Q3 2023 Newmark Group Inc Earnings Call

You're holding them for the new Mark Company Real estate, we are still in many additional participants in the call should begin shortly will do thank you for your patience and please continue.

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Please standby.

Good day and welcome to the Nu Mark Group three Q23 earnings call. Today's conference is being recorded at this time I'd like to turn the conference over to Jason Mcgruder head of IR. Please go ahead.

Thank you operator and good morning.

Newmark issued its third 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 September 30 of 2023 for the year earlier period.

Except as otherwise specified we will be referring to results only on a non-GAAP basis, which includes the tariffs adjusted earnings adjusted EBITDA.

Please refer to the section in today's press release for Cui <unk> updated definitions of any non-GAAP terms reconciliation of these items the corresponding GAAP results, how when and why management uses them.

Otherwise stated any figures discussed today with respect to cash flow from operations referred to net cash provided by operating activities, excluding loan origination and sales.

Cash generated by the visits.

This latter cash flow metric before the impact of loan forgivable loans and other receivables from employees and partners.

And the impact of a 2021 equity bet.

You can find more information on these items and with respect to our GAAP and non-GAAP results on our website and today's press release.

The supplemental excel tables and the presentation for the.

Outlook discussed today assumes no additional share repurchases material acquisitions or meaningful changes in the company's stock right. Our expectations are subject to change based on various macro economic social political and other factors none of our long term targets or goals beyond 2023 should be considered formal guidance.

Also remind you information on this call a better business that are not historical facts are forward looking statements within the meaning of section 27, a M Securities Act of 1933 as amended and section 21 E of Securities Exchange Act.

Or as method.

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 to differ from those contained in the forward looking statements see Newmark Securities 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 I'm now happy to turn the call over to our host Barry <unk>, Chief Executive Officer of Newmark.

Good morning, and thank you for joining us newmark strategy of attracting retaining and empowering the industry's best talent resulted in significant market share gains in leasing and capital markets during the quarter.

Clients increasingly seek our advice to help navigate the challenging environment and respond to shifting market dynamics, our deep bench of world class professionals in all major verticals across our expanding global footprint has enabled us to outpace the industry.

We also generated double digit growth in our recurring businesses during the quarter as we continue to expand our property management and our global corporate services businesses as well as our high margin servicing and asset management platforms.

With respect to leasing Newmark continued to outperform the industry with a seven 6% decline compared to overall U S leasing activity declining by 15% to 20% for both the third quarter and a year to date.

Our year to date leasing revenues were down 5% versus last year and flat compared with the same period in 2019.

Yeah.

[noise] [noise] Numerex industrial and retail leasing strength are expected to drive additional market share gains in the fourth quarter vacancies remain below long term averages.

Nearly all property types in the U S except for office, which remains challenged out outside of premium class a properties. Our recurring revenues were up 14%. We expect these businesses to continue their strong growth.

Led by the addition of Gerald even solid organic improvement across our global corporate services and property management platforms as well as our high margin asset management and servicing businesses, we gained meaningful market share in investment sales during the quarter. This was particularly true in the U S, where we materially outperformed the market by 19 percentage points.

According to RCA. Similarly, our total debt volumes to outpace the industry originations. We expect this outperformance to continue in the fourth quarter, given our strong pipeline of capital markets activity in terms of our intermediate and long term view on capital markets MSCI reports that the level of distress.

The assets in the U S is at its highest level in 10 years and new market research estimates that approximately $1 two trillion dollars of outstanding commercial and multifamily mortgages in the U S or potentially trouble.

As the industry leader in loan sales. This is an enormous opportunity for newmark higher interest interest rates rising cap rates and the pullback in lending by banks and other traditional lenders continues to lead more investors and owners to seek innovative financial solutions financing solutions.

What matters most when markets are difficult, which is why our team of the highest quality professionals uniquely positions newmark to gain market share and capitalize on the changing landscape. We expect our world class that platform to drive meaningful growth over time due in part to the record $1 nine trillion dollars of U S commercial real estate.

<unk> debt maturing through 2025, we anticipate these debt maturities will provide long term tailwind to our mortgage brokerage and origination businesses in the near term. We expect a continued increase in the number of financings, we're acquiring the more bespoke and innovative transactions in which our professional special.

Lives.

Recapitalization and restructuring volumes are expected to become an ever bigger part of our business.

We significantly outperformed our full service peers and a record market of 2021.

And also expect to outperform our peers in a challenging 2023 market. Our model has proven to be resilient and successful across the cycles. We expect to continue outpacing the industry in the fourth quarter of 2023 by generating double digit growth in revenues adjusted earnings per share and adjusted <unk>.

EBITDA, our strong incremental margins will drive significant revenue and earnings outperformance when the industry capital market volumes recover with that I'm happy to turn the call over to our CFO Mike <unk>.

Thank you Barry and good morning.

Total revenues were $616 3 million down seven 3%.

We significantly outperformed the industry and capital markets as our investment sales and commercial mortgage origination revenues declined by 28, 1% and 28, 8% respectively.

Paired to a more than 50% decline in overall market activity.

Our leasing revenues also outperformed the industry declining seven 6% in the quarter.

5% year to date as compared to a 15% to 20% decline for the industry for both periods.

Our industrial and retail platforms have grown 45% over the last 12 months compared with pre pandemic levels for 2019.

Our management services servicing and other revenues grew by 14, 1% led by the addition of Gerald <unk> growth from New marks high margin servicing business and improvement in gcs fees.

Turning to expenses.

Compensation expenses were down five 2%, reflecting lower variable compensation, partially offset by expenses related to acquired companies and new revenue generating professionals.

Non compensation expenses were up one 4%, excluding the $9 $8 million increase in pass through expenses.

The increase was due to acquisitions, which were largely offset by our cost savings initiatives.

We have completed our $50 million fixed cost reduction initiatives one quarter ahead of schedule and are now increasing our savings target to $75 million.

We expect to complete this additional $25 million of savings by the second quarter of 2024.

Moving to earnings.

Adjusted EBITDA was $96 3 million versus $122 $5 million or earnings per share were 2007 compared with 35.

Our fully diluted weighted average share count increased by one 5% to $247 2 million.

We repurchased two 8 million shares for $18 $9 million during the quarter and $5 1 million shares for $32 $3 million year to date.

We expect our fully diluted weighted average share count for adjusted earnings to be approximately $250 million in the fourth quarter and $246 million for the year.

Turning to the balance sheet.

We ended September with $143 $3 million of cash and cash equivalents.

During the quarter, we generated $89 $1 million of cash flow from operations and received $105 $5 million from the.

<unk> have a joint venture.

We use this cash to repay $170 million on our revolver and ended the period with $604 $7 million of total corporate debt.

New marks net leverage was one four times an improvement compared to one seven times at the end of June.

To repay our $550 million November debt maturity, we plan to borrow $420 million under our recently announced credit agreement.

And the remaining $130 million from our $600 million revolver.

Moving to outlook.

We expect to outperform the industry in the fourth quarter and to generate between 692 and $742 million of total revenues, an increase of 14% to 22% compared with last year.

Adjusted EBITDA of between 143, and $167 million, a 40% to 63% improvement in earnings per share of 42 to 49.

Up 31% to 53%.

For the full year, we anticipate revenues between $2.415 billion and $2.465 billion.

Adjusted EBITDA of $375 million to $400 million and earnings per share between $1 <unk> and $1 <unk>.

Nu Mark's model of investing for long term growth has driven our revenue and earnings outperformance across the cycles.

As we demonstrated in today's investor presentation on slide 14, we significantly outperformed the industry in 2021, which was a record year for industry capital markets volumes.

And in 2023 based on the midpoint of our guidance and street consensus for our competitors, we will once again outperform our peers.

And with that I would like to open the call for questions.

Well. Thank you if you would like to signal with questions. Please press star one on your Touchtone telephone if you're joining us today using a speaker phone. Please make sure. Your mute function is turned off July your signal to reach our equipment.

And that is star one if you would like to signals questions Star one.

Our first question will come from Alexander Goldfarb with Piper Sandler.

Hey, good morning, good morning down there.

Just the first question is clearly.

Strong fourth quarter guidance, so that's great to see.

Just curious yeah, one the drivers of that.

Particular, yes, it was it just a.

A few transactions that are closing and then two is that setting up that we should think of 2024 being equally as robust or is fourth quarter, just being enhanced by a few deals closing.

Good morning, Alex It's Mike I would say that what you're seeing is we've sort of bottomed out from an earnings perspective, and now we see the floor of the company's earnings performance.

Certainly we continue to be in a difficult market.

<unk>.

At least the first half of next year will continue to be challenging, but we'll see what happens in the second half.

From a numeric perspective, we just continue to win more market share.

Our management businesses are up 14% in the third quarter will be up double digits again in the fourth quarter.

Our leasing business continues to outperform the market and I think youll see that our leasing business will continue to be.

Better than the market and probably up in the fourth quarter and.

Our capital markets business, we just continue to win a larger share of the really significant transactions in the market.

And I think that's attributed to the talent we have on our platform.

So I wouldn't say 2024 is going to be significantly up.

A little early to tell but certainly 2023 will be.

A strong year for us relative to the market.

Okay, and then on the guidance. It was indicated that equity compensation, yes. It was going to be at the low end of the 7% to 9% obviously you know.

Everyone compensation in finance and real estate is always a fun topic.

I would I am a little surprised that it would be towards the lower end just given the positive comments you've made in the end the investment the business wins that you guys have had so are you altering or reducing your compensation payout and is that also part of the reason why the fourth quarter adjusted EPS guidance is <unk>.

Far ahead of the street or how should we think about the comments relating to the equity compensation guidance range.

Look I think we've always said is our management business is grow equity will become a smaller percentage of our overall revenue and our overall earnings of the company.

Certainly we have a unique structure and what comes through our GAAP compensation expenses for stock compensation.

Our.

The monetization of shares that we've issued in previous years and so.

With the stock price being down a little bit the fair value of what's coming through the P&L is just going to be a little bit lower.

Changing our model in any way, but.

The 7% to 9% guidance, we think holds true in most markets and will be just a little bit towards the lower end this year.

Okay. Thank you for that color. Thank you.

As a reminder, if you would like to signal with questions. Please press star one on your Touchtone telephone again star.

Star one for questions. Our next question will come from Jade Rahmani with K B W.

Thank you very much.

One of the outperformance this quarter was management services can you provide any comment as to what specifically within that is driving the strong growth.

Yeah.

Well, we can continue to do more servicing we continue to do asset management. We are also increasing our property management business with our really strong capital markets business.

The relationships that we build things, we sell give us a better opportunity and a closer look at getting those those opportunities to manage property.

That continues to grow.

Yeah, and the one other item we mentioned in there Jade as you remember earlier in the year, we bought Gerald even the U K and we said about two thirds of their business they.

They do about $110 million plus or minus of revenue annually now two thirds of that is management business. So that's also contributing to the.

To the management line.

Okay. Thank you for that.

I was wondering if you could.

Make any broad comment about 2020 for CBRE has said that the earliest stay we'd expect.

Recovery to begin is in the second half.

And that would be with respect to capital market also on the leasing side with respect to office.

Clear that a new new leases are smaller than they were before and there is some pressure on revenue.

On rents so.

That'd be helpful to hear from you how you're starting to think about 2024.

So as Mike said, we think we're at the bottom.

And we think it's only going to get better the question as to how how much better we are.

Done pretty well and leasing retail leasing industrial would be saying has done fairly well office.

There are there are transactions being made.

The high quality premium office market is generally pretty good in most cities companies are making decisions around occupying space and.

And as we get closer to determining what what the hybrid.

Environment looks like we'll get a clearer vision of what that is but it's going to get better and I don't think anybody can really say exactly whether it's in the middle of 'twenty four at the end of 2004, I think it's hard to predict.

And broadly speaking a follow up to that would be you know.

Absolute growth year on year, you expect to be positive in 2024.

We do we we have been hiring.

We've been hiring really great people.

This is a company where the.

The highest and most productive brokers would like to be.

That's been our plan from the very beginning I. We've stated this almost every quarter since we went public.

That RV.

Our view is we bring the best professionals to our platform. We will have the best result in the highest market share. We think that has been proven across all of the cycles, we've done well in the trough, we're doing well and the rise we do better than the market recovery.

So I think there's been enough time for you guys to evaluate that while we have said is our plan and what the results of our plan.

Has been over this period of time is yes.

Proven true.

Thanks very much.

Yeah.

And our next question will come from Patrick O'shaughnessy with Raymond James.

Hey, good morning, guys, maybe to follow up on an earlier question, how should we think about the size and the revenue impact of these signature bank portfolio sales and is it a big enough benefit to you in the fourth quarter of this year to create a tough comp for you in capital markets in 2024.

As we've said before we we're just not going to comment on the size of the signature portfolio, but we believe that our that we will have consistent market share outperformed performance.

Sequentially going forward, we've hired new people, we've acquired great talent, we will continue as the market resolve itself and recovers to get an outsized proportion of the business that gets <unk>.

Transacted.

Okay. Thank you.

And then you're limited in portfolio it looks like it grew a decent amount in the third quarter and if I recall correctly you bought the remainder of the spring 11 earlier. This year can you just provide an update on your servicing strategy.

While we.

Built a nice servicing business, we I mean, we had $171 billion servicing book, we've now better integrated as we own 100% of spring 11, we've integrated the spring 11 business, which does loans screening servicing asset management.

Together with that so that really adds to what the what the flexibility and capability of that platform in a market like this having people who can run the gamut of the asset management servicing leasing.

Property Management project management, all of those combined services within one one enterprise puts us in a very good position.

To work through this this and this moment in time.

Great. Thank you.

Thank you and thank you guys.

Everybody.

Alright. Thank you sure clarify the 100, it's 177 billion sorry go ahead operator.

Thanks Jess.

Sure.

We do have an additional question from Alexander Goldfarb with Piper Sandler.

Hey, Thank you for taking the question just going back Barry I can appreciate that you don't want to outline the FDIC.

Details, but just in general you guys have it by them that you advised on the Blackstone M&A transaction I mean, clearly you're building up more of what I guess I would term sort of traditional investment bank revenues.

That complement.

Your brokerage.

Verticals. So is there just a way that we can think about Holistically. The addition of sort of the new revenue streams.

As we try to think about the company.

Well.

We as we said last time, we as you picked up that we were getting more heavily in the advisory business. So where we've we brought on bankers we are starting to do more.

<unk> complex.

More in depth.

Kinds of transactions, where we see a real opportunity in REIT to REIT M&A.

<unk>.

Total recaps.

New investors as a whole new array of investors and debt providers in the business and we think.

We're in a good place to do that as you saw we.

Last quarter, we did.

$2 $2 billion self storage sale to a major food from a major institution to another major institution Park, La Brea was a $900 million debt debt that.

Placement, we just yesterday across the wire will come a day.

Maybe the largest multifamily office and multifamily and office $2 2 million square feet of office out of Texas that just traded yesterday.

And all of these cases.

And most of these cases there were other incumbents that we are picking up these opportunities from and we continue to be the go to company in respect of the more creative.

Providing a more creative solution. So so we just see a vast array and a wider spectrum of things.

And the real estate business right now that will bring our talent to the table we are in the room.

And that that's the first step.

Thank you.

Thank you and that does conclude the question and answer session I'll now turn the conference back over to Barry <unk> for any closing or additional remarks.

Thanks.

Well I want to thank everybody for joining us and I look forward to next quarter.

Thank you.

Thank you that does conclude today's conference. Thank you for your participation and have an excellent day.

Okay.

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Okay.

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Operator: You're holding for the Newmark Company real estate. We are still in many additional participants and the call should begin shortly. We do thank you for your patience and please continue to have a good time.

Yes.

Yeah.

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Okay.

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Yeah.

Operator: Please stand by. Good day and welcome to the Newmark Group 3Q23 earnings call. Today's conference is being recorded.

Jason Mcgruder: At this time I'd like to turn the conference over to Jason McGruder. Head of IR, please go ahead. Thank you operator and good morning. Newmark issued its third quarter 2023 financial results press release and presentation this morning. Otherwise stated the results provided on today's call compare only the three months ended in September 30th, 2023 to the year earlier period. Acceptance, otherwise specified, we will be referring to our results only on a non-gap basis, which includes the terms adjusted earnings and adjusted EBITDA.

Jason Mcgruder: Please refer to the sections in today's press release for complete and or updated definitions of any non-gap terms, reconciliation of these items for the corresponding gap results, how, when, and why man produces them. Cash generated by the business is this latter cash flow metric before the impact of loans, forgivable loans, and other receivables from employees and partners, and the impact of a 2021 equity event. You can find more information on these alternative items and with respect to our gap and non-gap results on our website in today's press release in the supplemental sales tables and the presentation.

Jason Mcgruder: The outlook discussed today seems no additional share references, material acquisitions or meaningful changes in the company's stock price. Our expectations are subject to change 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 remind you information on this call about our business that are not historical facts or for looking statements within the meeting of Section 27A of Security's Act of 1933 as amended. Section 21E of Security's Act of 1934 as amended. Such statements involved risks and uncertainties except is required by law. Newmark undertakes no obligation to update any forward-looking statements.

Jason Mcgruder: For complete discussion of additional risk and uncertainties which could cause actual results to differ from those contained in the forward-looking statements, see Newmark's Security's Exchange Commission filings including but not limited to the risk factors in our most recent form, 10K, form 10Q, or form AK filings which are incorporated by reference.

Barry Gosin: I now happy to turn the call over to our host, Barry Dawson, Chief Executive Officer of Newmark. Good morning and thank you for joining us. Newmark's strategy of attracting, retaining, and empowering the industry's best talent resulted in significant market share gains in leasing and capital markets during the quarter. Violence increasingly seek our advice to help navigate the challenging environment and respond to shifting market dynamics. A deep bench of world-class professionals and all major verticals across our expanding global footprint has enabled us to outpace the industry.

Barry Gosin: We also generated double digit growth in our recurring businesses during the quarter as we continue to expand our property management and global corporate services businesses, as well as our high margins servicing and asset management platforms. With respect to leasing, Newmark continued to outperform the industry with a 7.6% decline compared to overall US leasing activity declining by 15 to 20% for both the third quarter and the year-to-date. Our year-to-date leasing revenues are down 5% versus last year and flat compared with the same period in 2019.

Barry Gosin: Newmark's industrial and retail leasing strength are expected to drive additional market share gains in the fourth quarter. They can see as remained below long-term averages in nearly all property types in the US, except for office, which remains challenged outside of premium class A properties. Our recurring revenues were up 14%. We expect these businesses to continue their strong growth led by the addition of Gerald even solid organic improvement across our global corporate services and property management platforms, as well as our high margin asset management and servicing businesses.

Barry Gosin: We gained meaningful market share in investment sales during the quarter. This was particularly true in the US, where we materially outperformed the market by 19 percentage points according to our CA. Similarly, our total debt volumes outpaced the industry originations. We expect this outperformance to continue in the fourth quarter given our strong pipeline of capital markets activity. In terms of our intermediate and long-term view on capital markets, MSCI reports that the level of distressed assets in the US is at its highest level in 10 years, and Newmark research estimates that approximately $1.2 trillion of outstanding commercial and multi-family mortgages in the US are potentially troubled.

Barry Gosin: As the industry leader in loan sales, this is an enormous opportunity for Newmark. Higher interest rates, rising cap rates, and the pullback in lending by banks and other traditional lenders continues to lead more investors and owners to seek innovative financial solutions. Solutions. Talent matters most when markets are difficult, which is why our team of the highest quality professionals uniquely positions Newmark to gain market share and capitalize on the changing landscape. We expect our world-class debt platform to drive meaningful growth over time, doing part to the record $1.9 trillion of US commercial real estate debt maturing to 2025.

Barry Gosin: We anticipate these debt maturities will provide long-term tailwinds to our mortgage brokerage and origination businesses. In the near term, we expect a continued increase in the number of financings requiring the more bespoke and innovative transactions in which our professionals specialize. Recapitalizations and restructuring volumes are expected to become an ever bigger part of our business. We significantly outperformed our full service peers in the record market of 2021 and also expect to outperform our peers in the challenging 2023 market.

Barry Gosin: Our model has proven to be resilient and successful across the cycles. We expect to continue outpacing the industry in the fourth quarter of 2023 by generating double-digit growth in revenues, adjusted earnings per share and adjusted EBITDA. Our strong incremental margins will drive significant revenue and earnings outperformance when the industry capital markets volumes recover.

Michael Rispoli: With that, I am happy to turn the call over to our CFO, Microsoft. Thank you, Barry. Good morning. Total revenues were $616.3 million down 7.3%. We significantly outperformed the industry in capital markets as our investment sales and commercial mortgage origination revenues declined by 28.1% and 28.8% respectively compared to a more than 50% decline in overall market activity. Our leasing revenues also outperformed the industry, declining 7.6% in the quarter and 5% year-to-date as compared to a 15 to 20% decline for the industry for both periods.

Michael Rispoli: Our industrial and retail platforms have grown 45% over the last 12 months compared with pre-pandemic levels for 2019. Our management services, servicing and other revenues, grew by 14.1% led by the addition of Gerald Eave, growth from New Marks High Margin servicing business, and improvement in GCS fees.

Michael Rispoli: Turning to expenses. Compensation expenses were down 5.2%, reflecting lower variable compensation, partially offset by expenses related to acquired companies, and new revenue generating professionals. Non-compensation expenses were up 1.4%, excluding the $9.8 million increase in past their expenses. The increase was due to acquisitions which were largely offset by our cost savings initiatives.

Michael Rispoli: We have completed our $50 million fixed cost reduction initiative, one quarter ahead of schedule, and are now increasing our savings target to $75 million. We expect to complete this additional $25 million of savings by the second quarter of 2024.

Michael Rispoli: Moving to earnings. Adjusted EBITDA was $96.3 million versus $122.5 million. Our earnings per share were $0.27 compared with $0.35. Our fully diluted weighted average share count increased by 1.5% to $247.2 million. We repurchased $2.8 million shares for $18.9 million during the quarter and $5.1 million shares for $32.3 million a year to date. We expect our fully diluted weighted average share count for adjusted earnings to be approximately $250 million in the fourth quarter and $246 million for the year.

Michael Rispoli: Turning to the balance sheet. We ended September with $143.3 million of cash and cash equivalents. During the quarter we generated $89.1 million of cash flow from operations and received $105.5 million from the redemption of a joint venture. We used this cash to repay $170 million on a revolver and ended the period with $604.7 million of total corporate debt. Newmark's net leverage was 1.4 times and improvement compared to 1.7 times at the end of June. To repay our $550 million November debt maturity, we planned to borrow $420 million under our recently announced credit agreement and the remaining $130 million from our $600 million revolver.

Michael Rispoli: Moving to outlook. We expect to outperform the industry in the fourth quarter and to generate between $692 and $742 million of total revenues. An increase of 14 to 22% compared with last year. Adjusted EBIDA of between $143 and $167 million, a $40 to 63% improvement and earnings per share of $42 to $49 up 31 to 53%.

Michael Rispoli: For the full year, we anticipate revenues between $2.415 million and $2.465 million. Adjusted EBIDA of $375 to $400 million and earnings per share between $1.02 and $1.09.

Michael Rispoli: Newmark's model of investing for long term growth has driven our revenue and earnings outperformance across the cycles. As we demonstrate in today's investor presentation on slide 14, we significantly outperform the industry in 2021, which was a record year for industry capital markets volumes. And in 2023, based on the midpoint of our guidance and street consensus for our competitors, we will once again outperform our peers.

Operator: And with that, I would like to open the call for questions. Well, thank you. If you would like to signal with questions, please press star-1 on your touchtone telephone. If you're a joyous today, use a speaker phone. Please make sure your mute function is turned off to allow your signal to reach our equipment. Again, that is star-1. If you would like to signal with questions, star-1.

Alexander Goldfarb: And our first question will come from Alexander Goldfarb with Piper Sam. Hey, morning down there. The first question is clearly strong fourth quarter guidance, so that's great to see.

Barry Gosin: Just curious, one, the drivers of that in particular, is it just a few transactions that are closing and then two, is that setting up that we should think of 2024 being equally as robust or is fourth quarter just being enhanced by a few deals closing. Morning, Alex, it's like, I would say that what you're seeing is we've sort of bottomed out from an earnings perspective and now we see the floor of the company's earnings performance.

Barry Gosin: Certainly, we continue to be in a difficult market and at least the first half of next year will continue to be challenging. We'll see what happens in the second half. But from a new mark perspective, we just continue to win more market share. Our management businesses are up 14 percent and the third quarter will be up double digits again in the fourth quarter. Our leasing business continues to outperform the market and I think you'll see that our leasing business will continue to be better than the market and probably up in the fourth quarter.

Barry Gosin: In our capital markets business, we just continue to win a larger share of the really significant transactions in the market and I think that's attributed to the talent we have on our platform. So I wouldn't say 2024 is going to be significantly up to a little early to tell, but certainly 2023 will be a strong year for us relative to the market.

Michael Rispoli: Okay, and then on the guidance, it was indicated that equity compensation is going to be at the low end of the seven to nine percent. Obviously, everyone's competition in finance and real state is always a fun topic. I'm a little surprised it would be towards the lower end, just given the positive comments you've made and the investment, the business wins that you guys have had. So are you altering or reducing your compensation payout and is that also part of the reason why the fourth quarter adjusted EPS guidance is so far ahead of the street or how should we think about the comments relating to the equity compensation guidance range?

Michael Rispoli: Look, I think we've always said as our management businesses grow, equity will become a smaller percentage of our overall revenue and our overall earnings of the company. Certainly, we have unique structure and what comes through our gap compensation expenses for stock compensation are the monetization of shares that we've issued in previous years. And so with the stock price being down a little bit, the fair value of what's coming through the P&L is just going to be a little bit lower.

Michael Rispoli: We're not changing our model in any way, but you know, the seven to nine percent guidance we think holds true in most markets and will be just a little bit towards the lower end this year. Okay, thank you for that color. Thank you.

Operator: As a reminder, if you would like to signal with questions, please press star one or your touch-tone telephone. Again, star one for questions.

Jade Rahmani: Our next question will come from Jade Rahmani with KBW Thank you very much. One of the outperformers this quarter was management services. Can you provide any comment as to what specifically within that is driving the strong growth? Well, we continue to do more servicing, we continue to do asset management, we are also increasing our property management business with our really strong capital markets business, the relationships that we build, the things we sell give us a better opportunity and a closer look at getting those opportunities to manage property, so that continues to grow.

Jade Rahmani: The one other item we mentioned in there, Jade, is your member earlier in the year we bought Gerald even the UK, and we said about two-thirds of their business, they do about 110 million plus or minus of revenue annually, about two-thirds of that is management business, so that's also contributing to the management line.

Barry Gosin: Okay, thank you for that. I was wondering if you could make any broad comment about 2024, CBRI has said that the earliest they would expect recovery to begin is in the second half, and that would be with respect to capital markets, also on the leasing side with respect to office, it's clear that new leases are smaller than they were before, and there's some pressure on revenue on rent, so be helpful to hear from you how you're starting to think about 2024.

Barry Gosin: As Mike said, we think we are at the bottom, and we think it's only going to get better, the question is to how much better. We've done pretty well in leasing, retail leasing, industrial leasing has done fairly well, office, there are transactions being made, the high quality premium office market is generally pretty good in most cities, companies are making decisions around occupying space, and as we get closer to determining what the hybrid environment looks like, we'll get a clearer vision of what that is, but it's going to get better, and I don't think anybody could really say exactly whether it's in the middle of 2024, at the end of 2024, I think it's hard to predict.

Barry Gosin: And broadly speaking, a follow-up that would be absolute growth year on year, you expect to be positive in 2024. We do. We've been hiring really great people, this is a company where the highest and most productive brokers would like to be. That's been our plan from the very beginning. We've stated this almost every quarter since we went in public, that our view is we bring the best. First professionals to our platform, we will have the best results in the highest market share.

Barry Gosin: We think that has been proven across all the cycles. We've done well in the trough. We're doing well in the rise. We do better in the market recovery. So I think there's been enough time for you guys to evaluate that what we have said is our plan and what the results of our plan has been over this period of time as proven true.

Barry Gosin: Thanks very much.

Patrick O'Shaughnessy: And our next question will come from Patrick O'Shaughnessy with Raymond James. Hey, good morning guys. Maybe to follow up on an earlier question, how should we think about sizing the revenue impact of the signature bank portfolio sales?

Barry Gosin: And is it a big enough benefit to you in the fourth quarter of this year to create a tough comp for you in capital markets in 2024? As we've said before, we're just not going to comment on the size of the signature portfolio, but we believe that we will have consistent market share out for performance sequentially going forward. We've hired new people. We've acquired great talent. We will continue as the market resolves itself and recovers to get an outsized proportion of the business that gets transacted.

Barry Gosin: Okay, thank you. And then your limited scene portfolio looks like it grew a decent amount in the third quarter. And if I recall correctly, you bought the remainder of spring 11 earlier this year, can you just provide an update on your service and strategy? Well, we've built a nice servicing business. We have $171 billion servicing book. We've now a better integrated as we own 100% of spring 11. We've integrated the spring 11 business which does loan screening servicing asset management together with that.

Barry Gosin: So that really adds to what the flexibility and capability of that platform in a market like this, having people who can run the gamut of asset management servicing, leasing, property management, project management, all those combined services within one enterprise puts us in a very good position to work through this moment in time.

Michael Rispoli: Great. Thank you. And that does. Sorry, sorry. Oh, I'm sure. It's a hundred. It's a hundred seventy seven billion. Go ahead on, Bruce.

Michael Rispoli: Thank you.

Alexander Goldfarb: We do have an additional question from Alexander Goldfarb with Piper Sandler. Hey, thank you for taking the question. Just going back, Barry, I can appreciate that you don't want to outline the FDIC details. But just in general, you guys have advised on that. You advised on the blackstone M&A transaction. I mean, clearly you're building up more of, you know, what I guess I would term, you know, sort of traditional investment bank revenues that complement the, you know, your brokerage verticals.

Barry Gosin: So is there just a way that we can think about holistically the addition of, you know, sort of the new revenue streams as we try to think about the company? Well, you know, we've, we, as we said, last time we, we, as you, you picked up that we were getting more heavily in the advisory business, so we're, you know, we've, we've, we've brought on bankers, we are starting to do more, more complex, more in depth.

Barry Gosin: Kinds of transactions where we see a real opportunity and read to read more M&A, continuations, total recaps, new investors is a whole new array of investors and debt providers in the business, and we think we're, we're in a good place to do that. As you saw, we last quarter, we did a $2.2 billion self storage sale to a major from a major institution to another major institution. The park La Brea was a $900 million debt, debt placement.

Barry Gosin: We just yesterday across the wire will come a, the, maybe the largest multi family office, a multi family and office, 2.2 million square feet of office out of Texas that just traded yesterday. In all these cases, in most of these cases, there were other incumbents that we are picking up these opportunities from, and we continue to be to go to company in respect of the more creative, providing the more creative solutions.

Barry Gosin: So, we just see a vast array and a wider spectrum of things in the real estate business right now that will bring our talent to the table. We're in the room, and that's, that's the first step. Thank you.

Barry Gosin: Thank you, and that does conclude the question and answer session.

Barry Gosin: I now turn the conference back over to Barry Goson for any closing or additional remarks. Well, I want to thank everybody for joining us and look forward to next quarter. Thank you.

Operator: That does conclude today's conference. What do you think you for your participation?

Operator: Have an excellent day. Thank you.