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Compensation
 3 Months Ended
Mar. 31, 2020
Share-based Payment Arrangement [Abstract]  
Compensation
Compensation

Newmark’s Compensation Committee may grant various equity-based awards to employees of Newmark, including RSUs, limited partnership units and shares of Newmark Class A common stock upon exchange of Newmark limited partnership units (see Note 2 — “Limited Partnership Interests in Newmark 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 shares of Newmark Class A common stock, of which 65.0 million are registered, that may be delivered or cash-settled pursuant to awards granted during the life of the Newmark Equity Plan. As of March 31, 2020, awards with respect to 22.8 million shares have been granted and 377.2 million shares are available for future awards. Upon vesting of RSUs, issuance of restricted stock and redemption/exchange 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, limited partnership units and exchange rights for shares of BGC Class A common stock upon exchange of BGC Holdings limited partnership units (see Note 2 — “Limited Partnership interests in Newmark Holdings and BGC Holdings”).

As a result of the Separation, limited partnership interests in Newmark Holdings were distributed to the holders of limited partnership interests in BGC Holdings. 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.

The exchange ratio is the 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 one, but is subject to adjustment as set forth in the Separation and Distribution Agreement and was 0.9461 as of March 31, 2020).

Newmark incurred compensation expense related to Class A common stock, limited partnership units and RSUs held by Newmark employees as follows (in thousands):
 
Three Months Ended March 31,
 
2020
 
2019
Issuance of common stock and exchangeability expenses
$
8,119

 
$
661

Allocations of net income (1)
549

 
6,313

Limited partnership units amortization
1,895

 
6,335

RSU amortization
2,351

 
562

Equity-based compensation and allocations of net income to limited partnership units and FPUs (2)
$
12,914

 
$
13,871

(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.
(2) 
Reclassifications have been made to previously reported amounts to conform to the new presentation (see Note 1 — “Organization and Basis of Presentation”).

(a)
Limited Partnership Units
A summary of the activity associated with limited partnership units held by Newmark employees is as follows:
 
BGC Units
 
Newmark Units
 
Balance, January 1, 2019
61,870,969

 
44,733,487

(1) 
Granted
319,586

 
13,813,204

 
Redeemed/exchanged units
(3,938,134
)
 
(2,487,885
)
 
Forfeited units/other
(2,198,720
)
 
4,742,046

 
Balance, December 31, 2019
56,053,701

 
60,800,852

 
Granted
884,335

 
1,650,749

 
Redeemed/exchanged units
(439,178
)
 
(588,031
)
 
Forfeited units/other
—

 
(677
)
 
Balance, March 31, 2020
56,498,858

 
61,862,893

 
 
 
 
 
 
Total exchangeable units outstanding:
 
 
 
 
December 31, 2019
24,692,695

 
10,108,598

 
March 31, 2020
24,353,910

 
9,902,345

 

(1) 
Represents the pre-IPO Newmark employees share-equivalent limited partnership units in BGC Holdings.

The Limited Partnership Units table above includes both regular and Preferred Units. The Preferred Units are not entitled to participate in partnership distributions other than with respect to the Preferred Distribution (see Note 2 — “Limited Partnership Interests in BGC Holdings and Newmark Holdings” for further information on Preferred Units). A summary of the BGC Holdings and Newmark Holdings limited partnership units held by Newmark employees is as follows:
 
BGC
Units
 
Newmark
Units
Regular units
54,956,732

 
58,256,181

Preferred Units
1,542,126

 
3,606,712

Balance, March 31, 2020
56,498,858

 
61,862,893



A summary of units held by Newmark employees redeemed in connection with the issuance of Newmark or BGC Class A common stock (at the current exchange ratio) or granted exchangeability for Newmark or BGC Class A common stock is as follows:
 
Three Months Ended March 31,
 
2020
 
2019
BGC Holdings units
149,280

 
58,855

Newmark Holdings units
142,441

 
29,690

Total
291,721

 
88,545


    
    
Compensation expense related to the issuance of Newmark or BGC Class A common stock and grants of exchangeability on Newmark Holdings and BGC Holdings limited partnership units to Newmark employees is as follows (in thousands):
 
Three Months Ended March 31,
 
2020
 
2019
Issuance of common stock and exchangeability expenses
$
2,474

 
$
661



    
Limited partnership units with a post-termination payout held by Newmark employees are as follows (dollars in thousands):
 
March 31,
2020
 
December 31,
2019
Notional Value(1)
$
240,251

 
$
261,025

Estimated fair value of the post-termination payout(2)
$
59,925

 
$
58,149

Outstanding limited partnership units in BGC Holdings
5,323,593

 
6,251,816

Outstanding limited partnership units in BGC Holdings - unvested
1,163,775

 
1,508,510

Outstanding limited partnership units in Newmark Holdings
16,138,694

 
17,097,639

Outstanding limited partnership units in Newmark Holdings - unvested
8,678,865

 
9,357,822

(1) 
Beginning January 1, 2018, Newmark began granting stand-alone limited partnership units in Newmark Holdings to Newmark employees.
(2) 
Included in “Other long-term liabilities” on the accompanying unaudited condensed consolidated balance sheets.


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 seven years from the date of grant. Newmark recognized compensation expense/(benefit) related to these limited partnership units that were not redeemed as follows (in thousands):
 
Three Months Ended March 31,
 
2020
 
2019
Limited partnership units amortization
$
1,895

 
$
6,335



During the three months ended March 31, 2020 and 2019, Newmark did not grant any conversion rights to Newmark employees on outstanding limited partnership units in BGC Holdings or Newmark Holdings, giving the employee the option to convert the limited partnership units to HDUs with a capital balance within BGC Holdings or Newmark Holdings. Generally, HDUs are not considered share-equivalent limited partnership units and are not in the fully diluted share count. The grant of conversion rights to Newmark employees are as follows (in thousands):
 
March 31,
2020
 
December 31,
2019
Notional Value
$
193,278

 
$
194,995

Estimated fair value of limited partnership units (1)
$
187,503

 
$
182,800

(1) 
Included in “Other long-term liabilities” on the accompanying unaudited condensed consolidated balance sheets.

Compensation expense related to these limited partnership units held by Newmark employees was as follows (in thousands):
 
Three Months Ended March 31,
 
2020
 
2019
Issuance of common stock and exchangeability expenses
$
5,645

 
$
—



During the three months ended March 31, 2020, Newmark employees received 4.9 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 revenue threshold is met, the N Units are converted to equivalent limited partnership units that receive quarterly net 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 table above.

(b)
Restricted Stock Units
A summary of the activity associated with RSUs held by Newmark employees is as follows (fair value amount in thousands):
 
BGC RSUs(1)
 
Newmark 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, 2019
168,675

$
9.77

$
1,619

0.98
 
219,887

$
13.52

$
2,973

2.28
Granted
—

—

—

 
 
4,766,611

7.42

35,344

 
Settled units (delivered shares)
(107,820
)
9.38

(1,011
)
 
 
(109,007
)
11.70

(1,275
)
 
Forfeited units
(14,048
)
10.02

(141
)
 
 
(193,920
)
8.67

(1,681
)
 
Balance, December 31, 2019
46,807

$
9.97

$
467

0.25
 
4,683,571

$
7.55

$
35,361

5.69
Granted
—

$
—

$
—

 
 
1,686,149

$
9.58

$
16,153

 
Settled units (delivered shares)
(35,825
)
$
10.32

$
(370
)
 
 
(425,271
)
$
8.50

$
(3,616
)
 
Forfeited units
(857
)
$
10.54

$
(9
)
 
 
(17,669
)
$
8.54

$
(151
)
 
Balance, March 31, 2020
10,125

$
8.71

$
88

0.18
 
5,926,780

$
8.06

$
47,747

6.08
(1) 
RSUs granted to these individuals generally vest over a two- to four-year period
(2) 
Beginning January 1, 2018, Newmark began granting stand-alone Newmark RSUs to Newmark employees and the awards vest ratably over the two- to eight-year vesting period into shares of Newmark Class A common stock.

The fair value of BGC RSUs and Newmark RSUs held by Newmark employees is determined on the date of grant based on the market value (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 RSUs. Each RSU is settled for one share of BGC or Newmark Class A common stock, as applicable, upon completion of the vesting period.

Compensation expense related to BGC RSUs and Newmark RSUs are as follows (in thousands):
 
Three Months Ended March 31,
 
2020
 
2019
RSU amortization
$
2,351

 
$
562



As of March 31, 2020, there was $46.2 million total unrecognized compensation expense related to unvested Newmark RSUs and $0.1 million total unrecognized compensation expense related to unvested BGC RSUs.

(c)
Deferred Compensation
Newmark may pay certain bonuses in the form of deferred cash compensation awards, which generally vest over a future service period. The total compensation expense recognized in relation to the deferred cash compensation awards for the three months ended March 31, 2020 and 2019 was $0.1 million and $0.2 million, respectively. As of March 31, 2020 and December 31, 2019, the total liability for the deferred cash compensation awards was $0.9 million, and is included in “Other long-term liabilities” on the unaudited condensed consolidated balance sheets.

See Note 27 — "Related Party Transactions" for compensation related matters for the transfer of CCRE employees to Newmark.