KBRA Revises Outlook to Positive for Newmark Group, Inc. BBB- Issuer Rating and Senior Note Ratings; Rating Affirmed

KBRA revises its Outlook to Positive from Stable and affirms its BBB- issuer rating for Newmark Group, Inc. (Newmark), as well as its BBB- issue rating for Newmark’s outstanding $600 million 7.500% senior unsecured notes due 2029.

Newmark is a $5.4 billion (enterprise value) commercial real estate (CRE) services company that provides a wide range of services to real estate owners and tenants. Newmark generated $3.1 billion in total revenues for the trailing 12-month (TTM) period ending September 30, 2025, and has over 8,100 employees in more than 170 offices. Key business segments include management services (39% of year-to-date (YTD) revenues), leasing (30%), and capital markets (31%). Newmark ranks among the top five U.S. CRE brokers in YTD transaction volume and originators and servicers of loans sold to Fannie Mae and Freddie Mac.

The rating action balances Newmark’s strong competitive position in the CRE services segment, improving earnings diversification across business lines and regions, sustained decreases in overall leverage levels, and above-average financial flexibility given a longer-dated debt maturity schedule and strong free cash flow generation after dividends. The $600 million unsecured note matures in January 2029, which together with the $150 million balance on Newmark’s $600 million revolving credit facility (maturing April 2027) represents the company’s only debt obligations.

The rating also acknowledges the inherent cyclicality of the investment sales and mortgage origination segments, which after reaching record volumes in 2021 were negatively affected by rate increases during the 2022-23 period. However, transaction activity has since rebounded to more normalized levels, as seen in Newmark’s capital markets segment generating a 45% increase in YTD 2025 revenues, driven by increases in both market share and CRE transaction volumes. KBRA maintains a favorable near- to intermediate-term outlook for CRE transaction and financing activities, supported by record levels of near-term mortgage maturities and an improved outlook on interest rates.

Newmark debt leverage remains within KBRA expectations. Net debt/TTM EBITDA as reported by Newmark was 1.0x as of Q3 2025, and 1.15x as adjusted by KBRA to exclude the add-back of certain compensation-related expenses. Net total debt leverage (including $551 million of capitalized lease obligations) was 1.8x based on September 30, 2025, TTM EBITDAR.

Key Credit Considerations

The rating affirmation reflects the following key credit considerations:

(+) Credit Positives

Newmark’s expansion strategy that is self-funded and focused on moderate-sized acquisition targets; growth in market share across business lines; diversification into new markets including the UK, France, Germany, and India; the consistent growth of its management services and loan servicing segments that continue to reduce dependence on investment sales and mortgage origination transaction revenues; the company’s primarily variable expense structure and continued commitment to reducing operating expenses and increasing process efficiencies; and a high level of internally generated cash flow estimated by KBRA at TTM $355 million after capital expenditures and dividends. Credit positives also include Newmark’s commitment to maintain company-reported net debt to EBITDA below a targeted 1.5x maximum—a level consistently achieved by Newmark, including during both 2020 and 2023; a moderate 20% ratio of net debt and lease obligations to enterprise value (a low 11% excluding lease obligations); satisfactory liquidity sources, which include $224 million of cash and $450 million revolver capacity as of September 30, 2025; and a modest 8% dividend payout ratio based on 2025 earnings guidance.

(-) Credit Negatives

Rating constraints include the high variability of investment sales and mortgage origination transaction volumes for Newmark and its peers—with record volumes in 2021 followed by declines in 2022 and 2023 to below pre-COVID volumes; meaningful but declining exposure to lease obligations for the flexible office space operators Knotel and Deskeo; and the potential that share buybacks could exceed internally generated cash flow and result in incremental debt leverage.

Rating Sensitivities

Upgrade or Positive Outlook

Growth in company-reported adjusted EBITDA to a level approaching the Newmark-targeted $630 million in 2026; maintenance of net debt to Newmark-reported adjusted EBITDA in the low 1x range, and net total debt (including net present value (NPV) of lease obligations) to EBITDAR below 2.0x; recurring revenue approaching 50% of total revenue; share buyback levels that remain below internally generated cash flow after capital expenditures; and limited growth in capital expenditures and lease obligations as well as consistent unit-level profitability for Newmark’s flexible office segment.

Downgrade or Negative Outlook

EBITDA decline and increase in net debt to Newmark-reported TTM adjusted EBITDA above the 1.5x upper end of Newmark’s targeted range; net total debt (including the NPV of future lease obligations) to EBITDAR approaching 3.0x; and increased capital expenditures and lease obligations related to the flexible office lease segment.

ESG Considerations

Environmental, Social, and Governance (ESG)

KBRA ratings incorporate all meaningful credit factors, including those that relate to ESG factors. While ESG factors may influence ratings, KBRA analysis captures their impact in the same manner as all other credit-relevant factors. The KBRA rating and Outlook reflect favorably on the 25% share of Newmark equity owned by employees. KBRA considers Newmark’s dual-class share and voting structure to be a credit negative.

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