Marcus & Millichap, Inc.
For the period ended Mar 31, 2025. Filed May 7, 2025.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Mar 31, 2025 · Filed May 7, 2025
MMI$27.75-3.2%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-09-30; filed 2024-11-08.
0001578732-24-000053
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2025-03-31; filed 2025-05-07.
0001578732-25-000031
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 138 previous paragraphs and 131 current paragraphs.
81 unchanged; 28 reworded; 21 added; 25 removed; 4 previous and 1 current paragraphs rearranged.
Tables are not compared: 8 previous and 6 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (21)
Current report
Overall economic performance was sound in the first quarter of 2025, with low unemployment and the addition of 456,000 new jobs. Retail sales remained active and inflation trended lower. Entering the second quarter of 2025, however, economic uncertainty increased dramatically as the U.S. reset its global trade policies with dramatic tariff increases. The resulting financial market volatility, falling consumer sentiment and general uncertainty have spurred increased caution among both consumers and businesses. Elevated caution may cause businesses and consumers to limit investment and spending as a potential trade war could weaken economic growth and spur inflation. Although most of the punitive tariffs were put on hold for 90 days, 10% tariffs on all countries aside from China, which faces 145% tariffs, has driven the net effective tariff rate to approximately 28%, the highest level since 1901. Limited insights into future trade policy has impacted decision making, increasing the risk of slowing economic growth.
Current report
The lack of clarity of the U.S. presidential administration regarding tariffs has made it increasingly difficult to predict the economic outlook, and many economists have raised their expectations of both recession and inflation risk in 2025. Nonetheless, some signs of a pullback on tariffs have emerged, suggesting that a trade war may be averted, which could revive the outlook for economic growth.
Current report
Within the broader economic context, commercial real estate fundamentals remain sturdy, with most property types delivering positive space absorption. Apartment demand remained robust through the first quarter of 2025, exceeding elevated construction completions and supporting modest but positive rent gains. Retail space demand was marginally negative for the quarter, but the resulting uptick in vacancy was minimal and may simply reflect a temporary market recalibration. Industrial space demand was positive for the quarter, and office space demand continued to gain momentum.
Current report
Although apartment and industrial construction remains elevated, the supply additions are concentrated in select markets and the pace of deliveries is tapering. Oversupply risks in most markets are beginning to diminish as elevated capital costs join rising tariffs on building materials and construction labor shortages to drive construction costs higher. Retail and office development was already low entering 2025, with little sign of a revival. Apartment starts have fallen by 76% from their peak in 2022 and industrial completions in 2025 are expected to fall to approximately 210 million square feet, their lowest level since 2014. As a result, receding new supply risks in 2025 should aid commercial real estate performance in the coming quarters.
Current report
The commercial real estate space demand outlook for 2025 remains uncertain. Core drivers including job creation, retail sales and modest gains in office attendance entering the second quarter of 2025 suggest positive momentum, but the broader economic climate could impact the trajectory either positively or negatively. If the U.S. economy enters a recession, space demand for all types of commercial real estate could be negatively impacted. However, if a trade war is averted and sentiment increases, space demand could be bolstered.
Current report
All four major property types saw positive space demand in the fourth quarter of 2024 and in the year ended December 31, 2024. Nearly 660,000 apartment units were filled in 2024, the second strongest annual total in the 32 years on record. Apartment demand sustained momentum in the first quarter of 2025 with nearly 147,000 net units filled, the strongest first quarter on record. Office space demand was also positive in the first quarter of 2025, marking the fourth consecutive quarter of gains. This has helped reduce the office vacancy rate by 50 basis points from its peak of 17.2% set in the second quarter of 2024 spurring speculation that a slow recovery of the office market is occurring. Industrial space demand also remained positive, but the pace of absorption was overshadowed by new completions. Following 17 consecutive quarters of positive demand, retail space absorption fell in the first quarter of 2025, pushing the average vacancy rate up by 10 basis points to 4.5%, still well below the twenty-year average of 5.6%. The retail space demand slowdown may reflect a temporary moderation of expansion plans by retailers ahead of tariff and trade war risks or it could simply reflect the limited availability of retail space.
Current report
The commercial real estate space demand outlook remains difficult to discern amid the dramatic policy shifts enacted by the new U.S. presidential administration. Increased uncertainty, falling sentiment and risks of a recession and higher inflation could slow decision making, causing commercial real estate space demand to falter. If the trade war deescalates and policy clarity emerges, commercial real estate space demand could be reinvigorated. Nonetheless, all commercial real estate property types have entered the new cycle on sound footing, suggesting a durable performance outlook.
Current report
Although interest rates had been trending lower entering 2025, the recent economic turmoil driven by aggressive trade policies has spurred increased interest rate volatility. Interest rate risks were exacerbated by President Trump’s threats to remove Jerome Powell as the head of the Federal Reserve, risking the independence of the Federal Reserve. While lender spreads had been tightening, the rising risk of inflation, policy uncertainty and financial market volatility have led to increased lender caution. Although debt capital liquidity remains strong, many lenders have increased their safety spreads, resulting in a modest increase in lending rates.
Current report
The combination of limited federal policy transparency and inflation risks posed by tariffs have caused the Federal Reserve to await further clarity before making any decisions on monetary policy. The prevailing sentiment by Wall Street is that the Federal Reserve will cut rates two or three times this year, but Chairman Powell has clearly stated that until clarity emerges, they will likely hold the overnight rate flat. Nonetheless, the Federal Reserve’s influence on longer term rates like the 10-year treasury, which more directly influence commercial real estate lending rates, is limited. Following the institution of the “Liberation Day” tariffs, international capital began to migrate out of U.S. bonds and financial assets, putting upward pressure on interest rates. Looking forward, long-term rates may be more influenced by international capital flows and treasury issuance than by the Federal Reserve.
Current report
Although economic uncertainty together with financial market and interest rate volatility normally tend to increase investor caution, capital flows into commercial real estate could potentially be bolstered. As a “hard asset” with some level of resistance to inflation, recessions and financial market volatility, investment into commercial real estate could benefit from the current economic climate. The repricing of commercial real estate assets over the last three years has enhanced the yield profile, supporting positive or neutral leverage in many markets and property types. Whether capital migrates to commercial properties will likely depend on the risk perception of the broader financial market, but other hard assets have already experienced increased demand in the wake of the rapid policy shifts and financial market downturn.
Current report
In the first quarter of 2025, commercial real estate transaction activity increased by 7% compared to the same quarter last year, led by velocity gains in seniors housing, retail and industrial property sales. Apartment transactions increased by 8% on a year-over-year basis, while office and hotel property sales activity declined. The transaction uptick reflects a narrowing of the expectation gap that began in the fourth quarter last year, but recent financial market volatility and uncertainty surrounding trade and the economy as a whole could re-widen expectations. Clarity on investor expectations in the new trade and economic climate have yet to fully emerge.
Current report
Several metrics traditionally associated with rising transaction activity velocity, including increased exclusive inventory being brought to market and rising requests for Broker Opinions of Value, suggest that transactional momentum could be sustained in the coming quarters. Nonetheless, the variety of potential headwinds facing the sector including the economy, interest rates, financial market trends, geopolitical and commercial real estate pricing clarity could ultimately suppress activity in 2025. In the current uncertain climate, defensive assets such as single-tenant net lease properties backed by high-credit tenants and medical office assets continue to receive buyer interest. Apartment properties, supported by positive long-term drivers including robust demographics of the renter-aged population and the high cost of homeownership is also a favored property segment. Another important factor influencing the investor outlook is the prospective renewal of the 2017 Tax Cuts and Jobs Act which includes several tax benefits that are supportive of commercial real estate investment including accelerated depreciation, pass-through entity deductions and Opportunity Zones. Ultimately, market velocity will be dictated by a combination of the economic outlook, financial market trends, geopolitical forces, Federal Reserve action, interest rates and the buyer/seller expectation gap. If trade policy stabilizes, uncertainty abates and investor sentiment rises, we believe commercial real estate investment activity could gain additional momentum.
Current report
Other Income, Net
Current report
Interest Expense
Current report
Benefit for Income Taxes
Current report
Other revenue. Other revenue decreased to $3.3 million for the three months ended March 31, 2025 from $5.2 million for the same period in 2024, a decrease of $1.9 million, or 36.8%, resulting primarily from a decrease in leasing fees.
Current report
Other Income, Net
Current report
Interest Expense
Current report
Benefit for Income Taxes
Current report
Cash flows used in financing activities were $8.1 million for the three months ended March 31, 2025, which is comparable to $7.5 million for the same period in 2024.
Current report
Looking forward, inflation could rise as the impact of tariffs flow-through to consumers, and the Federal Reserve has communicated a restrained interest rate outlook pending additional clarity on federal fiscal, trade, tax, regulatory and domestic policies. Several of the policies such as tariffs and more stringent immigration controls have the potential to be inflationary in nature, so future inflation risk may depend on when and how assertively the proposed policies are ultimately implemented.
Removed paragraphs (25)
Previous report
A “soft landing” remains the leading consensus economic forecast for the remainder of 2024 and into 2025, but economic readings in the second half of 2024 have been inconsistent. Upward revisions to job creation statistics during the summer months and adding 254,000 positions in September, together with a 20 basis point reduction of the unemployment rate curbed expectations of significant Federal Reserve rate reductions in the final two months of 2024. In addition, October labor strikes and a series of natural disasters could skew fourth quarter economic data, making it more difficult to determine a clear economic trend. Nonetheless, inflation still appears to be slowly trending lower. Prevailing Wall Street sentiment continues to predict modest Federal Reserve rate cuts in the final months of 2024. At the same time, inflation-adjusted core retail sales continued to exhibit moderate gains, up 1.3% on a year-over-year basis through September, and the Institute of Supply Chain Management (“ISM”) leading economic indices have delivered mixed readings. The ISM manufacturing index remains contractionary, while the ISM services index suggests economic growth in the service sector.
Previous report
We believe this combination of economic trends will generate modestly positive economic growth through the remainder of 2024 and into 2025, but the growth is not expected to be substantial enough to reignite inflation.
Previous report
Both the headline Consumer Price Index (“CPI”) inflation metric and the Personal Consumption Expenditure (“PCE”) index have sustained downward momentum, with CPI registering 2.4% and PCE reading 2.1% in September. While these trends have been positive, the Federal Reserve's preferred inflation metric, the core Personal Consumption Expenditure, has proven more sticky, hovering in the 2.6% to 2.7% range for five consecutive months. Following the 50 basis point rate cut in September and 25 basis point rate cut in November by the Federal Reserve, Wall Street metrics suggest the Federal Reserve will further reduce rates by 25 basis points at their next meeting. We believe that such a move could positively impact investor sentiment and bolster the flow of capital into commercial real estate.
Previous report
All four major property types demonstrated positive space demand in the third quarter of 2024, although each demonstrated unique nuances. Over 191,000 net apartment units were filled in the quarter, the strongest quarterly results since 2021. The demand modestly outpaced the record-level 163,000 apartment completions delivered in the quarter to reduce vacancy by 20 basis points to 5.6%. Robust apartment demand outpaced expectations and bolstered multifamily investor confidence.
Previous report
The industrial vacancy rate increased in the third quarter of 2024 as elevated construction exceeded space demand of 22 million square feet. Industrial completions have been highly concentrated, with about half of the additions being delivered in seven metros areas. Although many retailers increased their inventories in anticipation of the east coast dockworker strike, warehouse industrial space needs have tapered significantly over the last two years. Retail vacancy rates remain near a record-low, with space absorption being restricted by limited space availability and nominal construction levels. Office vacancy rates decreased by 20 basis points to 17.0% on positive absorption of 26 million square feet, the strongest quarterly office space demand since 2021. Nonetheless, the office performance outlook remains in question as it is unclear when or if a sizable portion of workers will return permanently to the office.
Previous report
Although the fundamentals of most property types remain sound, with the notable exception of urban office properties, both lending and investor activity remain below the pre-pandemic historical norm. The expectation gap between buyers and sellers has narrowed slightly, particularly after the Federal Reserve reduced rates in September, but the gap remains challenging. The demand for space will continue to be influenced by consumer and business sentiment as well as the broader economic outlook. However, should the Federal Reserve reduce rates in the fourth quarter, as expected, sentiment could continue to strengthen and space demand could increase.
Previous report
The capital markets remain at the heart of the commercial real estate transaction slowdown over the last two years. The combination of sustained higher interest rates with tighter lender underwriting, reduced loan-to-value standards and a broad-based reduction in the volume of available debt capital have restrained market liquidity. This has forced investors to recalibrate their underwriting. This widened the buyer/seller expectation gap and reduced trading throughout 2023 and thus far in 2024.
Previous report
The 50 basis point rate reduction by the Federal Reserve in September improved investor sentiment, but the increase of the 10-year treasury rate following the rate cut has negatively impacted borrowing rates. Nonetheless, we believe that the sustained downward pressure on interest rates over the next year anticipated by most investors will ultimately occur, and many investors have reinitiated preliminary actions that may ultimately lead to transaction activity. At present, FedWatch has assigned a high likelihood that the Federal Reserve overnight rate will be in the 4.25%-4.5% range by year-end. However, numerous variables including the election, global geopolitical forces, job creation trends and other economic readings could still sway those expectations. Despite the broad consensus that the Federal Reserve will continue to reduce rates, there can be no certainty until each reduction takes place.
Previous report
The commercial real estate sector once again saw below average sales activity in the third quarter as investors contended with persistent headwinds including still-elevated interest rates, tightened lender underwriting and the buyer/seller expectation gap. Although some signs of recovery have emerged, including more exclusive inventory being brought to market, a sustainable recovery in trading volumes has yet to occur. We believe a significant volume of investment capital remains un-deployed waiting for economic, interest rate, financial market, geopolitical and commercial real estate pricing clarity. Should the Federal Reserve continue to reduce rates, it would support positive momentum, but finalizing the transaction process will take additional time.
Previous report
Office properties, particularly those in the urban core, continue to face the greatest uncertainty and the greatest challenges in acquiring debt financing. In addition, signs of distress and the potential for additional foreclosures in this commercial real estate segment continue to rise. Apartment financing, underpinned by Fannie Mae and Freddie Mac, has generally been the most attainable, with typically lower interest rates than other property types. However, the rapid interest rate spike relative to the sector's very low cap rates and the large apartment development pipeline together with still-modest rent growth has impacted apartment sales. Defensive assets, such as single-tenant net lease properties backed by high-credit tenants, and medical office assets continue to receive buyer interest, but sales of these types of properties have also fallen as the flow of 1031 exchange capital coming from other property types has diminished. Ultimately, the market velocity will be dictated by a combination of the economic outlook, geopolitical forces, Federal Reserve action, interest rates and the narrowing of the buyer/seller expectation gap. As downward pressure on interest rates is applied, we believe commercial real estate investment activity could gain momentum.
Previous report
Other revenue. Other revenue increased to $6.0 million for the three months ended September 30, 2024 from $5.0 million for the same period in 2023, an increase of $1.0 million, or 20.3%, resulting primarily from an increase in consulting fees.
Previous report
Other income, net increased to $5.3 million for the three months ended September 30, 2024 from $4.4 million for the same period in 2023. The increase of $0.9 million was primarily driven by an increase in the carrying value of the assets held in the rabbi trust.
Previous report
Comparison of Nine Months Ended September 30, 2024 and 2023
Previous report
Revenue
Previous report
Total revenue was $456.0 million for the nine months ended September 30, 2024 compared to $479.7 million for the same period in 2023, a decrease of $23.7 million, or 4.9%. Total revenue decreased as a result of a decrease in real estate brokerage commissions, partially offset by increases in financing fees and other revenue, as described below. See “Factors Affecting Our Business” for additional market information.
Previous report
Real estate brokerage commissions. Revenue from real estate brokerage commissions decreased to $386.9 million for the nine months ended September 30, 2024 from $415.2 million for the same period in 2023, a decrease of $28.3 million, or 6.8%. The decrease was the result of total sales volume decreasing by 3.4% and a reduction of seven basis points in the average commission rate earned for the nine months ended September 30, 2024 compared to the same period in 2023. Private Client Market revenue decreased by 11.8%, while the combined Middle Market and Larger Transaction Market increased by 3.6%.
Previous report
Financing fees. Revenue from financing fees increased to $53.3 million for the nine months ended September 30, 2024 from $51.0 million for the same period in 2023, an increase of $2.3 million, or 4.5%, resulting primarily from a 6.5% increase in total financing volume, partially offset by a decrease of six basis points in the average fee rate.
Previous report
Other revenue. Other revenue increased to $15.8 million for the nine months ended September 30, 2024 from $13.5 million for the same period in 2023, an increase of $2.3 million, or 17.4%. The increase was primarily driven by increases in leasing fees during the nine months ended September 30, 2024, compared to the same period in 2023.
Previous report
Total Operating Expenses
Previous report
Our total operating expenses were $495.6 million for the nine months ended September 30, 2024 compared to $521.9 million for the same period in 2023, a decrease of $26.3 million, or 5.0%. Cost of services decreased by $21.5 million and selling, general, and administrative expenses decreased by $5.7 million, as described below.
Previous report
Cost of services. Cost of services are variable commissions paid to our investment sales professionals and compensation-related costs in connection with our financing activities. Cost of services decreased to $279.7 million for the nine months ended September 30, 2024 from $301.2 million for the same period in 2023, a decrease of $21.5 million, or 7.1%. The decrease was primarily due to decreased commission expenses driven by the related decreased revenue noted above. Cost of services as a percentage of total revenue decreased by 150 basis points to 61.3% compared to the same period in 2023 primarily due to our senior investment sales and financing professionals earning a lower amount of additional commissions due to lower revenue.
Previous report
Selling, general, and administrative expense. Selling, general and administrative expense for the nine months ended September 30, 2024 decreased to $204.6 million, from $210.3 million compared to the same period in the prior year, a decrease of $5.7 million or 2.7%. The decrease was primarily due to a reduction in marketing support costs provided to our investment sales and financing professionals, partially offset by an increase in compensation-related costs.
Previous report
Depreciation and amortization expense. Depreciation and amortization expense increased to $11.3 million for the nine months ended September 30, 2024 from $10.3 million compared to the same period in 2023, an increase of $1.0 million, or 9.6%. The increase primarily relates to accelerated amortization of certain intangible assets resulting from changes in estimates.
Previous report
The benefit for income taxes was $3.6 million for the nine months ended September 30, 2024, compared to $4.9 million for the same period in 2023. The effective income tax rate for the nine months ended September 30, 2024 was 14.7% compared to 17.1% for the same period in 2023. The effective income tax rate decreased primarily due to the relationship of permanent nondeductible items to projected pre-tax loss for the full year as the impact to the effective tax rate that were caused by other items were largely offsetting.
Previous report
Cash flows used in financing activities were $18.3 million for the nine months ended September 30, 2024 compared to $53.3 million for the same period in 2023. The decrease of $35.0 million in cash flows used in financing activities for the nine months ended September 30, 2024 compared to the same period in 2023 was primarily due to a decrease of $34.4 million in stock repurchases in 2024 compared to the same period in 2023.
Reworded paragraphs (28)
Previous wording
This Quarterly Report on Form 10-Q includes forward-looking statements, including our expectations regarding the long-term outlook of the commercial real estate transaction market and our positioning within it, our belief relating to the Company’s long-term growth, our assessment of the key factors influencing the Company’s business outlook, including the expectation for future interest rate cuts and likely impact of such cuts on commercial real estate demand, and the execution of our capital return program, including a semi-annual dividend and stock repurchase program. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends affecting the financial condition of our business. Forward-looking statements should not be read as a guarantee of future performance or results and will not necessarily be accurate indications of the times at, or by, which such performance or results may be achieved. Forward-looking statements are based on information available at the time those statements are made and/or management’s good faith belief as of that time with respect to future events and are subject to risks and uncertainties that could cause actual performance or results to differ materially from those expressed in or suggested by the forward-looking statements. Important factors that could cause such differences include, but are not limited to:
Current wording
This Quarterly Report on Form 10-Q includes forward-looking statements, including our expectations regarding the long-term outlook of the commercial real estate transaction market and our positioning within it, our belief relating to the Company’s long-term growth, our assessment of the key factors influencing the Company’s business outlook, including the expectation for future interest rate cuts or rising inflation and likely impact of such cuts or inflation on commercial real estate demand, and the execution of our capital return program, including a semi-annual dividend and stock repurchase program. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends affecting the financial condition of our business. Forward-looking statements should not be read as a guarantee of future performance or results and will not necessarily be accurate indications of the times at, or by, which such performance or results may be achieved. Forward-looking statements are based on information available at the time those statements are made and/or management’s good faith belief as of that time with respect to future events and are subject to risks and uncertainties that could cause actual performance or results to differ materially from those expressed in or suggested by the forward-looking statements. Important factors that could cause such differences include, but are not limited to:
Previous wording
•changes in interest rates, availability of capital, tax laws, employment laws, or other government regulation affecting our business, in each case as may be impacted by the 2024 U.S. presidential election;
Current wording
•changes in interest rates, availability of capital, tax laws, employment laws, tariffs and trade regulations, executive orders, or other government regulation affecting our business;
Previous wording
The results of operations for the nine months ended September 30, 2024 are not necessarily indicative of the results that may be expected for the full year ending December 31, 2024, or for any other future period. The following discussion should be read in conjunction with the unaudited condensed consolidated financial statements and the notes thereto included in Item 1 of this Quarterly Report on Form 10-Q and in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2023, filed with the SEC on February 27, 2024, including the “Risk Factors” section and the consolidated financial statements and notes included therein.
Current wording
The results of operations for the three months ended March 31, 2025 are not necessarily indicative of the results that may be expected for the full year ending December 31, 2025, or for any other future period. The following discussion should be read in conjunction with the unaudited condensed consolidated financial statements and the notes thereto included in Item 1 of this Quarterly Report on Form 10-Q and in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2024, filed with the SEC on February 27, 2025, including the “Risk Factors” section and the consolidated financial statements and notes included therein.
Previous wording
We are a leading national real estate services firm specializing in commercial real estate investment sales, financing services, research and advisory services. We have been the top commercial real estate investment broker in the United States based on the number of investment transactions for more than 15 years. As of September 30, 2024, we had 1,678 investment sales and financing professionals that are primarily exclusive independent contractors operating in more than 80 offices, who provide real estate brokerage and financing services to sellers and buyers of commercial real estate assets. During the three and nine months ended September 30, 2024, we closed 1,987 and 5,351 investment sales, financing and other transactions with total sales volume of approximately $12.0 billion and $31.2 billion, respectively. During the year ended December 31, 2023, we closed 7,546 investment sales, financing and other transactions with total sales volume of approximately $43.6 billion.
Current wording
We are a leading national real estate services firm specializing in commercial real estate investment sales, financing services, research and advisory services. We have been the top commercial real estate investment broker in the United States based on the number of investment transactions for more than 15 years. As of March 31, 2025, we had 1,668 investment sales and financing professionals that are primarily exclusive independent contractors operating in more than 80 offices, who provide real estate brokerage and financing services to sellers and buyers of commercial real estate assets. During the three months ended March 31, 2025, we closed 1,706 investment sales, financing and other transactions with total sales volume of approximately $9.4 billion. During the year ended December 31, 2024, we closed 7,836 investment sales, financing and other transactions with total sales volume of approximately $49.6 billion.
Previous wording
We generate revenue by collecting real estate brokerage commissions upon the sale, and financing fees upon the financing of commercial properties, by providing equity advisory services and loan sales, loan guarantees and by providing leasing, consulting and advisory services. Real estate brokerage commissions are typically based upon the value of the property and financing fees are typically based upon the size of the loan. During the three months ended September 30, 2024, approximately 84% of our revenue was generated from real estate brokerage commissions, 12% from financing fees and 4% from other real estate related services.
Current wording
We generate revenue by collecting real estate brokerage commissions upon the sale, and financing fees upon the financing of commercial properties, by providing equity advisory services and loan sales, loan guarantees and by providing leasing, consulting and advisory services. Real estate brokerage commissions are typically based upon the value of the property and financing fees are typically based upon the size of the loan. During the three months ended March 31, 2025, approximately 85% of our revenue was generated from real estate brokerage commissions, 13% from financing fees and 2% from other real estate related services.
Previous wording
We are the industry leader in serving private clients in the $1 million - $10 million private client market, which contributed approximately 62% and 65% of our real estate brokerage commissions during the three months ended September 30, 2024 and 2023, respectively, and approximately 63% and 67% of our real estate brokerage commissions during the nine months ended September 30, 2024 and 2023, respectively. The following tables set forth the number of transactions, sales volume and revenue by each commercial real estate market for real estate brokerage:
Current wording
We are the industry leader in serving private clients in the $1 million - $10 million private client market, which contributed approximately 63% and 67% of our real estate brokerage commissions during the three months ended March 31, 2025 and 2024, respectively. The following table sets forth the number of transactions, sales volume and revenue by each commercial real estate market for real estate brokerage:
Previous wording
Other revenue includes fees generated from leasing, consulting and advisory services, as well as referral fees from other real estate brokers, and are recognized when services are provided, upon closing of the transaction or when we have no further performance obligations.
Current wording
Other revenue includes fees generated from leasing, consulting and advisory services, as well as ancillary fees from other real estate brokers, and are recognized when services are provided, upon closing of the transaction or when we have no further performance obligations.
Previous wording
The following is a discussion of our results of operations for the three and nine months ended September 30, 2024 and 2023. The tables included in the period comparisons below provide summaries of our results of operations. The period-to-period comparisons of financial results are not necessarily indicative of future results.
Current wording
The following is a discussion of our results of operations for the three months ended March 31, 2025 and 2024. The tables included in the period comparisons below provide summaries of our results of operations. The period-to-period comparisons of financial results are not necessarily indicative of future results.
Previous wording
We regularly review a number of key metrics to evaluate our business, measure our performance, identify trends affecting our business, formulate financial projections and make strategic decisions. We also believe these metrics are relevant to investors’ and others’ assessment of our financial condition and results of operations. During the three months ended September 30, 2024 and 2023, we closed 1,987 and 1,846 investment sales, financing and other transactions, respectively, with total sales volume of approximately $12.0 billion and $11.4 billion, respectively. During the nine months ended September 30, 2024 and 2023, we closed 5,351 and 5,599 investment sales, financing and other transactions, respectively, with total sales volume of approximately $31.2 billion and $31.7 billion, respectively. Such key metrics for real estate brokerage and financing activities (excluding other transactions) are as follows:
Current wording
We regularly review a number of key metrics to evaluate our business, measure our performance, identify trends affecting our business, formulate financial projections and make strategic decisions. We also believe these metrics are relevant to investors’ and others’ assessment of our financial condition and results of operations. During the three months ended March 31, 2025 and 2024, we closed 1,706 and 1,564 investment sales, financing and other transactions, respectively, with total sales volume of approximately $9.4 billion and $9.7 billion, respectively. Such key metrics for real estate brokerage and financing activities (excluding other transactions) are as follows:
Previous wording
Total revenue was $168.5 million for the three months ended September 30, 2024 compared to $162.0 million for the same period in 2023, an increase of $6.5 million, or 4.0%. Total revenue increased as a result of increases in real estate brokerage commissions, financing fees and other revenue, as described below. See “Factors Affecting Our Business” for additional market information.
Current wording
Total revenue was $145.0 million for the three months ended March 31, 2025 compared to $129.1 million for the same period in 2024, an increase of $15.9 million, or 12.3%. Total revenue increased as a result of increases in real estate brokerage commissions and financing fees, partially offset by a reduction in other revenue, as described below. See “Factors Affecting Our Business” for additional market information.
Previous wording
Real estate brokerage commissions. Revenue from real estate brokerage commissions increased to $142.0 million for the three months ended September 30, 2024 from $139.8 million for the same period in 2023, an increase of $2.2 million, or 1.5%. The increase was the result of total sales volume increasing by 14.7%, partially offset by a reduction of 22 basis points in the average commission rate earned during the three months ended September 30, 2024 compared to the same period in 2023. Private Client Market revenue decreased by 4.3%, while the combined Middle Market and Larger Transaction Market revenue increased by 15.1%.
Current wording
Real estate brokerage commissions. Revenue from real estate brokerage commissions increased to $123.6 million for the three months ended March 31, 2025 from $109.5 million for the same period in 2024, an increase of $14.1 million, or 12.9%. The increase was the result of total sales volume increasing by 17.6%, partially offset by a reduction of seven basis points in the average commission rate earned during the three months ended March 31, 2025 compared to the same period in 2024, caused by the shift in the proportion of transactions to the Middle Market and Larger Transaction Market from the Private Client Market, as Middle Market and Larger Transaction Markets typically earn lower commission rates. Private Client Market revenue increased by 6.2%, and the combined Middle Market and Larger Transaction Market revenue increased by 29.6%.
Previous wording
Financing fees. Revenue from financing fees increased to $20.6 million for the three months ended September 30, 2024 from $17.3 million for the same period in 2023, an increase of $3.3 million, or 19.3%, resulting primarily from a 12.0% increase in total financing volume and a two basis point increase in the average fee rate during the three months ended September 30, 2024 compared to the same period in 2023.
Current wording
Financing fees. Revenue from financing fees increased to $18.1 million for the three months ended March 31, 2025 from $14.4 million for the same period in 2024, an increase of $3.7 million, or 25.7%, resulting primarily from a 16.1% increase in total financing volume and an eight basis point increase in the average fee rate during the three months ended March 31, 2025 compared to the same period in 2024.
Previous wording
Total operating expenses were $180.0 million for the three months ended September 30, 2024 compared to $177.5 million for the same period in 2023, an increase of $2.5 million, or 1.4%. The change was primarily due to an increase of $1.5 million in selling, general, and administrative expenses as described below.
Current wording
Total operating expenses were $162.7 million for the three months ended March 31, 2025 compared to $149.2 million for the same period in 2024, an increase of $13.5 million, or 9.1%. The change was primarily due to an increase of $11.5 million in cost of services as described below.
Previous wording
Cost of services. Cost of services are variable commissions paid to our investment sales professionals and compensation-related costs in connection with our financing activities. Cost of services slightly increased to $104.7 million for the three months ended September 30, 2024 from $104.6 million for the same period in 2023. Cost of services as a percentage of total revenue decreased by 240 basis points to 62.2% compared to the same period in 2023 primarily due to our senior investment sales and financing professionals earning a lower amount of additional commissions.
Current wording
Cost of services. Cost of services are variable commissions paid to our investment sales professionals and compensation-related costs in connection with our financing activities. Cost of services increased to $88.3 million for the three months ended March 31, 2025 from $76.9 million for the same period in 2024. Cost of services as a percentage of total revenue increased by 140 basis points to 60.9% compared to the same period in 2024 primarily due to our senior investment sales and financing professionals earning a higher amount of additional commissions.
Previous wording
Selling, general, and administrative expense. Selling, general and administrative expense for the three months ended September 30, 2024 increased to $70.7 million, from $69.2 million compared to the same period in 2023, an increase of $1.5 million or 2.1%. The increase was primarily due to an increase in personnel costs, partially offset by a reduction in marketing support costs provided to our investment sales and financing professionals.
Current wording
Selling, general, and administrative expense. Selling, general and administrative expense for the three months ended March 31, 2025 increased to $71.6 million, from $68.9 million for the same period in 2024, an increase of $2.6 million or 3.8%. The increase was primarily due to (i) an increase in compensation related costs and (ii) increased investment in business development, marketing and other support related to the long-term talent acquisition and retention of our investment sales and financing professionals.
Previous wording
Depreciation and amortization expense. Depreciation and amortization expense increased to $4.5 million for the three months ended September 30, 2024 from $3.6 million compared to the same period in 2023, an increase of $0.9 million, or 25.1%. The increase primarily relates to accelerated amortization of certain intangible assets resulting from changes in estimates.
Current wording
Depreciation and amortization expense. Depreciation and amortization expense decreased to $2.8 million for the three months ended March 31, 2025 from $3.4 million compared to the same period in 2024, a decrease of $0.6 million, or 16.7%. The decrease primarily relates to accelerated amortization and impairment of certain intangible assets recorded in the second half of 2024 resulting from changes in estimates.
Previous wording
Other income, net increased to $15.7 million for the nine months ended September 30, 2024 from $14.1 million for the same period in 2023. The increase of $1.6 million was primarily driven by increase in interest income as a result of rebalancing the Company's investments to take advantage of higher yields and an increase in the carrying value of the assets held in the rabbi trust.
Current wording
Other income, net decreased to $4.0 million for the three months ended March 31, 2025 from $5.6 million for the same period in 2024. The decrease of $1.6 million was primarily driven by a decrease in interest income due to a decreased average yield on our investments and a decrease in the investment gains and loss related to the assets held in the rabbi trust during the period compared to the same period in prior year.
Previous wording
The benefit for income taxes was $1.0 million for the three months ended September 30, 2024, compared to $2.0 million for the same period in 2023. The effective income tax rate for the three months ended September 30, 2024, was 15.2% compared to 17.8% for the same period in 2023. The net decrease in the effective tax rate is primarily due to the relationship of permanent and other items, the change in the valuation allowance and the change in the state income tax benefit to pre-tax loss as presented in Note 10 – “Income Taxes” in the Notes to the Condensed Consolidated Financial Statements in Item 1, Part I of this Quarterly Report on Form 10-Q.
Current wording
The benefit for income taxes was $9.5 million for the three months ended March 31, 2025, compared to $4.7 million for the same period in 2024. The effective income tax rate for the three months ended March 31, 2025, was 68.2% compared to 32.2% for the same period in 2024. The net increase in the effective tax rate is primarily due to the relationship of permanent items, the change in the valuation allowance and the change in the state income tax benefit to pre-tax loss as presented in Note 10 – “Income Taxes” in the Notes to the Condensed Consolidated Financial Statements in Item 1, Part I of this Quarterly Report on Form 10-Q.
Previous wording
In this Quarterly Report on Form 10-Q, we include a non-GAAP financial measure, Adjusted EBITDA. We define Adjusted EBITDA as net loss before (i) interest income and other, including net realized gains (losses) on marketable debt securities, available-for-sale and cash, cash equivalents, and restricted cash, (ii) interest expense, (iii) benefit for income taxes, (iv) depreciation and amortization, and (v) stock-based compensation. We use Adjusted EBITDA in our business operations to evaluate the performance of our business, develop budgets and measure our performance against those budgets, among other things. We also believe that analysts and investors use Adjusted EBITDA as a supplemental measure to evaluate our overall operating performance. However, Adjusted EBITDA has material limitations as a supplemental metric and should not be considered in isolation, or as a substitute for analysis of our results as reported under U.S. GAAP. We find Adjusted EBITDA to be a useful management metric to assist in evaluating performance, because Adjusted EBITDA eliminates items related to capital structure, taxes and non-cash items. In light of the foregoing limitations, we do not rely solely on Adjusted EBITDA as a performance measure and also consider our U.S. GAAP results. Adjusted EBITDA is not a measurement of our financial performance under U.S. GAAP and should not be considered as an alternative to net loss, operating income or any other measures calculated in accordance with U.S. GAAP. Because
Current wording
In this Quarterly Report on Form 10-Q, we include a non-GAAP financial measure, Adjusted EBITDA. We define Adjusted EBITDA as net loss before (i) interest income and other, including net realized gains (losses) on marketable debt securities, available-for-sale and cash, cash equivalents, and restricted cash, (ii) interest expense, (iii) benefit for income taxes, (iv) depreciation and amortization, and (v) stock-based compensation. We use Adjusted EBITDA in our business operations to evaluate the performance of our business, develop budgets and measure our performance against those budgets, among other things. We also believe that analysts and investors use Adjusted EBITDA as a supplemental measure to evaluate our overall operating performance. However, Adjusted EBITDA has material limitations as a supplemental metric and should not be considered in isolation, or as a substitute for analysis of our results as reported under U.S. GAAP. We find Adjusted EBITDA to be a useful management metric to assist in evaluating performance, because Adjusted
Previous wording
(1)Other includes net realized losses on marketable debt securities, available-for-sale.
Current wording
(1)Other includes net realized gains (losses) on marketable debt securities, available-for-sale.
Previous wording
Our total cash, cash equivalents, and restricted cash balance increased by $1.9 million to $172.7 million at September 30, 2024, compared to $170.8 million at December 31, 2023. The following table sets forth our summary cash flows for the nine months ended September 30, 2024 and 2023 (in thousands):
Current wording
Our total cash, cash equivalents, and restricted cash balance decreased by $3.7 million to $149.7 million at March 31, 2025, compared to $153.4 million at December 31, 2024. The following table sets forth our summary cash flows for the three months ended March 31, 2025 and 2024 (in thousands):
Previous wording
Cash flows used in operating activities were $34.9 million for the nine months ended September 30, 2024 compared to $87.1 million for the same period in 2023. The $52.2 million decrease in cash flows used in operating activities for the nine months ended September 30, 2024 compared to the same period in 2023 was primarily due to decreased payments for bonuses and deferred compensation and commissions in the current year compared to the same period in prior year. The larger bonus and commission payments made in the 2023 period primarily related to amounts accrued in 2022. The cash flows from operating activities are also affected by the timing of certain cash receipts and payments.
Current wording
Cash flows used in operating activities were $52.8 million for the three months ended March 31, 2025 compared to $51.0 million for the same period in 2024. The $1.8 million increase in cash flows used in operating activities for the three months ended March 31, 2025 compared to the same period in 2024 relates to a number of factors that are largely offsetting. These factors include a reduction in net loss, more than offset by increased payments for bonuses and deferred compensation and commissions in the current year compared to the same period in prior year and the effect of the timing of certain cash receipts and payments.
Previous wording
Cash flows provided by investing activities were $55.3 million for the nine months ended September 30, 2024 compared to $128.7 million for the same period in 2023. The $73.4 million decrease in cash flows provided by investing activities for the nine months ended September 30, 2024 compared to the same period in 2023 was primarily due to a net decrease of $74.9 million in net proceeds from sales and maturities of securities in 2024 compared to the same period in 2023. Net proceeds from marketable debt securities, available-for-sale during the nine-month period ended September 30, 2023 were used to fund operations, dividends and stock repurchases.
Current wording
Cash flows provided by investing activities were $57.2 million for the three months ended March 31, 2025 compared to cash flows used in investing activities of $21.6 million for the same period in 2024. The $78.8 million increase in cash flows provided by investing activities for the three months ended March 31, 2025 compared to the same period in 2024 was primarily due to a net increase of $77.6 million in proceeds from sales and maturities of securities, net of purchases of securities in 2025 compared to the same period in 2024.
Previous wording
We believe that our existing balances of cash, cash equivalents, cash flows expected to be generated from our operations, and proceeds from the sale of marketable debt securities, available-for-sale will be sufficient to satisfy our operating requirements for at least the next 12 months and the foreseeable future. If we need to raise additional capital through public or private debt or equity financings, strategic relationships or other arrangements, this capital might not be available to us in a timely manner, on acceptable terms, or at all. Our failure to raise sufficient capital when needed could prevent us from funding acquisitions or otherwise financing our growth or operations. As of September 30, 2024, cash, excluding restricted cash, cash equivalents, and marketable debt securities, available-for-sale, aggregated $338.3 million.
Current wording
We believe that our existing balances of cash, cash equivalents, cash flows expected to be generated from our operations, and proceeds from the sale of marketable debt securities, available-for-sale will be sufficient to satisfy our operating requirements for at least the next 12 months and the foreseeable future. If we need to raise additional capital through public or private debt or equity financings, strategic relationships or other arrangements, this capital might not be available to us in a timely manner, on acceptable terms, or at all. Our failure to raise sufficient capital when needed could prevent us from funding acquisitions or otherwise financing our growth or operations. As of March 31, 2025, cash, excluding restricted cash, cash equivalents, and marketable debt securities, available-for-sale, aggregated $319.5 million.
Previous wording
Our credit agreement with Wells Fargo Bank, National Association (as amended, the “Credit Agreement”) provides for a $10.0 million principal amount senior secured revolving credit facility that is guaranteed by all of our domestic subsidiaries and matures on June 1, 2025. The Company maintains a $10.0 million restricted cash balance in support of the Credit Agreement. The Company is monitoring covenant compliance on a regular basis to ensure continued compliance with the Credit Agreement. Our ability to borrow under our Credit Agreement is limited by our ability to comply with its covenants or obtain necessary waivers. See Note 12 – “Commitments and Contingencies” of our Notes to Condensed Consolidated Financial Statements in Item 1, Part I of this Quarterly Report on Form 10-Q for additional information on the Credit Agreement.
Current wording
Our credit agreement with Wells Fargo Bank, National Association (as amended, the “Credit Agreement”) provides for a $10 million principal amount senior secured revolving credit facility that is guaranteed by all of our domestic subsidiaries and matures on June 1, 2025. The Company maintains a $10 million restricted cash balance in support of the Credit Agreement. The Company is monitoring covenant compliance on a regular basis to ensure continued compliance with the Credit Agreement. Our ability to borrow under our Credit Agreement is limited by our ability to comply with its covenants or obtain necessary waivers. See Note 12 – “Commitments and Contingencies” of our Notes to Condensed Consolidated Financial Statements in Item 1, Part I of this Quarterly Report on Form 10-Q for additional information on the Credit Agreement.
Previous wording
The Company, in connection with the Strategic Alliance with M&T Realty Capital Corporation (“MTRCC”), has agreed to provide loan opportunities that may be funded through MTRCC’s agreement with Fannie Mae, which requires MTRCC to guarantee a portion of each funded loan. On a loan-by-loan basis, the Company, at its option, can assume a portion of MTRCC’s guarantee obligation to Fannie Mae of loan opportunities presented to and closed by MTRCC. As of September 30, 2024, the Company has agreed to a maximum aggregate guarantee obligation of $226.0 million relating to loans with an unpaid balance of $1,356.3 million. The maximum guarantee obligation is not representative of the actual loss we would incur. The Company would be liable for this amount only if all of the loans for which it is providing a guarantee to MTRCC were to default and all of the collateral underlying these loans was determined to be without value at the time of settlement. As of September 30, 2024, the Company has recorded an allowance for loss-sharing obligations of $1,222,000 and pledged $678,000 in a restricted bank account in support of the guarantee obligation.
Current wording
The Company, in connection with the Strategic Alliance with M&T Realty Capital Corporation (“MTRCC”), has agreed to provide loan opportunities that may be funded through MTRCC’s agreement with Fannie Mae, which requires MTRCC to guarantee a portion of each funded loan. On a loan-by-loan basis, the Company, at its option, can assume a portion of MTRCC’s guarantee obligation to Fannie Mae of loan opportunities presented to and closed by MTRCC. As of March 31, 2025, the Company has agreed to a maximum aggregate guarantee obligation of $326.3 million relating to loans with an unpaid balance of $2,011.9 million. The maximum guarantee obligation is not representative of the actual loss we would incur. The Company would be liable for this amount only if all of the loans for which it is providing a guarantee to MTRCC were to default and all of the collateral underlying these loans was determined to be without value at the time of settlement, and the Company has recorded an allowance for losses of $(159,000) as of March 31, 2025 related to these guarantee obligations. The Company is required to provide cash collateral to MTRCC for this obligation, and this is reflected as $0.7 million of restricted cash as of March 31, 2025, which is included in cash, cash equivalents, and restricted cash on the condensed consolidated balance sheet.
Previous wording
There have been no material changes in our commitments under contractual obligations, as disclosed in our Annual Report on Form 10-K for the year ended December 31, 2023 through the date the condensed consolidated financial statements were issued, other than commitments that are already disclosed in the accompanying notes to the condensed consolidated financial statements.
Current wording
There have been no material changes in our commitments under contractual obligations, as disclosed in our Annual Report on Form 10-K for the year ended December 31, 2024 through the date the condensed consolidated financial statements were issued, other than for the payment on April 4, 2025 of a semi-annual regular dividend of $0.25 per share on outstanding common stock declared by our Board of Directors on February 6, 2025, aggregating $10.2 million.
Previous wording
The annual CPI inflation rate in the U.S. peaked at 9.1% in June 2022, the highest annual inflation rate since November 1981, then fell to 3.1% in November 2023. In the first quarter of 2024, the headline CPI inflation rate trended upward to a reading of 3.5% in March 2024, but it has since been reduced to 2.4% and most economists believe that the current trend will continue. In 2022 through 2023, the Federal Reserve increased the federal funds rate to the 5.25%-5.5% range in an effort to combat inflation, which has had an adverse impact on commercial real estate transactions. The inflation volatility in the first quarter of 2024 raised questions about whether and when the Federal Reserve will reduce interest rates. At the beginning of the year, there were broad expectations that the Federal Reserve would make several rate cuts in 2024, but expectations have been pared back. The significant 50 basis point reduction of the overnight rate in September was positively received by investors, boosting sentiment, but questions about the pace of future reductions remain. The volatility of the 10-year treasury rate following the Federal Reserve's overnight interest rate reduction remains a headwind for investors, but many investors have reinitiated preliminary transactional activity such as requesting broker opinions of value and touring assets as they reassess the market.
Current wording
The annual CPI inflation rate in the U.S. peaked at 9.1% in June 2022, the highest annual inflation rate since November 1981. CPI inflation has since fallen to 2.4% as of March 2025. In 2022 through 2023, the Federal Reserve increased the federal funds rate to the 5.25%-5.5% range in an effort to combat inflation, which had an adverse impact on commercial real estate transactions. In the latter part of 2024, the Federal Reserve lowered the overnight rate by 100 basis points to the 4.25%-4.5% range, which was a positive trend for investors, but the 10-year treasury rate has remained range-bound in the low- to mid-4% range keeping the cost of debt capital elevated.
Rearranged current paragraphs (1)
Current report — wording carried from elsewhere
EBITDA eliminates items related to capital structure, taxes and non-cash items. In light of the foregoing limitations, we do not rely solely on Adjusted EBITDA as a performance measure and also consider our U.S. GAAP results. Adjusted EBITDA is not a measurement of our financial performance under U.S. GAAP and should not be considered as an alternative to net loss, operating loss or any other measures calculated in accordance with U.S. GAAP. Because Adjusted EBITDA is not calculated in the same manner by all companies, it may not be comparable to other similarly titled measures used by other companies. A reconciliation of the most directly comparable U.S. GAAP financial measure, net loss, to Adjusted EBITDA is as follows (in thousands):
Rearranged previous paragraphs (4)
Previous report — wording carried elsewhere
Below are key operating results for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023 (dollars in thousands):
Previous report — wording carried elsewhere
(1)Adjusted EBITDA is not a measurement of our financial performance under U.S. generally accepted accounting principles (“U.S. GAAP”) and should not be considered as an alternative to net loss, operating income or any other measures derived in accordance with U.S. GAAP. For a definition of Adjusted EBITDA and a reconciliation of Adjusted EBITDA to net loss, see “Non-GAAP Financial Measure.”
Previous report — wording carried elsewhere
Interest expense decreased by an immaterial amount for the nine months ended September 30, 2024 compared to the same period in 2023, and primarily relates to interest expense on the Company’s SARs liability.
Previous report — wording carried elsewhere
Adjusted EBITDA is not calculated in the same manner by all companies, it may not be comparable to other similarly titled measures used by other companies. A reconciliation of the most directly comparable U.S. GAAP financial measure, net loss, to Adjusted EBITDA is as follows (in thousands):