Newmark Group, Inc.

Newmark second quarter 2023 earnings call. Today's conference is being recorded. At this time, I'd like to turn the conference over to Mr. Jason McGruder, head of investor relations. Please go ahead, sir.

Thank you, operator, and good morning. Newmark issued its second quarter 2023 financial results press release and presentation this morning. Unless otherwise stated, the results provided on today's call compare only the three months ended June 30th, 2023 with the year earlier period. except as otherwise specified, we will be referring to results only on a non-GAAP basis, which include terms such as adjusted earnings and adjusted EBITDA. Please refer to the section of today's press release for complete and or updated definition of any non-GAAP terms, reconciliation of these items to corresponding GAAP results, and how, when, and why management uses them. You can find more information with respect to our GAAP and non-GAAP results on our website. In today's press release, the supplemental Excel tables, and the presentation. Unless otherwise stated, any figures discussed today with respect to cash flow from operations refer to the net cash provided by operating activities excluding loan origination and sales, as well as the impact of the 2021 equity event. Cash from the business is this same cash flow metric excluding employee loans for producers and new hires. The outlook discussed today assumes no additional share purchases, material acquisitions, or meaningful changes And the company's stock price, our expectations are subject to change. And based on various macroeconomic, social, political and other factors, none of our long term targets or goals beyond 2023 should be considered formal guidance. Also, I remind you that information on this call about our business that are not historical facts are forward looking statements within the section. 27 a of the Securities Act of 1933 as amended section 21 E of the Securities Exchange Act of 1934 as amended. Such statements involve risks and uncertainties. Except as required by law, Newmark undertakes no obligation to update any forward-looking statements. For complete discussion of additional risks and uncertainties which could cause actual results, differ from those contained in the forward-looking statements, see Newmark Security Exchange Commission filings, including but not limited to the risk factors in our most recent Form 10-K, Form 10-Q, or Form 8-K filings, which are incorporated by reference. Now I'm happy to turn the call over to our host, Barry Gossin, Chief Executive Officer of Newmark.

Good morning and thank you for joining us. Despite the industry-wide headwinds, I have never been more excited about our future. We are on the cusp of a new market. The complex dynamics of a dramatically higher interest rates and shifting capital sources across both debt and equity requires a higher level of ingenuity and talent to provide different and creative solutions in this new world. Given the investments we have made, We are uniquely positioned to capitalize in this changing landscape. Market dynamics have changed. The criteria for incumbent lenders is shifting, which is creating a challenging environment for borrowers. The demand and requirement for equity is increasing, and the providers of equity are changing. Our sophisticated market professionals are required to solve the complex problems facing the real estate ownership market. We are the platform of choice for the best and brightest professionals who can develop and execute solutions on behalf of our clients. This is why we are winning an even larger percentage of the most important assignments in the real estate services business. For example, the FDIC recently announced a sale process for approximately $18.5 billion of loans by Numark, representing a portion of the approximately $60 billion signature loan portfolio we're handling. We served as a lead advisor to Blackstone's B-REIT on the recently announced agreement to sell their $2.2 billion self-storage portfolio to public storage. Numer originated a $947 million Freddie Mac loan on Park La Brea, the largest single asset multifamily financing in the U.S. since 2019. We arranged the recapitalization of a life science building in Boston, one of the largest single building transactions in the U.S. this year. Newmark currently has well over $100 billion of equity and debt mandates. Please remember, Newmark is a real estate services provider. We do not own or invest in real estate. As interest rates stabilize, capital markets activity will begin to rebound towards the end of the year, and we expect there will be a robust back half of 2024. The resurgence of our higher margin capital markets business combined with our strong leasing recurring revenue businesses, and the investments we have made in expanding our platform will drive significant revenue and earnings growth. Additionally, a world-class debt platform will drive outsized growth over the intermediate term given the record $1.9 trillion of debt maturities through 2025. With the sharp increase in interest rates and cap rates and the pullback in lending by banks and other traditional lenders We believe a large and growing percentage of investors and owners will need to find alternative solutions. Goldman Sachs recently estimated that real estate-focused private credit funds will triple their share of U.S. commercial real estate originations to 30% between 2022 and 2027. We expect a significant portion of debt maturities to be resolved not only through refinancings, which will help our mortgage, brokerage, and origination businesses, but through more complex and sophisticated restructurings and recapitalizations. This process has already begun, with Newmark arranging several equity joint ventures and recaps for our clients thus far in 2023. With many other mandates in the pipeline, and we expect a growing number of owners and investors to turn to our best-in-class professionals for innovative financing solutions. We anticipate assisting private credit funds and other institutional investors to acquire a significant portion of the loans sold by banks and other lenders. U.S. real estate loan sales volumes were up by over 400% for the first four months of 2023 compared to the 2015 to 2019 average. And we anticipate a significant percentage of the over $3 trillion of outstanding non-GSE commercial mortgages that will become distressed. We therefore expect banks and other lenders to sell an ever-increasing portion of their loans over the next few years. As a clear leader in loan sales, Newmark will generate a dramatic growth from this counter-cyclical business, which partially offsets and replaces near-term declines in the sale of buildings. Growth in distressed loans and assets will lead to other opportunities for Newmark across its service line. In addition, we expect to continue to outperform the market in leasing, due to the investments we have made in industrial and retail brokerage, which augment our already strong office leasing business. We're starting to see increased tenant demand in the office markets, led by ongoing return to office plans. With that, I'm happy to turn the call over to our CFO, Mike Rispoli.