Commitments and Contingencies

12 Months Ended

Dec. 31, 2019

Commitments and Contingencies Disclosure [Abstract]


(a)	Contractual Obligations and Commitments

The following table summarizes certain of Newmark’s contractual obligations at December 31, 2019 (in thousands):



	Total		Less than 1 Year		1-3 Years		3-5 Years		More than 5 Years
Operating leases⁽¹⁾	$	347,408	$	44,709	$	82,424	$	73,812	$	146,463
Warehouse facilities⁽²⁾	209,648		209,648		—		—		—
Long-term debt⁽³⁾	600,000		—		50,000		550,000		—
Interest on long-term debt⁽⁴⁾	134,000		35,569		69,081		29,350		—
Interest on warehouse facilities⁽⁵⁾	5,404		5,404		—		—		—
Total	$	1,296,460	$	295,330	$	201,505	$	653,162	$	146,463


⁽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 $1.9 million over the life of the agreement.


⁽²⁾	The warehouse facilities are collateralized by $215.3 million of loans held for sale, at fair value, which loans were either under commitment to be purchased by Freddie Mac or had confirmed forward trade commitments for the issuance of and purchase of Fannie Mae or Ginnie Mae mortgage-backed securities.


⁽³⁾	Long-term debt reflects long-term borrowings of 6.125% Senior Notes and the Credit Facility. The carrying amount of the 6.125% Senior Notes and the Credit Facility were $540.4 million and $48.9 million as of December 31, 2019, respectively. See Note 22 — “Long-Term Debt” for more information regarding these obligations.


⁽⁴⁾	Reflects interest on the $550 million 6.125% Senior Notes until their maturity date of November 15, 2023.

⁽⁵⁾

Interest on the warehouse facilities was projected by using the 1 month LIBOR rate plus their respective additional basis points, primarily 115 basis points above LIBOR, applied to their respective outstanding balances as of December 31, 2019, through their respective maturity dates. Their respective maturity dates range from June to October 2019, while one line has an open maturity date. The notional amount of these committed and uncommitted warehouse facilities was $1.8 billion at December 31, 2019. One of these lines was temporarily increased by $350.0 million for the period January 13, 2020 to March 30, 2020 and another line was temporarily increased by $100.0 million for the period January 29, 2020 to March 13, 2020. See Note 21 — “Warehouse Facilities Collateralized by U.S. Government Sponsored Enterprises” for more information.

As of December 31, 2019 and 2018, Newmark committed to fund approximately $1.5 billion and $294.0 million, 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.


(b)	Contingent Payments Related to Acquisitions

Newmark completed acquisitions from 2015 through 2019 for which contingent cash consideration of $29.3 million and limited partnership units of 0.4 million may be issued on certain targets being met through 2022. The contingent equity instruments are issued by and are included in the “Accounts payable, accrued expenses and other liabilities” on Newmark’s consolidated balance sheets. The contingent cash liability is recorded at fair value as deferred consideration on Newmark’s consolidated balance 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:

Employment, Competitor-Related and Other Litigation

From time to time, Newmark and its subsidiaries are involved in litigation, claims and arbitrations 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 outcome of these current pending matters will not have a material adverse effect on Newmark’s 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.