Newmark Group (NMRK) risk factors, FY2024 10-K

Risks Related to Global Economic and Market Conditions

1. 01General conditions in the economy, commercial real estate market and the banking sector (including perceptions of such conditions) can have a material adverse effect on our business, financial condition, results of operations and prospects
2. 02Actions taken by central banks in major global economies, including with regards to interest rates, may have a material negative impact on our businesses
3. 03manage properties acquired under distress, there can be no assurance that these incremental fees, if any, will offset any declines in other parts of our business as a result of higher interest rates, which in turn could materially adversely affect our business, financial condition, results of operations and prospects

Risks Related to Concentration of our Business

1. 04Our business is generally geographically concentrated and could be significantly affected by any adverse change in the regions in which we operate
2. 05Concentration of business with particular institutional owners and corporate clients can increase risk, and our business can be adversely affected due to the loss of certain of these clients

Risks Related to the Commercial Real Estate Services Industry

1. 06We operate in a highly competitive industry with numerous competitors, some of which may have greater financial and operational resources than we do

Risks Related to International Operations

1. 07We are and we will continue to be exposed to political, economic, legal, regulatory, operational and other risks, including with respect to the outbreak of hostilities or other instability, inherent in operating in foreign countries
2. 08The U.K. exit from the EU could materially adversely impact our customers, counterparties, businesses, financial condition, results of operations and prospects

Risks Related to Regulatory Compliance and Potential Liabilities

1. 09We may have liabilities in connection with our business activities, including appraisal and valuation, sales and leasing and property and facilities management activities, and such liabilities may exceed our insurance coverage
2. 10Because we employ large numbers of building staff in facilities that we manage, we face risk in potential claims relating to employment injuries, termination and other employment matters. While these risks are generally passed back to the building owner, there is no assurance that this will continue to be the case
3. 11If we fail to comply with laws, rules and regulations applicable to commercial real estate brokerage, valuation and advisory, mortgage transactions and our other business lines, we may incur significant financial penalties
4. 12Changes in our tax rates, unavailability of certain tax credits or reliefs, exposure to additional tax liabilities or assessments or challenges to our tax positions or interpretations could adversely affect our results of operations and financial condition
5. 13Environmental regulations may adversely impact our commercial real estate business and/or cause us to incur costs for cleanup of hazardous substances or wastes or other environmental liabilities

Risks Related to Our Mortgage Origination and Servicing Business

1. 14We are subject to risk of loss in connection with defaults on loans sold under the Fannie Mae DUS program that could materially and adversely affect our results of operations and liquidity

Risks Related to Our Intellectual Property

1. 15We may not be able to protect our intellectual property rights or may be prevented from using intellectual property necessary for our business
2. 16provisions to establish and protect our intellectual property rights to proprietary technologies, products, services or methods, and our brand

Risks Related to Our IT Systems and Cybersecurity

1. 17Defects or disruptions in our technology or services could diminish demand for our products and services and subject us to liability
2. 18Malicious cyber-attacks and other adverse events affecting our operational systems or infrastructure, or those of third parties, could disrupt our business, result in the disclosure of confidential information, damage our reputation and cause losses or regulatory penalties
3. 19We and our competitors may use AI in our businesses, and challenges with properly managing its use could result in competitive harm, regulatory action, legal liability and brand or reputational harm

Risks Related to Our Key Personnel and Employee Turnover

1. 20Howard Lutnick’s confirmation as the U.S. Secretary of Commerce and the loss of his services could have an adverse effect on our business
2. 21The loss of key employees or the failure to hire and retain highly skilled and other key personnel could negatively affect our business
3. 22The ability of key employees to devote adequate time and attention to us are a key part of the success of our business, and failure to continue to employ and have the benefit of these persons may adversely affect our business and prospects
4. 23We may be unable to enforce post-employment restrictive covenants applicable to our employees

Risks Related to Seasonality

1. 24Our business is generally affected by seasonality, which could have a material adverse effect on our results of operations in a given period

Risks Related to Our Commercial Contracts and Arrangements

1. 25We may not be able to replace partner offices when affiliation agreements are terminated, which may decrease our scope of services and geographic reach
2. 26Declines in or terminations of servicing engagements or breaches of servicing agreements could have a material adverse effect on our business, financial condition, results of operations and prospects
3. 27Reductions in loan servicing fees as a result of defaults or prepayments by borrowers could have a material adverse effect on our business, financial condition, results of operations and prospects

Risks Related to Liquidity, Funding and Indebtedness

1. 28Liquidity is essential to our business, and insufficient liquidity could have a material adverse effect on our business, financial condition, results of operations and prospects
2. 29Liquidity is essential to our business. Our liquidity position could be impaired due to circumstances that we may be unable to control, such as a general market disruption or idiosyncratic events that affect our clients, other third parties or us
3. 30the extent we are unable to access the debt capital markets on acceptable terms in the future, we may seek to raise funding and capital through equity issuances or other means
4. 31We may incur substantially more debt or take other actions which would intensify the risks discussed herein
5. 32Credit ratings downgrades could adversely affect our cost of capital and the availability of debt financing
6. 33Our acquisitions may require significant cash resources and may lead to a significant increase in the level of our indebtedness

Risks Related to Our 7.500% Senior Notes

1. 34We may not have the funds necessary to repurchase the 7.500% Senior Notes upon a change of control triggering event as required by the indenture governing these notes
2. 35The requirement to offer to repurchase the 7.500% Senior Notes upon a change of control triggering event may delay or prevent an otherwise beneficial takeover attempt of us

RISKS RELATED TO OUR CORPORATE AND PARTNERSHIP AND EQUITY STRUCTURE

1. 36We are a holding company and accordingly are dependent upon distributions from Newmark OpCo to pay dividends, taxes and indebtedness and other expenses and to make repurchases of our Class A common stock
2. 37Because our voting control is concentrated among the holders of our Class B common stock, the market price of our Class A common stock may be materially adversely affected by its disparate voting rights
3. 38The dual class structure of our common stock may adversely affect the trading market for our Class A common stock
4. 39Delaware law may protect decisions of our Board of Directors that have a different effect on holders of our Class A common stock and Class B common stock
5. 40We expect to take all legally permissible action to ensure that we and Newmark Holdings are not deemed investment companies under the Investment Company Act, but no assurance can be given that this will not occur
6. 41Newmark OpCo, or any combination thereof, and materially adversely affect our business, financial condition, results of operations and prospects

Risks Related to Our Relationship with Cantor and its Affiliates

1. 42Our Class B common stock is held by Cantor and CFGM, whose interests may conflict with ours and may exercise their control in a way that favors their interests to our detriment
2. 43Further changes in Cantor’s management may occur pursuant to Mr. Howard Lutnick’s divestiture of his interests, which may impact Cantor’s control over and relationship with us in ways that we cannot currently predict
3. 44Kyle Lutnick was appointed as Executive Vice Chairman of Cantor and President of CFGM, and as a member of our Board of Directors
4. 45Newmark Holdings exchangeable limited partnership interest, will not agree to a higher dividend percentage or a different use of reinvestment cash, even if doing so might be more advantageous to the Newmark stockholders
5. 46Cantor may compete with us for acquisitions or other business opportunities
6. 47Agreements between us and/or Cantor or its affiliates are between related parties, and the terms of these agreements may be less favorable to us than those that we could negotiate with third parties and may subject us to litigation

RISKS RELATED TO OWNERSHIP OF OUR CLASS A COMMON STOCK AND OUR STATUS AS A PUBLIC COMPANY

1. 48If we fail to implement and maintain an effective internal control environment, our operations, reputation and stock price could suffer, we may need to restate our financial statements and we may be delayed in or prevented from accessing the capital markets
2. 49Purchasers of our Class A common stock, as well as existing stockholders, may experience significant dilution as a result of sales of shares of our Class A common stock by us, and the perception that such sales could occur may adversely affect prevailing market prices for our stock
3. 50We are a Delaware corporation, and the anti-takeover provisions of the DGCL, our Certificate of Incorporation and our Bylaws impose various impediments to the ability of a third-party to acquire control of us, even if a change of control would be beneficial to our Class A stockholders

GENERAL RISKS

1. 51Ongoing scrutiny and changing expectations from stockholders, clients and customers with respect to the Company’s corporate responsibility or ESG practices may result in additional costs or risks
2. 52We face increasing financial, regulatory, and transitional risks associated with the effects of climate change