Newmark is playing for commercial’s No. 1 spot

The country’s top two real estate brokers had barely settled into their new offices when they got the call to help prevent a national banking crisis.

In February 2023, Newmark Group announced it had lured Doug Harmon and Adam Spies from rival Cushman & Wakefield as co-heads of its capital markets team, reporting to the CEO.

The company expected Harmon and Spies “to amplify Newmark’s strength, upwards trajectory and momentum” in the capital markets business, whose role at the firm was already “outsized.”

Six weeks later, when Signature Bank failed and the Federal Deposit Insurance Corporation needed to sell $60 billion worth of its loans, the agency called Newmark. And so the dealmakers were in the room as the government made decisions that could bring calm to a skittish economy — or lead to a panic and cause contagion.

The assignment was a rush for brokers who feed off of high-stakes moments. For executives at Newmark, it was vindication. CEO Barry Gosin and Howard Lutnick, Newmark’s chair, had wanted to overtake industry leaders like CBRE and JLL by piecing together real estate’s No. 1 capital markets team, and hiring Harmon and Spies had been a key element in the plan. 

Newmark’s leaders had another piece of foresight: The company had earlier applied for a contract with the FDIC putting it on the short list of brokerages that would aid the government during a banking crisis. 

“So they come in … the greatest talent, with the greatest license, and we win the business because we were set up to do everything from the beginning,” Lutnick, who’s also the head of Cantor Fitzgerald, said at The Real Deal’s forum last month.

For Newmark, the Signature deal suggested what the payoff for 12 years of building would look like.  

Another 500 to 1,000 banks — about a quarter of the country’s banks — could go under next year, Lutnick believes, meaning more chances to help out in a crisis. And so, a year and a half after hiring Harmon and Spies, his brokerage is still “spending money like it’s going out of style,” hiring talent who can grab market share as soon as things start heating up. 

“The world of services in 2025-2026 is going to be so hot, so busy, so insane that I’m trying to hire all the talent we possibly can,” he said.

“The world of services in 2025-2026 is going to be so hot, so busy, so insane that I’m trying to hire all the talent we possibly can.”
Howard Lutnick

The CRE brokerage business has endured a brutal two years. Rising interest rates, employees’ slow return to workplaces and investors’ negative view on office properties turned off the once-steady flow of leasing and sale deals that is the lifeblood of Newmark and its ilk.

In response, most big brokerages cut costs and watched their balance sheets — sometimes at the expense of the health of their business. But Newmark has bucked the trend, spending big, hoping the investment will pay off when business comes back.

“Basically what Newmark is playing for right now is they’re trying to opportunistically buy brokers or capital markets teams, and the goal is hopefully it pays off in 2025,” said Dominick D’Angelo, an analyst at O’Keefe Stevens Advisory. 

Not everyone agrees with this contrarian view or sees why Gosin has stuck to his growth plan (some might say stubbornly) in spite of public shareholders who would prefer that the company focus on its bottom line.

Newmark’s 2017 initial public offering landed on Wall Street with a thud, and the stock has largely underperformed since. If the IPO was Gosin and Lutnick’s first big swing, their big bet in capital markets may be their second — and last — chance to turn Newmark into the top brokerage.

“The big question with all this hiring is, when things start to get normal, is Newmark going to be the fastest-growing company?” said D’Angelo.

Super shares

Gosin can execute on his spendy growth plan thanks to the support he enjoys from Lutnick. And Lutnick can give the go-ahead because he has an iron grip on the company.

Here’s how it works. When the two took Newmark public, they set the company up with a dual-class share system. Dual-class shares, controversial in corporate America, give greater voting rights to company founders. Mark Zuckerberg famously uses them to maintain total voting control of Meta even though he owns only 13.6 percent of the company’s stock.

At Newmark, Lutnick’s 10-to-1 shares give him 55.8 percent of the voting power, even though he owns just 11.2 percent of the stock.

And so when Lutnick likes one of Gosin’s plans, no one can do much to object. 

When Gosin recruits, he often offers signing bonuses in company stock as enticement. Handing out stock increases the share count and dilutes the equity of other shareholders — namely, the large institutional investors that buy the brokerage’s stock. 

Newmark’s stock price has struggled as a result. Shares now trade at about $10, down from $14 at the IPO, and at a lower multiple than other big CRE firms. Newmark’s chief financial officer, Michael Rispoli, said on a July 2023 earnings call that the company will limit growth in share count.

“We know we can manage it to 2 percent, and we’re watching it all the time,” he said.

The dual-class setup takes away institutional oversight, and without checks and balances, problems can fester.

“With dual-class companies, there’s no sort of safety valve,” said Glenn Davis, deputy director at the Council of Institutional Investors, which advocates for stronger corporate governance.

“When performance goes great, it’s an outcome no investor’s going to complain about. But what happens when things turn south or when there is no succession plan?” he added. 

Lutnick’s grip on Newmark goes beyond his stock. He also has something called an exchange agreement — slipped into Newmark just six days before its IPO — that allows him to acquire new voting rights if shares ever get so diluted as to threaten his control. 

And he has stacked the board with people loyal to him: the widow of a former employee who’s involved in his 9/11 charities, a trustee of a Newmark client and a director who’s on the board of six other Lutnick entities.

The issue came to a head in December 2021, when Newmark paid Lutnick a controversial $50 million bonus, which investors would like to claw back.

According to an investor lawsuit, Lutnick “demanded” that the board pay him the bonus, reasoning that he had engineered a financial windfall for Newmark during and after the IPO. The board’s compensation committee disagreed — Lutnick was just doing his job, for which he was paid a salary. After Lutnick had a “strong adverse reaction,” according to the lawsuit, the board paid out the $50 million, calling it a retention bonus. 

“Every member of the board suffers conflicts of interest and divided loyalties,” the lawsuit claims. “These conflicts preclude them from disinterested assessment of any stockholder demand to investigate and pursue the claims alleged herein: they are all part of Lutnick’s ‘rainbow of friends.’” 

Representatives for Lutnick and Newmark declined to be interviewed for this story. In SEC filings, Newmark dismisses the lawsuit’s merit.

“The company’s position is that the …  bonus award was properly approved by the compensation committee comprised of independent directors (which does not include Mr. Lutnick) after careful consideration of his contributions to the company, including the company’s superior financial results, and following an extensive process that included advice from independent legal counsel and an independent compensation consultant,” the latest quarterly report said. 

The case is scheduled for a five-day trial in the summer of 2025.

Beyond brokerage

The strategy goes beyond recruiting top brokers.

If Gosin wants to be No. 1, he’ll have to overtake CBRE, JLL and Eastdil Secured. He has talked about getting into new lines of business like advising REITs on mergers and acquisitions, business that has usually been done by investment banks. 

Gosin has been pounding the drum on capital markets for years, since selling buildings or arranging debt and equity gets you in the room with property owners, and that can lead to more business leasing office space or doing property management. A top cap markets practice can be a multiplier that supercharges a company’s growth.

Darcy Stacom — long Harmon and Spies’ top competitor — left a hole in the market when she departed CBRE this year for her own firm. She’s not competing for market share like she once was, which has cleared out more room for the Newmark brokers.

“Every member of the board suffers conflicts of interest and divided loyalties … they are all part of Lutnick’s ‘rainbow of friends.”
investor lawsuit fighting Lutnicks $50M bonus

“Adam and Doug have a real lock on the market right now,” one owner said.

Lutnick, meanwhile, is eyeing another big opportunity for Newmark.

He said he bought the company in 2011 because he realized that low interest rates would benefit real estate. He sees another pivotal moment for the business now that rates are high. On Fox Business and CNBC, he returns to the $2 trillion of CRE loans maturing over the next three years.

“The business of services of real estate are going to be FIRE!” he yelled from the stage of TRD’s forum. “This is the opportunity: ‘25 to ‘26! The greatest opportunity to buy real estate correctly that you will get in your generation.”

In the bullpen

At Newmark’s headquarters on Park Avenue, Gosin sits in an open-floor bullpen, à la Michael Bloomberg. 

Accessibility is part of the sell to new talent. 

Gosin and Lutnick “travel around like a tag team when they’re going after these big teams and big producers, making it a personal investment,” said Piper Sandler analyst Alex Goldfarb. “You don’t necessarily hear about other CEOs and chairmen getting intimately involved in hiring.”

Newmark’s corporate culture is more entrepreneurial and less bureaucratic than competitors’, people who know the companies said. That can be a huge draw for dealmakers.

It was a factor in snagging Harmon and Spies, the sources said. The two have more influence inside Newmark, which is smaller than Cushman.

Sometimes the charm offensive can turn into aggression.

In 2016, Newmark hired away Cushman’s head of global advisory, who then turned around and tried to poach his former team members. The incident became known inside Cushman as “the Newmark siege.”

Inside Newmark, brokers revere the 74-year-old Gosin, who started his career leasing office space in gritty buildings.

He grew up in East Flatbush, where one of his friends was fellow future real estate mogul Fred Wilpon — the head of developer Sterling Equities and former owner of the New York Mets.

Gosin graduated college and went to work as a broker, but not the kind doing glamorous deals for hedge funds and law firms on Park Avenue. He worked on the West Side. It wasn’t fancy.

He was smart, though, and he made a name for himself. In the early 1970s, he and his business partner were in charge of leasing a building owned by Rudin Management near Madison Square Park.

They thought it would be a good idea to market it as a showroom hub for toy companies, which were concentrated in two buildings on the other side of the park. The companies were hesitant. Gosin persuaded the first one to move by making its lease contingent on other toy companies signing on within six months. They did.

Gosin and his partner earned the Real Estate Board of New York’s Most Ingenious Deal of the Year award in 1976.

Their work caught the eye of Jeff Gural, who was then the owner of Newmark. Newmark bought Gosin’s firm, and Gural noted his ambition.

“Barry wanted to be rich and successful and a big-shot broker,” he said during a 2013 interview on the Stoler Report.

Waiting for the market

The investment in people and their ingenuity has to pay off, and for that the company needs the market to turn around.

Newmark moved from fifth in CRE sales with $42.5 billion of deals in 2022 — the year before Harmon and Spies came on — to the fourth spot last year with much lower sales of $22.3 billion, according to rankings by real estate analytics firm Green Street.

The gain in the rankings came as revenue fell to $380 million in 2023 from $600 million the year before, though the 37 percent decline is better than the 50 percent overall drop in the market, Newmark notes. Meanwhile, the company has not let up on spending. It went through $161 million to hire brokers, in the form of forgivable loans, at the start of the year — the most it’s ever spent in a quarter. 

Gosin and Lutnick are still holding up the $60 billion Signature assignment as proof that their plan is working.

Ultimately, shareholders will judge management via the share price. Others await more evidence.

“I don’t think you’re ever vindicated. It’s a marathon, not a sprint,” Goldfarb said. “Let’s see how this goes.”