redemption and issuance of
   Class A common stock, 2,827,773,905 shares
96 — 130,743 — — — — 74,978 205,817 
Contributions of capital to and from Cantor for equity-based compensation— — 17,980 — — — — 8,310 26,290 
Repurchase of 4,492,341 shares of Class A Common Stock— — — — (47,409)— — (7,793)(55,202)
Restricted stock units compensation— — 5,904 — — — — 1,539 7,443 
Redemption of EPU's— — — — — — — (167,396)(167,396)
Balance, June 30, 2021$1,772 $212 $506,077 $1,572 $(87,940)$805,720 $(2,192)$345,999 $1,571,220 

 Three Months Ended June 30,Six Months Ended June 30,
 2022202120222021
Dividends declared per share of common stock$0.03 $0.01 $0.06 $0.02 
Dividends declared and paid per share of common stock$0.03 $0.01 $0.04 $0.02 
The accompanying Notes to the unaudited Condensed Consolidated Financial Statements are an integral part of these financial statements.


10


NEWMARK GROUP INC.

(Prior to December 13, 2017 the Combined entities of Newmark Knight Frank)

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(unaudited)

 

 

Three Months Ended March 31,

 

 

 

2018

 

 

2017

 

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

 

 

 

 

 

Consolidated net income

 

$

32,487

 

 

$

37,007

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

 

 

 

Gain on originated mortgage servicing rights

 

 

(6,389

)

 

 

(28,806

)

Depreciation and amortization

 

 

22,513

 

 

 

18,237

 

Equity-based compensation and allocations of net income to limited partnership units

 

 

25,809

 

 

 

—

 

Employee loan amortization and impairment

 

 

6,009

 

 

 

1,974

 

Change in fair value of contingent consideration

 

 

134

 

 

 

—

 

Unrealized gains on loans held for sale

 

 

(15,126

)

 

 

(2,102

)

Income from an equity method investment

 

 

(3,176

)

 

 

—

 

Amortization of deferred financing costs

 

 

255

 

 

 

259

 

Provision for uncollectible accounts

 

 

1,140

 

 

 

(211

)

Realized gain on marketable securities

 

 

(2,400

)

 

 

—

 

Unrealized gain on marketable securities

 

 

(796

)

 

 

—

 

Loan originations—loans held for sale

 

 

(1,410,690

)

 

 

(1,842,357

)

Loan sales—loans held for sale

 

 

822,811

 

 

 

2,139,634

 

Consolidated net income, adjusted for non-cash and non-operating items

 

 

(527,419

)

 

 

323,635

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Receivables, net

 

 

(19,374

)

 

 

4,340

 

Loans, forgivable loans and other receivables from employees and partners

 

 

(24,583

)

 

 

(6,226

)

Other assets

 

 

(14,063

)

 

 

10,498

 

Accrued compensation

 

 

(35,069

)

 

 

(33,599

)

Accounts payable, accrued expenses and other liabilities

 

 

30,114

 

 

 

(2,237

)

Net cash provided by (used in) operating activities

 

 

(590,394

)

 

 

296,411

 

CASH FLOWS FROM INVESTING ACTIVITIES:

 

 

 

 

 

 

 

 

Cash acquired, net of purchases of noncontrolling interest

 

 

—

 

 

 

(997

)

Proceeds from the sale of marketable securities

 

 

52,196

 

 

 

—

 

Investment in cost method investments

 

 

(7,500

)

 

 

—

 

Purchases of fixed assets

 

 

(1,714

)

 

 

(3,053

)

Purchase of mortgage servicing rights

 

 

(509

)

 

 

—

 

Net cash provided (used in) by investing activities

 

 

42,473

 

 

 

(4,050

)

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

 

 

 

 

 

 

Proceeds from warehouse notes payable

 

 

1,410,690

 

 

 

1,842,357

 

Principal payments on warehouse notes payable

 

 

(820,651

)

 

 

(1,879,963

)

Proceeds from BGC's purchase of exchangeability limited partnership units in Newmark

   Holdings

 

 

241,960

 

 

 

—

 

Payments to related parties

 

 

(13,000

)

 

 

(578,263

)

Borrowings from related parties

 

 

177,016

 

 

 

354,493

 

Repayment of long-term debt

 

 

(270,710

)

 

 

—

 

Payments for IPO offering costs

 

 

(8,870

)

 

 

—

 

Secured loans

 

 

(49,001

)

 

 

—

 

Distributions to noncontrolling interests

 

 

(100

)

 

 

(71

)

Payments on acquisition earn-outs

 

 

(758

)

 

 

(10,513

)

Payment of deferred financing costs

 

 

(16

)

 

 

(9

)

Net cash provided (used in) by financing activities

 

 

666,560

 

 

 

(271,969

)

Net increase (decrease) in cash and cash equivalents

 

 

118,639

 

 

 

20,392

 

Cash and cash equivalents and restricted cash at beginning of period

 

 

173,374

 

 

 

117,554

 

Cash and cash equivalents and restricted cash at end of period

 

$

292,013

 

 

$

137,946

 

Supplemental disclosures of cash flow information:

 

 

 

 

 

 

 

 

Cash paid during the period for:

 

 

 

 

 

 

 

 

Interest

 

$

12,922

 

 

$

2,969

 

Taxes

 

$

19

 

 

$

18

 



 Six Months Ended June 30,
 20222021
CASH FLOWS FROM OPERATING ACTIVITIES:  
Consolidated net income$62,508 $629,769 
Adjustments to reconcile net income to net cash (used in) provided by operating activities:
Gain on originated mortgage servicing rights(71,626)(70,574)
Depreciation and amortization74,400 51,921 
Nasdaq earn-out recognition— (1,108,012)
Provision/(reversals) for/of credit losses on the financial guarantee liability(89)(6,349)
Provision for doubtful accounts4,631 4,064 
Equity-based compensation and allocation of net income to limited partnership units and FPUs58,886 296,073 
Employee loan amortization39,565 36,777 
Deferred tax (benefit) provision(94)1,084 
Non-cash changes in acquisition related earn-outs— 752 
Unrealized (gains) on loans held for sale(11,827)(5,821)
Realized loss (gain) on marketable securities7,470 (4,643)
Unrealized loss (gain) on marketable securities80,130 16,640 
Unrealized loss (gains) on non-marketable investments13,945 (2,531)
Change in valuation of derivative asset1,400 12,404 
Loan originations—loans held for sale(3,811,260)(3,283,534)
Loan sales—loans held for sale4,046,373 3,960,169 
Other1,297 1,775 
Consolidated net income, adjusted for non-cash and non-operating items495,709 529,964 
Changes in operating assets and liabilities:
Receivables, net50,056 (31,230)
Loans, forgivable loans and other receivables from employees and partners(64,586)(33,697)
Right of use asset(24,830)20,638 
Receivable from related parties8,262 — 
Other assets12,711 82,935 
Accrued compensation(97,142)118,936 
Right of use liability27,800 (21,160)
Accounts payable, accrued expenses and other liabilities(65,294)123,425 
Payables to related parties(3,652)(4,669)
Net cash provided by operating activities339,034 785,142 
CASH FLOWS FROM INVESTING ACTIVITIES:
Payments for acquisitions, net of cash acquired(64,247)(43,529)
Proceeds from the sale of marketable securities437,820 35,412 
Purchase of non-marketable investments(2,723)— 
Purchases of fixed assets(17,529)(6,103)
Net cash provided by investing activities353,321 (14,220)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from warehouse facilities3,811,260 3,283,534 
Principal payments on warehouse facilities(4,027,371)(3,934,565)
Proceeds from the sale of limited partnership interests— 4,025 
Borrowing of debt— 55,000 
Repayment of debt— (55,000)
Repurchase agreements and securities loaned(140,007)(33,278)
Redemption and repurchase of limited partnership interests— (2,321)
Treasury stock repurchases(175,928)(55,202)
Earnings and tax distributions to limited partnership interests and other noncontrolling interests(58,712)(11,374)
Dividends to stockholders(7,395)(3,693)
Payments on acquisition earn-outs(2,131)(38,350)
Deferred financing costs(3,409)(450)
Net cash used in financing activities(603,693)(791,674)
Net increase in cash and cash equivalents and restricted cash88,662 (20,752)
Cash and cash equivalents and restricted cash at beginning of period266,500 258,399 
Cash and cash equivalents and restricted cash at end of period$355,162 $237,647 

NEWMARK GROUP INC.

(Prior to December 13, 2017 the Combined entities of Newmark Knight Frank)

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS – (Continued)

(In thousands)

(unaudited)

The following presents our cash, cash equivalents and restricted cash by category within the unaudited Condensed Consolidated Balance Sheets:

 

 

March 31, 2018

 

 

December 31, 2017

 

Cash and cash equivalents

 

$

48,069

 

 

$

121,027

 

Restricted cash

 

 

243,944

 

 

 

52,347

 

Total cash and cash equivalents and restricted cash

 

$

292,013

 

 

$

173,374

 

11


 Six Months Ended June 30,
Supplemental disclosures of cash flow information:20222021
Supplemental disclosures of cash flow information:
Cash paid during the period for:  
Interest$20,308 $18,670 
Taxes$68,488 $23,444 
Supplemental disclosure of non-cash operating, investing and financing activities:
Right-of-use assets and liabilities$82,019 $252,163 

The accompanying Notes to the unaudited Condensed Consolidated Financial Statements are an integral part of these financial statements.



12

NEWMARK GROUP, INC.

(Prior

Notes to December 13, 2017 the Combined entities of Newmark Knight Frank)

Notes to Condensed Consolidated Financial Statements

(unaudited)

(1)

Organization and Basis of Presentation


(1)    Organization and Basis of Presentation

Newmark Group, Inc., formerly known as Newmark Knight Frank (together with its subsidiaries, “Newmark” or the “Company”), a Delaware corporation, was formed as NRE Delaware, Inc. on November 18, 2016. Newmark changed its name to Newmark Group, Inc. on October 18, 2017. Newmark Holdings, L.P. (“Newmark Holdings”) is a consolidated subsidiary of Newmark for which Newmark is the general partner. Newmark and Newmark Holdings jointly own Newmark Partners, L.P. (“Newmark OpCo”), the operating partnership. Newmark is a leading commercial real estate services firm. Newmark offers a diverse array of integrated services and products designed to meet the full needs of both real estate investors/owners and occupiers. Newmark’s investor/owner services and products include capital markets, which consists of investment sales, debt and structured finance and loan sales, agency leasing, property management, valuation and advisory, commercial real estate tenants, owner-occupiers, investorsdue diligence consulting and developers a wide range ofadvisory services including leasing and corporate advisory, investment salesGovernment Sponsored Enterprise (“GSE”) lending and loan servicing, mortgage brokerage and equity-raising. Newmark’s occupier services and products include tenant representation, real estate finance, origination ofmanagement technology systems, workplace and servicing of commercial mortgage loans, valuation,occupancy strategy, global corporate consulting services, project management, lease administration and development managementfacilities management. Newmark's global flexible workspace platform, which operates under the names Knotel and propertyDeskeo, is a product that is offered to owners and facility management.

investors. Newmark was formedenhances these services and products through BGC Partners, Inc.’s (“BGC Partners” or “BGC”) purchase ofinnovative real estate technology solutions and data analytics that enable clients to increase their efficiency and profits by optimizing their real estate portfolio. Newmark & Company Real Estate, Inc. and certain of its affiliates in 2011. A majorityhas relationships with many of the voting power of BGC Partners is held by Cantor Fitzgerald, L.P. and its affiliates (together, “Cantor”) including Cantor Fitzgerald & Co. which we refer to as “CF&Co.”

On September 8, 2017, BGC acquired, from Cantor Commercial Real Estate Company, LP (“CCRE”), 100% of the equity of Berkeley Point Financial LLC (“Berkeley Point Acquisition”). Berkeley Point Financial LLC (“Berkeley Point” or “BPF”) is a leadingworld’s largest commercial property owners, real estate finance company focused on the originationdevelopers and sale of multifamily and other commercial real estate loans through government-sponsored and government-funded loan programs,investors, as well as Fortune 500 and Forbes Global 2000 companies.


Nasdaq Monetization Transactions
On June 28, 2013, BGC Partners, Inc. ("BGC") had sold certain assets of its on-the-run, electronic benchmark U.S. Treasury platform (“eSpeed”) to Nasdaq, Inc. ("Nasdaq"). The total consideration received in the servicingtransaction included $750.0 million in cash paid upon closing and an earn-out of commercial real estate loans. At the closing of the Berkeley Point Acquisition, BGC purchased and acquired from CCRE all of the outstanding membership interests of BPF, a wholly owned subsidiary of CCRE, for an acquisition price of $875.0 million, subjectup to a post-closing upward or downward adjustment to the extent that the net assets, inclusive of certain fair value adjustments, of BPF as of the closing were greater than or less than $508.6 million. BGC paid $3.2 million of the $875.0 million acquisition price with 247,099 limited partnership units of BGC Holdings, L.P. (“BGC Holdings”), which may be exchanged over time for14,883,705 shares of Class A common stock of BGC, with each BGC Holdings unit valued for these purposesNasdaq shares to be paid ratably over 15 years, provided that Nasdaq, as a whole, produces at the volume weighted-average price of a share of BGC Class A common stock for the three trading days prior to the closing. The Berkeley Point Acquisition did not include the Special Asset Servicing Group of BPF; however, BPF will continue to hold the Special Asset Servicing Group’s assets until the servicing group is transferred to CCRE at a later date in a separate transaction. Accordingly, CCRE will continue to bear the benefits and burdens of the Special Asset Servicing Group from and after the closing.

Concurrently with the Berkeley Point Acquisition, on September 8, 2017 Newmark invested $100least $25.0 million in a newly formed commercial real estate-related financial and investment business, CF Real Estate Finance Holdings, L.P. (“Real Estate LP”consolidated gross revenues each year (the “Nasdaq Earn-out”), which is controlled and managed by Cantor. Real Estate LP may conduct activities in any real estate related business or asset backed securities-related business or any extensions thereof and ancillary activities thereto. In addition, Real Estate LP may provide short-term loans to related parties from time to time when funds in excess of amounts needed for investment are available. As of March 31, 2018, Newmark’s investment in Real Estate LP is accounted for. The remaining rights under the equity method.

On December 13, 2017, prior to the closing of Newmark’s initial public offering (“IPO”), BGC, BGC Holdings, BGC Partners, L.P. (“BGC U.S. OpCo”), Newmark, Newmark Holdings, Newmark OpCo and, solely for the provisions listed therein, Cantor and BGC Global Holdings, L.P. (“BGC Global OpCo”) entered into a Separation and Distribution Agreement (the “Separation and Distribution Agreement”). The Separation and Distribution Agreement sets forth the agreements among BGC, Cantor, Newmark and their respective subsidiaries regarding, among other things:

the principal corporate transactions pursuant to which BGC, BGC Holdings and BGC U.S. OpCo and their respective subsidiaries (other than the Newmark Group (defined below), the “BGC Group”)Nasdaq Earn-out were transferred to Newmark on September 28, 2017. From September of 2017 through March 31, 2022, Newmark Holdings and Newmark OpCo and their respective subsidiaries (the “Newmark Group”) the assets and liabilities of the BGC Group relating to BGC’s Real Estate Services business, including BGC’s interests in both BPF and Real Estate LP (the “Separation”);

the proportional distribution of interests in Newmark Holdings to holders of interests in BGC Holdings;

the IPO;

the assumption and repayment of indebtedness by the BGC Group and the Newmark Group, as further described below; and


��

•

the pro rata distribution of the shares of Newmark Class A common stock and the shares of Newmark Class B common stock held by BGC, pursuant to which shares of Newmark Class A common stock held by BGC would be distributed to the holders of shares of BGC Class A common stock and shares of Newmark Class B common stock held by BGC would be distributed to the holders of shares of BGC Class B common stock (which are currently Cantor and another entity controlled by Howard W. Lutnick), which distribution is intended to qualify as generally tax-free for U.S. federal income tax purposes; provided that the determination of whether, when and how to proceed with the distribution shall be entirely within the discretion of BGC (the “Newmark Distribution” or “spin-off”).

On December 15, 2017, Newmark announced the pricing of the IPO of 20received 10.2 million shares of Newmark’s Class A common stock at a priceNasdaq. Over this period, Newmark sold 7.6 million shares of Nasdaq and delivered 2.6 million shares of Nasdaq to RBC, and recognized $1,474.2 million of realized gains and dividend income. Newmark did not hold any Nasdaq shares as of June 30, 2022. See below for further discussion and Note 7 — “Marketable Securities” for additional information.


Exchangeable Preferred Partnership Units and Nasdaq Forward Contracts
On June 18, 2018 and September 26, 2018, Newmark OpCo issued approximately 175.0 million and 150.0 million of exchangeable preferred partnership units (“EPUs”), respectively, in private transactions to the publicRoyal Bank of $14.00 per share, which was completed on December 19, 2017.Canada (“RBC”) (the “Newmark OpCo Preferred Investment”). Newmark Class A shares began trading on December 15, 2017 on the NASDAQ Global Select Market under the symbol “NMRK.” In addition,received $266.1 million of cash in 2018 with respect to these transactions. The EPUs were issued in 4 tranches and are separately convertible by either RBC or Newmark granted the underwritersinto a 30-day option to purchase up to an additional 3 millionfixed number of shares of Newmark Class A common stock, atsubject to a revenue hurdle in each of the IPO price, less underwriting discountsfourth quarters of 2019 through 2022 for each of the respective 4 tranches. The ability to convert the EPUs into Newmark Class A common stock is subject to the special purpose vehicle's (the “SPVs”) option to settle the postpaid forward contracts as described below. As the EPUs represent equity ownership of a consolidated subsidiary of Newmark, they have been included in “Noncontrolling interests” on the accompanying unaudited condensed consolidated balance sheets and commissions.unaudited condensed consolidated statements of changes in equity. The EPUs are entitled to a preferred payable-in-kind dividend, which is recorded as accretion to the carrying amount of the EPUs through Retained earnings on the accompanying unaudited condensed consolidated statements of changes in equity and are reductions to “Net income (loss) available to common stockholders” for the purpose of calculating earnings per share.

Contemporaneously with the issuance of the EPUs, an SPV that is a consolidated subsidiary of Newmark entered into variable postpaid forward contracts with RBC (together, the “Nasdaq Forwards”). The SPV is an indirect subsidiary of Newmark whose sole assets are the Nasdaq Earn-outs for 2019 through 2022. The Nasdaq Forwards provide the SPV the option to settle using up to 992,247 Nasdaq shares, to be received by the SPV pursuant to the Nasdaq Earn-out shares to be received (see Note 7 — “Marketable Securities”), or Newmark Class A common stock, in exchange for either cash or redemption of the EPUs, notice of which must be provided to RBC prior to November 1 of each year from 2019 through 2022.

In September 2020, the SPV notified RBC of its decision to settle the second Nasdaq Forward using the Nasdaq shares the SPV received in November 2020 in exchange for the second tranche of the EPUs, which resulted in a payable to RBC that was settled upon receipt of Nasdaq Earn-out shares. The fair value of the Nasdaq common shares that Newmark received was
13

$121.9 million. On November 30, 2020, Newmark settled the second Nasdaq Forward 741,505 Nasdaq shares, with a fair value of $93.5 million and Newmark retained 250,742 Nasdaq shares.
In September 2019, the SPV notified RBC of its decision to settle the first Nasdaq Forward using the Nasdaq shares the SPV received in November 2019 in exchange for the first tranche of the EPUs, which resulted in a payable to RBC that was settled upon receipt of Nasdaq Earn-out shares. The fair value of the Nasdaq shares that Newmark received was $98.6 million. On December 26, 2017,2, 2019, Newmark settled the underwritersfirst Nasdaq forward contract with 898,685 Nasdaq shares, with a fair value of $93.5 million and Newmark retained 93,562 Nasdaq shares.

Acceleration of Nasdaq Earn-out
On February 2, 2021, Nasdaq announced that it entered into a definitive agreement to sell its U.S. fixed income business to Tradeweb. On June 25, 2021, Nasdaq announced the close of the IPO exercisedsale of its U.S. fixed income business, which accelerated Newmark’s receipt of Nasdaq shares. Newmark received 6,222,340 Nasdaq shares, with a fair value of $1,093.9 million based on the closing price on June 30, 2021 included in full“Other (loss) income, net” for the three months ended June 30, 2021. Newmark has no remaining Nasdaq shares as of June 30, 2022.

On June 25, 2021, the SPV notified RBC of its decision to settle the third and fourth Nasdaq Forwards using the Nasdaq shares the SPV received on June 25, 2021. On July 2, 2021, Newmark settled the third and the fourth Nasdaq Forwards with 944,329 Nasdaq shares, with a fair value of $166.0 million based on the closing price of June 30, 2021. Newmark had no remaining Nasdaq Forward contracts as of June 30, 2022.

2021 Equity Event and Share Count Reduction
In connection with the acceleration of the Nasdaq Earn-out, on June 28, 2021, the Compensation Committee of Newmark’s Board of Directors (the "Compensation Committee") approved a plan to expedite the tax deductible exchange and redemption of a substantial number of limited partnership units held by partners of the Company (the "2021 Equity Event"). The 2021 Equity Event also accelerated certain compensation expenses resulting in $428.6 million of compensation charges. These charges, along with the use of $101.0 million of net deferred tax assets, are expected to offset a significant percentage of the Company's taxes related to the 2021 Equity Event. These partnership units were settled using a $12.50 share price. In July 2021, the Compensation Committee approved increasing to $13.01 the price to settle certain units.

Some of the key components of the 2021 Equity Event are as follows:

•8.3 million and 8.0 million compensatory limited partnership units, respectively, of Newmark Holdings and BGC Holdings, L.P. ("BGC Holdings") held by the Company's partners who are employees were redeemed or exchanged.

•23.2 million and 17.4 million compensatory limited partnership units, respectively, of Newmark Holdings and BGC Holdings held by the Company's partners who are independent contractors were redeemed or exchanged. The Company also accelerated the payment of related withholding taxes to them with respect to their overallotment optionNewmark units. Independent contractors received one BGC Class A common share for each redeemed non-preferred BGC unit or cash and are responsible for paying any related withholding taxes.

•Partners with nonexchangeable non-preferred compensatory units exchanged or redeemed in connection with the 2021 Equity Event generally received restricted Class A common shares of Newmark and/or BGC to purchase an additional 3 millionthe extent tax deductible. A portion of the BGC Class A common shares received by independent contractors were unrestricted to facilitate their payment of withholding taxes.

•The issuance of Newmark Class A common stock from related to the 2021 Equity Event reflected the June 28, 2021 exchange ratio of 0.9403.

•Newmark at the IPO price, less underwriting discountsHoldings and commission (the “option”). As a result, Newmark received aggregate net proceeds of approximately $295.4 million from the IPO, after deducting underwriting discounts and commissions and estimated offering expenses. Upon the closing of the option, Newmark’s public stockholders owned approximately 16.6% of the shares of Newmark Class A common stock. This is based on 138.6 million shares of Newmark Class A common stock outstanding following the closing of the option. Also upon the closing of the option, Newmark’s public stockholders owned approximately 9.8% of Newmark’s 234.2 million fully diluted shares outstanding.

As part of the Separation described above, BGC contributed its interests in both BPF and Real Estate LP to Newmark.

On March 7, 2018, BGC Partners and its operating subsidiaries purchased 16.6 million newly issued exchangeableHoldings limited partnership units (the “Newmark Units”) of Newmark Holdings L.P.interests with rights to convert into HDUs for approximately $242.0 million (the “Investmentcash were also redeemed in Newmark”). These newly-issued Newmark Units are exchangeable, at BGC’s discretion, into either shares of Class A common stock or shares of Class B common stock of Newmark. BGC and its subsidiaries funded the Investment in Newmark using proceeds of its Controlled Equity Offering sales program. See Note 25—Related Party Transactions for additional information.

BGC currently expects to pursue a distribution or spin-off to its common stockholders of all the Class A shares and Class B shares of Newmark common stock that it then owns in a manner intended to qualify as generally tax-free for U.S. federal income tax purposes. The spin-off is subject to a number of conditions, and BGC may determine not to proceed with the spin-off if the BGC board of directors determines, in its sole discretion that the distribution is not in the best interest of BGC and its stockholders. Accordingly, the spin-off may not occur on the expected timeframe, or at all. Key steps that Newmark plans to take toward BGC’s tax-free spin-off of Newmark include: first, Newmark intends to attain its own credit rating; and second, Newmark expects to repay or refinance its $812.5 million of long-term debt owed to or guaranteed by BGC. This is necessary for the spin-off to be tax free.

On November 22, 2017, BGC and Newmark entered into an amendment to an unsecured senior term loan credit agreement, dated as of September 8, 2017, with Bank of America, N.A., as administrative agent and a syndicate of lenders. The agreement provides for a term loan of up to $575.0 million (the “Term Loan”), and as of the Separation this entire amount remained outstanding under the term loan credit agreement. Pursuant to the term loan amendment and effective as of the Separation, Newmark assumed the obligations of BGC as borrower under the Term Loan. Newmark used the proceeds, net of underwriting discounts and commissions from the IPO to partially repay $304.3 million of the Term Loan. During the three months ended March 31, 2018, Newmark repaid the outstanding balance of $270.7 million on the Term Loan. As of March 31, 2018, there were no borrowings outstanding under the Term Loan.

Also on November 22, 2017, BGC and Newmark entered into an amendment to the unsecured senior revolving credit agreement, dated as of September 8, 2017, with the administrative agent and a syndicate of lenders. The revolving credit agreement provides for revolving loans of up to $400.0 million. As of the Separation, $400.0 million of borrowings were outstanding under the revolving credit facility. Pursuant to the revolver amendment, the then-outstanding borrowings of BGC under the revolving credit facility were converted into a term loan (the “Converted Term Loan”) and, effective upon the Separation, Newmark assumed the obligations of BGC as borrower under the Converted Term Loan.

On June 26, 2012, BGC issued an aggregate of $112.5 million principal amount of its 8.125% Senior Notes due 2042 (the “8.125% BGC Senior Notes”). In connection with the issuance of2021 Equity Event.


See Note 27 — "Related Party Transactions" for the 8.125% BGC Senior Notes, BGC lenttransactions with the proceeds of the 8.125% BGC Senior Notes to BGC U.S. OpCo, and BGC U.S. OpCo issued an amended and restated promissory note, effective as of June 26, 2012, with an aggregate principal amount of $112.5 million payable to BGC (the “2042 Promissory Note”). InCompany's executive officers in connection with the Separation, on December 13, 2017 Newmark OpCo assumed all2021 Equity Event.




14

(a)Basis of BGC U.S. OpCo’s rights and obligations under the 2042 Promissory Note.

Presentation


On December 9, 2014, BGC issued an aggregate of $300.0 million principal amount of its 5.375% Senior Notes due 2019 (the “5.375% BGC Senior Notes”). In connection with the issuance of the 5.375% BGC Senior Notes, BGC lent the proceeds of the 5.375% BGC Senior Notes to BGC U.S. OpCo, and BGC U.S. OpCo issued an amended and restated promissory note, effective as of December 9, 2014, with an aggregate principal amount of $300.0 million payable to BGC (the “2019 Promissory Note” and, together with the 2042 Promissory Note, the “BGC Notes”). In connection with the Separation, on December 13, 2017 Newmark OpCo assumed all of BGC U.S. OpCo’s rights and obligations under the 2019 Promissory Note.

On March 19, 2018, Newmark entered into an amended and restated credit agreement (the “Intercompany Credit Agreement”) with BGC, which amended and restated the original intercompany credit agreement between the parties in relation to the Separation, dated as of December 13, 2017.

The Intercompany Credit Agreement provides for each party to issue revolving loans to the other party in the lender’s discretion. The interest rate on the Intercompany Credit Agreement can be the higher of BGC’s or Newmark’s short term borrowings rate in effect at such time plus 100 basis points, or such other interest rate as may be mutually agreed between BGC and Newmark. The interest rate as of March 31, 2018 was 4.99%. As of March 31, 2018, the amount outstanding under the Intercompany Facility was $202.0 million and is included in “Current portion of payables to related parties” on the unaudited condensed consolidated balance sheets Newmark recorded interest expense of $1.0 million for the three months ended March 31, 2018, which is included in “Interest income, net” in the unaudited condensed consolidated statement of operations.

(a)

Basis of Presentation

Newmark’saccompanying unaudited condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (the “SEC”) and in conformity with accounting principles generally accepted in the U.S. (“U.S. GAAP”). TheFor the year ended December 31, 2019, Newmark changed the line item formerly known as “Allocations of net income and grant of exchangeability to limited partnership units and FPUs and issuance of common stock” to “Equity-based compensation and allocations of net income to limited partnership units and FPUs” on the accompanying unaudited condensed consolidated financial statements were prepared on a stand-alone basis derivedof operations and statements of cash flow. The change resulted in the reclassification of amortization charges related to equity-based awards, such as REUs and Restricted Stock Units (“RSUs”), from “Compensation and employee benefits” to “Equity-based compensation and allocations of net income to limited partnership units and FPUs.”


“Equity-based compensation and allocations of net income to limited partnership units and FPUs” reflect the financial statementsfollowing items related to cash and accounting records of BGC. For the periods presented, priorequity-based compensation:
•Charges with respect to the IPO, Newmark was an unincorporated reportable segmentgrant of BGC. These unaudited condensed consolidated financial statements reflect the historical resultsshares of operations, financial position and cash flows of Newmarkcommon stock or limited partnership units, such as it was historically managed and adjusted to conform with U.S. GAAP. These unaudited condensed consolidated financial statements are presented as if Newmark had operated on a stand-alone basis for all periods presented. Newmark’s unaudited condensed consolidated financial statements include all of the BGC subsidiaries that comprise its real estate segment, all of which are controlled by BGC.

This Berkeley Point Acquisition has been determined to be a combination of entities under common control that resulted in a change in the reporting entity. Accordingly, the financial results of Newmark have been retrospectively adjusted to include the financial results of BPF in the current and prior periods as if BPF had always been consolidated. On December 13, 2017,HDUs, including in connection with the Separation,redemption of non-exchangeable limited partnership units, including PSUs;

•Charges with respect to grants of exchangeability, such as the assets and liabilitiesright of BPF were transferredholders of limited partnership units with no capital accounts, such as PSUs, to Newmark.

The following tables summarizeexchange the impactunits into shares of common stock, or HDUs, as well as the cash paid in the settlement of the Berkeley Point Acquisitionrelated exchangeable preferred units to Newmark’s consolidated statementspay withholding taxes owed by the unit holder upon such exchange;

•Preferred units are granted in connection with the grant of operations forcertain limited partnership units, such as PSUs, that may be granted exchangeability to cover the three months ended March 31, 2017:

withholding taxes owed by the unit holder, rather than issuing the gross amount of shares to employees, subject to cashless withholding of shares to pay applicable withholding taxes;

 

 

Three Months Ended March 31, 2017

 

 

 

As Previously Reported

 

 

Retrospective Adjustments

 

 

As Retrospectively Adjusted

 

Income before income taxes and noncontrolling interests

 

$

7,946

 

 

 

29,046

 

 

$

36,992

 

Net income

 

 

7,980

 

 

 

29,027

 

 

 

37,007

 

Net income attributable to noncontrolling interests

 

 

296

 

 

 

—

 

 

 

296

 

Net income available to common stockholders

 

$

7,684

 

 

$

29,027

 

 

$

36,711

 

•Charges related to the amortization of RSUs and REUs; and

•Allocations of net income to limited partnership units and founding/working partner units (“FPUs”), including the Preferred Distribution (as hereinafter defined).

Intercompany balances and transactions within Newmark have been eliminated. Transactions between Cantor or BGCFitzgerald, L.P. ("Cantor") and Newmark pursuant to service agreements betweenwith Cantor and BGC (see Note 25—Related27 — “Related Party Transactions)Transactions”), representrepresenting valid receivables and liabilities of Newmark which are periodically cash settled, have been included inon the accompanying unaudited condensed consolidated financial statements as either receivables tofrom or payables fromto related parties. Additionally, certain other transactions between BGC and Newmark are contributions of BGC’s net investment in Newmark including acquisitions prior to the IPO (Note 4—Acquisitions).


Newmark receives administrative services to support its operations, and in return, Cantor and BGC allocateallocates certain of theirits expenses to Newmark. Such expenses represent costs related, but not limited to, treasury, legal, accounting, information technology, payroll administration, human resources, incentive compensation plans and other services. These costs, together with an allocation of Cantor and BGCCantor's overhead costs, are included as expenses inon the accompanying unaudited condensed consolidated statements of operations. Where it is possible to specifically attribute such expenses to activities of Newmark, these amounts have been expensed directly to Newmark. Allocation of all other such expenses is based on a services agreement between Cantor and BGC which reflects the utilization of


service provided or benefits received by Newmark during the periods presented on a consistent basis, such as headcount, square footage, revenue, etc. Management believes the assumptions underlying the stand-alone financial statements, including the assumptions regarding allocated expenses, reasonably reflect the utilization of services provided to or the benefit received by Newmark during the periods presented. However, these shared expenses may not represent the amounts that would have been incurred had Newmark operated independently from Cantor and BGC.Cantor. Actual costs that would have been incurred if Newmark had been a stand-alone companyperformed the services itself would depend on multiple factors, including organizational structure and strategic decisions in various areas, including information technology and infrastructure. Forinfrastructure (see Note 27 — “Related Party Transactions” for an additional discussion of expense allocations, (see Note 25—Related Party Transactions)allocations).

Prior to the Separation, BGC used a centralized approach to cash management. Accordingly, excess cash and cash equivalents were held by BGC at the corporate level and were not attributed to Newmark for any of the periods presented.


Transfers of cash, both to and from BGC’s centralized cash management system,Cantor, as well as amounts due to Newmark from BGC are reflected as aincluded in “Receivables from related party receivableparties or payablePayables to related parties” on the accompanying unaudited condensed consolidated balance sheetsheets and as part of the change in payments to and borrowings from related parties in the financing section withinprior to the Spin-Off and in the operating section after the Spin-Off on the accompanying unaudited condensed consolidated statements of cash flows.


The income tax provision inon the accompanying unaudited condensed consolidated statements of operations and unaudited condensed consolidated statements of comprehensive income has been calculated as if Newmark washad been operating
15

on a stand-alone basis and filed separate tax returns in the jurisdictions in which it operates. Prior to the Spin-Off, Newmark’s operations have historicallyhad been included in the BGC U.S. federal and state tax returns or separate non-U.S. jurisdictions tax returns. As Newmark operations in many jurisdictions arewere unincorporated commercial units of BGC and its subsidiaries, stand-alone tax returns have not been filed for the operations in these jurisdictions.

Newmark’s


The accompanying unaudited condensed consolidated financial statements contain all normal and recurring adjustments that, in the opinion of management, are necessary for a fair presentation of the accompanying unaudited condensed consolidated balance sheets, the unaudited condensed consolidated statements of operations, the unaudited condensed consolidated statements of comprehensive income, the unaudited condensed consolidated statements of cash flows and the unaudited condensed consolidated statements of changes in equity of Newmark for the periods presented.

(b)

Recently Adopted Accounting Pronouncements


(b)Recently Adopted Accounting Pronouncements

In August 2014, the Financial Accounting Standards Board (the “FASB”) issued an Accounting Standards Update (“ASU”) No. 2014-15, Presentation of Financial Statements—Going Concern, which relates to disclosure of uncertainties about an entity’s ability to continue as a going concern. The ASU provides additional guidance on management’s responsibility to evaluate the condition of an entity and the required disclosures based on this assessment. The amendments in this update were effective for the annual period ending after December 15, 2016. The adoption of this standard did not impact Newmark’s unaudited condensed consolidated financial statements.

In March 2016,2019, the FASB issued ASU No. 2016-09, Improvements2019-12, Income Taxes (Topic 740):Simplifying the Accounting for Income Taxes. The ASU is part of the FASB’s simplification initiative, and it is expected to Employee Share-Based Payment Accounting, whichreduce cost and complexity related to accounting for income taxes by eliminating certain exceptions to the guidance in ASC 740, Income Taxes related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences. The new guidance also simplifies several aspects of the accounting for employee share-based payment transactions, includingfranchise taxes and enacted changes in tax laws or rates, and clarifies the accounting for income taxes, forfeitures, and statutorytransactions that result in a step-up in the tax withholding requirements, as well as classificationbasis of related amounts within the statement of cash flows. The new standard was effective for Newmark beginning January 1, 2017, and early adoption was permitted. The adoption of this standard did not have a material impact on Newmark’s unaudited condensed consolidated financial statements.

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers, which relates to how an entity recognizes the revenue it expects to be entitled to for the transfer of promised goods and services to customers.goodwill. Newmark adopted the standard as of itson the required effective date of January 1, 2018 and recognized an increase in assets, liabilities, beginning retained earnings and non-controlling interests of $64.4 million, $45.6 million, $16.5 million and $2.3 million , respectively, as the cumulative effect of adoption of this accounting change. The impact of adoption is primarily related to Newmark’s brokerage revenues from leasing commissions where revenue recognition was previously deferred when future contingencies exist under the previous revenue recognition guidance. The adoption of the new revenue recognition guidance accelerated these commission revenues that were based, in part, on future contingent events. For example, a portion of certain brokerage revenues from leasing commissions were deferred until a future contingency was resolved (e.g., tenant move-in or payment of first month’s rent). Under the new revenue recognition model, Newmark’s performance obligation will be typically satisfied at lease signing and, therefore, the portion of the commission that is contingent on a future event will likely be recognized earlier, if it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur.  

Further, Newmark previously presented expenses incurred on behalf of customers for certain management services subject to reimbursement on a net basis within expenses. Under the new revenue recognition model, Newmark concluded that it controls the services provided by a third party on behalf of customers and, therefore, acts as a principal under those contracts. As a result, for these service contracts, Newmark will present expenses incurred on behalf of customers along with corresponding reimbursement revenue


on a gross basis in Newmark’s condensed consolidated statements of operations, with no impact on net income available to common stockholders.

Newmark elected to adopt the new guidance using a modified retrospective approach applied to contracts that were not completed as of January 1, 2018. Accordingly, the new revenue standard is applied prospectively in Newmark’s financial statements from January 1, 2018 onward, and reported financial information for historical comparable periods is not revised and continues to be reported under the accounting standards in effect during those historical periods.

The new revenue recognition guidance does not apply to revenue associated with financial instruments, including loans and securities that are accounted for under other U.S. GAAP, and as a result did not have an impact on the elements of Newmark’s condensed consolidated statements of operations most closely associated with financial instruments, including revenues from Capital markets commissions, Gains from mortgage banking activities/origination, net, and Servicing fees.

There was no significant impact as a result of applying the new revenue standard to Newmark’s condensed consolidated financial statements for the three months ended March 31, 2018, except as it relates to the revenue recognition of certain brokerage revenues from leasing commissions that were based, in part, on future contingent events and the presentation of expenses incurred on behalf of customers for certain management services subject to reimbursement.

See Note 3, Summary of Significant Accounting Policies and Note 12, Revenue from Contracts with Customers.

In January 2016, the FASB issued ASU No. 2016-01, Financial Instruments—Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities. This ASU requires entities to measure equity investments that do not result in consolidation and are not accounted for under the equity method at fair value and recognize any changes in fair value in net income unless the investments qualify for the new practicability exception. Entities will also have to record changes in instrument-specific credit risk for financial liabilities measured under the fair value option in other comprehensive income. In addition, entities will be required to present enhanced disclosures of financial assets and financial liabilities. The guidance became effective beginning January 1, 2018. In September 2017, the FASB issued a Proposed ASU, Technical Corrections2021 and, Improvements to Recently Issued Standards: Accounting Standards Update No. 2016-01, Financial Instruments—Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities, that clarifiedwith certain aspects of the guidance.exceptions, it was applied prospectively. The adoption of this guidance did not have a material impact on Newmark’sthe accompanying unaudited condensed consolidated financial statements.


In August 2016,January 2020, the FASB issued ASU No. 2016-15, Statement2020-01, Investments—Equity Securities (Topic 321), Investments—Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815)—Clarifying the Interactions between Topic 321, Topic 323, and Topic 815 (a consensus of Cash Flows (Topic 230)—Classificationthe FASB Emerging Issues Task Force). These amendments improve previous guidance by reducing diversity in practice and increasing comparability of Certain Cash Receiptsthe accounting for the interactions between these codification topics as they pertain to certain equity securities, investments under the equity method of accounting and Cash Payments, which makes changesforward contracts or purchased options to how cash receipts and cash payments are presented and classified inpurchase securities that, upon settlement of the statementsforward contract or exercise of cash flows. The newthe purchased option, would be accounted for under the equity method of accounting or the fair value option. Newmark adopted the standard becameon the required effective date beginning with the first quarter of 2018 and required adoptionJanuary 1, 2021 on a retrospectiveprospective basis. The adoption of this guidance did not have a material impact on Newmark’sthe accompanying unaudited condensed consolidated statements of cash flows.

financial statements.


In November 2016,October 2020, the FASB issued ASU No. 2016-18, Statement2020-10, Codification Improvements. The standard amends the Codification by moving existing disclosure requirements to (or adding appropriate references in) the relevant disclosure sections. The ASU also clarifies various provisions of Cash Flows (Topic 230)—Restricted Cash, which requires that the statements of cash flows explainCodification by amending and adding new headings, cross-referencing, and refining or correcting terminology. Newmark adopted the change duringstandard on the period in the total of cash, cash equivalents and amounts generally described as restricted cash or restricted cash equivalents. The new standard becamerequired effective date beginning January 1, 20182021 and required adoption onwas applied using a modified retrospective basis. The effectmethod of this guidance resulted in the inclusion of restricted cash in the cash and cash equivalents balance on Newmark’s unaudited condensed consolidated statements of cash flows.

In January 2017, the FASB issued ASU No. 2017-01, Business Combinations (Topic 805) Clarifying the definition of Business, which clarifies the definition of a business with the objective of providing additional guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The new standard became effective beginning January 1, 2018 on a prospective basis. The adoption of this U.S. GAAP guidance did not have a material impact on Newmark’s unaudited condensed consolidated financial statements.

In May 2017, the FASB issued ASU No. 2017-09, Compensation—Stock Compensation (Topic 718): Scope of Modification Accounting, which amends the scope of modification accounting for share-based payment arrangements and provides guidance on the types of changes to the terms or conditions of share-based payment awards to which an entity would be required to apply modification accounting. Under this guidance, an entity would not apply modification accounting if the fair value, the vesting conditions, and the classification of the awards (as equity or liability) are the same immediately before and after the modification. The new standard became effective beginning January 1, 2018, on a prospective basis for awards modified on or after the adoption date.transition. The adoption of this guidance did not have a material impact on Newmark’sthe accompanying unaudited condensed consolidated financial statements.


(c)

New Accounting Pronouncements


In February 2016,August 2020, the FASB issued ASU No. 2016-02, Leases (Topic 842)2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity. ThisThe standard is expected to reduce complexity and improve comparability of financial reporting associated with accounting for convertible instruments and contracts in an entity’s own equity. The ASU requires lesseesalso enhances information transparency by making targeted improvements to recognize a right-of-use assetthe related disclosures guidance. Additionally, the amendments affect the diluted EPS calculation for instruments that may be settled in cash or shares and lease liability for all leases with terms of more than 12 months. Recognition, measurement and presentation of expenses will dependconvertible instruments. Newmark adopted the standard on classification as finance or operating lease. The amendments also require certain quantitative and qualitative disclosures. Accounting guidance for lessors is largely unchanged. The guidance isthe required effective date beginning January 1, 2019, with early2022, and it was applied using a modified retrospective method of transition. The adoption permitted. Management is currently evaluatingof this guidance did not have a material impact on the impact of the new guidance on Newmark’saccompanying unaudited condensed consolidated financial statements.


In June 2016,March 2020, the FASB issued ASU No. 2016-13, Financial Instruments—Credit Losses2020-04, Reference Rate Reform (Topic 326)848): MeasurementFacilitation of Credit Lossesthe Effects of Reference Rate Reform on Financial Instruments, which requiresReporting. The guidance is designed to provide relief from the accounting analysis and impacts that may otherwise be required for modifications to agreements (e.g., loans, debt securities, derivatives, and borrowings) necessitated by reference rate reform as entities transition away from LIBOR and other interbank offered rates to alternative reference rates. This ASU also provides optional expedients to enable companies to continue to apply hedge accounting to certain hedging relationships impacted by reference rate reform. Application of the guidance is optional and only available in certain situations. The ASU is effective upon issuance and generally can be applied through December 31, 2022. In January 2021, the FASB issued ASU No. 2021-01, Reference Rate Reform (Topic 848): Scope. The amendments in this standard are elective and principally apply to entities that have derivative instruments that use an interest rate for margining, discounting, or contract price alignment that is modified as a result of reference rate reform (referred to as the “discounting
16

transition”). The standard expands the scope of ASC 848, Reference Rate Reform and allows entities to elect optional expedients to derivative contracts impacted by the discounting transition. Similar to ASU No. 2020-04, provisions of this ASU are effective upon issuance and generally can be applied through December 31, 2022. During the first quarter of 2022, Newmark elected to apply the practical expedients to modifications of qualifying contracts as continuation of the existing contract rather than as a new contract. The adoption of the new guidance did not have a material impact on the accompanying unaudited condensed consolidated financial assets that are measured at amortized coststatements. Management will continue to be presented, netevaluate the impacts of reference rate reform through December 31, 2022.

(c)New Accounting Pronouncements

In October 2021, the FASB issued ASU No. 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers. The standard improves the accounting for acquired revenue contracts with customers in a business combination by addressing diversity in practice and inconsistency related to the recognition of an allowance for credit losses, at the amount expected to be collected over their estimated life. Expected credit losses for newly recognized financial assets,acquired contract liability, as well as changespayment terms and their effect on subsequent revenue recognized by the acquirer. The ASU requires companies to credit losses during the period, are recognizedapply guidance in earnings. For certain purchased financialASC 606, Revenue from Contracts with Customers, to recognize and measure contract assets and contract liabilities from contracts with deteriorationcustomers acquired in credit quality since origination, the initial allowance for expected credit losses will be recorded asa business combination, and, thus, creates an increaseexception to the purchase price. Expected credit losses, including losses on off-balance-sheet exposures such as lending commitments, will be measured based on historical experience, current conditions,general recognition and reasonable and supportable forecasts that affect the collectability of the reported amount.measurement principle in ASC 805, Business Combinations. The new standard will become effective for Newmark beginning January 1, 2020, under a modified retrospective approach,2023, can be applied prospectively for business combinations occurring on or after the effective date, and early adoption is permitted. Management is currently evaluating the impact of the new guidancestandard on Newmark’sthe accompanying unaudited condensed consolidated financial statements.


In January 2017,November 2021, the FASB issued ASU No. 2017-04, Intangibles—Goodwill and Other2021-10, Government Assistance (Topic 350)832): Simplifying the TestDisclosures by Business Entities about Government Assistance. The standard requires business entities to make annual disclosures about transactions with a government they account for Goodwill Impairment, which eliminates the requirementby analogizing to determine the fair value of individual assets and liabilities of a reporting unit to measure goodwill impairment. Under the amendmentsgrant or contribution accounting model. The guidance is aimed at increasing transparency about government assistance transactions that are not in the newscope of other U.S. GAAP guidance. The ASU goodwill impairment testing will be performed by comparing the fair valuerequires disclosure of the reporting unit with its carrying amountnature and recognizing an impairment charge forsignificant terms and considerations of the amount by whichtransactions, the carrying amount exceeds the reporting unit’s fair value. The new standard will become effective beginning January 1, 2020accounting policies used and will be applied on a prospective basis, and early adoption is permitted. The adoption of this guidance will not have a material impact on Newmark’s unaudited condensed consolidated financial statements.

In August 2017, the FASB issued ASU No. 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities. The guidance intends to better align an entity’s risk management activities and financial reporting for hedging relationships through changes to both the designation and measurement guidance for qualifying hedging relationships and the presentation of hedge results. To meet that objective, the amendments expand and refine hedge accounting for both nonfinancial and financial risk components and align the recognition and presentation of the effects of the hedging instrument and the hedged item in thethose transactions on an entity’s financial statements. The new standard will become effective for the Newmark’s financial statements issued for annual reporting periods beginning on January 1, 2019, with2022, can be applied prospectively or retrospectively, and early adoption permitted, and will be applied on a prospective basis and modified retrospective basis.is permitted. Management is currently evaluating the impact of the new guidancestandard on Newmark’sthe accompanying unaudited condensed consolidated financial statements.


In February 2018,March 2022, the FASB issued ASU No. 2018-02, Income Statement—Reporting Comprehensive Income2022-02, Financial Instruments—Credit Losses (Topic 220)326): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income.Troubled Debt Restructurings and Vintage Disclosures. The guidance helps organizations addressis intended to improve the decision usefulness of information provided to investors about certain stranded income tax effectsloan refinancings, restructurings, and write-offs. The standard eliminates the recognition and measurement guidance on troubled debt restructurings (“TDRs”) for creditors that have adopted ASC 326, Financial Instruments — Credit Losses and requires them to make enhanced disclosures about loan modifications for borrowers experiencing financial difficulty. The new guidance also requires public business entities to present current-period gross write-offs (on a current year-to-date basis for interim-period disclosures) by year of origination in accumulated other comprehensive income resulting from the Tax Cuts and Jobs Act of 2017 by providing an option to reclassify these stranded tax effects to retained earnings in each period in which the effect of the change in the U.S. federal corporate income tax rate in the Tax Cuts and Jobs Act (or portion thereof) is recorded.their vintage disclosures. The new standard will become effective for Newmark beginning January 1, 2019, with early adoption permitted.2023. The guidance shouldfor recognition and measurement of TDRs can be applied using either ina prospective or modified retrospective transition method, and the period ofamendments related to disclosures can be applied prospectively. Early adoption or retrospectivelyis permitted, and an entity may elect to each period (or periods) in whichearly adopt the effect ofamendments related to TDRs separately from the change in the U.S. federal corporate income tax rate in the Tax Cuts and Jobs Act is recognized.amendments related to vintage disclosures. Management is currently evaluating the transition method and the adoptionimpact of the new guidance is not expected to have a material effectstandard on Newmark’sthe accompanying unaudited condensed consolidated financial statements.

(2)

Limited Partnership Interest in Newmark Holdings



(2)    Limited Partnership Interests in Newmark Holdings and BGC Holdings

Newmark is a holding company with no direct operations and conducts substantially all of its operations through its operating subsidiaries. Virtually all of Newmark’s consolidated net assets and net income are those of consolidated variable interest entities. Newmark Holdings is a consolidated subsidiary of Newmark for which Newmark is the general partner. Newmark and Newmark Holdings jointly own Newmark OpCo, the operating partnership. Listed below areIn connection with the limitedSeparation and BGC Holdings Distribution, holders of BGC Holdings partnership interests received partnership interests in Newmark Holdings. The founding/working partner units, limited partnership units, limited partnership interests held by Cantor (“Cantor units”) and limited partnership interests held by BGC (“BGC units”), each asHoldings, described below. In addition, BGC Partners and its operating subsidiaries hold limited partnership interest in Newmark Holdings due to the Investment in Newmarkbelow (see Note 25—Related27 — “Related Party Transactions)Transactions”). These collectively represent all of the “limited partnership interests” in BGC Holdings and Newmark Holdings.

BGC Holdings is a consolidated subsidiary of BGC, which along with BGC jointly own BGC U.S. OpCo and BGC Global OpCo, the two BCG operating partnerships.


As a result of the Separation, and Distribution Agreement, the limited partnership interests


in Newmark Holdings were distributed to the holders of limited partnership interests in BGC Holdings, whereby each holder of BGC Holdings limited partnership interests at that time holds a BGC Holdings limited partnership interest andreceived a corresponding Newmark Holdings limited partnership interest, determined by the contribution ratio (as hereafter defined), which iswas equal to a BGC Holdings limited partnership interest multiplied by one divided by 2.2 (the “contribution ratio”), divided by the exchange ratio (which is the ratio by which a Newmark Holdings limited partnership interest can be

17

exchanged for a number of shares of Newmark Class A common stock)stock (the “exchange ratio”)). As of March 31, 2018,Initially, the exchange ratio equaled one,1, so that each Newmark Holdings limited partnership interest iswas exchangeable for one1 share of Newmark Class A common stock,stock; however, such exchange ratio is subject to adjustment. For reinvestment, acquisition or other purposes, Newmark may determine on a quarterly basis to distribute to its stockholders a smaller percentage of its income than Newmark Holdings distributes to its equity holders (excluding tax distributions from Newmark Holdings) of the cash that it received from Newmark OpCo. In such circumstances, the Separation and Distribution Agreement provides that the exchange ratio will be reduced to reflect the amount of additional cash retained by Newmark as a result of the distribution of such smaller percentage, after the payment of taxes.

Founding/Working Partner Units

As of June 30, 2022, the exchange ratio equaled 0.9393.


Redeemable Partnership Interests
Founding/working partners have a limited partnership interestinterests (“FPUs”) in BGC Holdings and Newmark Holdings. Newmark accounts for founding/working partner units (“FPUs”)FPUs outside of permanent capital as “Redeemable partnership interests,” in Newmark’son the accompanying unaudited condensed consolidated statements balance sheets. This classification is applicable to founding/working partner unitsFPUs because these units are redeemable upon termination of a partner, including a termination of employment, which can be at the option of the partner and not within the control of the issuer.

Founding/working partner units


FPUs are held by limited partners who are primarily employees of BGC and generally receive quarterly allocations of net income. Upon termination of employment or otherwise ceasing to provide substantive services, the founding/working partner unitsFPUs are generally redeemed, and the unit holders are no longer entitled to participate in the quarterly allocations of net income. Since theseThese quarterly allocations of net income are cash distributed on a quarterly basis and are contingent upon services being provided by the unit holder theyand are reflected as a component of “Netcompensation expense under “Equity-based compensation and allocations of net income (loss) attributable to non-controlling interests” in Newmark’slimited partnership units and FPUs” on the accompanying unaudited condensed consolidated statements of operations to the extent they relatedrelate to FPUs held by Newmark employees.


Limited Partnership Units

Certain employees of Newmark employees hold limited partnership interests in Newmark Holdings and BGC Holdings (e.g., REUs, RPUs, PSUs, PSIs, HDUs, and LPUs, collectively the “limited partnership units”).

Prior to the Separation, certain employees of both BGC and Newmark generally received limited partnership units in BGC Holdings. As a result of the Separation, these employees were distributed limited partnership units in Newmark Holdings equal to a BGC Holdings limited partnership unit multiplied by the contribution ratio. In addition, in the BGC Holdings Distribution, these employees also received additional limited partnership units in Newmark Holdings. Subsequent to the Separation, Newmark employees generally have been granted limited partnership units in Newmark Holdings.

Generally, such limited partnership units receive quarterly allocations of net income which are cash distributed and generally are contingent upon services being provided by the unit holders. As prescribed in U.S. GAAP guidance, prior to the Spin-Off, the quarterly allocations of net income on such limited partnership units were reflected as a component of compensation expense under “Equity-based compensation and allocations of net income to limited partnership units and FPUs” on the accompanying unaudited condensed consolidated statements of operations. Following the Spin-Off, the quarterly allocations of net income on BGC Holdings and Newmark Holdings limited partnership units held by Newmark employees are reflected as a component of compensation expense under “Allocations“Equity-based compensation and allocations of net income and grant of exchangeability to limited partnership units” in Newmark’sunits and FPUs” on the accompanying unaudited condensed consolidated statements of operations, and the quarterly allocations of net income on Newmark Holdings limited partnership units held by BGC employees are reflected as a component of “Net income (loss) attributable to noncontrolling interests” on the accompanying unaudited condensed consolidated statements of operations. From time to time, Newmark issues limited partnership units as part of the consideration for acquisitions.


Certain of these limited partnership units held by Newmark and BGC employees entitle the holders to receive post-termination payments equal to the notional amount of the units in four equal yearly installments after the holder’s termination. These limited partnership units are accounted for as post-termination liability awards and are included on the accompanying unaudited condensed consolidated balance sheets as part of "Accrued compensation", and in accordance with U.S. GAAP guidance, Newmark records compensation expense for the awards based on the change in value at each reporting date inon the Newmark’saccompanying unaudited condensed consolidated statements of operations as part of “Compensation“Equity-based compensation and employee benefits.allocations of net income to limited partnership units and FPUs.”


Certain Newmark employees hold preferred partnership units (“Preferred Units.Units”). Each quarter, the net profits of BGC Holdings and Newmark Holdings are allocated to such units at a rate of either 0.6875% (which is 2.75% per calendar year) or such other amount as set forth in the award documentation (the “Preferred Distribution”). These allocations are deducted before the calculation and distribution of the quarterly partnership distribution for the remaining partnership units and are generally contingent upon services being provided by the unit holder. The Preferred Units are not entitled to participate in partnership
18

distributions other than with respect to the Preferred Distribution. Preferred Units may not be made exchangeable into Newmark’s Class A common stock and are only entitled to the Preferred Distribution, and accordingly are not included in Newmark’s fully diluted share count. The quarterly allocations of net income on Preferred Units are reflected in compensation expense under “Allocations“Equity-based compensation and allocations of net income and grant of exchangeability to limited partnership units” in Newmark’sunits and FPUs” on the accompanying unaudited condensed consolidated statements of operations. After deduction of the Preferred Distribution, the remaining partnership units generally receive quarterly allocation of net income based on their weighted-average pro raterata share of economic ownership of the operating subsidiaries.

In addition, Preferred Units are granted in connection with the grant of certain limited partnership units, such as PSUs, that may be granted exchangeability to cover the withholding taxes owed by the unit holder, rather than issuing the gross amount of shares to employees, subject to cashless withholding of shares to pay applicable withholding taxes.


Certain Newmark employees hold non-distribution earning units (e.g. NPSUs and NREUs, collectively “N Units”) that do not participate in quarterly partnership distributions and are not allocated any items of profit or loss. N Units become distribution earning limited partnership units, ratably over a four-year vesting term, if certain revenue thresholds are met at the end of each vesting term.

Cantor Units

Cantor holds limited partnership interests in Newmark Holdings.Holdings (“Cantor units”). Cantor units are reflected as a component of “Noncontrolling interest” ininterests” on the Newmark’saccompanying unaudited condensed consolidated balance sheets. Cantor receives quarterly allocations of net income (loss), which


are cash distributed on a quarterly basis and are reflected as a component of “Net income (loss) attributable to noncontrolling interest” in Newmark’sinterests” on the accompanying unaudited condensed consolidated statements of operations.

BGC


Exchangeable Preferred Limited Partnership Units

BGC

The EPUs were issued in 4 tranches and its operating subsidiaries hold limited partnership interestsare separately convertible by either RBC or Newmark into a fixed number of Newmark’s Class A common stock, subject to a revenue hurdle for Newmark in each of the fourth quarters of 2019 through 2022 for each of the 4 tranches, respectively. As the EPUs represent equity ownership of a consolidated subsidiary of Newmark, Holdings. Such BGC unitsthey have been reflected as a component ofincluded in “Noncontrolling interest” ininterests” on the Newmark’s unaudited condensed consolidated balance sheets. BGC and its operating subsidiaries  received allocations of net income (loss), which will be cash distributed on a quarterly basis and will be reflected as a component of “Net income (loss) attributable to noncontrolling interest” in Newmark’s unaudited condensed consolidated statements of operations.

changes in equity. The EPUs are entitled to a preferred payable-in-kind dividend, which is recorded as accretion to the carrying amount of the EPUs through retained earnings on the accompanying unaudited condensed consolidated statements of changes in equity and are reductions to “Net income available to common stockholders” for the purpose of calculating earnings per share. (See Note 1 — “Organization and Basis of Presentation” for additional information). As of June 30, 2022, there were no EPUs outstanding.


General

Certain of the limited partnership interests, described above, have been granted exchangeability into BGC and/or Newmark Class A common stock, and additional limited partnership interests may become exchangeable for BGC and/or Newmark Class A common stock. At the time exchangeability is granted, Newmark recognizes an expense based on the fair value of the award on that date, which is included in “Equity-based compensation and allocations of net income to limited partnership units and FPUs” on the accompanying unaudited condensed consolidated statements of operations. In addition, certain limited partnership interests have been granted the limitedright to exchange into a Newmark partnership unit with a capital account, such as HDUs. HDUs have a stated capital account which is initially based on the closing trading price of Newmark Class A common stock at the time the HDU is granted and are included in “Accrued Compensation” on the accompanying unaudited condensed consolidated balance sheets. HDUs participate in quarterly partnership distributions and are not exchangeable into shares of Class A common stock. Limited partnership interests held by Cantor in BGC Holdings and Newmark Holdings as of June 30, 2022 are generally exchangeable for up to 34.624.7 million shares of BGC Class B common stock and/or up to the authorized amount of Newmark Class B common stock. In order forSubsequent to the Spin-Off, limited partnership interests in BGC Holdings held by a partner or Cantor to exchange a limited partnership interest in BGC Holdings or Newmark Holdings into a Class A or Class B common stock of BGC, such partner or Cantor must exchange both one BGC Holdings limited partnership interests and a number of Newmark Holdings limited partnership interests equal to a BGC Holdings limited partnership interest multiplied by the quotient obtained by dividing Newmark Class A and Class B common stock, Newmark OpCo interests, and Newmark Holdings limited partnership interests held by BGC as of such time by the number of BGC Class A and Class B common stock outstanding as of such time (the “distribution ratio”), divided by the exchange ratio. Initially the distribution ratio was equivalent to the contribution ratio (one divided by 2.2 or 0.4545), and as of immediately following the close of the first quarter of 2018 is equal to 0.4702. As a result of the change in the distribution ratio, certain BGC Holdings limited partnership interests no longer have a corresponding Newmark Holdings limited partnership interest. The exchangeability of these BGC Holdings limited partnership interests along with any new BGC Holdings limited partnership interests issued after the Separation and Distribution Agreement (together referred to as “standalone”) intomay become exchangeable for BGC Class A or Class B common stock is contingent upon the Newmark spin-off. After the spin-off, these standalone BGCon a 1-for-one basis, and limited partnership interests can thenin Newmark Holdings held by a partner or Cantor may become exchangeable into BGCfor a number of shares of Newmark Class A or Class B common stock.

stock equal to the number of limited partnership interests multiplied by the exchange ratio at that time. As of June 30, 2022, the exchange ratio equaled 0.9393.


Each quarter, net income (loss) is allocated between the limited partnership interests and the common stockholders. In quarterly periods in which Newmark has a net loss, the loss allocation for FPUs, limited partnership units (including BGC units and Cantor units) is allocated to Cantor and reflected as a component of “Net income (loss) attributable to noncontrolling interest” in Newmark’sinterests” on the accompanying unaudited condensed consolidated statements of operations. In subsequent quarters in which Newmark has net income, the initial allocation of income to the limited partnership interests is allocated to Cantor, and reflected in, “Net income (loss) attributable to noncontrolling interests,” to recover any losses taken in earlier quarters, with the remaining income allocated to the limited partnership interests. This income (loss)loss allocation process between limited partners and Cantor has no material impact on the net income (loss) allocated to common stockholders.

(3)

Summary of Significant Accounting Policies


19


(3)    Summary of Significant Accounting Policies

For a detailed discussion about Newmark’s significant accounting policies, see Note 3 Summary— “Summary of Significant Accounting Policies,” in ourNewmark’s consolidated financial statements included in Part II, Item 8 of ourNewmark’s Annual Report on Form 10-K for the year ended December 31, 2017. Other than the following, during the three months ended March 31, 2018, there2021. There were no significant changes made to Newmark’s significant accounting policies.

Equity Investments:

Effective January 1, 2018, in accordance with the new guidance on recognition and measurement of equity investments, Newmark carries its marketable equity securities at fair value and recognizes any changes in fair value in net income (loss). Further, Newmark has elected to use a measurement alternative for its equity investments without a readily determinable fair value, pursuant to which these investments are initially recognized at cost and remeasured through earnings when there is an observable transaction involving the same or similar investment of the same issuer, or due to an impairment. See Note 6—Marketable Securities and Note 7—Cost and Equity Method Investments for additional information. Newmark had unrealized gains of $2.6 million related to Marketable securities and Investments carried under the measurement alternative forpolicies during the three and six months ended March 31, 2018.

June 30, 2022.


Revenue Recognition:

The accounting policy changes are attributable to the adoption of ASU No. 2014-09, Revenue from contracts with Customers and related amendments on January 1, 2018. These revenue recognition policy updates are applied prospectively in Newmark’s



unaudited condensed consolidated financial statements from January 1, 2018 onward. Financial information for the historical comparable periods was not revised and continues to be reported under the accounting standards in effect during those historical periods.

Management Services, Servicing Fees and Other

For certainOther:

Management services revenues based, in part, on future contingent events (e.g., tenant move-in or payment of first month’s rent), Newmark’s performance obligation is typically satisfied at lease signing and, therefore, the portion of the commission that is contingent on a future event is recognized as revenue, if deemed not subject to significant reversal.

Segment:

Newmark has a single operating segment. Newmark is a real estate services firm offering services to commercial real estate tenants, owner occupiers, investors and developers, leasing and corporate advisory, investment sales and real estate finance, consulting, origination and servicing of commercial mortgage loans, valuation,include property management, facilities management, project and development management and propertyvaluation and facility management. The chief operating decision maker regardless of geographic location evaluates the operating results of Newmark as total real estate services and allocates resources accordingly. For the three months ended March 31, 2018 and 2017, Newmark recognized revenues as follows (in thousands):

 

 

Three Months Ended March 31,

 

 

 

2018

 

 

2017

 

Leasing and other commissions

 

$

159,371

 

 

$

127,567

 

Capital markets

 

 

101,364

 

 

 

77,391

 

Gains from mortgage banking activities/origination, net

 

 

38,914

 

 

 

45,262

 

Management services, servicing fees and other

 

 

130,811

 

 

 

82,362

 

Revenues

 

$

430,460

 

 

$

332,582

 

(4)

Acquisitions

There were no acquisitions during the three months ended March 31, 2018.

On September 8, 2017, Newmark acquired from CCRE 100% of the equity of BPF. The Berkeley Point Acquisition has been determined to be a combination of entities under common control that resulted in a change in the reporting entity (see Note 1—Organization and Basis of Presentation).

The assets and liabilities of BPF have been recorded in Newmark’s unaudited condensed consolidated balance sheets at the seller’s historical carrying value. The excess of the purchase price over BPF’s net assets was accounted for as an equity transaction for the year ended December 31, 2017 (the period in which the transaction occurred). (See Note 1—Organization and Basis of Presentation for additional information.)

Deferred tax assets and liabilitiesappraisal. Management fees are recognized for the future tax consequences attributable to basis differences between the carrying amounts of existing assets and liabilities and their respective tax basis. Accordingly, a deferred tax asset of $108.6 million has been contributed to Newmark for the period ended December 31, 2017 for the basis difference between BPF’s net assets and its tax basis.

On January 13, 2017, Newmark acquired a San Francisco based advisory firm, Regency Capital Partners (“Regency”). Regency specializes in structured debt and equity for large office and multi-family developments.

On July 26, 2017, Newmark acquired an approximately 50% controlling interest in a joint venture. Cantor owns a noncontrolling interest of 25% of the company, which is headquartered in New York, NY and specializes in commercial real estate due diligence.

In September 2017, Newmark completed the acquisition of six former Integra Realty Resources offices (Washington DC, Baltimore, Willmington, DE, New York/New Jersey, Philadelphia and Atlanta offices). These firms specialize in valuation services, and the acquisition provides Newmark with greater geographic coverage.

For the year ended December 31, 2017, the following tables summarize the components of the purchase consideration transferred, and the preliminary allocation of the assets acquired and liabilities assumed, for all acquisitions other than the Berkeley


Point Acquisition, based on the fair values of the acquisition date. Newmark expects to finalize its analysis of the assets acquired and liabilities assumed within the first year of the acquisition, and therefore adjustments to assets and liabilities may occur.

 

 

As of the

Acquisition

Date

 

Assets

 

 

 

 

Cash and cash equivalents

 

$

3,903

 

Goodwill

 

 

64,291

 

Intangibles assets, net

 

 

3,188

 

Other assets

 

 

9,234

 

Total Assets

 

 

80,616

 

Current liabilities

 

 

 

 

Accounts payable, accrued expenses and other liabilities

 

 

7,119

 

Total Liabilities

 

 

7,119

 

Noncontrolling interest

 

 

19,145

 

Net assets acquired

 

$

54,352

 

The total consideration for acquisitions during the year ended December 31, 2017 was approximately $55.6 million in total fair value, comprised of cash, and BGC Holdings limited partnership units. The total consideration included contingent consideration of approximately 477,169 BGC’s Holding partnership units (with an acquisition date fair value of approximately $5.0 million) and $1.3 million in cash that may be issued contingent on certain targets being met through 2020. The excess of the consideration over the fair value of the net assets acquired has been recorded as goodwill of approximately $64.3 million, of which $45.4 million is deductible by Newmark for tax purposes.

These acquisitions are accounted for using the purchase method of accounting. The results of operations of these acquisitions have been included in Newmark’s unaudited condensed consolidated financial statements subsequent to their respective dates of acquisition, which in aggregate contributed $13.1 million to Newmark’s revenue for the year ended December 31, 2017.

(5)

Earnings Per Share and Weighted-Average Shares Outstanding

U.S. GAAP guidance—Earnings Per Share provides guidance on the computation and presentation of earnings per share (“EPS”). Basic EPS excludes dilution and is computed by dividing Net income (loss) available to common stockholders by the weighted-average number of shares of common stock outstanding and contingent shares for which all necessary conditions have been satisfied except for the passage of time. Net income (loss) is allocated to the Newmark’s outstanding common stock, FPUs, limited partnership units, Cantor units and BGC units (see Note 2—Limited Partnership Interest in Newmark Holdings).

The following is the calculation of Newmark’s basic EPS (in thousands, except per share data):

 

 

Three Months Ended March 31,

 

 

 

2018

 

 

2017

 

Basic earnings per share:

 

 

 

 

 

 

 

 

Net income available to common stockholders

 

$

19,997

 

 

$

36,711

 

Basic weighted-average shares of common stock outstanding

 

 

155,694

 

 

N/A

 

Basic earnings per share

 

 

0.13

 

 

N/A

 

Fully diluted EPS is calculated utilizing net income (loss) available to common stockholders plus net income allocations to the limited partnership interests in Newmark Holdings as the numerator. The denominator comprises Newmark’s weighted-average number of outstanding shares of common stock and, if dilutive, the weighted-average number of limited partnership interests and other contracts to issue shares of common stock, stock options and RSUs. The limited partnership interests generally are potentially exchangeable into shares of Class A common stock and are entitled to remaining earnings after the deduction for the Preferred Distribution; as a result, they are included in the fully diluted EPS computation to the extent that the effect would be dilutive.


The following is the calculation of Newmark’s fully diluted EPS (in thousands, except per share data):

 

 

Three Months Ended March 31,

 

 

 

2018

 

 

2017

 

Fully diluted earnings per share

 

 

 

 

 

 

 

 

Net income available to common stockholders

 

$

19,997

 

 

$

36,711

 

Allocations of net income to limited partnership

   interests in BGC Holdings and Newmark Holdings,

   net of tax

 

 

10,289

 

 

N/A

 

Net income for fully diluted shares

 

$

30,286

 

 

N/A

 

Weighted-average shares:

 

 

 

 

 

 

 

 

Common stock outstanding

 

 

155,694

 

 

N/A

 

Partnership units1

 

 

90,222

 

 

N/A

 

Other

 

 

918

 

 

N/A

 

Fully diluted weighted-average shares of common

   stock outstanding

 

 

246,834

 

 

N/A

 

Fully diluted earnings per share

 

 

0.12

 

 

N/A

 

1

Partnership units collectively include founding/working partner units, limited partnership units, and Cantor units (see Note 2—Limited Partnership Interest in Newmark Holdings for more information).

For the quarter ended March 31, 2018, there were no potentially dilutive securities that would have had an anti-dilutive effect.

(6)

Marketable Securities

On June 28, 2013, BGC sold certain assets of its on-the-run, electronic benchmark U.S. Treasury platform (“eSpeed”) to Nasdaq. The total consideration received in the transaction included an earn-out of up to 14,883,705 shares of Nasdaq common stock to be paid ratably over 15 years, provided that Nasdaq, as a whole, produces at least $25.0 million in consolidated gross revenues each year. The earn-out was excluded from the initial gain on the divestiture and is recognized in income as it is realized and earned when these contingent events have occurred, consistent with the accounting guidance for gain contingencies (the “Nasdaq Earn-Out”). The remaining rights under the Nasdaq Earn-Out were transferred to Newmark on September 28, 2017. Any Nasdaq shares that were received by BGC prior to September 28, 2017 were not transferred to Newmark.

In connection with the Nasdaq Earn-Out, Newmark received 992,247 shares during the year ended December 31, 2017. Newmark will receive a remaining Earn-Out of up to 9,922,470 shares of Nasdaq common stock ratably over the next approximately 10 years, provided that Nasdaq, as a whole, produces at least $25.0 million in gross revenues each year. During the three months ended March 31, 2018, Newmark sold 650,000 shares of the Nasdaq shares received.  In November of 2017, Newmark sold 242,247 shares and has 100,000 remaining shares as of March 31, 2018. During the three months ended March 31, 2018, the market value of the securities sold was $52.2 million. For the three months ended March 31, 2018, Newmark recognized a gain on the sale of these securities of $2.4 million. For the three months ended March 31, 2018, Newmark also recorded an unrealized gain of $0.8 million on the mark to market of these securities, which is included in “Other income, net” in Newmark’s unaudited condensed consolidated statement of operations. As of March 31, 2018 and December 31, 2017, Newmark had $8.6 million and $57.6 million, respectively included in “Marketable securities” on its unaudited condensed consolidated balance sheet (see Note 18—Securities Loans)

(7)

Cost and Equity Method Investments

Newmark has a 27% ownership in Real Estate LP a joint venture with Cantor in which Newmark has the ability to exert significant influence over the operating and financial policies. Accordingly, Newmark accounts for this investment under the equity method of accounting. For the three months ended March 31, 2018, Newmark recognized $3.2 million of equity income included in “Other income, net” in its unaudited condensed consolidated statements of operations. As of March 31, 2018 and December 31, 2017, Newmark had $104.7 million and $101.6 million, respectively in an equity method investment, and is included in “Other assets” in Newmark’s unaudited condensed consolidated balance sheets.

Investments Carried Under Measurements Alternative

Newmark had previously acquired investments for which it did not have the ability to exert significant influence over operating and financial policies of the investees. Prior to January 1, 2018, these investments were accounted for using the cost method in accordance with U.S. GAAP guidance, Investments—Other. The carrying value of the cost method investments was $6.0 million and


is included in “Other assets” in the Newmark’s unaudited condensed consolidated balance sheets as of December 31, 2017. Newmark did not recognize any gain or loss relating to cost method investments for the three months ended March 31, 2017.

Effective January 1, 2018, these investments are accounted for using the measurement alternative in accordance with the new guidance on recognition and measurement. The carrying value of these investments was $13.6 million and is included in “Other assets” in the Newmark’s unaudited condensed statements balance sheets as of March 31, 2018. Newmark did not recognize any gains, losses, or impairments relating to investments carried under the measurement alternative for the three months ended March 31, 2018.

(8)

Capital and Liquidity Requirements

Newmark is subject to various capital requirements in connection with seller/servicer agreements that Newmark has entered into with the various GSEs. Failure to maintain minimum capital requirements could result in Newmark’s inability to originate and service loans for the respective GSEs and could have a direct material adverse effect on Newmark’s unaudited condensed consolidated financial statements. Management believes that, as of March 31, 2018 and December 31, 2017, Newmark has met all capital requirements. As of March 31, 2018, the most restrictive capital requirement was Fannie Mae’s net worth requirement. Newmark exceeded the minimum requirement by $426.0 million.

Certain of Newmark’s agreements with Fannie Mae allow Newmark to originate and service loans under Fannie Mae’s DUS Program. These agreements require Newmark to maintain sufficient collateral to meet Fannie Mae’s restricted and operational liquidity requirements based on a pre-established formula. Certain of Newmark’s agreements with Freddie Mac allow Newmark to service loans under Freddie Mac’s Targeted Affordable Housing Program (“TAH”). These agreements require Newmark to pledge sufficient collateral to meet Freddie Mac’s liquidity requirement of 8% of the outstanding principal of TAH loans serviced by Newmark. Management believes that, as of March 31, 2018 and December 31, 2017, Newmark has met all liquidity requirements.

In addition, as a servicer for Fannie Mae, GNMA and FHA, Newmark is required to advance to investors any uncollected principal and interest due from borrowers. At each of March 31, 2018 and December 31, 2017, outstanding borrower advances were approximately $0.1 million and are included in “Other assets” in Newmark’s unaudited condensed consolidated balance sheets.

(9)

Loans Held for Sale, at Fair Value

Loans held for sale represent originated loans that are typically sold within 45 days from the date of the mortgage loan is funded. Newmark initially and subsequently measures all loans held for sale at fair value on the accompanying unaudited condensed consolidated balance sheets. The fair value measurement falls within the definition of a Level 2 measurement (significant other observable inputs) within the fair value hierarchy. Electing to use fair value allows a better offset of the change in the fair value of the loan and the change in fair value of the derivative instruments used as economic hedges. Loans held for sale had a cost basis and fair value as follows (in thousands):

 

 

Cost Basis

 

 

Fair Value

 

March 31, 2018

 

$

950,514

 

 

$

965,639

 

December 31, 2017

 

$

360,440

 

 

$

362,635

 

As of March 31, 2018 and December 31, 2017, there were no loans held for sale that were 90 days or more past due or in nonaccrual status.

During the period prior to its sale, interest income on a loan held for sale is calculated in accordance with the terms of the individual loan. Interest income on loans held for sale was $4.7 million and $6.5 million for the three months ended March 31, 2018 and 2017, respectively. Interest income on loans held for sale in included in “Management services, servicing fees and other” in Newmark’s unaudited condensed consolidated statements of operations. During the three months ended March 31, 2018 and 2017, Newmark also recognized gains of $15.1 and $2.1 million, respectively, for the change in fair value on loans held for sale.  These gains were included in “Gains from mortgage banking activity/originations, net” in Newmark’s unaudited condensed consolidated statements of operations.

(10)

Derivatives

Newmark accounts for its derivatives at fair value, and recognized all derivatives as either assets or liabilities in its unaudited condensed consolidated balance sheets. In its normal course of business, Newmark enters into commitments to extend credit for


mortgage loans at a specific rate (rate lock commitments) and commitments to deliver these loans to third-party investors at a fixed price (forward sale contracts). These transactions are accounted for as derivatives.

The fair value of derivative contracts, computed in accordance with the Newmark’s netting policy, is set forth below (in thousands):

 

 

March 31, 2018

 

 

December 31, 2017

 

 

 

 

 

 

 

 

 

 

 

Notional

 

 

 

 

 

 

 

 

 

 

Notional

 

Derivative contract

 

Assets

 

 

Liabilities

 

 

Amounts (1)

 

 

Assets

 

 

Liabilities

 

 

Amounts(1)

 

Forwards

 

$

9,687

 

 

$

2,421

 

 

$

1,324,711

 

 

$

3,753

 

 

$

657

 

 

$

541,359

 

Rate lock commitments

 

 

8,750

 

 

 

8,980

 

 

 

374,197

 

 

 

2,923

 

 

 

2,390

 

 

 

180,918

 

Total

 

$

18,437

 

 

$

11,401

 

 

 

 

 

 

$

6,676

 

 

$

3,047

 

 

 

 

 

(1)

Notional amounts represent the sum of gross long and short derivative contracts, an indication of the volume of Newmark’s derivative activity, and does not represent anticipated losses.

The change in fair value of rate lock commitments and forward sale contracts related to mortgage loans are reported as part of “Gain from mortgage banking activities/originations, net” in Newmark’s unaudited condensed consolidated statements of operations. The change in fair value of rate lock commitments are disclosed net of expenses of $2.5 million and $0.8 million for the three months ended March 31, 2018 and 2017, which are reported as part of “Compensation and employee benefits” in the Newmark’s unaudited condensed consolidated statements of operations.

The fair value of Newmark’s derivatives for rate lock commitments and forward sale contracts are as follows (in thousands) and are included in “Gain from mortgage banking activities/originations, net” and “Compensation and employee benefits” in the unaudited condensed consolidated statements of operations:

 

 

Location of gain (loss) recognized

 

Three Months Ended March 31,

 

 

 

in income for derivatives

 

2018

 

 

2017

 

Derivatives not designed as hedging

   instruments:

 

 

 

 

 

 

 

 

 

 

Rate lock commitments

 

Gains from mortgage banking

activities/originations, net

 

$

2,269

 

 

$

132

 

Rate lock commitments

 

Compensation and employee

benefits

 

 

(2,500

)

 

 

(807

)

Forward sale contracts

 

Gains from mortgage banking

activities/originations, net

 

 

7,266

 

 

 

3,317

 

 

 

 

 

$

7,035

 

 

$

2,642

 

Derivative assets and derivative liabilities are included in “Other current assets” and the current portion of “Accounts payable, accrued expenses and other liabilities,” respectively.

(11)

Credit Enhancement Receivable, Contingent Liability and Credit Enhancement Deposit

Newmark is a party to a Credit Enhancement Agreement (“CEA”), dated March 9, 2012, with German American Capital Corporation and Deutsche Bank Americas Holding Corporation (together, the “DB Entities”). On October 20, 2016, the DB Entities assigned the CEA to Deutsche Bank AG Cayman Island Branch, a Cayman Island Branch of Deutsche Bank AG (“DB Cayman”). Under the terms of these agreements, DB Cayman provides Newmark with varying levels of ongoing credit protection, subject to certain limits, for Fannie Mae and Freddie Mac loans subject to loss sharing (see Note 21—Financial Guarantee Liability) in Newmark’s servicing portfolio as of March 9, 2012. DB Cayman will also reimburse Newmark for any losses incurred due to violation of underwriting and serving agreements that occurred prior to March 9, 2012. For the three months ended March 31, 2018 and 2017 there were no reimbursements under this agreement.

Credit enhancement receivable

At March 31, 2018, Newmark had $18.9 billion of credit risk loans in its servicing portfolio with a maximum pre-credit enhancement loss exposure of $5.4 billion. Newmark had a form of credit protection from DB Cayman on $0.4 billion of credit risk loans with a maximum loss exposure coverage of $0.1 billion. The amount of the maximum loss exposure without any form of credit protection from DB Cayman was $5.3 billion.


At December 31, 2017, Newmark had $18.8 billion of credit risk loans in its servicing portfolio with a maximum pre-credit enhancement loss exposure of $5.3 billion. Newmark had a form of credit protection from DB Cayman on $4.2 billion of credit risk loans with a maximum loss exposure coverage of $1.2 billion. The amount of the maximum loss exposure without any form of credit protection from DB Cayman was $4.1 billion.

As of March 31, 2018, there was no credit enhancement receivable. Credit enhancement receivables as December 31, 2017 were $10 thousand are included in “Other assets” in Newmark’s unaudited condensed consolidated balance sheets.

Credit enhancement deposit

The CEA required the DB Entities to deposit $25 million into Newmark’s Fannie Mae restricted liquidity account (see Note 8—Capital and Liquidity Requirements), which Newmark is required to return to DB Cayman, less any outstanding claims, on March 9, 2021. The $25 million deposit is included in “Restricted cash” and the offsetting liability in “Other long-term liabilities” in Newmark’s unaudited condensed consolidated balance sheets.

Contingent liability

Under the CEA, Newmark is required to pay DB Cayman, on March 9, 2021, an amount equal to 50% of the positive difference, if any, between (a) $25 million, and (b) Newmark’s unreimbursed loss-sharing payments from March 9, 2012 through March 9, 2021 on Newmark’s servicing portfolio as of March 9, 2012.

Contingent liabilities as of March 31, 2018 and December 31, 2017 were $10.7 million and $10.7 million, respectively and are included in “Other liabilities” in Newmark’s unaudited condensed consolidated balance sheets.

(12)

Revenues from Contracts with Customers

The following table presents Newmark’s total revenues separately for its revenues from contracts with customers and our other sources of revenues (in thousands):

 

 

Three Months Ended

March 31,

 

 

 

2018

 

Revenues from contracts with customers:

 

 

 

 

Leasing and other commissions

 

$

159,371

 

Capital markets

 

 

101,364

 

Management services

 

 

96,933

 

Revenues

 

 

357,668

 

Other sources of revenue:

 

 

 

 

Gains from mortgage banking activities/originations, net(1)

 

 

38,914

 

Servicing fees and other(1)

 

 

33,878

 

Revenues

 

$

430,460

 

(1)

Although these items have customers under contract, they were recorded as other sources of revenue as they were excluded from the scope of ASU No. 2014-09.


The table below presents the impact to the Newmark’s condensed consolidated balance sheets and condensed consolidated statement of operations as a result of  applying the new revenue recognition standard, as codified within ASC 606 (in thousands):

 

 

For the Three Months Ended March 31, 2018

 

 

 

As

Reported

 

 

Under Previous U.S. GAAP

 

 

Effect of Change

Higher/(Lower) (1)

 

Income Statement

 

 

 

 

 

 

 

 

 

 

 

 

Revenues

 

 

 

 

 

 

 

 

 

 

 

 

Leasing and other commissions

 

$

159,371

 

 

 

148,754

 

 

$

10,617

 

Capital Markets

 

 

101,364

 

 

 

101,364

 

 

 

—

 

Gains from mortgage banking activities/originations, net

 

 

38,914

 

 

 

38,914

 

 

 

—

 

Management services, servicing fees and other

 

 

130,811

 

 

 

112,424

 

 

 

18,387

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Expenses

 

 

 

 

 

 

 

 

 

 

 

 

Compensation and employee benefits

 

 

252,695

 

 

 

247,053

 

 

 

5,642

 

Operating, administrative and other

 

$

75,427

 

 

 

57,040

 

 

$

18,387

 

(1)

The amounts reflect each affected financial statement line item as they would have been reported under U.S. GAAP, prior to the adoption of the new revenue standard.

 

 

March 31, 2018

 

 

 

As

Reported

 

 

Under Previous U.S. GAAP

 

 

Effect of Change

Higher/(Lower) (1)

 

Balance Sheet

 

 

 

 

 

 

 

 

 

 

 

 

Receivables, net

 

$

293,148

 

 

 

214,695

 

 

$

78,453

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

Accrued compensation

 

 

205,732

 

 

 

168,338

 

 

 

37,394

 

Current portion of accounts payable,

   accrued expenses and other liabilities

 

$

165,746

 

 

 

148,466

 

 

$

17,280

 

(1)

The amounts reflect each affected financial statement line item as they would have been reported under U.S. GAAP, prior to the adoption of the new revenue standard

Revenue from contracts with customers is recognized when, or as, Newmark satisfies its performance obligations by transferring the promised goods or services to the customers as determined by when, or as, the customer obtains control of that good or service. A performance obligation may be satisfied over time or at a point in time. Revenue from a performance obligation satisfied over time is recognized by measuring Newmark’s progress in satisfying the performance obligation as evidenced by the transfer of the goods or services to the customer. Revenue from a performance obligation satisfied at a point in time is recognized at the pointtime the related services have been performed, unless future contingencies exist. In addition, in time when the customer obtains control over the promised good or service. The amount of revenue recognized reflects the consideration Newmark expectsregard to be entitled to in exchange for those promised goods or services (i.e., the “transaction price”). In determining the transaction price, Newmark must consider consideration promised in a contract that includes a variable amount, referred to as variable consideration, and estimate the amount of consideration due Newmark. Additionally, variable consideration is included in the transaction price only to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur. In determining when to include variable consideration in the transaction price, Newmark considers all information (historical, current and forecast) that is available including the range of possible outcomes, the predictive value of past experiences, the time period of when uncertainties expect to be resolved and the amount of consideration that is susceptible to factors outside of Newmark’s influence, such as market volatility or the judgment and actions of third parties.  

Newmark also uses third-party service providers in the provision of its services to customers. In instances where a third-party service provider is used, Newmark performs an analysis to determine whether Newmark is acting as a principal or an agent with respect to the services provided. To the extent that Newmark determines that it is acting as a principal, the revenue and the expenses incurred are recorded on a gross basis. In instances where Newmark has determined that it is acting as an agent, the revenue and expenses are presented on a net basis within the revenue line item.  

In some instances, Newmark performs services for customers and incurs out-of-pocket expenses as part of delivering those services (such as travel, meals and lodging). Newmark’s customers agree to reimburse Newmark for those expenses, and those reimbursements are part of the contract’s transaction price. Consequently, these expenses and the reimbursements of such expenses from the customer are presented on a gross basis because the services giving rise to the out-of-pocket expenses do not transfer a good


or service. The reimbursements are included in the transaction price when the costs are incurred and the reimbursements are due from the customer.

The following provides detailed information on the recognition of Newmark’s revenues from contracts with customers:

Leasing and other commissions. Newmark offers a diverse range of commercial real estate brokerage and advisory services, including tenant and agency representation. Newmark’s performance obligation is to match a qualified tenant with available landlord property. Commissions from real estate brokerage transactions are typically recognized at a point in time on the date the lease is signed. The date the lease is signed represents the transfer of control and satisfaction of the performance obligation as the tenant has been secured. The commission fees are either a fixed or variable based on a percentage of the aggregate rental fee payable over the lease term. Commission payments may be due entirely upon lease execution or may be paid in installments upon the resolution of a future contingency. In those cases, Newmark does not provide any further services after the first contingency has been met. Therefore, the performance obligation of securing a tenant has been fulfilled upon reaching the first contingency. Newmark records a receivable for future installments of the commission revenue subject to any constraints that may exist in instances where the commission is considered variable consideration.

Capital markets. Newmark provides investment sales and mortgage brokerage services to property owners to identify qualified purchasers or debt placement for an owner’s property in exchange for a commission. Newmark is compensated for its services of finding a qualified purchaser or lender for the owner’s property, the one performance obligation, as evidenced by the closing of the sale of the property. In some cases, the consideration is payable in separate installments upon reaching two separate contingencies, such as the closing of a construction loan and the subsequent consummation of the sale of the property. In those cases, Newmark does not provide any further services after the first contingency has been met. The transfer of control and satisfaction of the performance obligation occurs when Newmark obtains a qualified purchaser or lender, as evidenced by the closing of the sale of or loans to the property. Therefore, revenue is recognized at a point in time. Commission fees may be fixed or variable based on a percentage of the transaction amount. Commission payments may be due entirely upon closing, either through escrow or upon recordation of the deed. Consideration is variable if the payment is contingent on an event that may or may not occur after Newmark has satisfied its performance obligation.  For example, if Newmark’s obligations are fulfilled upon execution of a purchase and sale agreement, but the commission is not payable until closing of the transaction, there would exist an element of variable consideration. In those instances, Newmark assesses whether the amount of variable consideration is constrained and, if so, the source of the uncertainty and expected resolution of that uncertainty.  Accordingly, the variable consideration adjusted for any constraints, if any, should be recognized upon the sale of the property.

Management services, servicing fees and other. In this business, Newmark provides property and facilities management services along with project management and other consulting services (collectively, “management services”), to customers who may also utilize Newmark’s commercial real estate brokerage services. As previously noted, servicing fees are not within the scope of the new revenue standard and a description of these services can be found in Note 3 Summary of Significant Accounting Policies.

Each type of management service (property, facility and project) generally represents a single performance obligation composed of a series of distinct services that are substantially the same and have the same pattern of transfer. Each task is an activity to fulfill the management service and are not separate promises that are distinct in the context of the contract. To meet the same pattern of transfer criterion, Newmark determined each distinct day of service represents a performance obligation that would be satisfied over time and has the same measure of progress. The customer simultaneously receives and consumes the benefits provided by Newmark’s performance as Newmark performs. Therefore, revenue is recognized over time using a time-elapsed method to measure progress.

Consideration received may be fixed or variable. Fixed consideration is included in the transaction price whereas variable consideration is subject to the revenue constraint and included in the transaction price only to the extent it is probable a significant reversal in the amount of cumulative revenue recognized will not occur in the future. For example, management fees subject to key performance indicators for an annual period are considered variable consideration due to the future contingency that performance indicators would not be met and Newmark would be required to return a portion of management fees already received. Accordingly, the entire transaction price, including the element of variable consideration adjusted for any constraints, is recognized over the term of the contracts. In some cases, Newmark has determined that it has a right to consideration from a customer in an amount that corresponds directly with the value to the customer of Newmark’s performance completed to date (for example, a service contract in which Newmark bills a fixed amount for each hour of service provided). Newmark has elected to use the practical expedient whereby an entity may recognize revenue in the amount to which the entity has a right to invoice.

In some instances, because project management services can cover many different types of projects and even include phases for a single project that vary in the services delivered, the performance obligation is the completion of a deliverable. In those instances, the satisfaction of the performance obligation occurs at a point in time (upon completion of the deliverable when the customer obtains control). Generally, the fee is due upon completion and delivery and, accordingly, is recognized at that time.


For management and facility service contracts, the owner of the property will typically reimburse Newmark for certain expenses that are incurred on behalf of the owner, which comprise primarily on-site employee salaries and related benefit costs. The reimbursement amounts which are to be reimbursed per the terms of the services contract are recognized as revenue in the same period as the related expenses are incurred. In certain instances, Newmark subcontracts property management services to independent property managers, in which case Newmark passes a portion of its property management fee on to the subcontractor, and Newmark retains the balance. Accordingly, Newmark records these fees gross of the amounts paid to subcontractors, and the amounts paid to subcontractors are recognized as expenses in the same period.


Newmark incurs expenses on behalf of customers for certain management services subject to reimbursement. Newmark concluded that it controls the services provided by aalso uses third party on behalfservice providers in the provision of customers and, therefore, actsits services to customers. In instances where a third-party service provider is used, Newmark performs an analysis to determine whether it is acting as a principal under those contracts. For these service contracts,or an agent with respect to the services provided. To the extent that Newmark presentsdetermines that it is acting as a principal, the revenue and the expenses incurred are recorded on behalfa gross basis. In instances where Newmark has determined that it is acting as an agent, the revenue and expenses are presented on a net basis within the revenue line item.

In some instances, Newmark performs services for customers and incurs out-of-pocket expenses as part of delivering those services. Newmark’s customers along with corresponding reimbursement revenueagree to reimburse Newmark for those expenses, and those reimbursements are part of the contract’s transaction price. Consequently, these expenses and the reimbursements of such expenses from the customer are presented on a gross basis because the services giving rise to the out-of-pocket expenses do not transfer a good or service. The reimbursements are included in the transaction price when the costs are incurred, and the reimbursements are due from the
customer.

Servicing fees are earned for servicing mortgage loans and are recognized on an accrual basis over the lives of the related mortgage loans. Also included in servicing fees are the fees earned on prepayments, interest and placement fees on borrowers’ escrow accounts and other ancillary fees.Other revenues include interest income on warehouse notes receivable.

Leasing and Other Commissions:
Commissions from real estate lease brokerage transactions are typically recognized at a point in time on the date the lease is signed, if deemed not subject to significant reversal. The date the lease is signed represents the transfer of control and satisfaction of the performance obligation as the tenant has been secured. Commission payments may be due entirely upon lease execution or may be paid in installments upon the resolution of a future contingency (e.g. tenant move-in or payment of first month’s rent).

Investment Sales
Investment sales revenue from real estate sales brokerage transactions are recognized at the time the service has been provided and the commission becomes legally due, except when future contingencies exist. In most cases, close of escrow or transfer of title is a future contingency, and revenue recognition is deferred until all contingencies are satisfied.

Commercial Mortgage Origination, net:
Fair value of expected net future cash flows from servicing and loan originations and related fees and sales premiums, net, are recognized when a derivative asset or liability is recorded upon the commitment to originate a loan with a borrower and sell the loan to an investor. The derivative is recorded at fair value and includes loan origination fees, sales premiums, and the estimated fair value of the expected net servicing cash flows. The revenue is recognized net of related fees and commissions to third-party brokers. Mortgage brokerage and debt placement revenue is earned and recognized when the sale of a property closes, and title passes from seller to buyer.



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Current Expected Credit Losses ("CECL"):
The accounting policy changes described below were updated pursuant to the adoption of ASU No. 2016-13, Financial Instruments—Credit Losses (Topic 326)—Measurement of Credit Losses on Financial Instruments and related amendments on January 1, 2020. These policy updates have been applied using the modified retrospective approach in the accompanying unaudited condensed consolidated financial statements from January 1, 2020 onward. Financial information for the historical comparable periods was not revised and continues to be reported under the accounting standards in effect during those historical periods. In accordance with the guidance in ASC Topic 326, Newmark presents its financial assets that are measured at amortized cost, net of an allowance for credit losses, which represents the amount expected to be collected over their estimated life. Expected credit losses for newly recognized financial assets carried at amortized cost and credit exposures on off-balance sheet financial guarantees, as well as changes to expected lifetime credit losses during the period, are recognized in earnings. The CECL methodology represents a significant change from prior U.S. GAAP and replaced the prior multiple impairment methods, which generally required that a loss be incurred before it was recognized. Within the life cycle of a loan or other financial asset in scope, the CECL methodology generally results in the earlier recognition of the provision for credit losses and the related allowance for credit losses than under prior U.S. GAAP. The CECL methodology’s impact on expected credit losses, among other things, reflects Newmark’s view of the current state of the economy, forecasted macroeconomic conditions and Newmark’s portfolios.

Financial guarantee liability:
Newmark's adoption of ASC 326 impacted the expected credit loss reserving methodology for the financial guarantee liability provided to Fannie Mae under the Delegated Underwriting and Servicing (“DUS”) Program and Freddie Mac’s Targeted Affordable Housing Program “TAH”). The expected credit loss is modeled based on Newmark's historical loss experience adjusted to reflect current economic conditions. A significant amount of judgment is required in the determination of the appropriate reasonable and supportable period, the methodology used to incorporate current and future macroeconomic conditions, determination of the probability of and exposure at default or non-payment, current delinquency status, loan size, terms, amortization types, and the forward-looking view of the primary risk drivers (debt-service coverage ratio and loan-to-value), all of which are ultimately used in measuring the quantitative components of the reserve. Beyond the reasonable and supportable period, Newmark estimates expected credit losses using its historical loss rates. In addition, Newmark reviews the reserves periodically and makes adjustments for certain external and internal qualitative factors, which may increase or decrease the reserves for credit losses. In order to estimate credit losses, assumptions about current and future economic conditions are incorporated into the model using multiple economic scenarios that are weighted to reflect the conditions at each measurement date. During the three and six months ended June 30, 2022, there was a reduction in the CECL related provision of $0.3 million and $0.1 million, respectively. During the three and six months ended June 30, 2021, there was a reduction in the CECL related provision of $4.7 million and $6.3 million, respectively. As of June 30, 2022 and December 31, 2021, respectively, the balance of the financial guarantee liabilities was $25.9 million and $26.0 million, and is included in “Other long-term liabilities” on the accompanying unaudited condensed consolidated balance sheets.

Receivables, net:
Newmark has accrued commissions receivable from real estate brokerage transactions, management services and other receivables from contractual management assignments. Receivables are presented net of the CECL allowance as discussed above and are included in “Receivables, net” on the accompanying unaudited condensed consolidated balance sheets. For its CECL reserve, Newmark segregated its receivables into certain pools based on similar risk characteristics and further defined a range of potential loss rates for each pool based on aging. Newmark designed its methodology to allow for a range of loss rates in each pool such that changes in forward-looking conditions can be incorporated into the estimate. Each pool is assigned a loss rate that incorporates management’s view of current conditions and forward-looking conditions that inform the level of expected credit losses in each pool. The credit loss estimate includes specifically identified amounts for which payment has become unlikely. During the three and six months ended June 30, 2022, there was an increase in the CECL related provision of $0.8 million and $4.6 million, respectively. During the three and six months ended June 30, 2021, there was an increase in the CECL related provision of $2.9 million and $4.1 million, respectively. The balance of the reserve was $20.7 million and $16.7 million, respectively, as of June 30, 2022 and December 31, 2021 and is included in "Receivables, net" on the accompanying unaudited condensed consolidated balance sheets.

Loans, Forgivable Loans and Other Receivables from Employees and Partners, net:
Newmark has entered into various agreements with certain of its employees and partners, whereby these individuals receive loans which may be either wholly or in part repaid from the distribution earnings that the individual receives on some or all of their limited partnership units or may be forgiven over a period of time. The forgivable portion of these loans is not included in Newmark’s estimate of expected credit losses when employees meet the conditions for forgiveness through their continued employment over the specified time period and is recognized as compensation expense over the life of the loan. The amounts due from terminated employees that Newmark does not expect to collect are included in the allowance for credit losses. As of June 30, 2022 and December 31, 2021, the balance of this reserve was $3.8 million, and is included in “Loans, forgivable loans and other receivables from employees and partners, net” on the accompanying unaudited condensed
21

consolidated statementbalance sheets.

From time to time, Newmark may also enter into agreements with employees and partners to grant bonus and salary advances or other types of loans. These advances and loans are repayable in the time frame outlined in the underlying agreements. Newmark reviews loan balances each reporting period for collectability. If Newmark determines that the collectability of a portion of the loan balances is not expected, Newmark recognizes a reserve against the loan balances as compensation expense.

Reclassifications:
The Company has made reclassifications to prior period balances to conform to current period presentation. These reclassifications had no effect on the reported results of operations.

Disaggregation Beginning with the period ended March 31, 2022, the Company adjusted the revenue presentation in the unaudited condensed consolidated Statement of Revenue

Newmark’sOperations. "Gains from mortgage banking activities/origination, net" has been combined with mortgage brokerage and debt placement revenues as "Commercial mortgage origination, net", while "Investment sales" is a stand-alone line-item. For the three and six months ended June 30, 2021, $42.5 million and $62.4 million, respectively, was reclassified from "Commissions" to "Commercial mortgage origination, net."


Segment:
Newmark has a single operating segment. Newmark is a real estate services firm offering services to commercial real estate tenants, investors, owners, occupiers, developers, leasing and corporate advisory, investment sales and real estate finance, consulting, origination and servicing of commercial mortgage loans, valuation, project and development management and property and facility management. The chief operating decision makerdecision-maker regardless of geographic location evaluates the operating results of Newmark as total real estate.estate services and allocates resources accordingly. Newmark recognized revenues as follows (in thousands): 
 Three Months Ended June 30,Six Months Ended June 30,
 2022202120222021
Management services, servicing fees and other$233,685 $219,509 $466,804 $407,259 
Leasing and other commissions212,825 184,346 411,778 331,779 
Investment sales209,053 142,233 361,167 243,778 
Commercial mortgage origination, net99,788 83,783 193,850 151,035 
Revenues$755,351 $629,871 $1,433,599 $1,133,851 


(4)    Acquisitions

On April 1, 2022, Newmark completed the acquisitions of 2 companies; BH2, a London-based real estate advisory firm, and McCall & Almy, a multi-market tenant representation and real estate advisory firm.

On May 3, 2022, Newmark completed the acquisition of Open Realty Advisors and Open Realty Properties, which together operate as “Open Realty”, a retail real estate advisory firm.

For the six months ended June 30, 2022, the following table summarizes the components of the purchase consideration transferred, and the preliminary allocation of the assets acquired, and liabilities assumed, for the acquisition. Newmark expects to finalize its analysis of the assets acquired and liabilities assumed within the first year of the acquisition, and therefore adjustments to assets and liabilities may occur (in thousands):

As of the
Acquisition
Date
Purchase Price
Contingent Consideration12,195 
Cash and stock issued at closing65,533 
Total$77,728 
Allocations
Cash$1,286 
Goodwill50,997 
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Other intangible assets, net24,444 
Receivables, net1,984 
Other assets290 
Right-of-use Assets4,305 
Right-of-use Liabilities(4,305)
Accrued Compensation(1,190)
Accounts payable, accrued expenses and other liabilities(83)
Total$77,728 

The total consideration for the acquisitions during the six months ended June 30, 2022, was $77.7 million in total fair value, comprising cash of $65.5 million and an assumed liability of $12.2 million. The excess of the consideration over the fair value of the net assets acquired was recorded as goodwill of $51.0 million, of which approximately $39.4 million is deductible by Newmark for tax purposes.

These acquisitions were accounted for using the purchase method of accounting. The results of operations of the acquisitions have been included on the accompanying unaudited condensed consolidated financial statements subsequent to the respective dates of acquisition, which in aggregate contributed $4.5 million to Newmark’s revenues for the six months ended June 30, 2022.

Newmark acquired the first lien debt of Knotel, Inc. (“Knotel”), a global flexible workspace provider, in December of 2020. Newmark subsequently acquired Knotel's second lien debt in January of 2021. On January 31, 2021, Newmark agreed to provide approximately $19.8 million of debtor-in-possession financing to Knotel and to acquire the business, as part of Knotel's Chapter 11 sales process. On March 18, 2021, Newmark received approval from the U.S. Bankruptcy Court for the District of Delaware to acquire the business of Knotel. On March 24, 2021, Newmark acquired the business of Knotel. The Knotel acquisition has been determined to be a business combination with an acquisition date of March 31, 2021, for accounting purposes. The assets and liabilities of Knotel have been recorded in Newmark’s consolidated balance sheets at fair market value.

On September 6, 2021, Newmark acquired a majority stake in the start-up Space Management (DBA"Deskeo"), France's leader in flexible and serviced workspace for enterprise clients. Based in Paris, France Deskeo added over 50 locations to Newmark's international flexible office portfolio.

In November 2021, Newmark completed the acquisition of a U.S. based real estate property management services firm.

As of June 30, 2022, the following table summarizes the components of the purchase consideration transferred, and the preliminary allocation of the assets acquired, and liabilities assumed, for the acquisitions which occurred in 2021. Newmark expects to finalize its analysis of the assets acquired and liabilities assumed within the first year of the acquisition, and therefore adjustments to assets and liabilities may occur (in thousands):

As of the
Acquisition
Date
Purchase Price
First and second lien debt39,584 
Debtor-in-possession financing19,788 
Assumed liability6,574 
Cash and stock issued at closing44,492 
Total$110,438 
Allocations
Cash$21,641 
Goodwill97,639 
Other intangible assets, net41,332 
Receivables, net7,478 
Fixed Assets, net40,605 
Other assets62,710 
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Right-of-use Assets434,315 
Right-of-use Liabilities(434,315)
Accrued Compensation(2,076)
Accounts payable, accrued expenses and other liabilities(103,771)
Unrealized gain on investment(27,825)
Initial investment (recorded at cost)(13,832)
Non-controlling interest(13,463)
Total$110,438 

The total consideration for the acquisitions during the year ended December 31, 2021, was $110.4 million in total fair value, comprising of the extinguishment of first and second lien debt of $39.6 million, debtor-in-possession financing of $19.8 million, an assumed liability of $6.6 million, and $41.5 million in cash and $3.0 million of restricted Class A common stock. The excess of the consideration over the fair value of the net assets acquired was recorded as goodwill of $97.6 million, of which approximately $78.3 million is deductible by Newmark for tax purposes.

These acquisitions were accounted for using the purchase method of accounting. The results of operations of the acquisitions have been included on the accompanying unaudited condensed consolidated financial statements subsequent to the date of acquisition, which in aggregate contributed $75.6 million to Newmark’s revenues for the year ended December 31, 2021. Deskeo was previously recorded as an alternative method investment on Newmark’s unaudited condensed consolidated balance sheet and amounted to $13.8 million. Pursuant to acquiring a majority interest in Deskeo and valuing its previously held non-controlling interest, Newmark recorded an unrealized gain of $27.8 million on the investment during the year ended December 31, 2021.


(5)    Earnings Per Share and Weighted-Average Shares Outstanding

U.S. GAAP guidance — Earnings (Loss) Per Share provides guidance on the computation and presentation of earnings (loss) per share (“EPS”). Basic EPS excludes dilution and is computed by dividing Net income available to common stockholders by the weighted-average number of shares of common stock outstanding and contingent shares for which all necessary conditions have been satisfied except for the passage of time. Net income (loss) is allocated to Newmark’s outstanding common stock, FPUs, limited partnership units and Cantor units (see Note 2 — “Limited Partnership Interests in Newmark Holdings and BGC Holdings”). In addition, in relation to the Newmark OpCo Preferred Investment, the EPUs issued in June 2018 and September 2018 are entitled to a preferred payable-in-kind dividend which is recorded as accretion to the carrying amount of the EPUs and is a reduction to net income available to common stockholders for the calculation of Newmark’s basic earnings per share and fully diluted earnings per share.

The following is the calculation of Newmark’s basic EPS (in thousands, except per share data): 
 Three Months Ended June 30,Six Months Ended June 30,
 2022202120222021
Basic earnings per share:
Net income available to common stockholders (1)
$48,519 $435,178 $48,881 $466,642 
Basic weighted-average shares of common stock outstanding183,948 185,114 186,401 184,190 
Basic earnings per share$0.26 $2.35 $0.26 $2.53 
(1)Includes a reduction for dividends on preferred stock or EPUs in the amount of $4.6 million and $6.2 million for the three and six months ended June 30, 2021, respectively.(see Note 1 — “Organization and Basis of Presentation”).

Fully diluted EPS is calculated utilizing net income available to common stockholders plus net income allocations to the limited partnership interests in Newmark Holdings as the numerator. The denominator comprises Newmark’s weighted-average number of outstanding shares of Newmark common stock to the extent the related units are dilutive and, if dilutive, the weighted-average number of limited partnership interests and other contracts to issue shares of common stock, stock options and RSUs. The limited partnership interests generally are potentially exchangeable into shares of Newmark Class A common stock and are entitled to remaining earnings after the deduction for the Preferred Distribution; as a result, they are included in the fully diluted EPS computation to the extent that the effect would be dilutive.

The following is the calculation of Newmark’s fully diluted EPS (in thousands, except per share data):
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 Three Months Ended June 30,Six Months Ended June 30,
2022202120222021
Fully diluted earnings per share:
Net income available to common stockholders$48,519 $435,178 $48,881 $466,642 
Allocations of net income to limited partnership interests in Newmark Holdings, net of tax14,860 148,567 14,567 159,830 
Net income for fully diluted shares$63,379 $583,745 $63,448 $626,472 
Weighted-average shares:
Common stock outstanding183,948 185,114 186,401 184,190 
Partnership units (1)
58,917 83,122 57,576 83,336 
RSUs (Treasury stock method)3,067 4,149 4,475 3,582 
Newmark exchange shares2,053 1,170 2,006 1,195 
Fully diluted weighted-average shares of common stock outstanding247,985 273,555 250,458 272,303 
Fully diluted earnings per share$0.26 $2.13 $0.25 $2.30 
(1)Partnership units collectively include FPUs, limited partnership units, and Cantor and BGC units (see Note 2 — “Limited Partnership Interests in Newmark Holdings and BGC Holdings” for more information).

For the three and six months ended June 30, 2022, 0.6 million and 0.8 million potentially dilutive securities, respectively, were excluded from the computation of fully diluted EPS because their effect would have been anti-dilutive. For the three and six months ended June 30, 2021, 0.1 million and 1.0 million potentially dilutive securities, respectively, were excluded from the computation of fully diluted EPS because their effect would have been anti-dilutive.

(6)    Stock Transactions and Unit Redemptions

As of June 30, 2022, Newmark has 2 classes of authorized common stock: Class A common stock and Class B common stock.

Class A Common Stock
Each share of Class A common stock is entitled to 1 vote. Newmark has 1.0 billion authorized shares of Class A common stock at $0.01 par value per share.

Changes in shares of Newmark’s Class A common stock outstanding were as follows:
 Three Months Ended June 30,Six Months Ended June 30,
 2022202120222021
Shares outstanding at beginning of period168,557,363 163,113,922 168,272,371 161,175,894 
Share issuances:
LPU redemption/exchange (1)
2,395,043 1,140,363 3,329,911 2,992,165 
Issuance of Class A common stock for Newmark RSUs369,567 278,139 1,389,041 1,243,608 
Other51,314 18,817,132 64,835 18,817,132 
Treasury stock repurchases(11,370,647)(3,613,098)(13,053,518)(4,492,341)
Shares outstanding at end of period160,002,640 179,736,458 160,002,640 179,736,458 
(1)Because they were included in the Newmark’s fully diluted share count, if dilutive, any exchange of LPUs into Class A common stock would not impact the fully diluted number of shares and units outstanding. 

Class B Common Stock
Each share of Class B common stock is entitled to 10 votes and is convertible at any time into 1 share of Class A common stock.

As of June 30, 2022 and December 31, 2021, there were 21.3 million shares of Newmark Class B common stock outstanding.

Share Repurchases
On February 17, 2021, our Board increased its authorized share repurchases of Newmark Class A Common stock and purchases of limited partnership interests in Newmark's subsidiaries to $400.0 million. This authorization includes repurchases of shares or purchase of units from executive officers, other employees and partners, including of BGC and Cantor, as well as other affiliated persons or entities. On February 10, 2022, the Board and Audit Committee reauthorized the $400.0 million Newmark share repurchase and unit redemption authorization, which may include purchases from Cantor, its partners or employees or other affiliated persons or entities.
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From time to time, Newmark may actively continue to repurchase shares and/or purchase units. During the three and six months ended June 30, 2022, Newmark repurchased 11,370,647 and 13,053,518 shares of Class A common stock, respectively, at an average price of $12.76 and $13.47, respectively. As of June 30, 2022, Newmark had $252.2 million remaining from its share repurchase and unit purchase authorization.

The following table details Newmark's unit redemptions and share repurchases for cash, under the new program, and does not include unit redemptions and/or cancellations in connection with the grant of shares of Newmark's Class A common stock. The gross unit redemptions and share repurchases of Newmark's Class A common stock during the six months ended June 30, 2022 were as follows (in thousands except units, shares and per share amounts):
Total
Number of
Shares
Repurchased/Purchased		Average
Price Paid
per Unit
or Share		Approximate
Dollar Value
of Units and
Shares That
May Yet Be
Repurchased/
Purchased
Under the 
Program
Repurchases
January 1, 2022 - March 31, 20221,682,871 $18.35 
April 20226,025,762 $13.96 
May 20224,544,224 $11.82 
June 2022800,661 $9.03 
Total Repurchases13,053,518 $13.47 $252,192 

Redeemable Partnership Interests
The changes in the carrying amount of FPUs follow (in thousands):
 June 30, 2022December 31, 2021
Balance at beginning of period:$20,947 $20,045 
Income allocation1,230 4,532 
Distributions of income(3,260)(1,215)
Redemptions— (2,169)
Issuance and other(697)(246)
Balance at end of period$18,220 $20,947 

(7)     Marketable Securities

On June 28, 2013, BGC sold certain assets of eSpeed, its on-the-run business, to Nasdaq. The total consideration received by BGC in the transaction included the Nasdaq Earn-out of up to 14,883,705 shares of Nasdaq shares to be paid ratably over 15 years, provided that Nasdaq, as a whole, produces at least $25.0 million in consolidated gross revenues each year. The Nasdaq Earn-out was excluded from the initial gain on the divestiture and is recognized in income as it is realized and earned when these contingent events have occurred, consistent with the accounting guidance for gain contingencies. BGC transferred the remaining rights under the Nasdaq Earn-out to Newmark on September 28, 2017. Any Nasdaq shares that were received by BGC prior to September 28, 2017 were not transferred to Newmark.

In connection with the Nasdaq Earn-out, Newmark received 992,247 shares during the years ended December 31, 2017 through 2020. In accordance with the terms of the agreement, Newmark would recognize the remaining Nasdaq Earn-out of up to 6,945,729 shares of Nasdaq shares ratably over approximately the next 7 years, provided that Nasdaq, as a whole, produces at least $25.0 million in gross revenues each year. On February 2, 2021, Nasdaq announced that it entered into a definitive agreement to sell its U.S. fixed income business to Tradeweb. On June 25, 2021, Nasdaq announced the close of the sale of its U.S. fixed income business, which accelerated Newmark’s receipt of Nasdaq shares. Newmark received 6,222,340 Nasdaq shares, with a fair value of $1,093.9 million based on the closing price on June 30, 2021 included in “Other (loss) income, net” for the three months ended June 30, 2021.

On June 25, 2021, the SPV notified RBC of its decision to settle the third and fourth Nasdaq Forwards using the Nasdaq shares the SPV received on June 25, 2021. On July 2, 2021, Newmark settled the Nasdaq Forwards with 944,329 Nasdaq shares, with a fair value of $166.0 million based on the closing price of June 30, 2021, and retained 5,278,011 Nasdaq shares. Newmark had no remaining Nasdaq Forward contracts as of June 30, 2022.

26

Newmark sold 2,780,180 shares of Nasdaq during the third and fourth quarter of 2021, and during the three months ended March 31, 2022, Newmark sold all of its remaining 2,497,831 shares of Nasdaq. The gross proceeds of the Nasdaq shares sold was $437.8 million for the six months ended June 30, 2022. Newmark recorded realized losses on the mark-to-market of these securities of $7.5 million for the six months ended June 30, 2022. Newmark recorded unrealized loss on the mark-to-market of these securities of $80.1 million for the six months ended June 30, 2022. During the three and six months ended June 30, 2021, Newmark sold 27,134 and 250,742 of the Nasdaq shares. The gross proceeds of the Nasdaq shares sold were $3.8 million and $35.4 million for the three and six months ended June 30, 2021, respectively. Newmark recorded realized gains on the mark-to-market of these securities of $0.7 million and $4.6 million for the three and six months ended June 30, 2021, respectively. Newmark recorded unrealized gains losses on the mark-to-market of these securities of $14.8 million and $16.6 million for the three and six months ended June 30, 2021, respectively. Realized and unrealized gains on the mark-to-market of these shares are included in “Other income, net” on the accompanying unaudited condensed consolidated statements of operations. As of June 30, 2022, Newmark had no marketable securities on the accompanying unaudited condensed consolidated balance sheets.

As of December 31, 2021, Newmark had $524.6 million, included in “Marketable securities” on the accompanying unaudited condensed consolidated balance sheets (see Note 20 — “Collateralized Transactions”).

On August 2, 2021, a subsidiary of Newmark, Newmark OpCo, entered into a Master Repurchase Agreement (the “Repurchase Agreement”) with CF Secured, LLC (“CF Secured”), an affiliate of Cantor, pursuant to which Newmark could seek, from time-to-time, to execute short-term secured financing transactions. The Company, under the Repurchase Agreement, could seek to sell securities, in this case common shares of Nasdaq, owned by the Company, to CF Secured, under the Repurchase Agreement, and agreed to repurchase those securities on a date certain at a repurchase price generally equal to the original purchase price plus interest. Pursuant to the Repurchase Agreement, as of December 31, 2021 the Company had 866,791 Nasdaq shares pledged in the amount of $182.0 million, against which Newmark received $140.0 million. The $140.0 million amount received from CF Secured is included in "Repurchase agreements and securities loaned" on the accompanying unaudited condensed consolidated balance sheets (see Note 20 — "Repurchase Agreements and Securities Loaned" and Note 27 — “Related Party Transactions”). As of June 30, 2022, Newmark had no shares pledged.


(8)    Investments

Newmark has a 27% ownership in Real Estate LP, a joint venture with Cantor in which Newmark has the ability to exert significant influence over the operating and financial policies. Accordingly, Newmark accounts for this investment under the equity method of accounting. Newmark recognized equity (loss) income of $0.0 million and $(1.0) million for the three months ended June 30, 2022 and 2021, respectively and $0.0 million and $0.0 million for the six months ended June 30, 2022 and 2021, respectively. Equity (loss) income are included in "Other income, net" on the accompanying unaudited condensed consolidated statements of operations. Newmark did not receive any distributions for the three and six months ended June 30, 2022 and 2021, respectively. The carrying value of these investments were $88.3 million as of both June 30, 2022 and December 31, 2021, and are included in “Other assets” on the accompanying unaudited condensed consolidated balance sheets. See Note 27 - "Related Party Transactions - CF Real Estate Finance Holdings, L.P." for further information.

Investments Carried Under Measurement Alternatives
Newmark has acquired investments in entities for which it does not have the ability to exert significant influence over operating and financial policies (see Note 4 — “Acquisitions”).

For the three and six months ended June 30, 2022, respectively, Newmark recorded unrealized losses related to these investments of $15.5 million and $13.9 million. Newmark recorded gains of $2.5 million relating to these investments for the three and six months ended June 30, 2021. The changes in value are included as a part of “Other income (loss), net” on the accompanying unaudited condensed consolidated statements of operations. The carrying value of these investments were $8.8 million and $20.0 million as of June 30, 2022 and December 31, 2021, respectively, and are included in “Other assets” on the accompanying unaudited condensed consolidated balance sheets.


(9)    Capital and Liquidity Requirements

Newmark is subject to various capital requirements in connection with seller/servicer agreements that Newmark has entered into with the various GSEs. Failure to maintain minimum capital requirements could result in Newmark’s inability to originate and service loans for the respective GSEs and could have a direct material adverse effect on the accompanying unaudited condensed consolidated financial statements. Management believes that, as of June 30, 2022 and December 31, 2021, Newmark had met all capital requirements. As of June 30, 2022 and December 31, 2021, the most restrictive capital
27

requirement was the net worth requirement of the Federal National Mortgage Association (“Fannie Mae”). Newmark exceeded the minimum requirement by $411.1 million and $400.5 million, respectively.                                        

Certain of Newmark’s agreements with Fannie Mae allow Newmark to originate and service loans under Fannie Mae’s DUS Program. These agreements require Newmark to maintain sufficient collateral to meet Fannie Mae’s restricted and operational liquidity requirements based on a pre-established formula. Certain of Newmark’s agreements with the Federal Home Loan Mortgage Corporation (“Freddie Mac”) allow Newmark to service loans under TAH. These agreements require Newmark to pledge sufficient collateral to meet Freddie Mac’s liquidity requirement of 8% of the outstanding principal of TAH loans serviced by Newmark. Management believes that, as of June 30, 2022 and December 31, 2021, Newmark had met all liquidity requirements.

In addition, as a servicer for Fannie Mae, the Government National Mortgage Association (“Ginnie Mae”) and Federal Housing Administration, Newmark is required to advance to investors any uncollected principal and interest due from borrowers. Outstanding borrower advances were $1.2 million and $0.9 million as of June 30, 2022 and December 31, 2021, respectively, and are included in “Other assets” on the accompanying unaudited condensed consolidated balance sheets.

(10)    Loans Held for Sale, at Fair Value

Loans held for sale, at fair value represent originated loans that are typically financed by short-term warehouse facilities (see Note 21 — “Warehouse Facilities Collateralized by U.S. Government Sponsored Enterprises”) and sold within 45 days from the date the mortgage loan is funded. Newmark initially and subsequently measures all loans held for sale at fair value on the accompanying unaudited condensed consolidated balance sheets. The fair value measurement falls within the definition of a Level 2 measurement (significant other observable inputs) within the fair value hierarchy. Electing to use fair value allows a better offset of the change in the fair value of the loans and the change in fair value of the derivative instruments used as economic hedges. Loans held for sale had a cost basis and fair value as follows (in thousands):

June 30, 2022December 31, 2021
Cost Basis$837,366 $1,051,220 
Fair Value849,193 1,072,479 
As of June 30, 2022 and December 31, 2021, all of the loans held for sale were either under commitment to be purchased by Freddie Mac or had confirmed forward trade commitments for the issuance and purchase of Fannie Mae or Ginnie Mae mortgage-backed securities that will be secured by the underlying loans. As of June 30, 2022 and December 31, 2021, there were no loans held for sale that were 90 days or more past due or in nonaccrual status.

Newmark records interest income on loans held for sale, in accordance with the terms of the individual loans, during the period prior to sale. Interest income on loans held for sale is included in “Management services, servicing fees and other” on the accompanying unaudited condensed consolidated statements of operations. Gains (losses) for fair value adjustments on loans held for sale is included in “Commercial mortgage origination, net” on the accompanying unaudited condensed consolidated statements of operations. Interest income and gains (losses) for fair value adjustments on loans held for sale were as follows (in thousands):


 Three Months Ended June 30,Six Months Ended June 30,
 2022202120222021
Interest income on loans held for sale$5,162 $2,953 $10,106 $7,934 
Gains (loss) recognized on change in fair value on loans held for sale10,862 1,786 11,827 5,821 


(11)    Derivatives

Newmark accounts for its derivatives at fair value and recognizes all derivatives as either assets or liabilities on the accompanying unaudited condensed consolidated balance sheets. In its normal course of business, Newmark enters into commitments to extend credit for mortgage loans at a specific rate (rate lock commitments) and commitments to deliver these loans to third-party investors at a fixed price (forward sale contracts). In addition, Newmark has entered into the Nasdaq Forwards (see Note 1 — “Organization and Basis of Presentation”) that are accounted for as derivatives.

28

The fair value of derivative contracts, computed in accordance with Newmark’s netting policy, is set forth below (in thousands):
 June 30, 2022December 31, 2021
Derivative contractAssetsLiabilities
Notional
Amounts(1)
AssetsLiabilities
Notional
Amounts(1)
Rate lock commitments$3,717 $9,108 $140,706 $3,956 $2,836 $174,787 
Forward sale contracts15,643 6,119 978,072 4,544 2,180 1,226,007 
Total$19,360 $15,227 $1,118,778 $8,500 $5,016 $1,400,794 
(1)Notional amounts represent the sum of gross long and short derivative contracts, an indication of the volume of Newmark’s derivative activity, and do not represent anticipated losses.

The change in fair value of rate lock commitments and forward sale contracts related to mortgage loans are reported as part of “Commercial mortgage origination, net” on the accompanying unaudited condensed consolidated statements of operations. The change in fair value of rate lock commitments are disclosed net of $(1.1) million and $1.1 million of expenses for the three months ended June 30, 2022 and 2021, respectively, and $0.2 million and $2.2 million of expenses for the six months ended June 30, 2022 and 2021, respectively. The changes in fair value of rate lock commitments are reported as part of “Compensation and employee benefits” on the accompanying unaudited condensed consolidated statements of operations.

Gains and losses on derivative contracts, which are included on the accompanying unaudited condensed consolidated statements of operations were as follows (in thousands):
 Location of gain (loss) recognized in income for derivativesThree Months Ended June 30,Six Months Ended June 30,
 2022202120222021
Derivatives not designed as hedging instruments: 
Nasdaq ForwardsOther income (loss), net$— $(6,802)$— $(12,404)
Rate lock commitmentsCommercial mortgage origination, net(2,198)15,149 (5,167)19,843 
Rate lock commitmentsCompensation and employee benefits1,123 (1,060)(224)(2,177)
Forward sale contractsCommercial mortgage origination, net(11,992)(10,061)9,524 (7,304)
Total $(13,067)$(2,774)$4,133 $(2,042)
Derivative assets and derivative liabilities are included in “Other current assets”, “Other assets” and the “Accounts payable, accrued expenses and other liabilities”, on the accompanying unaudited condensed consolidated balance sheets.

(12)    Credit Enhancement Receivable, Credit Enhancement Deposit and Contingent Liability

Newmark was a party to a Credit Enhancement Agreement (“CEA”), dated March 9, 2012, with German American Capital Corporation and Deutsche Bank Americas Holding Corporation (together, the “DB Entities”). On October 20, 2016, the DB Entities assigned the CEA to Deutsche Bank AG Cayman Island Branch, a Cayman Island Branch of Deutsche Bank AG (“DB Cayman”). Under the terms of these agreements, DB Cayman provided Newmark with varying levels of ongoing credit protection, subject to certain limits, for Fannie Mae and Freddie Mac loans subject to loss-sharing (see Note 23 — “Financial Guarantee Liability”) in Newmark’s servicing portfolio as of March 9, 2012. DB Cayman also reimbursed Newmark for any losses incurred due to violation of underwriting and servicing agreements that occurred prior to March 9, 2012. In accordance within the terms of the CEA, Newmark paid all amounts due to the DB Entities on March 23, 2021 fulfilling the Company's obligations under the agreement. For the three and six months ended June 30, 2022 and 2021, there were no reimbursements under the CEA.

Newmark's servicing portfolio consisted of the following loss-sharing components (in thousands):
 June 30, 2022December 31, 2021
Total credit risk loan portfolio$26,725,990 $25,764,721 
Maximum pre-credit enhancement loss exposure$8,108,893 $7,785,850 
Maximum DB Cayman credit protection— — 
Maximum loss exposure without any form of credit protection$8,108,893 $7,785,850 

Credit enhancement receivable
29

As of June 30, 2022 and December 31, 2021, there were no credit enhancement receivables.

Credit enhancement deposit
The CEA required the DB Entities to deposit $25.0 million into Newmark’s Fannie Mae restricted liquidity account (see Note 9 — “Capital and Liquidity Requirements”). On March 23, 2021, Newmark returned the credit enhancement deposit of $25.0 million to the DB Entities.

Contingent liability
Under the CEA, Newmark was required to pay DB Cayman, on March 9, 2021, an amount equal to 50% of the positive difference, if any, between (a) $25.0 million, and (b) Newmark’s unreimbursed loss-sharing payments from March 9, 2012 through March 9, 2021 on Newmark’s servicing portfolio as of March 9, 2012. On March 23, 2021, Newmark paid DB Cayman the entire outstanding amount. As of June 30, 2022 and December 31, 2021, there was no contingent liability.

(13)    Revenues from Contracts with Customers

The following table presents Newmark’s total revenues separately for its revenues from contracts with customers and other sources of revenues (in thousands):
 Three Months Ended June 30,Six Months Ended June 30,
 2022202120222021
Revenues from contracts with customers:
Leasing and other commissions$212,825 $184,346 $411,778 $331,779 
Investment sales209,053 142,233 361,167 243,778 
Mortgage brokerage and debt placement50,326 42,522 96,615 62,380 
Management services181,329 179,414 366,389 325,980 
Total653,533 548,515 1,235,949 963,917 
Other sources of revenue(1):
Fair value of expected net future cash flows from servicing recognized at commitment, net31,499 25,815 60,971 54,532 
Loan originations related fees and sales premiums, net17,963 15,446 36,264 34,123 
Servicing fees and other52,356 40,095 100,415 81,279 
Total$755,351 $629,871 $1,433,599 $1,133,851 
(1)Although these items have customers under contract, they were recorded as other sources of revenue as they were excluded from the scope of ASU No. 2014-9.


Disaggregation of revenues
Newmark’s chief operating decision-maker, regardless of geographic location, evaluates the operating results, including revenues, of Newmark as total real estate services (see Note 3 Summary— “Summary of Significant Accounting PoliciesPolicies” for further discussion.

discussion).


Contract Balances

balances

The timing of Newmark’s revenue recognition may differ from the timing of payment by its customers. Newmark records a receivable when revenue is recognized prior to payment and Newmark has an unconditional right to payment. Alternatively, when payment precedes the provision of the related services, Newmark records deferred revenue until the performance obligations are satisfied.


Newmark’s deferred revenue primarily relates to customers paying in advance or billed in advance where the performance obligation has not yet been satisfied. Deferred revenue is recorded as a contract liability. Deferred revenue at MarchJune 30, 2022 and December 31, 2018 and January 1, 20182021 was $3.9$3.3 million and $4.6$3.7 million, respectively. During the threesix months ended March 31, 2018,June 30, 2022 and 2021, Newmark recognized revenue of $1.8 million and $1.5 million, respectively, that was recorded as deferred revenue at the beginning of the period.

Contract Costs

Newmark capitalizes costs


For Knotel and Deskeo, the aggregate amount of the transaction price allocated to fulfillthe Company’s remaining performance obligations that represent contracted customer revenues that have not yet been recognized as revenue as of June 30, 2022, that will be recognized as revenue in future periods over the life of the customer contracts, associatedin accordance with different linesASC 606, is approximately $199.5 million. Over half of its business where the revenueremaining performance obligation as of June 30, 2022 is recognized at a point in time and the costs are determinedscheduled to be recoverable. Capitalized costsrecognized as revenue within the next twelve months, with the remaining to fulfill a contractbe recognized over the remaining life of the customer contracts, which extends through 2030.

30

Approximate future cash flows to be received over the next five years at June 30, 2022 are recognized at the point in time that the related revenue is recognized.  

At March 31, 2018, there were no capitalized costs recorded to fulfill a contract.

as follows (in thousands):

(13)

Gains from Mortgage Banking Activities/Originations, Net


Gains from

2022$61,579 
202380,626 
202435,454 
202512,119 
20265,116 
Thereafter4,640 
Total$199,534 

(14)    Commercial Mortgage Origination, Net

Commercial mortgage banking activities/originations,origination, net consists of the following activity (in thousands):

 

 

Three Months Ended March 31,

 

 

 

2018

 

 

2017

 

Loan originations related fees and sales premiums, net

 

$

17,817

 

 

$

15,952

 

Fair value of expected net future cash flows from servicing

   recognized at commitment, net

 

 

21,097

 

 

 

29,310

 

Gains from mortgage banking activities/originations, net

 

$

38,914

 

 

$

45,262

 


(14)

Mortgage Servicing Rights, Net (MSR)

 Three Months Ended June 30,Six Months Ended June 30,
 2022202120222021
Fair value of expected net future cash flows from servicing recognized at commitment, net$31,499$25,815$60,971$54,532
Loan originations related fees and sales premiums, net17,963 15,446 36,264 34,123 
Mortgage brokerage and debt placement50,326 42,523 96,615 62,381 
Total$99,788 $83,784 $193,850 $151,036 

A summary


(15)     Mortgage Servicing Rights,Net

    The changes in the carrying amount of the activity in mortgage servicing rights by class for the three months ended March 31, 2018 and 2017 isMSRs were as follows (in thousands):

 

Three Months Ended March 31,

 

 Three Months Ended June 30,Six Months Ended June 30,

Mortgage Servicing Rights

 

2018

 

 

2017

 

Mortgage Servicing Rights2022202120222021

Beginning Balance

 

$

399,349

 

 

$

347,558

 

Beginning Balance$571,581 $550,251 $563,488 $528,983 

Additions

 

 

6,389

 

 

 

28,806

 

Additions35,426 22,436 71,626 70,574 

Purchases from an affiliate

 

 

509

 

 

 

—

 

Amortization

 

 

(19,294

)

 

 

(17,175

)

Amortization(29,059)(27,962)(57,166)(54,832)

Ending Balance

 

$

386,953

 

 

$

359,189

 

Ending Balance$577,948 $544,725 $577,948 $544,725 

Valuation Allowance

 

 

 

 

 

 

 

 

Valuation Allowance

Beginning Balance

 

$

(6,723

)

 

$

(7,742

)

Beginning Balance$(11,986)$(23,006)$(13,186)$(34,254)

Decrease

 

 

1,296

 

 

 

3,168

 

Decrease (increase)Decrease (increase)2,718 4,687 3,918 15,935 

Ending Balance

 

$

(5,427

)

 

$

(4,574

)

Ending Balance$(9,268)$(18,319)$(9,268)$(18,319)

Net balance

 

$

381,526

 

 

$

354,615

 

Net BalanceNet Balance$568,680 $526,406 $568,680 $526,406 

Servicing fees are included in “Management services, servicing fees and other” in Newmark’son the accompanying unaudited condensed consolidated statements of operations and arewere as follows (in thousands):

 

Three Months Ended March 31,

 

 Three Months Ended June 30,Six Months Ended June 30,

 

2018

 

 

2017

 

 2022202120222021

Servicing fees

 

$

25,132

 

 

$

22,050

 

Servicing fees$37,089 $34,414 $73,034 $67,090 

Escrow interest and placement fees

 

 

2,967

 

 

 

1,459

 

Escrow interest and placement fees2,389 1,080 3,406 2,051 

Ancillary fees

 

 

827

 

 

 

1,323

 

Ancillary fees7,482 1,132 13,156 3,819 

Total servicing fees and escrow interest

 

$

28,926

 

 

$

24,832

 

TotalTotal$46,960 $36,626 $89,596 $72,960 


Newmark’s primary servicing portfolio at March 31, 2018June 30, 2022 and December 31, 20172021 was approximately $55.1$69.5 billion and $54.2$68.4 billion, respectively. Also, Newmark is the named special servicer for a number of commercial mortgage backedmortgage-backed securitizations. Upon certain specified events (such as, but not limited to, loan defaults and loans assumptions), the administration of the loan is transferred to Newmark. Newmark’s special servicing portfolio was $1.8 billion and $2.0 billion at March 31, 2018June 30, 2022 and December 31, 2017 was $3.6 billion and $3.8 billion,2021, respectively.


The estimated fair value of the MSRs at March 31, 2018June 30, 2022 and December 31, 20172021 was $ 422.2$661.5 million and $418.1$608.0 million, respectively.

31

Fair values are estimated using a valuation model that calculates the present value of the future net servicing cash flows. The cash flows assumptions used are based on assumptions Newmark believes market participants would use to value the portfolio. Significant assumptions include estimates of the cost of servicing per loan, discount rate, earnings rate on escrow deposits and prepayment speeds.

The discount rates used in measuring fair value for the threesix months ended March 31, 2018June 30, 2022 and for the year ended December 31, 2017 was2021 were between 3.0%6.1% and 13.5% and varied based on investor type. An increase in discount rate of 100 bpsbasis points or 200 bpsbasis points would result in a decrease in fair value by $13.7$18.9 million and $25.0$36.9 million, respectively, at March 31, 2018. An increase in discount rate of 100 bps or 200 bps would result in a decrease in fair valueJune 30, 2022 and by $11.8$18.0 million and $23.0$35.1 million, respectively, at December 31, 2017.

2021.

(15)

Goodwill and Other Intangible Assets, Net of Accumulated Amortization


(16)    Goodwill and Other Intangible Assets, Net

The changes in the carrying amount of goodwill the three months ended March 31, 2018 and the year ended December 31, 2017 were as follows (in thousands):

Balance at December 31, 2016

 

$

412,846

 

Acquisitions

 

 

64,291

 

Measurement period adjustments

 

 

395

 

Balance at December 31, 2017

 

 

477,532

 

Acquisitions

 

 

—

 

Measurement period adjustments

 

 

(2,542

)

Balance at March 31, 2018

 

$

474,990

 

Balance, January 1, 2021$560,332 
Acquisitions97,168 
Measurement period adjustments(369)
Balance, December 31, 2021657,131 
Acquisitions50,997 
Measurement period adjustments(2,929)
Balance, June 30, 2022$705,199 



During the three months ended March 31, 2018, Newmark recognized measurement period adjustments of approximately $(2.5) million.  Newmark did not have any additions to goodwill as a result of acquisitions for the three months ended March 31, 2018. During the years ended December 31, 2017, Newmark recognized additional goodwill and measurement period adjustments of approximately $64.3 million and $0.4 million, respectively. See Note 4—Acquisitions for more information.

Goodwill is not amortized and is reviewed annually for impairment or more frequently if impairment indicators arise, in accordance with U.S. GAAP guidance on Goodwill and Other Intangible Assets.Assets. Newmark completed its annual goodwill impairment testing duringfor the fourth quarter of 2017,year ended December 31, 2021, which did not result in anya goodwill impairment.

impairment (see Note 4 — “Acquisitions” for more information).


Other intangible assets consisted of the following at March 31, 2018 and December 31, 2017 (in thousands, except weighted averageweighted-average life):

 

March 31, 2018

 

 June 30, 2022

 

Gross

Amount

 

 

Accumulated

Amortization

 

 

Net

Carrying

Amount

 

 

Weighted-

Average

Remaining

Life (Years)

 

 Gross
Amount		Accumulated
Amortization		Net
Carrying
Amount		Weighted-
Average
Remaining
Life (Years)

Indefinite life:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Indefinite life:    

Trademark and trade names

 

$

4,400

 

 

$

—

 

 

$

4,400

 

 

N/A

 

Trademark and trade names$11,350 $— $11,350 N/A

License agreements (GSE)

 

 

5,390

 

 

 

—

 

 

 

5,390

 

 

N/A

 

License agreements (GSE)5,390 — 5,390 N/A

Definite life:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Definite life:

Trademark and trade names

 

 

7,061

 

 

 

(6,183

)

 

 

878

 

 

 

0.1

 

Trademark and trade names12,826 (7,090)5,736 2.9

Non-contractual customers

 

 

10,447

 

 

 

(2,407

)

 

 

8,040

 

 

 

2.5

 

Non-contractual customers30,131 (13,921)16,210 9.0

License agreements

 

 

4,981

 

 

 

(1,548

)

 

 

3,433

 

 

 

0.7

 

License agreements4,981 (4,981)— 0.0

Non-compete agreements

 

 

3,608

 

 

 

(642

)

 

 

2,966

 

 

 

1.1

 

Non-compete agreements10,070 (4,477)5,593 3.4

Contractual customers

 

 

1,452

 

 

 

(664

)

 

 

788

 

 

 

0.2

 

Contractual customers52,313 (6,909)45,404 6.6

Below market leases

 

 

15

 

 

 

(14

)

 

 

1

 

 

 

—

 

 

$

37,354

 

 

$

(11,458

)

 

$

25,896

 

 

 

4.6

 

OtherOther6,609 (3,123)3,486 12.0
Total Total$133,670 $(40,501)$93,169 6.5

 

 

December 31, 2017

 

 

 

Gross

Amount

 

 

Accumulated

Amortization

 

 

Net

Carrying

Amount

 

 

Weighted-

Average

Remaining

Life (Years)

 

Indefinite life:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Trademark and trade names

 

$

4,400

 

 

$

—

 

 

$

4,400

 

 

N/A

 

License agreements (GSE)

 

 

5,390

 

 

 

—

 

 

 

5,390

 

 

N/A

 

Definite life:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Trademark and trade names

 

 

7,061

 

 

 

(6,030

)

 

 

1,031

 

 

 

0.2

 

Non-contractual customers

 

 

7,950

 

 

 

(1,495

)

 

 

6,455

 

 

 

2.5

 

License agreements

 

 

4,981

 

 

 

(1,298

)

 

 

3,683

 

 

 

0.9

 

Non-compete agreements

 

 

3,606

 

 

 

(496

)

 

 

3,110

 

 

 

1.2

 

Contractual customers

 

 

1,452

 

 

 

(602

)

 

 

850

 

 

 

0.2

 

Below market leases

 

 

15

 

 

 

(13

)

 

 

2

 

 

 

—

 

 

 

$

34,855

 

 

$

(9,934

)

 

$

24,921

 

 

 

5.0

 


32

 December 31, 2021
 Gross
Amount		Accumulated
Amortization		Net
Carrying
Amount		Weighted-
Average
Remaining
Life (Years)
Indefinite life:    
Trademark and trade names$11,350 $— $11,350 N/A
License agreements (GSE)5,390 — 5,390 N/A
Definite life:
Trademark and trade names12,765 (6,021)6,744 3.7
Non-contractual customers30,131 (12,815)17,316 9.4
License agreements4,981 (4,981)— 0.0
Non-compete agreements6,558 (3,898)2,660 3.5
Contractual customers33,731 (3,822)29,909 7.0
Other4,552 (1,722)2,830 5.3
 Total$109,458 $(33,259)$76,199 7.1

Intangible amortization expense for the three months ended March 31, 2018June 30, 2022 and 2017 2021 was $1.5$4.8 million and $1.3$2.4 million, respectively, and $7.4 million and $4.1 million for the six months ended June 30, 2022 and 2021, respectively. Intangible amortization is included as a part of “Depreciation and amortization” in Newmark’son the accompanying unaudited condensed consolidated statements of operations.

Impairment charges are included in intangible amortization expense.

The estimated future amortization of definite life intangible assets as of March 31, 2018June 30, 2022 was as follows (in thousands):

2018

 

$

3,047

 

2019

 

 

3,934

 

2020

 

 

3,691

 

2021

 

 

2,709

 

2022 and thereafter

 

 

2,725

 

Total

 

$

16,106

 


2022$7,658 
202315,127 
202414,470 
202512,742 
20268,826 
Thereafter17,606 
Total$76,429 

(16)

Fixed Assets, Net



(17)    Fixed Assets, Net

Fixed assets, net consisted of the following (in thousands):

 

March 31,

2018

 

 

December 31,

2017

 

Leasehold improvements and other fixed assets

 

$

79,121

 

 

$

77,313

 

June 30, 2022December 31, 2021
Leasehold improvements, furniture and fixtures, and other fixed assetsLeasehold improvements, furniture and fixtures, and other fixed assets$183,905 $184,704 

Software, including software development costs

 

 

17,827

 

 

 

17,395

 

Software, including software development costs45,718 32,851 

Computer and communications equipment

 

 

16,450

 

 

 

15,878

 

Computer and communications equipment28,417 27,382 

 

 

113,398

 

 

 

110,586

 

Total, costTotal, cost258,040 244,937 

Accumulated depreciation and amortization

 

 

(48,833

)

 

 

(45,764

)

Accumulated depreciation and amortization(119,919)(109,181)

 

$

64,565

 

 

$

64,822

 

Total, netTotal, net$138,121 $135,756 

Depreciation expense for the three months ended March 31, 2018June 30, 2022 and 2017,2021 was $3.2$8.5 million and $3.0$5.8 million, respectively, and $15.2 million and $10.1 million for the six months ended June 30, 2022 and 2021, respectively. Depreciation expense is included as a part of “DepreciationNewmark did not record impairment for the three and amortization” in Newmark’s unaudited condensed consolidated statement of operations.

Forsix months ended June 30, 2022 and 2021, respectively.


Capitalized software development costs for the three months ended March 31, 2018June 30, 2022 and 2017, $0.52021 was $0.7 million and $0.1$0.0 million, of software development costs were capitalized,respectively, and $1.1 million and $0.6 million for the six months ended June 30, 2022 and 2021, respectively. Amortization of software development costs totaled $0.2$0.4 million and $0.1million$0.3 million for the three months ended March 31, 2018June 30, 2022 and 2017,2021, respectively and $0.7 million and $0.6 million for the six months ended June 30, 2022 and 2021, respectively. Amortization of software development costs is included as part of “Operating, administrative“Depreciation and other” in Newmark’samortization” on the accompanying unaudited condensed consolidated statements of operations.

(17)

Other Assets



33

(18)    Leases

Newmark has operating leases for real estate and equipment. These leases have remaining lease terms ranging from 1 to 16 years, some of which include options to extend the leases in 5 to 10 years increments for up to 10 years. Renewal periods are included in the lease term only when renewal is reasonably certain, which is a high threshold and requires management to apply the judgment to determine the appropriate lease term. Certain leases also include periods covered by an option to terminate the lease if Newmark is reasonably certain not to exercise the termination option. The Company measures its lease payments by including fixed rental payments and, where relevant, variable rental payments tied to an index, such as the Consumer Price Index. Payments for leases in place before the date of adoption of ASC 842, Leases were determined based on previous leases guidance. The Company recognizes lease expense for its operating leases on a straight-line basis over the lease term and variable lease expense not included in the lease payment measurement is recognized as incurred. All leases were classified as operating leases as of June 30, 2022.

Pursuant to the accounting policy election, leases with an initial term of twelve months or less are not recognized on the balance sheet. The short-term lease expense over the period reasonably reflects the Company’s short-term lease commitments.

ASC 842, Leases requires the Company to make certain assumptions and judgments in applying the guidance, including determining whether an arrangement includes a lease, determining the term of a lease when the contract has renewal or cancellation provisions, and determining the discount rate.

The Company determines whether an arrangement is a lease or includes a lease at the contract inception by evaluating whether the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. If the Company has the right to obtain substantially all of the economic benefits from, and can direct the use of, the identified asset for a period of time, the Company accounts for the identified asset as a lease. The Company has elected the practical expedient to not separate lease and non-lease components for all leases other than real estate leases. The primary non-lease component that is combined with a lease component represents operating expenses such as utilities, maintenance or management fees.

As the rate implicit in the lease is not usually available, the Company used an incremental borrowing rate based on the information available at the adoption date of the new Leases standard in determining the present value of lease payments for existing leases. The Company has elected to use a portfolio approach for the incremental borrowing rate, applying corporate bond rates to the leases. The Company calculated the appropriate rates with reference to the lease term and lease currency. The Company uses information available at the lease commencement date to determine the discount rate for any new leases.

Operating lease costs were $31.3 million and $21.3 million for the three months ended June 30, 2022 and 2021, respectively, and $56.7 million and $33.1 million for the six months ended June 30, 2022 and 2021, respectively, and are included in “Operating, administrative and other” on the accompanying unaudited condensed consolidated statements of operations. Operating cash flows for the six months ended June 30, 2022 and 2021, included payments of $52.9 million and $33.2 million for operating lease liabilities, respectively. As of June 30, 2022 and December 31, 2021, Newmark did not have any leases that have not yet commenced but that create significant rights and obligations. For the three and six months ended June 30, 2022 and 2021, respectively, Newmark had short-term lease expense of $0.3 million and $0.7 million, respectively, and $0.1 million and $0.3 million, respectively. For the three and six months ended June 30, 2022 and 2021, respectively, Newmark had sublease income of $0.2 million and $0.2 million, respectively, and $0.2 million and $0.6 million, respectively.

The weighted-average discount rate as of June 30, 2022 and December 31, 2021 was 4.13% and 3.95% and the remaining weighted-average lease term was 7.3 years and 7.4 years, respectively.

As of June 30, 2022 and December 31, 2021, Newmark had operating lease Right-of-use assets of $635.8 million and $606.6 million, respectively, and operating lease Right-of-use liabilities of $87.2 million and $82.0 million, respectively, recorded in “Accounts payable, and accrued expenses and other liabilities” and $612.9 million and $586.1 million, respectively, recorded in “Right-of-use liabilities”, on the accompanying unaudited condensed consolidated balance sheets.

Rent expense, including the operating lease costs above, for the three months ended June 30, 2022 and 2021, were $35.4 million and $21.3 million, respectively, and $72.1 million and $33.2 million for the six months ended June 30, 2022 and 2021, respectively. Rent expense is included in “Operating, administrative and other” on the accompanying unaudited condensed consolidated statements of operations.

34

Newmark is obligated for minimum rental payments under various non-cancelable operating leases, principally for office space, expiring at various dates through 2032. Certain of these leases contain escalation clauses that require payment of additional rent to the extent of increases in certain operating or other costs.


Minimum lease payments under these arrangements were as follows (in thousands):
June 30, 2022December 31, 2021
2022$85,433 $113,822 
2023120,513 112,840 
2024115,867 106,038 
2025110,470 101,211 
2026105,054 96,493 
Thereafter319,210 274,764 
Total lease payments856,547 805,168 
Less: Interest156,411 137,141 
Present value of lease liability$700,136 $668,027 

(19)    Other Current Assets and Other Assets

Other current assets consisted of the following (in thousands):

 

March 31,

 

 

December 31,

 

 

2018

 

 

2017

 

June 30, 2022December 31, 2021
Derivative assetsDerivative assets$19,360 $8,501 

Prepaid expenses

 

$

16,108

 

 

$

12,708

 

Prepaid expenses38,508 36,422 

Derivative assets

 

 

18,437

 

 

 

6,676

 

Other taxesOther taxes— 17,383 

Rent and other deposits

 

 

1,279

 

 

 

1,479

 

Rent and other deposits19,256 20,471 

Other

 

 

675

 

 

 

131

 

Other2,191 560 

 

$

36,499

 

 

$

20,994

 

TotalTotal$79,315 $83,337 

Non-current other


Other assets consisted of the following (in thousands):

 

 

March 31,

 

 

December 31,

 

 

 

2018

 

 

2017

 

Equity method investment

 

$

104,718

 

 

$

101,562

 

Deferred tax assets(a)

 

 

166,804

 

 

 

168,594

 

Cost method investments

 

 

13,580

 

 

 

6,005

 

Other

 

 

2,406

 

 

 

2,299

 

 

 

$

287,508

 

 

$

278,460

 

(a)

Deferred tax assets and liabilities are recognized for the future tax consequences attributable to basis differences between the carrying amounts of existing assets and liabilities and their respective tax basis. Accordingly, a deferred tax asset of $108.6 million has been contributed to Newmark for the year ended December 31, 2017 for the basis difference between BPF’s net assets and its tax basis.

(18)

Securities Loaned

 June 30, 2022December 31, 2021
Deferred tax assets$70,285 $70,191 
Equity method investment88,308 88,308 
Non-marketable investments8,796 20,017 
Other28,124 33,965 
Total$195,513 $212,481 



(20)    Repurchase Agreements and Securities Loaned

Securities sold under Repurchase Agreements are accounted for as collateralized financing transactions and are recorded at the contractual amount for which the securities will be repurchase, including accrued interest. As of March 31, 2018 and December 31, 2017,2021, Newmark had securities loaned transactions with Cantor of $8.6 million and $57.6 million, respectively.$140.0 million. The market value of the securities lentloaned was $8.6 million and $57.6$182.0 million as of March 31, 2018 and December 31, 2017, respectively. As of March 31, 2018, the2021. The cash collateral received from Cantor bore an interest rate of 2.18%. As0.95% as of December 31, 2017,2021. As of June 30, 2022, there were no repurchase agreements and securities loaned on the cash collateral received from Cantor bore interest rates ranging from 3.1% to 3.25%. Securities loaned transactions are included in “Securities loaned” in Newmark’saccompanying unaudited condensed consolidated balance sheets.


sheet.

(19)

Warehouse Notes Payable


(21)    Warehouse Facilities Collateralized by U.S. Government Sponsored Enterprises

Newmark uses its warehouse linesfacilities and repurchase agreements to fund mortgage loans originated under its various lending programs. Outstanding borrowings against these lines are collateralized by an assignment of the underlying mortgages and third-party purchase commitments. As of March 31, 2018, commitments and are recourse only to Berkeley Point Capital, LLC.

Newmark had the following lines available and borrowings outstanding (in thousands):

 

 

Committed

Lines

 

 

Uncommitted

Lines

 

 

Balance at

March 31,

2018

 

 

Stated Spread

to One Month

LIBOR

 

Rate

Type

Warehouse line due June 20, 2018

 

$

450,000

 

 

$

—

 

 

$

390,295

 

 

130 bps

 

Variable

Warehouse line due September 25, 2018

 

 

200,000

 

 

 

—

 

 

 

166,480

 

 

130 bps

 

Variable

Warehouse line due October 11, 2018(1)

 

 

400,000

 

 

 

—

 

 

 

361,739

 

 

130 bps

 

Variable

Fannie Mae repurchase agreement, open maturity

 

 

—

 

 

 

325,000

 

 

 

31,965

 

 

120 bps

 

Variable

 

 

$

1,050,000

 

 

$

325,000

 

 

$

950,479

 

 

 

 

 

35

(1)


 Committed
Lines		Uncommitted
Lines		Balance at June 30, 2022Balance at December 31, 2021
Stated Spread
to One-Month
LIBOR/SOFR(2)
Rate Type
Warehouse facility due June 14, 2023 (1)
$450,000 $— $— $243,659 135 bpsVariable
Warehouse facility due June 14, 2023 (1)
— 300,000 — 135,601 135 bpsVariable
Warehouse facility due October 7 2022600,000 — 275,008 384,571 130 bpsVariable
Warehouse facility due September 25, 2022400,000 — 371,932 193,091 130 bpsVariable
Fannie Mae repurchase agreement, open maturity— 400,000 187,642 93,771 115 bpsVariable
Total$1,450,000 $700,000 $834,582 $1,050,693 
(1)The warehouse line established a $125.0 million sublimit line was temporarily increased by $300.0 million to $400.0 million for the period of March 29, 2018 to May 12, 2018.

As of December 31, 2017, Newmark hadcredit to fund potential principal and interest servicing advances on the following lines availableCompany's Fannie Mae portfolio during the forbearance period related to the CARES Act. Advances will have an interest rate of 1-month SOFR plus 190 bps. There were no outstanding draws under this sublimit as of June 30, 2022.

(2)The spread for the warehouse line due June 14, 2023 and borrowings outstanding (in thousands):

the Fannie Mae repurchase agreement is to SOFR. The other warehouse facilities are to LIBOR.

 

 

Committed

Lines

 

 

Uncommitted

Lines

 

 

Balance at

December 31,

2017

 

 

Stated Spread

to One Month

LIBOR

 

Rate

Type

Warehouse line due June 20, 2018

 

$

450,000

 

 

$

—

 

 

$

60,715

 

 

130 bps

 

Variable

Warehouse line due September 25, 2018

 

 

200,000

 

 

 

—

 

 

 

107,383

 

 

130 bps

 

Variable

Warehouse line due October 11, 2018

 

 

300,000

 

 

 

—

 

 

 

174,102

 

 

130 bps

 

Variable

Fannie Mae repurchase agreement, open maturity

 

 

—

 

 

 

325,000

 

 

 

18,240

 

 

120 bps

 

Variable

 

 

$

950,000

 

 

$

325,000

 

 

$

360,440

 

 

 

 

 


Pursuant to the terms of the warehouse facilities, Newmark is required to meet a number ofseveral financial covenants, including maintaining a minimum of $15.0 million of cash and cash equivalents.covenants. Newmark was in compliance with all covenants on March 31, 2018as of June 30, 2022 and December 31, 2017 and for the three months ended March 31, 2018 and the year ended December 31, 2017.

2021, respectively.


The borrowing rates on the warehouse linesfacilities are based on short term London Interbank Offered Rate (LIBOR)short-term LIBOR or SOFR plus applicable margins. Due to the short termshort-term maturity of these instruments, the carrying amounts approximate fair value.

(20)

Long-Term Debt and Long-Term Debt Payable to Related Parties



(22)    Long-Term Debt

Long-term debt and long-term debt payable to related parties consisted of the following (in thousands):

 

 

March 31,

2018

 

 

December 31,

2017

 

Converted Term Loan

 

$

400,000

 

 

$

400,000

 

Term Loan

 

 

—

 

 

 

270,710

 

Long-term debt

 

 

400,000

 

 

 

670,710

 

2019 Promissory Notes

 

 

300,000

 

 

 

300,000

 

2042 Promissory Notes

 

 

112,500

 

 

 

112,500

 

Total long-term debt

 

$

812,500

 

 

$

1,083,210

 

 June 30, 2022December 31, 2021
6.125% Senior Notes$546,502 $545,239 
Credit Facility— — 
Total$546,502 $545,239 

Converted Term Loan

6.125% Senior Notes
On September 8, 2017, BGCNovember 6, 2018, Newmark closed its offering of $550.0 million aggregate principal amount of 6.125% Senior Notes due 2023 (the “6.125% Senior Notes”). The 6.125% Senior Notes were priced on November 1, 2018 at 98.94% to yield 6.375%. The 6.125% Senior Notes were offered and sold by Newmark in a private offering exempt from the registration requirements under the Securities Act of 1933, as amended (“Securities Act”). The 6.125% Senior Notes were subsequently exchanged for notes with substantially similar terms that were registered under the Securities Act. The 6.125% Senior Notes bear an interest rate of 6.125% per annum, payable on each May 15 and November 15, beginning on May 15, 2019, and will mature on November 15, 2023.

The carrying amount of the 6.125% Senior Notes was determined as follows (in thousands):
 June 30, 2022December 31, 2021
Principal balance$550,000 $550,000 
Less: debt issue cost1,762 2,404 
Less: debt discount1,736 2,357 
Total$546,502 $545,239 

Newmark uses the effective interest rate method to amortize debt discounts and uses the straight-line method to amortize debt issue costs over the life of the notes. Interest expense, amortization of debt issue costs and amortization of the debt discount of the 6.125% Senior Notes, included in “Interest (expense) income, net” on the accompanying unaudited condensed consolidated statements of operations, were as follows (in thousands):
 Three Months Ended June 30,Six Months Ended June 30,
2022202120222021
Interest expense$8,735 $8,715 $17,464 $17,426 
Debt issue cost amortization321 321 642 642 
Debt discount amortization313 293 621 582 
Total$9,369 $9,329 $18,727 $18,650 


36

Debt Repurchase Program
On June 16, 2020, the Newmark Board of Directors and its Audit Committee authorized a debt repurchase program for the repurchase by Newmark of up to $50.0 million of Newmark’s 6.125% Senior Notes and any future debt securities issued by the Company.

As of June 30, 2022, Newmark had $50.0 million remaining under its debt repurchase authorization.

Credit Facility
On November 28, 2018, Newmark entered into a committed unsecured senior revolving credit agreement withby and among Newmark, the several financial institutions from time to time party thereto, as Lenders, and Bank of America N.A., as administrative agent and(the “Credit Agreement”). The Credit Agreement provided for a syndicate of lenders. The$250.0 million three-year unsecured senior revolving credit agreement provides for revolving loans of up to $400.0 million. The maturity date of the facility is September 8, 2019.(the “Credit Facility”). Borrowings under the Converted Term Loan bearCredit Facility bore an annual interest rate equal to, at Newmark’s option, either (a) LIBOR for specified periods, or a defined base rateupon the consent of all Lenders, such other period that is 12 months or less, plus an additionalapplicable margin, which ranges from 50 basis points to 325 basis points depending on BGC’s debt rating as determined by S&P and Fitch and whether such loan is a LIBOR loan or (b) a base rate loan. Since there were amounts outstanding under the term loan facility as of December 31, 2017, the pricing increased by 50 basis points until the term loan facility is paid in full, and if there are any amounts outstanding under the term loan facility as of June 30, 2018, the pricing shall increase by an additional 75 basis points (125 basis points in the aggregate) until the term loan facility is paid in full. From and after


the repayment in full of the term loan facility, the pricing shall returnequal to the levels previously described. greatest of (i) the federal funds rate plus 0.5%, (ii) the prime rate as established by the administrative agent, and (iii) one-month LIBOR plus 1.0%, plus an applicable margin. The applicable margin is 2.0% with respect to LIBOR borrowings and can range from 1.25% to 2.25% in (a) above and was 1.00% with respect to base rate borrowings and can range from 0.25% to 1.25% in (b) above, depending upon Newmark’s credit rating. The Credit Facility also provides for an unused facility fee.


On November 22, 2017, BGC andFebruary 26, 2020, Newmark entered into an amendment to the unsecured senior revolving credit agreement. Pursuant toCredit Agreement, increasing the amendment, the then-outstanding borrowingssize of the BGC under the revolving credit facility were converted into a term loan. There was no change inCredit Facility to $425.0 million (the “Amended Credit Facility”) and extending the maturity date or interest rate. As of December 13, 2017, Newmark assumed the obligations of BGC as borrower under the Converted Term Loan (the “Converted Term Loan”). BGC remains a borrower under, and retains access to the revolving credit facility for any future draws, subject to availability which increases as Newmark repays the Converted Term Loan. As of March 31, 2018 and December 31, 2017, there were $400.0 million of borrowings outstanding under the Converted Term Loan. As of March 31, 2018, theFebruary 26, 2023. The annual interest rate on the Converted Term LoanAmended Credit Facility was 3.99%.reduced to LIBOR plus 1.75%, subject to a pricing grid linked to Newmark’s credit ratings from Standard & Poor’s and Fitch.

On March 16, 2020, Newmark recorded interest expense related to the Converted Term Loan of $4.6 million for the three months ended March 31, 2018.  There was no interest expense recorded for the three months ended March 31, 2017.

Term Loan

On September 8, 2017, BGC entered into a committed unsecured senior term loansecond amendment to the Credit Agreement, increasing the size of the Amended Credit Facility to $465.0 million (the "Second Amended Credit Facility"). The annual interest rate on the Second Amended Credit Facility is LIBOR plus 1.75%, subject to a pricing grid linked to Newmark’s credit agreement with Bank of America, N.A.,ratings from Standard & Poor’s and Fitch. In July 2021, Newmark paid the $140.0 million outstanding on the Credit Facility.


On March 10, 2022, Newmark entered into the A&R Credit Agreement, which amends and restates the Credit Agreement, as administrative agent, and a syndicate of lenders. The term loan credit agreement provides for loans of upamended. Pursuant to $575.0 million. Thethe A&R Credit Agreement, the Lenders agreed to: (a) increase the amount available to the Company under the Credit Facility to $600.0 million, (b) extend the maturity date of the agreement is September 8, 2019. Borrowings underCredit Facility to March 10, 2025, and (c) improve pricing to 1.50% per annum with respect to Term SOFR (as defined in the Term Loan bear interest at either LIBOR or a defined base rate plus an additional margin which ranges from 50 basis points to 325 basis points depending on BGC’s debt rating as determined by S&P and Fitch and whether such loan is a LIBOR loan or a base rate loan. Since there were amounts outstanding under the term loan facility as of December 31, 2017, the pricing increased by 50 basis points until the term loan facility is paid in full and if there are any amounts outstanding under the term loan facility asA&R Credit Agreement) borrowings.

As of June 30, 2018, the pricing shall increase by an additional 75 basis points (125 basis points in the aggregate) until the term loan facility is paid in full. From and after the repayment in full of the term loan facility, the pricing shall return to the levels previously described. On November 22, 2017, BGC and Newmark entered into an amendment to the unsecured senior term loan credit agreement. Pursuant to the term loan amendment and effective as of December 13, 2017, Newmark assumed the obligations of the BGC as borrower2021, borrowings under the senior term loan (the “Term Loan”). The Term Loan is also subject to mandatory prepayment from 100%Credit Facility carried an interest rate of net cash proceeds1.84%, with a weighted-average interest rate of all material asset sales and debt and equity issuances (subject to certain customary exceptions, including sales under the BGC’s CEO sales program)1.86%. The proceeds from the IPO net of underwriting discounts of approximately $304.3 million have been used to partially repay the Term Loan. The proceeds from the exercise by the underwriters of their option to purchase additional shares of Newmark Class A Common Stock in the IPO were also used to partially repay the Term Loan. During the three months ended March 31, 2018, Newmark repaid the outstanding balance of $270.7 million on the Term Loan. As of March 31, 2018,June 30, 2022, there were no borrowings outstanding under the Term Loan. Credit Facility.Newmark recorded interest expense relateduses the straight-line method to amortize debt issue costs over the Term Loan of $2.6 million for three months ended March 31, 2018.

As of March 31, 2018 the carrying value of Converted Term Loan approximated the fair value.  As of December 31, 2017 the carrying valuelife of the Converted Term Loannotes. Interest expense and Term Loan approximated the fair value.

On December 13, 2017, in connection with the Separation, Newmark assumed from BGC an aggregateamortization of $300.0 million principal amount of its 2019 Promissory Note due December 9, 2019 and $112.5 million principal amount of its 2042 Promissory Note due June 26, 2042. Newmark’s Senior Notes are recorded at amortized cost. As of March 31, 2018 and December 31, 2017, the carrying amounts and estimated fair valuesdebt issue costs of the Senior NotesCredit Facility, included in “Interest (expense) income, net” on the accompanying unaudited condensed consolidated statements of operations, were as follows (in thousands):

 

 

March 31, 2018

 

 

December 31, 2017

 

 

 

Carrying

Amount

 

 

Fair

Value

 

 

Carrying

Amount

 

 

Fair

Value

 

2019 Promissory Notes

 

$

300,000

 

 

$

309,750

 

 

$

300,000

 

 

$

313,125

 

2042 Promissory Notes

 

 

112,500

 

 

 

115,650

 

 

 

112,500

 

 

 

116,550

 

 

 

$

412,500

 

 

$

425,400

 

 

$

412,500

 

 

$

429,675

 

 Three Months Ended June 30,Six Months Ended June 30,
2022202120222021
Interest expense$— $609 $— $1,191 
Debt issue cost amortization— 275 — 550 
Unused facility fee334 206 634 419 
Total$334 $1,090 $634 $2,160 

The fair value of the 2042 Promissory Notes was determined using observable market prices as these securities are traded and are considered Level 1 within the fair value hierarchy as they are deemed to be actively traded and the 2019 Promissory Notes are considered Level 2 within the fair value hierarchy.

For the three months ended March 31,


On November 30, 2018, Newmark recorded interest expense on its 2019 Promissoryentered into an unsecured credit agreement (the “Cantor Credit Agreement”) with Cantor (see Note and 2042 Promissory Note in the amount of $4.3 million and $2.3 million, respectively For the year ended December 31, 2017, Newmark recorded interest expense on its 2019 Promissory Note and 2042 Promissory Note in the amount of $0.8 million and $0.5 million, respectively. These Senior Notes are included in “Long-term debt payable to related parties” on Newmark’s unaudited condensed consolidated balance sheets.


27 — “Related Party Transactions” for a more detailed discussion).

(21)

Financial Guarantee Liability


(23)    Financial Guarantee Liability

Newmark shares risk of loss for loans originated under the Fannie Mae DUS and Freddie TAH programs and could incur losses in the event of defaults under or foreclosure of these loans. Under the loss-share guarantee, Newmark’s maximum contingent liability to the extent of actual losses incurred is approximately 33% of the outstanding principal balance on Fannie Mae DUS or Freddie TAH loans. Risk sharingRisk-sharing percentages are established on a loan-by-loan basis when originated, with most loans at 33% and “modified” loans at lower percentages. Under certain circumstances, risk sharingrisk-sharing percentages can be revised subsequent to origination or Newmark could be required to repurchase the loan. In the event of a loss resulting from a
37

catastrophic event that is not required to be covered by borrowers’ insurance policies, Newmark can recover the loss under its mortgage impairment insurance policy. Any potential recovery is subject to the policy’s deductibles and limits.


At MarchJune 30, 2022, the credit risk loans being serviced by Newmark on behalf of Fannie Mae and Freddie Mac had outstanding principal balances of $26.7 billion with a maximum potential loss of $8.1 billion. At December 31, 2018,2021, the credit risk loans being serviced by Newmark on behalf of Fannie Mae and Freddie Mac had outstanding principal balances of approximately $18.9$25.8 billion with a maximum potential loss of approximately $5.4 billion,$7.8 billion. As of which $0.1 billion isJune 30, 2022 and December 31, 2021, there were no loans covered by the Credit Enhancement Agreement (see Note 11—Credit Enhancement Receivable, Contingent LiabilityAgreement.

Newmark’s current estimate of expected credit losses considers various factors, including, without being limited to, historical default and Credit Enhancement Deposit).

Atlosses, current delinquency status, loan size, terms, amortization types, the forward-looking view of the primary risk drivers (debt-service coverage ratio and loan-to-value) based on forecasts in economic conditions and local market performance. During the three and six months ended June 30, 2022, there was a decrease to the reserve by $0.3 million and $0.1 million, respectively. For the three and six months ended June 30, 2021, there was a decrease to the reserve of $4.7 million and $6.3 million, respectively. A loan is considered to be delinquent once it is 60 days past due. As of June 30, 2022, there was 1 loan in foreclosure with an outstanding principal balance of $22.8 million, with a maximum loss exposure of $7.6 million. Proceeds from the liquidation of the assets are estimated to be approximately $20.0 million based on current estimates of fair value. Newmark’s share of the loss would approximate $0.7 million. As of December 31, 2017,2021, there were 2 loans in the credit risk loans being serviced by Newmark on behalf of Fannie Mae and Freddie Mac hadportfolio with outstanding principal balances of approximately $18.8 billion$33.6 million, with a maximum potential loss exposure of $11.2 million, that were delinquent. If all 2 delinquent loans resulted in a loss event, proceeds from the liquidation of the assets are estimated to be approximately $5.3 billion,$28.4 million based on estimates of which $1.2 billion is covered by the Credit Enhancement Agreement (see Note 11—Credit Enhancement Receivable, Contingent Liability and Credit Enhancement Deposit).

At March 31, 2018 and the year endedfair value at December 31, 2017, changes on the estimated liability under the guarantee liability were as follows:

Financial guarantee liability (in thousands)

 

 

 

 

Balance at December 31, 2016

 

$

(413

)

Reversal of provision

 

 

359

 

Balance at December 31, 2017

 

$

(54

)

Increase to provision

 

 

(7

)

Balance at March 31, 2018

 

$

(61

)

In order to monitor and mitigate potential losses, Newmark uses an internally developed loan rating scorecard for determining which loans meet Newmark’s criteria to be placed on a watch list. Newmark also calculates default probabilities based on internal ratings and expected losses on a loan-by-loan basis. This methodology uses a number of factors including, but not limited to, debt service coverage ratios, collateral valuation, the condition2021. Newmark's share of the underlying assets, borrower strengthloss would approximate $2.3 million. As of June 30, 2022 and market conditions.

See Note 11—Credit Enhancement Receivable, Contingent Liability and Credit Enhancement Deposit for further explanation of credit protection provided by DB Cayman. December 31, 2021, no actual losses were incurred.


The provisions for risk sharingrisk-sharing were includeincluded in “Operating, administrative and other” in Newmark’son the accompanying unaudited condensed consolidated statements of operations was as follows (in thousands):

 

 

Three Months Ended March 31,

 

 

 

2018

 

 

2017

 

Increase (decrease) to financial guarantee liability

 

$

7

 

 

$

(5

)

Decrease to credit enhancement asset

 

 

10

 

 

 

4

 

Total expense

 

$

17

 

 

$

(1

)

(22)

Concentrations of Credit Risk

Balance, January 1, 2021$29,581 
Provision for expected credit losses(3,592)
Balance, December 31, 202125,989 
Provision for expected credit losses(89)
Balance, June 30, 2022$25,900 



(24)    Concentrations of Credit Risk

The lending activities of Newmark create credit risk in the event that counterparties do not fulfill their contractual payment obligations. In particular, Newmark is exposed to credit risk related to the Fannie Mae DUS and Freddie Mac TAH loans (see Note 21—Financial23 — “Financial Guarantee Liability)Liability”). As of March 31, 2018, 26%June 30, 2022, 21% and 12% of $5.4$8.1 billion of the maximum loss (see Note 21—Financial Guarantee Liability) was for properties located in California.California and Texas, respectively. As of December 31, 2017, 26%2021, 20% and 13% of $5.3$7.8 billion of the maximum loss (see Note 21—Financial Guarantee Liability) was for properties located in California.

California and Texas, respectively.

(23)

Escrow and Custodial Funds


(25)    Escrow and Custodial Funds

In conjunction with the servicing of multifamily and commercial loans, Newmark holds escrow and other custodial funds. Escrow funds are held at unaffiliated financial institutions generally in the form of cash and cash equivalents. These funds amounted


to approximately $0.8$1.1 billion and $0.8$2.3 billion, as of March 31, 2018June 30, 2022 and December 31, 2017,2021, respectively. These funds are held for the benefit of Newmark’s borrowers and are segregated in custodial bank accounts. These amounts are excluded from the assets and liabilities of Newmark.

(24)

Fair Value of Financial Assets and Liabilities


(26)    Fair Value of Financial Assets and Liabilities

U.S. GAAP guidance establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets and liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are as follows:

•Level 1 measurements—Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.

•Level 2 measurements—Quoted prices in markets that are not active or financial instruments for which all significant inputs are observable, either directly or indirectly.

38

•Level 3 measurements—Prices or valuations that require inputs that are both significant to the fair value measurement and unobservable.

As required by U.S. GAAP guidance, assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. The following table sets forth by level within the fair value hierarchy financial assets and liabilities accounted for at fair value under U.S. GAAP guidance at March 31, 2018 and December 31, 2017 (in thousands):

 

 

As of March 31, 2018

 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

 

 

Total

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Marketable securities

 

$

8,622

 

 

$

—

 

 

$

—

 

 

 

 

$

8,622

 

Loans held for sale

 

 

—

 

 

 

965,639

 

 

 

—

 

 

 

 

 

965,639

 

Rate lock commitments

 

 

—

 

 

 

—

 

 

 

8,750

 

 

 

 

 

8,750

 

Forwards

 

 

—

 

 

 

—

 

 

 

9,687

 

 

 

 

 

9,687

 

Total assets

 

$

8,622

 

 

$

965,639

 

 

$

18,437

 

 

#

 

$

992,698

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accounts payable, accrued expenses and other

   liabilities—contingent consideration

 

$

—

 

 

$

—

 

 

$

23,087

 

 

 

 

$

23,087

 

Rate lock commitments

 

 

—

 

 

 

—

 

 

 

8,980

 

 

 

 

 

8,980

 

Forwards

 

 

—

 

 

 

—

 

 

 

2,421

 

 

 

 

 

2,421

 

Total Liabilities

 

$

—

 

 

$

—

 

 

$

34,488

 

 

 

 

$

34,488

 

 As of June 30, 2022
 Level 1Level 2Level 3Total
Assets:    
Loans held for sale, at fair value— 849,193 — 849,193 
Rate lock commitments— — 3,717 3,717 
Forward sale contracts— — 15,643 15,643 
Total$— $849,193 $19,360 $868,553 
Liabilities:
Contingent consideration— — 20,079 20,079 
Rate lock commitments— — 9,108 9,108 
Forward sale contracts— — 6,119 6,119 
Total$— $— $35,306 $35,306 

 

 

As of December 31, 2017

 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Marketable securities

 

$

57,623

 

 

$

—

 

 

$

—

 

 

$

57,623

 

Loans held for sale

 

 

—

 

 

 

362,635

 

 

 

—

 

 

 

362,635

 

Rate lock commitments

 

 

—

 

 

 

—

 

 

 

2,923

 

 

 

2,923

 

Forwards

 

 

—

 

 

 

—

 

 

 

3,753

 

 

 

3,753

 

Total assets

 

$

57,623

 

 

$

362,635

 

 

$

6,676

 

 

$

426,934

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accounts payable, accrued expenses and

   other liabilities—contingent consideration

 

$

—

 

 

$

—

 

 

$

23,711

 

 

$

23,711

 

Rate lock commitments

 

 

—

 

 

 

—

 

 

 

2,390

 

 

 

2,390

 

Forwards

 

 

—

 

 

 

—

 

 

 

657

 

 

 

657

 

Total Liabilities

 

$

—

 

 

$

—

 

 

$

26,758

 

 

$

26,758

 

 As of December 31, 2021
 Level 1Level 2Level 3Total
Assets:    
Marketable securities$524,569 $— $— $524,569 
Loans held for sale, at fair value— 1,072,479 — 1,072,479 
Debt securities— — — — 
Rate lock commitments— — 3,957 3,957 
Forward sale contracts— — 4,544 4,544 
Total$524,569 $1,072,479 $8,501 $1,605,549 
Liabilities:
Contingent consideration$— $— $12,338 $12,338 
Rate lock commitments— — 2,836 2,836 
Forwards sale contracts— — 2,180 2,180 
Total$— $— $17,354 $17,354 


There were no transfers among levelLevel 1, Level 2 and levelLevel 3 for the three and six months ended March 31, 2018June 30, 2022 and the year ended December 31, 2017.

2021, respectively.


Derivative instruments are outstanding for short periods of time (generally less than 60 days). A roll

Level 3 Financial Assets and Liabilities: Changes in Level 3 Nasdaq Forwards, rate lock commitments, forward of derivative instrumentssale contracts and contingent consideration (level 3) that require valuation based upon significant unobservable inputs is presented belowmeasured at fair value on recurring basis were as follows (in thousands):

 

 

As of March 31, 2018

 

 

 

Opening

Balance

 

 

Total realized

and unrealized

(gains) losses

included in

Net income(1)

 

 

Issuances

 

 

Settlements

 

 

Closing

Balance

 

 

Unrealized

(gains) losses

outstanding

as of

March 31, 2018

 

Accounts payable, accrued expenses and other

   liabilities—contingent consideration

 

$

23,711

 

 

$

134

 

 

$

—

 

 

$

(758

)

 

$

23,087

 

 

$

134

 

Rate lock commitments and forwards, net

 

 

3,629

 

 

 

7,036

 

 

 

—

 

 

 

(3,629

)

 

 

7,036

 

 

 

7,036

 

 

 

$

27,340

 

 

$

7,170

 

 

$

—

 

 

$

(4,387

)

 

$

30,123

 

 

$

7,170

 

 As of June 30, 2022
 Opening
Balance		Total realized
and unrealized
gains (losses)
included in
Net income		AdditionsSettlementsClosing
Balance		Unrealized
gains (losses)
outstanding
Assets:      
Rate lock commitments$3,957 $3,717 $— $(3,957)$3,717 $3,717 
Forward sale contracts4,544 15,643 — (4,544)15,643 15,643 
Total$8,501 $19,360 $— $(8,501)$19,360 $19,360 
 Opening
Balance		Total realized
and unrealized
gains (losses)
included in
Net income		AdditionsSettlementsClosing
Balance		Unrealized
gains (losses)
outstanding
Liabilities:      
Contingent consideration$12,338 $547 $12,195 $(5,001)$20,079 $20,079 
Rate lock commitments2,836 9,108 — (2,836)9,108 9,108 
Forward sale contracts2,180 6,119 — (2,180)6,119 6,119 
Total$17,354 $15,774 $12,195 $(10,017)$35,306 $35,306 

 

 

As of March 31, 2017

 

 

 

Opening

Balance

 

 

Total realized

and unrealized

(gains) losses

included in

Net income(1)

 

 

Issuances

 

 

Settlements

 

 

Closing

Balance

 

 

Unrealized

(gains) losses

outstanding

as of

March 31, 2017

 

Accounts payable, accrued expenses and other

   liabilities—contingent consideration

 

$

38,713

 

 

$

438

 

 

$

—

 

 

$

(10,153

)

 

$

28,998

 

 

$

438

 

Rate lock commitments and forwards, net

 

 

10,254

 

 

 

2,462

 

 

 

—

 

 

 

(10,254

)

 

 

2,462

 

 

 

2,462

 

 

 

$

48,967

 

 

$

2,900

 

 

$

—

 

 

$

(20,407

)

 

$

31,460

 

 

$

2,900

 

(1)

Realized losses are reported in “Other income, net” in Newmark’s unaudited condensed consolidated statements of operations.

39


 As of December 31, 2021
 Opening
Balance		Total realized
and unrealized
gains (losses)
included in
Net income		IssuancesSettlementsClosing
Balance		Unrealized
gains (losses)
outstanding
Assets:      
Rate lock commitments$21,034 $3,957 $— $(21,034)$3,957 $3,957 
Forward sale contracts7,632 4,544 — (7,632)4,544 4,544 
Nasdaq Forwards12,822 (12,822)— — — — 
Total$41,488 $(4,321)$— $(28,666)$8,501 $8,501 
 Opening
Balance		Total realized
and unrealized
gains (losses)
included in
Net income		IssuancesSettlementsClosing
Balance		Unrealized
gains (losses)
outstanding
Liabilities:      
Contingent consideration$31,481 $(1,351)$— $(17,792)$12,338 $12,338 
Rate lock commitments2,977 2,836 — (2,977)2,836 2,836 
Forward sale contracts14,971 2,180 — (14,971)2,180 2,180 
Total$49,429 $3,665 $— $(35,740)$17,354 $17,354 
Quantitative Information About Level 3 Fair Value Measurements


The following tables present quantitative information about the significant unobservable inputs utilized by Newmark in the fair value measurement of Level 3 assets and liabilities measured at fair value on a recurring basis:

March 31, 2018

June 30, 2022June 30, 2022

Level 3 assets and liabilities

 

Assets

 

 

Liabilities

 

 

Significant Unobservable Inputs

Level 3 assets and liabilitiesAssetsLiabilitiesSignificant Unobservable
Inputs		RangeWeighted
Average

Accounts payable, accrued expenses and other

liabilities:

 

 

 

 

 

 

 

 

 

 

Accounts payable, accrued expenses and other liabilities:     

Contingent consideration

 

$

—

 

 

$

23,087

 

 

Discount rate—6.6% weighted average rate(a)

Contingent consideration$— $20,079 Discount rate4.0% - 11.8%(1)8.7%
Probability of meeting earnout and contingencies75.0%- 99.0%(1)94.9%

Derivative assets and liabilities:

 

 

 

 

 

 

 

 

 

Financial forecast information

Derivative assets and liabilities:

Forward sale contracts

 

$

9,687

 

 

$

2,421

 

 

Counterparty credit risk

Forward sale contracts$15,643 $6,119 Counterparty credit riskN/AN/A

Rate lock commitments

 

$

8,750

 

 

$

8,980

 

 

Counterparty credit risk

Rate lock commitments$3,717 $9,108 Counterparty credit riskN/AN/A

December 31, 2017

Level 3 assets and liabilities

 

Assets

 

 

Liabilities

 

 

Significant Unobservable Inputs

Accounts payable, accrued expenses and other

   liabilities:

 

 

 

 

 

 

 

 

 

 

Contingent consideration

 

$

—

 

 

$

23,711

 

 

Discount rate—6.43% weighted average rate(a)

Derivative assets and liabilities:

 

 

 

 

 

 

 

 

 

Financial forecast information

Forward sale contracts

 

$

3,753

 

 

$

657

 

 

Counterparty credit risk

Rate lock commitments

 

$

2,923

 

 

$

2,390

 

 

Counterparty credit risk


(a)

Newmark’s estimate of contingent consideration as of March 31, 2018 and December 31, 2017 was based on the acquired business’ projected future financial performance, including revenues.

December 31, 2021
Level 3 assets and liabilitiesAssetsLiabilitiesSignificant Unobservable
Inputs		RangeWeighted
Average
Accounts payable, accrued expenses and other liabilities:     
Contingent consideration$— $12,338 Discount rate4.0% - 10.2%(1)8.1%
 Probability of meeting earnout and contingencies75.0% - 99.0%(1)91.6%
 
Derivative assets and liabilities:
Forward sale contracts$4,544 $2,180 Counterparty credit riskN/AN/A
Rate lock commitments$3,957 $2,836 Counterparty credit riskN/AN/A

(1)Newmark’s estimate of contingent consideration as of June 30, 2022 and December 31, 2021 was based on the acquired business’ projected future financial performance, including revenues.

Valuation Processes - Level 3 Measurements

Both the rate lock commitments to borrowers and the forward sale contracts to investors are derivatives and, accordingly, are marked to fair value through Newmark’son the accompanying unaudited condensed consolidated statements of operations. The fair value of Newmark’s rate lock commitments to borrowers and loans held for sale and the related input levels includes, as applicable:

•The assumed gain/gain loss of the expected loan sale to the investor, net of employee benefits;

40

•The expected net future cash flows associateassociated with servicing the loan;

•The effects of interest rate movements between the date of the rate lock and the balance sheet date; and

•The nonperformance risk of both the counterparty and Newmark.

The fair value of Newmark’s forward sales contracts to investors considers effects of interest rate movements between the trade date and the balance sheet date. The market price changes are multiplied by the notional amount of the forward sales contracts to measure the fair value.


The fair value of Newmark’s rate lock commitments and forward sale contracts is adjusted to reflect the risk that the agreement will not be fulfilled. Newmark’s exposure to nonperformance in rate lock and forward sale contracts is represented by the contractual amount of those instruments. Given the credit quality of Newmark’s counterparties, the short duration of rate lock commitments and forward sales contracts, and Newmark’s historical experience with the agreements, management does not believe the risk of nonperformance by Newmark’s counterparties to be significant.

Sensitivity Analysis -


The Nasdaq Forwards are derivatives and, accordingly, are marked to fair value on the accompanying unaudited condensed consolidated statements of operations. The fair value of the Nasdaq Forwards are determined utilizing the following inputs, as applicable:
•The underlying number of shares and the related strike price;
•The maturity date; and
•The implied volatility of Nasdaq’s stock price.

The fair value of Newmark’s Nasdaq Forwards considers the effects of Nasdaq’s stock price volatility between the balance sheet date and the maturity date. The fair value is determined by the use of a Black-Scholes put option valuation model.

Information About Uncertainty of Level 3 Fair Value Measurements

The significant unobservable inputs used in the fair value of Newmark’s contingent consideration are the discount rate and forecasted financial information. Significant increases (decreases) in the discount rate would have resulted in a significantly lower (higher) fair value measurement. Significant increases (decreases) in the forecasted financial information would have resulted in a significantly higher (lower) fair value measurement. As of March 31, 2018June 30, 2022 and December 31, 2017,2021, the present value of expected payments related to Newmark’s contingent consideration was $26.7$20.1 million and $23.7$12.3 million, respectively (Note 28- Commitments(see Note 31 — “Commitments and Contingencies)Contingencies”). Valuations for contingent considerationAs of June 30, 2022 and December 31, 2021, the undiscounted value of the payments, assuming that all contingencies are conducted by Newmark. Each reporting period, Newmark updates unobservable inputs. Newmark hasmet, would be $27.4 million and $13.2 million, respectively.

Fair Value Measurements on a formal process to review changes inNon-Recurring Basis
Equity investments carried under the measurement alternative are remeasured at fair value for satisfactory explanation.

on a non-recurring basis to reflect observable transactions which occurred during the period. Newmark applied the measurement alternative to equity securities with the fair value of $8.8 million and $20.0 million, which was included in “Other assets” on the accompanying unaudited condensed consolidated balance sheets as of June 30, 2022 and December 31, 2021, respectively. These investments are classified within Level 2 in the fair value hierarchy, because their estimated fair value is based on valuation methods using the observable transaction price at the transaction date.

(25)

Related Party Transactions


(27)    Related Party Transactions

(a)Service Agreements


Newmark receives administrative services, including but not limited to, treasury, legal, accounting, information technology, payroll administration, human resources, incentive compensation plans and other support, provided by CantorCantor. Allocated expenses were $6.7 million and BGC. For$5.8 million for the three months ended March 31, 2018June 30, 2022 and 2017, allocated expenses were $6.92021, respectively, and $13.6 million and $4.7$12.0 million for the six months ended June 30, 2022 and 2021, respectively. These expenses are included as part of “Fees to related parties” in Newmark’son the accompanying unaudited condensed consolidated statements of operations.


(b)Loans, Forgivable Loans and Other Receivables from Employees and Partners


Newmark has entered into various agreements with certain employees and partners whereby these individuals receive loans which may be either wholly or in part repaid from the distribution of earnings that the individuals receive on some or all of their limited partnership interests or may be forgiven over a period of time. The forgivable portion of these loans is recognized as compensation expense over the life of the loans. From time to time, Newmark may also enter into agreements
41

with employees and partners to grant bonus and salary advances or other types of loans. These advances and loans are repayable in the timeframes outlined in the underlying agreements.



As of March 31, 2018June 30, 2022 and December 31, 2017,2021, the aggregate balance of employee loans was $226.7$478.4 million and $209.6$453.3 million, respectively, and is included as “Loans, forgivable loans and other receivables from employees and partners, net” in Newmark’son the accompanying unaudited condensed consolidated balance sheets. Compensation expense for the above mentionedabove-mentioned employee loans for the three months ended March 31, 2018June 30, 2022 and 20172021 was $6.0$20.7 million and $2.0$19.5 million, respectively, and $39.6 million, and $36.8 million for the six months ended June 30, 2022 and 2021, respectively. The compensation expense related to these employee loans is included as part of “Compensation and employee benefits” in Newmark’son the accompanying unaudited condensed consolidated statements of operations.


Other Related Party Transactions with

In February 2019, Newmark's Audit Committee authorized Newmark and its subsidiaries to originate and service GSE loans for Cantor Commercial Real Estate Company, L.P.

and its affiliates (other than BGC) and service loans originated by Cantor and its affiliates (other than BGC) on prices, rates and terms no less favorable to Newmark also hasand its subsidiaries than those charged by third parties. The authorization is subject to certain terms and conditions, including but not limited to: (i) a referral agreementmaximum amount up to $100.0 million per loan, (ii) a $250.0 million limit on loans that have not yet been acquired or sold to a GSE at any given time, and (iii) a separate $250.0 million limit on originated Fannie Mae Loans outstanding to Cantor at any given time.


On November 30, 2020, Newmark entered into an arrangement to assist View, Inc. (“View”) in place with CCRE,the sale of its products and services to real estate clients in which Newmark’s brokers are incentivized to refer business to CCRE throughexchange for commissions. View, Inc. is a revenue-share agreement.Silicon Valley-based producer of high-efficiency dynamic glass that controls light, heat, and glare, providing unobstructed views and privacy using a low voltage control system. In connection with this revenue-sharethe arrangement, View also agreed to engage Newmark as its exclusive provider of real estate services for a period of at least five years. While View is not under common control with Newmark, it was, at the time that the agreement In connectionwas executed, the target of a merger with this revenue share agreement, CF Finance Acquisition Corp. II, a special purpose acquisition company sponsored by Cantor.

(c)Transactions with CCRE

Newmark recognized revenues of $60.9 thousand million for the three months ended March 31, 2017. Newmark did not recognize any revenue related to this agreement during the three months ended March 31, 2018. This revenue was recorded as part of “Commissions” in Newmark’s unaudited condensed consolidated statements of operations.

Newmark also has a revenue-share agreement with CCRE, in which Newmark pays CCRE for referrals for leasing or other services. Newmark did not make any payments under this agreement to CCRE during the six months ended June 30, 2022 and 2021. Newmark did not recognize revenue for the three and six months ended March 31, 2018June 30, 2022 and 2017, respectively.  

recognized $0.5 million and $1.0 million of revenue for the three and six months ended June 30, 2021, respectively, in connection with this revenue-share agreement.


In addition, Newmark has a loan referral agreement in place with CCRE, in which either party can refer a loan to the other. RevenueNewmark did not have any revenues from these referrals were $3.7 million and $0.3 million for the three and six months ended March 31, 2018June 30, 2022 and 2017, respectively, and was2021, respectively. Such revenues are recognized in “Gain from“Commercial mortgage banking activities/originations,origination, net” in Newmark’son the accompanying unaudited condensed consolidated statements of operations. These referralsreferral fees are net of the broker fees and commissions paid to CCRE of $0.7 million and $0.2 million for the three months ended March 31, 2018 and 2017, respectively.

On September 8, 2017, BGC completed the Berkeley Point Acquisition, for an acquisition price of $875.0 million with $3.2 million of the acquisition price paid in units of BGC Holdings, pursuant to a Transaction Agreement, dated as of July 17, 2017, with Cantor and certain of Cantor’s affiliates, including CCRE and Cantor Commercial Real Estate Sponsor, L.P., the general partner of CCRE. In accordance with this Transaction Agreement, BPF made a distribution of $89.1 million to CCRE, for the amount that BPF’s net assets exceeded $508.6 million.

On March 11, 2015, Newmark and CCRE entered into a note receivable/payable that allows for advances to or from CCRE at an interest rate of 1-month LIBOR plus 1.0%. On September 8, 2017, the note receivable/payable was terminated, and all outstanding advances due were paid off. Newmark recognized interest expense of $2.1 for the three months ended March 31, 2017.

For the three months ended March 31, 2018, Newmark purchased the primary servicing rights for $0.3 billion of loans originated by CCRE for $0.5 million.


Newmark did not purchase any primary servicing rights from CCRE forduring the three and six months ended March 31, 2017.June 30, 2022 and 2021. Newmark also services loans for CCRE on a “Fee“fee for service” basis, generally prior to a loan’s sale or securitization, and for which no mortgage servicing rightMSR is recognized. Newmark recognized $0.9 million and $1.0 million for the three months ended March 31, 2018 and 2017, respectively, of servicing revenues from (excludes(excluding interest and placement fees) loansfrom servicing rights purchased from CCRE on a “fee for service” basis of $0.9 million and $0.9 million for the three months ended June 30, 2022 and 2021, respectively, and $1.8 million and $1.8 million for the six months ended June 30, 2022, and 2021, respectively, which was included as part of “Management services, servicing fee and other” in Newmark’son the accompanying unaudited condensed consolidated statements of operations.


On July 22, 2019, Cantor Commercial Real Estate Lending, L.P. (“CCRE Lending”), a wholly owned subsidiary of Real Estate LP, made a $146.6 million commercial real estate loan (the “Loan”) to a single-purpose company (the “Borrower”) in which Barry Gosin, Newmark’s Chief Executive Officer, owns a 19% interest. The Loan is secured by the Borrower’s interest in property in Pennsylvania that is subject to a ground lease. While CCRE Lending initially provided the full loan amount, on August 16, 2019, a third-party bank purchased approximately 80% of the Loan value from CCRE Lending, with CCRE Lending retaining approximately 20%. The Loan matures on August 6, 2029, and is payable monthly at a fixed interest rate of 4.38% per annum.



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Transactions with Executive Officers and Directors

Executive Compensation

On December 21, 2021, the Compensation Committee approved: (i) the redemption of all of Mr. Gosin’s remaining 838,996 non-exchangeable Newmark PPSUs for $8,339,980 in cash and (ii) compensation of approximately $7,357,329 by way of the Company causing 478,328 of Mr. Gosin’s non-exchangeable Newmark PSUs to be redeemed for zero and issuing 446,711 shares of Newmark Class A Common Stock, based upon the closing price on the date the Committee approved the transaction (which was $16.47) and an exchange ratio of 0.9339. The estimated pre-tax value of this transaction is $15,697,309, less applicable taxes and withholdings, using a 53.13% tax rate for Mr. Gosin.

On December 21, 2021, Mr. Lutnick elected to redeem all of his 193,530 currently exchangeable Newmark PPSUs for a cash payment of $1,465,873. In addition, upon the Compensation Committee’s approval of the monetization of Mr. Gosin’s remaining non-exchangeable Newmark PPSUs and a number of Mr. Gosin’s non-exchangeable PSUs on December 21, 2021, Mr. Lutnick (i)elected to redeem 188,883 non-exchangeable Newmark PPSUs for a cash payment of $1,954,728, and 127,799 non-exchangeable Newmark NPPSUs for a cash payment of $1,284,376, both for which he previously waived, but now accepted under the Company’s standing policy for Mr. Lutnick; and (ii) received the right to monetize, and accepted the monetization of, his remaining 122,201 non-exchangeable Newmark NPPSUs for a cash payment of $1,228,124, under such standing policy.

In connection with the foregoing, Mr. Lutnick accepted the right to monetize approximately $4,406,915 by way of the Company causing 286,511 of Mr. Lutnick’s non-exchangeable Newmark PSUs to be redeemed for zero and issuing 267,572 shares of Newmark Class A Common Stock based upon the closing price on the date the Committee approved the transaction (which was $16.47) and a 0.9339 exchange ratio, under the Company’s standing policy applying to Mr. Lutnick, with such acceptance of rights granted in reference to Mr. Gosin’s December 2021 transactions to the extent necessary to effectuate the foregoing (and otherwise Mr. Lutnick waived all remaining rights, which shall be cumulative). The aggregate estimated pre-tax value of these transactions is $10,340,015, less applicable taxes and withholdings, using a 57.38% tax rate for Mr. Lutnick.

On June 28, 2021, in connection with the 2021 Equity Event, the Compensation Committee approved the specific transactions with respect to the Company’s executive officers set forth below. All of the transactions included in the 2021 Equity Event, with respect to Messrs. Lutnick, Gosin and Rispoli, were based on (i) the price for Newmark Class A common stock of $12.50 per share, as approved by the Compensation Committee; (ii) the price of BGC Partners Class A common stock of $5.86; and (iii) the price of Nasdaq common stock of $177.11.

On April 27, 2021, the Compensation Committee approved an additional monetization opportunity for Mr. Merkel: (i) 73,387 of Mr. Merkel’s 145,384 non-exchangeable Newmark Holdings PSUs were redeemed for zero, (ii) 19,426 of Mr. Merkel’s 86,649 non-exchangeable Newmark Holdings PPSUs were redeemed for a cash payment of $0.2 million, and (iii) 68,727 shares of Newmark Class A common stock were issued to Mr. Merkel. On the same day, the 68,727 shares of Newmark Class A common stock were repurchased from Mr. Merkel at $10.67 per share, the closing price of Newmark Class A common stock on that date, under the Company's stock buyback program. The total payment delivered to Mr. Merkel was $0.8 million, less applicable taxes and withholdings.

On March 16, 2021, the Company redeemed 30,926 non-exchangeable Newmark Holdings PSUs held by Mr. Merkel for zero and in connection therewith issued 28,962 shares of Newmark Class A common stock. On the same day, the Company repurchased these shares from Mr. Merkel at the closing price of Newmark Class A common stock of $11.09 per share under the Company's stock buyback program. The total payment delivered to Mr. Merkel was $0.3 million, less applicable taxes and withholdings. The Compensation Committee approved these transactions.

On March 16, 2021, pursuant to the Newmark standing policy for Mr. Lutnick, the Compensation Committee granted exchange rights and/or monetization rights with respect to rights available to Mr. Lutnick. Mr. Lutnick elected to waive such rights one-time with such future opportunities to be cumulative. The aggregate number of Mr. Lutnick’s units for which he waived exchange rights or other monetization rights was 4,423,457 non-exchangeable Newmark Holdings PSUs/NPSUs, inclusive of the PSUs receiving an HDU conversion right and 1,770,016 non-exchangeable Newmark Holdings PPSUs with an aggregate determination amount of $21.6 million at that time, inclusive of the PPSUs receiving an HDU conversion right.

On March 16, 2021, the Compensation Committee granted Mr. Gosin exchange rights into shares of Newmark Class A common stock with respect to 526,828 previously awarded non-exchangeable Newmark Holdings PSUs and 30,871 non-exchangeable Newmark Holdings APSUs held by Mr. Gosin (which, based on the closing price of the Class A common stock of $11.09 per share on such date and using the exchange ratio of 0.9365, had a value of $5.8 million in the aggregate). In
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addition, on March 16, 2021, the Compensation Committee approved removing the sale restrictions on Mr. Gosin’s remaining 178,232 restricted shares of Class A common stock in BGC (which were originally issued in 2013) and associated 82,680 remaining restricted shares of Newmark Class A common stock (issued as a result of the Company spin-off in November 2018).

On March 16, 2021, the Compensation Committee granted Mr. Rispoli (i) exchange rights into shares of Newmark Class A common stock with respect to 6,043 previously awarded non-exchangeable Newmark Holdings PSUs held by Mr. Rispoli (which, based on the closing price of the Class A common stock of $11.09 per share on such date and using the exchange ratio of 0.9365, had a value of $0.1 million); and (ii) exchange rights into cash with respect to 4,907 previously awarded non-exchangeable Newmark Holdings PPSUs held by Mr. Rispoli (which had an average determination price of $15.57 per unit, for a total of $0.1 million in the aggregate to be paid for taxes when (i) is exchanged).

Howard W. Lutnick, Chairman

On December 27, 2021, the Compensation Committee approved a one-time bonus award to Mr. Lutnick (the “Award”), which was evidenced by the execution and delivery of a Retention Bonus Agreement dated December 28, 2021 (the “Effective Date”) and described below (the “Award Agreement”), in consideration of his success in managing certain aspects of the Company’s performance as its principal executive officer and Chairman. The Award rewarded Mr. Lutnick for his efforts in delivering superior financial results for the Company and its stockholders, including in particular his success in creating substantial value for the Company and its stockholders in connection with creating, structuring, hedging and monetizing the forward share contract to receive over time shares of common stock of Nasdaq, Inc. (the “Nasdaq Derivative”) held by the Company (together, the “Nasdaq Shares”) and the strong balance sheet and significant amount of income created from the Nasdaq Derivative. A principal reason for structuring the Award with a substantial portion to be paid out over three years was also to further incentivize Mr. Lutnick to continue to serve as both the Company’s principal executive officer and its Chairman for the benefit of the Company’s stockholders.

The Award Agreement provides for an aggregate cash payment of $50 million, payable as follows: $20 million within three days of the Effective Date (which payment was made on December 31, 2021), and $10 million within thirty days following vesting on each of the first, second and third anniversaries of the Effective Date. Any entitlement to future amounts not vested will be forfeited immediately if, prior to the applicable anniversary date, Mr. Lutnick ceases to serve as both the Company’s Chairman and its principal executive officer, unless Mr. Lutnick ceasing to serve in either such capacity occurs pursuant to a “Vesting Termination,” as that term is defined in the Award Agreement. Mr. Lutnick has purchased Newmark Class A Common Stock with the after-tax proceeds of the initial tranche of the Award. The Award Agreement describes a “Vesting Termination” as (i) a termination of Mr. Lutnick’s employment by the Company without “Cause” (as that term is defined in the Award Agreement) or (ii) an involuntary removal of the Executive from the position of Chairman of the Board on or after the occurrence of a Change in Control (as that term is defined in the Change of Control Agreement dated as of December 13, 2017 by and between Mr. Lutnick and the Company (the “Control Agreement”). In the event that Mr. Lutnick ceases to serve as both the Company’s Chairman and its principal executive officer pursuant to a Vesting Termination, any amounts not vested will immediately become fully vested. The Award Agreement provides that Mr. Lutnick ceasing to serve as the Company’s Chairman and principal executive officer pursuant to his death or disability does not constitute a Vesting Termination. The provisions of the Control Agreement do not apply to the Award. A copy of the Award Agreement was attached as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on December 29, 2021 and is described in detail under the heading “2021 Lutnick Award” in Amendment No. 1 to the Company’s Annual Report on From 10-K/A.

On June 28, 2021, in connection with the 2021 Equity Event, the Newmark Compensation Committee approved the following for Mr. Lutnick: (i) the exchange of 279,725 exchangeable Newmark Holdings PSUs into 263,025 shares of Class A common stock of Newmark based on the then applicable Exchange Ratio of 0.9403; and $1,465,874 associated with Mr. Lutnick’s non-exchangeable 193,530 Newmark Holdings PPSUs was redeemed and used for tax purposes; (ii) the conversion of 552,482.62 non-exchangeable Newmark Holdings PSUs with the right to exchange PSUs into HDUs (“H-Rights”) into 552,482.62 non-exchangeable Newmark Holdings HDUs and redemption of such HDUs for their Capital Account of $7,017,000, paid in the form of Nasdaq Shares issued at $177.11 per share (which was the NASDAQ closing price as of June 28, 2021); and $7,983,000 associated with Mr. Lutnick’s non-exchangeable Newmark Holdings PPSUs with -H were redeemed and used for tax purposes; (iii) the exchange of 520,380 exchangeable BGC Holdings PSUs into 520,380 shares of Class A common stock of BGC Partners, and $1,525,705 associated with Mr. Lutnick’s exchangeable BGC Holdings PPSUs was redeemed and used for tax purposes; (iv) the redemption of 88,636 non-exchangeable BGC Holdings PSUs pursuant to Mr. Lutnick’s rights under his existing standing policy, and the issuance of 88,636 shares of Class A common stock of BGC Partners; (v) the conversion of 1,131,774 non-exchangeable BGC Holdings PSUs with H-Rights into 1,131,774 non-exchangeable BGC Holdings HDUs and $7,983,000 associated with Mr. Lutnick’s BGC Holdings PPSUs with H- Rights was redeemed and used for tax purposes in connection with the exercise of the exercise of the BGC Holdings HDUs; and (vi) the issuance of 29,059 shares of Class A common stock of Newmark. In accordance with Mr. Lutnick’s right under his existing standing policy, and in connection with the 2021 Equity Event, upon the approval of the Newmark Compensation Committee: (i) 2,909,819 non-exchangeable Newmark Holdings PSUs, pursuant to Mr. Lutnick’s rights under his existing standing policy,
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were redeemed and 2,736,103 shares of Class A common stock of Newmark, based upon the then applicable exchange ratio of 0.9403, were granted to Mr. Lutnick; and (ii) $8,798,546 associated with Mr. Lutnick’s rights under his existing standing policy was redeemed and used for tax purposes. See Item 11 — “Executive Compensation” in our Annual Report on Form 10-K/A for additional information and definitions.

Barry M. Gosin, Chief Executive Officer

On September 20, 2021, the Compensation Committee approved a monetization opportunity for Mr. Gosin: all of Mr. Gosin’s 2,114,546 non-exchangeable BGC Holdings PSUs were redeemed for zero and 2,114,456 shares of BGC Class A common stock were issued to Mr. Gosin.

On June 28, 2021, the Compensation Committee approved the following for Mr. Gosin, the Company’s Chief Executive Officer: (i) the exchange of 1,531,061.84 exchangeable Newmark Holdings units (comprised of 1,438,597.37 exchangeable Newmark Holdings PSUs and 92,464.47 exchangeable Newmark Holdings APSUs) into 1,439,658 shares of Class A common stock of Newmark based upon the then current exchange ratio of 0.9403; and $834,508 associated with Mr. Gosin’s exchangeable Newmark Holdings PPSUs was redeemed and used for tax purposes; (ii) the conversion of 443,871.60 non-exchangeable Newmark Holdings PSUs with H-Rights into 443,871.60 non-exchangeable Newmark Holdings HDUs, and redemption of such HDUs, less any taxes and withholdings in excess of $5,362,452, paid in the form of Nasdaq shares issued at $177.11 per share (which was the NASDAQ closing price as of June 28, 2021); and $5,362,452 in connection with Mr. Gosin’s Newmark Holdings PPSUs with H-Rights was redeemed and used for tax purposes; (iii) the exchange of 3,348,706 exchangeable BGC Holdings units (comprised of 3,147,085 exchangeable BGC Holdings PSUs and 201,621 exchangeable BGC Holdings APSUs) into 3,348,706 shares of Class A common stock of BGC Partners; and $298,273 associated with Mr. Gosin’s exchangeable BGC Holdings PPSUs was redeemed and used for tax purposes; (iv) the conversion of 1,592,016 non-exchangeable BGC Holdings PSUs with H-Rights into 1,592,016 non-exchangeable BGC Holdings HDUs, and $1,129,499 associated with Mr. Gosin non-exchangeable BGC Holdings PPSUs was redeemed and used for tax purposes; and (v) the issuance of 12,500 shares of Class A common stock of Newmark.

Michael J. Rispoli, Chief Financial Officer

On June 28, 2021, the Compensation Committee approved the following for Mr. Michael Rispoli, the Company’s Chief Financial Officer: (i) the exchange of 23,124 exchangeable Newmark Holdings PSUs into 21,744 shares of Class A common stock of Newmark based on the then current exchange ratio of 0.9403 and $208,407 associated with Mr. Rispoli’s exchangeable Newmark Holdings PPSUs was redeemed and used for tax purposes; (ii) 6,000 non-exchangeable Newmark Holdings PSUs were redeemed and an aggregate of 5,642 restricted shares of Newmark were issued to Mr. Rispoli based upon the then current exchange ratio of 0.9403, and $52,309 associated with Mr. Rispoli’s non-exchangeable Newmark Holdings PPSUs was redeemed and used for tax purposes; (iii) the conversion of 5,846.07 non-exchangeable Newmark Holdings PSUs with H-Rights into 5,846 non-exchangeable Newmark Holdings HDUs and the redemption of such HDUs, less any taxes and withholdings in excess of $60,750, paid in the form of Nasdaq shares issued at $177.11 per share (which was the NASDAQ closing price as of June 28, 2021); and $60,750 associated with Mr. Rispoli’s PPSUs with H-Rights was redeemed and used for tax purposes; (iv) the exchange of 36,985 exchangeable BGC Holdings PSUs into 36,985 shares of Class A common stock of BGC, and $134,573 associated with Mr. Rispoli’s exchangeable BGC Holdings PPSUs was redeemed and used for tax purposes; and (v) the issuance of 383 shares of Class A common stock of Newmark.

Stephen M. Merkel, Chief Legal Officer

On June 28, 2021 the Compensation Committee also approved the following for Stephen M. Merkel, the Company’s Chief Legal Officer: (i) the redemption of 51,124.28 non-exchangeable Newmark Holdings PSUs and issuance of 48,072 shares of Newmark Class A common stock based upon the current exchange ratio of 0.9403; and (ii) the redemption of 46,349.87 non-exchangeable Newmark Holdings PPSUs for a cash payment of $0.5 million, to be remitted to the applicable tax authorities to the extent necessary in connection with the issuance of the shares above.

Retirement Fund Purchase
On April 27, 2021, a Keogh retirement account held by Mr. Lutnick purchased 5,154 shares of our Class A common stock from us at the closing price of Newmark Class A common stock on that date of $10.67 per share. The transaction was approved by our Audit Committee.

On November 4, 2020, the Audit Committee of the Board of Directors authorized entities in which executive officers have a non-controlling interest to engage Newmark to provide ordinary course real estate services to them as long as Newmark’s fees are consistent with the fees that Newmark ordinarily charges for these services.


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CF Real Estate Finance Holdings, LP.

Contemporaneously with the acquisition of Berkeley Point, Acquisition, on September 8, 2017, Newmark invested $100.0 million in a newly formed commercial real estate-related financial and investment business, Real Estate LP, which is controlled and managed by Cantor. Real Estate LP may conduct activities in any real estate related business or asset backed securities related business or any extensions thereof and ancillary activities thereto. In addition, Real Estate LP may provide short-term loans to related parties from time to time when funds in excess of amounts needed for investment opportunities are available. As of MarchJune 30, 2022 and December 31, 2018, $339.2 million had been loaned to related parties. As of March 31, 2018,2021, Newmark’s investment iswas accounted for under the equity method.

IPO

method (see Note 8 — “Investments”). Newmark holds a redemption option in which Real Estate LP will redeem in full Newmark’s investment in Real Estate LP in exchange for Newmark’s capital account balance in Real Estate LP as of such time. On December 13, 2017,July 20, 2022, Newmark exercised this redemption option and expects to receive approximately $88.4 million from Cantor on or prior to the closing of the IPO, BGC, BGC Holdings, BGC U.S. OpCo, Newmark, Newmark Holdings, Newmark OpCo,July 20, 2023.


Transactions with Cantor and BGC Global OpCo entered into the Separation and Distribution Agreement. The Separation and Distribution Agreement sets forth the agreements among BGC, Cantor, Newmark and their respective subsidiaries with respect to the Separation and related matters. For additional information, see Note 1 — Organization and Basis of Presentation. In addition, in connection with the Separation and Newmark IPO, on December 13, 2017 a Registration Rights Agreement by and among Cantor, BGC and Newmark, an Amended and Restated Tax Receivable Agreement by and between Cantor and BGC, an Exchange Agreement


by and among Cantor, BGC and Newmark, and Administrative Services Agreement by and between Cantor and Newmark (see “Service Agreements” above)Fitzgerald & Co., and a Tax Receivable Agreement by and between Cantor and Newmark were entered into.

As a result of the Separation, the limited partnership interests in Newmark Holdings were distributed to the holders of limited partnership interests in BGC Holdings, including Cantor, whereby each holder of BGC Holdings limited partnership interests at that time now holds a BGC Holdings limited partnership interest and a corresponding Newmark Holdings limited partnership interest, which is equal to a BGC Holdings limited partnership interest multiplied by the contribution ratio, divided by the current exchange ratio. The exchange ratio is subject to adjustment, in accordance with the terms of the separation agreement (For additional information, see Note 2 — Limited Partnership Interests in Newmark Holdings.)

In addition CF&Co, a wholly owned broker-dealer subsidiary of Cantor was an underwriter of the IPO. Pursuant to the underwriting agreement, Newmark paid ("CF&Co 5.5% of the gross proceeds from the sale of shares of Newmark Class A common stock sold by CF&Co. in connection with the IPO.

BGC’s Investment in Newmark Holdings

&Co")

On March 7,June 18, 2018 BGC Partners, L.P. and its operating subsidiaries purchased 16.6 million Newmark Units of Newmark Holdings for approximately $242.0 million. The price per Newmark Unit was based on the $14.57 closing price of Newmark’s Class A common stock on March 6, 2018 as reported on the NASDAQ Global Select Market. These newly-issued Newmark Units are exchangeable, at BGC’s discretion, into either shares of Class A common stock or shares of Class B common stock of Newmark. BGC made the Investment in Newmark pursuant to an Investment Agreement dated as of March 6, 2018 by and among BGC, BGC Holdings, BGC Partners, L.P., BGC Global Holdings, L.P., Newmark, Newmark Holdings and Newmark Partners, L.P. BGC’s investment in Newmark Holdings and related transactions were approved by the Audit Committees and Boards of Directors of BGC and Newmark. BGC and its subsidiaries funded the Investment in Newmark using the proceeds of its CEO sales program. Newmark used the proceeds to repay the balance of the outstanding principal amount under its Term Loan with Bank of America, N.A., as administrative agent, and a syndicate of lenders.  

Payables to Related Parties

On March 19,September 26, 2018, Newmark entered into transactions related to the “Intercompanymonetization of the Nasdaq shares that Newmark was scheduled to receive in 2019 through 2022 (see Note 1 — “Organization and Basis of Presentation”). Newmark paid $4.0 million in fees for services provided by CF&Co related to these monetization transactions. These fees were recorded as a deduction from the carrying amount of the EPUs.


On March 28, 2019, Newmark filed a registration statement on Form S-3 pursuant to which CF&Co may make offers and sales of Newmark's 6.125% Senior Notes in connection with ongoing market-making transactions which may occur from time to time. Such market-making transactions in these securities may occur in the open market or may be privately negotiated at prevailing market prices at a time of resale or at related or negotiated prices. Neither CF&Co, nor any of our affiliates, has any obligation to make a market in Newmark's securities, and CF&Co or any such other affiliate may discontinue market-making activities at any time without notice. Newmark does not receive any proceeds from market-making activities in these securities by CF&Co (or any of its affiliates). This registration statement expired in March 2022. On March 25, 2022, Newmark filed a new Registration Statement on Form S-3 to replace the one that was expiring.

(d)Other Related Party Transactions

On November 30, 2018, Newmark entered into an unsecured credit agreement with Cantor (the “Cantor Credit Agreement” with BGC, which amended and restated the original intercompany credit agreement between the parties in relation to the Separation, dated as of December 13, 2017.). The IntercompanyCantor Credit Agreement provides for each party to issue revolving loans to the other party inat the lender’s discretion. ThePursuant to the Cantor Credit Agreement, the parties and their respective subsidiaries (with respect to Cantor, other than BGC and its subsidiaries) may borrow up to an aggregate principal amount of $250 million from each other from time to time at an interest rate on the Intercompany Credit Agreement can bewhich is the higher of BGC’sCantor’s or Newmark’s short term borrowingsshort-term borrowing rate then in effect, at such time plus 100 basis points, or such other interest1%. No amounts were outstanding as of June 30, 2022 and 2021.

As of December 31, 2021, Newmark recognized a $8.3 million receivable from BGC, which is included as part of "Receivables from related parties, in the Company's unaudited condensed consolidated balance sheet. The receivable was a result of tax refunds due to Newmark on its share of taxable income which were included as part of BGC's consolidated tax return in the periods prior to the spin-off. This receivable was collected during the six months ended June 30, 2022.

Payables to related parties were $11.4 million and $10.8 million as of June 30, 2022 and December 31, 2021, respectively.

For a detailed discussion about Newmark’s Payables to related parties, see Note 1 — “Organization and Basis of Presentation”, Note 2 — “Limited Partnership Interests in Newmark and BGC Holdings” and Note 22 — “Long-Term Debt” in Newmark’s consolidated financial statements, included in Part II, Item 8 of Newmark’s Annual Report on Form 10-K for the year ended December 31, 2021.

On May, 15 2020, BGC U.S. OpCo ("BGC") entered into an arrangement to sublease excess space from RKF Retail Holdings LLC, a subsidiary of Newmark, which was approved by the Newmark Audit Committee. The deal was a one-year sublease of approximately 21,000 rentable square feet in New York City. Under the terms of the sublease, BGC paid a fixed rent amount of $1.1 million in addition to all operating and tax expenses attributable to the lease. In May 2021, the sublease was amended to provide for a rate as may be mutually agreed betweenof $15,000 per month based on the size of utilized space, in addition to terms extending on a month-to-month basis. The lease with BGC ended in December 2021. Newmark received $0.1 million and $0.4 million from BGC for the three and six months ended June 30, 2021, respectively.

In January 2022, Cantor entered into an arrangement to sublease excess space from RKF Retail Holdings LLC, a subsidiary of Newmark. The interestdeal was a six-month sublease of approximately 21,000 rentable square feet in New York City. Under the terms of the sublease, Cantor paid all operating and tax expenses attributable to the lease. The sublease was amended to provide for a rate of $81,600 per month based on the size of utilized space, in addition to terms extending on a month-to-
46

month basis. Newmark received $0.5 million for the six months ended June 30, 2022. In July 2022, the sublease was extended one year to June 30, 2023.

As part of the Knotel acquisition, Newmark assigned the rights to acquire certain Knotel assets to a subsidiary of Cantor, on the terms that if the subsidiary monetized the sale of these assets, Newmark would receive 10% of the proceeds of the sale after the subsidiary recoups its investment in the assets.

On June 28, 2021, the Audit Committee authorized Newmark to hire a son of its Chairman as a full-time employee of its Knotel business with an annual base salary of $125,000 and an annual discretionary bonus of up to 30%. The arrangement includes a potential profit participation consistent with other entrepreneurial arrangements in the event of certain liquidity events related to businesses developed by him. In June 2022, the Audit Committee approved ordinary course compensation adjustments and expense, travel and housing reimbursement for him in accordance with standard Company policies up to $250,000 in total compensation without further Committee review.

Cantor Rights to Purchase Cantor Units from Newmark Holdings

Cantor has a right to purchase from Newmark Holdings exchangeable limited partnership interests in the event that any Newmark Holdings founding partner interests that have not become exchangeable are redeemed by Newmark Holdings upon termination or bankruptcy of a founding partner or upon mutual consent of the general partner of Newmark Holdings and Cantor. Cantor has the right to purchase such Newmark Holdings exchangeable limited partnership interests at a price equal to the lesser of (1) the amount that Newmark Holdings would be required to pay to redeem and purchase such Newmark Holdings founding partner interests and (2) the amount equal to (a) the number of units underlying such founding partner interests, multiplied by (b) the exchange ratio as of the date of such purchase, multiplied by (c) the then-current market price of our Class A common stock. Cantor may pay such price using cash, publicly traded shares or other property, or a combination of the foregoing. If Cantor (or the other member of the Cantor group acquiring such limited partnership interests, as the case may be) so purchases such limited partnership interests at a price equal to clause (2) above, neither Cantor nor any member of the Cantor group nor Newmark Holdings nor any other person is obligated to pay Newmark Holdings or the holder of such founding partner interests any amount in excess of the amount set forth in clause (2) above.

In addition, the Newmark Holdings limited partnership agreement provides that (1) where either current, terminating or terminated partners are permitted by us to exchange any portion of their founding partner units and Cantor consents to such exchangeability, we will offer to Cantor the opportunity for Cantor to purchase the same number of new exchangeable limited partnership interests in Newmark Holdings at the price that Cantor would have paid for exchangeable limited partnership interests in the event we had redeemed the founding partner units; and (2) the exchangeable limited partnership interests to be offered to Cantor pursuant to clause (1) above would be subject to, and granted in accordance with, applicable laws, rules and regulations then in effect.

If Cantor acquires any units as a result of the purchase or redemption by Newmark Holdings of any founding partner interests, Cantor will be entitled to the benefits (including distributions) of the units it acquires from the date of termination or bankruptcy of the applicable founding partner. In addition, any such units will be exchangeable by Cantor for a number of shares of our Class B common stock or, at Cantor’s election, shares of our Class A common stock, in each case, equal to the then-current exchange ratio, on the same basis as the limited partnership interests held by Cantor, and will be designated as Newmark Holdings exchangeable limited partnership interests when acquired by Cantor. The exchange ratio was initially 1, but is subject to adjustment as set forth in the Separation and Distribution Agreement and was 0.9393 as of June 30, 2022. This may permit Cantor to receive a larger share of income generated by our business at a less expensive price than through purchasing shares of our Class A common stock, which is a result of the price payable by Cantor to Newmark.

On March 31, 2018 was 4.99%.2021, Cantor purchased from Newmark Holdings an aggregate of (i) 273,088 exchangeable limited partnership interests for aggregate consideration of $1,105,598 as a result of the redemption of 273,088 founding partner interests, and (ii) 735,625 exchangeable limited partnership interests for aggregate consideration of $2,918,919 as a result of the exchange of 735,625 founding partner interests.

On October 28, 2021, Cantor purchased from Newmark Holdings an aggregate of (i) 299,910 exchangeable limited partnership interests for aggregate consideration of $975,064 as a result of the redemption of 299,910 founding partner interests, and (ii) 523,284 exchangeable limited partnership interests for aggregate consideration of $1,898,363 as a result of the exchange of 523,284 founding partner interests.

On May 17, 2022, Cantor purchased from Newmark Holdings an aggregate of (i) 184,714 exchangeable limited partnership interests for aggregate consideration of $763,064 as a result of the redemption of 184,714 founding partner interests,
47

and (ii) 23,562 exchangeable limited partnership interests for aggregate consideration of $100,079 as a result of the exchange of 23,562 founding partner interests.

Following such purchases, as of June 30, 2022 there were 102,454 founding partner interests in Newmark Holdings remaining in which the partnership had the right to redeem or exchange and with respect to which Cantor will have the right to purchase an equivalent number of Cantor units following such redemption or exchange.

Special Purpose Acquisition Company

As previously reported, in April 2021, Newmark OpCo and Cantor entered into various arrangements pursuant to which they agreed to co-sponsor a special purpose acquisition company, named Newmark Acquisition Corp. (the “SPAC”), in which certain of the Company's executive officers are executive officers and are expected to be directors. Pursuant to a purchase agreement, Newmark OpCo purchased from Cantor a 75% equity interest in an entity now known as Newmark Acquisition Holdings, LLC, the sponsor of the SPAC (the “Sponsor”), for $18.8 thousand, with Cantor retaining the remaining 25% equity interest in the Sponsor. Pursuant to an amended and restated limited liability company agreement of the Sponsor, Newmark OpCo is the managing member of the Sponsor, and Newmark OpCo and Cantor have agreed to make additional equity contributions to the Sponsor in order to fund the obligations of the Sponsor with respect to the SPAC in proportion to their equity ownership in the Sponsor. Also, in April 2021, the Sponsor agreed to lend to the SPAC up to $0.3 million without interest in order to cover expenses related to any initial public offering of the SPAC; the maturity date of the loans is the earlier of the consummation of the initial public offering of the SPAC or December 31, 2022. As of MarchJune 30, 2022, there was no outstanding balance on this Pre-IPO loan.

Master Repurchase Agreement with Cantor

On August 2, 2021, a subsidiary of Newmark, Newmark OpCo, entered into the Repurchase Agreement with CF Secured, an affiliate of Cantor, pursuant to which Newmark could seek, from time-to-time, to execute short-term secured financing transactions. Repurchase agreements effect equity financing. The Company, under the Repurchase Agreement, could seek to sell securities, in this case common shares of Nasdaq, owned by the Company, to CF Secured, under the Repurchase Agreement, and agreed to repurchase those securities on a date certain at a repurchase price generally equal to the original purchase price plus interest.

Pursuant to the Repurchase Agreement, the Company and CF Secured agreed to enter into a repurchase transaction, wherein CF Secured could deliver the cash of such repurchase transaction to the Company on an overnight basis at an initial rate of 0.95% per annum (approximately 1.00% less expensive than Newmark’s revolving credit facility), and the Company would deliver to CF Secured the number of shares of Nasdaq as collateral so that the market value of such shares equaled 130% of such cash proceeds. The Nasdaq shares would be marked to market daily, and the minimum maintenance margin requirement, should the share price decline, would be 120% of such cash proceeds. The Company would be required to transfer additional collateral (securities and/or cash) in the event of a margin percentage decline below 120%.

As of December 31, 2018,2021, the amount of shares pledged was 0.8 million and the amount outstanding under the Intercompany Facilitythis borrowing facility was $202.0$140.0 million and is included in “Current portion of payables to related parties”"Repurchase agreements and securities loaned" on the accompanying unaudited condensed consolidated balance sheetssheets. As of June 30, 2022, there was no outstanding balance. (see Note 7 — "Marketable Securities" and Note 20 — “Collateralized Transactions”).


Referral Fees to Cantor

In September 2021, the Audit Committee approved the payment of a referral fee from Newmark recorded interest expenseto Cantor Realty Capital Advisors, L.P. (“CRCA”), a subsidiary of $1.0Cantor, in relation to CRCA’s referral to Newmark of a sale and lease back transaction for a portfolio of medical office properties. Newmark paid CRCA approximately $0.3 million for the three months ended March 31, 2018, which is included in “Interest income, net”referral of the portfolio sale. Newmark management negotiated the referral arrangement with CRCA in the unaudited condensed consolidated statementordinary course of operations.

Asbusiness and the arrangement is reasonable and consistent with referral arrangements of December 31, 2017,its type between unrelated parties.


Additionally, in September 2021, the related party receivablesAudit Committee authorized Newmark and current portionits subsidiaries to pay referral fees to Cantor and its subsidiaries (other than Newmark and its subsidiaries) in respect of payablesreferred business, pursuant to relatedordinary course arrangements in circumstances where Newmark would customarily pay referral fees to unrelated third parties were $0.0 million and $34.2 million, respectively.

(26)where Newmark is paying a referral fee to Cantor in an amount that is no more than the applicable percentage rate set forth in Newmark’s intra-company referral policies, as then in effect, with such fees to be at referral rates no less favorable to Newmark than would be paid to unrelated third parties.





48

(28)    Income Taxes

Newmark’s


The accompanying unaudited condensed consolidated financial statements include U.S. federal, state and local income taxes on Newmark’s allocable share of its U.S. results of operations, as well as taxes payable to jurisdictions outside the U.S. In addition, certain of Newmark’s entities are taxed as U.S. partnerships and are subject to the Unincorporated Business Tax (“UBT”) in New York City. Therefore, the tax liability or benefit related to the partnership income or loss, except for UBT, rests with the partners (see Note 2—“Limited2 — “Limited Partnership Interests in BGC Holdings and Newmark Holdings”Interests”, for discussion of partnership interests), rather than the partnership entity. Income taxes are accounted for using the asset and liability method, as prescribed in U.S. GAAP guidance for Income Taxes.Taxes.

 Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the accompanying unaudited condensed consolidated financial statementstatements carrying amounts of existing assets and liabilities and their respective tax bases.basis. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance is recorded against deferred tax assets if it is deemed more likely than not that those assets will not be realized.

Provisional amounts in effective rate



On December 22, 2017, “H.R.1,” formerly known as the Tax Cuts and Jobs Act of 2017 (the “2017 Tax Act”), was signed into law in the U.S. The 2017 Tax Act is expected to have a favorable impact on Newmark’s effective tax rate and net income as reported under generally accepted accounting principles both in the first quarter of 2018 and subsequent reporting periods to which the 2017 Tax Act is effective. Newmark is applying the guidance in SAB 118 when accounting for the enactment-date effects of the 2017 Tax Act. As of March 31, 2018, Newmark has not completed its accounting for all of the tax effects of the 2017 Tax Act.  Newmark will continue to make and refine its calculations as additional analysis is completed.The final impact of the 2017 Tax Act may differ from Newmark’s estimate for the provision for income taxes, possibly materially, due to, among other factors, changes in interpretations, additional guidance that may be issued, unexpected negative changes in business and market conditions that could reduce certain tax benefits, and actions taken by Newmark as a result of the 2017 Tax Act.

Because of the complexity of the new Global Intangible Low-Taxed Income (“GILTI”) tax rules, Newmark continues to evaluate this provision of the 2017 Tax Act.  Under U.S. GAAP, Newmark can elect an accounting policy choice to either (a) treat future taxes related to GILTI as a current period expense when incurred (“period cost method”) or (b) factor amounts related to GILTI into Newmark’s measurement of its deferred taxes (“deferred method”). Newmark’s accounting for the effects of the GILTI tax law provisions is incomplete at this time, and, therefore, Newmark is not yet able to reasonably estimate the effect of this provision of the 2017 Tax Act nor has an accounting policy decision been made with respect to GILTI.  As of March 31, 2018, because Newmark is still evaluating the GILTI provisions as well as future taxable income that may be subject to GILTI, Newmark shall include GILTI related to current-year operations, if any, only in the Estimated Annualized Effective Tax Rate and have not provided additional GILTI on deferred items.

Pursuant to U.S. GAAP guidance on Accounting for Uncertainty in Income Taxes, Newmark provides for uncertain tax positions based upon management’s assessment of whether a tax benefit is more likely than not to be sustained upon examination by tax authorities. As of MarchJune 30, 2022 and December 31, 2018,2021, Newmark had $0.2 million ofdid not have any unrecognized tax benefits which, if recognized, would affect the effective tax rate. As of December 31, 2017, Newmark’s unrecognized tax benefits, excluding related interest and penalties, were $0.2 million, all of which, ifNewmark recognized would affect the effective tax rate.  Newmark recognizes interest and penalties related to income tax matters in ”Provision“Provision for income taxes”, in Newmark’s on the accompanying unaudited condensed consolidated statements of operations. As of March 31, 2018,June 30, 2022, Newmark had approximately $45 thousand ofhas not accrued any tax-related interest and penalties related to uncertain tax positions. As of December 31, 2017, there were $45 thousand of accrued interestpenalties.

(29)    Accounts Payable, Accrued Expenses and penalties related to uncertain tax positions.

Other Liabilities

(27)

Accounts Payable, Accrued Expenses and Other Liabilities


The current portion of accounts payable, accrued expenses and other liabilities consisted of the following:

following (in thousands):

 

March 31,

 

 

December 31,

 

 

2018

 

 

2017

 

 June 30, 2022December 31, 2021

Accounts payable and accrued expenses

 

$

85,571

 

 

$

79,376

 

Accounts payable and accrued expenses$188,961 $223,158 
Outside broker payableOutside broker payable73,108 73,397 

Payroll taxes payable

 

 

20,416

 

 

 

12,673

 

Payroll taxes payable82,125 80,249 

Outside broker payable

 

 

41,242

 

 

 

23,361

 

Corporate taxes payableCorporate taxes payable8,592 56,265 
Derivative liabilityDerivative liability15,227 5,016 
Right-of-use liabilitiesRight-of-use liabilities87,236 81,958 

Contingent consideration

 

 

7,116

 

 

 

6,504

 

Contingent consideration5,617 8,703 

Derivative liability

 

 

11,401

 

 

 

3,047

 

 

$

165,746

 

 

$

124,961

 

TotalTotal$460,866 $528,746 

Other long-term liabilities consisted of the following:

following (in thousands):

 

March 31,

 

 

December 31,

 

 

2018

 

 

2017

 

June 30, 2022December 31, 2021
Accrued compensationAccrued compensation$100,652 $96,839 
Payroll and other taxes payablePayroll and other taxes payable70,230 70,677 
Financial guarantee liabilityFinancial guarantee liability25,900 25,989 

Deferred rent

 

$

41,841

 

 

$

41,875

 

Deferred rent12,660 9,872 

Payroll taxes payable

 

 

47,777

 

 

 

48,248

 

Accrued compensation

 

 

32,540

 

 

 

31,411

 

Credit enhancement deposit

 

 

25,000

 

 

 

25,000

 

Contingent consideration

 

 

15,971

 

 

 

17,207

 

Contingent consideration14,462 3,635 

Financial guarantee liability

 

 

61

 

 

 

54

 

 

$

163,190

 

 

$

163,795

 

TotalTotal$223,904 $207,012 

(28)

Compensation


(30)    Compensation

Newmark’s Compensation Committee may grant various equity-based awards to employees of Newmark, including RSUs, restricted stock, units, limited partnership units and exchange rights for shares of Newmark’sNewmark Class A common stock upon exchange or redemption of


Newmark limited partnership units (see Note 2—Limited2 — “Limited Partnership InterestInterests in Newmark Holdings)Holdings and BGC Holdings”). On December 13, 2017, as part of the Separation, the Newmark Group, Inc. Long Term Incentive Plan (the “Newmark Equity Plan”) was approved by Newmark’s then sole stockholder, BGC, for Newmark to issue up to 400.0 million aggregate numbershares of shares ofNewmark Class A common stock, of Newmark, of which 50.0115.0 million isare registered, that may be delivered or cash-settled pursuant to awards granted during the life of the Newmark Equity Plan.

As of June 30, 2022, awards with respect to 72.6 million shares have been granted and 327.7 million shares are available for future awards. Upon vesting of RSUs, issuance

49

of restricted stock and exchange or redemption of limited partnership units, Newmark generally issues new shares of its Class A common stock.

Prior to the Separation, BGC’s Compensation Committee granted various equity-based awards to employees of Newmark, including RSUs, restricted stock, units, limited partnership units and exchange rights for shares of BGC’sBGC Class A common stock upon exchange of BGC’sBGC Holdings limited partnership units (see Note 2—Limited2 — “Limited Partnership Interestsinterests in Newmark Holdings)Holdings and BGC Holdings”).

(a)

Limited Partnership Units


As a result of the Separation, limited partnership interests in Newmark Holdings were distributed to the holders of limited partnership interests in BGC Holdings, whereby eachHoldings. Each holder of BGC Holdings limited partnership interests at that time held a BGC Holdings limited partnership interest and 0.4545 of a corresponding Newmark Holdings limited partnership interest, whichinterest.

The exchange ratio is equal to a BGC Holdings limited partnership interest multiplied by an amount calculated in accordance with the BGC Holdings limited partnership agreement the distribution ratio, divided by an amount, as of March 31, 2018, is one-for-one, subject to adjustment, by which a Newmark Holdings limited partnership interest can be exchanged for a number of shares of Newmark common stock that a holder will receive upon exchange of one Newmark Holdings exchangeable unit (the exchange ratio was initially 1, but is subject to adjustment as set forth in the Separation and Distribution Agreement and was 0.9393 as of June 30, 2022.

Newmark incurred compensation expense related to Class A common stock, (the “exchange ratio”).

limited partnership units and RSUs held by Newmark employees as follows (in thousands):

Three Months Ended June 30,Six Months Ended June 30,
 2022202120222021
Issuance of common stock and exchangeability expenses$26,875 $242,324 $35,858 $243,542 
Allocations of net income to limited partnership units and FPUs (1)
7,787 14,293 7,933 24,926 
Limited partnership units amortization1,760 6,466 5,034 5,866 
RSU amortization5,566 4,449 10,061 7,446 
Equity-based compensation and allocations of net income to limited partnership units and FPUs$41,988 $267,532 $58,886 $281,780 
(1)Certain limited partnership units receive quarterly allocations of net income and are generally contingent upon services being provided by the unit holders, including the Preferred Distribution.

(a) Limited Partnership Units

A summary of the activity associated with limited partnership units held by Newmark employees in BGC Holdings is as follows:

Number of

Units

Balance at December 31, 2017

64,708,915

Redeemed/exchanged units

(353,054

)

Forfeited units

(18,233

)

Balance at March 31, 2018

64,337,628

 Newmark UnitsBGC Units
Balance, January 1, 202166,626,185 (1)54,422,002 
Issued10,143,799 159,057 
Redeemed/exchanged units(58,099,726)(45,024,619)
Forfeited units/other(250,645)(892,510)
Balance, December 31, 202118,419,613 8,663,930 
Issued7,694,924 — 
Redeemed/exchanged units(447,801)(1,217,709)
Forfeited units/other(230,411)(60,511)
June 30, 202225,436,325 7,385,710 
Total exchangeable units outstanding(2):
December 31, 20212,468,443 3,456,479 
June 30, 20222,944,731 2,841,025 

A summary of

(1)Includes the activity of the number ofpre-IPO Newmark employees share-equivalent limited partnership units and post IPO grants of Newmark LPU’s held by Newmark employees in Newmark Holdings is as follows:

BGC Holdings.

Number of

Units

Balance at December 31, 2017

29,413,143

Granted

3,767,619

Redeemed/exchanged units

(160,479

)

Forfeited units

(8,288

)

Balance at March 31, 2018

33,011,995

(2)The Limited Partnership table above also includes partnership units issued for consideration for acquisitions. As of March 31, 2018 and December 31, 2017, Newmark employees had 64.3 million and 64.7 million BGC Holdings limited partnership units outstanding, respectively. In addition,June 30, 2022, there were 33.03.9 million and 29.4 million limited partnership units in Newmark Holdings outstanding, as of March 31, 2018which 1.3 million units were exchangeable, and 5.8 million partnership units in BGC Holdings outstanding, of which 2.5 million were exchangeable. As of December 31, 2017, respectively. As a result2021, there were 4.2 million partnership units in Newmark Holdings outstanding, of the Newmark IPOwhich 1.3 million units were exchangeable, and the related Separation and Distribution Agreement,6.8 million partnership units in BGC Holdings limitedoutstanding, of which 3.1 million were exchangeable.


The Limited Partnership Units table above includes both regular and Preferred Units. The Preferred Units are not entitled to participate in partnership units can only be exchanged into BGC Class A common stockdistributions other than with a number of Newmark Holdings limited partnership units equalrespect to a BGC Holdings limited partnership unit multiplied by the distribution ratio and divided by the exchange ratio. Certain standalone BGC Holdings limited partnership units that do not have corresponding Newmark Holdings limited partnership units, may only become exchangeable into Class A common stock once thePreferred Distribution has occurred (see Note 2—Limited2 — “Limited Partnership Interests in BGC Holdings and Newmark HoldingsHoldings” for further detailsinformation on Preferred Units). Subsequent to the Spin-Off, there are remaining partners who hold limited partnership interests in Newmark Holdings who are BGC employees,
50

and there are remaining partners who hold limited partnership interests in BGC Holdings who are Newmark employees. These limited partnership interests represent interests that were held prior to the Newmark IPO or were distributed in connection with the Separation. Following the Newmark IPO, employees of Newmark and BGC received limited partnership interests in Newmark Holdings and BGC Holdings, respectively. As a result of the Spin-Off, as the existing limited partnership interests in Newmark Holdings held by BGC employees and the existing limited partnership interests in BGC Holdings held by Newmark employees are exchanged/redeemed, the related capital can be contributed to and from Cantor, respectively. The compensation expenses under GAAP related to the limited partnership interests are based on the Separationcompany where the partner is employed. Therefore, compensation expenses related to the limited partnership interests of both Newmark and Distribution Agreement Additionally, duringBGC but held by a Newmark employee are recognized by Newmark. However, the three months ended March 31, 2018, Newmark also has issued 3.8 millionHoldings limited partnership interests held by BGC employees are included in the Newmark share count and the BGC Holdings limited partnership interests held by Newmark employees are included in the BGC share count.

A summary of the BGC Holdings and Newmark Holdings limited partnership units that are redeemable forheld by Newmark Class employees is as follows:
 Newmark
Units		BGC
Units
Regular units24,279,159 7,309,036 
Preferred Units1,157,166 76,674 
Balance, June 30, 202225,436,325 7,385,710 
A common stock.


Duringsummary of units held by Newmark employees redeemed in connection with the three months ended March 31, 2018, BGC granted exchangeability on 1.5 million and 0.7 million limited partnership units in BGC Holdings andissuance of Newmark Holdings, respectively.  During the three months ended March 31, 2017 BGC granted exchangeability on 0.6 million limited partnership units in BGC Holdings to Newmark employees.  For the three months ended March 31, 2018 and 2017 Newmark incurred compensation expense of $21.7 million and $6.0 million, respectively related to the exchangeability granted in each period. For the three months ended March 31, 2018, there was no expense related to grants of exchangeability on limited partnership units in Newmark Holdings.

As of March 31, 2018 and December 31, 2017, the number of share-equivalent limited partnership units exchangeable into shares of BGC’s Class A common stock at the discretion of the unit holder was 17.2 million and 12.3 million, respectively. The number of share-equivalent limited partnership units exchangeable into shares ofor BGC Class A common stock as of March 31, 2018 represent 17.2 million limited partnership units in BGC Holdings and 8.1 million limited partnership units in(at the current exchange ratio) or granted exchangeability for Newmark Holdings exchangeable together into 17.2 million shares of BGC Class A common stock. Due to the change in the exchange ratio during the first quarter of 2018 there are 0.7 million standalone BGC units as of March 31, 2018 that are exchangeable intoor BGC Class A common stock contingent uponis as follows:

Three Months Ended June 30,Six Months Ended June 30,
 2022202120222021
BGC Units56,562 11,589,383 91,119 11,635,988
Newmark Units2,336,261 31,447,414 2,868,859 32,087,353
Total2,392,823 43,036,797 2,959,978 43,723,341 

    Compensation expense related to the issuance of Newmark spinoff. The number of share-equivalent limited partnership units exchangeable into shares ofor BGC Class A common stock asand grants of December 31, 2017 represented 12.3 millionexchangeability on Newmark Holdings and 5.6 million ofBGC Holdings limited partnership units in BGC Holdings andto Newmark Holdings, respectively, exchangeable together into 12.3 million shares of BGC Class A common stock.

As of March 31, 2018, the notional value of the limitedemployees is as follows (in thousands):

Three Months Ended June 30,Six Months Ended June 30,
 2022202120222021
Issuance of common stock and exchangeability expenses$28,898 $241,585 $37,881 $248,196 
    Limited partnership units with a post-termination pay-out amountpayout held by executives and non-executiveNewmark employees awardedare as follows (dollars in lieu of cash compensation for salaries, commissions and/or discretionary or guaranteed bonuses, was approximately $139.2 million. The number of outstanding limited partnership units with a post-termination pay-out represent 13.8 million limited partnership units in BGC Holdings and 6.3 million limited partnership units in Newmark Holdings, of which approximately 6.6 million units in BGC Holdings and 3.0 million units in Newmark Holdings were unvested. As of March 31, 2018, the aggregate estimated fair value of these limited partnership units was approximately $28.6 million. In addition, beginningthousands):
June 30, 2022December 31, 2021
Notional Value(1)
$148,411 $116,717 
Estimated fair value of the post-termination payout(2)
$40,930 $38,516 
Outstanding limited partnership units in BGC Holdings110,005 105,302 
Outstanding limited partnership units in BGC Holdings - unvested— — 
Outstanding limited partnership units in Newmark Holdings13,851,231 11,691,406 
Outstanding limited partnership units in Newmark Holdings - unvested6,433,700 5,980,996 
(1)Beginning January 1, 2018, the CompanyNewmark began granting standalonestand-alone limited partnership units in Newmark Holdings to Newmark employees. As of March 31, 2018, the notional value of the limited partnership units with a post-termination pay-out amount held by executives and non-executive employees, awarded in lieu of cash compensation for salaries, commissions and/or discretionary or guaranteed bonuses, was approximately $21.6 million. The number of outstanding limited partnership units with a post-termination pay-out represent 1.5 million limited partnership units in Newmark Holdings, of which approximately 1.1 million units in Newmark Holdings were unvested. As of March 31, 2018, the aggregate estimated fair value of these limited partnership units was approximately $2.1 million. As of December 31, 2017, the notional value of the limited partnership units with a post-termination pay-out amount held by executives and non-executive employees, awarded in lieu of cash compensation for salaries, commissions and/or discretionary or guaranteed bonuses, was approximately $232.9 million. The number of outstanding limited partnership units with a post-termination pay-out as of December 31, 2017 was approximately 23.4 million, of which approximately 13.2 million were unvested. As of December 31, 2017, the number of outstanding limited partnership units with a post-termination pay-out represent 23.4 million and 10.6 million of limited partnership units in BGC Holdings and Newmark Holdings, respectively, of which approximately 13.2 million and 6.0 million units in BGC Holdings and Newmark Holdings, respectively, were unvested. As of December 31, 2017, the aggregate estimated fair value of these limited partnership units was approximately $39.2 million.

Certain of the limited partnership units with a post-termination pay-out have been granted in connection with Newmark’s acquisitions. As of March 31, 2018 and December 31, 2017, the aggregate estimated fair value of these acquisition related limited partnership units was $6.7 million and $14.3 million, respectively. The liability for such acquisition-related limited partnership units is included

(2)Included in “Other long termlong-term liabilities” on Newmark’sthe accompanying unaudited condensed consolidated balance sheets.

Liability balance also includes $6.8 million of post-termination units issued as consideration for acquisition.








51

Compensation expense related to limited partnership units held by Newmark employees with a post-termination pay-out amount is recognized over the stated service period. These units generally vest between three and fiveseven years from the date of grant. Newmark recognized compensation expense (benefit), before associated income taxes, related to these limited partnership units that were not redeemed of $(8.7) millionas follows (in thousands):
Three Months Ended June 30,Six Months Ended June 30,
 2022202120222021
Limited partnership units amortization$1,760 $6,466 $5,034 $5,866 
During the three and $5.8 million threesix months ended March 31, 2018June 30, 2022, Newmark did not grant any conversion rights to Newmark employees on outstanding limited partnership units in BGC Holdings or Newmark Holdings. During the three and 2017, respectively. Thesesix months ended June 30, 2021, Newmark did not grant any conversion rights to Newmark employees on outstanding limited partnership units in BGC Holdings or Newmark Holdings. Granting conversion rights gives the employee the option to convert the limited units to HDUs with a capital balance within BGC Holdings or Newmark Holdings. Generally, HDUs are includednot considered share-equivalent limited partnership units and are not in “Compensation and employee benefits”the fully diluted share count. The grant of conversion rights to Newmark employees are as follows (in thousands):
June 30, 2022December 31, 2021
Notional Value$7,222 $12,836 
Estimated fair value of limited partnership units (1)
$7,013 $12,558 
(1)Included in Newmark’s“Other long-term liabilities” on the accompanying unaudited condensed consolidated statements of operations.

Certainbalance sheets.


Compensation expense related to these limited partnership units generallyheld by Newmark employees was as follows (in thousands:):
Three Months Ended June 30,Six Months Ended June 30,
 2022202120222021
Issuance of common stock and exchangeability expenses$(2,023)$181,994 $(2,023)$176,601 

During the three and six months ended June 30, 2022, Newmark employees were granted 0.8 million and 1.7 million N Units, that are excluded from the table above, since these units are not considered share-equivalent limited partnership units and are not included in the fully diluted share count. The N Units do not receive quarterly allocations of net income and remain unvested. Upon vesting, which occurs if the certain thresholds are cash distributed on a quarterly basis and generally contingent upon services being provided bymet, the unit holders. The allocation of incomeN Units are converted to equivalent limited partnership units was $4.1that receive quarterly certain income distributions and can be granted exchange rights or redeemed at a later date, at which time these N Units would be reflected as a share-equivalent grant in the tables above. During the three and six months ended June 30, 2022, 0.8 million and $4.61.3 million for the three months ended March 31, 2018N Units vested and 2017, respectively. This expense is included within “Allocations of net income and grant of exchangeability towere converted into distribution earning limited partnership units”units and were therefore included in Newmark’s unaudited condensed consolidated statements of operations.


the fully diluted share count.

(b)

Restricted Stock Units


(b) Restricted Stock Units

A summary of the activity associated with Newmark and BGC RSUs in BGCheld by Newmark employees is as follows:

follows (fair value amount in thousands):

Balance at December 31, 2017

 

 

346,538

 

 

$

9.56

 

 

 

1.85

 

Delivered units

 

 

(95,773

)

 

 

9.17

 

 

 

 

 

Forfeited units

 

 

(9,470

)

 

 

9.95

 

 

 

 

 

Balance at March 31, 2018

 

 

241,295

 

 

$

9.67

 

 

 

1.69

 

Newmark RSUs(1)
BGC RSUs(2)
 Restricted
Stock
Units		Weighted-
Average
Grant Date
Fair Value
Per Share		Fair
Value
Amount		Weighted-
Average
Remaining
Contractual
Term (Years)		Restricted
Stock
Units		Weighted-
Average
Grant Date
Fair Value
Per Share		Fair
Value
Amount		Weighted-
Average
Remaining
Contractual
Term (Years)
Balance, January 1, 202110,646,797 $7.75 $82,494 5.698,013 $3.80 $31 2.17
Granted2,913,572 9.71 28,290 — — — 
Settled units (delivered shares)(2,196,903)7.64 (16,792)(2,638)3.69 (10)
Forfeited units(642,009)7.74 (4,967)— — — 
Balance, December 31, 202110,721,457 $8.30 $89,025 4.965,375 $3.85 $21 1.16
Granted1,994,028 15.44 30,788 6,502 4.29 28 
Settled units (delivered shares)(1,607,457)8.07 (12,970)(2,638)3.69 (10)
Forfeited units(162,886)8.93 (1,455)— — — 
Balance, June 30, 202210,945,142 $9.63 $105,388 4.769,239 $4.22 $39 2.27

(1)Beginning January 1, 2018, Newmark began granting stand-alone Newmark RSUs to Newmark employees with the awards vesting ratably over a two- to eight-year vesting period into shares of Newmark Class A common stock.
(2)    RSUs granted to these individuals generally vest over a two to four year period.
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The fair value of Newmark and BGC RSUs awarded toheld by Newmark employees and directors is determined on the date of grant based on the market value of BGC’s Class A common stock (adjusted if appropriate based upon the award’s eligibility to receive dividends), and is recognized, net of the effect of estimated forfeitures, ratably over the vesting period. Newmark uses historical data, including historical forfeitures and turnover rates, to estimate expected forfeiture rates for both employees and directors RSUs. Each RSU is settled infor one share of BGC’sBGC or Newmark Class A common stock, as applicable, upon completion of the vesting period. Future RSU awards will be settled in one share of Newmark Class A common stock upon completion of the vesting period.

During the three months ended March 31, 2017, BGC granted 0.3 million, of RSUs with aggregate estimated grant date fair values of  $2.8 million to employees and directors of Newmark. These RSUs were awarded in lieu of cash compensation for salaries, commissions and/or discretionary or guaranteed bonuses. RSUs granted to these individuals generally vest over a two- to four-year period.

As of March 31, 2018 and December 31, 2017, the aggregate estimated grant date fair value of outstanding RSUs was $2.3 million and $3.3 million, respectively.


Compensation expense related to Newmark and BGC RSUs before associated income taxes, was approximately $0.3 million and $0.3 million for the three months ended March 31, 2018 and 2017, respectively. are as follows (in thousands):
Three Months Ended June 30,Six Months Ended June 30,
 2022202120222021
RSU amortization$5,566 $4,449 $10,061 $7,446 

As of March 31, 2018June 30, 2022, there was approximately $2.5$105.4 million total unrecognized compensation expense related to unvested RSUs.

Newmark may pay certain bonuses in the form of deferred cashRSUs.


See Note 27 — "Related Party Transactions" for compensation awards, which generally vest over a future service period. The total compensation expense recognized in relation to the deferred cash compensation awardsrelated matters for the three months March 31, 2018transfer of CCRE employees to Newmark.


(31)    Commitments and 2017 were $1.1 millionContingencies

(a)Contractual Obligations and $0.2 million, respectively. Commitments

As of March 31, 2018June 30, 2022 and December 31, 2017, the total liability for the deferred cash compensation awards was $0.6 million and $0.4 million, respectively, and is included in “Accounts payable and accrued expenses” in Newmark’s unaudited condensed consolidated balance sheets.

(29)

Commitments and Contingencies

Contractual Obligations and Commitments

As of March 31, 2018 and December 31, 2017,2021, Newmark was committed to fund approximately $437 million$0.3 billion and $244 million,$0.3 billion, respectively, which is the total remaining draws on construction loans originated by Newmark under the HUD 221(d)4, 220 and 232 programs, rate locked loans that have not been funded, forward commitments, as well as the funding for Fannie Mae structured transactions. Newmark also has corresponding commitments to sell these loans to various investors as they are funded.

Lease Commitments

Newmark is obligated for minimum rental payments under various non-cancelable operating leases, principally for office space, expiring at various dates through 2031. Certain of the leases contain escalation clauses that require payment of additional rent to the extent of increases in certain operating or other costs.

Rent expense for the three months ended March 31, 2018 and 2017 was $10.2 million and $9.8 million, respectively. Rent expense is reported in “Operating, administrative and other” in Newmark’s unaudited condensed consolidated statements of operations.


(b)    Contingent Payments Related to Acquisitions


Newmark completed acquisitions in 2014,from 2015 2016 and 2017 for whichthrough 2020 with contingent cash consideration may be issued on certain targets being met through 2020 of $12.4$19.3 million. The contingent equity instruments are issued by and are recorded as a payable to related party on Newmark’s unaudited condensed consolidated balance sheet. The contingent cash liability is recorded at fair value as deferred considerationin “Accounts payable, accrued expenses and other liabilities” on Newmark’s unaudited condensed consolidated balance sheet.

sheets.


(c)    Contingencies


In the ordinary course of business, various legal actions are brought and are pending against Newmark and its subsidiaries in the U.S. and internationally. In some of these actions, substantial amounts are claimed. Newmark is also involved, from time to time, in reviews, examinations, investigations and proceedings by governmental and self-regulatory agencies (both formal and informal) regarding Newmark’s businesses, which may result in regulatory, civil and criminal judgments, settlements, fines, penalties, injunctions or other relief. The following generally does not include matters that Newmark has pending against other parties which, if successful, would result in awards in favor of Newmark or its subsidiaries:

subsidiaries.


Employment, Competitor-Related and Other Litigation


From time to time, Newmark and its subsidiaries are involved in litigation, claims and arbitrationsarbitration in the U.S. and internationally, relating to various employment matters, including with respect to termination of employment, hiring of employees currently or previously employed by competitors, terms and conditions of employment and other matters. In light of the competitive nature of the real estate services industry, litigation, claims and arbitration between competitors regarding employee hiring are not uncommon.


Legal reserves are established in accordance with U.S. GAAP guidance on Accounting for Contingencies, when a material legal liability is both probable and reasonably estimable. Once established, reserves are adjusted when there is more information available or when an event occurs requiring a change. The outcome of such items cannot be determined with certainty. Newmark is unable to estimate a possible loss or range of loss in connection with specific matters beyond its current accrual and any other amounts disclosed. Management believes that, based on currently available information, the final
53

outcome of these current pending matters will not have a material adverse effect on Newmark’s unaudited condensed consolidated financial statements and disclosures taken as a whole.


Risks and Uncertainties


Newmark generates revenues by providing financial intermediary and brokerage activities and commercial real estate services to institutional customers. Revenues for these services are transaction-based. As a result, revenues could vary based on the transaction volume of global financial and real estate markets. Additionally, financing is sensitive to interest rate fluctuations, which could have an impact on Newmark’s overall profitability.

(30)


(32)    Subsequent Events

First Quarter 2018 Dividend


On May 2, 2018, Newmark’s Board of DirectorsJuly 28, 2022, Newmark declared a qualified quarterly cash dividend of $0.09$0.03 per share for the first quarter of 2018, payable on June 5, 2018August 31, 2022 to Newmark Class A and Class B common stockholders of record as of May 21, 2018.

August 15, 2022. The ex-dividend date will be August 12, 2022.

54


ITEM 2.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS


The following discussion of Newmark’s financial condition and results of operations should be read together with Newmark’s accompanying unaudited condensed consolidated financial statements and related notes, as well as the risk factors and the cautionary statementscaution “Special Note Regarding Forward-Looking Information” relating to forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), included in Newmark’sNewmark's Annual Reportreport on Form 10-K and in this report. When used herein, the terms “Newmark, Knight Frank,” “Newmark,” the “Company,” “we,” “us,” and “our” refer to Newmark Group, Inc. and its consolidated subsidiaries.


This discussion summarizes the significant factors affecting our results of operations and financial condition during the three and six months ended March 31, 2018June 30, 2022 and 2017.2021. We operate in one reportable segment, real estate services. This discussion is provided to increase the understanding of, and should be read in conjunction with, our accompanying unaudited condensed consolidated financial statements and the notes thereto included elsewhere in this report.




Overview and Business Environment

Newmark is a rapidly growing, high-margin,leading full-service commercial real estate services business. Since 2011, the year in which we were acquired by BGC Partners, Inc. (“BGC”), we have been the fastest growing U.S. commercial real estate services firm (when compared with our publicly traded U.S. peers), with a revenue compound annual growth rate of 37.7%. We offer a full suitediverse array of integrated services and products fordesigned to meet the full needs of both real estate investors/owners and occupiers across the entire commercial real estate industry.occupiers. Our investor/owner services and products include capital markets, which consists of investment sales, debt and structured finance and loan sales, agency leasing, property management, valuation and advisory, commercial real estate due diligence consulting and underwritingadvisory services and government-sponsoredgovernment sponsored enterprise (which we refer to as “GSE”(“GSE”) and Federal Housing Administration ("FHA") lending and loan servicing.servicing, mortgage broking and equity-raising. Our occupier services and products include tenant representation, real estate management technology systems, workplace and occupancy strategy, global corporate consulting services, project management, lease administration and facilities management. Newmark's global flexible workspace platform, which operates under the names Knotel and Deskeo, is a product that is offered to owners and investors. We enhance these services and products through innovative real estate technology solutions and data analytics that enable our clients to increase their efficiency and profits by optimizing their real estate portfolio. We have relationships with many of the world’s largest commercial property owners, real estate developers and investors, as well as Fortune 500 and Forbes Global 2000 companies. For the three months ended March 31, 2018, we generated revenues of $430.5 million, representing growth of 29.4% versus the same period in the prior year.


We generate revenues from commissions on leasing and capital markets transactions, consulting and technology user fees, property and facility management fees, and mortgage origination and loan servicing fees.


Our growth to date has historically been focused in North America. WeDuring 2021, we ended our affiliation with Knight Frank and have accelerated our global growth plans by acquiring Space Management (DBA "Deskeo") and Knotel Inc. ("Knotel"), both of which are European leaders in flexible and serviced workspace, and announced the addition of industry-leading international professionals in Global Corporate Services, Capital Markets, and Valuation and Advisory. During 2022, we acquired BH2, a London-based real estate advisory firm. As of June 30, 2022, we had over 6,200 employees in over 100 offices in more than 4,900120 cities. Approximately 1,200 of those employees including over 1,550 revenue-generating producersare fully reimbursed by clients, mainly in over 120 offices in 90 cities.our property management and global corporate services businesses. In addition, Newmark has licensed its name to 2110 commercial real estate providers that operate out of 3719 offices in certain locations where Newmark does not have its own offices.  Our partner, Knight Frank, operates out of nearly 300 offices.


The discussion of our financial results reflects only those businessesthe business owned by us and does not include the results for Knight Frank or for the independently owned offices that use some variation of the Newmark name in their branding or marketing.

Over the past several years, we expanded our


We are a leading capital markets capabilities through the strategic addition of many prolific, accomplished capital markets brokersbusiness in key markets throughout the United States. We have access to many of the world’s largest owners of commercial real estate, and this will drive growth throughout the life cycle of each real estate asset by allowing us to provide best-in-class agency leasing and property management during the ownership period. We also provide investment sales and arrange debt and equity financing to assist owners in maximizing the return on investment in each of their real estate assets. Specifically, with respect to multifamily assets, we are a leading GSE lender by loan origination volume and servicer with a servicing portfolio of $58.8approximately $71.3 billion as of March 31, 2018June 30, 2022 (of which approximately 6.2% relates to77.6% is higher margin primary servicing, 19.8% is limited servicing, and 2.5% is special servicing). This servicing portfolio provides a steady stream of income over the life of the serviced loans. We have also begun a dramatic expansion of our valuation and appraisal business from which we expect to see significant growth, particularly in conjunction with our increasingly robust capital markets platform.


We continue to invest in the business by adding dozens of high profile and talented brokersproducers and other revenue-generating professionals. Historically, newly hired commercial real estate brokersproducers tend to achieve dramatically higher productivity in
55

their second and third years with our company, although we incur related expenses immediately. As our newly hired brokersproducers increase their production, we expect our commission revenue and earnings growth to strongly accelerate, thus reflecting our operating leverage. We expect our overall profitability to increase as we increase the size and scale of our business.

Our pre-tax margins are impacted by the mix of revenues generated. For example, Gains from mortgage banking activities/originations, net, which includesservicing revenues related to commercial mortgage origination, tendstend to have higher pre-tax margins than Newmark as a whole. In addition, capital markets, which


includeswhole, and margins from originating GSE/FHA “Commercial mortgage origination, net” tend to be lower as we retain rights to service loans over time. Investment sales commercialand mortgage broking, and other real estate-related financial services, generally has larger transactions that occur with less frequency and more seasonality when compared with leasing advisory. Capital marketsbrokerage transactions tend to have higher pre-tax margins than leasing advisory transactions, while leasing advisory revenues are generally more predictable than revenues from capital markets. Propertytransactions. Pre-tax earnings margins on our property and facilities management, along with certain of our other Global Corporate Services (“GCS”) products, generally have the most predictable and steady revenues, although pre-tax earnings margins for property and facilities management are at the lower end of thosemargins for our business as a whole. When management services clients agree


Business Environment
During the second quarter of 2022, the U.S. economy rebound continued, as compared with the Covid-19 downturn in 2020. According to give us exclusive rightsthe U.S. Centers for Disease Control and Prevention (the "CDC") as of July 22, 2022, approximately 48.2% of the American population have been fully vaccinated and received a booster, 67.2% of the American population has been fully vaccinated against COVID-19, and 78.7% has received at least one dose, although there is persistent vaccine reluctance in the currently unvaccinated population. Mask mandates are also being revised in many areas. Many companies are requiring employees to provide real estate servicescome back to the office as business and the government continues to reopen both in the US and around the world. However, some of the recent strength in the U.S. office market could be tempered as companies continue to assess the impact of remote work, periodic increases in COVID-19 cases, legal, cultural, and political events and conflicts, and a slowing US economy.

Although there continues to be some uncertainty around COVID-19, the measures taken by the federal and state governments and the speed and voracity of a recovery in industry activity appear to be positive. Our capital markets have shown significant growth, as our investments in the business have coincided with record investment sales and debt volumes. For example, according to preliminary estimates from MSCI Real Capital Analytics (“RCA”), investment sales volumes in the US were $959.3 billion for their facilities or properties, it is for an extended period of time, which provides us with stable and foreseeable sources of revenues. Newmark’s revenues are balanced between businesses that are relatively less predictable and contractual sources that are very predictable. Approximately 42% of our revenues and other income for the trailing twelve months ended March 31, 2018 were generated byending June 30, 2022. This is 86.0% and 59.6% higher than in the year-earlier period and 2019, respectively. COVID-19 has created new opportunities in our most predictable and recurring sources, including agency leasing, valuation, GCS, management services incomebusinesses, which continued to perform well into 2022 as our clients turned to Newmark for advice on their real estate portfolios, including new environmental safety requirements, managing costs associated with implementing these new standards as well as assessing facility and employee readiness as companies plan their return to offices in the wake of the pandemic. In addition, consulting fee revenues from tenant restructuring and portfolio optimization are expected to continue in the near-term. We also expect structural reviews of office design and utilization by occupiers to create significant opportunities for our flexible workspace business and for leasing transactions involving external flexible workspace platforms.

Impact of COVID-19 on Employees
Newmark has taken steps to help its employees during this global pandemic and subsequent recovery. These policies and practices protect the health, safety and welfare of the Company’s workforce while enabling employees to maintain a high level of performance. Certain of these items are summarized below.
•We are focused on maximizing productivity regardless of where our employees work. In all cases, the Company has enacted appropriate health and safety measures including encouraging vaccinations;
•The Company has developed standardized procedures for reopening its offices safely in accordance with state and local regulatory requirements;
•The Company’s medical plans have waived applicable member cost sharing for all medically necessary diagnostic testing related to COVID-19;
•The Company also introduced zero co-pay telemedicine for COVID-related visits for participants in the receiptU.S. medical plans and their dependents. Newmark has encouraged the use of Nasdaq shares,telemedicine during the pandemic;
•The Company has reminded employees about its Employee Assistance Program and loan servicing. Another approximately 23% was generated by our moderately recurringthe ways it can assist them during this challenging time, including implementing preventative mental health solutions;
•Newmark provides paid leave in accordance with its policies and applicable COVID-19 related laws and regulations.

Acquisitions
On April 1, 2022, Newmark completed the acquisitions of two businesses; BH2, a London-based real estate advisory firm, and McCall & Almy, a multi-market tenant representation leasing business. The remaining 35%and real estate advisory firm.

On May 3, 2022, Newmark completed the acquisition of revenuesOpen Realty Advisors and other income was generated by our more transactional investment sales, mortgage broking, and GSE lending platforms.

Berkeley Point Acquisition

Open Realty Properties, which together operate as “Open Realty”, a retail real estate advisory firm.

56


On July 18, 2017, BGC announced that itMarch 24, 2021, Newmark acquired the business of Knotel, a global flexible workspace provider. Newmark agreed to provide approximately $19.8 million of debtor-in-possession financing as part of a $70 million credit bid to acquire Berkeley Point Financial LLCthe business through Knotel’s Chapter 11 sales process, subject to approval of the U.S. Bankruptcy Court. On March 18, 2021, the United States Bankruptcy Court approved the transaction under Section 363 of the United States Bankruptcy Code. See Note 4 — “Acquisitions” to our accompanying unaudited condensed consolidated financial statements included in Part I, Item 1 of the Quarterly Report on Form 10-Q for additional information.

On September 6, 2021, Newmark acquired Deskeo, France's leader in flexible and serviced workspace for enterprise clients. Based in Paris, France Deskeo adds over 50 locations to Newmark's international flexible workspace portfolio. See Note 4 — “Acquisitions” to our accompanying unaudited condensed consolidated financial statements included in Part I, Item 1 of the Quarterly Report on Form 10-Q for additional information.

Debt Credit Agreements
On November 6, 2018, Newmark closed its subsidiary (together referred to as “Berkeley Point” or “BPF”) from an affiliateoffering of Cantor Fitzgerald, L.P.$550.0 million aggregate principal amount of 6.125% Senior Notes due 2023 (“Cantor”). This affiliate of Cantor had acquired Berkeley Point on April 10, 2014. Berkeley Point is a leading commercial real estate finance company focused on the origination and sale of multifamily and other commercial real estate loans through government-sponsored and government-funded loan programs, as well us the servicing of commercial real estate loans, including those it originates. The acquisition of Berkeley Point was completed on September 8, 2017 (the “Berkeley Point Acquisition”6.125% Senior Notes”). The total consideration for the Berkeley Point Acquisition was $875 million, subject6.125% Senior Notes are general senior unsecured obligations of Newmark. The 6.125% Senior Notes, which were priced on November 1, 2018 at 98.94% to certain adjustments at closing.

On December 13, 2017, in connection with the Separation (as defined below)yield 6.375%, the assetswere offered and liabilities of BPF were transferred to Newmark. This transaction has been determined to be a combination of entities under common control that resultedsold by Newmark in a change inprivate offering exempt from the reporting entity. Accordingly, our financial results have been recast to includeregistration requirements under the financial resultsSecurities Act. Newmark received net proceeds of BPF in$537.6 million, net of debt issue costs and debt discount. The 6.125% Senior Notes bear an interest rate of 6.125% per annum, payable on each May 15 and November 15, beginning on May 15, 2019 and will mature on November 15, 2023. The 6.125% Senior Notes were subsequently exchanged for notes with substantially similar terms that were registered under the currentSecurities Act. As of June 30, 2022 and prior periods as if BPF had always been consolidated. We believe thatDecember 31, 2021, the addition of Berkeley Point will significantly increase the scale and scope of our business and generate substantial revenue synergies.

Initial Public Offering

On December 13, 2017, prior to the closing of Newmark’s initial public offering (the “IPO”); BGC, BGC Holdings, L.P. (“BGC Holdings”), BGC Partners, L.P. (“BGC U.S. OpCo”), Newmark, Newmark Holdings, L.P. (“Newmark Holdings”), Newmark Partners, L.P. (“Newmark OpCo”) and, solely for the provisions listed therein, Cantor and BGC Global Holdings, L.P. (“BGC Global OpCo”) entered into a Separation and Distribution Agreement (the “Separation and Distribution Agreement”). The Separation and Distribution Agreement sets forth the agreements among BGC, Cantor, Newmark and their respective subsidiaries regarding, among other things:

the principal corporate transactions pursuant to which BGC, BGC Holdings and BGC U.S. OpCo and their respective subsidiaries (other than the Newmark Group (defined below), the “BGC Group”) transferred to Newmark, Newmark Holdings and Newmark OpCo and their respective subsidiaries (the “Newmark Group”) the assets and liabilitiescarrying amount of the BGC Group relating to BGC’s Real Estate Services business (the “Separation”);

6.125% Senior Notes was $546.5 million and $545.2 million, respectively.

the proportional distribution of interests in Newmark Holdings to holders of interests in BGC Holdings;


the IPO;

the assumption and repayment of indebtedness by the BGC Group and theOn November 28, 2018, Newmark Group, as further described below;

the pro rata distribution of the shares of Newmark Class A common stock and the shares of Newmark Class B common stock held by BGC (the “Distribution” or the “Spin-off’), pursuant to which shares of Newmark Class A common stock held by BGC would be distributed to the holders of shares of Class A common stock of BGC and shares of Newmark Class B Common Stock held by BGC would be distributed to the holders of shares of Class B common stock of BGC (which are currently Cantor and another entity controlled by Howard W. Lutnick), which distribution is intended to qualify as generally tax-free for U.S. federal income tax purposes; provided that the determination of whether, when and how to proceed with the Distribution shall be entirely within the discretion of BGC; and

other agreements governing the relationship between BGC, Newmark and Cantor.


In connection with the Separation and the IPO, on December 13, 2017, the applicable parties entered into the following additional agreements:

an Amended and RestatedCredit Agreement of Limited Partnership of Newmark Holdings, dated as of December 13, 2017;

an Amended and Restated Agreement of Limited Partnership of Newmark OpCo, dated as of December 13, 2017, as amended;

a Second Amended and Restated Agreement of Limited Partnership of BGC U.S. OpCo, dated as of December 13, 2017;

a Second Amended and Restated Agreement of Limited Partnership of BGC Global OpCo, dated as of December 13, 2017;

a Registration Rights Agreement, dated as of December 13, 2017, by and among Cantor, BGCNewmark, the several financial institutions from time to time party thereto, as Lenders, and Newmark;

a Transition Services Agreement, dated as of December 13, 2017, by and between BGC and Newmark;

a Tax Matters Agreement, dated as of December 13,2017, by and among BGC, BGC Holdings, BGC U.S. OpCo, Newmark, Newmark Holdings and Newmark OpCo;

an Amended and Restated Tax Receivable Agreement, dated as of December 13, 2017, by and between Cantor and BGC;

an Exchange Agreement, dated as of December 13, 2017, by and among Cantor, BGC and Newmark;

an Administrative Services Agreement, dated as of December 13, 2017, by and between Cantor and Newmark; and

a Tax Receivable Agreement, dated as of December 13, 2017, by and between Cantor and Newmark.

Newmark is a holding company with no direct operations and conducts substantially all of its operations through its operating subsidiaries. Virtually all of Newmark’s consolidated net assets and net income are those of consolidated variable interest entities. Newmark Holdings is a consolidated subsidiary of Newmark for which Newmark is the general partner. Newmark and Newmark Holdings jointly own Newmark OpCo, the operating partnership.

Immediately prior to the Separation, the limited partnership interests in Newmark Holdings were distributed to the holders of limited partnership interests in BGC Holdings, whereby each holder of BGC Holdings limited partnership interests at that time received a BGC Holdings limited partnership interest and a corresponding Newmark Holdings limited partnership interest, equal to a BGC Holdings limited partnership interest multiplied by one divided by 2.2 (the “contribution ratio”), divided by the ratio by which a Newmark Holdings limited partnership interest can be exchanged for a number of Newmark Class A common stock (the “exchange ratio.”) Initially, the exchange ratio equaled one, so that each Newmark Holdings limited partnership interest is exchangeable for one Newmark Class A common stock, however, the exchange ratio is subject to adjustment. For example, for reinvestment, acquisition or other purposes, Newmark has determined on a quarterly basis to distribute to its stockholders a smaller percentage than Newmark Holdings distributes to its equity holders (excluding tax distributions from Newmark Holdings) of cash that it received from Newmark OpCo. In such circumstances, the Separation and Distribution Agreement provides that the exchange ratio will be reduced to reflect the amount of additional cash retained by Newmark as a result of the distribution of such smaller percentage, after the payment of taxes.

On December 19, 2017, Newmark closed its IPO of 20 million shares of Newmark’s Class A common stock at a price to the public of $14.00 per share. A registration statement relating to these securities was filed with, and declared effective by, the U.S. Securities and Exchange Commission. In addition, Newmark granted the underwriters a 30-day option to purchase up to an additional 3 million shares of Newmark’s Class A common stock at the IPO price, less underwriting discounts and commissions (the “overallotment option”). Subsequent to the IPO, the underwriters exercised the overallotment option in full. Upon the closing of the overallotment option, which occurred on December 26, 2017, Newmark’s public stockholders owned approximately 9.8% of Newmark’s 234.2 million fully diluted shares outstanding. Newmark received aggregate net proceeds of $295.4 million from the IPO, after deducting underwriting discounts and commissions and estimated offering expenses.

Accordingly, our financial results reflect the agreements discussed above related to the IPO. In addition, since the IPO, we have improved the credit profile of Newmark. The combination of our lower long-term debt and higher total equity have improved our credit ratios with specific regard to debt to equity. Newmark intends to continue to benefit from these strengths and pursue its own credit rating. We aim to obtain an investment grade rating to assist us in refinancing our $812.5 million of long-term debt owed to or guaranteed by BGC.

On March 7, 2018, BGC Partners and its operating subsidiaries purchased 16.6 million newly issued exchangeable limited partnership units (the “Newmark Units”) of Newmark Holdings for approximately $242.0 million (“BGC’s Investment in Newmark”). The price per Newmark Unit was based on the $14.57 closing price of Newmark’s Class A common stock on March 6, 2018 as


reported on the NASDAQ Global Select Market. These newly-issued Newmark Units are exchangeable, at BGC’s discretion, into either shares of Class A common stock or shares of Class B common stock of Newmark. BGC’s Investment in Newmark was made pursuant to an Investment Agreement, dated as of March 6, 2018, by and among BGC, BGC Holdings, BGC Partners, L.P., BGC Global Holdings, L.P., Newmark, Newmark Holdings and Newmark Partners, L.P. BGC’s Investment in Newmark and related transactions were approved by the Audit Committees and Boards of Directors of BGC and Newmark. BGC and its operating subsidiaries funded BGC’s Investment in Newmark using the proceeds of BGC’s CEO sales program. Newmark used the proceeds to repay the balance of the outstanding principal amount under its unsecured senior term loan credit agreement with Bank of America N.A., as administrative agent (the "Credit Agreement").. The Credit Agreement provided for a $250.0 million three year unsecured senior revolving Credit Facility (the "Credit Facility").


On February 26, 2020, Newmark entered into an amendment to the Credit Agreement (the “Amended Credit Agreement”), increasing the size of the Credit Facility to $425.0 million and extending the maturity date to February 26, 2023. The interest rate on the Credit Facility was reduced to LIBOR plus 1.75% per annum, subject to a syndicatepricing grid linked to Newmark’s credit ratings from Standard & Poor’s and Fitch.

On March 16, 2020, Newmark entered into a second amendment to the Credit Agreement (the "Second Amended Credit Agreement"), increasing the size of lenders. In addition,the Credit Facility to $465.0 million. The interest rate on the amended Credit Facility is LIBOR plus 1.75% per annum, subject to a pricing grid linked to Newmark’s credit ratings from Standard & Poor’s and Fitch.

On March 10, 2022, Newmark entered into the Amended and Restated Credit Agreement (the "A&R Credit Agreement"), which amends and restates the Credit Agreement, as amended. Pursuant to the A&R Credit Agreement, the Lenders agreed to: (a) increase the amount available to the Company under the Credit Facility to $600.0 million, (b) extend the maturity date of the Credit Facility to March 10, 2025, and (c) improve pricing to 1.50% per annum with respect to Term SOFR (as defined in the A&R Credit Agreement) borrowings.

Borrowings under the Credit Facility bear interest at a per annum rate equal to, at the Company’s option, either (a) Term SOFR for interest periods of one or three months, as selected by the Company, or upon the spin-off, theseconsent of all Lenders, such other period that is 12 months or less (in each case, subject to availability), as selected by the Company, plus an applicable margin, or (b) a base rate equal to the greatest of (i) the federal funds rate plus 0.50%, (ii) the prime rate as established by the Administrative Agent, and (iii) Term SOFR plus 1.00%, in each case plus an applicable margin. The applicable margin will initially be 1.50% with respect to Term SOFR borrowings in (a) above and 0.50% with respect to base rate borrowings in (b) above. The applicable margin with respect to Term SOFR borrowings in (a) above will range from 1.00% to 2.125% depending upon the Company’s credit rating, and with respect to base rate borrowings in (b) above will range from 0.00% to 1.125% depending upon the Company’s credit rating. The A&R Credit Agreement also provides for certain upfront and arrangement fees and for an unused facility fee.

On June 16, 2020, the Company’s Board of Directors and its Audit Committee authorized a debt repurchase program for the repurchase by the Company in the amount of up to $50.0 million of the Company’s 6.125% Senior Notes and any future debt securities issued by the Company hereafter (collectively, “Company debt securities”). Repurchases of Company debt
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securities, if any, are expected to reduce future cash interest payments, as well as future amounts due at maturity or upon redemption.
Under the authorization, the Company may make repurchases of Company debt securities for cash from time to time in the open market or in privately negotiated transactions upon such terms and at such prices as management may determine. Additionally, the Company is authorized to make any such repurchases of Company debt securities through Cantor Fitzgerald & Co. (or its affiliates), in its capacity as agent or principal, or such other broker-dealers as management shall determine to utilize from time to time upon customary market terms or commissions.

As of June 30, 2022, the Company had $50.0 million remaining from its debt repurchase authorization.

On June 19, 2020, Newmark Unitsestablished a $125.0 million sublimit line of credit to fund potential principal and interest servicing advances on its Fannie Mae portfolio during the forbearance period related to the Coronavirus Aid, Relief, and Economic Security Act. The sublimit is now included within the Company’s existing $450 million warehouse facility due June 14, 2023. The advance line will be exchanged into Newmark Class A or Class B common stock,provide 100% of the principal and interest advance payment at a rate of SOFR plus 1.90% and will be includedcollateralized by Fannie Mae's commitment to repay advances. There were no outstanding draws under this sublimit as part of the June 30, 2022. Newmark Distribution to holdershas one Fannie Mae loan in forbearance, with an outstanding principal balance of shares$7.4 million as of BGC Class A or Class B common stock.

June 30, 2022.


On March 19,November 30, 2018, Newmark and BGC Partners entered into an Amended and Restated Intercompanyunsecured credit agreement (the “Cantor Credit Agreement”) with Cantor. The Cantor Credit Agreement (the “Intercompanyprovides for each party to issue loans to the other party in the lender’s discretion. Pursuant to the Cantor Credit Agreement”Agreement, the parties and their respective subsidiaries (with respect to CFLP, other than BGC Partners, Inc. ("BGC") and on the same date Newmark borrowed $150.0its subsidiaries) may borrow up to an aggregate principal amount of $250.0 million from BGC pursuanteach other from time to the facilities under the Intercompany Credit Agreement.  Thetime at an interest rate as of March 31, 2018 was LIBOR plus 3.25%, or 4.99%, which may be adjusted based onis the higher of BGC’sCantor’s or Newmark’s short-term borrowing rate then in effect, at such time plus 100 basis points, or such other interest rate as may be mutually agreed between BGC1.0%. As of June 30, 2022 and Newmark..December 31, 2021, the Company did not have any outstanding balances under this facility.

Credit Ratings
    Newmark has transferred these proceeds to its restricted cash account pledged for the benefit of Fannie Mae. As of March 31, 2018, Newmark’s total net borrowings under the Intercompany Credit Agreement are $202.0 million.

BGC expects to pursue a distribution to its stockholders of all of the Class A shares common and Class B common shares of Newmark (collectively, the “Newmark common shares”) that BGC then owns in a manner that is intended to qualify as generally tax-free for U.S. federal income tax purposes (the “spin-off”). As currently contemplated, shares of Class A common stock of Newmark held by BGC would be distributed to the holders of shares of Class A common stock of BGC, and shares of Class B common stock of Newmark held by BGC would be distributed to that holders of shares of Class B common stock of BGC.  Key steps that Newmark plans to take towards the tax-free spin-off include: first, Newmark intends to attain its own credit rating; and second, Newmark expects to repay or refinance its $812.5 million of long-term debt owed to or guaranteed by BGC.  This is necessary for the spin-off to be tax free.  Newmark’s management is planning to begin the process of pursuing its ownstand-alone BBB+ Stable credit rating now that BGC’sfrom JCRA, BBB- Stable credit watch has been resolved.

Had the spin-off occurred immediately following the close of the first quarter of 2018, the ratio of Newmark common shares to be distributed in respect of each BGC common share would have been approximately 0.4702.  However, the exact ratio of Newmark common shares to be distributed in respect of each BGC common share in the spin-off will depend on, among other things, the number of BGC common shares outstandingratings from Fitch Ratings, Inc. and the number of Newmark common shares (including Newmark common shares underlying units of Newmark OpCo) owned by BGC as of the record date of the spin-off.  The spin-off is subject toKroll Bond Rating Agency, and a number of conditions, and BGC may determine not to proceed with the spin-off if the BGC board of directors determines, in its sole discretion, that the spin-off is not in the best interest of BGC and its stockholders. Accordingly, the spin-off may not occur on the expected timeframe, or at all.

BB+ Positive credit rating from Standard & Poor’s.


Nasdaq Transaction

Monetization Transactions

On June 28, 2013, BGC sold certain assets of its on-the-run, electronic benchmark U.S. Treasury platform (“eSpeed”) to Nasdaq.Nasdaq, Inc ("Nasdaq"). The total consideration received in the transaction included $750.0 million in cash paid upon closing and an earn-outEarn-out of up to 14,883,705 shares of Nasdaq common stockshares to be paid ratably over 15 years (subject to acceleration and present value discount as discussed below), provided that Nasdaq, as a whole, produces at least $25.0 million in consolidated gross revenues each year. The earn-out was excluded from the initial gain on the divestiture and is recognized in income as it is realized and earned when these contingent events have occurred, consistent with the accounting guidance for gain contingencies (the “Nasdaq Earn-out”). The remaining rights under the Nasdaq Earn-out were transferred to Newmark on September 28, 2017. Any Nasdaq shares that were received by BGC prior to September 28, 2017 were not transferred to Newmark.

In connection withDuring the Nasdaq Earn-out,third and fourth quarters of 2021, Newmark received 992,247 shares during the year ended December 31, 2017. Newmark will receive a remaining earn-out of up to 9,922,470sold 2,780,180 shares of Nasdaq common stock ratably over the next approximately 10 years, provided that Nasdaq, as a whole, produces at least $25.0 million infor gross revenues each year. In Novemberproceeds of 2017, Newmark sold 242,247 shares of the 992,247 Nasdaq shares received.$516.5 million. During the first quarter of 2022, Newmark sold all of its remaining 2,497,831 Nasdaq shares for gross proceeds of $437.8 million. In the aggregate from September 2017 through March 31, 2022, Newmark received 10.2 million shares of Nasdaq, of which Newmark sold 7.6 million shares of Nasdaq and delivered 2.6 million shares of Nasdaq to RBC. For further information regarding sales of Nasdaq shares and realized and unrealized gains (losses) on such shares, see Note 7 — “Marketable Securities” to our accompanying unaudited condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.


Exchangeable Preferred Partnership Units and Forward Contracts
On June 18, 2018, Newmark’s principal operating subsidiary, Newmark OpCo, issued $175.0 million of exchangeable preferred partnership units (“EPUs”) in a private transaction to the Royal Bank of Canada (“RBC”). Newmark received $152.9 million of cash with respect to this transaction.

On September 26, 2018, Newmark soldentered into a second agreement to issue $150.0 million of additional EPUs to RBC, similar to the June 18, 2018 transaction (together the “Newmark OpCo Preferred Investment”). Newmark received $113.2 million of cash with respect to this transaction.

The EPUs were issued in four tranches and are separately convertible by either RBC or Newmark into a fixed number of shares of Newmark Class A common stock, subject to a revenue hurdle in each of the fourth quarters of 2020 through 2022 for each of the respective four tranches. The ability to convert the EPUs into Newmark Class A common stock is subject to the special purpose vehicle (the “SPV”) SPV’s option to settle the postpaid forward contracts as described below. As the EPUs represent equity ownership of a consolidated subsidiary of Newmark, they have been included in “Noncontrolling interests” on our accompanying unaudited condensed consolidated balance sheets and unaudited condensed consolidated statements of changes in equity. The EPUs were entitled to a preferred payable-in-kind dividend, which is recorded as accretion to the
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carrying amount of the EPUs through “Retained earnings” on our accompanying unaudited condensed consolidated statements of changes in equity and are reductions to “Net income (loss) available to common stockholders” for the purpose of calculating earnings per share.

Contemporaneously with the issuance of the EPUs, the SPV that is a consolidated subsidiary of Newmark entered into variable postpaid forward contracts with RBC (together, the “Nasdaq Forwards”). The SPV was an indirect subsidiary of Newmark whose sole assets were the Nasdaq Earn-outs for 2019 through 2022. The Nasdaq Forwards provided the SPV the option to settle using up to 992,247 Nasdaq shares, to be received by the SPV pursuant to the Nasdaq Earn-out (see Note 7 — “Marketable Securities” to our accompanying unaudited condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q ), or Newmark Class A common stock, in exchange for either cash or redemption of the EPUs, notice of which must be provided to RBC prior to November 1 of each year from 2019 through 2022 (subject to acceleration due to Nasdaq's transaction with Tradeweb Markets, Inc ("Tradeweb")).

In September 2020, the SPV notified RBC of its decision to settle the second Nasdaq Forward using the Nasdaq shares the SPV received in November 2020 in exchange for the second tranche of the EPUs, which resulted in a payable to RBC that was settled upon receipt of Nasdaq Earn-out shares. The fair value of the Nasdaq shares that Newmark received was $121.9 million. On November 30, 2020, Newmark settled the second Nasdaq Forward with 741,505 Nasdaq shares, with a fair value of $93.5 million and Newmark retained 250,742 Nasdaq shares.

In September 2019, the SPV notified RBC of its decision to settle the first Nasdaq Forward using the Nasdaq shares the SPV received in November 2019 in exchange for the first tranche of the EPUs, which resulted in a payable to RBC that was settled upon receipt of Nasdaq Earn-out shares. The fair value of the Nasdaq shares that Newmark received was $98.6 million. On December 2, 2019, Newmark settled the first Nasdaq Forward with 898,685 Nasdaq shares, with a fair value of $93.5 million and Newmark retained 93,562 Nasdaq shares.

Acceleration of Nasdaq Earn-out
On February 2, 2021, Nasdaq announced that it entered into a definitive agreement to sell its U.S. fixed income business to Tradeweb. On June 25, 2021, Nasdaq announced the close of the sale of its U.S. fixed income business, which accelerated Newmark’s receipt of Nasdaq shares. Newmark received 6,222,340 Nasdaq shares, with a fair value of $1,093.9 million based on the closing price on June 30, 2021, included in “Other (loss) income, net” for the three months ended June 30, 2021.

On June 25, 2021, the SPV notified RBC of its decision to settle the third and fourth Nasdaq Forwards using the Nasdaq shares the SPV received on June 25, 2021. On July 2, 2021, Newmark settled the third and the fourth Nasdaq Forwards with 944,329 Nasdaq shares, with a fair value of $166.0 million based on the closing price of June 30, 2021.

Master Repurchase Agreement with Cantor
On August 2, 2021, our subsidiary, Newmark OpCo, entered into a Master Repurchase Agreement (the “Repurchase Agreement”) with CF Secured, LLC (“CF Secured”), an affiliate of Newmark’s majority stockholder, Cantor, pursuant to which Newmark could seek, from time-to-time, to execute short-term secured financing transactions. Repurchase agreements effect equity financing. The Company, under the Repurchase Agreement, could seek to sell securities, in this case common shares of Nasdaq, owned by the Company, to CF Secured, under the Repurchase Agreement, and agreed to repurchase those securities on a date certain at a repurchase price generally equal to the original purchase price plus interest.

Pursuant to the Repurchase Agreement, the Company and CF Secured agreed to enter into a repurchase transaction, wherein CF Secured would deliver the cash of such repurchase transaction to the Company on an overnight basis at an initial rate of 0.95% per annum (approximately 1.00% less expensive than Newmark’s revolving credit facility), and the Company would deliver to CF Secured the number of shares of Nasdaq as collateral so that the market value of such shares equaled 130% of such cash proceeds. The Nasdaq shares would be marked to market daily, and the minimum maintenance margin requirement, should the share price decline, would be 120% of such cash proceeds. The Company would be required to transfer additional collateral (securities and/or cash) in the event of a margin percentage decline below 120%.

The initial repurchase or financing transaction was executed on August 2, 2021 and consisted of Newmark receiving $260 million in cash and Newmark delivering 1,818,000 Nasdaq shares as collateral. The repurchase transaction could be rolled over daily (or for a term greater than one day at a time), subject to terms mutually acceptable to the Company and CF Secured, including the rate and minimum margin requirement, both of which could fluctuate based upon general funding rates and other factors in the repurchase funding market.

The Repurchase Agreement was subject to ongoing compliance with various covenants and contains customary events of default. If an event of default would have occurred, the repurchase date for each transaction under the Repurchase Agreement
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would have been accelerated to the date of default. For events of default relating to insolvency and receivership, the repurchase date for each transaction under the Repurchase Agreement would have been automatically accelerated to the date of default.

The Company utilized the cash proceeds from the repurchase transaction to lower its debt costs. The Company repaid the cash proceeds under the repurchase transaction with proceeds of periodic sales of Nasdaq shares and from its operating cash.

The Repurchase Agreement and related initial repurchase transaction were on market terms and rates and were approved by Newmark’s Audit Committee. There were no amounts outstanding under the Repurchase Agreement as of June 30, 2022, and $140.0 million was outstanding as of December 31, 2021. See Note 7 — "Marketable Securities" and Note 27 — “Related Party Transactions” to our accompanying unaudited condensed consolidated financial statements in Part I, Item 1 of this Quarterly Report on Form 10-Q.

2021 Equity Event and Share Count Reduction
In connection with the acceleration of the Nasdaq Earn-out, on June 28, 2021, the Compensation Committee of Newmark’s Board of Directors (the "Compensation Committee") approved a plan to expedite the tax deductible exchange and redemption of a substantial number of limited partnership units held by partners of the Company (the "2021 Equity Event"). The 2021 Equity Event also accelerated certain compensation expenses resulting in $428.6 million of compensation charges in the second quarter of 2021. These partnership units were settled using a $12.50 share price. In July 2021, the Compensation Committee approved increasing to $13.01 the price to settle certain units at an incremental cost of $15.9 million, which was recorded as compensation charges in the third quarter of 2021.

Some of the key components of the approved plan were as follows:

•8.3 million and 8.0 million compensatory limited partnership units, respectively, of Newmark Holdings, L.P. ("Newmark Holdings") and BGC Holdings, L.P. ("BGC Holdings") held by our partners who are employees were redeemed or exchanged .

•23.2 million and 17.4 million compensatory limited partnership units, respectively, of Newmark Holdings and BGC Holdings held by our partners who are independent contractors were redeemed or exchanged. We also accelerated the payment of related withholding taxes to them with respect to their Newmark units. Independent contractors received one BGC Class A common share for each redeemed non-preferred BGC unit or cash and are responsible for paying any related withholding taxes.

•Partners with nonexchangeable non-preferred compensatory units exchanged or redeemed in connection with the 2021 Equity Event generally received restricted Class A common shares of Newmark and/or BGC to the extent tax deductible. A portion of the BGC Class A common shares received by independent contractors were unrestricted to facilitate their payment of withholding taxes.

•The issuance of Newmark Class A common stock related to the 2021 Equity Event reflected the June 28, 2021 exchange ratio of 0.9403.

•Newmark Holdings and BGC Holdings limited partnership interests with rights to convert into HDUs for cash were also redeemed in connection with the 2021 Equity Event.

Refer to the section "Certain Other Related Party Transactions" below for the specific transactions with respect to our executive officers which are included in the above summary.

Certain Other Related Party Transactions
Transactions with Executive Officers and Directors
On December 21, 2021, the Compensation Committee approved: (i) the redemption of all of Mr. Gosin’s remaining 838,996 non-exchangeable Newmark PPSUs for $8,339,980 in cash and (ii) compensation of approximately $7,357,329 by way of the Company causing 478,328 of Mr. Gosin’s non-exchangeable Newmark PSUs to be redeemed for zero and issuing 446,711 shares of Newmark Class A Common Stock, based upon the closing price on the date the Committee approved the transaction (which was $16.47) and an exchange ratio of 0.9339. The estimated pre-tax value of this transaction is $15,697,309, less applicable taxes and withholdings, using a 53.13% tax rate for Mr. Gosin.

On December 21, 2021, Mr. Lutnick elected to redeem all of his 193,530 currently exchangeable Newmark PPSUs for a cash payment of $1,465,873. In addition, upon the Compensation Committee’s approval of the monetization of Mr. Gosin’s remaining non-exchangeable Newmark PPSUs and a number of Mr. Gosin’s non-exchangeable PSUs on December 21, 2021,
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Mr. Lutnick (i)elected to redeem 188,883 non-exchangeable Newmark PPSUs for a cash payment of $1,954,728, and 127,799 non-exchangeable Newmark NPPSUs for a cash payment of $1,284,376, both for which he previously waived, but now accepted under the Company’s standing policy for Mr. Lutnick; and (ii) received the right to monetize, and accepted the monetization of, his remaining 122,201 non-exchangeable Newmark NPPSUs for a cash payment of $1,228,124, under such standing policy.

In connection with the foregoing, Mr. Lutnick accepted the right to monetize approximately $4,406,915 by way of the Company causing 286,511 of Mr. Lutnick’s non-exchangeable Newmark PSUs to be redeemed for zero and issuing 267,572 shares of Newmark Class A Common Stock based upon the closing price on the date the Committee approved the transaction (which was $16.47) and a 0.9339 exchange ratio, under the Company’s standing policy applying to Mr. Lutnick, with such acceptance of rights granted in reference to Mr. Gosin’s December 2021 transactions to the extent necessary to effectuate the foregoing (and otherwise Mr. Lutnick waived all remaining rights, which shall be cumulative). The aggregate estimated pre-tax value of these transactions is $10,340,015, less applicable taxes and withholdings, using a 57.38% tax rate for Mr. Lutnick.

On April 27, 2021, the Compensation Committee approved an additional 650,000monetization opportunity for Mr. Merkel: (i) 73,387 of Mr. Merkel’s 145,384 non-exchangeable Newmark Holdings PSUs were redeemed for zero, (ii) 19,426 of Mr. Merkel’s 86,649 non-exchangeable Newmark Holdings PPSUs were redeemed for a cash payment of $173,863, and (iii) 68,727 shares of our Class A common stock were issued to Mr. Merkel. On the same day, the 68,727 shares of our Class A common stock were repurchased from Mr. Merkel at $10.67 per share, the closing price of our Class A common stock on that date, under our stock buyback program. The total payment delivered to Mr. Merkel was $0.8 million, less applicable taxes and withholdings.

On March 16, 2021, pursuant to the Newmark standing policy for Mr. Lutnick, the Compensation Committee granted exchange rights and/or monetization rights with respect to rights available to Mr. Lutnick. Mr. Lutnick elected to waive such rights one-time with such future opportunities to be cumulative. The aggregate number of Mr. Lutnick’s units for which he waived exchange rights or other monetization rights is 4,423,457 non-exchangeable Newmark Holdings PSUs/NPSUs, inclusive of the PSUs receiving an HDU conversion right and 1,770,016 non-exchangeable Newmark Holdings PPSUs with an aggregate determination amount of $21.6 million at that time, inclusive of the PPSUs receiving an HDU conversion right.

On March 16, 2021, the Company redeemed 30,926 non-exchangeable Newmark Holdings PSUs held by Mr. Merkel for zero and in connection therewith issued 28,962 shares of our Class A common stock. On the same day, the Company repurchased these shares from Mr. Merkel at the closing price of our Class A common stock of $11.09 per share under our stock buyback program. The total payment delivered to Mr. Merkel was $0.3 million, less applicable taxes and withholdings. The Compensation Committee approved these transactions.
On March 16, 2021, the Compensation Committee granted Mr. Gosin exchange rights into shares of Class A common stock with respect to 526,828 previously awarded non-exchangeable Newmark Holdings PSUs and 30,871 non-exchangeable Newmark Holdings APSUs held by Mr. Gosin (which, based on the closing price of the Class A common stock of $11.09 per share on such date and using the exchange ratio of 0.9365, had a value of $5.8 million in the aggregate). In addition, on March 16, 2021, the Compensation Committee approved removing the sale restrictions on Mr. Gosin’s remaining 178,232 restricted shares of Class A common stock in BGC (which were originally issued in 2013) and associated 82,680 remaining restricted shares of Newmark Class A common stock (issued as a result of the Company spin-off in November 2018).

On March 16, 2021, the Compensation Committee granted Mr. Rispoli (i) exchange rights into shares of Class A common stock with respect to 6,043 previously awarded non-exchangeable Newmark Holdings PSUs held by Mr. Rispoli (which, based on the closing price of the Class A common stock of $11.09 per share on such date and using the exchange ratio of 0.9365, had a value of $0.1 million); and (ii) exchange rights into cash with respect to 4,907 previously awarded non-exchangeable Newmark Holdings PPSUs held by Mr. Rispoli (which had an average determination price of $15.57 per unit, for a total of $76,407 in the aggregate to be paid for taxes when (i) is exchanged).

The specific transactions approved by the Compensation Committee, in connection with the 2021 Equity Event, with respect to our executive officers are set forth below. All of the transactions included in the 2021 Equity Event with respect to Messrs. Lutnick, Gosin and Rispoli, are based on (i) the price for Newmark Class A common stock of $12.50 per share, as approved by the Compensation Committee; (ii) the price of BGC Partners Class A common stock of $5.86; and (iii) the price of Nasdaq shares.

common stock of $177.11.


Growth Drivers

Howard W. Lutnick, Chairman
On December 27, 2021, the Compensation Committee approved a one-time bonus award to Mr. Lutnick (the “Award”), which was evidenced by the execution and delivery of a Retention Bonus Agreement dated December 28, 2021 (the “Effective Date”) and described below (the “Award Agreement”), in consideration of his success in managing certain aspects of
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the Company’s performance as its principal executive officer and Chairman. The keyAward rewarded Mr. Lutnick for his efforts in delivering superior financial results for the Company and its stockholders, including in particular his success in creating substantial value for the Company and its stockholders in connection with creating, structuring, hedging and monetizing the forward share contract to receive over time shares of common stock of Nasdaq, Inc. (the “Nasdaq Derivative”) held by the Company (together, the “Nasdaq Shares”) and the strong balance sheet and significant amount of income created from the Nasdaq Derivative. A principal reason for structuring the Award with a substantial portion to be paid out over three years was also to further incentivize Mr. Lutnick to continue to serve as both the Company’s principal executive officer and its Chairman for the benefit of the Company’s stockholders. The Award is the subject of legal challenge. See the heading "Derivative Suit" below.

The Award Agreement provides for an aggregate cash payment of $50 million, payable as follows: $20 million within three days of the Effective Date (which payment was made on December 31, 2021), and $10 million within thirty days following vesting on each of the first, second and third anniversaries of the Effective Date. Any entitlement to future amounts not vested will be forfeited immediately if, prior to the applicable anniversary date, Mr. Lutnick ceases to serve as both the Company’s Chairman and its principal executive officer, unless Mr. Lutnick ceasing to serve in either such capacity occurs pursuant to a “Vesting Termination,” as that term is defined in the Award Agreement. Mr. Lutnick has purchased Newmark Class A Common Stock with the after-tax proceeds of the initial tranche of the Award. The Award Agreement describes a “Vesting Termination” as (i) a termination of Mr. Lutnick’s employment by the Company without “Cause” (as that term is defined in the Award Agreement) or (ii) an involuntary removal of the Executive from the position of Chairman of the Board on or after the occurrence of a Change in Control (as that term is defined in the Change of Control Agreement dated as of December 13, 2017 by and between Mr. Lutnick and the Company (the “Control Agreement”). In the event that Mr. Lutnick ceases to serve as both the Company’s Chairman and its principal executive officer pursuant to a Vesting Termination, any amounts not vested will immediately become fully vested. The Award Agreement provides that Mr. Lutnick ceasing to serve as the Company’s Chairman and principal executive officer pursuant to his death or disability does not constitute a Vesting Termination. The provisions of the Control Agreement do not apply to the Award. A copy of the Award Agreement was attached as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on December 29, 2021 and is described in detail under the heading “2021 Lutnick Award” in Amendment No. 1 to the Company’s Annual Report on From 10-K/A.

On June 28, 2021, in connection with the 2021 Equity Event, the Newmark Compensation Committee approved the following for Mr. Lutnick: (i) the exchange of 279,725 exchangeable Newmark Holdings PSUs into 263,025 shares of Class A common stock of Newmark based on the then applicable Exchange Ratio of 0.9403; and $1,465,874 associated with Mr. Lutnick’s non-exchangeable 193,530 Newmark Holdings PPSUs was redeemed and used for tax purposes; (ii) the conversion of 552,482.62 non-exchangeable Newmark Holdings PSUs with the right to exchange PSUs into HDUs (“H-Rights”) into 552,482.62 non-exchangeable Newmark Holdings HDUs and redemption of such HDUs for their Capital Account of $7,017,000, paid in the form of Nasdaq Shares issued at $177.11 per share (which was the NASDAQ closing price as of June 28, 2021); and $7,983,000 associated with Mr. Lutnick’s non-exchangeable Newmark Holdings PPSUs with -H were redeemed and used for tax purposes; (iii) the exchange of 520,380 exchangeable BGC Holdings PSUs into 520,380 shares of Class A common stock of BGC Partners, and $1,525,705 associated with Mr. Lutnick’s exchangeable BGC Holdings PPSUs was redeemed and used for tax purposes; (iv) the redemption of 88,636 non-exchangeable BGC Holdings PSUs pursuant to Mr. Lutnick’s rights under his existing standing policy, and the issuance of 88,636 shares of Class A common stock of BGC Partners; (v) the conversion of 1,131,774 non-exchangeable BGC Holdings PSUs with H-Rights into 1,131,774 non-exchangeable BGC Holdings HDUs and $7,983,000 associated with Mr. Lutnick’s BGC Holdings PPSUs with H- Rights was redeemed and used for tax purposes in connection with the exercise of the exercise of the BGC Holdings HDUs; and (vi) the issuance of 29,059 shares of Class A common stock of Newmark. In accordance with Mr. Lutnick’s right under his existing standing policy, and in connection with the 2021 Equity Event, upon the approval of the Newmark Compensation Committee: (i) 2,909,819 non-exchangeable Newmark Holdings PSUs, pursuant to Mr. Lutnick’s rights under his existing standing policy, were redeemed and 2,736,103 shares of Class A common stock of Newmark, based upon the then applicable exchange ratio of 0.9403, were granted to Mr. Lutnick; and (ii) $8,798,546 associated with Mr. Lutnick’s rights under his existing standing policy was redeemed and used for tax purposes. See Item 11 — “Executive Compensation” in our Annual Report on Form 10-K/A for additional information and definitions.

Barry M. Gosin, Chief Executive Officer
On September 20, 2021, the Compensation Committee approved a monetization opportunity for Mr. Gosin: all of Mr. Gosin’s 2,114,546 non-exchangeable BGC Holdings PSUs were redeemed for zero and 2,114,456 shares of BGC Class A common stock were issued to Mr. Gosin.

On June 28, 2021, the Compensation Committee approved the following for Barry M. Gosin, the Company’s Chief Executive Officer: (i) the exchange of 1,531,061.84 exchangeable Newmark Holdings units (comprised of 1,438,597.37 exchangeable Newmark Holdings PSUs and 92,464.47 exchangeable Newmark Holdings APSUs) into 1,439,658 shares of Class A common stock of Newmark based upon the then current exchange ratio of 0.9403; and $834,508 associated with Mr. Gosin’s exchangeable Newmark Holdings PPSUs was redeemed and used for tax purposes; (ii) the conversion of 443,871.60
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non-exchangeable Newmark Holdings PSUs with H-Rights into 443,871.60 non-exchangeable Newmark Holdings HDUs, and redemption of such HDUs, less any taxes and withholdings in excess of $5,362,452, paid in the form of Nasdaq shares issued at $177.11 per share (which was the NASDAQ closing price as of June 28, 2021); and $5,362,452 in connection with Mr. Gosin’s Newmark Holdings PPSUs with H-Rights was redeemed and used for tax purposes; (iii) the exchange of 3,348,706 exchangeable BGC Holdings units (comprised of 3,147,085 exchangeable BGC Holdings PSUs and 201,621 exchangeable BGC Holdings APSUs) into 3,348,706 shares of Class A common stock of BGC Partners; and $298,273 associated with Mr. Gosin’s exchangeable BGC Holdings PPSUs was redeemed and used for tax purposes; (iv) the conversion of 1,592,016 non-exchangeable BGC Holdings PSUs with H-Rights into 1,592,016 non-exchangeable BGC Holdings HDUs, and $1,129,499 associated with Mr. Gosin non-exchangeable BGC Holdings PPSUs was redeemed and used for tax purposes; and (v) the issuance of 12,500 shares of Class A common stock of Newmark.

Michael J. Rispoli, Chief Financial Officer
On June 28, 2021, the Compensation Committee approved the following for Mr. Michael Rispoli, the Company’s Chief Financial Officer: (i) the exchange of 23,124 exchangeable Newmark Holdings PSUs into 21,744 shares of Class A common stock of Newmark based on the then current exchange ratio of 0.9403 and $208,407 associated with Mr. Rispoli’s exchangeable Newmark Holdings PPSUs was redeemed and used for tax purposes; (ii) 6,000 non-exchangeable Newmark Holdings PSUs were redeemed and an aggregate of 5,642 restricted shares of Newmark were issued to Mr. Rispoli based upon the then current exchange ratio of 0.9403, and $52,309 associated with Mr. Rispoli’s non-exchangeable Newmark Holdings PPSUs was redeemed and used for tax purposes; (iii) the conversion of 5,846.07 non-exchangeable Newmark Holdings PSUs with H-Rights into 5,846 non-exchangeable Newmark Holdings HDUs and the redemption of such HDUs, less any taxes and withholdings in excess of $60,750, paid in the form of Nasdaq shares issued at $177.11 per share (which was the NASDAQ closing price as of June 28, 2021); and $60,750 associated with Mr. Rispoli’s PPSUs with H-Rights was redeemed and used for tax purposes; (iv) the exchange of 36,985 exchangeable BGC Holdings PSUs into 36,985 shares of Class A common stock of BGC, and $134,573 associated with Mr. Rispoli’s exchangeable BGC Holdings PPSUs was redeemed and used for tax purposes; and (v) the issuance of 383 shares of Class A common stock of Newmark.

Stephen M. Merkel, Chief Legal Officer
On June 28, 2021 the Compensation Committee also approved the following for Stephen M. Merkel, the Company’s Chief Legal Officer: (i) the redemption of 51,124.28 non-exchangeable Newmark Holdings PSUs and issuance of 48,072 shares of Newmark Class A common stock based upon the current exchange ratio of 0.9403; and (ii) the redemption of 46,349.87 non-exchangeable Newmark Holdings PPSUs for a cash payment of $0.5 million, to be remitted to the applicable tax authorities to the extent necessary in connection with the issuance of the shares above.

Retirement Fund Purchase
On April 27, 2021, a Keogh retirement account held by Mr. Lutnick purchased 5,154 shares of our Class A common stock from us at the closing price of our Class A common stock on that date of $10.67 per share. The transaction was approved by our Audit Committee.

CF Real Estate Finance Holdings, LP.
Contemporaneously with the acquisition of Berkeley Point, on September 8, 2017, Newmark invested $100.0 million in a newly formed commercial real estate-related financial and investment business, Real Estate LP, which is controlled and managed by Cantor. Real Estate LP may conduct activities in any real estate related business or asset backed securities related business or any extensions thereof and ancillary activities thereto. As of June 30, 2022 and December 31, 2021, Newmark’s investment was accounted for under the equity method (see Note 8 — “Investments”). Newmark holds a redemption option in which Real Estate LP will redeem in full Newmark’s investment in Real Estate LP in exchange for Newmark’s capital account balance in Real Estate LP as of such time. On July 20, 2022, Newmark exercised this redemption option and expects to receive approximately $88.4 million from Cantor on or prior to July 20, 2023.

Pre-IPO intercompany agreements
In December 2017, prior to our Separation and IPO, all intercompany arrangements and agreements that were previously approved by the Audit Committee of BGC Partners with respect to BGC Partners and its subsidiaries and Cantor and its subsidiaries were also approved by our Board of Directors with respect to the relationships between us and our subsidiaries and Cantor and its subsidiaries following our IPO on the terms and conditions approved by the BGC Audit Committee during such time that our business was owned by BGC Partners. These arrangements include, but are not limited to, the following: (i) an authorization to provide Cantor real estate and related services, including real estate advice, brokerage, property or facilities management, valuation and advisory and other services; (ii) an authorization to enter into brokerage and similar agreements with respect to the provision of ordinary course brokerage services in circumstances in which such entities customarily provide brokerage services to third-party customers; (iii) an authorization to enter into agreements with Cantor and/or its affiliates, to provide services, including finding and reviewing suitable acquisition or partner candidates, structuring
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transactions and negotiating and due diligence services in connection with acquisitions and other business strategies in commercial real estate and other businesses from time to time; and (iv) an arrangement to jointly manage exposure to changes in foreign exchange rates. Please see the section entitled “Certain Relationships and Related Transactions, and Director Independence” in the Company's Amendment No.1 to the Annual Report on Form 10-K/A for the fiscal year ended December 31, 2019 filed on April 28, 2020 for a description of these and other approved arrangements.

Services Agreement with CFE Dubai
As the Company does not yet have a presence in Dubai, in May 2020, the Audit Committee of the Company authorized Newmark & Company Real Estate, Inc. (“Newmark & Co.”), a subsidiary of Newmark, to enter into an agreement with Cantor Fitzgerald Europe (DIFC Branch) (“CFE Dubai”) pursuant to which CFE Dubai will employ and support an individual who is a resident of Dubai in order to enhance Newmark’s capital markets platform, in exchange for a fee. CFE Dubai and Newmark & Co. negotiated a Services Agreement memorializing the arrangement between the parties (the “Services Agreement”). The Services Agreement provides that Newmark & Co. will reimburse CFE Dubai for the individual’s fully allocated costs, plus a mark-up of seven percent (7%). In addition, the Audit Committee of the Company authorized the Company and its subsidiaries to enter into similar arrangements in respect of any jurisdiction, in the future, with Cantor and its subsidiaries, provided that the applicable agreements contain customary terms for arrangements of this type and that the mark-up charged by the party employing one or more individuals for the benefit of the other is between 3% and 7.5%, depending on the level of support required for the employed individual(s).

Sublease to BGC and Cantor Fitzgerald, L.P.
On May 15 2020, BGC U.S. OpCo ("BGC") entered into an arrangement to sublease excess space from RKF Retail Holdings LLC, a subsidiary of Newmark, which was approved by the Newmark Audit Committee. The deal was a one-year sublease of approximately 21,000 rentable square feet in New York City. Under the terms of the sublease, BGC U.S. OpCo paid a fixed rent amount of $1.1 million in addition to all operating and tax expenses attributable to the lease. In May 2021, the sublease was amended to provide for a rate of $15 thousand per month based on the size of utilized space, in addition to terms extending on a month-to-month basis. The lease with BGC ended in December 2021. Newmark received $0.1 million and $0.4 million from BGC for the three and six months ended June 30, 2021, respectively.

In January 2022, Cantor entered into an agreement to sublease this space for a period of six months until June 30, 2022 at a rate of $0.1 million per month. In July 2022, the sublease was extended one year to June 30, 2023.

GSE loans and related party limits
In February 2019, the Audit Committee of the Company authorized Newmark and its subsidiaries to originate and service GSE loans to Cantor and its affiliates (other than BGC) and service loans originated by Cantor and its affiliates (other than BGC) on prices, rates and terms no less favorable to Newmark and its subsidiaries than those charged by third parties. The authorization is subject to certain terms and conditions, including but not limited to: (i) a maximum amount up to $100.0 million per loan, (ii) a $250.0 million limit on loans that have not yet been acquired or sold to a GSE at any given time, and (iii) a separate $250.0 million limit on originated Fannie Mae loans outstanding to Cantor at any given time.
Transaction with CCRE Lending
On July 22, 2019, Cantor Commercial Real Estate Lending, L.P. (“CCRE Lending”), a wholly-owned subsidiary of Real Estate LP, made a $146.6 million commercial real estate loan (the “Loan”) to a single-purpose company (the “Borrower”) in which Barry Gosin, Newmark’s Chief Executive Officer, owns a 19% interest. The Loan is secured by the Borrower’s interest in property in Pennsylvania that is subject to a ground lease. While CCRE Lending initially provided the full loan amount, on August 16, 2019, a third-party bank purchased approximately 80% of the Loan value from CCRE Lending, with CCRE Lending retaining approximately 20%. The Loan matures on August 6, 2029, and is payable monthly at a fixed interest rate of 4.38% per annum.

Transactions related to ordinary course real estate services
On November 4, 2020, the Audit Committee of the Board of Directors authorized entities in which executive officers have a non-controlling interest to engage Newmark to provide ordinary course real estate services to them as long as Newmark’s fees are consistent with the fees that Newmark ordinarily charges for these services.

Arrangement with View, Inc.
On November 30, 2020, Newmark entered into an arrangement to assist View, Inc. (“View”) in the sale of its products and services to real estate clients in exchange for commissions. View, Inc. is a Silicon Valley-based producer of high-efficiency dynamic glass that controls light, heat, and glare, providing unobstructed views and privacy using a low voltage control system. In connection with the arrangement, View also agreed to engage Newmark as its exclusive provider of real estate services for a period of at least five years. While View is not under common control with Newmark, it was, at the time that the agreement was
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executed, the target of a merger with CF Finance Acquisition Corp. II, a special purpose acquisition company sponsored by Cantor.

Cantor Rights to Purchase Cantor Units from Newmark Holdings
Cantor has a right to purchase from Newmark Holdings exchangeable limited partnership interests in the event that any Newmark Holdings founding partner interests that have not become exchangeable are redeemed by Newmark Holdings upon termination or bankruptcy of a founding partner or upon mutual consent of the general partner of Newmark Holdings and Cantor. Cantor has the right to purchase such Newmark Holdings exchangeable limited partnership interests at a price equal to the lesser of (1) the amount that Newmark Holdings would be required to pay to redeem and purchase such Newmark Holdings founding partner interests and (2) the amount equal to (a) the number of units underlying such founding partner interests, multiplied by (b) the exchange ratio as of the date of such purchase, multiplied by (c) the then-current market price of our Class A common stock. Cantor may pay such price using cash, publicly traded shares or other property, or a combination of the foregoing. If Cantor (or the other member of the Cantor group acquiring such limited partnership interests, as the case may be) so purchases such limited partnership interests at a price equal to clause (2) above, neither Cantor nor any member of the Cantor group nor Newmark Holdings nor any other person is obligated to pay Newmark Holdings or the holder of such founding partner interests any amount in excess of the amount set forth in clause (2) above.

In addition, the Newmark Holdings limited partnership agreement provides that (1) where either current, terminating or terminated partners are permitted by us to exchange any portion of their founding partner units and Cantor consents to such exchangeability, we will offer to Cantor the opportunity for Cantor to purchase the same number of new exchangeable limited partnership interests in Newmark Holdings at the price that Cantor would have paid for exchangeable limited partnership interests in the event we had redeemed the founding partner units; and (2) the exchangeable limited partnership interests to be offered to Cantor pursuant to clause (1) above would be subject to, and granted in accordance with, applicable laws, rules and regulations then in effect.

If Cantor acquires any units as a result of the purchase or redemption by Newmark Holdings of any founding partner interests, Cantor will be entitled to the benefits (including distributions) of the units it acquires from the date of termination or bankruptcy of the applicable founding partner. In addition, any such units will be exchangeable by Cantor for a number of shares of our Class B common stock or, at Cantor’s election, shares of our Class A common stock, in each case, equal to the then-current exchange ratio, on the same basis as the limited partnership interests held by Cantor, and will be designated as Newmark Holdings exchangeable limited partnership interests when acquired by Cantor. The exchange ratio was initially one, but is subject to adjustment as set forth in the Separation and Distribution Agreement and was 0.9393 as of June 30, 2022. This may permit Cantor to receive a larger share of income generated by our business at a less expensive price than through purchasing shares of our Class A common stock, which is a result of the price payable by Cantor to Newmark.
.
On March 31, 2021, Cantor purchased from Newmark Holdings an aggregate of (i) 273,088 exchangeable limited partnership interests for aggregate consideration of $1,105,598 as a result of the redemption of 273,088 founding partner interests, and (ii) 735,625 exchangeable limited partnership interests for aggregate consideration of $2,918,919 as a result of the exchange of 735,625 founding partner interests.

On October 28, 2021, Cantor purchased from Newmark Holdings an aggregate of (i) 299,910 exchangeable limited partnership interests for aggregate consideration of $975,064 as a result of the redemption of 299,910 founding partner interests, and (ii) 523,284 exchangeable limited partnership interests for aggregate consideration of $1,898,363 as a result of the exchange of 523,284 founding partner interests.

On May 17, 2022, Cantor purchased from Newmark Holdings an aggregate of (i) 184,714 exchangeable limited partnership interests for aggregate consideration of $763,064 as a result of the redemption of 184,714 founding partner interests, and (ii) 23,562 exchangeable limited partnership interests for aggregate consideration of $100,079 as a result of the exchange of 23,562 founding partner interests.

As of June 30, 2022 there were 102,454 founding partner interests in Newmark Holdings remaining in which the partnership had the right to redeem or exchange and with respect to which Cantor will have the right to purchase an equivalent number of Cantor units following such redemption or exchange.

Special Purpose Acquisition Company
As previously reported, in April 2021, Newmark OpCo and Cantor entered into various arrangements pursuant to which they agreed to co-sponsor a special purpose acquisition company, named Newmark Acquisition Corp. (the “SPAC”), in which certain of our executive officers are executive officers and are expected to be directors. Pursuant to a purchase agreement, Newmark OpCo purchased from Cantor a 75% equity interest in an entity now known as Newmark Acquisition
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Holdings, LLC, the sponsor of the SPAC (the “Sponsor”), for $18.8 thousand, with Cantor retaining the remaining 25% equity interest in the Sponsor. Pursuant to an amended and restated limited liability company agreement of the Sponsor, Newmark OpCo is the managing member of the Sponsor, and Newmark OpCo and Cantor have agreed to make additional equity contributions to the Sponsor in order to fund the obligations of the Sponsor with respect to the SPAC in proportion to their equity ownership in the Sponsor. Also, in April 2021, the Sponsor agreed to lend to the SPAC up to $0.3 million without interest in order to cover expenses related to any initial public offering of the SPAC; the maturity date of the loans is the earlier of the consummation of the initial public offering of the SPAC and December 31, 2022. As of June 30, 2022 there was no outstanding balance on this Pre-IPO loan.

Knotel Assets
As part of the Knotel acquisition, Newmark assigned the rights to acquire certain Knotel assets to a subsidiary of Cantor, on the terms that if the subsidiary monetized the sale of these assets, Newmark would receive 10% of the proceeds of the sale after the subsidiary recoups its investment in the assets.

Employment Matters
On June 28, 2021, the Audit Committee authorized Newmark to hire a son of its Chairman as a full-time employee of its Knotel business with an annual base salary of $125,000 and an annual discretionary bonus of up to 30%. The arrangement includes a potential profit participation consistent with other entrepreneurial arrangements in the event of certain liquidity events related to businesses developed by him. In June 2022, the Audit Committee approved ordinary course compensation adjustments and expense, travel and housing reimbursement for him in accordance with standard Company policies up to $250,000 in total compensation without further Committee review.

Referral Fees to Cantor
In September 2021, the Audit Committee approved the payment of a referral fee from Newmark to Cantor Realty Capital Advisors, L.P. (“CRCA”), a subsidiary of Cantor, in relation to CRCA’s referral to Newmark of a sale and lease back transaction for a portfolio of medical office properties. Newmark paid CRCA approximately $0.3 million for the referral of the portfolio sale. Newmark management negotiated the referral arrangement with CRCA in the ordinary course of business and the arrangement is reasonable and consistent with referral arrangements of its type between unrelated parties.

Additionally, in September 2021, the Audit Committee authorized Newmark and its subsidiaries to pay referral fees to Cantor and its subsidiaries (other than Newmark and its subsidiaries) in respect of referred business, pursuant to ordinary course arrangements in circumstances where Newmark would customarily pay referral fees to unrelated third parties and where Newmark is paying a referral fee to Cantor in an amount that is no more than the applicable percentage rate set forth in Newmark’s intra-company referral policies, as then in effect, with such fees to be at referral rates no less favorable to Newmark than would be paid to unrelated third parties.

Key Business Drivers
Key drivers of revenue growth for U.S. commercial real estate services companies include the overall health of the U.S. economy, the institutional ownership of commercial real estate as an investible asset class, and the ability to attract and retain talent. In addition, in our capital markets business growth is driven byinvestment sales and mortgage brokerage businesses, the availability of credit and certainty of valuations to purchasers of and investors in commercial real estate.are key drivers. In our multifamily business, delayed marriages, an aging populationdemographic and immigration toeconomic factors are driving increased demand for new apartments. For example, in June of 2021, the National Association of Realtors said the U.S. are increasinghas not constructed enough housing to keep up with population growth for many years, and that the country has a pressing need for new apartments,deficit of 1.1 million units in buildings with an estimated 4.6two to four units and of 2.4 million needed by 2030,units in buildings of at least five units according to "U.S. Housing Market Needs 5.5 Million More Units, Says New Report" from the Wall Street Journal. In July of 2022, a recent study commissionedreport published by the National Multifamily Housing Council and the National Apartment Association.Association said that the U.S. needs 4.3 million new apartments over the next 13 years just to meet projected demand. This strong demand for new housing should continue to drive growth across our investment sales, GSEGSE/FHA multifamily lending and otherorigination, mortgage brokerage, and growth in our servicing portfolio for the foreseeable future. Berkeley Point’sbusiness over time.

Our GSE/FHA origination business is also impacted by the lending caps imposed by the Federal Housing Finance Agency. As of March 31, 2018,Agency (the “FHFA”). On November 17, 2020, the industry-wideFHFA announced that the 2022 multifamily loan purchase caps are set at $70 billion, excluding loans exempt from the caps, such as loans in the affordable and underserved market segments, or that finance water and energy efficiency improvements. These excluded categories can make up a significant portion of the overall market. For example, in 2017, more than half of the loan production reported byfor Fannie Mae and Freddie Mac was excludedwere $70 billion for each GSE. The cap structure allowed the GSEs to offer a combined total of no more than $140 billion in lending support to the multifamily market in 2021, as compared to the $159 billion delivered in 2020. On October 13, 2021, the FHFA announced that the 2022 multifamily loan purchase caps will be $78 billion for each GSE, for a combined total of $156 billion. The 2022 caps are based on FHFA's projections of the overall growth of the multifamily originations market. The 2021 and 2022 caps require at least 50% of the Enterprises' multifamily business to be mission-driven, affordable housing. FHFA will also require at least 25% of the GSE's 2022 multifamily business be affordable to residents at or below 60% of area median income (AMI), up from 20% in 2021. Given the Federal Housing Finance Agency11% year-on-year increase in full year lending caps.

caps, and the 8% year-on-year increase in industry GSE lending in the first half of 2022, the Company anticipates solid improvements in industry-wide GSE multifamily activity over the remainder of 2022. However, there can be no assurance that the GSEs reach their caps in any given year.


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Overall U.S. investment sales and mortgage brokerage volumes are expected to face challenging comparisons, due to the more than 100% industry-wide growth in capital markets activity in the second half of 2021. In addition, volumes could be impacted by interest rate and credit spread volatility, and the gap between buyer and seller expectations. The Company is well-positioned to increase its market share in these economic conditions.

Economic GrowthOutlook in the United States

The

COVID-19 adversely affected the economic outlook beginning in March of 2020. Following a 3.4% contraction in 2020, U.S. economygross domestic product expanded by 2.3% during5.7% in 2021, according to the first quarterU.S. Department of 2018, accordingCommerce. According to a preliminary estimate from the same source, U.S. DepartmentGDP contracted at an annual rate of Commerce. This growth compares with an increase of 1.2% during1.6% and 0.9%, respectively, in the first and second quarters of 2022. The second quarter of 2017.drop was driven by various factors, including a slowdown in household spending, and declines in business investment, government outlays, housing construction, and higher business inventories. The consensus is that this is a temporary setback. For example, as of August 1, 2022, the Bloomberg consensus of economists was for U.S. gross domestic productGDP to expand by 2.5%2.0% in 2022, 1.3% in 2023, and 2.1%1.8% in 20192024. Some of the recent strength in the U.S. office market could be tempered as companies continue to assess the impact of remote work, periodic increases in COVID-19 cases, and 2020, respectively, accordinga slowing US economy.

According to a recent Bloomberg survey of economists. This moderate pace of growth should help keep interest rates and inflation low by historical standards.

Thethe Bureau of Labor Statistics, reported that employers added athe monthly average of 202,000non-farm payroll employment increased by a seasonally adjusted more than 6.7 million, net new payroll jobs during 2021, which was the highest such annual figure since record keeping began. Based on a preliminary report from the same source, strong job growth continued in the first quarterand second quarters of 2018, which2022, with average monthly gains of approximately 539 thousand and 375 thousand, respectively, on the same basis. The unemployment rate declined to 3.6% in June 2022, compared with 3.9% in December 2021 and a high of 14.8 % in April of 2020, and only 10 basis points higher than in February 2020. In comparison, the last time the U.S. unemployment rate was above the prior year period’s 177,000 and the seasonally adjusted average of 182,000 per month in 2017. Despite the returnnear these low levels was 1969, when unemployment reached 3.4%.


The ten-year Treasury yield increased by 154 basis points to pre-recession unemployment rates (4.1%3.0129% as of March 2018), the number of long-term unemployed and the labor force participation rate (the latter of which is near a 39-year low) remained disappointing for many economists, but these indicators are less important to commercial real estate than job creation.

The 10-year Treasury yield ended the first quarter of 2018 at 2.74%, up 35 basis points fromJune 30, 2022 versus the year-earlier date. In addition, 10-yearAs of that date, ten-year Treasury yields have remained well below their 50-year average of approximately 6.32%, in large part due to market expectations that6.0%. On July 27, 2022, the Federal Open Market Committee (“FOMC”) will only moderately raiseannounced another increase the target range for the federal funds rate by 75 basis points in order to curb inflation, which itself is due in part to tight labor market conditions. The FOMC also stated that it plans to continue reducing the $8.9 trillion portfolio of securities it holds, including long-term agency mortgage-backed securities and U.S. Treasuries. These securities were purchased as part of the Fed's quantitative easing program designed hold down long-term interest rates, and the FOMC previously indicated that a maximum of $60 billion in Treasury purchases and $35 billion in mortgage-backed securities purchases would be allowed to roll off, phased in over the next few years. Interestthree months starting June 1, 2022.


Economists generally expect U.S. interest rates are alsoto increase versus where they were in 2021 and 2022, but to remain relatively low due to even lower or negative benchmark government interest rates in much of the rest of the developed world, which makes U.S. government bonds relatively more attractive.

The combination of moderate economic growth and low interest rates that has been in place since the recession ended has been a powerful stimulus for commercial real estate, delivering steady absorption of space and strong investor demandby historical standards for the yields available through both direct ownership of assets and publicly traded funds. Steady economic growth and low interest rates have helped push vacancy rates downforeseeable future. For example, as August 1, 2022, the Bloomberg consensus was for the office, apartment, retailten-year Treasury yield to be 3.3%, 3.1%, and industrial markets over3.3% by the current economic expansion, now in its ninth year. Construction activity, though it is ramping up, remains low compared with prior expansion cyclesend of 2022, 2023 and low relative to demand and absorption, which means2024, respectively. Following the most recent FOMC rate increase, the treasury futures market indicated that property leasing markets continue to tighten. Overall, demand for commercial real estate remains strong. While the vast majority of new supply is going to just the top 10-15 markets, there is healthy demand among investors for well positioned suburban value add assets in secondary and tertiary markets, according to NKF Research. Asking rental rates posted moderate gains across all property types during 2017.

The following key trends drove the commercial real estate market during the first three months of 2018:

Sustained U.S. employment growth and rising home values have fueled the economy and generated demand for commercial real estate space across all major sectors;

traders expect similar forward yields.

Technology, professional and business services and healthcare continued to power demand for office space, although technology occupiers have turned more cautious;


Oil prices rose sharply in the first quarter of 2018, but Houston and other energy-focused office markets continued to deal with excess vacancies and generous lease concessions;

E-commerce and supply-chain optimization pushed 2017 industrial absorption to 31 consecutive quarters of positive net absorption, creating tenant and owner-user demand for warehouses and distribution centers;

Apartment rents benefited from sustained job growth, and underlying demographic trends towards urban living among two key age groups: millennials and baby boomers; and

Continued corporate employment growth, combined with increased leisure travel, generated demand for hotel room-nights.


The recently enacted U.S. tax cuts could lift growth, along with leasing activity. Rising inflation and interest rates, a byproduct of faster growth, could deliver a mixed outcome: Rising interest rates could pressure cap rates, but stronger rent growth and sustained investor demand could support property values.

Market Statistics

Although overall industry metrics are not necessarily correlated to our, they do provide some indication of the general direction of the business. The U.S commercial property market continues to display strength as commercial property prices continue to rise, as per CoStar.

According to RCA,preliminary estimates from CoStar, value-weighted prices for U.S. commercial real estate sales volumes increasedwere up by 5.9% year-over-year, bolstered by strong performance in key primary markets. U.S. commercial real estate activity is growing again, after a decline in activity16.2% in the beginning of 2017 related totrailing twelve months ended June 30, 2022 and were now at all-time highs and 31.3% higher than in February 2020, before the election and general political uncertainty.  Institutional-grade U.S. commercial real estate capitalization rates have not moved by more than 10 basis points, even in this period of interest rate uncertainty.  On average, capitalization rates offered a 297 basis point premium over the 10-year Treasury yield in the first quarter, well above the pre-recession low of 165 basis points. If the U.S. economy expands at the moderate pace envisioned by many economists and the Federal Reserve, we would expect this to fuel the continued expansion of demand for commercial real estate. The spread between local 10-year benchmark government bonds and U.S. cap rates was even wider with respect to major countries including Japan, Canada, Germany, the U.K. and France during the quarter. This should continue to make U.S. commercial real estate a relatively attractive investment for non-U.S. investors.

According to RCA, prices for commercial real estate were down by 6.3% quarter-over-quarter for the quarter ended March 31, 2018. During the quarter, the dollar volume of significant property sales totaled approximately $109 billion in the U.S., representing oneonset of the strongest starts in the past 10 years. According to a May 2018 MBA forecast, originations of commercial/multifamily loans ofglobal pandemic. Quarter-on-quarter, these price increases were across all types were estimated to be down 2% year-over-year in terms of dollar volume for the year ending December 31, 2018.major property types. MSCI Real Capital Analytics ("RCA") currently estimates that 2022 U.S. investment sales grew by 17.4% year-on-year. In comparison, our real estate capital markets businesses, which includesquarterly investment sales and commercialvolumes were up by 58.6% year-on-year.


Newmark quarterly volumes from mortgage brokerage increased its revenuesand GSE/FHA originations (together, "total debt") were up by 31% year-over-year, primarily due to organic growth. Our21.7% year-on-year.

Newmark’s loan origination volumes are driven more by the GSE multifamily financing volumes than the activity level of the overall commercial mortgage market. During the three months ended March 31, 2018,Overall industry GSE multifamily origination volumes decreased 19% year-over-year. In comparison, our loan origination volume decreasedincreased by 14% and our revenues from mortgage banking activities decreased by 14%.

According to NKF Research, the combined average vacancy rate for office, industrial, and retail properties ended8.1% in the first quarter at 8.1%, down from 8.2%half of 2022 compared with a year earlier, only a modest 10 basis point dropper data from Fannie Mae and Freddie Mac. In comparison, Newmark's GSE/FHA origination volumes increased by 4.5% over the past 12 months. Rentssame timeframe, while our total debt volumes in multifamily were up by 45.2%. Certain GSE multifamily volume statistics for all property typesthe industry are based on when loans are sold and/or securitized, and typically lag those reported by Newmark and its competitors by 30 to 45 days.


Regulatory Environment
See “Business—Regulation” in Part I, Item 1 of the U.S. continued to improve slightly across all three sectors. NKF Research estimates that overall U.S. leasing activity in quarter grew moderately from a year ago. In comparison, revenues from our leasing and other commissions business increased by 24.9%.

Regulatory Environment

See “Regulatory Requirements” hereinAnnual Report on Form 10-K for information related to our regulatory environment.


Liquidity

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See “Financial“—Financial Position, Liquidity and Capital Resources” herein for information related to our liquidity and capital resources.

Hiring and Acquisitions

Key drivers of our revenue are producer headcount and average revenue per producer. We believe that our strong technology platform and unique partnership structure have enabled us to use both acquisitions and recruiting to profitably increase our front-office revenue per producer.

We have invested significantly to capitalize on the current business environment through acquisitions, technology spending and the hiring of new brokers, salespeople, managers and other front-office personnel. The business climate for these acquisitions has been competitive, and it is expected that these conditions will persist for the foreseeable future. We have been able to attract businesses and brokers, salespeople, managers and other front-office personnel to our platform as we believe they recognize that we have the scale, technology, experience and expertise to succeed in the current business environment. See “Business—Our History” in Part I, Item 1 of our Annual Report on Form 10-K for a description of our acquisitions since 2012.

As of March 31, 2018, our producer headcount was over 1,550 brokers and salespeople. For the three months ended March 31, 2018, average revenue generated per producer increased by 15% for the same period from a year ago to approximately $192,000. This growth can be attributed to increased sales and leasing activity and to the ramp up of brokers we hired over the past year.



On September 8, 2017, we completed our acquisition of Berkeley Point. Berkeley Point is principally engaged in the origination, funding, sale and servicing of multifamily and commercial mortgage loans.

Financial Overview


Revenues

We derive revenues from the following general four sources:

•Management Services, Servicing Fees and Other. We provide commercial services to tenants and landlords. In this business, we provide property and facilities management services along with project management, valuation and advisory services and other consulting services, as well as technology, to customers who may also utilize our commercial real estate brokerage services, and flexible workspace solutions. Servicing fees are derived from the servicing of loans originated by us as well as loans originated by third parties.

•Leasing and Other Commissions. We offer a diverse range of commercial real estate brokerage and advisory services, including tenant and agency representation, which includes comprehensive lease negotiations, strategic planning, site selection, lease auditing, appraisal services and other financial and market analysis.

Capital Markets•Investment Sales. Our real estate capital markets business specializes in the arrangement of acquisitions and dispositions of commercial properties, as well as providing other financial services, including the arrangement of debt and equity financing, and loan sale advisory.

Gains from•Commercial Mortgage Banking Activities/Originations, Net. GainsOrigination, net. We offer services and products to facilitate debt financing for our clients and customers. Commercial mortgage origination revenue is comprised of commissions generated from mortgage banking activities/brokerage and debt placement services, as well as the origination arefees and premiums derived from the origination of GSE/FHA loans with borrowers and the sale of those loans to investors.

Our commercial mortgage origination revenue also includes the revenue recognized for the fair value of expected net future cash flows from servicing recognized at commitment.

Management Services, Servicing Fees and Other. We provide commercial services to tenants and landlords in several key U.S. markets. In this business, we provide property and facilities management services along with project management and other consulting services, as well as technology, to customers who may also utilize our commercial real estate brokerage services. Servicing fees are derived from the servicing of loans originated by us as well as loans originated by third parties.

Fees are generally earned when a lease is signed in leasing.signed. In many cases, landlords are responsible for paying the fees. In capital markets, fees are earned and recognized when the sale of a property closes, and title passes from seller to buyer for investment sales and when debt or equity is funded to a vehicle for debt and equity transactions. Gains from mortgage banking activities/origination,Loan originations related fees and sales premiums, net, are recognized when a derivative asset is recorded upon the commitment to originate a loan with a borrower and sell the loan to an investor. The derivative is recorded at fair value and includes loan origination fees, sales premiums and the estimated fair value of the expected net servicing cash flows. Gains from mortgage banking activities/origination,Loan originations related fees and sales premiums, net, are recognized net of related fees and commissions to affiliates or third-party brokers. For loans we broker, revenues are recognized when the loan is closed.


Servicing fees are recognized on an accrual basis over the lives of the related mortgage loans. We typically receive monthly management fees based upon a percentage of monthly rental income generated from the property under management, or in some cases, the greater of such percentage or a minimum agreed upon fee. We are often reimbursed for our administrative and payroll costs, as well as certain out-of-pocket expenses, directly attributable to properties under management. We follow accounting principles generally accepted in the U.S., or “U.S. GAAP”, which provides guidance when accounting for reimbursements from clients and when accounting for certain contingent events for Leasing and Capital Markets transactions. See Note 3—“Summary3 — “Summary of Significant Accounting Policies” to our accompanying unaudited condensed consolidated financial statements included elsewhere in Part I, Item 1 of this Quarterly Report on Form 10-Q for a more detailed discussion.


Expenses

Compensation and Employee Benefits

The majority of our operating costs consist of cash and non-cash compensation expenses, which include base salaries, broker and producer commissions based on production, forgivable loans for term contracts, discretionary and other bonuses and all related employee benefits and taxes. Our employees consist of brokers and other commissioned producers, executives and other administrative support. Our brokers and other producers are largely compensated based on the revenue they generate for the firm, keeping these costs variable in nature.


As part of our compensation plans, certain employees have been granted limited partnership units in BGCNewmark Holdings and, Newmarkprior to our 2017 IPO, BGC Holdings, which generally receive quarterly allocations of net income that are cash distributed on a quarterly basis and that are generally contingent upon services being provided by the unit holders. Certain Newmark employees also hold non-distribution earnings units (e.g. NPSUs and NREUs, collectively “N Units”) that do not participate in quarterly partnership distributions and are not allocated any items of profit or loss. These N Units vest into distribution earnings units over a 4-year period. As prescribed in U.S. GAAP guidance, the quarterly allocations of net income on such limited partnership units are reflected as a
68

component of compensation expense under “Allocations“Equity-based compensation and allocations of net income and grant of exchangeability to limited partnership units”units and FPUs” in our accompanying unaudited condensed consolidated statements of operations.


Newmark granted conversion rights on outstanding limited partnership units in Newmark Holdings and BGC Holdings to Newmark employees to convert the limited partnership units to a capital balance within Newmark Holdings or BGC Holdings. Generally, such units are not considered share-equivalent limited partnership units and are not in the fully diluted share count.

Certain of these limited partnership units entitle the holders to receive post-termination payments. These limited partnership units are accounted for as post-termination liability awards under U.S. GAAP guidance, which requires that we record an expense for such awards based on the change in value at each reporting period and include the expense in our accompanying unaudited condensed consolidated


statements of operations as part of “Compensation“Equity-based compensation and employee benefits.”allocations of net income to limited partnership units and FPUs”. The liability for limited partnership units with a post-termination payout amount is included in “Accrued compensation”“Other long-term liabilities” on our accompanying unaudited condensed consolidated balance sheets.


Certain limited partnership units in BGC Holdings and Newmark Holdings are granted exchangeability into BGC Partners’ and Newmark Partners’ Class A common stock on a one-for-one basis, respectively (subject to adjustments and other requirements as set forthor may be redeemed in connection with the BGC Holdings and Newmark Holdings respective limited partnership agreements).grant of shares of Class A common stock. At the time exchangeability is granted, we recognizeor the shares are issued, Newmark recognizes an expense based on the fair value of the award on that date, which is included in “Allocations“Equity-based compensation and allocations of net income and grant of exchangeability to limited partnership units”units and FPUs” in our accompanying unaudited condensed consolidated statements of operations.

We


Our employees have alsobeen awarded preferred partnership units (“Preferred Units”) in BGCNewmark Holdings and NewmarkBGC Holdings. Each quarter, the net profits of BGCNewmark Holdings and NewmarkBGC Holdings are allocated to such units at a rate of either 0.6875% (which is 2.75% per calendar year) or such other amount as set forth in the award documentation (the “Preferred Distribution”), which is deducted before the calculation and distribution of the quarterly partnership distribution for the remaining partnership units in Newmark Holdings and BGC Holdings, respectively. The Preferred Units are not entitled to participate in partnership distributions other than with respect to the Preferred Distribution. Preferred Units may not be made exchangeable into our Class A common stock and Newmark Holdings, respectively.are only entitled to the Preferred Distribution, and accordingly they are not included in our fully diluted share count. The quarterly allocations of net income on these preferred partnership unitsPreferred Units are also reflected in compensation expense under “Allocations“Equity-based compensation and allocations of net income and grant of exchangeability to limited partnership units”units and FPUs” in our accompanying unaudited condensed consolidated statements of operations.

After deduction of the Preferred Distribution, the remaining partnership units generally receive quarterly allocation of net income based on their weighted-average pro rata share of economic ownership of the operating subsidiaries. In addition, Preferred Units are granted in connection with the grant of certain limited partnership units, such as PSUs, that may be granted exchangeability to cover the withholding taxes owed by the unit holder upon such exchange. This is an acceptable alternative to the common practice among public companies of issuing the gross amount of shares to employees, subject to cashless withholding of shares to pay applicable withholding taxes.


We have entered into various agreements with certain of our employees and partners whereby these individuals receive loans, which may be either wholly or in part repaid from the distribution earnings that the individual receives on their limited partnership interests in BGC Holdings and Newmark Holdings or may be forgiven over a period of time. The repayment of these loans is derived from a cash flow source already accounted for through partnership distributions at BGC U.S. OpCo, BGC Global OpCo and Newmark OpCo.Holdings. The forgivable portion of these loans is recognized as compensation expense over the life of the loan or the estimated life of the partner.

loan.


From time to time, we may also enter into agreements with employees and partners to grant bonus and salary advances or other types of loans. These advances and loans are repayable in the timeframes outlined in the underlying agreements. In addition, we also enter into deferred compensation agreements with employees providing services to us. The costs associated with such plans are generally amortized over the period in which they vest. See(See Note 28—“Compensation,”,30 — “Compensation” and Note 29—“Commitment31 — “Commitment and Contingencies,”Contingencies”, to our accompanying unaudited condensed consolidated financial statements included elsewhere in Part I, Item 1 of this Quarterly Report on Form 10-Q.

10-Q).


Other Operating Expenses

We have various other operating expenses. We incur leasing, equipment and maintenance expenses. We also incur selling and promotion expenses, which include entertainment, marketing and travel-related expenses. We incur communication expenses, professional and consulting fees for legal, audit and other special projects, and interest expense related to short-term operational funding needs, and notes payable and collateralized borrowings.


We pay fees to BGC Partners and Cantor for performing certain administrative and other support, including charges for occupancy of office space, utilization of fixed assets and accounting, operations, human resources, legal services and technology infrastructure support. Management believes that these charges are a reasonable reflection of the utilization of services
69

rendered. However, the expenses for these services are not necessarily indicative of the expenses that would have been incurred if we had not obtained these services from BGC Partners or Cantor. In addition, these charges may not reflect the costs of services we may receive from BGC Partners or Cantor in the future.

Other Income (Losses)(loss), Net

Other Income (Losses)

Other income (loss), net is comprised of the gains associated with the earn-outEarn-out shares related to the Nasdaq transactionTransaction and the movements related to the impact of any realized and unrealized cash and non-cash mark-to-market and/gains or hedges on marketable securities that are classified as trading securities.losses related to the Nasdaq common shares held, and the Nasdaq Forwards. Additionally, other income includedincludes gains (losses) on cost and equity method investments which represent our pro rata share of the net gains (losses) on investments over which we have significant influence but which we do not control.

control, and the mark-to-market gains or losses on the non-marketable investments.


Provision for Income Taxes

We incur income tax expenses based on the location, legal structure, and jurisdictional taxing authorities of each of our subsidiaries. Certain of the Company’s entities are taxed as U.S. partnerships and are subject to the Unincorporated Business Tax (which we refer to as “UBT”) in New York City. U.S. federal and state income tax liability or benefit related to the partnership income


or loss, with the exception of UBT, rests with the partners (see Note 2 –— “Limited Partnership InterestInterests in Newmark Holdings”) rather than the partnership entity.

Financial Highlights

For the three months ended March 31, 2018, Newmark’s total revenues increased by 29.4% as compared to the three months ended March 31, 2017. This improvement was led by a 58.8% increase in management services, servicing feesHoldings and other, an almost entirely organic 24.9% increase in leasing and other commissions, and a 31.0% increase in revenues from capital markets brokerage,  offset by a 14.0% decrease in Gains from mortgage banking activities/origination, net. $18.5 million of the increase in management services, servicing fees and other related to additional pass-through revenues resulting from the adoption and implementation of Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers (as we refer to as “ASC 606” herein).  We believe that we gained significant market share in capital markets as we outpaced relevant industry metrics. Our growth has outpaced the overall market as we continue to hire high quality brokers, strategically acquire local and regional firms and enhance our cross-selling capabilities across business lines as prior acquisitions and hires become more acclimated to the platform.  Total expenses increased approximately $87.2 million to $383.3 million, due to a $15.2 million increase in allocations of net income and grant of exchangeability to limited partnership units, as well as a $37.6 million increase in compensation expenses. Operating, administrative and other expenses increased $28.0 million, of which $18.5 million is directly related to additional pass-through expenses resulting from the implementation of ASC 606.  We expect our revenues and earnings to grow over time as we continue to invest in our business and to reap the benefits from our recent acquisitions and front-office hires. We believe that our stock price does not accurately reflect the more than $875 million of additional Nasdaq shares (based on the May 2, 2018 closing price) we anticipate receiving over time, which are not reflected on our balance sheet. We anticipate having substantial resources with which to pay dividends, repurchase shares and/or units, profitably hire, and make accretive acquisitions, all while maintaining or improving our core business.

Impact of Adopting Revenue Recognition Guidance

On January 1, 2018, we adopted ASC 606, which provides accounting guidance on the recognition of revenues from contracts with customers and impacts the presentation of certain revenues and expenses in our Condensed Consolidated Statements of Operations.  Newmark elected to adopt ASC 606 using a modified retrospective approach with regard to contracts that were not completed as of December 31, 2017, and prospectively from January 1, 2018 onward.  Accordingly, our financial information have not been revised for historical comparable periods and are presented under the accounting standards in effect during those periods. Due to the adoption of ASC 606, for all periods from the first quarter of 2018 onward, Newmark did not and will not record revenues or earnings related to “Leasing and other commissions” with respect to contingent revenue expected to be received in future periods as of December 31, 2017, in relation to contracts signed prior to January 1, 2018, for which services have already been completed. Instead, the Company recorded this contingent revenue and related commission payments on the balance sheet on January 1, 2018, with a corresponding pre-tax improvement of approximately $22.7 million and Newmark recognized an increase of $16.5 million and $2.3 million to beginning retained earnings and non-controlling interest, respectively, as a cumulative effect of adoption of an accounting change. Over time, the Company expects to receive $23 million of cash related to these “Leasing and other commissions” receivables, primarily over the course of 2018 and 2019.  This cash, however, will not be recorded as GAAP net income.  Additionally, prior to the adoption of ASC 606, Newmark presented certain management services expenses incurred on behalf of customers, subject to reimbursement, on a net basis. Under ASC 606, Newmark concluded that it controls the services provided by a third party on behalf of customers and, therefore, acts as a principal under those contracts and will present the related expenses on a gross basis in our Condensed Consolidated Statements of Operations, with no impact on net income available to common stockholders.

ASC 606 does not apply to revenue associated with financial instruments, including loans and securities that are accounted for under other U.S. GAAP guidance, and as a result, did not have an impact on the elements of our Condensed Consolidated Statements of Operations most closely associated with financial instruments, including Commissions, Gains from mortgage banking activities/originations, net and Servicing fees.

There was no significant impact as a result of applying ASC 606BGC Holdings”, to our results of operations for the three months ended March 31, 2018, except as it relates to the recognition and presentation of Management services, servicing fees and other revenues that contained future contingencies and certain Operating, Administrative and Other expenses subject to reimbursement.

Refer to Note 3-“Summary of Significant Accounting Policies” and Note 12-“Revenues from Contracts with Customers” in ouraccompanying unaudited condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q, for further information.

10-Q) rather than the partnership entity. Our accompanying unaudited condensed consolidated financial statements include U.S. federal, state and local income taxes on Newmark’s allocable share of the U.S. results of operations. Outside of the U.S., we operate principally through subsidiary corporations subject to local income taxes.



Results of Operations


The following table sets forth our unaudited condensed consolidated statements of operations data expressed as a percentage of total revenues for the periods indicated (in thousands):

 

 

Three Months Ended March 31,

 

 

 

2018

 

 

2017

 

 

 

Actual

Results

 

 

Percentage

of Total

Revenues

 

 

Actual

Results

 

 

Percentage

of Total

Revenues

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Leasing and other commissions

 

$

159,371

 

 

 

37.0

 

 

$

127,568

 

 

 

38.4

 

Capital markets

 

 

101,364

 

 

 

23.6

 

 

 

77,390

 

 

 

23.4

 

Gains from mortgage banking activities/origination, net

 

 

38,914

 

 

 

9.0

 

 

 

45,262

 

 

 

13.6

 

Management services, servicing fees and other

 

 

130,811

 

 

 

30.4

 

 

 

82,362

 

 

 

24.8

 

Total revenues

 

 

430,460

 

 

 

100.0

 

 

 

332,582

 

 

 

100.2

 

Expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Compensation and employee benefits

 

 

252,695

 

 

 

58.7

 

 

 

215,145

 

 

 

64.7

 

Allocations of net income and grant of exchangeability

   to limited partnership units

 

 

25,809

 

 

 

6.0

 

 

 

10,649

 

 

 

3.2

 

Total compensation and employee benefits

 

 

278,504

 

 

 

64.7

 

 

 

225,794

 

 

 

67.9

 

Operating, administrative and other

 

 

75,427

 

 

 

17.5

 

 

 

47,382

 

 

 

14.2

 

Fees to related parties

 

 

6,894

 

 

 

1.6

 

 

 

4,718

 

 

 

1.4

 

Depreciation and amortization

 

 

22,513

 

 

 

5.2

 

 

 

18,237

 

 

 

5.5

 

Total operating expenses

 

 

383,338

 

 

 

89.0

 

 

 

296,131

 

 

 

89.0

 

Other income (losses), net:

 

 

 

 

 

 

-

 

 

 

 

 

 

0

 

Other income (loss)

 

 

5,707

 

 

 

1.3

 

 

 

(593

)

 

 

(0.2

)

Total other income (losses), net

 

 

5,707

 

 

 

1.3

 

 

 

(593

)

 

 

(0.2

)

Income (loss) from operations

 

 

52,829

 

 

 

12.3

 

 

 

35,858

 

 

 

10.8

 

Interest (expense) income, net

 

 

(13,409

)

 

 

(3.1

)

 

 

1,134

 

 

 

0.3

 

Income (loss) before income taxes and noncontrolling

   interests

 

 

39,420

 

 

 

9.2

 

 

 

36,992

 

 

 

11.1

 

Provision (benefit) for income taxes

 

 

6,933

 

 

 

1.6

 

 

 

(15

)

 

 

0.0

 

Consolidated net income (loss)

 

 

32,487

 

 

 

7.6

 

 

 

37,007

 

 

 

11.1

 

Less: Net income (loss) attributable to noncontrolling

   interests

 

 

12,490

 

 

 

2.9

 

 

 

296

 

 

 

0.1

 

Net income (loss) available to common stockholders

 

$

19,997

 

 

 

4.7

 

 

$

36,711

 

 

 

11.0

 


Three Months Ended June 30,Six Months Ended June 30,
2022202120222021
Actual ResultsPercentage of Total RevenuesActual ResultsPercentage of Total RevenuesActual ResultsPercentage of Total RevenuesActual ResultsPercentage of Total Revenues
Revenues:
Management services, servicing fees and other$233,685 30.9 %$219,509 34.8 %$466,804 32.6 %$407,259 35.9 %
Leasing and other commissions212,825 28.2 184,346 29.3 411,778 28.7 331,779 29.3 
Investment sales209,053 27.7 142,233 22.6 361,167 25.2 243,778 21.5 
Commercial mortgage origination, net99,788 13.2 83,783 13.3 193,850 13.5 151,035 13.3 
Total revenues755,351 100.0 629,871 100.0 1,433,599 100.0 1,133,851 100.0 
Expenses:
Compensation and employee benefits426,617 56.5 541,397 86.0 809,201 56.4 830,471 73.2 
Equity-based compensation and allocations of net income to limited partnership units and FPUs (1)
41,988 5.6 267,532 42.5 58,886 4.1 281,780 24.9 
Total compensation and employee benefits468,605 62.0 808,929 128.4 868,087 60.6 1,112,251 98.1 
Operating, administrative and other136,629 18.1 135,008 21.4 274,500 19.1 242,183 21.4 
Fees to related parties6,748 0.9 5,782 0.9 13,577 0.9 12,032 1.1 
Depreciation and amortization38,925 5.2 30,868 4.9 74,400 5.2 51,921 4.6 
Total operating expenses650,907 86.2 980,587 155.7 1,230,564 85.8 1,418,387 125.1 
Other income/(loss), net(15,303)(2.0)1,086,812 172.5 (101,304)(7.1)1,084,602 95.7 
Income from operations89,141 11.8 736,096 116.9 101,731 7.1 800,066 70.6 
Interest (expense) income, net(8,923)(1.2)(8,723)(1.4)(16,793)(1.2)(17,536)(1.5)
Income before income taxes and noncontrolling interests80,218 10.6 727,373 115.5 84,938 5.9 782,530 69.0 
Provision for income taxes18,426 2.4 142,182 22.6 22,430 1.6 152,761 13.5 
Consolidated net income61,792 8.2 585,191 92.9 62,508 4.4 629,769 55.5 
70

Less: Net income attributable to noncontrolling interests13,273 1.8 145,447 23.1 13,627 1.0 156,920 13.8 
Net income available to common stockholders$48,519 6.4  %$439,744 69.8  %$48,881 3.4  %$472,849 41.7  %
(1)The components of Equity-based compensation and allocations of net income to limited partnership units and FPUs are as follows (in thousands):

Three Months Ended June 30,Six Months Ended June 30,
2022202120222021
Actual ResultsPercentage of Total RevenuesActual ResultsPercentage of Total RevenuesActual ResultsPercentage of Total RevenuesActual ResultsPercentage of Total Revenues
Issuance of common stock and exchangeability expenses$26,875 3.6 %$242,324 38.5 %$35,858 2.5 %$243,542 21.5 %
Allocations of net income to limited partnership units and FPUs7,787 1.0 14,293 2.3 7,933 0.6 24,926 2.2 
Limited partnership units amortization1,760 0.2 6,466 1.0 5,034 0.4 5,866 0.5 
RSU amortization5,566 0.7 4,449 0.7 10,061 0.7 7,446 0.7 
Equity-based compensation and allocations of net income to limited partnership units and FPUs$41,988 5.6  %$267,532 42.5  %$58,886 4.1  %$281,780 24.9  %


Three months ended March 31, 2018June 30, 2022 compared to the three months ended March 31, 2017

June 30, 2021


Revenues

Leasing and Other Commissions

Leasing and other commission revenues increased by $31.8 million, or 24.9%, to $159.4 million for the three months ended March 31, 2018 as compared to the three months ended March 31, 2017. The increase was due to organic growth.

Capital Markets

Capital markets revenue increased by $24.0 million, or 31.0%, to $101.4 million for the three months ended March 31, 2018 as compared to the three months ended March 31, 2017. The increase was driven by a 22.8% increase in investment sales volume and an 61.7% increase in mortgage brokerage volume.

Gains from Mortgage Banking Activities/Originations, Net

Gains from mortgage banking activities/origination, net decreased by $6.3 million, or 14.0%, to $38.9 million for the three months ended March 31, 2018 as compared to the three months ended March 31, 2017. The decrease was driven by a 13.6% decrease in GSE lending to $1.6 billion as compared to $1.9 billion in the prior annual period.


A portion of our gains from mortgage banking activities/originations, net, relate to non-cash gains attributable to originated mortgage servicing rights (which we refer to as “OMSRs”). We recognize OMSR gains equal to the fair value of servicing rights retained on mortgage loans originated and sold. For the three months ended March 31, 2018 and 2017, we recognized $21.1 million and $29.3 million of non-cash gains, respectively, related to OMSRs.

Management Services, Servicing Fees and Other

Management services, servicing fees and other revenue increased $48.5by $14.2 million, or 58.8%6.5%, to $130.8$233.7 million for the three months ended March 31, 2018June 30, 2022 as compared to the three months ended March 31, 2017. $18.5 million of the increase was related to additionalJune 30, 2021. Excluding pass-through revenues, resulting from the implementation of ASC 606, while $10.9 million was related to the valuation and appraisal business.  Additionally $4.1 million was related tomanagement services, servicing fee revenues. The remainder of the increase is due to management services of which acquisitions contributed to approximately one-third of the growth.

Expenses

Compensation and Employee Benefits

Compensation and employee benefits expenseother increased by $37.6$37.3 million, or 17.5%30.1%, to $252.7$161.1 million for the three months ended March 31, 2018,June 30, 2022 as compared to the three months ended March 31, 2017. The main drivers of this increase were $22.4 million of additional payments directlyJune 30, 2021. Revenues was driven by strong improvements from servicing and other related to the increase in revenues, as well as Valuation & Advisory, property management, and the remainder related to acquisitionsflexible workspace.


Leasing and new hires.

Allocations of Net IncomeOther Commissions

Leasing and Grant of Exchangeability to Limited Partnership Units

The Allocations of net income and grant of exchangeability to limited partnership unitsother commission revenues increased by $15.2$28.5 million, or 142.4%15.4%, to $25.8$212.8 million for the three months ended March 31, 2018June 30, 2022 as compared to the three months ended March 31, 2017. This increase was primarily drivenJune 30, 2021, due to increased demand across office and retail property types.


Investment Sales
Investment sales revenue increased by an increase of $15.7 million in exchangeability charges.

Operating, Administrative and Other

Operating, administrative and other expenses increased $28.0$66.8 million, or 59.2%47.0%, to $75.4$209.1 million for the three months ended March 31, 2018June 30, 2022 as compared to the three months ended March 31, 2017. This increase was primarily drivenJune 30, 2021. Newmark's investment sales volumes increased by $18.5 million directly related58.6% to additional pass-through expenses resulting from the implementation of ASC 606. The remainder is$26.1 billion, due to increases in selling and promotional and other expenses associated with acquisitions and new hires.

Fees to Related Parties

Fees to related partiesincreased volume across most major property types.


Commercial Mortgage Origination, Net
Commercial mortgage origination, net activities, increased by $2.2$16.0 million, or 46.1%19.1%, to $6.9$99.8 million for the three months ended March 31, 2018June 30, 2022 as compared to the three months ended March 31, 2017. June 30, 2021. This growth was driven by total debt volumes of $13.5 billion, an increase of 21.7% year over year, with activity across most major property types.

Expenses
Compensation and Employee Benefits
Compensation and employee benefits expense decreased by $114.8 million, or 21.2%, to $426.6 million for the three months ended June 30, 2022 as compared to the three months ended June 30, 2021. The decrease is primarily a result of $187.8 million of compensation expense related to the 2021 Equity Event.

Equity-based compensation and allocations of net income to limited partnership units and FPUs
Equity-based compensation and allocations of net income to limited partnership units and FPUs decreased by $225.5 million, or 84.3%, to $42.0 million for the three months ended June 30, 2022 as compared to the three months ended June 30, 2021. The decrease was primarily due to $240.8 million of equity-based compensation expense related to the 2021 Equity Event.
71


Operating, Administrative and Other
Operating, administrative and other expenses increased by $1.6 million, or 1.2%, to $136.6 million for the three months ended June 30, 2022 as compared to the three months ended June 30, 2021.

Fees to Related Parties
Fees to related parties are allocations paidincreased by $1.0 million, or 16.7%, to BGC Partners and Cantor$6.7 million, for administrative and support services.

the three months ended June 30, 2022 as compared to the three months ended June 30, 2021.


Depreciation and Amortization

Depreciation and amortization for the three months ended March 31, 2018June 30, 2022 increased by $4.3$8.1 million, or 23.4%26.1%, to $22.5$38.9 million as compared to the three months ended March 31, 2017. This increase isJune 30, 2021 due to a $3.9 million increasechanges in mortgage servicing rights amortizationthe MSR valuation allowance and the remainder is primarily due to leasehold improvements placedfixed asset and intangible asset amortization.

Other Income (loss), Net
Other income (loss), net in service due to the continued expansion of our business.

Because the Company recognizes OMSR gains equal to the fair value of servicing rights retained on mortgage loans originated and sold, it also amortizes mortgage servicing rights (which we refer to as “MSRs”) in proportion to the net servicing revenue expected to be earned. Subsequent to the initial recording, MSRs are amortized and carried at the lower of amortized cost or fair value. For the three months ended March 31, 2018 and 2017, our expenses included $17.8 million and $13.9June 30, 2022 was primarily related to $15.5 million of MSR amortization, respectively.

Other Income (Losses), Net

mark-to- market losses on non-marketable investments.


Other income (loss), net of $5.7$1,086.8 million in the three months ended March 31, 2018 isJune 30, 2021 was primarily related to $1,108.0 million of gains from the recognitionNasdaq Earn-out and $2.5 million of income from the change in value of Nasdaq shares of $2.4 million, plus earnings from the Real Estate LP of $3.2 million. Other losses in the three months ended March 31, 2017 primarily relates to an accretion of the fair value of future earn-out payments.

non-marketable investment.


Interest (Expense) Income, Net

Interest expense, net increased by $0.2 million, or 2.3%, to $8.9 million during the three months ended March 31, 2018 is primarily related to interest expense on the Company’s debt.  Interest income during the three months ended March 31, 2018 is primarily related to income on employee loans.

Provision (Benefit) for Income Taxes

Provision for income taxes increased by $6.9 million for the three months ended March 31, 2018June 30, 2022 as compared to the three months ended March 31, 2017.June 30, 2021.


Provision for Income Taxes
Provision for income taxes decreased by $123.8 million, to $18.4 million for the three months ended June 30, 2022 as compared to the three months ended June 30, 2021. This increasedecrease was primarily driven by an increasethe Nasdaq earn-out in the mix of allocable revenue among legal entities as a corporation versus flow through resulting from our Separation.2021. In general, our consolidated effective tax rate can vary from period to period depending on, among other factors, the geographic and business mix of our earnings. The Tax Act is expected

Net income attributable to have a favorable impact on Newmark’s effective tax rate and net income as reported under generally accepted accounting principles in subsequent reporting periods to which the Tax Act is effective.

Net Income (Loss) Attributable to Noncontrolling Interests

noncontrolling interests

Net income attributable to noncontrolling interests was $12.5decreased by $132.2 million, to $13.3 million for the three months ended March 31, 2018.June 30, 2022 as compared to the three months ended June 30, 2021.


Six months ended June 30, 2022 compared to six months ended June 30, 2021

Revenues

Management Services, Servicing Fees and Other
Management services, servicing fees and other revenue increased by $59.5 million, or 14.6%, to $466.8 million for the six months ended June 30, 2022 as compared to the six months ended June 30, 2021. Excluding pass-through revenues, management services, servicing fee and other increased $92.5 million, or 41.3%, to $316.4 million, for the six months ended June 30, 2022 as compared to the six months ended June 30, 2021. The growth was driven by strong improvements from servicing and other related revenues, as well as Valuation & Advisory, property management, and flexible workspace.

Leasing and Other Commissions
Leasing and other commission revenues increased by $80.0 million, or 24.1%, to $411.8 million for the six months ended June 30, 2022 as compared to the six months ended June 30, 2021, due to increased demand across most major property types.

Investment Sales
Investment sales revenue increased by $117.4 million, or 48.2%, to $361.2 million for the six months ended June 30, 2022 as compared to the six months ended June 30, 2021. This was primarily due to a 60.2% year-over-year increase in investment sales volume across most major property types.

Commercial Mortgage Origination, Net
Commercial mortgage origination activities, net increased by $42.8 million, or 28.3%, to $193.8 million for the six
72

months ended June 30, 2022 as compared to the six months ended June 30, 2021. The increase was attributableprimarily due to higher origination volumes and product mix.



Expenses

Compensation and Employee Benefits
Compensation and employee benefits expense decreased by $21.3 million, or 2.6%, to $809.2 million for the six months ended June 30, 2022 as compared to the changesix months ended June 30, 2021. The decrease in Newmark’s corporate structurethe six months was due to the 2021 Equity Event offset by an increase in commission-based revenue due to higher business activity and acquisitions.

Equity-based compensation and allocations of net income to limited partnership units and FPUs
Equity-based compensation and allocations of net income to limited partnership units and FPUs decreased by $222.9 million, or 79.1%, to $58.9 million for the six months ended June 30, 2022 as compared to the six months ended June 30, 2021 as a result of the $240.8 million of equity-based compensation expense related to the Separation2021 Equity Event.

Operating, Administrative and IPO.

Other

QUARTERLY RESULTS OF OPERATIONS

The following table sets forth our unaudited quarterly results of operationsOperating, administrative and other expenses increased by $32.3 million, or 13.3%, to $274.5 million for the indicated periods (in thousands). Results of any period are not necessarily indicative of results for a full year and may, in certain periods, be affected by seasonal fluctuations in our business. Certain reclassifications have been made to prior period amounts to conformsix months ended June 30, 2022 as compared to the current period’s presentation.

 

 

March 31,

20182

 

 

December 31,

20172

 

 

September 30,

20171,2

 

 

June 30,

20171

 

 

March 31,

20171

 

 

December 31,

20161

 

 

September 30,

20161

 

 

June 30,

20161

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commissions

 

$

260,735

 

 

$

312,992

 

 

$

256,918

 

 

$

239,848

 

 

$

204,958

 

 

$

245,348

 

 

$

230,204

 

 

$

206,361

 

Gains from mortgage banking

   activities/origination, net

 

 

38,914

 

 

 

41,737

 

 

 

45,455

 

 

 

73,546

 

 

 

45,262

 

 

 

54,378

 

 

 

65,378

 

 

 

43,597

 

Management services, servicing fees

   and other

 

 

130,811

 

 

 

105,847

 

 

 

95,848

 

 

 

91,677

 

 

 

82,362

 

 

 

87,860

 

 

 

77,046

 

 

 

70,178

 

Total revenues

 

 

430,460

 

 

 

460,576

 

 

 

398,221

 

 

 

405,071

 

 

 

332,582

 

 

 

387,586

 

 

 

372,628

 

 

 

320,136

 

Expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Compensation and employee benefits

 

 

252,695

 

 

 

295,577

 

 

 

270,943

 

 

 

238,518

 

 

 

215,145

 

 

 

231,910

 

 

 

239,690

 

 

 

203,432

 

Allocations of net income and grant of

   exchangeability to limited

   partnership units

 

 

25,809

 

 

 

61,940

 

 

 

18,217

 

 

 

23,851

 

 

 

10,649

 

 

 

32,315

 

 

 

16,568

 

 

 

10,484

 

Total compensation and

   employee benefits

 

 

278,504

 

 

 

357,517

 

 

 

289,160

 

 

 

262,369

 

 

 

225,794

 

 

 

264,225

 

 

 

256,258

 

 

 

213,916

 

Operating, administrative and other

 

 

75,427

 

 

 

60,064

 

 

 

52,313

 

 

 

59,404

 

 

 

47,382

 

 

 

53,115

 

 

 

44,546

 

 

 

44,092

 

Fees to related parties

 

 

6,894

 

 

 

6,531

 

 

 

5,355

 

 

 

4,167

 

 

 

4,718

 

 

 

2,348

 

 

 

5,821

 

 

 

4,770

 

Depreciation and amortization

 

 

22,513

 

 

 

24,438

 

 

 

29,922

 

 

 

23,218

 

 

 

18,237

 

 

 

13,841

 

 

 

20,918

 

 

 

17,090

 

Total operating expenses

 

 

383,338

 

 

 

448,550

 

 

 

376,750

 

 

 

349,158

 

 

 

296,131

 

 

 

333,529

 

 

 

327,543

 

 

 

279,868

 

Other income (losses), net:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other income (loss)

 

 

5,707

 

 

 

(2,029

)

 

 

77,264

 

 

 

(715

)

 

 

(593

)

 

 

(684

)

 

 

17,849

 

 

 

(813

)

Total other income (losses), net

 

 

5,707

 

 

 

(2,029

)

 

 

77,264

 

 

 

(715

)

 

 

(593

)

 

 

(684

)

 

 

17,849

 

 

 

(813

)

Income (loss) from operations

 

 

52,829

 

 

 

9,997

 

 

 

98,735

 

 

 

55,198

 

 

 

35,858

 

 

 

53,373

 

 

 

62,934

 

 

 

39,455

 

Interest (Expense) Income, net

 

 

(13,409

)

 

 

(1,453

)

 

 

1,724

 

 

 

1,381

 

 

 

1,134

 

 

 

1,021

 

 

 

1,009

 

 

 

1,010

 

Income before income taxes and

   noncontrolling interests

 

 

39,420

 

 

 

8,544

 

 

 

100,459

 

 

 

56,579

 

 

 

36,992

 

 

 

54,394

 

 

 

63,943

 

 

 

40,465

 

Provision (benefit) for income taxes

 

 

6,933

 

 

 

54,082

 

 

 

1,989

 

 

 

1,422

 

 

 

(15

)

 

 

2,010

 

 

 

1,125

 

 

 

324

 

Consolidated net income (loss)

 

 

32,487

 

 

 

(45,538

)

 

 

98,470

 

 

 

55,157

 

 

 

37,007

 

 

 

52,384

 

 

 

62,818

 

 

 

40,141

 

Less: Net income (loss) attributable to

   noncontrolling interest

 

 

12,490

 

 

 

633

 

 

 

(337

)

 

 

12

 

 

 

296

 

 

 

(69

)

 

 

(556

)

 

 

(190

)

Net income (loss) available to

   common stockholders

 

$

19,997

 

 

$

(46,171

)

 

$

98,807

 

 

$

55,145

 

 

$

36,711

 

 

$

52,453

 

 

$

63,374

 

 

$

40,331

 

1

Financial results have been retrospectively adjusted to include the financial results of Berkeley Point. See “Berkeley Point Acquisition and Related Transactions” herein for a summary of the impact on Newmark’s Quarterly and Annual Results of Operations.

six months ended June 30, 2021 due to increased pass-through expenses tied to non-fee revenue growth and higher additional support and operational expenses related to the resumption of normalized business activity on the part of us and our clients, as well as from our acquisitions.

2

Amounts include the gains related to the Nasdaq Earn-out associated with the Nasdaq transaction recorded in Other income (loss).


Fees to Related Parties
Fees to related parties increased by $1.5 million, or 12.8%, to $13.6 million for the six months ended June 30, 2022 as compared to the six months ended June 30, 2021.

Depreciation and Amortization
Depreciation and amortization for the six months ended June 30, 2022 increased by $22.5 million, or 43.3%, to $74.4 million as compared to the six months ended June 30, 2021 due to changes in the MSR valuation allowance and fixed asset and intangible amortization.

Other Income (loss), Net
Other income (loss), net of $101.3 million in the six months ended June 30, 2022 was primarily due to realized and unrealized losses from the sale of Nasdaq shares and mark-to-market losses on non-marketable investments.

Other income (loss), net of $1,084.6 million in the six months ended June 30, 2021 was primarily related to the Nasdaq Earn-out net of mark-to-market loss on the Nasdaq Forwards of $12.4 million.

Interest (Expense) Income, Net
Interest expense, net decreased by $0.7 million, or 4.2%, to $16.8 million during the six months ended June 30, 2022 as compared to the six months ended June 30, 2021.

Provision for Income Taxes
Provision for income taxes decreased by $130.3 million, to $22.4 million for the six months ended June 30, 2022 as compared to the six months ended June 30, 2021. This decrease was primarily driven by the Nasdaq earn-out in 2021. In general, our consolidated effective tax rate can vary from period to period depending on, among other factors, the geographic and business mix of our earnings.

Net income attributable to noncontrolling interests
Net income attributable to noncontrolling interests decreased by $143.3 million, to $13.6 million for the six months ended June 30, 2022 as compared to the six months ended June 30, 2021.


Financial Position, Liquidity and Capital Resources


Overview

The primary source of liquidity for our business is the cash on our balance sheet, cash flow provided by our operations. Prior to the Separation and IPO, our cash was transferred to BGC Partners to support its overall cash management strategy. Transfers of cash to and from BGC Partners’ cash management system have been reflected in related party receivables and payables in the historical unaudited condensed consolidated balance sheets and in payments to and borrowings from related parties in the financing section of the unaudited condensed consolidated statements of cash flows. Cash and equity issued for acquisitions have been reflected in BGC Partners’ net investment in the historical unaudited condensed consolidated balance sheets and statement of changes in invested equity.

Following the completion of the Separation and IPO, we maintain separate cash management and financing functions for operations. Additionally, our capital structure, long-term commitments and sources of liquidity will change significantly from our historical capital structure, long-term commitments and sources of liquidity.


In connection with the Separation, we assumed from BGC Partners the Term Loanoperations, and the Converted Term Loan. Newmark OpCo also assumed from BGC U.S. OpCo the BGC Notes. We contributed all of the net proceeds of the IPO to Newmark OpCo in exchange for a number of units representing Newmark OpCo limited partnership interests equal to the number of shares issued by us in the IPO. Newmark OpCo used all of such net proceeds to partially repay intercompany indebtedness owed by Newmark OpCo to us in respect of the Term Loan (which intercompany indebtedness was originally issued by BGC U.S. OpCo and will be assumed by Newmark OpCo in connection with the separation). On March 7, 2018, BGC, including through its subsidiary invested $242.0$600.0 million in Newmark limited partnership interests. Newmark has used the proceeds from this transaction plus all of the repayment from Newmark OpCo, and cash on hand to repay in full the $270.7 million remaining balance of the Term Loan.  Following the IPO, in the event that any member of Newmark receives net proceeds from the incurrence of indebtedness for borrowed money or an equity issuance (in each case subject to certain exceptions), Newmark OpCo will be obligated to use such net proceeds to repay the remaining intercompany indebtedness owed by Newmark OpCo to us in respect of the Converted Term Loan (which in turn we will use to repay the Converted Term Loan). Following the repayment of the remaining amount outstanding on the Converted Term Loan, in the event that any member of the Newmark Group receives net proceeds from the incurrence of indebtedness for borrowed money (subject to certain exceptions), Newmark OpCo will be obligated to use such net proceeds to repay the BGC Notes. In addition, we will be obligated to repay any remaining amounts under the BGC Notes prior to the distribution. We intend to replace the financing provided by the Converted Term Loan and BGC Notes that remain outstanding with new senior term loans (which may be secured or unsecured), new senior unsecured notes, other long- or short-term financing or a combination thereof.

revolving credit facility.

73


Our future capital requirements will depend on many factors, including our rate of sales growth, the expansion of our sales and marketing activities, our expansion into other markets and our results of operations. To the extent that existing cash, cash from operations and credit facilities (including the Intercompany Credit Agreement with BGC) are insufficient to fund our future activities, we may need to raise additional funds through public equity or debt financing.

Balance Sheet

As of June 30, 2022, our long-term debt consists of our 6.125% Senior Notes with a carrying amount of $546.5 million.


Financial Position
Total assets were $4.6 billion at March 31, 2018 were $3,057.1 million as compared to $2,273.0 millionJune 30, 2022 and $5.2 billion at December 31, 2017. 2021.

Total liabilities were $3.1 billion at March 31, 2018June 30, 2022 and December 31, 2017 were $2,503.5 million and $2,029.6 million, respectively. $603.0 million of the increase in total assets, and $590.0 million of the increase in total liabilities can be attributed to loans held for sale and related borrowings from our warehouse facilities.  Additionally, the Company’s long-term debt was reduced by $270.7 million, its current portion of payables to related parties increased by $163.0 million and its restricted cash increased by $191.6 million.  

Liquidity

Prior to December 13, 2017, the date of the Separation, BGC Partners funded our growth through contributing acquired companies and related party payables. The related party payables are net of related party receivables which were generated from our earnings as BGC Partners sweeps our excess cash to manage treasury centrally. Additionally, prior to its acquisition by BGC, Berkeley Point and its parent company, Cantor Commercial Real Estate Company, L.P. (which we refer to as “CCRE”), loaned money to each other. In connection with the Separation and IPO, Newmark settled its intercompany payable to BGC. Subsequent to the IPO, Newmark’s total net borrowings under the credit facility between BGC and Newmark were $202.0 million as of March 31, 2018, which are reflected as current portion of payables to related parties on the March 31, 2018 balance sheet. The total net payable to related parties at March 31, 2018 was $197.2 million as compared to a net payable$3.5 billion at December 31, 20172021.


Liquidity
At June 30, 2022, we had cash and cash equivalents of $34.2 million. Loans held for sale were financed from the warehouse notes payable, net at March 31, 2018. Fees to related parties that are charged by BGC Partners and Cantor to Newmark are reflected as cash flows from operating activities in the unaudited condensed consolidated Statement of Cash Flows for each period presented. For the three months ended March 31, 2018, these fees and charges totaled $6.9$280.5 million. Additionally, prior to the Berkeley Point Acquisition, Berkeley Point loaned excess cash to CCRE to fund CCRE’s lending business. These amounts are presented as investing activities on the Statement of Cash Flows for all periods presented. All other amounts sent to or from BGC Partners are reflected as cash flows from financing activities in the unaudited condensed consolidated Statement of Cash Flows for each period presented.

For the three months ended March 31, 2018, net cash used in operating activities was $590.4we have a $600.0 million and for the three months ended March 31, 2017, net cash provided by operating activities was $296.4 million. Cash flows from operating activities included  $6.0 million of cash paid to BGC Partners, related to grant of exchangeability to limited partnership units for the three months ended March 31, 2017. As of the Separation and IPO, these charges became non-cash in nature to the extent they relate to limited partnership units in Newmark, and therefore are excluded from cash outflows from operating activities.undrawn revolving credit facility. We expect to generate cash flows from operations to fund our business operations and growth strategy to meet our short-term liquidity requirements, which we define as the next 12twelve months. We also expect that proceeds



Long-term debt
Long-term debt consisted of the following (in thousands):
June 30, 2022December 31, 2021
 20222021
6.125% Senior Notes$546,502 $545,239 
Credit Facility— — 
Total$546,502 $545,239 

6.125% Senior Notes
On November 2, 2018, Newmark announced the pricing of an offering of $550.0 million aggregate principal amount of 6.125% Senior Notes due 2023, which closed on November 6, 2018. The 6.125% Senior Notes were offered and sold in a private offering exempt from new debt financing combined with cash flows from operations will be sufficientthe registration requirements under the Securities Act. The 6.125% Senior Notes are general senior unsecured obligations of Newmark. These 6.125% Senior Notes were priced at 98.94% to fund our operations, growth strategy and dividends and distributions to meet our long-term liquidity requirements.


Prior to the Separation, we received the rights to 10,914,717 million Nasdaq shares, of which 992,247 million were received in 2017 and the remaining 9,922,470 million Nasdaq shares will be received ratably over approximately the next 10 years, provided that Nasdaq, as a whole, produces at least $25.0 million in gross revenues each year. The Nasdaq shares not yet received were valued at approximately $855.5 million based on the closing share price of Nasdaq on March 29, 2018 (the last day of trading for the first quarter of 2018)yield 6.375%. The value6.125% Senior Notes bear an interest rate of the Nasdaq payment yet to be received is not reflected in our liquidity position or6.125% per annum, payable on our balance sheet. The receipt of the Nasdaq payment will be reflected in our earningseach May 15 and is expected to result in increases in our liquidity.  We currently expect to receive more than $875.0 million in additional Nasdaq stock over time (stock value basedNovember 15, beginning on May 2,15, 2019 and will mature on November 15, 2023. The 6.125% Senior Notes were subsequently exchanged for notes with substantially similar terms that were registered under the Securities Act.


Credit Facility
On November 28, 2018, closing price) as a result ofNewmark entered into the Nasdaq Earn-out, which is not reflected in our balance sheet.

On September 8, 2017, BGC completedCredit Agreement by and among Newmark, the Berkeley Point Acquisition. Berkeley Point is a leading commercial real estate finance company focused on the origination and sale of multifamily and other commercial real estate loans through government-sponsored and government-funded loan programs, as well as the servicing of commercial real estate loans, including those it originates. BGC acquired all of the outstanding membership interests of Berkeley Point Financial LLC for an acquisition price of $875 million, with $3.2 million of the acquisition price paid with 247,099 partnership units in BGC Holdings pursuant to a Transaction Agreement, dated as of July 17, 2017, with Cantor and certain Cantor’s affiliates, including CCRE and Cantor Commercial Real Estate Sponsor, L.P., the general partner of CCRE. In accordance with this Transaction Agreement, Berkeley Point made a distribution of $89.1 million to CCRE related to the Berkeley Point Acquisition, for the amount that Berkeley Point’s net assets, inclusive of certain fair value adjustments, exceeded $508.6 million. Contemporaneously with the Berkeley Point Acquisition, on September 8, 2017, the Company invested $100 million in a newly formed commercial real estate-relatedseveral financial and investment business, Real Estate LP, which is controlled and managed by Cantor. Real Estate LP may conduct activities in any real estate related business or asset backed securities-related business or any extensions thereof and ancillary activities thereto. In addition, Real Estate LP may provide short-term loans to related partiesinstitutions from time to time when funds in excess of amounts needed for investment opportunities are available. The Company’s investment is accounted for under the equity method. In connection with these aforementioned transactions, BGC entered into a $400 million two-year unsecured senior revolving credit facilityparty thereto, as Lenders, and a $575 million unsecured senior term loan maturing on the second anniversary of the Berkeley Point Acquisition closing date.

On October 23, 2017, we filed a registration statement on Form S-1 with the SEC relating to the IPO of our Class A common stock. On December 19, 2017 BGC Partners, Inc. and Newmark Group, Inc. announced the closing of the offering of 20 million shares of Newmark’s Class “A” common stock to the public at a price of $14.00 per share less underwriting discounts and commissions. On December 26, 2017, BGC and Newmark announced that the underwriters of Newmark’s IPO exercised in full their overallotment option to purchase an additional 3 million shares of Newmark’s Class A common stock at the initial public offering price of $14.00 per share less underwriting discounts and commissions. As a result, Newmark received aggregate net proceeds of $295.4 million from the IPO after deducting underwriting discounts and commissions and estimated offering expenses. The proceeds of the IPO were used to repay the Term Loan. Following some period after the IPO; BGC may, subject to market and other conditions, distribute the shares that BGC holds of Newmark Group, Inc. pro rata to BGC’s stockholders in a manner intended to qualify as tax-free for U.S. federal income tax purposes.

As of March 31, 2018, our liquidity, which we define as cash and cash equivalents, and marketable securities, less securities loaned, was approximately $48.1 million. This does not include the approximately (i) $190.0 million of excess funds maintained in our restricted liquidity account pledged for the benefit of Fannie Mae and (ii) more than $875.0 million in additional Nasdaq stock (stock value based on the May 2, 2018 closing price) that we expect to receive over time. We expect to use our considerable financial resources to repay debt, profitably hire, make accretive acquisitions, pay dividends, and/or repurchase shares and units of Newmark, all while maintaining or improving our investment grade rating.

Term Loan and Converted Term Loan

In connection with the Berkeley Point Acquisition and BGC Partners’ investment in Real Estate LP, on September 8, 2017, BGC Partners entered into an unsecured senior term loan credit agreement (which we refer to as the “Term Loan Credit Agreement”) with Bank of America N.A., as administrative agent (which we refer to as the “Administrative Agent”), and a syndicate of lenders.agent. The Term Loan Credit Agreement providesprovided for a term loan of up to $575.0$250.0 million (which we refer to asCredit Facility.


On February 26, 2020, Newmark entered into the “Term Loan”).  DuringAmended Credit Agreement, increasing the year ended December 31, 2017, in connection with the Term Loan, BGC Partners lent the proceedssize of the Term LoanCredit Facility to BGC U.S. OpCo,$425.0 million and BGC U.S. OpCo issuedextending the maturity date to February 26, 2023. The interest rate on the Credit Facility was reduced to LIBOR plus 1.75% per annum, subject to a promissory note with an aggregate principal amountpricing grid linked to Newmark’s credit ratings from Standard & Poor’s and Fitch.

On March 16, 2020, Newmark entered into the Second Amended Credit Agreement, increasing the size of $575.0 millionthe Credit Facility to BGC Partners (which we refer$465.0 million. The interest rate on the amended Credit Facility is LIBOR plus 1.75% per annum, subject to a pricing grid linked to Newmark’s credit ratings from Standard & Poor’s and Fitch.

On March 10, 2022, Newmark entered into the A&R Credit Agreement, which amends and restates the Credit Agreement, as the “Intercompany Term Loan Note”).amended. Pursuant to the termsA&R Credit Agreement, the Lenders agreed to: (a) increase the amount available to the Company under the Credit Facility to $600.0 million, (b) extend the maturity date of the Intercompany Term Loan Note, all of the rightsCredit Facility to March 10, 2025, and obligations of BGC Partners under the Intercompany Term Loan Note are the same as the rights and obligations of the lenders(c) improve pricing to 1.50% per annum with respect to paymentTerm SOFR (as defined in the A&R Credit Agreement) borrowings.

Borrowings under the Term Loan, and all of the rights and obligations of BGC U.S. OpCo under the Intercompany Term Loan Note are the same as the rights and obligations of BGC Partners with respect to payment under the Term Loan. On November 22, 2017, we entered into an amendment to the Term Loan Credit Agreement (which we refer to as the “Term Loan Amendment”), pursuant to which, in connection with the Separation and prior to the closing of the IPO, we assumed the obligations of BGC Partners under the Term Loan. In connection with our assumption of BGC Partners’ rights and obligations under the Term Loan, BGC Partners


assigned to us, and we assumed, all of BGC Partners’ rights and obligations under the Intercompany Term Loan Note and, pursuant to the separation, Newmark OpCo assumed all of BGC U.S. OpCo’s rights and obligations under the Intercompany Term Loan Note. During the three months ended March 31, 2018 the Term Loan Credit Agreement was repaid in full.

Also in connection with the Berkeley Point Acquisition and BGC Partners’ investment in Real Estate LP, on September 8, 2017, BGC Partners entered into an unsecured senior revolving credit agreement (which we refer to as the “Revolving Credit Agreement”) with the Administrative Agent and a syndicate of lenders. The Revolving Credit Agreement provides for revolving loans of up to $400.0 million (which we refer to as the “Revolving Credit Facility”). As of March 31, 2018, there were $400.0 million of borrowings outstanding under the Revolving Credit Facility. As of December 31, 2017, the pricing was increased by 50 basis points until the Term Loan Facility is paid in full, and if there are any amounts outstanding under the term loan facility as of June 30, 2018, the pricing shall increase by an additional 75 basis points (125 basis points in the aggregate) until the term loan facility is paid in full. From and after the repayment in full of the Term Loan Facility, the pricing shall return to the levels previously described. In connection with the $400.0 million borrowings, the proceeds of which BGC Partners lent to BGC U.S. OpCo, BGC U.S. OpCo issued a promissory note with an aggregate principal amount of $400.0 million to BGC Partners (which we refer to as the “Intercompany Revolver Note”). Pursuant to the terms of the Intercompany Revolver Note, all of the rights and obligations of BGC Partners under the Intercompany Revolver Note are the same as the rights and obligations of the lenders with respect to payment under the Revolving Credit Facility and all of the rights and obligations of BGC U.S. OpCo under the Intercompany Revolver Note are the same as the rights and obligations of BGC Partners with respect to payment under the Revolving Credit Facility. On November 22, 2017, we entered into an amendment to the Revolving Credit Agreement (which we refer to as the “Revolver Amendment”), pursuant to which the then outstanding borrowings of BGC Partners under the Revolving Credit Facility were converted into a term loan (which we refer to as the “Converted Term Loan”) and thereafter, in connection with the Separation and prior to the closing of the IPO, we assumed the obligations of BGC Partners as borrower under the Converted Term Loan. BGC Partners remained the borrower under the Revolving Credit Facility for any future draws and, as long as there is any principal amount outstanding under the Converted Term Loan, we guaranteed the obligations of BGC Partners under the Revolving Credit Facility. In connection with our assumption of the Converted Term Loan, BGC Partners assigned to us, and we assumed, all of BGC Partners’ rights and obligations under the Intercompany Revolver Note and, pursuant to the Separation, Newmark OpCo assumed all of BGC U.S. OpCo’s rights and obligations under the Intercompany Revolver Note.

Under the Revolving Credit Agreement, as amended, BGC Partners guaranteed our repayment obligations under the Converted Term Loan. As long as the Converted Term Loan remains unpaid in any portion, we will guarantee any draws by BGC Partners under the Revolving Credit Facility. Once the Converted Term Loan has been paid in full, we will no longer have obligations as a borrower or as a guarantor under the Revolving Credit Agreement. Upon repayment, no portion of the Term Loan or the Converted Term Loan may be reborrowed by us.

Pursuant to the Separation and Distribution Agreement, (a) Newmark Group, Inc. will indemnify, defend and hold harmless the members of the BGC Partners group and each of their respective directors, officers, general partners, managers and employees from and against any and all losses of such persons to the extent relating to, arising out of or resulting from payments made to satisfy any guarantee by a member of the BGC Partners group to a third person in respect of the Term Loan Credit Agreement or the Converted Term Loan and (b) BGC Partners will indemnify, defend and hold harmless the members of the Newmark group and each of their respective directors, officers, general partners, managers and employees from and against any and all losses of such persons to the extent relating to, arising out of or resulting from payments made to satisfy any guarantee by a member of the Newmark group to a third person in respect of borrowings under the Revolving Credit Agreement other than the Converted Term Loans. In addition, (a) Newmark OpCo will indemnify, defend and hold harmless the Cantor group, the BGC Partners group and the Newmark group (other than Newmark OpCo and its subsidiaries) and each of their respective directors, officers, general partners, managers and employees, from and against all liabilities to the extent relating to, arising out of or resulting from any guarantee for the benefit of any member of the Newmark group by any member of the BGC Partners group that survives following the Separation and (b) BGC U.S. OpCo and BGC Global OpCo will indemnify, defend and hold harmless the Cantor group, the Newmark group and the BGC Partners Group (other than BGC U.S. OpCo , BGC Global OpCo and their respective subsidiaries) and each of their respective directors, officers, general partners, managers and employees from and against all liabilities to the extent relating to, arising out of or resulting from any guarantee for the benefit of any member of the BGC Partners group by any member of the Newmark group that survives following the Separation, including, in each case, any guarantee under the Term Loan Credit Agreement or the Revolving Credit Agreement.

The Converted Term Loan will mature on September 8, 2019. The outstanding amounts under the Converted Term Loan will bear interest at a per annum rate equal to, at ourthe Company’s option, either (a) LIBORTerm SOFR for interest periods of one two,or three or six months, as selected by us,the Company, or upon the consent of all applicable lenders,Lenders, such

74

other period that is 12 months or less (in each case, subject to availability), as selected by us,the Company, plus an applicable margin, or (b) a base rate equal to the greatest of (i) the federal funds rate plus 0.5%0.50%, (ii) the prime rate as established by the Administrative Agent, and (iii) one-month LIBORTerm SOFR plus 1.0%1.00%, in each case plus an applicable margin. The applicable margin will initially be 2.25%1.50% with respect to LIBORTerm SOFR borrowings in (a) above and 1.25%0.50% with respect to base


rate borrowings in (b) above. The applicable margin with respect to LIBORTerm SOFR borrowings in (a) above will range from 1.5%1.00% to 3.25%2.125% depending upon BGC Partners’the Company’s credit rating, and with respect to base rate borrowings in (b) above will range from 0.5%0.00% to 2.25%1.125% depending upon BGC Partners’the Company’s credit rating. In addition, (x) ifThe A&R Credit Agreement also provides for certain upfront and arrangement fees and for an unused facility fee.


Cantor Credit Agreement
On November 30, 2018, Newmark entered into an unsecured credit agreement with Cantor. The Cantor Credit Agreement provides for each party to issue loans to the other party in the lender’s discretion. Pursuant to the Cantor Credit Agreement, the parties and their respective subsidiaries (with respect to CFLP, other than BGC and its subsidiaries) may borrow up to an aggregate principal amount of $250.0 million from each other from time to time at an interest rate which is the higher of CFLP’s or Newmark’s short-term borrowing rate then in effect, plus 1.0%. As of June 30, 2022, and December 31, 2021 there are any amountswere no borrowings outstanding under the Term Loan asCantor Credit Agreement.

Master Repurchase Agreement
On August 2, 2021, a subsidiary of December 31, 2017,Newmark, Newmark OpCo, entered into the pricing shall increaseRepurchase Agreement with CF Secured, an affiliate of Cantor, pursuant to which Newmark could seek, from time-to-time, to execute short-term secured financing transactions. For additional information regarding this agreement, see Note 27 — “Related Party Transactions” to our accompanying unaudited condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

Warehouse Facilities Collateralized by 0.50% until the Term Loan is paid in full, and (y) if there are any amounts outstanding under the Term Loan asU.S. Government Sponsored Enterprises
As of June 30, 2018, the pricing shall increase by an additional 0.75% (and 1.25% in the aggregate) until the Term Loan is paid in full.  Since the repayment in full2022, Newmark had $1.5 billion of the Term Loan, the pricing for the Converted Term Loan has returned to the levels described above, as applicable. On March 31, 2018, the interest rate on the Term Loancommitted loan funding and the Converted Term Loan was one-month LIBOR plus 2.25%, which was approximately 3.99% per annum.

The Revolving Credit Agreement also contain certain other customary affirmative and negative covenants and events of default that apply to us.

Pursuant to the Term Loan Credit Agreement the Converted Term Loan Credit Agreement and the Separation and Distribution Agreement, both the Term Loan and the Converted Term Loan were subject to a mandatory prepayment requirement by an amount equal to 100% of net cash proceeds of our IPO and all other material debt and equity issuances (and certain asset sales), in each case subject to customary exceptions. We contributed all of the net proceeds of the IPO to Newmark OpCo in exchange for a number of units representing Newmark OpCo limited partnership interests equal to the number of shares issued by us in the  IPO. Newmark OpCo used all of such net proceeds, plus proceeds from BGC’s investment on March 7, 2018, of $242.0 million in Newmark limited partnership interests and cash on hand to repay in full the Term Loan (which intercompany indebtedness was originally issued by BGC U.S. OpCo and was assumed by Newmark OpCo in connection with the Separation).

The Term Loan Credit Agreement and the Converted Term Loan Credit Agreement and the Separation and Distribution Agreement also require us to apply net cash proceeds of material debt issuances after repayment in full of the Term Loan and Converted Term Loan (and subject to certain exceptions) to repay the BGC Notes.

Berkeley Point Warehouse Facilities

As of March 31, 2018, Berkeley Point had $950$300.0 million of committeduncommitted loan funding available through three commercial banks and an uncommitted $325$400.0 million Fannie Mae loan repurchase facility. Consistent with industry practice, Berkeley Point’s existingthese warehouse facilities are short-term, requiring annual renewal. If anyThese warehouse facilities are collateralized by an assignment of the committedunderlying mortgage loans originated under its various lending programs and third-party purchase commitments and are recourse only to our wholly-owned subsidiary, Berkeley Point Capital, LLC. As of June 30, 2022 and December 31, 2021, respectively, we had $0.8 billion and $1.1 billion outstanding under “Warehouse facilities are terminated or are not renewed orcollateralized by U.S. Government Sponsored Enterprises” on our accompanying unaudited condensed consolidated balance sheets.


Cash Flows
Cash flows from operations excluding activity from loan originations and sales, net were as follows (in thousands):
Six Months Ended June 30,
20222021
Net cash provided by operating activities$339,034 $785,142 
Add back:
Loan originations - loans held for sale3,811,260 3,283,534 
Loan sales - loans held for sale(4,046,373)(3,960,169)
Unrealized gains on loans held for sale11,827 5,821 
Net cash provided by (used in) operating activities excluding activity from loan originations and sales (1)
$115,748 $114,328 
(1) Includes payments for corporate taxes in the uncommitted facility is not honored, we would be required to obtain replacement financing.

2042 Promissory Note

On June 26, 2012, BGC issued an aggregate of $112.5 million principal amount of its 8.125% Senior Notes due 2042 (the “8.125% BGC Senior Notes”). In connection with the issuance of the 8.125% BGC Senior Notes, BGC lent the proceeds of the 8.125% BGC Senior Notes to BGC U.S. OpCo,$68.5 million, and BGC U.S. OpCo issued an amended and restated promissory note, effective as of June 26, 2012, with an aggregate principal amount of $112.5$18.7 million, payable to BGC (the “2042 Promissory Note”). In connection with the Separation, on December 13, 2017, Newmark OpCo assumed all of BGC U.S. OpCo’s rights and obligations under the 2042 Promissory Note.

2019 Promissory Note

On December 9, 2014, BGC issued an aggregate of $300.0 million principal amount of its 5.375% Senior Notes due 2019 (the “5.375% BGC Senior Notes”). In connection with the issuance of the 5.375% BGC Senior Notes, BGC lent the proceeds of the 5.375% BGC Senior Notes to BGC U.S. OpCo, and BGC U.S. OpCo issued an amended and restated promissory note, effective as of December 9, 2014, with an aggregate principal amount of $300.0 million payable to BGC (the “2019 Promissory Note” and, together with the 2042 Promissory Note, the “BGC Notes”). In connection with the Separation, on December 13, 2017, Newmark OpCo assumed all of BGC U.S. OpCo’s rights and obligations under the 2019 Promissory Note.

Intercompany Credit Agreement

In connection with the Separation on December 13, 2017, BGC entered into an unsecured senior credit agreement with Newmark (the “Original Credit Agreement”), which was amended and restated, as Intercompany Credit Agreement, on March 19, 2018. The Intercompany Credit Agreement provides for each party to issue revolving loans to the other party in the lender’s discretion.

The Intercompany Credit Agreement eliminates certain provisions from the Original Credit Agreement but the facility maturity date and the interest rate applicable to loans outstanding under the Intercompany Credit Facility remain the same.


On March 19, 2018, Newmark borrowed $150.0 million from BGC pursuant to the facilities under the Intercompany Credit Agreement.  The interest rate as of March 31, 2018 was 4.99%, which may be adjusted based on the higher of BGC’s or Newmark’s short-term borrowing rate then in effect at such time plus 100 basis points, or such other interest rate as may be mutually agreed between BGC and Newmark.. Newmark has transferred these proceeds to its restricted cash account pledged for the benefit of Fannie Mae. As of March 31, 2018, Newmark’s total net borrowings under the Intercompany Credit Agreement are $202.0 million.

six months ended June 30, 2022 and 2021, respectively.




Cash Flows for the threeSix Months Ended June 30, 2022
For the six months ended March 31, 2018

For the three months ended March 31, 2018,June 30, 2022, we used $590.4generated $339.0 million of cash from operations. Excluding activity from loan originations and sales, cash from operating activities for the six months ended June 30, 2022 was $115.7 million. Cash provided by investing activities was $353.3 million, primarily related to $437.8 million of proceeds from the sale of Nasdaq shares. Cash used in financing activities of $603.7 million primarily related to net principal payments on warehouse facilities of $216.1 million, $140.0 million related to repurchase agreements and securities loaned, and $175.9 million of treasury stock repurchases.


Cash Flows for the Six Months Ended June 30, 2021
75

For the six months ended June 30, 2021, we generated $785.1 million of cash from operations. However, excluding activity from loan originations and sales, net cash generated from operating activities for the six months ended June 30, 2021 was $114.3 million. We had consolidated net income of $32.5$629.8 million, $559.9$770.6 million of negative adjustments to reconcile net income to net cash provided by operating activities (excluding activity from loan originations and $63.0sales) and $255.2 million of negativepositive changes in operating assets and liabilities. $603.0 million of adjustmentsThe negative adjustment to reconcile the net income to net cash provided by operating activities was related to loans held for sale.primarily the result of $1,108 million from the Nasdaq Earn-out. offset by equity-based compensation of $296.1 million. The negativepositive change in operating assets and liabilities included $24.6$33.7 million of increasesdecrease in loans, forgivable loans and other receivables from employees, a $31.2 million increases in receivables, net, a decrease in other assets of $82.9 million, a $123.4 million increase in accounts payable, accrued expenses and partnersother liabilities, a $118.9 million increase in accrued compensation and an decrease in payable to related parties of $4.7 million. Cash used in investing activities was $14.2 million, primarily related to continued hiring and expansion of our business. We generated $42.5$43.5 million of payments for acquisitions, net of cash providedacquired, partially offset by investing activities primarily related to$35.4 million of proceeds from the sale of marketable securities. We generated $666.6 million of cash fromCash used in financing activities primarily due to net  proceeds from warehouse notes payable of $590.0$791.7 million $242.0 million of proceeds from BGC’s investment in Newmark LPU’s and $162.0 million of new borrowings from BGC under the credit facility, partially offset by $270.7 million repayment of long term debt.

Cash Flows for the three months ended March 31, 2017

For the three months ended March 31, 2017, we generated $296.4 million of cash from operations. We had net income of $37.0 million, $286.6 million of positive adjustments to reconcile net income to net cash provided by operating activities, and $27.2 million of negative changes in operating assets and liabilities. $295.2 million of the positive adjustments to reconcile net income to net cash provided by operating activities was related to loans held for sale. The negative change in operating assets and liabilities was driven by a $33.6 million decrease in our accrued compensation. We used $4.0 million of cash for investing activities primarily related to fixed asset purchases, and used $272.0$651.0 million of net repayments on the warehouse facilities collateralized by U.S. Government Sponsored Enterprises, $37.4 million of payments to Deutsche Bank related to Berkeley Point, $33.3 million for repayment of securities loaned, $11.4 million in financing activities primarily dueearning distributions to net paymentslimited partnership interests and other noncontrolling interests, and $3.7 million in dividends to related partiesstockholders.




Credit Ratings
    As of $223.8.

REGULATORY REQUIREMENTS

As a resultJune 30, 2022, our public long-term credit ratings and associated outlooks are as follows:

RatingOutlook
Fitch Ratings Inc.BBB-Stable
JCRABBB+Stable
Kroll Bond Rating AgencyBBB-Stable
Standard & Poor'sBB+Positive

Credit ratings and associated outlooks are influenced by several factors, including but not limited to: operating environment, earnings and profitability trends, the prudence of funding and liquidity management practices, balance sheet size/composition and resulting leverage, cash flow coverage of interest, composition and size of the Berkeley Point Acquisition, capital base, available liquidity, outstanding borrowing levels and the firm’s competitive position in the industry. A credit rating and/or the associated outlook can be revised upward or downward at any time by a rating agency if such rating agency decides that circumstances warrant such a change. Any reduction in our credit ratings and/or the associated outlook could adversely affect the availability of debt financing on terms acceptable to us, as well as the cost and other terms upon which we are able to obtain any such financing. In addition, credit ratings and associated outlooks may be important to customers or counterparties when we compete in certain markets and when we seek to engage in certain transactions. In connection with certain agreements, interest rates on our notes may incur increases of up to 2% in the event of a credit ratings downgrade.

Regulatory Requirements
Newmark is now subject to various capital requirements in connection with seller/servicer agreements that Newmark has entered into with the various GSEs. Failure to maintain minimum capital requirements could result in Newmark’s inability to originate and service loans for the respective GSEs and could have a direct material adverse effect on Newmark’sour accompanying unaudited condensed consolidated financial statements. As of March 31, 2018,June 30, 2022, Newmark has met all capital requirements. As of March 31, 2018,June 30, 2022, the most restrictive capital requirement was Fannie Mae’s net worth requirement. Newmark exceeded the minimum requirement by $426.3$411.1 million.


Certain of Newmark’s agreements with Fannie Mae allow Newmark to originate and service loans under Fannie Mae’s DUSDelegated Underwriting and Servicing (“DUS”) Program. These agreements require Newmark to maintain sufficient collateral to meet Fannie Mae’s restricted and operational liquidity requirements based on a pre-established formula. Certain of Newmark’s agreements with Freddie Mac allow Newmark to service loans under Freddie Mac’s Targeted Affordable Housing Program (“TAH”). Program. These agreements require Newmark to pledge sufficient collateral to meet Freddie Mac’s liquidity requirement of 8% of the outstanding principal of TAH loans serviced by Newmark. As of MarchJune 30, 2022 and December 31, 20182021, Newmark has met all liquidity requirements.


In addition, as a servicer for Fannie Mae, GNMAthe Government National Mortgage Association (“Ginnie Mae”) and FHA, Newmark is required to advance to investors any uncollected principal and interest due from borrowers. As of March 31, 2018June 30, 2022 and December 31, 20172021, outstanding borrower advances were approximately $63 thousand$1.2 million and $120 thousand,$0.9 million, respectively, and are included in “Other assets” in theour accompanying unaudited condensed consolidated balance sheets.


76

On September 9, 2019, the U.S. Department of the Treasury issued a Housing Reform Plan (the “Plan”) in response to a March 27, 2019 Presidential Memorandum soliciting reforms in the housing financing system designed to minimize taxpayer exposure to future bailouts. The primary recommendations of the Plan are: (i) that existing government support for the secondary markets should be explicitly defined, tailored and paid for; (ii) that the GSEs’ conservatorship should come to an end; (iii) the implementation of reforms necessary to ensure that the GSEs, and any successors, are appropriately capitalized to withstand a severe economic downturn and that shareholders and unsecured creditors, rather than U.S. taxpayers, bear the losses; (iv) that the GSEs should continue to support affordable housing at a reasonable economic return that may be less than the return earned on other activities; (v) that the FHFA and the U.S. Department of Housing and Urban Development should clearly define the appropriate roles and overlap between the GSEs and the Federal Housing Administration so as to avoid duplication and (vi) that measures should be implemented to “level the playing field” between the GSEs and private sector competitors. Additionally, in September 2019, FHFA announced a cap of $200 billion as the maximum volume for combined Fannie Mae and Freddie Mac multifamily volume through the end of 2020, of which 37.5% must meet certain affordability requirements. The foregoing proposals may have the effect of impacting the volume of business that we may do with Fannie Mae and Freddie Mac. Additionally, the potential increase in our proportion of affordable business and the potential implementation of a fee to be charged in connection with the government's offer of a guarantee may alter the economics of the business and, accordingly, may impact our financial results.

See “Regulation”“Business—Regulation” in Part I, Item 1 of our Annualthis Quarterly     Report on Form 10-K10-Q for additional information related to our regulatory environment.

EQUITY

Share Exchange

In relation to the IPO, on December 13, 2017, Newmark entered into an exchange agreement with Cantor, CFGM, BGC and other Cantor affiliates entitled to hold Class B common stock, providing the right to exchange from time to time shares of Class A



common stock of Newmark now owned or hereafter acquired, as applicable, on a one-for-one basis for shares of Class B common stock, up to the number of shares

Equity
Repurchase Program
On February 10, 2022, our Board increased its authorized share repurchases of Newmark Class B common stock that are authorized but unissued under Newmark’s certificate of incorporation. The Newmark Audit Committee and Board of Directors have determined that the exchange agreement is in the best interests of Newmark and its stockholders because, among other things, it will help ensure that Cantor retains its exchangeable limited partnership units in Newmark Holdings, which is the same partnership in which Newmark’s partner employees participate, thus continuing to align the interests of Cantor with those of the partner employees.

Repurchase Program

On March 12, 2018, our board of directors and audit committee authorized repurchases of shares of our Class A commonCommon stock and redemptions or repurchasespurchases of limited partnership interests or other equity interests in ourNewmark's subsidiaries up to $100$400.0 million. This authorization includes repurchases of stockshares or purchase of units from executive officers, other employees and partners, including of BGC and Cantor, as well as other affiliated persons or entities. From time to time, weNewmark may actively continue to repurchase shares and/or redeem purchase units. During the six months ended June 30, 2022, Newmark repurchased 13,053,518 shares of Class A common stock, at an average price of $13.47. As of June 30, 2022, Newmark had $252.2 million remaining from its share repurchase and unit purchase authorization.


The following table details Newmark's unit redemptions and share repurchases for cash, under the new program, and does not include unit redemptions and/or repurchase units. To date, no suchcancellations in connection with the grant of shares orNewmark's Class A common stock. The gross unit redemptions and share repurchases of Newmark's Class A common stock during the six months ended June 30, 2022 were as follows (in thousands except units, have been repurchased or redeemed.

shares and per share amounts):

Total
Number of
Shares
Repurchased/Purchased		Average
Price Paid
per Unit
or Share		Approximate
Dollar Value
of Units and
Shares That
May Yet Be
Repurchased/
Purchased
Under the 
Program
Repurchases
January 1, 2022 - March 31, 20221,682,871 $18.35 
April 20226,025,762 $13.96 
May 20224,544,224 $11.82 
June 2022800,661 $9.03 
Total Repurchases13,053,518 $13.47 $252,192 

In addition to the repurchases in the table above, during the three months ended March 31, 2022, Mr. Lutnick purchased an aggregate of 503,500 shares of Newmark's Class A common stock at an average price of $16.92. On May 23, 2022, he purchased 227,000 shares at an average price of $10.83. On June 14, 2022, he purchased 329,000 shares at an average price of $9.11.

Fully Diluted Share Count

Our fully diluted weighted-average share count forfollows (in thousands):
77

June 30,
 20222021
Common stock outstanding(1)
186,401 184,190 
Partnership units(2)
57,576 83,337 
RSUs (Treasury stock method)4,475 3,582 
Newmark exchange shares2,005 1,195 
Total(3)
250,457 272,304 
(1)Common stock consisted of Class A shares and Class B shares. For the threesix months ended March 31, 2018June 30, 2022, the weighted-average number of Class A shares was 165.1 million shares and Class B shares was 21.3 million that were included in our fully diluted EPS computation because the conditions for issuance had been met by the end of the period.
(2)Partnership units collectively include FPUs, limited partnership units, and Cantor units,(see Note 2 —“Limited Partnership Interests in Newmark Holdings and BGC Holdings”, to ourConsolidatedFinancialStatements in Part I, Item 1 of this Quarterly Report on Form 10-Q for more information).In general, these partnership units are potentially exchangeable into shares of Newmark Class A common stock. In addition, partnership units held by Cantor are generally exchangeable into shares of Newmark Class A common stock and/or for up to 24.7 million shares of Newmark Class B common stock. These partnership units also generally receive quarterly allocations of net income, after the deduction of the Preferred Distribution, based on their weighted-average pro rata share of economic ownership of the operating subsidiaries. As a result, these partnership units are included in the fully diluted share count calculation shown above.
(3)For the six months ended June 30, 2022, the weighted-average share count did not include any potentially anti-dilutive securities, which were excluded in the computation of fully diluted earnings per share.


Our fully diluted period-end (spot) share count were as follows (in thousands)

 

 

Three Months Ended March 31, 2018

 

Common stock outstanding(1)

 

 

155,694

 

Partnership units(2)

 

 

90,222

 

RSUs (Treasury stock method)

 

 

275

 

Other

 

 

643

 

Total(3)

 

$

246,834

 

1

Common stock consisted of Class A shares, Class B shares and contingent shares for which all necessary conditions have been satisfied except for the passage of time. For the quarter ended March 31, 2018, the weighted-average number of Class A shares was 138.7 million shares, Class B shares was 15.8 million shares and approximately 1.6 million shares of contingent Class A common stock and limited partnership units were included in our fully diluted EPS computation because the conditions for issuance had been met by the end of the period.

:

2

Partnership units collectively include founding/working partner units, limited partnership units, and Cantor units (see Note 2—“Limited Partnership Interests in Newmark Holdings,” to our unaudited condensed consolidated financial statements in Part I, Item 1 of this Quarterly Report on Form 10-Q for more information).

June 30,
 20222021
Common stock outstanding181,288 201,022 
Partnership units58,238 49,654 
Newmark RSUs3,067 — 
Newmark exchange shares2,155 1,175 
Other378 — 
Total245,126 251,851 

3

For the quarter ended March 31, 2018, all potentially dilutive securities were included in the computation of fully diluted earnings per share.


CONTINGENT PAYMENTS RELATED TO ACQUISITIONS

Contingent Payments Related to Acquisitions
Newmark completed acquisitions in 2014, 2015, 2016 and 2017 for which there is contingent cash consideration may be issued on certain targets being met through 2020 of $12.4$19.3 million. The contingent equity instruments are issued by and are recorded as a payable to related party on the unaudited condensed consolidated balance sheet. The contingent cash liability is recorded at fair value as deferred consideration on theour accompanying unaudited condensed consolidated balance sheet.

EQUITY METHOD INVESTMENTS

sheets.


Equity Method Investments
Newmark has an investment in Real Estate LP, a joint venture with Cantor in which Newmark has a less than majority ownership and has the ability to exert significant influence over the operating and financial policies. As of March 31, 2018,June 30, 2022, Newmark had $104.7$88.3 million in anthis equity method investment, which represents a 27% ownership in Real Estate LP.


Contractual Obligations Newmark holds a redemption option in which Real Estate LP will redeem in full Newmark’s investment in Real Estate LP in exchange for Newmark’s capital account balance in Real Estate LP as of such time. On July 20, 2022, Newmark exercised this redemption option and Commitments

The following table summarizes certainexpects to receive approximately $88.4 million from Cantor on or prior to July 20, 2023.


Registration Statements

On March 28, 2019, we filed a registration statement on Form S-3 pursuant to which CF&Co may make offers and sales of our contractual obligations6.125% Senior Notes in connection with ongoing market-making transactions which may occur from time to time. Such market-making transactions in these securities may occur in the open market or may be privately negotiated at prevailing market prices at a time of resale or at related or negotiated prices. Neither CF&Co, nor any of our affiliates, has any obligation to make a market in our securities, and CF&Co or any such other affiliate may discontinue market-making activities at any time without notice. Newmark does not receive any proceeds from market-making activities in these securities by CF&Co (or any of its affiliates). This registration statement expired in March 2022. On March 25, 2022, we filed a new market making Registration Statement on Form S-3 to replace the one that was expiring.
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We have an effective registration statement on Form S-4, with respect to the offer and sale of up to 20.0 million shares of our Class A common stock from time to time in connection with business combination transactions, including acquisitions of other businesses, assets, properties or securities. As of June 30, 2022, we have issued 1.7 million shares of our Class A common stock under this registration statement.

As of June 30, 2022 and December 31, 2017 (in thousands):

 

 

Total

 

 

Less than

1 Year

 

 

1-3

Years

 

 

3-5

Years

 

 

More than

5 Years

 

Operating leases(1)

 

$

328,697

 

 

$

36,624

 

 

$

69,410

 

 

$

61,940

 

 

$

160,723

 

Warehouse facility

 

 

360,440

 

 

 

360,440

 

 

 

—

 

 

 

—

 

 

 

—

 

Long-term debt(2)

 

 

812,500

 

 

 

—

 

 

 

700,000

 

 

 

—

 

 

 

112,500

 

Intercompany Credit Agreement

 

 

202,000

 

 

 

202,000

 

 

 

—

 

 

 

—

 

 

 

—

 

Total contractual obligations

 

$

1,703,637

 

 

$

599,064

 

 

$

769,410

 

 

$

61,940

 

 

$

273,223

 

(1)

Operating leases are related to rental payments under various non-cancelable leases principally for office space, net of sublease payments to be received. The total amount of sublease payments to be received is approximately $2.9 over the life of the agreement.

2021, Newmark was committed to fund approximately $0.3 billion and $0.3 billion, respectively, which is the total remaining draws on construction loans originated by Newmark under the Housing and Urban Development (“HUD”) 221(d)4, 220 and 232 programs, rate locked loans that have not been funded, and forward commitments, as well as the funding for Fannie Mae structured transactions. Newmark also has corresponding commitments to sell these loans to various purchasers as they are funded.

(2)

Long-term debt reflects long-term borrowings of $400.0 million under Newmark’s Term Loan: the issuance of $112.5 million of the 2042 Promissory Notes due June 26, 2042, and $300.0 million of the 2019 Promissory Notes due December 9, 2019. See Note 20–“Long-Term Debt” for more information regarding these obligations.


Derivative Suit

On August 5, 2022, Robert Garfield filed a complaint in the Delaware Court of Chancery, captioned Robert Garfield v. Howard W. Lutnick, et al. (Case No.2022-0687), against the members of the Board and Mr. Lutnick in his capacity as Chairman of the Board and controlling stockholder. This derivative complaint alleges that in connection with the December 2021 bonus award, payable over a 3-year period, granted to Mr. Lutnick, that: (i) the Board breached its fiduciary duty, (ii) neither the award nor the approval process employed by the Compensation Committee were entirely fair to the Company and its stockholders, and (iii) the members of the Compensation Committee did not exercise independent judgment. The complaint alleges that Mr. Lutnick breached his fiduciary duty as Chairman and controlling shareholder by forcing the Company to grant the award and by accepting it. The complaint seeks rescission of the award and other compensation, as well as damages and other relief. The Company’s position is that the award was properly approved by the Compensation Committee comprised of independent directors (which does not include Mr. Lutnick) after careful consideration of his contributions to the Company, including the Company’s superior financial results, and following an extensive process that included advice from independent legal counsel and an independent compensation consultant. The Company believes the lawsuit has no merit. However, as with any litigation, the outcome cannot be determined with certainty.

Critical Accounting Policies and Estimates

The preparation of our accompanying unaudited condensed consolidated financial statements in conformity with U.S. GAAP guidance requires management to make estimates and assumptions that affect the reported amounts of the assets and liabilities, revenues and expenses, and the disclosure of contingent assets and liabilities in our accompanying unaudited condensed consolidated financial statements. These accounting estimates require the use of assumptions about matters, some which are highly uncertain at the time of estimation. To the extent actual experience differs from the assumptions used, our accompanying unaudited condensed consolidated balance sheets, condensed consolidated statements of operations and condensed consolidated statements of cash flows could be materially affected. We believe that of our significant accounting policies, the following policies involve a higher degree of judgment and complexity.


Revenue Recognition

We derive our revenues primarily through commissions from brokerage services, gains fromcommercial mortgage banking activities/originations,origination, net, revenues from real estate management services, servicing fees and other revenues. Revenue from contracts with customers is recognized when, or as, the Company satisfies itswe satisfy our performance obligations by transferring the promised goods or services to the customers as determined by when, or as, the customer obtains control of that good or service. A performance obligation may be satisfied over time or at a point in time. Revenue from a performance obligation satisfied over time is recognized by measuring the Company’sour progress in satisfying the performance obligation as evidenced by the transfer of the goods or services to the customer. Revenue from a performance obligation satisfied at a point in time is recognized at the point in time when the customer obtains control over the promised good or service.

The amount of revenue recognized reflects the consideration we expect to be entitled to in exchange for those promised goods or services (i.e., the “transaction price”). In determining the transaction price, we consider consideration promised in a contract that includes a variable amount, referred to as variable consideration, and estimate the amount of consideration due the Company.to us. Additionally, variable consideration is included in the transaction price only to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur. In determining when to include variable consideration in the transaction price, the Company considerswe consider all information (historical, current and forecast) that is available, including the range of possible outcomes, the predictive value of past experiences, the time period of when uncertainties expect to be resolved and the amount of consideration that is susceptible to factors outside of the Company’sour influence.


We also use third-party service providers in the provision of its services to customers. In instances where a third-party service provider is used, the Company performswe perform an analysis to determine whether the Company iswe are acting as a principal or an agent with respect to the services provided. To the extent that the Company determines that it iswe are acting as a principal, the revenue and the expenses incurred are recorded on a
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gross basis. In instances where the Company has determined that it iswe are acting as an agent, the revenue and expenses are presented on a net basis within the revenue line item.


In some instances, the Company performswe perform services for customers and incursincur out-of-pocket expenses as part of delivering those services. The Company’sOur customers agree to reimburse the Companyus for those expenses, and those reimbursements are part of the contract’s transaction price. Consequently, these expenses and the reimbursements of such expenses from the customer are presented on a gross basis because the services giving rise to the out-of-pocket expenses do not transfer a good or service. The reimbursements are included in the transaction price when the costs are incurred, and the reimbursements are due from the customer.



MSRs, Net
We initially recognize and measure the rights to service mortgage loans at fair value and subsequently measure them using the amortization method. We recognize rights to service mortgage loans as separate assets at the time the underlying originated mortgage loan is sold, and the value of those rights is included in the determination of the gains on loans held for sale. Purchased MSRs, including MSRs purchased from CCRE, are initially recorded at fair value, and subsequently measured using the amortization method.

We receive up to a 3-basis point servicing fee and/or up to a 1-basis point surveillance fee on certain Freddie Mac loans after the loan is securitized in a Freddie Mac pool (“Freddie Mac Strip”). The Freddie Mac Strip is also recognized at fair value and subsequently measured using the amortization method, but is recognized as a MSR at the securitization date.

MSRs are assessed for impairment, at least on an annual basis, based upon the fair value of those rights as compared to the amortized cost. Fair values are estimated using a valuation model that calculates the present value of the future net servicing cash flows. In using this valuation method, we incorporate assumptions that management believes market participants would use in estimating future net servicing income. The fair value estimates are sensitive to significant assumptions used in the valuation model such as prepayment rates, cost of servicing, escrow earnings rates, discount rates and servicing multiples, which are affected by expectations about future market or economic conditions derived, in part, from historical data. It is reasonably possible that such estimates may change. We amortize the MSRs in proportion to, and over the period of, the projected net servicing income. For purposes of impairment evaluation and measurement, we stratify MSRs based on predominant risk characteristics of the underlying loans, primarily by investor type (Fannie Mae/Freddie Mac, FHA/GNMA, CMBS and other). To the extent that the carrying value exceeds the fair value of a specific MSR strata, a valuation allowance is established, which is adjusted in the future as the fair value of MSRs increases or decreases. Reversals of valuation allowances cannot exceed the previously recognized impairment up to the amortized cost.

Equity-Based and Other Compensation

Discretionary Bonus: A portion of our compensation and employee benefits expense comprises discretionary bonuses, which may be paid in cash, equity, partnership awards or a combination thereof. We accrue expense in a period based on revenues in that period and on the expected combination of cash, equity and partnership units. Given the assumptions used in estimating discretionary bonuses, actual results may differ.


Restricted Stock Units: We account for equity-based compensation under the fair value recognition provisions of U.S. GAAP guidance. Restricted stock units (which we refer to as “RSUs”) provided to certain employees are accounted for as equity awards, and in accordance with U.S. GAAP guidance, we are required to record an expense for the portion of the RSUs that is ultimately expected to vest. Further, U.S. GAAP guidance requires forfeitures to be estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. Because significant assumptions are used in estimating employee turnover and associated forfeiture rates, actual results may differ from our estimates under different assumptions or conditions.


The fair value of RSU awards to employees is determined on the date of grant, based on the fair value of BGC Partners’our Class A common stock. Generally, RSUs granted by us as employee compensation do not receive dividend equivalents; as such, we adjust the fair value of the RSUs for the present value of expected forgone dividends, which requires us to include an estimate of expected dividends as a valuation input. This grant-date fair value is amortized to expense ratably over the awards’ vesting periods. For RSUs with graded vesting features, we have made an accounting policy election to recognize compensation cost on a straight linestraight-line basis. The amortization is reflected as non-cash equity-based compensation expense in our accompanying unaudited condensed consolidated statements of operations.


Restricted Stock: Restricted stock provided to certain employees is accounted for as an equity award, and as per U.S. GAAP guidance, we are required to record an expense for the portion of the restricted stock that is ultimately expected to vest. We have granted restricted stock that is not subject to continued employment or service; however, transferability is subject to compliance with our and our affiliates’ customary non-compete obligations. Such shares of restricted stock are generally
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saleable by partners in 5 to 10 years. Because the restricted stock is not subject to continued employment or service, the grant-date fair value of the restricted stock is expensed on the date of grant. The expense is reflected as non-cash equity-based compensation expense in our accompanying unaudited condensed consolidated statements of operations.


Limited Partnership Units: Limited partnership units in Newmark Holdings and BGC Holdings and Newmark Holdings are generally held by employees. Generally such unitsNewmark employees and receive quarterly allocations of net income whichand are cash distributed on a quarterly basis and generally contingent upon services being provided by the unit holders. As discussed above, preferred units in BGCNewmark Holdings and NewmarkBGC Holdings are not entitled to participate in partnership distributions other than with respect to a distribution at a rate of either 0.6875% (which is 2.75% per calendar year) or such other amount as set forth in the award documentation. The quarterly allocations of net income to such limited partnership units are reflected as a component of compensation expense under “Allocations“Equity-based compensation and allocations of net income and grants of exchangeability to limited partnership units”units and FPUs” in our accompanying unaudited condensed consolidated statements of operations.


Certain of these limited partnership units entitle the holders to receive post-termination payments equal to the notional amount in four equal yearly installments after the holder’s termination. These limited partnership units are accounted for as post-termination liability awards under U.S. GAAP guidance. Accordingly, we recognize a liability for these units on our unaudited condensed consolidated statements of financial condition as part of “Accrued compensation” for the amortized portion of the post-termination payment amount, based on the current fair value of the expected future cash payout. We amortize the post-termination payment amount, less an expected forfeiture rate, over the vesting period, andguidance, which requires that Newmark record an expense for such awards based on the change in value at each reporting period and include the expense in our accompanying unaudited condensed consolidated statements of operations as part of “Compensation“Equity-based compensation and employee benefits.allocations of net income to limited partnership units and FPUs.”

The liability for limited partnership units with a post-termination payout is included in “Other long-term liabilities” on our accompanying unaudited condensed consolidated balance sheets.


Certain limited partnership units in BGC Holdings andheld by Newmark Holdingsemployees are granted exchangeability into BGC Partners Class A common stock on a one-for-one basis (subject to adjustments and other requirements as set forthor may be redeemed in connection with the BGC Holdings and Newmark Holdings limited partnership agreement).grant of shares of Class A common stock. At the time exchangeability is granted, we recognizeor the shares are issued, Newmark recognizes an expense based on the fair value of the award on that date, which is included in “Allocations“Equity-based compensation and allocations of net income and grants of exchangeability to limited partnership units”units and FPUs” in our accompanying unaudited condensed consolidated statements of operations.


Employee Loans: We have entered into various agreements with certain of our employees and partners whereby these individuals receive loans that may be either wholly or in part repaid from distributions that the individuals receive on some or all of their limited partnership interests or may be forgiven over a period of time. Cash advance distribution loans are documented in formal agreements and are repayable in timeframes outlined in the underlying agreements. We intend for these advances to be repaid in full from the future distributions on existing and future awards granted. The distributionsallocations of net income to the awards are treated as compensation expense when made and the proceeds from distributions are used to repay the loan. The forgivable portion of any loans is recognized as compensation expense in our accompanying unaudited


condensed consolidated statements of operations over the life of the loan. We review the loan balances each reporting period for collectability. If we determine that the collectability of a portion of the loan balances is not expected, we recognize a reserve against the loan balances. Actual collectability of loan balances may differ from our estimates. As of March 31, 2018June 30, 2022 and December 31, 2017,2021, the aggregate balance of employee loans, net of reserve, was $226.7$478.4 million and $209.6$453.3 million, respectively, and is included as “Loans, forgivable loans and other receivables from employees and partners”partners, net” in our accompanying unaudited condensed consolidated balance sheets. Compensation expense for the above-mentioned employee loans three and six months ended June 30, 2022, was $20.7 million and $39.6 million, respectively, compared with $19.5 million and $36.8 million, respectively, for the three and six months ended March 31, 2018 and 2017 was $6.0 million and $2.0 million, respectively.June 30, 2021. The compensation expense related to these loans was included as part of “Compensation and employee benefits” in our accompanying unaudited condensed consolidated statements of operations.


Goodwill

Goodwill is the excess of the purchase price over the fair value of identifiable net assets acquired in a business combination. As prescribed in U.S. GAAP guidance, Intangibles -– Goodwill and Other Intangible Assets, goodwill is not amortized, but instead is periodically tested for impairment. We review goodwill for impairment on an annual basis during the fourth quarter of each fiscal year or whenever an event occurs, or circumstances change that could reduce the fair value of a reporting unit below its carrying amount.


When reviewing goodwill for impairment, we first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount, including goodwill. If the results of the qualitative assessment areindicate that it is more likely than not conclusive,that the fair value of a reporting unit is less than its carrying amount, or if we choose to bypass the qualitative assessment, we perform a quantitative goodwill impairment analysis usingas follows.

The quantitative goodwill impairment test, used to identify both the existence of impairment and the amount of impairment loss, compares the fair value of a two-step process. Newmark hadreporting unit with its carrying amount, including goodwill. If the carrying amount of a reporting unit exceeds its fair value, an impairment loss should be recognized in an amount equal to that excess,
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limited to the total amount of goodwill balances as of March 31, 2018 and December 31, 2017 of $475.0 million and $477.0 million, respectively.

The first step ofallocated to that reporting unit. If the process involves comparing each reporting unit’s estimated fair value toof a reporting unit exceeds its carrying value, including goodwill.goodwill is deemed not to be impaired. To estimate the fair value of the reporting units,unit, we use a discounted cash flow model and data regarding market comparables. The valuation process requires significant judgment and involves the use of significant estimates and assumptions. These assumptions include cash flow projections, estimated cost of capital and the selection of peer companies and relevant multiples. Because significant assumptions and estimates are used in projecting future cash flows, choosing peer companies and selecting relevant multiples, actual results may differ from our estimates under different assumptions or conditions. If


Credit Losses
The CECL methodology, which became effective on January 1, 2020, requires us to estimate lifetime expected credit losses by incorporating historical loss experience, as well as current and future economic conditions over a reasonable and supportable period beyond the estimated fair valuebalance sheet date. The adoption of CECL resulted in the recognition of reserves relating to our loss sharing guarantee provided to Fannie Mae under the DUS Program which was previously accounted for under the incurred loss model, which generally required that a reporting unit exceeds its carrying value, goodwillloss be incurred before it was recognized. Additional reserves were recognized for our receivables from customers including certain employee receivables carried at amortized cost.

The expected credit loss is deemed notmodeled based on our historical loss experience adjusted to be impaired. If the carrying value exceeds estimated fair value, there is an indication of potential impairment and the second step is performed to measure thereflect current conditions. A significant amount of potential impairment.

The second stepjudgment is required in the determination of the process involvesappropriate reasonable and supportable period, the calculationmethodology used to incorporate current and future macroeconomic conditions, determination of an implied fair valuethe probability of goodwill for each reporting unit forand exposure at default, all of which step one indicated a potential impairment may exist. The implied fair value of goodwill is determined byare ultimately used in measuring the excessquantitative components of our reserves. Beyond the estimated fair valuereasonable and supportable period, we estimate expected credit losses using our historical loss rates. We also consider whether to adjust the quantitative reserves for certain external and internal qualitative factors, which consequentially may increase or decrease the reserves for credit losses and receivables. In order to estimate credit losses, assumptions about current and future economic conditions are incorporated into the model using multiple economic scenarios that are weighted to reflect the conditions at each measurement date.


During the six months ended June 30, 2022, there was a decrease of the reporting unit as calculated$0.1 million in step one, over the estimated fair values of the individual assets, liabilitiesour reserves. These reserves were based on macroeconomic forecasts are critical inputs into our model and identified intangibles. Eventsmaterial movements in variables such as, economic weakness, significant declines in operating results of reporting units,the U.S. unemployment rate and U.S. GDP growth rate could significantly affect our estimated expected credit losses. These macroeconomic forecasts, under different conditions or significant changes to critical inputs of the goodwill impairment test (e.g.,using different assumptions or estimates of cash flows or cost of capital) could cause the estimated fair value of our reporting units to decline, which could result in an impairmentsignificantly different changes in reserves for credit losses. It is difficult to estimate how potential changes in specific factors might affect the overall reserves for credit losses and current results may not reflect the potential future impact of goodwill in the future.

macroeconomic forecast changes.


Income Taxes

Newmark accounts for income taxes using the asset and liability method as prescribed in U.S. GAAP guidance, Income Taxes.Taxes. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to basis differences between theour accompanying unaudited condensed consolidated financial statement carrying amounts of existing assets and liabilities and their respective tax basis. Certain of Newmark’s entities are taxed as U.S. partnerships and are subject to the Unincorporated Business Tax (“UBT”)UBT in New York City. Therefore, the tax liability or benefit related to the partnership income or loss except for UBT rests with the partners, rather than the partnership entity. As such, the partners’ tax liability or benefit is not reflected in Newmark’sour accompanying unaudited condensed consolidated financial statements. The tax-related assets, liabilities, provisions or benefits included in Newmark’sour accompanying unaudited condensed consolidated financial statements also reflect the results of the entities that are taxed as corporations, either in the U.S. or in foreign jurisdictions.

Newmark’s income taxes as presented are calculated on a separate return basis, although Newmark’s operations have historically been included in BGC’s U.S. federal and state tax returns or separate non-U.S. jurisdictions tax returns. As Newmark operations in many jurisdictions are unincorporated commercial units of BGC and its subsidiaries, stand-alone tax returns have not been filed for the operations in these jurisdictions. Accordingly, Newmark’s tax results as presented are not necessarily reflective of the results that Newmark would have generated on a stand-alone basis.


Newmark provides for uncertain tax positions based upon management’s assessment of whether a tax benefit is more likely than not to be sustained upon examination by tax authorities. Management is required to determine whether a tax position is more likely than not to be sustained upon examination by tax authorities, including resolution of any related appeals or litigation processes, based on the technical merits of the position. Because significant assumptions are used in determining whether a tax benefit is more likely


than not to be sustained upon examination by tax authorities, actual results may differ from Newmark’s estimates under different assumptions or conditions. Newmark recognizes interest and penalties related to uncertain tax positions in “Provision for income taxes” in Newmark’sour accompanying unaudited condensed consolidated statements of operations.


A valuation allowance is recorded against deferred tax assets if it is deemed more likely than not that those assets will not be realized. In assessing the need for a valuation allowance, Newmark considers all available evidence, including past operating results, the existence of cumulative losses in the most recent fiscal years, estimates of future taxable income and the feasibility of tax planning strategies.


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The measurement of current and deferred income tax assets and liabilities is based on provisions of enacted tax laws and involves uncertainties in the application of tax regulations in the U.S. and other tax jurisdictions. Because Newmark’s interpretation of complex tax law may impact the measurement of current and deferred income taxes, actual results may differ from these estimates under different assumptions regarding the application of tax law.

On December 22, 2017, the SEC issued Staff Accounting Bulletin (“SAB 118”), which provides guidance on accounting for tax effects of the 2017 Tax Act. SAB 118 provides a measurement period that should not extend beyond one year from the 2017 Tax Act enactment date for companies to complete the accounting under ASC 740. In accordance with SAB 118, a company must reflect the income tax effects of those aspects of the 2017 Tax Act for which the accounting under ASC 740 is complete. To the extent that a company’s accounting for certain income tax effects of the 2017 Tax Act is incomplete but it is able to determine a reasonable estimate, it must record a provisional estimate to be included in the financial statements. If a company cannot determine a provisional estimate to be included in the financial statements, it should continue to apply ASC 740 on the basis of the provision of the tax laws that were in effect immediately before the enactment of the 2017 Tax Act. While Newmark is able to make reasonable estimates of the impact of the reduction in corporate rate and the deemed repatriation transition tax, the final impact of the 2017 Tax Act may differ from these estimates, due to, among other things, changes in interpretations, additional guidance that may be issued, unexpected negative changes in business and market conditions that could reduce certain tax benefits, and actions taken by Newmark as a result of the 2017 Tax Act.


Derivative Financial Instruments

We have loan commitments to extend credit to third parties. The commitments to extend credit are for mortgage loans at a specific rate (rate lock commitments). These commitments generally have fixed expiration dates or other termination clauses and may require a fee. We are committed to extend credit to the counterparty as long as there is no violation of any condition established in the commitment contracts.


We simultaneously enter into an agreement to deliver such mortgages to third-party investors at a fixed price (forward(“forward sale contracts)contracts”).


Both the commitment to extend credit and the forward sale commitment qualify as derivative financial instruments. We recognize all derivatives on theour accompanying unaudited condensed consolidated balance sheets as assets or liabilities measured at fair value. The change in the derivatives fair value is recognized in current period earnings.

Recent Accounting Pronouncements


Newmark entered into variable postpaid forward contracts as a result of the Nasdaq Forwards. These contracts qualify as derivative financial instruments. The Nasdaq Forwards provide Newmark with the ability to redeem the EPUs for Nasdaq stock, and as these instruments are not legally detachable, they represent single financial instruments. The financial instruments’ EPU redemption feature for Nasdaq shares is not clearly and closely related to the economic characteristics and risks of Newmark’s EPU equity host instruments, and, therefore, it represents an embedded derivative that is required to be bifurcated and recorded at fair value on our accompanying unaudited condensed consolidated balance sheets, with all changes in fair value recorded as a component of “Other income (loss), net” on our accompanying unaudited condensed consolidated statements of operations. See Note 1—“Organization and Basis of Presentation,”11 — “Derivatives”, to our accompanying unaudited condensed consolidated financial statements in Part I, Item 1 of this Quarterly Report on Form 10-Q for additional information.

Recent Accounting Pronouncements
See Note 1 — “Organization and Basis of Presentation”, to our accompanying unaudited condensed consolidated financial statements in Part I, Item 1 of this Quarterly Report on Form 10-Q, for information regarding recent accounting pronouncements.


Capital Deployment Priorities, Dividend Policy

and Repurchase and Redemption Program


Our board of directors has authorized anear-term capital allocation priorities are to return capital to stockholders through share and unit repurchases and to invest in growth and margin expansion at attractive returns.

Traditionally, our dividend policy provided that reflects our intentionwe expect to pay a quarterly cash dividend starting with the first quarter of 2018. Any dividends to our common stockholders will be calculated based on our expected post-tax Adjusted Earnings per fully diluted share, as a measure of net income for the year. See below for a definition of “post-tax Adjusted Earnings” per fully diluted share.

We currently expect that, in any year, our aggregate quarterly dividends will be equal to or less than our estimate at the end of the first quarter of such year of 25% of our post-tax Adjusted Earnings per fully diluted share to our common stockholders for such year. The declaration, payment, timing and amount of any future dividends payable by us will be at the discretion of our board of directors; provided that any dividend to our common stockholders that would result in the dividendsshare. Please see below for a year exceeding 25%detailed definition of our post-tax Adjusted Earnings per fully diluted share for such year shall require the consent of the holder of a majority of the Newmark Holdings exchangeable limited partnership interests, which is currently Cantor.


For the first quarter of 2018, our board of directors declared a dividend of 9 cents per share based on management’s current expectation of our post-tax Adjusted Earning per fully diluted share for the year, and has indicated that it expects such dividend to remain consistent for the full year. To the extent that 25% of our post-tax Adjusted Earnings per fully diluted share for the year exceeds this dividend on an annualized basis (i.e. an expected aggregate of $0.36 for four quarters), we do not expect that our board of directors will increase the amount of the quarterly dividend payment during the year, or make downward adjustments in the event of a shortfall, although no assurance can be given that adjustments will not be made during the year. We have indicated that we expect to announce the annual expected dividend rateshare. Beginning in the first quarter of 2020, and for all of the quarterly periods in 2020 and 2021, the Board reduced the quarterly dividend to $0.01 per share out of an abundance of caution in order to strengthen the Company’s balance sheet as the real estate markets faced difficult and unprecedented macroeconomic conditions due to the COVID-19 pandemic. Additionally, beginning with the first quarter 2020, Newmark Holdings reduced its distributions to or on behalf of its partners. In the first quarter of 2022, the Board increased the quarterly dividend to $0.03 per share. In addition, Newmark increased the after-tax distributions to its partners to $0.06 per unit. The exchange ratio was adjusted in accordance with the terms of the Separation and Distribution Agreement due to any difference in our dividend policy and the distribution policy of Newmark Holdings. See Note 6 “Stock Transactions and Unit Redemptions” to our accompanying unaudited condensed consolidated financial statements in Part I, Item 1 of this Quarterly Report on Form 10-Q for more information.


As Newmark’s financial condition has improved substantially year-over-year, and as the economy has rebounded from the lows it reached during the pandemic, the Company has repurchased and/or redeemed a meaningful number of shares/units in 2021 and thus far in 2022 as part of its overall capital return policy.

Any dividends, if and when declared by our Board, will be paid on a quarterly basis. The dividend to our common stockholders is expected to be calculated based on a number of factors, including post-tax Adjusted Earnings allocated to us and generated over the fiscal quarter ending prior to the record date for the dividend. No assurance can be made, however, that a dividend will be paid each year.

quarter. The declaration, payment, timing, and amount of any future dividends payable by us will be at the sole discretion of our boardBoard. With respect to any distributions which are declared, amounts paid to or on behalf of directors.

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partners will at least cover their related tax payments. Whether any given post-tax amount is equivalent to the amount received by a stockholder also on an after-tax basis depends upon stockholders’ and partners’ domiciles and tax status.

We received 6,222,340 Nasdaq shares worth $1,093.9 million as of June 30, 2021. On July 2, 2021, we settled the third and fourth Nasdaq Forwards with 944,329 Nasdaq shares worth $166.0 million and retained 5,278,011 Nasdaq shares. In connection with the 2021 Equity Event, we used $484.4 million, of which $203.5 million was to reduce our fully diluted share count by 16.3 million. From July 2021 through March 2022, we sold all of the Nasdaq shares.

We are a holding company, with no direct operations, and therefore we are able to pay dividends only from our available cash on hand and funds received from distributions from Newmark OpCo. Our ability to pay dividends may also be limited by regulatory or other considerations as well as by covenants contained in financing or other agreements. In addition, under Delaware law, our, dividends may be payable only out of surplus, which is our net assets minus our capital (as defined under Delaware law), or, if we have no surplus, out of our net profits for the fiscal year in which the dividend is declared and/or the preceding fiscal year. Accordingly, any unanticipated accounting, tax, regulatory or other charges against net income may adversely affect our ability to declare and pay dividends. While we intend to declare and pay dividends quarterly, there can be no assurance that our board of directorsBoard will declare dividends at all or on a regular basis or that the amount of our dividends will not change.



Non-GAAP Financial Measures

Newmark uses non-GAAP financial measures that differ from the most directly comparable measures calculated and presented in accordance with Generally Accepted Accounting Principles in the United States ("GAAP"). Non-GAAP financial measures used by the Company include "Adjusted Earnings before noncontrolling interests and taxes", which is used interchangeably with "pre-tax Adjusted Earnings"; "Post-tax Adjusted Earnings to fully diluted shareholders", which is used interchangeably with "post-tax Adjusted Earnings"; "Adjusted EBITDA"; and "Liquidity". The definitions of these terms are below.

Adjusted Earnings Defined


Newmark uses non-GAAP financial measures, including but not limited“Adjusted Earnings before noncontrolling interests and taxes” and “Post-tax Adjusted Earnings to “pre-tax Adjusted Earnings” and “post-tax Adjusted Earnings,”fully diluted shareholders” which are supplemental measures of operating results that are used by management to evaluate the financial performance of the Company and its consolidated subsidiaries. Newmark believes that Adjusted Earnings best reflect the operating earnings generated by the Company on a consolidated basis and are the earnings which management considers available for, among other things, dividends and/or distributions to Newmark’s common stockholders and holders of Newmark Holdings partnership units during any period.

when managing its business.


As compared with items such as “Income (loss) before income taxes and noncontrolling interests” and “Net income (loss) for fully diluted shares” allboth prepared in accordance with GAAP, Adjusted Earnings calculations primarily exclude certain non-cash compensationitems and other expenses that generally do not involve the receipt or outlay of cash by the Company and/or which do not dilute existing stockholders, as described below.stockholders. In addition, Adjusted Earnings calculations exclude certain gains and charges that management believes do not best reflect the ordinary operating results of Newmark

Adjustments Made to Calculate Pre-TaxNewmark. Adjusted Earnings

Newmark defines pre-tax is calculated by taking the most comparable GAAP measures and making adjustments for certain items with respect to compensation expenses, non-compensation expenses, and other income, as discussed below.


Calculations of Compensation Adjustments for Adjusted Earnings and Adjusted EBITDA

Treatment of Equity-Based Compensation under Adjusted Earnings and Adjusted EBITDA

The Company’s Adjusted Earnings and Adjusted EBITDA measures exclude all GAAP charges included in the line item “Equity-based compensation and allocations of net income to limited partnership units and FPUs” (or “equity-based compensation” for purposes of defining the Company’s non-GAAP results) as recorded on the Company’s GAAP income (loss) from operations before incomeConsolidated Statements of Operations and GAAP Consolidated Statements of Cash Flows. These GAAP equity-based compensation charges reflect the following items:
•Charges with respect to grants of exchangeability, which reflect the right of holders of limited partnership units with no capital accounts, such as LPUs and PSUs, to exchange these units into shares of common stock, as well as cash paid with respect to taxes withheld or expected to be owed by the unit holder upon such exchange. The withholding taxes related to the exchange of certain non-exchangeable units without a capital account into either common shares or units with a capital account may be funded by the redemption of preferred units such as PPSUs.
•Charges with respect to preferred units. Any preferred units would not be included in the Company’s fully diluted share count because they cannot be made exchangeable into shares of common stock and noncontrolling interestare entitled only to a fixed distribution. Preferred units are granted in subsidiaries, excludingconnection with the grant of certain items such as:

limited partnership units that

Non-cash asset impairment charges, if any;

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may be granted exchangeability or redeemed in connection with the grant of shares of common stock at ratios designed to cover any withholding taxes expected to be paid. This is an acceptable alternative to the common practice among public companies of issuing the gross amount of shares to employees, subject to cashless withholding of shares, to pay applicable withholding taxes.

•GAAP equity-based compensation charges with respect to the grant of an offsetting amount of common stock or partnership units with capital accounts in connection with the redemption of non-exchangeable units, including PSUs and LPUs.

•Charges related to amortization of RSUs and limited partnership units.
•Charges related to grants of equity awards, including common stock or partnership units with capital accounts.
•Allocations of net income to limited partnership units;

units and FPUs. Such allocations represent the pro-rata portion of post-tax GAAP earnings available to such unit holders.

Non-cashThe amount of certain quarterly equity-based compensation charges related tois based upon the amortizationCompany’s estimate of intangibles with respect to acquisitions;

such expected charges during the annual period, as described further below under “Methodology for Calculating Adjusted Earnings Taxes”.

Non-cash charges relating to grants of exchangeability to limited partnership units.

Virtually all of the Company’sNewmark’s key executives and producers have partnershipequity or equitypartnership stakes in the Company and its subsidiaries and generally receive deferred equity or limited partnership units as part of their compensation. A significant percentage of Newmark’s fully diluted shares are owned by the Company’sits executives, partners, and employees. The Company issues limited partnership units andas well as other forms of equity-based compensation, including grants of exchangeability to unit holdersinto shares of common stock, to provide liquidity to Newmark’sits employees, to align the interests of the Company’sits employees and management with those of common stockholders, to help motivate and retain key employees, and to encourage a collaborative culture that drives cross-selling and revenue growth.

When


All share equivalents that are part of the Company issues limited partnershipCompany’s equity-based compensation program, including REUs, PSUs, LPUs, and other units the shares ofthat may be made exchangeable into common stock, into whichas well as RSUs (which are recorded using the units can be ultimately exchangedtreasury stock method), are included in Newmark’sthe fully diluted share count for Adjusted Earningswhen issued or at the beginning of the subsequent quarter after the date of grant. Newmark includes such shares in the Company’s fully diluted share count when the unit is granted because the unit holder isGenerally, limited partnership units other than preferred units are expected to be paid a pro-rata distribution based on Newmark’s calculation of Adjusted Earnings per fully diluted shareshare.

Certain Other Compensation-Related Items under Adjusted Earnings and becauseAdjusted EBITDA

Newmark also excludes various other GAAP items that management views as not reflective of the holder could be grantedCompany’s underlying performance for the ability to exchange their units into sharesgiven period from its calculation of common stock in the future. Non-cash chargesAdjusted Earnings and Adjusted EBITDA. These may include compensation-related items with respect to grantscost-saving initiatives, such as severance charges incurred in connection with headcount reductions as part of exchangeability reflect the value of the shares of common stock into which the unit is exchangeable when the unit holder is granted exchangeability not previously expensed in accordance with GAAP. broad restructuring and/or cost savings plans.

The amount of non-cash charges relating to


grants of exchangeability the Company uses to calculate pre-tax Adjusted Earnings on a quarterly basis is based upon the Company’s estimate of expected grants of exchangeability to limited partnership units during the annual period, as described further below under “Adjustments Made to Calculate Post-Tax Adjusted Earnings.”

Adjusted Earnings also excludes compensation charges related to non-cash GAAP gains attributable to originated mortgage servicing rights (which Newmark referrefers to as “OMSRs”) because these gains are also excluded from Adjusted Earnings and Adjusted EBITDA.


Excluded Compensation-Related Items with Respect to the 2021 Equity Event under Adjusted Earnings and Adjusted EBITDA (Beginning in Third Quarter 2021, as Updated)

Newmark does not view the GAAP compensation charges related to 2021 Equity Event that were not equity-based compensation as being reflective of its ongoing operations (the "Impact of the 2021 Equity Event"). These consisted of charges relating to cash paid to independent contractors for their withholding taxes and the cash redemption of HDUs. These were recorded as expenses based on Newmark's previous non-GAAP results, but were excluded in the recast non-GAAP results beginning in the third quarter of 2021 for the following reasons:

•But for the 2021 Equity Event, the items comprising such charges would have otherwise been settled in shares and been recorded as equity-based compensation in future periods, as is the Company's normal practice. Had this occurred, such amounts would have been excluded from Adjusted Earnings and Adjusted EBITDA, and would also have resulted in higher fully diluted share counts, all else equal.
•Newmark views the fully diluted share count reduction related to the 2021 Equity Event to be economically similar to the common practice among public companies of issuing the net amount of common shares to employees for their vested stock-based compensation, selling a portion of the gross shares pay applicable withholding taxes, and separately making open market repurchases of common shares.
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•There was nothing comparable to the 2021 Equity Event in 2020 and nothing similar is currently contemplated after 2021. Accordingly, the only prior period recast with respect to the 2021 Equity Event was the second quarter of 2021.

Calculation of Non-Compensation Expense Adjustments for Adjusted Earnings

Newmark’s calculation of pre-tax Adjusted Earnings excludes non-cash GAAP amortizationcharges related to the following:
•Amortization of intangibles with respect to acquisitions.
•Amortization of mortgage servicing rights (which the CompanyNewmark refers to as “MSRs”). Under GAAP, the Company recognizes OMSRs gains equal to the fair value of servicing rights retained on mortgage loans originated and sold. Subsequent to the initial recognition at fair value, MSRs are carried at the lower of amortized cost or fair value and amortized in proportion to the net servicing revenue expected to be earned. However, it is expected that any cash received with respect to these servicing rights, net of associated expenses, will increase Adjusted Earnings (andand Adjusted EBITDA)EBITDA in future periods.

Additionally,

•Various other GAAP items that management views as not reflective of the Company’s underlying performance for the given period, including non-compensation-related charges incurred as part of broad restructuring and/or cost savings plans. Such GAAP items may include charges for exiting leases and/or other long-term contracts as part of cost-saving initiatives, as well as non-cash impairment charges related to assets, goodwill and/or intangibles created from acquisitions.

Non-Cash Adjustment for Originated Mortgage Servicing Rights Revenue for Adjusted Earnings

Newmark's calculation of pre-tax Adjusted Earnings excludes non-cash GAAP gains attributable to OMSRs. Beginning in the fourth quarter of 2020, OMSRs are no longer included in non-compensation adjustments for Adjusted Earnings but instead shown as a separate line item in the Company's “Reconciliation of GAAP Net Income Available to Common Stockholders to Adjusted Earnings Before Noncontrolling Interests and Taxes and GAAP Fully Diluted EPS to Post-Tax Adjusted EPS”. This presentation has no impact on previously reported Adjusted Earnings.

Calculation of Other (income) losses for Adjusted Earnings and Adjusted EBITDA

Adjusted Earnings calculations also exclude certain unusual,other non-cash, non-dilutive, and/or non-economic items, which may, in some periods, include:
•Unusual, one-time, non-ordinary or non-recurring items, if any. These items are excluded fromgains or losses.
•Non-cash GAAP asset impairment charges.
•The impact of any unrealized non-cash mark-to-market gains or losses on “Other income (loss)” related to the variable share forward agreements with respect to Newmark’s receipt of the Nasdaq payments in 2021 and 2022 and the 2020 Nasdaq payment (the “Nasdaq Forwards”).
•Mark-to-market adjustments for non-marketable investments.
•Certain other non-cash, non-dilutive, and/or non-economic items.

Due to the sale of Nasdaq’s U.S. fixed income business in the second quarter of 2021, the Nasdaq Earn-out and related Forward settlements were accelerated, less certain previously disclosed adjustments. Because these shares were originally expected to be received over a 15 year period ending in 2027, the Earn-out had been included in calculations of Adjusted Earnings becauseand Adjusted EBITDA under Newmark's previous non-GAAP methodology. Due to the acceleration of the Earn-out and the Nasdaq Forwards, the Company now views results excluding suchcertain items asrelated to the Earn-out to be a better reflection of the underlying performance of Newmark’s ongoing ordinary operationsoperations. Therefore, beginning with the third quarter of Newmark. Newmark’s definition of2021, other (income) losses for Adjusted Earnings and Adjusted EBITDA also excludes certainthe impact of the below items. These items may collectively be referred to as the “Impact of Nasdaq”.

•Realized gains related to the accelerated receipt on June 25, 2021 of Nasdaq shares.
•Realized gains or losses and chargesunrealized mark-to-market gains or losses with respect to acquisitions, dispositions,Nasdaq shares received prior to the Earn-out acceleration.
•Dividend income on Nasdaq shares.
•The impact of any unrealized non-cash mark-to-market gains or resolutionslosses on “Other income (loss)” related to the variable share forward agreements with respect to Newmark’s receipt of litigation. Management believes that excludingthe Nasdaq payments in 2021 and 2022 and the 2020 Nasdaq payment (the “Nasdaq Forwards”). This item was historically excluded under the previous non-GAAP definitions.
•Other items related to the Earn-out

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Upon further consideration, Newmark's calculations of non-GAAP “Other income (loss)” will continue to include dividend income on Nasdaq shares, as these dividends contribute to cash flow and are generally correlated to Newmark's interest expense on short term borrowing against such gainsshares. All other things being equal, as Newmark sells Nasdaq shares, both its interest expense and charges also best reflects the ongoing operating performance of Newmark.

Adjustments Made to Calculate Post-Taxdividend income will decline.


Methodology for Calculating Adjusted Earnings

Because Taxes


Although Adjusted Earnings are calculated on a pre-tax basis, Newmark also intends to reportreports post-tax Adjusted Earnings to fully diluted stockholders. Newmarkshareholders. The Company defines post-tax Adjusted Earnings to fully diluted stockholdersshareholders as pre-tax Adjusted Earnings reduced by the non-GAAP tax provision described below.

below and net income (loss) attributable to noncontrolling interest for Adjusted Earnings.


The Company calculates its tax provision for post-tax Adjusted Earnings using an annual estimate similar to how it accounts for its income tax provision under GAAP. To calculate the quarterly tax provision under GAAP, Newmark estimates its full fiscal year GAAP income (loss) from operations before income taxes and noncontrolling interests in subsidiariesand taxes and the expected inclusions and deductions for income tax purposes, including expected grants of exchangeability to limited partnership unitsequity-based compensation during the annual period. The resulting annualized tax rate is applied to Newmark’s quarterly GAAP income (loss) from operations before income taxes and noncontrolling interests in subsidiaries.interests. At the end of the annual period, the Company updates its estimate to reflect the actual tax amounts owed for the period.


To determine the non-GAAP tax provision, Newmark first adjusts pre-tax Adjusted Earnings by recognizing any, and only, amounts for which a tax deduction applies under applicable law. The amounts include non-cash charges with respect to grants of exchangeability,equity-based compensation; certain charges related to employee loan forgiveness,forgiveness; certain net operating loss carryforwards when taken for statutory purposes,purposes; and certain charges related to tax goodwill amortization. These adjustments may also reflect timing and measurement differences, including treatment of employee loans,loans; changes in the value of units between the dates of grants of exchangeability and the date of actual unit exchange,exchange; variations in the value of certain deferred tax assetsassets; and liabilities and the different timing of permitted deductions for tax under GAAP and statutory tax requirements.


After application of these previously described adjustments, the result is the Company’s taxable income for Newmark’sits pre-tax Adjusted Earnings, to which the CompanyNewmark then applies the statutory tax rates. This amount is the Company’srates to determine its non-GAAP tax provision. Newmark views the effective tax rate on pre-tax Adjusted Earnings as equal to the amount of Newmark’sits non-GAAP tax provision divided by the amount of pre-tax Adjusted Earnings.


Generally, the most significant factor affecting this non-GAAP tax provision is the amount of non-cash charges relating to the grants of exchangeability to limited partnership units.equity-based compensation. Because the non-cash charges relating to the grants of exchangeabilityequity-based compensation are deductible in accordance with applicable tax laws, increases in exchangeabilitysuch charges have the effect of lowering the Company’s non-GAAP effective tax rate and thereby increasing Newmark’sits post-tax Adjusted Earnings.

Management uses post-tax Adjusted Earnings in part to help it evaluate, among other things, the overall performance of the business, to make decisions with respect to the Company’s operations, and to determine the amount of dividends payable to common stockholders and distributions payable to holders of limited partnership units.


Newmark incurs income tax expenses based on the location, legal structure, and jurisdictional taxing authorities of each of its subsidiaries. Certain of the Company’s entities are taxed as U.S. partnerships and are subject to the Unincorporated Business Tax (“UBT”) in New York City. Any U.S. federal and state income tax liability or benefit related to the partnership income or loss, with the exception of UBT, rests with the unit holders rather than with the partnership entity. The Company’s consolidated financial statements include U.S. federal, state, and local income taxes on the Company’s allocable share of the U.S. results of operations. Outside of the U.S., Newmark is expected to operate principally through subsidiary corporations subject to local income taxes. For


these reasons, taxes for Adjusted Earnings are expected to be presented to show the tax provision the consolidated Company would expect to pay if 100 percent100% of earnings were taxed at global corporate rates.


Calculations of Pre-TaxPre- and Post-Tax Adjusted Earnings per Share

Newmark’s pre- and post-tax Adjusted Earnings per share calculations assume either that:

•The fully diluted share count includes the shares related to any dilutive instruments, but excludes the associated interest expense, net of tax, when the impact would be dilutive; or

•The fully diluted share count excludes the shares related to these instruments, but includes the associated interest expense, net of tax.


The share count for Adjusted Earnings excludes certain shares and share equivalents expected to be issued in future periods but not yet eligible to receive dividends and/or distributions. Each quarter, the dividend payable to Newmark’s common stockholders, if any, is expected to be determined by the Company’s boardBoard of directorsDirectors with reference to a number of factors, including post-tax Adjusted Earnings per fully diluted share. Newmark may also pay a pro ratapro-rata distribution of net income to limited partnership units, as well as to Cantor for its noncontrolling interest. The amount of this net income, and therefore of these payments per unit, would be determined using the above definition of pre-tax Adjusted Earnings using the fully dilutedper share count. on a pre-tax basis.
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The declaration, payment, timing, and amount of any future dividends payable by the Company will be at the discretion of its boardBoard of directorsDirectors using the fully diluted share count.

OUR ORGANIZATIONAL STRUCTURE

Our Restructuring

We In addition, the non-cash preferred dividends are excluded from Adjusted Earnings per share as Newmark Group, Inc.,expected to redeem the related exchangeable preferred limited partnership units (“EPUs”) with Nasdaq shares.


Management Rationale for Using Adjusted Earnings
Newmark’s calculation of Adjusted Earnings excludes the items discussed above because they are either non-cash in nature, because the anticipated benefits from the expenditures are not expected to be fully realized until future periods, or because the Company views results excluding these items as a Delaware corporation. We were formed as NRE Delaware, Inc. on November 18, 2016 and changed our name to Newmark Group, Inc. on October 18, 2017. We were formed for the purpose of becoming a public company conducting the operations of BGC Partners’ Real Estate Services segment, including Newmark and Berkeley Point.

Through the following series of transactions prior to and following the completionbetter reflection of the Separation and our IPO, we became a separate publicly traded company. A majorityunderlying performance of our issued and outstanding shares of common stock are held by BGC Partners. If BGC Partners completesNewmark’s ongoing operations. Management uses Adjusted Earnings in part to help it evaluate, among other things, the spin-off, a majority of our issued and outstanding shares of common stock will be held by the stockholders of BGC Partners asoverall performance of the date of the spin-off.

PriorCompany’s business, to make decisions with respect to the completionCompany’s operations, and to determine the amount of our IPO, the separationdividends payable to common stockholders and contribution pursuant to which members of the BGC Group transferred to us substantially all of the assets and liabilities of the BGC Partners’ Real Estate Services segment, including Newmark, Berkeley Point and the right to receive the remainder of the Nasdaq payment (the “Contribution”), various types of interests of Newmark Holdings were issueddistributions payable to holders of interests of BGC Holdings in proportion to such interests of BGC Holdings held by such holders immediately prior thereto.

Concurrently with the Separation and Contribution, we entered into the transactions described under “Assumption and Repayment of Indebtedness” below.

In March 2018, BGC Partners made an additional investment in us as described under “BGC Partners March 2018 Investment” below.

BGC Partners may distribute the shares of our common stock held thereby to its stockholders as described under “The Distribution” below.

The types of interests in Newmark, Newmark Holdings and Newmark OpCo outstanding following the completion of the these transactions are described under “Current Structure of Newmark” below.

The Separation and Contribution

Prior to the completion of the IPO, pursuant to the Separation and Distribution Agreement, members of the BGC Group transferred to us substantially all of the assets and liabilities of the BGC group relating to BGC Partners’ Real Estate Services segment, including Newmark, Berkeley Point and the right to receive the remainder of the Nasdaq Earn-out. For a description of the Nasdaq Earn-out, see “Nasdaq Transaction.” Prior to the separation, the BGC Group held all of the historical assets and liabilities related to our business.

In connection with the Separation, Newmark Holdings limited partnership interests, Newmark Holdings founding partner interests, Newmark Holdings working partner interestsunits. Dividends payable to common stockholders and Newmark Holdings limited partnership units were distributeddistributions payable to holders of


BGC Holdings limited partnership interests, BGC Holdings founding partner interests, BGC Holdings working partner interests and BGC Holdings limited partnership units in proportion to such interests of BGC Holdings held by such holders immediately prior to the Separation.

We also entered into a tax matters agreement with BGC Partners that governs the parties’ respective rights, responsibilities and obligations after the Separation with respect to taxes, tax attributes, the preparation and filing of tax returns, the control of audits and other tax proceedings, tax elections, assistance and cooperation in respect of tax matters, procedures and restrictions relating to the Distribution, if any, and certain other tax matters. We also entered into an administrative services agreement with Cantor, which governs the provision by Cantor of various administrative services to us, and our provision of various administrative services to Cantor, at a cost equal to (1) the direct cost that the providing party incurs in performing those services, including third-party charges incurred in providing services, plus (2) a reasonable allocation of other costs determined in a consistent and fair manner so as to cover the providing party’s appropriate costs or in such other manner as the parties agree. We also entered into a transition services agreement with BGC Partners, which governs the provision by BGC Partners of various administrative services to us, and our provision of various administrative services to BGC Partners, on a transitional basis (with a term of up to two years following the Distribution) and at a cost equal to (1) the direct cost that the providing party incurs in performing those services, including third-party charges incurred in providing services, plus (2) a reasonable allocation of other costs determined in a consistent and fair manner so as to cover the providing party’s appropriate costs or in such other manner as the parties agree.

Assumption and Repayment of Indebtedness

In connection with the Separation and prior to the closing of our IPO, we assumed from BGC Partners the Term Loan and the Converted Term Loan. Newmark OpCo also assumed from BGC U.S. OpCo the BGC Notes. We contributed all of the net proceeds of our IPO to Newmark OpCo in exchange for a number of units representing Newmark OpCo limited partnership interests equal to the number of shares issued by us in the IPO. Newmark OpCo used all of such net proceeds to partially repay intercompany indebtedness owed by Newmark OpCo to us in respect of the Term Loan (which intercompany indebtedness was originally issued by BGC U.S. OpCo and was assumed by Newmark OpCo in connection with the separation). We used all of such repayment from Newmark OpCo to partially repay the Term Loan. The Term Loan had a maturity date of September 8, 2019, and was repaid in full on March 9, 2018. Pursuant to the Term Loan, in the event that any member of the Newmark Group received net proceeds from the incurrence of indebtedness for borrowed money or an equity issuance (in each case subject to certain exceptions), Newmark OpCo was obligated to use such net proceeds to repay the remaining intercompany indebtedness owed by Newmark OpCo to us in respect of the Term Loan (which in turn we were obligated to the remaining amount outstanding on the Term Loan), and thereafter, to repay the remaining intercompany indebtedness owed by Newmark OpCo to us in respect of the Converted Term Loan (which in turn we will use to repay the remaining amount outstanding on the Converted Term Loan). Following the repayment of the Term Loan and the Converted Term Loan, in the event that any member of the Newmark Group receives net proceeds from the incurrence of indebtedness for borrowed money (subject to certain exceptions), Newmark OpCo will be obligated to use such net proceeds to repay the BGC Notes. In addition, we will be obligated to repay any remaining amounts under the BGC Notes prior to the Distribution.

On March 19, 2018, Newmark and BGC Partners entered into an Amended and Restated Intercompany Credit Agreement and on the same date Newmark borrowed $150.0 million from BGC pursuant to the facilities under the Intercompany Credit Agreement.  The interest rate as of March 31, 2018 was LIBOR plus 3.25%, or 4.99%, which may be adjusted based on the higher of BGC’s or Newmark’s short-term borrowing rate then in effect at such time plus 100 basis points, or such other interest rate as may be mutually agreed between BGC and Newmark.. Newmark has transferred these proceeds to its restricted cash account pledged for the benefit of Fannie Mae. As of March 31, 2018, Newmark’s total net borrowings under the Intercompany Credit Agreement are $202.0 million.

BGC Partners March 2018 Investment

On March 7, 2018, BGC Partners and its operating subsidiaries purchased 16,606,726 newly issued exchangeable limited partnership units of Newmark Holdings for an aggregate investment of approximately $242.0 million. The price per unit was based on the $14.57 closing price of our Class A common stock on March 6, 2018 as reported on the NASDAQ Global Select Market.  These units are exchangeable, at BGC Partners’ discretion, into either shares of our Class common stock or our Class B common stock, par value $0.01 per share.  Following such issuance, BGC Partners owned 83.4% of our 138.6 million shares of Class A common issued and outstanding on March 7, 2018 and 100% of our 15.8 million issued and outstanding shares of Class B common stock. Including the newly issued exchangeable limited partnership units of Newmark Holdings, BGC Group owned 59.2% of the 253.0 million fully diluted shares of Newmark outstanding on March 7, 2018.  The balance of our fully diluted share count was owned by the public, Cantor, partners of Newmark Holdings, and employees. Because Newmark limited partnership units are included within “Distributions to stockholders” and “Earnings distributions to limited partnership interests and noncontrolling interests,” respectively, in our accompanying unaudited condensed consolidated statements of cash flows.


The term “Adjusted Earnings” should not entitledbe considered in isolation or as an alternative to GAAP net income (loss). The Company views Adjusted Earnings as a vote until theymetric that is not indicative of liquidity, or the cash available to fund its operations, but rather as a performance measure. Pre- and post-tax Adjusted Earnings, as well as related measures, are exchangednot intended to replace the Company’s presentation of its GAAP financial results. However, management believes that these measures help provide investors with a clearer understanding of Newmark’s financial performance and offer useful information to both management and investors regarding certain financial and business trends related to the Company’s financial condition and results of operations. Management believes that the GAAP and Adjusted Earnings measures of financial performance should be considered together.

For more information regarding Adjusted Earnings, see the sections of the Company’s most recent financial results press release titled “Reconciliation of GAAP Income to Adjusted Earnings and GAAP Fully Diluted EPS to Post-tax Adjusted EPS”, including the related footnotes, for details about how Newmark’s non-GAAP results are reconciled to those under GAAP.

Adjusted EBITDA Defined
Newmark also provides an additional non-GAAP financial performance measure, “Adjusted EBITDA” which it defines as GAAP “Net income (loss) available to common stock, BGC Group’s voting powerstockholders” adjusted for the following items:
•Net income (loss) attributable to noncontrolling interest.
•Provision (benefit) for income taxes.
•OMSR revenue.
•MSR amortization.
•Compensation charges related to OMSRs.
•Other depreciation and amortization.
•Equity-based compensation and allocations of net income to limited partnership units and FPUs.
•Various other GAAP items that management views as not reflective of the Company’s underlying
performance for the given period. These may include compensation-related items with respect to Newmark didcost-saving
initiatives, such as severance charges incurred in connection with headcount reductions as part of broad
restructuring and/or cost savings plans; charges for exiting leases and/or other long-term contracts as part of
cost-saving initiatives; and non-cash impairment charges related to assets, goodwill and/or intangibles created
from acquisitions.
•Other non-cash, non-dilutive, and/or non-economic items, which may, in certain periods, include the impact of any unrealized non-cash mark-to-market gains or losses on “other income (loss)” related to the variable share forward agreements with respect to Newmark’s receipt of the Nasdaq payments in 2021 and 2022 and the 2020 Nasdaq payment (the “Nasdaq Forwards”), as well as mark-to-market adjustments for non-marketable investments.
•Interest expense.

Beginning with the third quarter of 2021, calculation of Adjusted EBITDA will also exclude the “Impact of Nasdaq” and the “Impact of the 2021 Equity Event”, which are defined above.

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Newmark’s calculation of Adjusted EBITDA excludes certain items discussed above because they are either non-cash in nature, because the anticipated benefits from the expenditures are not changeexpected to be fully realized until future periods, or because the Company views excluding these items as a resultbetter reflection of the March 2018 investment.  Ifunderlying performance Newmark’s ongoing operations. The Company’s management believes that its Adjusted EBITDA measure is useful in evaluating Newmark’s operating performance, because the BGC Group werecalculation of this measure generally eliminates the effects of financing and income taxes and the accounting effects of capital spending and acquisitions, which would include impairment charges of goodwill and intangibles created from acquisitions. Such items may vary for different companies for reasons unrelated to exchangeoverall operating performance. As a result, the Company’s management uses this measure to evaluate operating performance and for other discretionary purposes. Newmark believes that Adjusted EBITDA is useful to investors to assist them in getting a more complete picture of the Company’s financial results and operations.

Since Newmark’s Adjusted EBITDA is not a recognized measurement under GAAP, investors should use this measure in addition to GAAP measures of net income when analyzing Newmark’s operating performance. Because not all companies use identical EBITDA calculations, the Company’s presentation of Adjusted EBITDA may not be comparable to similarly titled measures of other companies. Furthermore, Adjusted EBITDA is not intended to be a measure of free cash flow or GAAP cash flow from operations because the Company’s Adjusted EBITDA does not consider certain cash requirements, such units into sharesas tax and debt service payments.

For more information regarding Adjusted EBITDA, see the section of our Class B common stock, the BGC Group wouldCompany’s most recent financial results press release titled “Reconciliation of GAAP Income to Adjusted EBITDA” including the related footnotes, for details about how Newmark’s non-GAAP results are reconciled to those under GAAP EPS.

Timing of Outlook for Certain GAAP and Non-GAAP Items
Newmark anticipates providing forward-looking guidance for GAAP revenues and for certain non-GAAP measures from time to time. However, the Company does not anticipate providing an outlook for other GAAP results. This is because certain GAAP items, which are excluded from Adjusted Earnings and/or Adjusted EBITDA, are difficult to forecast with precision before the end of each period. The Company therefore believes that it is not possible for it to have 95.0%the required information necessary to forecast GAAP results or to quantitatively reconcile GAAP forecasts to non-GAAP forecasts with sufficient precision without unreasonable efforts. For the same reasons, the Company is unable to address the probable significance of our total voting power as of March 31, 2018 (92.6% if the BGC Group wereunavailable information. The relevant items that are difficult to exchange such units into shares of our Class A common stock).


Immediately after giving effectpredict on a quarterly and/or annual basis with precision and may materially impact the Company’s GAAP results include, but are not limited to the March 7, 2018 investment, the BGC Group owned an aggregate 19.2% of the economic interest in Newmark Holdings and an aggregate 59.8% indirect economic interest in Newmark OpCo. Immediately after giving effect to the March 7, 2018 investment, Cantor owns 24.8% of the economic interest in Newmark Holdings and a 9.5% indirect economic interest in Newmark OpCo, and the other limited partners of Newmark Holdings (including Newmark employees) owned 56.0% of the economics of Newmark Holdings and an aggregate 21.4% indirect economic interest in Newmark OpCo.

The Distribution (Spin-off)

BGC Partners has advised usfollowing:

•Certain equity-based compensation charges that it currently expects to pursue a Distribution, or spin-off, to its stockholders of all of the shares of our common stock that it then owns in a manner that is intended to qualify as generally tax-free for U.S. federal income tax purposes. As currently contemplated, shares of our Class A common stock held by BGC Partners wouldmay be distributed to the holders of shares of Class A common stock of BGC Partners and shares of our Class B common stock held by BGC Partners would be distributed to the holders of shares of Class B common stock of BGC Partners (which are currently Cantor and another entity controlled by Mr. Lutnick). The determination of whether, when and how to proceed with any such spin-off is entirely withindetermined at the discretion of BGC Partners.

management throughout and up to the period-end;

•Unusual, one-time, non-ordinary, or non-recurring items;
•The impact of gains or losses on certain marketable securities, as well as any gains or losses related to associated mark-to- market movements and/or hedging. These items are calculated using period-end closing prices;
•Non-cash asset impairment charges, which are calculated and analyzed based on the period-end values of the underlying assets. These amounts may not be known until after period-end;
•Acquisitions, dispositions and/or resolutions of litigation, which are fluid and unpredictable in nature.

Liquidity Defined
Newmark may also use a non-GAAP measure called “liquidity.” The Company considers liquidity to be comprised of the sum of cash and cash equivalents, marketable securities, and reverse repurchase agreements (if any), less securities lent out in securities loaned transactions and repurchase agreements. The Company considers liquidity to be an important metric for determining the amount of cash that is available or that could be readily available to the Company on short notice.

For more information regarding liquidity, see the section of the Company’s most recent financial results press release titled “Liquidity Analysis,” including any related footnotes, for details about how Newmark’s non-GAAP results are reconciled to those under GAAP.


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OUR ORGANIZATIONAL STRUCTURE

Current Organizational Structure
As of June 30, 2022, there were 198,830,672 shares of Newmark

As of March 31, 2018, there were 138,921,532 shares of Class A common stock issued and 160,002,640 outstanding. BGC PartnersCantor and CFGM held 115,593,786no shares of our Class A common stock representing approximately 83.2% of our outstandingNewmark Class A common stock. Each share of Newmark Class A common stock is generally entitled to one vote on matters submitted to a vote of our stockholders. In addition, asAs of March 31, 2018, BGC PartnersJune 30, 2022, Cantor and CFGM held 15,840,04921,285,533 shares of ourNewmark Class B common stock representing all of the outstanding shares of ourNewmark Class B common stock. Together, theThe shares of Class A common stock andNewmark Class B common stock held by BGC PartnersCantor and CFGM, as of March 31, 2018,June 30, 2022, represented approximately 92.2%57.1% of our total voting power. Each share of Newmark Class B common stock is generally entitled to the same rights as a share of Newmark Class A common stock, except that, on matters submitted to a vote of our stockholders, each share of Newmark Class B common stock is entitled to 10 votes. The Newmark Class B common stock generally votes together with the Newmark Class A common stock on all matters submitted to a vote of our stockholders. We expect to retain our dual class structure, and there are no circumstances under which the holders of Newmark Class B common stock would be required to convert their shares of Newmark Class B common stock into shares of Newmark Class A common stock. Our amended and restated certificate of incorporation referred to herein as our certificate of incorporation does not provide for automatic conversion of shares of Newmark Class B common stock into shares of Newmark Class A common stock upon the occurrence of any event.


We hold the Newmark Holdings general partnership interest and the Newmark Holdings special voting limited partnership interest, which entitle us to remove and appoint the general partner of Newmark Holdings and serve as the general partner of Newmark Holdings, which entitles us to control Newmark Holdings. Newmark Holdings, in turn, holds the Newmark OpCo general partnership interest and the Newmark OpCo special voting limited partnership interest, which entitle Newmark Holdings to remove and appoint the general partner of Newmark OpCo, and serve as the general partner of Newmark OpCo, which entitles Newmark Holdings (and thereby us) to control Newmark OpCo. In addition, as of March 31, 2018,June 30, 2022, we indirectly, through wholly owned subsidiaries,directly held Newmark OpCo limited partnership interests consisting of approximately 154,761,58159,020,128 units representing approximately 61.3%24.4% of the outstanding Newmark OpCo limited partnership interests.interests (not including EPUs). We are a holding company that will holdholds these interests, serveserves as the general partner of Newmark Holdings and, through Newmark Holdings, actacts as the general partner of Newmark OpCo. As a result of our ownership of the general partnership interest in Newmark Holdings and Newmark Holdings’ general partnership interest in Newmark OpCo, we will consolidate Newmark OpCo’s results for financial reporting purposes.


Cantor, BGC Partners (including through its operating subsidiaries), founding partners, working partners and limited partnership unit holders directly hold Newmark Holdings limited partnership interests. Newmark Holdings, in turn, holds Newmark OpCo limited partnership interests and, as a result, Cantor, BGC Partners (including through its operating subsidiaries), founding partners, working partners and limited partnership unit holders indirectly have interests in Newmark OpCo limited partnership interests.

As a result of the Distribution of limited partnership interests of Newmark Holdings to partners of BGC Holdings in connection with the separation, each holder of BGC Holdings limited partnership interests held a BGC Holdings limited partnership interest and a corresponding 0.454545 of a Newmark Holdings limited partnership interest for each BGC Holdings limited partnership interest held thereby immediately prior to the Separation. The BGC Holdings limited partnership interests and Newmark Holdings limited partnership interests are each entitled to receive cash distributions from BGC Holdings and Newmark Holdings, respectively, in accordance with the terms of such partnership’s respective limited partnership agreement.


The Newmark Holdings limited partnership interests held by Cantor and BGC Partners (including through its operating subsidiaries)CFGM are designated as Newmark Holdings exchangeable limited partnership interests. The Newmark Holdings limited partnership interests held by the founding partners are designated as Newmark Holdings founding partner interests. The Newmark


Holdings limited partnership interests held by the working partners are designated as Newmark Holdings working partner interests. The Newmark Holdings limited partnership interests held by the limited partnership unit holders are designated as limited partnership units.


Each unit of Newmark Holdings limited partnership interests held by Cantor and BGC Partners (including through its operating subsidiaries)CFGM is generally exchangeable with us for a number of shares of Class B common stock (or, at Cantor’s option or if there are no additional authorized but unissued shares of Class B common stock, a number of shares of Class A common stock) equal to the exchange ratio (which is currently one, but is subject to adjustment as set forth in the Separation and Distribution Agreement). Prior to the spin-off, however, such exchanges are subject to the limitation as described in our 2017 Annual Report on Form 10-K (the “10-K”) under “Item 13—Certain Relationships and Related-Party Transactions—Amended and Restated Newmark Holdings Limited Partnership Agreement—Exchanges.”

ratio.


As of March 31, 2018, 5,732,543June 30, 2022, 3,149,016 founding/working partner interests were outstanding. These founding/working partnerpartners were issued in the Separationto holders of BGC Holdings founding/working partner interests, who received such founding/working partner interests in connection with BGC Partners’ acquisition of the BGC Partners business from Cantor in 2008. The Newmark Holdings limited partnership interests held by founding/working partners are not exchangeable with us unless (1) Cantor acquires such interestsCantor units from Newmark Holdings upon termination or bankruptcy of the founding/working partners or redemption of their units by Newmark Holdings (which it has the right to do under certain circumstances), in which case such interests will be exchangeable with us for ourshares of Newmark Class A common stock or Newmark Class B common stock as described above, or (2) Cantor determines that such interests can be exchanged by such founding/working partners with us for ourNewmark Class A common stock, with each Newmark Holdings unit exchangeable for a number of shares of ourNewmark Class A common stock equal to the exchange ratio (which is currentlywas initially one, but is subject to adjustment as set forth in the Separation and Distribution Agreement), on terms and conditions to be determined by Cantor (which exchange of certain interests Cantor expects to permit from time to time). Cantor has provided that certain founding/working partner interests are exchangeable with us for Class A common stock, with each Newmark Holdings unit exchangeable for a number of shares of ourNewmark Class A common stock equal to the exchange ratio (which is currentlywas initially one, but is subject to adjustment as set forth in the Separation
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and Distribution Agreement), in accordance with the terms of the Newmark Holdings limited partnership agreement. Once a Newmark Holdings founding/working partner interest becomes exchangeable, such founding/working partner interest is automatically exchanged upon a termination or bankruptcy (x) with BGC Partnersus for Newmark Class A common stock of BGC Partners (after also providing the requisite portion of BGC Holdings founding/working partner interests) if the termination or bankruptcy occurs prior to the Distribution and (y) in all other cases, with us for our Class A common stock.


Further, we provide exchangeability for partnership units under other circumstances in connection with (1) our partnership redemption, compensation and restructuring programs, (2) other incentive compensation arrangements and (3) business combination transactions.


As of March 31, 2018, 73,863,094June 30, 2022, 29,579,666 limited partnership units were outstanding (including founding/working partner interests and Cantor interests)working partner interests, and units held by Cantor). Limited partnership units will be only exchangeable with us in accordance with the terms and conditions of the grant of such units, which terms and conditions are determined in our sole discretion, as the Newmark Holdings general partner, with the consent of the Newmark Holdings exchangeable limited partnership interest majority in interest, in accordance with the terms of the Newmark Holdings limited partnership agreement.

Notwithstanding the foregoing, prior to the Distribution, without the prior consent of BGC Partners, no Newmark Holdings limited partnership interests shall be exchangeable into shares of our Class A common stock or Class B common stock. Prior to the Distribution, unless otherwise agreed by BGC Partners, in order for a partner to exchange an exchangeable limited partnership interest in BGC Holdings or Newmark Holdings into a share of BGC common stock, such partner must exchange both one BGC Holdings exchange right unit and a certain number of Newmark Holdings exchangeable units as set forth in the BGC Holdings limited partnership agreement, in order to receive one share of BGC Partners common stock. Prior to the Distribution, to the extent that BGC Partners receives any Newmark OpCo units as a result of any exchange of Newmark Holdings exchangeable units as described in the immediately preceding sentence or as a result of any contribution by BGC Partners to Newmark OpCo or purchase by BGC Partners of Newmark OpCo units (see “Item 13—Certain Relationships and Related-Party Transactions—Reinvestments in Newmark OpCo by BGC Partners” in our Annual Report on Form 10-K/A (“10-K/A”), then, in each case, prior to the Distribution BGC Partners will contribute such Newmark OpCo units to Newmark in exchange for a number of shares of Newmark common stock equal to the number of such Newmark OpCo units multiplied by the then current exchange ratio (with the class of shares of our common stock corresponding to the class of shares of common stock that BGC Partners issued upon such exchange).


The current exchange ratio between Newmark Holdings limited partnership interests and our common stock iswas initially one. However, this exchange ratio will be adjusted in accordance with the terms of the Separation and Distribution Agreement if our dividend policy and the distribution policy of Newmark Holdings are different. See “Item 5—Market forAs of June 30, 2022, the Registrant’s Common Equity, Related Stockholder Matters and Purchased of Equity Securities—Dividend Policy” and “Item 13—Certain Relationship and Related-Party Transactions-Adjustments to Exchange Ratio” in our 10-K/A.

exchange ratio was 0.9393.


With each exchange, our direct and indirect (and, prior to the Distribution and as described above, BGC Partners’ indirect) interest in Newmark OpCo will proportionately increase because, immediately following an exchange, Newmark Holdings will redeem the Newmark Holdings unit so acquired for the Newmark OpCo limited partnership interest underlying such Newmark Holdings unit.


The profit and loss of Newmark OpCo and Newmark Holdings, as the case may be, are allocated based on the total number of Newmark OpCo units (not including EPUs) and Newmark Holdings units, as the case may be, outstanding.


The following diagram illustrates ourthe ownership structure of Newmark as of March 31, 2018.June 30, 2022. The diagram does not reflect the various subsidiaries of Newmark, Newmark Holdings, Newmark OpCo, BGC Partners, BGC U.S. OpCo, BGC Global OpCo or Cantor (including certain operating subsidiaries that are organized as corporations whose equity is either wholly-owned by Newmark or whose equity is majority-owned by Newmark with the remainder owned by Newmark OpCo) or the results of any exchange of Newmark Holdings exchangeable limited partnership interests or, to the extent applicable, Newmark Holdings founding partner interests, Newmark Holdings working partner interests or Newmark Holdings limited partnership units.

In addition, the diagram does not reflect the Newmark OpCo exchangeable preferred limited partnership units, or EPUs, since they are not allocated any gains or losses of Newmark OpCo for tax purposes and are not entitled to regular distributions from Newmark OpCo.


OUR OWNERSHIP

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STRUCTURE

 

OF NEWMARK AS OF June 30, 2022


nmrk-20220630_g1.jpg
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Shares of ourNewmark Class B common stock are convertible into shares of ourNewmark Class A common stock at any time in the discretion of the holder on a one-for-one basis. Accordingly, if BGC PartnersCantor and CFGM converted all of its common stock held in ourtheir shares of Newmark Class B common stock into ourshares of Newmark Class A common stock, BGC PartnersCantor and CFGM would hold approximately 84.9%11.7% of the voting power in Newmark and the public stockholders of Newmark other than Cantor and CFGM would hold approximately 15.1%88.3% of the voting power in Newmark (and the indirect economic interests in Newmark OpCo would remain unchanged).

The diagram above does not show certain operating subsidiaries that are organized as corporations whose equity are either wholly owned by us or whose equity are majority-owned by us with the remainder owned by Newmark OpCo.

Structure In addition, if Cantor and CFGM continued to hold shares of Newmark Following the Distribution (Spin-off)

BGC Partners has advised us that it currently expects to pursue a Distribution, or spin-off, to its stockholders ofClass B common stock and if Cantor exchanged all of the exchangeable limited partnership units held by Cantor for shares of ourNewmark Class B common stock, that it then ownsCantor and CFGM would hold 74.8% of the voting power in a manner that is intended to qualify as generally tax-free for U.S. federal income tax purposes. As currently contemplated, sharesNewmark, and the stockholders of ourNewmark other than Cantor and CFGM would hold 25.2% of the voting power in Newmark.


The diagram reflects Newmark Class A common stock heldand Newmark Holdings partnership unit activity from January 1, 2022 through June 30, 2022 as follows: (a) an aggregate of 6,920,251 limited partnership units granted by BGC Partners would be distributed to the holdersNewmark Holdings; (b) 13,053,518 shares of Newmark Class A common stock repurchased by us; (c) no shares of Newmark Class A common stock forfeited; (d) 1,389,041 shares of Newmark Class A common stock issued for vested restricted stock units; (e) 234,482 shares of Class A common stock issued by us under our acquisition shelf Registration Statement on Form S-4 (Registration No. 333-231616), but not the 18,411,842 of BGC Partnerssuch shares remaining available for issuance by us under such Registration Statement; and shares of our Class B common stock held by BGC Partners would be distributed to the holders of shares of Class B common stock of BGC Partners (which are currently Cantor and another entity controlled by Mr. Lutnick). The determination of whether, when and how to proceed with any such spin-off is entirely within the discretion of BGC Partners.

To account for potential changes in the number of shares of Class A common stock and Class B common stock of BGC Partners and Newmark between the IPO and the spin-off, and to ensure that the spin-off (if it occurs) is pro rata to the stockholders of BGC Partners, immediately prior to the spin-off, BGC Partners will convert any shares of Class B common stock of Newmark beneficially owned by BGC Partners into shares of Class A common stock of Newmark, or exchange any shares of Class A common stock of Newmark beneficially owned by BGC Partners for shares of Class B common stock of Newmark, so that the ratio of shares of Class B common stock of Newmark held by BGC Partners to the shares of Class A common stock of Newmark held by BGC Partners, in each case as of immediately prior to the spin-off, equals the ratio of shares of outstanding Class B common stock of BGC Partners to the shares of outstanding Class A common stock of BGC Partners, in each case as of the record date of the spin-off.

(h) 220,976 terminated limited partnership units.


ITEM 3. QUALITATIVEQUANTITATIVE AND QUANTITATIVEQUALITATIVE DISCLOSURES ABOUT MARKET RISK

Interest Rate


Credit Risk

Our multifamily origination business, under the Fannie Mae DUS program, originates and services multifamily loans for Fannie Mae without having to obtain Fannie Mae’s prior approval for certain loans, as long as the loans meet the underwriting guidelines set forth by Fannie Mae. In connection withreturn for the Separation, we assumed from BGC Partners the Term Loandelegated authority to make loans and the Converted Term Loan. Newmark OpCo also assumed from BGC U.S. OpCocommitment to purchase loans by Fannie Mae, we must maintain minimum collateral and generally are required to share risk of loss on loans sold through Fannie Mae. With respect to most loans, we are generally required to absorb approximately one-third of any losses on the BGC Notes. We contributed allunpaid principal balance of a loan at the time of loss settlement. Some of the net proceedsloans that we originate under the Fannie Mae DUS program are subject to reduced levels or no risk-sharing. However, we generally receive lower servicing fees with respect to such loans. Although our Berkeley Point business’s average annual losses from such risk-sharing programs have been a minimal percentage of the IPO to Newmark OpCo in exchange for a number of units representing Newmark OpCo limited partnership interests equal to the number of shares issued by us in the IPO.  Newmark OpCo used all of such net proceeds to partially repay intercompany indebtedness owed by Newmark OpCo to us in respect of the Term Loan (which intercompany indebtedness was originally issued by BGC U.S. OpCo and has been assumed by Newmark OpCo in connection with the separation). In addition, on March 7, 2018, BGC, including through its subsidiary invested $242.0 million in Newmark limited partnership interests. Newmark has used the proceeds from this transaction plus all of the repayment from Newmark OpCo, and cash on hand to repay in full the Term Loan during the three months ended March 31, 2018. Following the IPO, in the event that any member of the Newmark Group receives net proceeds from the incurrence of indebtedness for borrowed money or an equity issuance (in each case subject to certain exceptions), Newmark OpCo will be obligated to use such net proceeds to repay the remaining intercompany indebtedness owed by Newmark OpCo to us to repay the remaining intercompany indebtedness owed by Newmark OpCo to us in respect of the Converted Term Loan (which in turn we will use to repay the remaining amount outstanding on the Converted Term Loan). Following the repayment of the Term Loan and the Converted Term Loan, in the event that any member of the Newmark Group receives net proceeds from the incurrence of indebtedness for borrowed money (subject to certain exceptions), Newmark OpCo will be obligated to use such net proceeds to repay the BGC Notes. In addition, we will be obligated to repay any remaining amounts under the BGC Notes prior to the distribution. We intend to replace the financing provided by the BGC Notes that remain outstanding with new senior term loans (which may be secured or unsecured), new senior unsecured notes, other long- or short-term financing or a combination thereof in an aggregate principal amount of approximately $412.5 million. Whilesuch loans, if loan defaults increase, actual risk-sharing obligation payments under the termsFannie Mae DUS program could increase, and such defaults could have a material adverse effect on our business, financial condition, results of these borrowings, includingoperations and prospects. In addition, a material failure to pay its share of losses under the Fannie Mae DUS program could result in the revocation of Berkeley Point’s license from Fannie Mae and the exercise of various remedies available to Fannie Mae under the Fannie Mae DUS program.

Interest Rate Risk
Newmark had $546.5 million of fixed rate 6.125% Senior Notes outstanding as of June 30, 2022. These debt obligations are not currently subject to fluctuations in interest rates, have not yet been determined, our interest income expensealthough in the event of refinancing or issuance of new debt, such debt could be exposedsubject to changes in interest rates. In that event, we may enter intoNewmark had no amounts outstanding under its Credit Facility as of June 30, 2022. The interest rate swap agreements to attempt to hedgeon the variability of future interest payments due to changes in interest rates.

Credit Facility is currently based upon SOFR.


Berkeley Point is an intermediary that originates loans which are generally pre-sold prior to loan closing. Therefore, for loans held for sale to the GSEs and HUD, we are not currently exposed to unhedged interest rate risk. Prior to closing on loans with borrowers, we enter into agreements to sell the loans to investors, and originated loans are typically sold within 45 days of funding. The coupon rate for each loan is set concurrently with the establishment of the interest rate with the investor.


Some of our assets and liabilities are subject to changes in interest rates. Earnings from escrows are generally based on LIBOR.LIBOR or SOFR. 30-day LIBOR as of March 31, 2018June 30, 2022 and December 31, 20172021 was 188179 basis points and 15710 basis points, respectively. A 100 basis100-basis point increase in the 30-day LIBOR would increase our annual earnings by approximately $7.9$11.0 million based on our escrow balancebalances as of March 31, 2018June 30, 2022 compared to $8.1$11.8 million based on our escrow balancebalances as of December 31, 2017.June 30, 2021. A 100-basis point decrease in the 30-day LIBOR would decrease our annual earnings by $11.0 million based on our escrow balances as of June 30, 2022. A decrease in 30-day LIBOR to zero would decrease our annual earnings by approximately $7.9$1.2 million based on the escrow balancebalances as of March 31, 2018 compared to $8.1 million based on our escrow balance as of December 31, 2017.

June 30, 2021.


We use warehouse facilities borrowings from related parties, and a repurchase agreement to fund loans we originate under our various lending programs. The borrowing costs of our warehouse facilities and the repurchase agreement is based on LIBOR. A 100-basis point increase in 30-day LIBOR would decrease our annual net interest incomeearnings by approximately $9.5$8.3 million based on our outstanding balances as of March 31, 2018June 30, 2022 compared to $6.7$4.1 million based on our outstanding balances as of March 31, 2017.June 30, 2021. A 100-basis100 basis point decrease in 30-day LIBOR would increase our annual earnings by approximately $9.5$8.3 million based on our outstanding warehouse balance as of March 31, 2018 compared
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June 30, 2022. A decrease in 30-day LIBOR to $6.6 million as of March 31, 2017.

The borrowing cost of the Converted Term Loan is based on LIBOR. A 100-basis point increase in the 30-day LIBORzero would increase our interest expenseannual earnings by $4.0 million on our outstanding balances as of March 31, 2018. A 100-basis point decrease in the 30-day LIBOR would decrease our annual interest expense by $4.0approximately $0.4 million based on our outstanding warehouse balance as of  March 31, 2018.

The borrowing cost of the Intercompany Credit Agreement is based on LIBOR. A 100-basis point increase in the 30-day LIBOR would increase our interest expense by $2.1 million on our outstanding balances as of March 31, 2018. A 100-basis point decrease in the 30-day LIBOR would decrease our annual interest expense by $2.1 million based on our outstanding balance as of March 31, 2018.

June 30, 2021.


Foreign Currency Risk

We are exposed to risks associated with changes in foreign exchange rates. Changes in foreign exchange rates create volatility in the U.S. Dollar equivalent of our revenues and expenses. While our international results of operations, as measured in U.S. Dollars, are subject to foreign exchange fluctuations, we do not consider the related risk to be material to our results of operations. While our exposure to foreign exchange risk is not currently material to us, we expect to grow our international revenues in the future, and any future potential exposure to foreign exchange fluctuations may present a material risk to our business.



Disaster Recovery

Our processes address disaster recovery concerns. We operate most of our technology from dual-primary data centers at our two different London locations. Either site alone is capable of running all of our essential systems. In addition, we maintain technology operations from data centers in New Jersey and Connecticut. Replicated instances of this technology are maintained in our London data centers. All data centers are built and equipped to best-practice standards of physical security with appropriate environmental monitoring and safeguards. Failover for the majority of our systems is automated.


ITEM 4. CONTROLS AND PROCEDURES


Evaluation of Disclosure Controls and Procedures

Newmark Group, Inc. maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed by Newmark Group, Inc. is recorded, processed, accumulated, summarized and communicated to its management, including its Chairman and its Chief Financial Officer, to allow timely decisions regarding required disclosures, and reported within the time periods specified in the SEC’s rules and forms. The Chairman and the Chief Financial Officer have performed an evaluation of the effectiveness of the design and operation of Newmark Group, Inc.’s disclosure controls and procedures as of March 31, 2018.June 30, 2022. Based on that evaluation, the Chairman and the Chief Financial Officer concluded that Newmark’sNewmark Group, Inc’s disclosure controls and procedures were effective as of March 31, 2018.

June 30, 2022.


Changes in Internal Control over Financial Reporting

During the three months ending March 31, 2018,quarter ended June 30, 2022, there were no changes in our internal control over financial reporting that materially affect,affected, or are reasonably likely to materially affect, our internal control over financial reporting.


PART II


ITEM 1. LEGAL PROCEEDINGS


See Note 29—“Commitments, Contingencies31 — “Commitments and Guarantees”Contingencies” to the Company’s unaudited condensed consolidated financial statementsConsolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q and under the heading "Derivative Suit" included in Part I, Item 2 of this Quarterly Report on Form 10-Q, Management's Discussion and Analysis of Financial Condition and Results of Operation for a description of our legal proceedings which is incorporated by reference herein.


ITEM 1A. RISK FACTORS

Investors should consider


There have been no material changes to the following additional risk factors:

We may not be able to protect our intellectual property rights or may be prevented from using intellectual property usedfactors previously disclosed under Part I, Item 1A, "Risk Factors" in our business.

Our success is dependent, in part, upon our intellectual property. We rely primarilyAnnual Report on trade secret, contract, patent, copyright and trademark law in the United States and other jurisdictions as well as confidentiality procedures and contractual provisions to establish and protect our intellectual property rights to proprietary technologies, products, services or methods, and our brand.

Unauthorized use of our intellectual property could make it more expensive to do business and harm our operating results. We cannot ensure that our intellectual property rights are sufficient to protect our competitive advantages or that any particular patent, copyright or trademark is valid and enforceable, and all patents ultimately expire. In addition, the laws of some foreign countries may not protect our intellectual property rights to the same extent as the laws in the United States, or at all. Any significant impairment of our intellectual property rights could harm our business or our ability to compete.

Protecting our intellectual property rights is costly and time consuming. Although we have taken steps to protect ourselves, there can be no assurance that we will be aware of all patents, copyrights or trademarks that may pose a risk of infringement by our products and services. Generally, it is not economically practicable to determine in advance whether our products or services may infringe the present or future rights of others.

Accordingly, we may face claims of infringement or other violations of intellectual property rights that could interfere with our ability to use intellectual property or technology that is material to our business. The number of such third-party claims may grow. Our technologies may not be able to withstand such third-party claims or rights against their use.

We may have to rely on litigation to enforce our intellectual property rights, protect our trade secrets, determine the validity and scope of the rights of others or defend against claims of infringement or invalidity. For example, we recently responded to a claim by Newmark Realty Capital, Inc. (which we refer to as “Realty Capital”) against us alleging, among other things, trademark infringement under Section 32 of the Lanham Act. In connection with our answer, we filed counterclaims alleging that Realty Capital has infringed our trademarks and seeking an order cancelling Realty Capital’s registered trademarks. We also separately initiated an action before the U.S. Patent and Trademark Office seeking invalidation of Realty Capital’s registration of a design mark that includes the stand-alone name “Newmark.” On November 16, 2017, a federal court in the Northern District of California issued an order denying Realty Capital’s motion to enjoin us from using the name “Newmark” generally as a trademark, which supported Newmark’s rights and longstanding goodwill in relation to the use of the “Newmark” name. The same order temporarily enjoined Newmark from using the name “Newmark” for “mortgage banking, mortgage brokerage, loan servicing, investment brokerage, and investment consulting services in the field of commercial real estate.” This order is in effect until a decision at trial, which is currently scheduled for January 2019. We have moved the court for an order reconsidering the injunction and lifting it in its entirety, and may eventually file an appeal if necessary. In response to our request that the court stay the injunction pending reconsideration, the court ruled in our favor and has suspended the injunction as to the categories of “investment consulting” and “investment brokerage.” In advance of the motion for reconsideration hearing, Realty Capital filed a motion for a new injunction prohibiting the use of “Newmark” for “any commercial real estate services” and demanding relief more expansive than the request the Court previously denied on November 16, 2017. On March 30, 2018, the court granted the reconsideration motion in part and denied it in part, reversing that part of the injunction that prohibited the us from using the “Newmark Knight Frank” name.  We have initiated an appeal of the remaining portion of the injunction.  On April 17, 2018, the court denied Realty Capital’s motion to modify the injunction in its entirety. No assurance can be given as to whether these cases will ultimately be determined in our favor or that our ability to use the “Newmark” name will be impacted by the proceedings. Any such claims or litigation, whether successful or unsuccessful, could result in substantial costs, the diversion of resources and the attention of management, any of which could materially negatively affect our business. Responding to these claims could also require us to enter into royalty or licensing agreements with the third parties claiming infringement, stop selling or redesign affected products or services or pay damages on our own behalf or to satisfy indemnification commitments with our clients. Such royalty or licensing agreements, if available, may not be available on terms acceptable to us, and may negatively affect our business, financial condition, results of operations or prospects. Despite these potential risks, even if we are permanently


enjoined from using the “Newmark” name in the sectors described in the preliminary injunction order or in connection with commercial real estate services generally, we do not believe such an order would significantly affect our long-term prospects.

We have debt, which could adversely affect our ability to raise additional capital to fund our operations and activities, limit our ability to react to changes in the economy or the commercial real estate services industry, expose us to interest rate risk, impact our ability to obtain a favorable credit rating and prevent us from meeting or refinancing our obligations under our indebtedness.

As of March 31, 2018, we had approximately $1,014.5 million in aggregate principal amount of indebtedness outstanding. The amount of debt we incur may have important, adverse consequences to us and our investors, including that:

it may limit our ability to borrow money, dispose of assets or sell equity to fund our working capital, capital expenditures, dividend payments, debt service, strategic initiatives or other obligations or purposes;

it may limit our flexibility in planning for, or reacting to, changes in the economy, the markets, regulatory requirements, our operations or our business;

we may be more highly leveraged than some of our competitors, which may place us at a competitive disadvantage;

it may impact the time frameForm 10-K for the completion of the Distribution;

year ended December 31, 2021.

it may make us more vulnerable to downturns in the economy or our business;


it may require a substantial portion of our cash flow from operations to make interest payments;


it may make it more difficult for us to satisfy other obligations;

it may increase the risk of a future credit ratings downgrade of us or otherwise impact our ability to obtain favorable credit ratings, which could increase future debt costs and limit the future availability of debt financing;

we may not be able to borrow additional funds or refinance existing debt as needed or take advantage of business opportunities as they arise, pay cash dividends or repurchase common stock; and

there would be a material adverse effect on our businesses, financial condition, results of operations and prospects if we were unable to service our indebtedness or obtain additional financing or refinance our existing debt on terms acceptable to us.

In December 2017, following the announcement of the Berkeley Point Acquisition and our IPO, the credit rating outlooks of BGC were amended to “negative watch,” which is subject to the successful completion of various capital raising and other activities to strengthen its balance sheet.  We are also planning to begin the process of pursuing our own credit rating, which is likely to be impacted by BGC’s rating. Although BGC has taken steps in recent months to strengthen its balance sheet and improve its credit ratios, no assurance can be given that we will obtain a credit rating in a timely fashion or that the credit rating we do ultimately receive will enable us to borrow on favorable terms. Such credit ratings may further impact the timing of our proposed tax-free spin-off, which is contingent upon us repaying or refinancing our $812.5 million of long-term debt owed to or guaranteed by BGC in order to be tax-free.  On May 8, 2018, Fitch ratings affirmed Cantor’s and BGC’s Long-term Issuer Default Ratings (“IDRs”) at ‘BBB-‘ and Short-term IDRs at ‘F3’.  Fitch has also removed the ratings from Rating Watch Negative and assigned Stable Rating Outlooks to both Cantor and BGC. Additionally, on May 14, 2018, Standard and Poor’s (“S&P”) also affirmed Cantor’s and BGC’s issuer credit and senior unsecured debt ratings at ‘BBB-‘ and removed the ratings from CreditWatch with negative implications, assigning stable rating outlooks.

To the extent that we incur additional indebtedness or seek to refinance our existing debt, the risks described above could increase. In addition, our actual cash requirements in the future may be greater than expected. Our cash flow from operations may not be sufficient to service our outstanding debt or to repay the outstanding debt as it becomes due, and we may not be able to borrow money, sell assets or otherwise raise funds on acceptable terms, or at all, to service or refinance our debt.


ITEM 2.UNREGISTERED SALES OF EQUITYEQUITY SECURITIES AND USE OF PROCEEDS


The information required by this Item is set forth in Note 28-“Compensation”6 — “Stock Transactions and Unit Redemptions” and Note 30 — “Compensation” to theour accompanying unaudited condensed consolidated financial statements included in Item 1 of Part I of this Quarterly Report on Form 10-Q and in Part I, Item 2, of this Quarterly Report on Form 10-Q, Management’s Discussion and Analysis of Financial Condition and Results of Operations, (Item 2 of Part I) and is incorporated by reference herein.


ITEM 3.DEFAULTS UPON SENIOR SECURITIES

None.


Not applicable.

ITEM 4. MINE SAFETY DISCLOSURES

None.

94


Not Applicable.


ITEM 5.     OTHER INFORMATION


None.



ITEM 6.EXHIBITS

    EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

The Exhibit Index set forth below is incorporated by reference in response to this Item 6.

EXHIBIT INDEX

Exhibit

Number

Exhibit Title

Exhibit
Number

Exhibit Title

  10.26

Investment Agreement, dated as of March  6, 2018, by and among BGC Partners, Inc., BGC Holdings, L.P., BGC Partners, L.P., BGC Global Holdings, L.P., Newmark Group, Inc., Newmark Holdings, L.P., and Newmark Partners, L.P. (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed with the SEC on March 7, 2018)

31.1

  10.27

Amendment No. 1 to Amended and Restated Agreement of Limited Partnership of Newmark Partners, L.P., dated as of March 14, 2018 (incorporated by reference to Exhibit 10.27 to the Registrant’s Current Report on Form 10-K filed with the SEC on March 20, 2018)*

  10.28

Amended and Restated Credit Agreement, dated as of March 19, 2018, by and between BGC Partners, Inc. and Newmark Group, Inc. (incorporated by reference to Exhibit 10.28 to the Registrant’s Current Report on Form 10-K filed with the SEC on March 20, 2018)

  31.1

31.2

32.1

101

The following materials from Newmark Group, Inc.’s Quarterly Report on Form 10-Q for the period ended March 31, 20182022 are formatted in inline eXtensible Business Reporting Language (XBRL)(iXBRL): (i) the Unaudited Condensed Consolidated Balance Sheets, (ii) the Unaudited Condensed Consolidated Statements of Operations, (iii) the Unaudited Condensed Consolidated Statements of Comprehensive Income, (Loss), (iv) the Unaudited Condensed Consolidated Statements of Cash Flows, (v) the Unaudited Condensed Consolidated Statements of Changes in Equity, and(v) the Consolidated Statements of Cash Flows (vi) Notes to the Unaudited Condensed Consolidated Financial Statements, and (vii) Schedule I, Parent Company Only Financial Statements.

The XBRL Instance Document does not appear in the Interactive Data File because its XBRL tags are embedded within the iXBRL document.
104
The cover page from this Quarterly Report on Form 10-Q, formatted in InlineXBRL (included in Exhibit 101)



SIGNATURES



SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this Quarterly Report on Form 10-Q for the three monthsquarter ended March 31, 2018June 30, 2022 to be signed on its behalf by the undersigned, thereunto duly authorized, on the 15th day of May, 2018.

authorized.



Newmark Group, Inc.
/s/ Howard W. Lutnick
Name:Howard W. Lutnick
Title:Chairman

Newmark Group, Inc.

By:

/s/ Howard W. Lutnick 

Name:

Howard W. Lutnick

Title:

Chairman

Pursuant to the requirements of the Securities Exchange Act of 1934, this Quarterly Report on Form 10-Q has been signed below by the following persons on behalf of the registrant, Newmark Group, Inc., in the capacities and on the date indicated.

Signature 

Capacity in Which Signed 

Date 

/s/ Howard W. Lutnick

Howard W. Lutnick

Chairman (Principal Executive Officer)

May 15, 2018

/s/ Michael J. Rispoli

Name:Michael J. Rispoli

Title:

Chief Financial Officer (Principal Financial and Accounting Officer)

May 15, 2018

82

Date: August 8, 2022
95