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What changed in Marcus & Millichap, Inc.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Marcus & Millichap, Inc.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+362 added−378 removedSource: 10-K (2024-02-27) vs 10-K (2023-02-28)

Top changes in Marcus & Millichap, Inc.'s 2023 10-K

362 paragraphs added · 378 removed · 306 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

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Biggest changeMillichap Fellowship Program (discussed below), and mentorship by our dedicated regional, district and division managers, as well as our senior investment sales and financing professionals. As these investment sales professionals mature, we continue to provide them with identified best practices and training in specialty property types.
Biggest changeOur new investment 11 Table of Contents sales and financing professionals are trained in all aspects of real estate fundamentals, client service, and our proprietary marketing technologies through formal training, apprenticeship programs, the William A. Millichap Fellowship Program (discussed below), and mentorship by our dedicated regional, district and division managers, as well as our senior investment sales and financing professionals.
Our sales force executes these services under the supervision of a dedicated sales management team focused on client service and growing the firm; • market leading share and brand within the $1 million to $10 million private client market segment, which consistently represents more than 80% of total U.S. commercial property transactions greater than $1 million in the marketplace; • investment sales and financing professionals providing exclusive client representation across multiple property types; • a broad geographic platform in the United States and Canada powered by information sharing and proprietary real estate marketing technologies; • an ability to scale with our private clients as they grow and connect private capital with larger assets through our Institutional Property Advisors (“IPA”) division; • a financing team integrated with our brokerage sales force providing independent mortgage brokerage services by accessing a wide range of lenders on behalf of our clients; • a sales management team that supports and leads as Company executives and that does not compete with or participate in investment sales or financing professionals’ commissions; and • industry-leading research and advisory services tailored to the needs of our clients and supporting our investment sales and financing professionals.
Our sales force executes these services under the supervision of a dedicated sales management team focused on client service and growing the firm; • market leading share and brand within the $1 million to $10 million private client market, which consistently represents more than 80% of total U.S. commercial property transactions greater than $1 million in the marketplace; • investment sales and financing professionals providing exclusive client representation across multiple property types; • a broad geographic platform in the United States and Canada powered by information sharing and proprietary real estate marketing technologies; • an ability to scale with our private clients as they grow and connect private capital with larger assets through our Institutional Property Advisors (“IPA”) division; • a financing team integrated with our brokerage sales force providing independent mortgage brokerage services by accessing a wide range of lenders on behalf of our clients; • a sales management team that supports and leads as Company executives and that does not compete with or participate in investment sales or financing professionals’ commissions; and • industry-leading research and advisory services tailored to the needs of our clients and supporting our investment sales and financing professionals.
Prior to the completion of our IPO in November 2013, the shareholders of MMREIS contributed the shares of MMREIS to MMI in exchange for common stock of MMI, and MMREIS became a wholly-owned subsidiary of MMI. 5 Table of Contents Our Services 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, and providing consulting and advisory services.
Prior to the completion of our IPO in November 2013, the shareholders of MMREIS contributed the shares of MMREIS to MMI in exchange for common stock of MMI, and MMREIS became a wholly-owned subsidiary of MMI. 5 Table of Contents Our Services 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 providing consulting and advisory services.
We believe this management structure has helped differentiate the firm from our competitors and ultimately achieves better results for our clients. 10 Table of Contents Growth Strategy We have demonstrated the ability over the long-term to manage through the cyclical market and continue to be a leader in the $1 million to $10 million private client market segment.
We believe this management structure has helped differentiate the firm from our competitors and ultimately achieves better results for our clients. 10 Table of Contents Growth Strategy We have demonstrated the ability over the long term to manage through the cyclical market and continue to be a leader in the $1 million to $10 million private client market.
We serve clients with one property, multiple properties and large investment portfolios. The largest group of investors we serve typically transacts in the $1 million to $10 million private client market segment. The investment brokerage and financing professionals serving private clients within the private client market segment represent the largest part of our business, which differentiates us from our competitors.
We serve clients with one property, multiple properties and large investment portfolios. The largest group of investors we serve typically transacts in the $1 million to $10 million private client market. The investment brokerage and financing professionals serving private clients within the private client market represent the largest part of our business, which differentiates us from our competitors.
Our investment sales and financing professionals hold applicable real estate sales licenses for their function and execute a “Salespersons Agreement” setting out the relationship between the professional and us. Each professional is obligated to provide brokerage services exclusively to us, and is provided access to our information technology, research and other support and business forms.
Our investment sales professionals hold applicable real estate sales licenses for their function and execute a “Salespersons Agreement” setting out the relationship between the professional and us. Each professional is obligated to provide brokerage services exclusively to us, and is provided access to our information technology, research and other support and business forms.
Recruiting We seek to attract talent by offering in-depth training to our employees, independent investment sales and financing professionals, as well as competitive salaries and benefit programs for our employees, competitive commissions and business support for our independent investment sales and financing professionals, and through our reputation as the top broker within the $1 million to $10 million private client market segment.
Recruiting We seek to attract talent by offering in-depth training to our employees, independent investment sales and financing professionals, as well as competitive salaries and benefit programs for our employees, competitive commissions and business support for our independent investment sales and financing professionals, and through our reputation as the top broker within the $1 million to $10 million private client market.
Our ability to connect private client capital with middle and larger transaction market segment properties allows us to continue to serve our clients as they grow and plays a major role in differentiating our services. The IPA division is a group dedicated to servicing larger investors.
Our ability to connect private client capital with middle and larger transaction market properties allows us to continue to serve our clients as they grow and plays a major role in differentiating our services. The IPA division is a group dedicated to servicing larger investors.
Item 1. Business Company Overview Marcus & Millichap, Inc. (“MMI”) is a leading national real estate services firm specializing in commercial real estate investment sales, financing services, research, and advisory services. We are the leading national investment brokerage company in the $1 million to $10 million private client market segment.
Item 1. Business Company Overview Marcus & Millichap, Inc. (“MMI”) is a leading national real estate services firm specializing in commercial real estate investment sales, financing services, research, and advisory services. We are the leading national investment brokerage company in the $1 million to $10 million private client market.
These investment brokerage firms mainly focus on larger sales and institutional investors and are not heavily concentrated in our largest market segment, which is the $1 million to $10 million private client market segment. However, there is crossover and competition between us and these firms.
These investment brokerage firms mainly focus on larger sales and institutional investors and are not heavily concentrated in our largest market, which is the $1 million to $10 million private client market. However, there is crossover and competition between us and these firms.
These executives will work with our sales management team to increase investment sales professional hiring, training, development, and redeployment and to execute various branding and marketing campaigns to expand our presence in these targeted property types.
These executives will work with our sales management team to increase investment sales professional recruiting, hiring, training, development, and redeployment and to execute various branding and marketing campaigns to expand our presence in these targeted property types.
We are committed to leasing office space in LEED Certified, Energy Star Rated, and BOMA Best Gold buildings where appropriate and are working with our current landlords to make environmentally sustainable improvements. Thirty-two of our current offices are located in such buildings, and we expect this number to increase as leases expire and new space is acquired.
We are committed to leasing office space in LEED Certified, Energy Star Rated, and BOMA Best Gold buildings where appropriate and are working with our current landlords to make environmentally sustainable improvements. Thirty-five of our current offices are located in such buildings, and we expect this number to increase as leases expire and new space is acquired.
Hiring multiple investment sales teams into IPA in 2022 has expanded our capability to service clients and furthers our growth plan. Expand Marcus & Millichap Capital Corporation Financing Business Our growth plan for MMCC continues to focus on expanding our capital markets services in markets currently served by our investment sales brokerage offices and other strategic markets.
Hiring multiple investment sales teams into IPA in 2023 has expanded our capability to service clients and furthers our growth plan. Expand Marcus & Millichap Capital Corporation Financing Business Our growth plan for MMCC continues to focus on expanding our capital markets services in markets currently served by our investment sales brokerage offices and other strategic markets.
We divide commercial real estate into four major market segments, characterized by price in order to understand trends in our revenue from period to period: • Properties priced less than $1 million; • Private client market: properties priced from $1 million to up to but less than $10 million; • Middle market: properties priced from $10 million to up to but less than $20 million; and • Larger transaction market: properties priced from $20 million and above.
We divide commercial real estate into four major markets, characterized by price in order to understand trends in our revenue from period to period: • Properties priced less than $1 million; • Private client market: properties priced from $1 million to up to but less than $10 million; • Middle market: properties priced from $10 million to up to but less than $20 million; and • Larger transaction market: properties priced from $20 million and above.
In October 2022, we launched a new feature on our website called MyMMI, which allows investors to register for an account and create personalized criteria for inventory, research, and events notifications. Since its launch, over 27,000 visitors have created MyMMI accounts.
In October 2022, we launched a new feature on our website called MyMMI, which allows investors to register for an account and create personalized criteria for inventory, research, and events notifications. Since its launch, over 90,000 visitors have created MyMMI accounts.
Our efforts include the development of proprietary applications designed to make the process of matching buyers and sellers faster and more efficient as well as state-of-the-art communication technology, infrastructure, internet presence, and electronic marketing. We have a proprietary internal marketing system, MNet, which allows our investment sales professionals to share listing information with investors across the United States and Canada.
Our efforts include the development of proprietary applications designed to make the process of matching buyers and sellers faster and more efficient as well as state-of-the-art communication technology, infrastructure, internet presence, and electronic marketing. 13 Table of Contents We have a proprietary internal marketing system, MNet, which allows our investment sales professionals to share listing information with investors across the United States and Canada.
These specialized financing professionals work closely with IPA investment sales professionals across the country, supporting them and their clients in their financing needs as well as working directly with institutional clients. We have established alliances with national capital sources that provide access to an assortment of highly competitive products including Fannie Mae, Freddie Mac, and FHA.
These specialized financing professionals work closely with IPA investment sales professionals across the country, supporting them and their clients in their financing needs as well as working directly with institutional clients. 12 Table of Contents We have established alliances with national capital sources that provide access to an assortment of highly competitive products including Fannie Mae, Freddie Mac, and FHA.
We have enacted policies designed to manage our environmental impact and support our clients in their efforts to advance their own sustainability initiatives. Resource Consumption We are similarly focused on reducing our waste and energy usage.
We have enacted policies designed to manage our environmental impact and support our clients, vendors, and suppliers in their efforts to advance their own sustainability initiatives. Resource Consumption We are similarly focused on reducing our waste and energy usage.
Because commission rates earned on commercial properties are typically inversely correlated with sales price, our expansion into the middle and larger transaction market segments has led to our average commission rates fluctuating from period-to-period as a result of changes in the relative mix of transactions closed in the middle and larger transaction market segments as compared to the private client market segment.
Because commission rates earned on commercial properties are typically inversely correlated with sales price, our expansion into the middle and larger transaction markets has led to our average commission rates fluctuating from period-to-period as a result of changes in the relative mix of transactions closed in the middle and larger transaction markets as compared to the private client market.
These barriers include the need for a large, specialized sales force prospecting private clients, the difficulties in identifying, establishing, and maintaining relationships with such investors, capabilities of exposing properties to a large pool of potential buyers, and the challenge of serving their needs locally, regionally, and nationally.
These barriers include the need for a large, specialized sales force prospecting private clients, the difficulties in identifying, establishing, and maintaining 9 Table of Contents relationships with such investors, capabilities of exposing properties to a large pool of potential buyers, and the challenge of serving their needs locally, regionally, and nationally.
Middle and Larger Transaction Market Segments Presence Our extensive relationships with private client investors who typically invest in the $1 million to $10 million private client market segment have enabled us to capture a greater portion of commercial real estate transactions in excess of $10 million and bridge the private client market investor to the middle market and larger transaction market segments in recent years.
Middle and Larger Transaction Market Presence Our extensive relationships with private client investors who typically invest in the $1 million to $10 million private client market have enabled us to capture a greater portion of commercial real estate transactions in excess of $10 million and bridge the private client market investor to the middle market and larger transaction markets in recent years.
Government Regulation We are subject to various real estate regulations, and we maintain real estate and other broker licenses in 47 states in the United States and four provinces in Canada. We are a licensed broker in each state in which we have an office, as well as those states where we frequently do business.
Government Regulation We are subject to various real estate regulations, and we maintain real estate and other broker licenses in 47 states and the District of Columbia in the United States and four provinces in Canada. We are a licensed broker in each state in which we have an office, as well as those states where we frequently do business.
Competitors in financing services include institutional firms such as CBRE, JLL, Cushman, Walker & Dunlop, NorthMarq Capital, and a large group of local and regional mortgage banking firms.
Competitors in financing services include institutional firms such as CBRE, JLL, Cushman, Walker & Dunlop Inc., NorthMarq Capital, LLC, and a large group of local and regional mortgage banking firms.
Accordingly, our business model distinguishes us from our national competitors, who may focus primarily on the more volatile larger transaction and middle market segments, or on other business activities such as leasing or property management, and from our local and regional competitors, who lack a broad national platform.
Accordingly, our business model distinguishes us from our national competitors, who may focus primarily on the more volatile larger transaction and middle markets, or on other business activities such as leasing or property management, and from our local and regional competitors, who lack a broad national platform.
Our transactional and market research expertise result in significant print, radio, television, and online media coverage including major national real estate publications such as Real Estate Forum, Multi-Housing News, Commercial Property Executive, Connect CRE, Wealth Management Real Estate, as well as local market business journals and major national news outlets such as CNBC, The Wall Street Journal, Los Angeles Times, The New York Times, Fox Business, Bloomberg Businessweek, Forbes, and numerous newspapers and trade publications in major metropolitan cities.
Our transactional and market research expertise result in significant print, radio, television, and online media coverage including major national real estate publications such as Real Estate Forum, GlobeSt, Multi-Housing News, 14 Table of Contents Commercial Property Executive, Connect CRE, Wealth Management Real Estate, as well as local market business journals and major national news outlets such as CNBC, The Wall Street Journal, Los Angeles Times, The New York Times, Fox Business, Bloomberg Businessweek, Forbes, and numerous newspapers and trade publications in major metropolitan cities.
Commissions from real estate investment brokerage sales accounted for approximately 90% of our revenue in 2022. Sales are generated by maintaining relationships with property owners, providing market information and trends to them during their investment or “hold” period, and being selected as their representative when they decide to sell, buy additional property, or exchange their property for another property.
Commissions from real estate investment brokerage sales accounted for approximately 87% of our revenue in 2023. Sales are generated by maintaining relationships with property owners, providing market information and trends to them during their investment or “hold” period, and being selected as their representative when they decide to sell, buy additional property, or exchange their property for another property.
In addition, although we do not own or manage real property, we recognize the impact our activities, as well as those of our clients and vendors, may have on the environment and are exploring ways to reduce these impacts.
In addition, although we do not own or manage real property, we recognize the impact our activities, as 15 Table of Contents well as those of our clients and vendors, may have on the environment and are exploring ways to reduce these impacts.
The majority of our local management teams are former senior investment sales professionals of the Company, who now focus on management, do 16 Table of Contents not compete with our sales force and have an average of 14 years of real estate investment brokerage experience with our Company.
The majority of our local management teams are former senior investment sales professionals of the Company, who now focus on management, do not compete with our sales force and have an average of 14 years of real estate investment brokerage experience with our Company.
The Fellowship Program was launched in partnership with the Commercial Real Estate Women Network (“CREW Network”), a premier business network dedicated to transforming the commercial real estate industry by advancing women globally and Project Destined, a leading social impact platform that provides training in financial literacy, entrepreneurship, and real estate, and sponsors real estate internships in HBCUs and Public Universities.
The Fellowship Program was 16 Table of Contents launched in partnership with the Commercial Real Estate Women Network (“CREW Network”), a premier business network dedicated to transforming the commercial real estate industry by advancing women globally and Project Destined, a leading social impact platform that provides training in financial literacy, entrepreneurship, and real estate, and sponsors real estate internships in HBCUs and Public Universities.
We service clients in all market segments by underwriting, marketing, selling and financing commercial real estate properties in a manner that maximizes value for sellers and provides buyers with the largest and most diverse inventory of commercial properties.
We service clients in all markets by underwriting, marketing, selling and financing commercial real estate properties in a manner that maximizes value for sellers and provides buyers with the largest and most diverse inventory of commercial properties.
Information on our website does not constitute part of this report and inclusions of our internet address in this Annual Report on Form 10-K are inactive textual references only. We are required to file current, annual and quarterly reports, proxy statements, and other information required by the Exchange Act, with the SEC.
Information on our website does not constitute part of this report and inclusions of our internet address in this Annual Report on Form 10-K are inactive textual references only. We are required to file current, annual and quarterly reports, proxy statements, and other information required by the Securities Exchange Act of 1934, as amended (the "Exchange Act"), with the SEC.
As property values increase and investors grow and expand, they require larger properties. Our IPA division positions us to provide our unique investment brokerage and financing services to investors in those market segments.
As property values increase and investors grow and expand, they require larger properties. Our IPA division positions us to provide our unique investment brokerage and financing services to investors in those markets.
These initiatives do not require significant increases in the number of offices or in the size of our offices, which allows us to leverage our current office locations without significant incremental investment. 11 Table of Contents Expand and Develop Our Team of Investment Sales Professionals A key to growing our business is hiring, training, and developing investment sales professionals.
These initiatives do not require significant increases in the number of offices or in the size of our offices, which allows us to leverage our current office locations without significant incremental investment. Expand and Develop Our Team of Investment Sales and Financing Professionals A key to growing our business is recruiting, hiring, training, and developing investment sales and financing professionals.
We have and continue to expand MMCC’s capital markets advisory services and added complementary services in loan sales, consultative/due diligence, and debt and equity 12 Table of Contents advising through acquisitions, as well as expanded service offerings. While maintaining a core focus on our private client segment, MMCC, through the IPA division, has commenced a focus on institutional clients.
We have and continue to expand MMCC’s capital markets advisory services and added complementary services in loan sales, consultative/due diligence, and debt and equity advising through acquisitions, as well as expanded service offerings. While maintaining a core focus on our private client market, MMCC, through the IPA division, has commenced a focus on institutional clients.
We actively qualify leads generated from the saved search preferences and share those leads with our agents via our customer relationship management platform. During 2022, our websites averaged approximately 179,000 new visitors per month and approximately 623,000 page views per month and also served as a portal for delivery of online marketing materials and for deal collaboration.
We actively qualify leads generated from the saved search preferences and share those leads with our agents via our customer relationship management platform. During 2023, our websites averaged approximately 144,000 new visitors per month and approximately 473,000 page views per month and also served as a portal for delivery of online marketing materials and for deal collaboration.
In 2022, we continued to partner with a leading analytics and advisory company to implement a robust leadership training program for our senior leadership including our regional managers. This program includes a leadership strengths assessment, a leadership development program, and an employee engagement survey.
We continue to partner with a leading analytics and advisory company to implement a robust leadership training program for our senior leadership including our regional managers. This program includes a leadership strengths assessment, a leadership development program, and an employee engagement survey.
In addition, we achieve growth by leveraging the strength of our relationships in the private client market segment to increase our share of the middle and larger transaction market segments.
In addition, we achieve growth by leveraging the strength of our relationships in the private client market to increase our share of the middle and larger transaction markets.
Therefore, private client investors are influenced less by the macroeconomic trends than other large-scale investors, making the private client market segment less volatile over the long-term than other market segments.
Therefore, private client investors are influenced less by the macroeconomic trends than other large-scale investors, making the private client market less volatile over the long term than other markets.
The following graph shows the number of transactions and sales volume of all investment sales, financing and other transactions from 2013 to 2022: We have a long track record of growing our business model driven by opening new offices, recruiting, training, and developing new investment sales and financing professionals as well as deploying our client-focused business model to increase coverage of specialty property types and the middle and larger transaction market segments.
The following graph shows the number of transactions and sales volume of all investment sales, financing and other transactions from 2014 to 2023: We have a long track record of growing our business model driven by opening new offices, recruiting, training, and developing new investment sales and financing professionals as well as deploying our client-focused business model to increase coverage of specialty property types and the middle and larger transaction markets.
This strategy has had market acceptance and provides a vehicle for growth by delivering our unique service platform within the middle and larger transaction market segments for the multifamily, retail, and office property types. The evolution of our investors and their utilization of our IPA division has driven incremental growth in these market segments.
This strategy has had market acceptance and provides a vehicle for growth by delivering our unique service platform within the middle and larger transaction markets for the multifamily, retail, and office property types. The evolution of our investors and their utilization of our IPA division has driven incremental growth in these markets over the past several years.
We continually explore acquisition opportunities to augment our investment brokerage and financing services businesses. We primarily look for acquisitions of small-to-medium size investment brokerage and financing services businesses with teams of professionals with consistent revenue and earnings trends, which will expand our geographic or property type coverage.
We primarily look for acquisitions of small-to-medium size investment brokerage and financing services businesses with teams of professionals with consistent revenue and earnings trends, which will expand our geographic or property type coverage.
The Fellowship Program is currently conducted in 15 major cities within the U.S. The first fellowship group commenced in February 2022. We believe our training, development, and mentoring programs have helped differentiate us from our competitors and achieve better results for our clients.
The Fellowship Program is currently conducted in 15 major cities within the U.S. We believe our training, development, and mentoring programs have helped differentiate us from our competitors and achieve better results for our clients.
Our CEO is frequently interviewed on national business channels, such as CNBC, Yahoo! Finance, TD Ameritrade, Fox Business, and Bloomberg to discuss the commercial real estate market.
Our CEO is frequently interviewed on national business channels, such as CNBC, Yahoo! Finance, Schwab Network, Fox Business, and Bloomberg to discuss the commercial real estate market.
From time to time, we may announce key information in compliance with Regulation FD by disclosing that information on our website.
From time to time, we may announce key information in compliance with Regulation Fair Disclosure by disclosing that information on our website.
We have grown to have offices in 36 states across the United States and in four provinces in Canada. 6 Table of Contents Below is a map reflecting the geographic location of our 81 offices as of December 31, 2022.
We have grown to have offices in 34 states across the United States and in four provinces in Canada. 6 Table of Contents Below is a map reflecting the geographic location of our offices as of December 31, 2023.
As of December 31, 2022, we had 1,904 investment sales and financing professionals that are primarily exclusive commission-based independent contractors who provide real estate investment brokerage and financing services to sellers and buyers of commercial real estate in 81 offices in the United States and Canada.
As of December 31, 2023, we had 1,783 investment sales and financing professionals that are primarily exclusive commission-based independent contractors who provide real estate investment brokerage and financing services to sellers and buyers of commercial real estate in over 80 offices in the United States and Canada.
Our local management team members, as executives of the Company, are dedicated to recruiting, training, developing, and supporting our investment sales and financing professionals.
Our local management team members, as executives of the Company, are tasked with recruiting, training, developing, and supporting our investment sales and financing professionals.
As we noted above in “Growth Strategy,” a key factor to growing our business is hiring, training and developing investment sales and financing professionals. As of December 31, 2022, we had 1,904 investment sales and financing professionals, a 4.5% decrease compared to December 31, 2021.
As we noted above in “Growth Strategy,” a key factor to growing our business is recruiting, hiring, training, and developing investment sales and financing professionals. As of December 31, 2023, we had 1,783 investment sales and financing professionals, a 6.4% decrease compared to December 31, 2022.
The key strategies of our growth plan include: Increase Market Share in the Private Client Market Segment Our leading position in the private client market segment and inherent fragmentation continues to provide significant opportunity for us to expand and bring our client service offerings to a larger portion of this expansive market segment.
Despite the current market circumstances, this remains our long-term strategy. The key strategies of our growth plan include: Increase Market Share in the Private Client Market Our leading position in the private client market and inherent fragmentation continues to provide significant opportunity for us to expand and bring our client service offerings to a larger portion of this expansive market.
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. In 2022, approximately 90% of our revenues were generated from real estate brokerage commissions, 9% from financing fees, and 1% from other revenue, including 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. In 2023, approximately 87% of our revenues were generated from real estate brokerage commissions, 10% from financing fees, and 3% from other revenue, including consulting and advisory services.
In 2022, approximately 58% of our brokerage commissions came from this market segment. Properties in this market segment are characterized by higher asset turnover rates due to the type of investor as compared to other market segments.
In 2023, approximately 67% of our brokerage commissions came from this market. Properties in this market are characterized by higher asset turnover rates due to the type of investor as compared to other markets.
We continue to implement internal initiatives to increase diversity in our workforce and strengthen an inclusive culture. Among these initiatives are our sponsorships of CREW Network, Project Destined, AAREP, Project Reap, and CORE REimagined. We are currently a National Platinum Sponsor of CREW Network, as well as a local sponsor in Southern California with local board participation.
We continue to implement internal initiatives to increase diversity in our workforce and strengthen an inclusive culture. Among these initiatives are our sponsorships of CREW Network, Project Destined, and CORE REimagined. We are currently a National Platinum Sponsor of CREW Network.
This historical trend could be disrupted either positively or negatively by market trends, macroeconomic uncertainties, geopolitical events, or natural disasters, which may impact, among other things, investor sentiment for a particular property type or location, volatility in financial markets, current and future projections of interest rates, attractiveness of other asset classes, market liquidity, and the extent of limitations or availability of capital allocations for larger property buyers.
This historical trend can be disrupted both positively and negatively by major economic events, or natural disasters or pandemics such as the COVID-19 pandemic, which may impact, among other things, investor sentiment for a particular property type or location, volatility in financial markets, current and future projections of interest rates, attractiveness of other asset classes, market liquidity, and the extent of limitations or availability of capital allocations for larger property buyers.
Further, our internally developed training programs are directed at enhancing the skill sets for our professionals, promoting the MMCC value proposition, increasing our internal capture rate with our investment sales brokerage clients, and increasing activity with non-brokerage clients. As of December 31, 2022, we had 34 offices with financing professionals.
Further, our internally developed training programs are directed at enhancing the skill sets for our professionals, promoting the MMCC value proposition, increasing our internal capture rate with our investment sales brokerage clients, and increasing activity with non-brokerage clients.
Our affinity groups, MMWomen (Marcus & Millichap Women) and MMAA (Marcus & Millichap African Americans), hold various networking and virtual events designed for agents and originators who are interested in making connections across the firm, in addition to internal Company events such as Fireside Chats with leaders inside and outside the Company.
Our affinity group, MMWomen (Marcus & Millichap Women), holds various networking and virtual events designed for agents and originators who are interested in making connections across the firm, in addition to internal Company events such as Fireside Chats with leaders inside and outside the Company. We also partner with the U.S.
Our ability to bridge private capital with larger, institutional assets creates value for private and larger transaction clients, while offering growth opportunities and strengthening the retention of our investment sales and financing professionals. We have one of the largest teams of financing professionals in the investment brokerage industry through MMCC.
Our ability to bridge private capital with larger, institutional assets creates value for private and larger transaction clients, while offering growth opportunities and strengthening the retention of our investment sales and financing professionals.
In 2022, MMCC completed 2,143 financing transactions representing total financing volume of approximately $12.8 billion, resulting in $113.0 million in financing fees, which accounted for approximately 9% of MMI’s total revenue. The combination of MMCC’s size, market reach, and financing volume enables us to establish long-term relationships with various capital sources.
In 2023, MMCC completed 1,076 financing transactions representing total financing volume of approximately $6.7 billion, resulting in $66.9 million in financing fees, which accounted for approximately 10% of MMI’s total revenue. The combination of MMCC’s size, market reach, and financing volume enables us to establish long-term relationships with various capital sources.
Competition to attract and retain qualified professionals is also intense in each of our geographic regions and across all property types. We offer what we believe to be competitive compensation and support programs to our professionals.
Competition to attract and retain qualified professionals is also intense in each of our geographic regions and across all property types. We offer what we believe to be competitive compensation and support programs to our professionals. Our ability to continue to compete effectively will depend on retaining, motivating, and appropriately compensating our professionals.
Seasonality There is seasonality in our real estate brokerage commissions and financing fees, which has generally caused our revenue, operating income, net income, and cash flows from operating activities to be lower in the first half of the year and higher in the second half of the year, particularly in the fourth quarter.
Historically, this seasonality has generally caused our revenue, operating income, net income, and cash flows from operating activities to be lower in the first half of the year and higher in the second half of the year, particularly in the fourth quarter.
In 2022, 17 Table of Contents we also engaged in a new recruitment endeavor, partnering with the U.S. Department of Defense's SkillBridge program, which assists retiring military veterans retrain for, and transition to, civilian careers. Communication and Engagement with Our Workforce We also monitor and measure employee satisfaction and engagement through embedded management, human resource, and legal departments.
Department of Defense's SkillBridge program, which assists retiring military veterans retrain for, and transition to, civilian careers. Communication and Engagement with Our Workforce We also monitor and measure employee satisfaction and engagement through embedded management, human resource, and legal departments.
This is the largest and most active market segment and comprised approximately 83% of total U.S. commercial property transactions greater than $1 million in the marketplace in 2022.
This is the largest and most active market and consistently comprises more than 80% of total U.S. commercial property transactions greater than $1 million in the marketplace.
In addition, we are continuously focusing on our recruitment efforts for new and experienced investment sales and financing professionals. We expect that these efforts will expand our presence and result in increased business in these property types.
We have expanded our specialty group management and support infrastructure, specialized branding, and business development customized for each property type. In addition, we are continuously focusing on our recruitment efforts for new and experienced investment sales and financing professionals. We expect that these efforts will expand our presence and result in increased business in these property types.
One of our 15 Table of Contents wholly-owned subsidiaries is subject to certain human resource, data security, information technology, and other compliance requirements due to its loan sale and consulting contracts with certain U.S. government agencies.
One of our wholly-owned subsidiaries is subject to certain human resource, data security, information technology, and other compliance requirements due to its loan sale and consulting contracts with certain U.S. government agencies. Investment Sales Professionals Our investment sales professionals are classified as independent contractors under state and Internal Revenue Service guidelines.
To create these opportunities, we are increasing our property type expertise by continuing to strategically add specialty directors who can bring added management capacity, business development, and investment sales professional support.
By deploying our unique business model to increase coverage of these property types, we can create growth for us as well as enhance value for our clients through diversification. To create these opportunities, we are increasing our property type expertise by continuing to strategically add specialty directors who can bring added management capacity, business development, and investment sales professional support.
When the COVID-19 pandemic required the immediate closure of offices, the Company’s workforce pivoted to remote work and continued without disruption or delay. Promoting Health, Well-being and Employee Safety We are committed to protecting the health and safety of our employees, investment sales and financing professionals, and their families, while at the same time focusing on our clients’ success.
Promoting Health, Well-being and Employee Safety We are committed to protecting the health and safety of our employees, investment sales and financing professionals, and their families, while at the same time focusing on our clients’ success.
This research includes analysis and forecasting of the economy, capital markets, real estate fundamentals, investment, pricing, and yield trends. It is designed to assist investors in their strategy formation and decisions relating to specific assets and to help our investment sales and financing professionals develop and maintain relationships with clients.
It is designed to assist investors in their strategy formation and decisions relating to specific assets and to help our investment sales and financing professionals develop and maintain relationships with clients.
This, in turn, improves MMCC’s value proposition to borrowers who are seeking competitive rates and terms. MMCC seeks to secure the most competitive financing solutions for each client’s specific needs and requirements.
This, in turn, improves MMCC’s value proposition to borrowers who are seeking competitive rates and terms. MMCC seeks to secure the most competitive financing solutions for each client’s specific needs and requirements. During 2023, approximately 38% of 8 Table of Contents MMCC’s revenue came from placing acquisition financing, 37% from refinancing activities, and 25% from other financing activities.
As a result of these founding principles, we offer an efficient system of matching each property with the largest pool of qualified buyers and therefore maximizing value in the process.
As a result of these founding principles, we offer an efficient system of matching each property with the largest pool of qualified buyers and therefore maximizing value in the process. Market Leader in the Private Client Market Since our founding, we have focused on being the leading service provider to the $1 million to $10 million private client market.
Grow in Specialty Property Types and Middle and Larger Transaction Market Segment Presence Leveraging our current business model into specialty property types and to the middle and larger transaction market segments opens up significant opportunities for growth.
Grow in Specialty Property Types and Middle and Larger Transaction Market Presence Leveraging our current business model into specialty property types and to the middle and larger transaction markets opens up significant opportunities for growth. Specialty Property Types We believe that specialty property types, including hospitality, self-storage, seniors housing, land, and manufactured housing offer significant opportunities for our clients.
We also provide “Well-ness Resource Monthly Articles” to all employees, which are available on our intranet. Topics have included: healthy habits, burnout and resilience, financial wellness, vaccine information, breast cancer awareness, suicide prevention, and alcohol and substance abuse. We also hold an annual fitness challenge in which all employees can participate.
Topics have included: healthy habits, burnout and resilience, financial wellness, vaccine information, breast cancer awareness, suicide prevention, and alcohol and substance abuse. We also hold an annual fitness challenge in which all employees can participate. Community Engagement and Empowerment We have participated in and continue to be involved in ongoing community and charity events to promote community and employee engagement.
In 2022, we closed 12,272 sales, financing, and other transactions with total sales volume of approximately $86.3 billion.
In 2023, we closed 7,546 sales, financing, and other transactions with total sales volume of approximately $43.6 billion.
We are the leading broker in the $1 million to $10 million private client market segment based on transaction count in 2022. With our established market leadership and brand name, we have significant room for market share expansion by further consolidating our leadership position in this market segment.
With our established market leadership and brand name, we have significant room for market share expansion by further consolidating our leadership position in this market. In addition, the private client market is characterized by high barriers to entry.
These include hospitality, self-storage, seniors housing, healthcare, land, and manufactured housing properties, where we are already a leading broker but have significant room for additional growth due to market size, fragmentation, and specific geographic market opportunities. We are also expanding our specialty group management and support infrastructure, specialized branding, and business development customized for each property type.
We are building on our track record of strength in multifamily, retail, office, and industrial properties by expanding our coverage of additional property types. These include hospitality, self-storage, seniors housing, healthcare, land, and manufactured housing properties, where we are already a leading broker but have significant room for additional growth due to market size, fragmentation, and specific geographic market opportunities.
By combining these resources with the latest property and capital markets data and information, we can differentiate ourselves in the marketplace and deliver tailored financial solutions that meet our clients’ financial objectives.
The MMCC national network of financing professionals is also supported by a dedicated, nationally-focused management team coordinating access to a broad range of national and regional capital sources. By combining these resources with the latest property and capital markets data and information, we can differentiate ourselves in the marketplace and deliver tailored financial solutions that meet our clients’ financial objectives.
Our long-term growth plan has focused on investing in our current business model through organic growth and acquisitions to provide our unique business model to a wider client base.
Our long-term growth plan has focused on investing in our current business model through organic growth and acquisitions to provide our unique business model to a wider client base. Our future growth will depend on continually expanding our national footprint and optimizing the size, product segmentation, and specialization of our team of investment sales and financing professionals.
The decline in the headcount of investment sales and financing professionals is attributable to a 18 Table of Contents reduction of unproductive investment sales and financing professionals during the COVID-19 pandemic and a shift toward more experienced investment sales and financing professionals due to the challenging market environment and rising interest rates. Available Information Our website address is www.MarcusMillichap.com .
The decline in the overall headcount is attributable to a reduction of unproductive investment sales and financing professionals and the challenge of recruiting and retaining investment sales and financing professionals in the current market environment. Available Information Our website address is www.MarcusMillichap.com .
The following table sets forth the number of investment sales transactions, sales volume, and revenue by commercial real estate market segment for real estate brokerage in 2022 compared to 2021: 2022 2021 Change Real Estate Brokerage: Number Volume Revenue Number Volume Revenue Number Volume Revenue (in millions) (in thousands) (in millions) (in thousands) (in millions) (in thousands) 936 $ 560 $ 24,809 1087 $ 732 $ 30,681 (151) $ (172) $ (5,872) Private Client Market ($1 – 6,850 24,474 682,019 7,300 24,339 693,996 (450) 135 (11,977) Middle Market ($10 – 735 9,980 188,593 643 8,874 170,230 92 1,106 18,363 Larger Transaction Market (≥$20 million) 590 33,074 274,889 622 33,562 276,062 (32) (488) (1,173) 9,111 $ 68,088 $ 1,170,310 9,652 $ 67,507 $ 1,170,969 (541) $ 581 $ (659) Financing Marcus & Millichap Capital Corporation (“MMCC”) is a financial intermediary that provides commercial real estate capital markets solutions, including senior debt, mezzanine debt, joint venture and preferred equity, as well as loan sales and consultative/due diligence services to commercial real estate owners, developers, investors, and capital providers.
The following table sets forth the number of investment sales transactions, sales volume, and revenue by commercial real estate market for real estate brokerage in 2023 compared to 2022: 2023 2022 Change Real Estate Brokerage: Number Volume Revenue Number Volume Revenue Number Volume Revenue (in millions) (in thousands) (in millions) (in thousands) (in millions) (in thousands) 809 $ 483 $ 20,894 936 $ 560 $ 24,809 (127) $ (77) $ (3,915) Private Client Market ($1 – 4,097 13,616 372,979 6,850 24,474 682,019 (2,753) (10,858) (309,040) Middle Market ($10 – 303 4,117 73,007 735 9,980 188,593 (432) (5,863) (115,586) Larger Transaction Market (≥$20 million) 266 12,607 92,872 590 33,074 274,889 (324) (20,467) (182,017) 5,475 $ 30,823 $ 559,752 9,111 $ 68,088 $ 1,170,310 (3,636) $ (37,265) $ (610,558) Financing Marcus & Millichap Capital Corporation (“MMCC”) is a financial intermediary that provides commercial real estate capital markets solutions, including senior debt, mezzanine debt, joint venture and preferred equity, as well as loan sales and consultative/due diligence services to commercial real estate owners, developers, investors, and capital providers.
We are always focused on hiring experienced investment sales professionals through our recruiting department, specialty directors, and regional managers in support of our expansion strategy. Our new investment sales professionals are trained in all aspects of real estate fundamentals, client service, and our proprietary marketing technologies through formal training, apprenticeship programs, the William A.
We are always focused on hiring experienced investment sales and financing professionals through our recruiting department, specialty directors, and regional managers in support of our expansion strategy.
Platform Built for Maximizing Investor Value We have built our business to maximize value for real estate investors through an integrated set of services geared toward our clients’ needs.
We believe this private client market is the least covered market by other national firms and is significantly underserved by local and regional firms that lack a national platform. Platform Built for Maximizing Investor Value We have built our business to maximize value for real estate investors through an integrated set of services geared toward our clients’ needs.
These digital tools are available anywhere, anytime to help employees identify thoughts and behavior patterns that affect their emotional well-being and work through them. It provides tools and instruction to manage stress, depression, anxiety, substance use, and sleep issues. The program includes one-on-one coaching, a support team to work through individual programs, and live and on-demand webinars.
It provides tools and instruction to manage stress, depression, anxiety, substance use, and sleep issues. The program includes one-on-one coaching, a support team to work through individual programs, and live and on-demand webinars. We also provide “Well-ness Resource Monthly Articles” to all employees, which are available on our intranet.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeHowever, our competitors continue to offer lucrative compensation packages and commission splits to these key experienced professionals that we may not be able to match or exceed while also remaining profitable. As a result, the professionals whom we would like to recruit or retain may not agree to terms and conditions acceptable to us.
Biggest changeHowever, our competitors compete vigorously with us to recruit and retain investment sales and financing professionals and may offer lucrative compensation packages and commission splits that we may not be able to match on terms that are economically favorable to us.
MTRCC originates, underwrites, closes and services loans under the DUS Agreement and is subject to indemnifying Fannie Mae for of a portion of the risk of loss for those loans.
MTRCC originates, underwrites, closes and services loans under the DUS Agreement and is subject to indemnifying Fannie Mae for a portion of the risk of loss for those loans.
We plan our capital and operating expenditures based on our expectations of future revenue and, if revenue are below expectations in any given quarter or year, we may be unable to adjust capital or operating expenditures in a timely manner to compensate for any unexpected revenue shortfall, which could have an immediate material adverse effect on our business, financial condition and results of operation.
We plan our capital and operating expenditures based on our expectations of future revenue and, if revenues are below expectations in any given quarter or year, we may be unable to adjust capital or operating expenditures in a timely manner to compensate for any unexpected revenue shortfall, which could have an immediate material adverse effect on our business, financial condition and results of operation.
We have numerous significant competitors and potential future competitors, some of which may have greater resources than we do, and we may not be able to continue to compete effectively. We compete in investment sales and financing within the commercial real estate industry. Our investment sales focus is on the private client market segment, which is highly fragmented.
We have numerous significant competitors and potential future competitors, some of which may have greater resources than we do, and we may not be able to continue to compete effectively. We compete in investment sales and financing within the commercial real estate industry. Our investment sales focus is on the private client market, which is highly fragmented.
Although most are substantially smaller than we are, some of these competitors are larger on a local, regional or national basis, and we believe more national firms are exploring entry into or expansion in the $1 million to $10 million private client market segment.
Although most are substantially smaller than we are, some of these competitors are larger on a local, regional or national basis, and we believe more national firms are exploring entry into or expansion in the $1 million to $10 million private client market.
Infrastructure upgrades may require significant capital investment outside of the normal course of business. In the future, we will likely need to improve and upgrade our technology, database systems and network infrastructure in order to allow our business to grow in both size and scope.
Infrastructure upgrades may require significant capital investment outside of the normal course of business. In the future, we will likely need to improve and upgrade our technology, database systems and network infrastructure to allow our business to grow in both size and scope.
Federal Reserve, (iii) changes in the perception that commercial real estate is an accepted asset class for portfolio diversification, (iv) changes in tax policy affecting the attractiveness of real estate as an investment choice, (v) changes in regulatory policy impacting real estate development opportunities and capital markets, (vi) slowdowns in economic activity that could cause residential and commercial tenant demand to decline, (vii) declines in the regional or local demand for commercial real estate, or (viii) significant disruptions in other segments of the real estate markets could adversely affect our results of operations.
Federal Reserve, (iii) changes in the perception that commercial real estate is an accepted asset class for portfolio diversification, (iv) changes in tax policy affecting the attractiveness of real estate as an investment choice, (v) changes in regulatory policy impacting real estate development opportunities and capital markets, (vi) slowdowns in economic activity that could cause residential and commercial tenant demand to decline, (vii) declines in the regional or local demand for commercial real estate, or (viii) significant disruptions in other areas of the real estate markets could adversely affect our results of operations.
Failure to maintain the security of our information and technology networks, including personally identifiable and client information could adversely affect us. Security breaches and other disruptions could compromise our information and expose us to liability, which could cause our business and reputation to suffer.
Failure to maintain the security of our information and technology networks, including personally identifiable and client information could adversely affect us. Security breaches and other disruptions could compromise our and our clients' information and expose us to liability, which could cause our business and reputation to suffer.
Our business is particularly sensitive to the volume of activity and pricing in the commercial real estate market. This has had, and may have in the future, a significant adverse effect on our business.
Our business is particularly sensitive to the volume of activity and pricing in the commercial real estate market. This has recently had, and may have in the future, a significant adverse effect on our business.
Our attempts to expand our services and businesses may not be successful and we may expend significant resources without corresponding returns. We intend to expand our specialty groups, particularly multi-tenant retail, office, industrial and hospitality, as well as various niche segments, including multifamily tax credit, affordable housing, student housing, manufactured housing, seniors housing and self-storage.
Our attempts to expand our services and businesses may not be successful and we may expend significant resources without corresponding returns. We intend to expand our specialty groups, particularly multi-tenant retail, office, industrial and hospitality, as well as various niche markets, including multifamily tax credit, affordable housing, student housing, manufactured housing, seniors housing and self-storage.
A decline in the number of transactions completed or in the value of the commercial real estate we sell could significantly decrease our revenue, which would adversely affect our business, financial condition and results of operations. If we are unable to retain existing clients and develop new clients, our financial condition may be adversely affected.
A continued decline in the number of transactions completed or in the value of the commercial real estate we sell could significantly decrease our revenue further, which would adversely affect our business, financial condition and results of operations. If we are unable to retain existing clients and develop new clients, our financial condition may be adversely affected.
A catastrophic event that results in the destruction or disruption of any of our data centers or our critical business or information technology systems could severely affect our ability to conduct normal business operations and, as a result, our future operating results could be adversely affected. Our business relies significantly on the use of commercial real estate data.
An event that results in the destruction or disruption of any of our data centers or our critical business or information technology systems could severely affect our ability to conduct normal business operations and, as a result, our future operating results could be adversely affected. Our business relies significantly on the use of commercial real estate data.
The market price for our common stock could fluctuate significantly for various reasons, including quarterly and annual variations in our results and those of our competitors; 30 Table of Contents changes to the competitive landscape; estimates and projections by the investment community; the arrival or departure of key personnel, especially the retirement or departure of key senior investment sales and financing professionals and management; the introduction of new services by us or our competitors; acquisitions, strategic alliances or joint ventures involving us or our competitors; and general global and domestic economic, credit and liquidity issues, market or political conditions.
The market price for our common stock could fluctuate significantly for various reasons, including quarterly and annual variations in our results and those of our competitors; changes to the competitive landscape; estimates and projections by the investment community; the arrival or departure of key personnel, especially the retirement or departure of key senior investment sales and financing professionals and management; the introduction of new services by us or our competitors; acquisitions, strategic alliances or joint ventures involving us or our competitors; and general global and domestic economic, credit and liquidity issues, market or political conditions.
We may be negatively impacted by periods of economic downturns, recessions and disruptions in the capital markets; credit and liquidity issues in the capital markets, including international, national, regional and local markets; inflationary pressures; tax and regulatory changes and corresponding declines in the demand for commercial real estate investment and related services.
We may continue to be negatively impacted by periods of economic downturns, recessions and disruptions in the capital markets; credit and liquidity issues in the capital markets, including international, national, regional and local markets; inflationary pressures; tax and regulatory changes and corresponding declines in the demand for commercial real estate investment and related services.
Inflation has increased the wages paid to our employees and independent contractors. Furthermore, our clients are also affected by inflation and rising interest rates.
Inflation has increased the wages paid to our employees and independent contractors. Furthermore, our clients are also affected by inflation and increased interest rates.
Future sales, issuances of shares under our Amended and Restated 2013 Omnibus Equity Incentive Plan and 2013 Employee Stock Purchase Plan or the availability of a substantial amount of our common stock in the public market could adversely affect the prevailing market price of our common stock and could impair our ability to raise capital through the future sales of equity securities.
Future sales, issuances of shares under our Amended and Restated 2013 Omnibus Equity Incentive Plan, as amended (the "2013 Plan"), and 2013 Employee Stock Purchase Plan (the "ESPP") or the availability of a substantial amount of our common stock in the public market could adversely affect the prevailing market price of our common stock and could impair our ability to raise capital through the future sales of equity securities.
Most of our sales professionals are independent contractors, not employees, and if laws, regulations or rulings mandate that they be employees, our business would be adversely impacted. Most of our investment sales professionals are retained as independent contractors, and we are subject to the Internal Revenue Service regulations and applicable state law guidelines regarding independent contractor classification.
Our investment sales professionals are independent contractors, not employees, and if laws, regulations or rulings mandate that they be employees, our business would be adversely impacted. Our investment sales professionals are retained as independent contractors, and we are subject to the Internal Revenue Service regulations and applicable state law guidelines regarding independent contractor classification.
Negative economic conditions, changes in interest rates such as the significant increase in rates during 2022, credit and the availability of capital, both debt and/or equity, disruptions in capital markets, uncertainty of the tax and regulatory environment and/or declines in the demand for commercial real estate investment and related services in international and domestic markets or in significant markets in which we do business, have had and could have in the future a material adverse effect on our business, results of operations and/or financial condition.
Negative economic conditions, changes in interest rates such as the significant increase in rates during 2022 and 2023, credit and the availability of capital, both debt and/or equity, disruptions in capital markets, uncertainty of the tax and regulatory environment and/or declines in the demand for commercial real estate investment and related services in international and domestic markets or in significant markets in which we do business, had a significant impact to our financial results in 2023 and could have in the future a material adverse effect on our business, results of operations and/or financial condition.
Rising interest rates create downward pressure on the price of real estate and reduce activity in the commercial real estate industry, which have recently and may continue to have an adverse impact on our business. Interest rates remained at relatively low levels on a historical basis and the U.S.
Increased interest rates create downward pressure on the price of real estate and reduce activity in the commercial real estate industry, which have recently and may continue to have an adverse impact on our business. Interest rates remained at relatively low levels on a historical basis and the U.S.
The proliferation of large amounts of data on the Internet could also devalue the information that we gather and disseminate as part of our business model and may harm certain aspects of our investment brokerage business in the event that principals of transactions prefer to transact directly with each other.
The accumulation of large amounts of data on the Internet could also devalue the information that we gather and disseminate as part of our business model and may harm certain aspects of our investment brokerage business in the event that principals of transactions prefer to transact directly with each other.
We may be deemed to be an investment company under the Investment Company Act of 1940 if, among other things, we own “investment securities” with a value exceeding 40% of the value of our total assets, unless we qualify under a particular exemption or safe harbor.
We may be deemed to be an investment company under the Investment Company Act of 1940, as amended (the "Investment Company Act"), if, among other things, we own “investment securities” with a value exceeding 40% of the value of our total assets, unless we qualify under a particular exemption or safe harbor.
Marcus’s substantial ownership of our outstanding common stock, he may be able to significantly influence the outcome of corporate actions requiring stockholder approval, including the election and removal of directors, so long as he controls a significant portion of our common stock. Mr.
Marcus’ substantial ownership of our outstanding common stock, he may be able to significantly influence the outcome of corporate actions requiring stockholder approval, including the election and removal of directors, so long as he controls a significant portion of our common stock. Mr.
If the commission structure or the velocity of transactions were to change, we could be disproportionately affected by changes compared to other companies that focus on larger transactions, institutional clients and other segments of the commercial real estate market.
If the commission structure or the velocity of transactions were to change, we could be disproportionately affected by changes compared to other companies that focus on larger transactions, institutional clients and other areas of the commercial real estate market.
A significant and continued increase in interest rates and inflation would be expected to have a negative impact on client demand for commercial real estate and need for our services, which would, in turn, affect our profitability.
A significant and continued increase in interest rates and inflation would be expected to have a further negative impact on client demand for commercial real estate and demand for our services, which would, in turn, affect our profitability.
In addition, the operation and maintenance of these systems and networks is, in some cases, dependent on third-party technologies, systems and service providers for which there is no certainty of uninterrupted availability.
In addition, the operation and maintenance of these systems and networks is, in some cases, dependent on third-party technologies, systems and service providers for which there is no certainty of security or uninterrupted availability.
Additionally, should we choose or are required to sell these securities in the future at a loss, our consolidated operating results or cash flows may be affected.
Additionally, if we choose or are required to sell these securities in the future at a loss, our consolidated operating results or cash flows may be affected.
Federal Reserve maintained the federal funds target range at 0.0% to 0.25% for much of 2020 and 2021. During 2022, the Federal Reserve raised interest rates by an aggregate of 425 basis points. These increases resulted in a slow down in activity during the second half of 2022.
Federal Reserve maintained the federal funds target range at 0.0% to 0.25% for much of 2020 and 2021. During 2022, the Federal Reserve raised interest rates by an aggregate of 425 basis points. These increases resulted in a slowdown in activity during the second half of 2022.
Sales of substantial amounts of our common stock (including shares of our common stock issued in connection with an acquisition), or the perception that such sales could occur, may adversely affect prevailing market prices for our common stock. 31 Table of Contents Item 1B. Unresolved Staff Comments Not applicable.
Sales of substantial amounts of our common stock (including shares of our common stock issued in connection with an acquisition), or the perception that such sales could occur, may adversely affect prevailing market prices for our common stock. Item 1B. Unresolved Staff Comments Not applicable.
As a result, such changes may increase or decrease investors’ desire to engage in real estate transactions, which could have an unfavorable impact on our business, financial condition, results of operations, and 22 Table of Contents the value of our stock.
As a result, such changes may increase or decrease investors’ desire to engage in real estate transactions, which could have an unfavorable impact on our business, financial condition, results of operations and the value of our stock.
If these managers or investment sales and financing professionals depart, 23 Table of Contents we will lose the substantial time and resources we have invested in training and developing those individuals and our business, financial condition and results of operations may suffer.
If these managers or investment sales and financing professionals depart, we will lose the substantial time and resources we have invested in training and developing those individuals and our business, financial condition and results of operations may suffer.
Historically, commercial real estate markets and, in particular, the U.S. commercial real estate market, have tended to be cyclical and related to the flow of capital to the sector, the condition of the economy 19 Table of Contents as a whole, and to the perceptions and confidence of market participants to the economic outlook.
Historically, commercial real estate markets and, in particular, the U.S. commercial real estate market, have tended to be cyclical and related to the flow of capital to the sector, the condition of the economy as a whole, and to the perceptions and confidence of market participants to the economic outlook.
George M. Marcus serves as the Chair of our Board of Directors and is Chair of the Board of Directors of MMC. In addition, Mr. Marcus beneficially owns substantially all of the outstanding stock of MMC.
Marcus serves as the Chair of our Board of Directors and is Chair of the Board of Directors of MMC. In addition, Mr. Marcus beneficially owns substantially all of the outstanding stock of MMC.
Depending on the geography, property type or service, we face competition from, including, but not limited to, commercial real estate service providers, in-house real estate departments, private owners and developers, commercial mortgage servicers, institutional lenders, research and consulting 21 Table of Contents firms, and investment managers, some of whom are clients and many of whom may have greater financial resources than we do.
Depending on the geography, property type or service, we face competition from, including, but not limited to, commercial real estate service providers, in-house real estate departments, private owners and developers, institutional lenders, research and consulting firms, and investment managers, some of whom are clients and many of whom may have greater financial resources than we do.
Marcus’ shares may also be sold in a public or private sale which could adversely affect the prevailing market price of our common stock and could impair our ability to raise capital through the future sales of equity securities. 29 Table of Contents Our Chair may have actual or potential conflicts of interest because of his position with MMC.
Marcus’ shares may also be sold in a public or private sale which could adversely affect the prevailing market price of our common stock and could impair our ability to raise capital through the future sales of equity securities. Our Chair may have actual or potential conflicts of interest because of his position with MMC. George M.
Furthermore, many of our 24 Table of Contents investment sales and financing professionals work in teams. If a team leader or manager leaves our Company, his or her team members may leave with the team leader or manager.
Furthermore, many of our investment sales and financing professionals work in teams. If a team leader or manager leaves our Company, his or her team members may leave with the team leader or manager.
External Business Risks General economic conditions and commercial real estate market conditions have had and may in the future have a negative impact on our business. Over the past several years macroeconomic factors, including the COVID-19 pandemic, have caused significant volatility to the U.S. economy.
External Business Risks General economic conditions and commercial real estate market conditions have had and may in the future have a negative impact on our business. Over the past several years macroeconomic factors have caused significant volatility to the U.S. economy.
For example, in August 2021, we were subject to a cybersecurity attack on our information technology systems. We immediately engaged cybersecurity experts to secure and restore all essential systems and were able to do so with only minimal disruption to our business.
For example, in August 2021, we were subject to a cybersecurity attack on our 27 Table of Contents information technology systems. We immediately engaged cybersecurity experts to secure and restore all essential systems and were able to do so with only minimal disruption to our business.
Any of the foregoing could adversely affect the operation and income of commercial real estate properties. Additionally, we are subject to inflationary pressures on employee and contractor wages and salaries, which can materially impact our financial results.
Any of the foregoing could adversely affect the operation and income of commercial real estate 19 Table of Contents properties. Additionally, we are subject to inflationary pressures on employee and contractor wages and salaries, which materially impact our financial results.
We may also be subject to claims to the extent individual employees or investment sales and financing professionals breach or fail to adhere to Company policies and practices designed to maintain compliance with these laws and regulations.
We may also be subject 22 Table of Contents to claims to the extent individual employees or investment sales and financing professionals breach or fail to adhere to Company policies and practices designed to maintain compliance with these laws and regulations.
These 26 Table of Contents effects could increase again in the wake of the continuing political and economic uncertainties in the U.S. and in other countries. We may face significant liabilities and/or damage to our professional reputation as a result of litigation allegations and negative publicity.
These effects have in the past and could increase again in the wake of the continuing political and economic uncertainties in the U.S. and in other countries. We may face significant liabilities and/or damage to our professional reputation as a result of litigation allegations and negative publicity.
Marcus, our Chair and founder beneficially owns approximately 15.0 million shares, or approximately 38% of our outstanding common stock as of December 31, 2022. Because of Mr.
Marcus, our Chair and founder beneficially owns approximately 15.0 million shares, or approximately 39% of our outstanding common stock as of December 31, 2023. Because of Mr.
We disclose our information collection and dissemination practices in a published privacy statement on our websites, which we 28 Table of Contents may modify from time to time.
We disclose our information collection and dissemination practices in a published privacy statement on our websites, which we may modify from time to time.
The concentration of sales among our top investment sales and financing professionals could lead to losses if we are unable to retain them. Our most successful investment sales and financing professionals are responsible for a significant percentage of our revenue.
The concentration of sales among our top investment sales and financing professionals could lead to losses if we are unable to retain them or if there is an economic downturn. Our most successful investment sales and financing professionals are responsible for a significant percentage of our revenue.
We have experienced and may continue to experience fluctuations in revenue and net income as a result of many factors, including, but not limited to, economic conditions, capital market disruptions, the timing of transactions, revenue mix and the timing of additional selling, general and administrative expenses to support growth initiatives.
We have experienced and may continue to experience fluctuations in revenue and net income as a result of many factors, including, but not limited to, economic conditions, capital market disruptions, the timing of transactions, revenue mix and the timing of additional selling, general and administrative expenses to support growth initiatives, recognition and expensing of forgivable loans provided to investment sales and financing professionals.
In 2022, we earned approximately 23% of our revenue from offices in California. In particular, as a result of this concentration, we are subject to risks related to the California economy and real estate markets more than in other geographic markets.
In 21 Table of Contents 2023, we earned approximately 24% of our revenue from offices in California. In particular, as a result of this concentration, we are subject to risks related to the California economy and real estate markets more than in other geographic markets.
Similarly, most key employees in sales leadership roles, which includes our experienced managers, currently do not have employment agreements and there is no assurance that we will be able to retain their services. An increasing component of our growth has also occurred through the recruiting, training and retention of key experienced investment sales and financing professionals.
Similarly, most key employees in sales leadership roles, which includes our experienced managers, currently do not have employment agreements and there is no assurance that we will be able to retain their services. An important component of maintaining and growing our business includes the recruiting, training and retention of new and experienced investment sales and financing professionals.
We perform the required annual goodwill impairment evaluation in the fourth quarter of each year. Any impairment of goodwill or other intangible assets would result in a non-cash charge against earnings, and such charge could materially adversely affect our reported results of operations and the market price of our common stock in future periods.
Any impairment of goodwill or other intangible assets would result in a non-cash charge against earnings, and such charge could materially adversely affect our reported results of operations and the market price of our common stock in future periods.
These assumptions, judgments, and estimates are drawn from historical experience and various other factors that we believe are reasonable under the circumstances as of the date of the consolidated financial statements. Actual results could differ materially from our estimates, and such differences could significantly impact our financial results. Changes in United States Generally Accepted Accounting Principles (“U.S.
These assumptions, judgments, and estimates are drawn from historical experience and various other factors that we believe are reasonable under the circumstances as of the date of the consolidated financial statements. Actual results could differ materially from our estimates, and such differences could significantly impact our financial results.
Despite our security measures, our information technology and infrastructure have been subject to, and may in the future be vulnerable to various cyber-attacks, such as hacking, spoofing and phishing attacks and ransomware attacks, or our systems may be breached due to employee error, malfeasance or other disruptions.
Our security measures vary in maturity across our business. Our information technology and infrastructure have been subject to, and may in the future be vulnerable to various cyber-attacks, such as hacking, spoofing and phishing attacks and ransomware attacks, exploitation of system or application vulnerabilities or our systems may be breached due to employee error, malfeasance or other disruptions.
These and other types of events could lead to a decline in transaction activity as well as a decrease in property values which, in turn, would likely lead to a reduction in brokerage commissions and financing fees relating to such transactions.
These and other types of events have recently led to a decline in transaction activity as well as a decrease in property values which, in turn, has and may continue to lead to a reduction in brokerage commissions and financing fees relating to such transactions.
While business opportunities may emerge from assisting clients with transactions relating to distressed commercial real estate assets, there can be no assurance that the volume of such transactions will be sufficient to meaningfully offset the declines in transaction volumes within the overall commercial real estate market.
While business opportunities may emerge from assisting clients with transactions relating to distressed commercial real estate assets, the volume of such transactions has not been, and may in the future not be, sufficient to meaningfully offset the declines in transaction volumes within the overall commercial real estate market.
Furthermore, transactions in the private client market segment are smaller than many other commercial real estate transactions. Although the brokerage commissions in this segment are generally a higher percentage of the sales price, the smaller size of the transactions requires us to close many more transactions to sustain revenue.
Although the brokerage commissions in this market are generally a higher percentage of the sales price, the smaller size of the transactions requires us to close many more transactions to sustain revenue.
During the year ended December 31, 2022, seasonal fluctuations were disrupted by changes in overall market conditions and rising interest rates.
During the year ended December 31, 2023, seasonal fluctuations were disrupted by continued volatility in overall market conditions and increased interest rates.
Fiscal uncertainty, significant changes and volatility in the financial markets and business environment, and similar significant changes in the global, political, security and competitive landscape, make it increasingly difficult for us to predict our revenue and earnings into the future.
Such declines in transaction activity and value have and may continue to also significantly reduce our financing activities and revenue. Fiscal uncertainty, significant changes and volatility in the financial markets and business environment, and similar significant changes in the global, political, security and competitive landscape, make it increasingly difficult for us to predict our revenue and earnings into the future.
The companies we have acquired have generally been regional or specialty firms that expand our network of investing and financing professionals and/or provide further diversification to our brokerage and financing services.
From time to time, we pursue strategic acquisitions to add and enhance our real estate brokerage and financing service offerings. The companies we have acquired have generally been regional or specialty firms that expand our network of investing and financing professionals and/or provide further diversification to our brokerage and financing services.
These effects would likely cause us to realize lower revenue from our transaction service fees, including brokerage commissions, which fees usually are tied to the transaction value and are payable upon the successful completion of a particular transaction. Such declines in transaction activity and value would likely also significantly reduce our financing activities and revenue.
These effects have and may continue to cause us to realize lower revenue from our transaction service fees, including brokerage commissions, which fees usually are tied to the transaction value and are payable upon the successful completion of a particular transaction.
Item 1A. Risk Factors Investing in our securities involves a high degree of risk. You should carefully consider the following risk factors and the other information in this Annual Report on Form 10-K, including our consolidated financial statements and related notes, before making any investment decisions regarding our securities.
You should carefully consider the following risk factors and the other information in this Annual Report on Form 10-K, including "Management's Discussion and Analysis of Financial Position and Results of Operations," "Quantitative and Qualitative Disclosures About Market Risk," and our consolidated financial statements and related notes, before making any investment decisions regarding our securities.
The planned expansion of services and platforms requires significant resources, and there can be no assurance we will compete effectively, attract or train a sufficient number of professionals to support the expansion, or operate these businesses profitably.
The planned expansion of services and platforms requires significant resources, and there can be no assurance we will compete effectively, attract or train a sufficient number of professionals to support the expansion, or operate these businesses profitably. We may incur significant expenses for these plans without corresponding returns, which would harm our business, financial condition and results of operations.
The fragmentation of our market makes it challenging to effectively gain market share. While we may have a competitive advantage over other national firms in the private client market segment, we also face competition from local and regional service providers who have existing relationships with potential clients.
The fragmentation of our market makes it challenging to effectively gain market share. We also face competition from local and regional service providers who have existing relationships with potential clients. Furthermore, transactions in the private client market are smaller than many other commercial real estate transactions.
We have business continuity plans and backup systems to reduce the potentially adverse effect of such events, but our business continuity planning may not be sufficient and cannot account for all eventualities.
The business continuity planning and backup systems we have in place for such events may not be sufficient and cannot account for all eventualities.
In addition, the expansion and improvement of our systems and infrastructure may require us to commit substantial financial, operational and technical resources, with no assurance that our business will improve.
If competitors introduce new products and services using new technologies, our proprietary technology and systems may become less competitive, and our business may be harmed. In addition, the expansion and improvement of our systems and infrastructure may require us to commit substantial financial, operational and technical resources, with no assurance that our business will improve.
The market consensus is that interest rates will be increased additional times during 2023. If interest rates increase further, the resulting reduction in commercial real estate transactions and subsequent price reduction of commercial real estate generally may result in us closing fewer brokerage, financing and other transactions, which would result in decreased revenue and adversely impact our business.
If interest rates continue at current rates or increase further, the resulting reduction in commercial real estate transactions and subsequent price reduction of commercial real estate generally may result in us continuing to close fewer brokerage, financing and other transactions, which would result in further decreased revenue and adversely impact our business.
It is not always possible to deter misconduct, and the precautions we take to deter and prevent this activity may not be effective in all cases.
If our employees or investment sales and financing professionals engage in misconduct, our business could be adversely affected. It is not always possible to deter misconduct, and the precautions we take to deter and prevent this activity may not be effective in all cases.
His position at MMC and the ownership of any MMC equity or equity awards creates or may create the appearance of conflicts of interest if and when he is faced with decisions that could have different implications for MMC and for us.
His position at MMC and the ownership of any MMC equity or equity awards creates or may create the appearance of conflicts of interest if and when he is faced with decisions that could have different implications for MMC and for us. 29 Table of Contents General Risks Our existing goodwill and other intangible assets could become impaired, which may require us to take non-cash charges.
Increases in prevailing interest rates may result in downward pressure on the price of real estate and reduce activity in the commercial real estate industry resulting in a negative impact on our business. 20 Table of Contents Market interest rates are affected by many factors outside of our control, including governmental monetary policies, domestic and international economic conditions, inflation, deflation, recession, changes in unemployment, the money supply, international disorder and instability in domestic and foreign financial markets.
Market interest rates are affected by many factors outside of our control, including governmental monetary policies, domestic and international economic conditions, inflation, deflation, recession, changes in unemployment, the money supply, international disorder and instability in domestic and foreign financial markets.
Any of these outcomes could result in substantial costs to us, could significantly impair our financial condition and our ability to conduct our business as we choose, and could damage our reputation and impair our ability to attract clients and investment sales and financing professionals.
Any of these outcomes could result in substantial costs to us, could significantly impair our financial condition and our ability to conduct our business as we choose, and could damage our reputation and impair our ability to attract clients and investment sales and financing professionals. 24 Table of Contents Fraud, or theft, which is difficult to detect and deter, could harm us by impairing our ability to attract and retain clients and subjecting us to significant legal liability and reputational harm.
Additionally, since 2020, a portion of our workforce has worked remotely in some capacity in response to the COVID-19 pandemic. This arrangement introduces potential new vulnerabilities to cyber threats.
We may also not have sufficient logging available to fully investigate the scope of a cyber-attack. Additionally, since 2020, a portion of our workforce has worked remotely in some capacity in response to the COVID-19 pandemic. This arrangement introduces new threat vectors and vulnerabilities.
In addition to economic conditions, this geographic concentration means that California-specific legislation, California-specific COVID-19 outbreaks or restrictions, taxes and regional disasters, such as earthquakes and wildfires as well as the impact of climate change, could disproportionately affect us.
In addition to economic conditions, this geographic concentration means that California-specific legislation, real estate and income taxes, rent control or rent stabilization laws and regulations, a migration of residents from the California markets or a reduction in the attractiveness of the California market as a place to live and regional disasters, such as earthquakes and wildfires as well as the impact of climate change, could disproportionately affect us.
Moreover, if we do not keep pace with the rapid innovations and 27 Table of Contents changes taking place in information technology in our industry, we could be at a competitive disadvantage. If competitors introduce new products and services using new technologies, our proprietary technology and systems may become less competitive, and our business may be harmed.
Moreover, if we do not keep pace with the rapid innovations and changes taking place in information technology in our industry, we could be at a competitive disadvantage.
The annual inflation rate in the U.S. increased to 9.1% in June 2022, the highest annual inflation rate since November 1981, but decreased to 6.5% in December 2022. As a result, during 2022, the Federal Reserve increased the federal funds rate and indicated its intention to continue to increase interest rates in an effort to combat inflation.
The annual inflation rate in the U.S. increased to 9.1% in June 2022, the highest 20 Table of Contents annual inflation rate since November 1981, but decreased to 3.4% in December 2023. As a result, during 2023, the Federal Reserve increased the federal funds rate an additional 100 basis points in an effort to combat inflation.
If we lose the services of our executive officers or certain other members of our senior management team, we may not be able to execute our business strategy. Our success depends in a large part upon the continued service of our senior management team, who are important to our vision, strategic direction and culture.
Our success depends in a large part upon the continued service of our senior management team, who are important to our vision, strategic direction and culture.
In addition, uncertainty regarding market conditions may limit the ability of other participants in the credit markets or commercial real estate markets to plan for the future. As a result, market participants may act more conservatively than they might in a stabilized market, which may perpetuate and amplify the adverse developments in the markets we service.
As a result, market participants have and may continue to act more conservatively than they might in a stabilized market, which may perpetuate and amplify the adverse developments in the markets we service.
In addition, if any lawsuits were brought against us and resulted in a finding of substantial legal liability, it could materially, adversely affect our business, financial condition or results of operations or cause significant reputational harm to us, which could materially impact our business.
In addition, if any lawsuits were brought against us and resulted in a finding of substantial legal liability, it could materially, adversely affect our business, financial condition or results of operations or cause significant reputational harm to us, which could materially impact our business. 26 Table of Contents In the event of a substantial loss, our commercial insurance coverage and/or self-insurance reserve levels might not be sufficient to pay the full damages, or the scope of available coverage may not cover certain types of claims.
Any future growth through attracting these types of professionals will be partially dependent upon the continued availability of qualified candidates fitting the culture of our firm at reasonable terms and conditions.
Any future growth will be dependent upon the continued availability of qualified candidates fitting the culture of our firm that can be recruited and retained on favorable economic terms and conditions.
In addition, concern among potential buyers or sellers about our privacy practices could keep them from using our services or require us to incur significant expense to alter our business practices or educate them about how we use personally identifiable information.
In addition, concern among potential buyers or sellers about our privacy practices could keep them from using our services or require us to incur significant expense to alter our business practices or educate them about how we use personally identifiable information. 28 Table of Contents Investment Risks Our investments in marketable debt securities, available-for-sale are subject to certain risks which could affect our overall financial condition, results of operations or cash flows.
We may incur significant expenses for these plans without corresponding returns, which would harm our business, financial condition and results of operations. 25 Table of Contents If we experience significant growth in the future, such growth may be difficult to sustain and may place significant demands on our administrative, operational and financial resources.
If we experience significant growth in the future, such growth may be difficult to sustain and may place significant demands on our administrative, operational and financial resources.
If we are unable to find suitable acquisition candidates, if we are unable to attract the interest of such candidates, or if we are unable to successfully negotiate and complete such acquisitions, that could limit our ability to grow.
If we are unable to find suitable acquisition candidates, if we are unable to attract the interest of such candidates, or if we are unable to successfully negotiate and complete such acquisitions, that could limit our ability to grow. 25 Table of Contents If we acquire businesses in the future, we may experience high transaction and integration costs, the integration process may be disruptive to our business and the acquired businesses may not perform as we expect.
The impact of these factors has led to uncertainty in the financial markets, high inflation, rising interest rates and may lead to an extended economic downturn, which could adversely impact the commercial real estate industry.
The impact of these factors has led to uncertainty in the financial markets, inflation, increased interest rates, which has adversely impacted the commercial real estate industry. The commercial real estate industry, in particular, has seen significant slowing, and we experienced a significant decline in revenues in 2023 resulting in an operating loss.
General Risks Our existing goodwill and other intangible assets could become impaired, which may require us to take non-cash charges. Under current accounting guidelines, we evaluate our goodwill and other intangible assets for potential impairment annually or more frequently if circumstances indicate impairment may have occurred.
Under current accounting guidelines, we evaluate our goodwill and other intangible assets for potential impairment annually or more frequently if circumstances indicate impairment may have occurred. We perform the required annual goodwill impairment evaluation in the fourth quarter of each year.
In addition, as the recruitment and retention of what appear to be the key experienced professionals may require substantial investment, such as lucrative compensation packages, support agreements, and commission splits, this investment involves risks that the persons acquired will not perform in accordance with expectations and that business judgments concerning the value, strengths and weaknesses of the persons recruited will prove incorrect, and therefore may not have been worth the substantial investment.
All of these investments involve the risk that such professionals will not perform in accordance with performance expectations under such arrangements and that the business judgments concerning the value, strengths and weaknesses of such professionals will prove incorrect, and therefore may not have been worth the substantial investment.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeItem 2. Properties Our principal executive offices are located at 23975 Park Sorrento, Suite 400, Calabasas, California 91302 where our telephone number is (818) 212-2250. We lease all of our brokerage offices (typically less than 12,000 square feet) and other support facilities in United States and Canada.
Biggest changeItem 2. Properties Our principal executive offices are located at 23975 Park Sorrento, Suite 400, Calabasas, California 91302 where our telephone number is (818) 212-2250. We lease all of our brokerage offices (typically less than 12,000 square feet) and other support facilities in the United States and Canada.
We believe that our current facilities are adequate to meet our needs through the end of 2023; however, as we continue to evaluate our office footprint, our lease needs could change during the year.
We believe that our current facilities are adequate to meet our needs through the end of 2024; however, as we continue to evaluate our office footprint, our lease needs could change during the year.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeWe do not believe, based on information currently available to us, that the final outcome of these proceedings will have a material adverse effect on our consolidated financial position, results of operations, or cash flows.
Biggest changeWe do not believe, based on information currently available to us, that the final outcome of these proceedings will have a material adverse effect on our consolidated financial position, results of operations, or cash flows. Item 4. Mine Safety Disclosures Not applicable. 33 Table of Contents PART II
Removed
For information on our legal proceedings, see Note 15 – “Commitments and Contingencies” of our accompanying Notes to Consolidated Financial Statements included in Part II, Item 8 – “Financial Statements and Supplementary Data” of this Annual Report on Form 10-K. Item 4. Mine Safety Disclosures Not applicable. 32 Table of Contents PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeWe selected our Peer Group based on companies that represent our primary competitors with certain business lines reasonably comparable to ours and based on how long they have been publicly-traded. 33 Table of Contents COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN Among Marcus & Millichap, Inc, the S&P 500 Index, and a Peer Group Base Period 12/31/17 12/31/18 12/31/19 12/31/20 12/31/21 12/31/22 Marcus & Millichap, Inc. 100.00 105.27 114.23 114.17 157.80 109.17 S&P 500 Index 100.00 95.62 125.72 148.85 191.58 156.88 Peer Group 100.00 86.65 128.20 119.03 208.45 135.96 Purchases of Equity Securities by the Issuer On August 2, 2022, our Board of Directors authorized a common stock repurchase program of up to $70 million.
Biggest changeWe selected our Peer Group based on companies that represent our primary competitors with certain business lines reasonably comparable to ours and based on how long they have been publicly-traded. 34 Table of Contents COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN Among Marcus & Millichap, Inc, the S&P 500 Index, and a Peer Group Base Period 12/31/18 12/31/19 12/31/20 12/31/21 12/31/22 12/31/23 Marcus & Millichap, Inc. 100.00 108.51 108.45 149.90 103.70 133.59 S&P 500 Index 100.00 131.49 155.68 200.37 164.08 207.21 Peer Group 100.00 147.96 137.37 240.57 156.91 188.48 Purchases of Equity Securities by the Issuer Share repurchase activity during the three months ended December 31, 2023 was as follows: Periods Total Number of Shares Purchased (1) Average Price Paid Per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Approximate Dollar Value of Shares That May Yet Be Purchased Under the Plans or Programs (2) October 1, 2023 - October 31, 2023 161,490 $ 27.92 161,490 $ 71,511,196 November 1, 2023 - November 30, 2023 200 28.52 200 71,505,492 December 1, 2023 - December 31, 2023 — — — 71,505,492 Total 161,690 161,690 $ 71,505,492 (1) Excludes shares withheld for employee taxes upon vesting of stock-based awards.
The graph assumes that $100 was invested at the market close on December 31, 2017 in the common stock of Marcus & Millichap Inc., the S&P 500 Index and the peer group, and assumes reinvestment of dividends. The stock price performance of the following graph is not necessarily indicative of future stock price performance.
The graph assumes that $100 was invested at the market close on December 31, 2018 in the common stock of Marcus & Millichap Inc., the S&P 500 Index and the peer group, and assumes reinvestment of dividends. The stock price performance of the following graph is not necessarily indicative of future stock price performance.
The following graph shows a comparison from December 31, 2017 through December 31, 2022 of the cumulative total return for our common stock, the Standard & Poor’s 500 Stock Index (“S&P 500 Index”) and an industry peer group for this period.
The following graph shows a comparison from December 31, 2018 through December 31, 2023 of the cumulative total return for our common stock, the Standard & Poor’s 500 Stock Index (“S&P 500 Index”) and an industry peer group for this period.
As of December 31, 2022, $2.2 million remains to be paid upon vesting of stock awards. On February 9, 2023, the Board of Directors declared a semi-annual regular dividend of $0.25 per share, payable on April 6, 2023, to stockholders of record at the close of business on March 14, 2023.
As of December 31, 2023, $2.5 million remains to be paid upon vesting of stock awards. On February 8, 2024, the Board of Directors declared a semi-annual regular dividend of $0.25 per share, payable on April 5, 2024, to stockholders of record at the close of business on March 12, 2024.
Based on the estimated number of shares to be outstanding as of March 14, 2023, the dividends declared aggregated $10.4 million, including dividend equivalents totaling $0.5 million to be paid on unvested restricted stock and deferred stock units granted under the 2013 Plan. These dividend equivalents will be paid when the underlying restricted stock and deferred stock units vest.
Based on the estimated number of shares to be outstanding as of March 12, 2024, the dividends declared are estimated to aggregate $10.1 million, including dividend equivalents totaling $0.4 million related to unvested restricted stock units granted under the 2013 Plan. These dividend equivalents will be paid when the underlying restricted stock units vest.
As of February 13, 2023, there were 20 stockholders of record, and the closing price of our common stock was $36.62 per share as reported on the NYSE.
As of February 13, 2024, there were 66 stockholders of record, and the closing price of our common stock was $37.30 per share as reported on the NYSE.
The industry peer group is comprised of the following publicly-traded real estate services companies: CBRE, Colliers, Cushman (from August 2018 when it began trading), JLL, and Newmark (from December 2017 when it began trading) (collectively “Peer Group”).
The industry peer group is comprised of the following publicly-traded real estate services companies: CBRE, Colliers, Cushman, JLL, and Newmark (collectively “Peer Group”).
Dividends On February 16, 2022, the Board of Directors declared a semi-annual regular dividend of $0.25 per share and a special dividend of $1.00 per share, payable on April 4, 2022, to stockholders of record at the close of business on March 8, 2022.
Dividends On February 9, 2023, the Board of Directors declared a semi-annual regular dividend of $0.25 per share, with a payment date of April 6, 2023, to stockholders of record at the close of business on March 14, 2023.
The second of the semi-annual regular dividends was paid on October 6, 2022, to stockholders of record at the close of business on September 15, 2022. As a result, the Company paid $60.4 million in dividends to outstanding shareholders during the twelve months ended December 31, 2022.
On August 1, 2023, the Board of Directors declared the second semi-annual regular dividend with a payment date of October 6, 2023, to stockholders of record at the close of business on September 15, 2023. The total dividend declared by the Company during the year ended December 31, 2023 was $20.4 million.
The stock repurchase program does not have an expiration date and may be limited or terminated at any time without prior notice. 34 Table of Contents Recent Sales of Unregistered Securities None. Item 6. [RESERVED] Not applicable.
The stock repurchase program does not have an expiration date and may be limited or terminated at any time without prior notice. 35 Table of Contents (2) On May 2, 2023, the Board of Directors authorized an additional $70 million to repurchase common stock under its common stock repurchase program, resulting in approximately $72 million available to repurchase shares under its common stock repurchase program as of December 31, 2023.
Removed
Any and all future dividends are subject to review and approval by the Board of Directors.
Added
We currently expect to continue to declare semi-annual regular dividends; however, the declaration and amount of any future cash dividends will be subject to the sole discretion of the Board of Directors and will depend upon many factors, including our business, financial condition and results of operations and other factors deemed relevant by our Board of Directors from time to time.
Removed
As of December 31, 2022, $40.4 million of common stock remains eligible for repurchase under the program.
Added
Recent Sales of Unregistered Securities None. Item 6. [RESERVED]
Removed
Share repurchase activity during the three months ended December 31, 2022 was as follows: Periods Total Number of Shares Purchased (1) Average Price Paid Per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Approximate Dollar Value of Shares That May Yet Be Purchased Under the Plans or Programs October 1, 2022 - October 31, 2022 431,700 $ 34.51 431,700 $ 47,526,291 November 1, 2022 - November 30, 2022 103,343 35.13 103,343 43,895,957 December 1, 2022 - December 31, 2022 102,433 34.31 102,433 40,381,973 Total 637,476 637,476 $ 40,381,973 (1) Excludes shares withheld for employee taxes upon vesting of stock-based awards.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeSuch key metrics for real estate brokerage and financing activities (excluding other transactions) are as follows: Years Ended December 31, 2022 2021 2020 Real Estate Brokerage: Average Number of Investment Sales Professionals 1,817 1,925 1,920 Average Number of Transactions per Investment Sales Professional 5.01 5.01 3.28 Average Commission per Transaction $ 128,450 $ 121,319 $ 100,694 Average Commission Rate 1.72 % 1.73 % 1.98 % Average Transaction Size (in thousands) $ 7,473 $ 6,994 $ 5,097 Total Number of Transactions 9,111 9,652 6,288 Total Sales Volume (in millions) $ 68,088 $ 67,507 $ 32,052 Years Ended December 31, 2022 2021 2020 Financing (1) : Average Number of Financing Professionals 86 85 86 Average Number of Transactions per Financing Professional 24.92 29.11 22.59 Average Fee per Transaction $ 44,546 $ 37,959 $ 33,747 Average Fee Rate 0.74 % 0.81 % 0.85 % Average Transaction Size (in thousands) $ 5,984 $ 4,691 $ 3,948 Total Number of Transactions 2,143 2,474 1,943 Total Financing Volume (in millions) $ 12,823 $ 11,605 $ 7,672 (1) Operating metrics calculated excluding certain financing fees not directly associated to transactions. 40 Table of Contents Comparison of Years Ended December 31, 2022 and 2021 Below are key operating results for the year ended December 31, 2022 compared to the results for the year ended December 31, 2021 (dollars in thousands): Year Ended December 31, 2022 Percentage of Revenue Year Ended December 31, 2021 Percentage of Revenue Change Dollar Percentage Revenue: Real estate brokerage commissions $ 1,170,310 89.9 % $ 1,170,969 90.3 % $ (659) (0.1) % Financing fees 112,978 8.7 109,690 8.5 3,288 3.0 % Other revenue 18,422 1.4 15,781 1.2 2,641 16.7 % Total revenue 1,301,710 100.0 1,296,440 100.0 5,270 0.4 % Operating expenses: Cost of services 850,894 65.4 840,209 64.8 10,685 1.3 % Selling, general and administrative 300,009 23.0 255,154 19.7 44,855 17.6 % Depreciation and amortization 13,406 1.0 11,721 0.9 1,685 14.4 % Total operating expenses 1,164,309 89.4 1,107,084 85.4 57,225 5.2 % Operating income 137,401 10.6 189,356 14.6 (51,955) (27.4) % Other income, net 5,336 0.4 4,527 0.3 809 17.9 % Interest expense (708) (0.1) (580) — (128) 22.1 % Income before provision for income taxes 142,029 10.9 193,303 14.9 (51,274) (26.5) % Provision for income taxes 37,804 2.9 50,833 3.9 (13,029) (25.6) % Net income $ 104,225 8.0 % $ 142,470 11.0 % $ (38,245) (26.8) % Adjusted EBITDA (1) $ 165,504 12.7 % $ 213,002 16.4 % $ (47,498) (22.3) % (1) Adjusted EBITDA is not a measurement of our financial performance under U.S. generally accepted accounting principles (“U.S.
Biggest changeSuch key metrics for real estate brokerage and financing activities (excluding other transactions) are as follows: Years Ended December 31, Real Estate Brokerage 2023 2022 2021 Average Number of Investment Sales Professionals 1,744 1,817 1,925 Average Number of Transactions per Investment Sales Professional 3.14 5.01 5.01 Average Commission per Transaction $ 102,238 $ 128,450 $ 121,319 Average Commission Rate 1.82 % 1.72 % 1.73 % Average Transaction Size (in thousands) $ 5,630 $ 7,473 $ 6,994 Total Number of Transactions 5,475 9,111 9,652 Total Sales Volume (in millions) $ 30,823 $ 68,088 $ 67,507 Years Ended December 31, Financing (1) 2023 2022 2021 Average Number of Financing Professionals 96 86 85 Average Number of Transactions per Financing Professional 11.21 24.92 29.11 Average Fee per Transaction $ 50,677 $ 44,546 $ 37,959 Average Fee Rate 0.81 % 0.74 % 0.81 % Average Transaction Size (in thousands) $ 6,254 $ 5,984 $ 4,691 Total Number of Transactions 1,076 2,143 2,474 Total Financing Volume (in millions) $ 6,729 $ 12,823 $ 11,605 (1) Operating metrics exclude certain financing fees not directly associated to transactions. 41 Table of Contents Comparison of Years Ended December 31, 2023 and 2022 Below are key operating results for the year ended December 31, 2023 compared to the results for the year ended December 31, 2022 (dollars in thousands): Year Ended December 31 2023, Percentage of Revenue Year Ended December 31 2022, Percentage of Revenue Change Dollar Percentage Revenue: Real estate brokerage commissions $ 559,752 86.6 % $ 1,170,310 89.9 % $ (610,558) (52.2) % Financing fees 66,898 10.4 112,978 8.7 (46,080) (40.8) % Other revenue 19,277 3.0 18,422 1.4 855 4.6 % Total revenue 645,927 100 1,301,710 100 (655,783) (50.4) % Operating expenses: Cost of services 406,645 63.0 850,894 65.4 (444,249) (52.2) % Selling, general and administrative 285,023 44.1 300,009 23.0 (14,986) (5.0) % Depreciation and amortization 13,627 2.1 13,406 1.0 221 1.6 % Total operating expenses 705,295 109.2 1,164,309 89.4 (459,014) (39.4) % Operating (loss) income (59,368) (9.2) 137,401 10.6 (196,769) (143.2) % Other income, net 19,855 3.0 5,336 0.4 14,519 272.1 % Interest expense (888) (0.1) (708) (0.1) (180) 25.4 % (Loss) income before (benefit) provision for income taxes (40,401) (6.3) 142,029 10.9 (182,430) (128.4) % (Benefit) provision for income taxes (6,366) (1.0) 37,804 2.9 (44,170) (116.8) % Net (loss) income $ (34,035) (5.3) % $ 104,225 8.0 % $ (138,260) (132.7) % Adjusted EBITDA (1) $ (19,630) (3.0) % $ 165,504 12.7 % $ (185,134) (111.9) % (1) Adjusted EBITDA is not a measurement of our financial performance under U.S.
Impairment that has not been recorded as a credit loss is recorded through other comprehensive income (loss), net of applicable taxes. We made an accounting policy election to not measure an allowance for credit losses for accrued interest receivable.
Impairment that has not been recorded as a credit loss is recorded through other comprehensive (loss) income, net of applicable taxes. We made an accounting policy election to not measure an allowance for credit losses for accrued interest receivable.
While our sales volume is impacted by seasonality factors, the timing of closings is also dependent on many market and personal factors unique to a particular client or transaction, particularly clients transacting in the $1 million to $10 million private client market segment. These factors can cause transactions to be accelerated or delayed beyond our control.
While our sales volume is impacted by seasonality factors, the timing of closings is also dependent on many market and personal factors unique to a particular client or transaction, particularly clients transacting in the $1 million to $10 million private client market. These factors can cause transactions to be accelerated or delayed beyond our control.
We determine the appropriate classification of investments in marketable debt securities at the time of purchase. Interest along with amortization of purchase premiums and accretion of discounts from the purchase date through the estimated maturity date, including consideration of variable maturities and contractual call provisions, are included in other income (expense), net in the consolidated statements of operations.
We determine the appropriate classification of investments in marketable debt securities at the time of purchase. Interest along with amortization of purchase premiums and accretion of discounts from the purchase date through the estimated maturity date, including consideration of variable maturities and contractual call provisions, are included in other income, net in the consolidated statements of operations.
Interest Expense Interest expense primarily consists of interest expense associated with the stock appreciation rights (“SARs”) liability and our credit agreement. Provision for Income Taxes We are subject to U.S. and Canadian federal taxes and individual state and local taxes based on the income generated in the jurisdictions in which we operate.
Interest Expense Interest expense primarily consists of interest expense associated with the stock appreciation rights (“SARs”) liability, and our credit agreement. (Benefit) Provision for Income Taxes We are subject to U.S. and Canadian federal taxes and individual state and local taxes based on the income generated in the jurisdictions in which we operate.
Overview Our Business We are a leading national brokerage firm specializing in commercial real estate investment sales, financing, 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.
Overview Our Business 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.
See Note 5 – “Investments in Marketable Debt Securities, Available-for-Sale” of our Notes to the Consolidated Financial Statements for additional information. We typically invest in highly rated debt securities, and our investment policy generally limits the amount of credit exposure to any one issuer.
See Note 5 – “Investments in Marketable Debt Securities, Available-for-Sale” of our accompanying Notes to Consolidated Financial Statements for additional information. We typically invest in highly rated debt securities, and our investment policy generally limits the amount of credit exposure to any one issuer.
Real Estate Brokerage Commissions We earn real estate brokerage commissions by acting as a broker for commercial real estate owners seeking to sell or investors seeking to buy properties. Revenue from real estate brokerage commissions is typically recognized at the close of escrow.
Real Estate Brokerage Commissions We earn real estate brokerage commissions by acting as a broker for commercial real estate owners seeking to sell or investors seeking to buy properties. Revenue from real estate brokerage commissions is recognized at the close of escrow.
Inflation Our commissions and other variable costs related to revenue are primarily affected by real estate market supply and demand, which may be affected by uncertain or changing economic and market conditions, including inflation/deflation arising in connection with and in response to various macroeconomic factors and impact of rising interest rates on the broader economy.
Inflation Our commissions and other variable costs related to revenue are primarily affected by real estate market supply and demand, which may be affected by uncertain or changing economic and market conditions, including inflation/deflation arising in connection with and in response to various macroeconomic factors and impact of increased interest rates on the broader economy.
For all securities in an unrealized loss position, we evaluate, among other items, the extent and length of time the fair market value of a security is less than its amortized cost, time to maturity, duration, seniority, the financial condition of the issuer including credit ratings, any changes thereto and relative default rates and loss severity, leverage ratios, availability of liquidity to make principle and interest payments, performance indicators of the underlying assets, analyst reports and recommendations, and changes in base and market interest rates.
For all securities in an unrealized loss position, we evaluate, among other items, the extent and length of time the fair market value of a security is less than its amortized cost, time to maturity, duration, seniority, the financial condition of the issuer including credit ratings, any changes thereto and relative default rates and loss severity, leverage ratios, availability of liquidity to make principle and interest payments, 48 Table of Contents performance indicators of the underlying assets, analyst reports and recommendations, and changes in base and market interest rates.
This historical trend can be disrupted both positively and negatively by major economic events, political events, natural disasters or pandemics such as the COVID-19 pandemic, which may impact, among other things, investor sentiment for a particular property type or location, volatility in financial markets, current and future projections of interest rates, attractiveness of other asset classes, market liquidity and the extent of limitations or availability of capital allocations for larger property buyers, among others.
This historical trend can be disrupted both positively and negatively by major economic events, political events, natural disasters or pandemics such as the COVID-19 pandemic, which may impact, among other things, investor sentiment for a particular property type or location, volatility in financial markets, current and future projections of interest rates, attractiveness of other asset classes, market liquidity, and the extent of limitations or availability of capital allocations for larger property 38 Table of Contents buyers, among others.
Other than operating expenses, including those accrued and payable as December 31, 2022, cash requirements for 2023 are expected to consist primarily of capital expenditures for the future acquisitions, if any, payment of dividends, payments for stock repurchases, and advances to our investment sales and financing professionals.
Other than operating expenses, including those accrued and payable as December 31, 2023, cash requirements for 2024 are expected to consist primarily of capital expenditures for the future acquisitions, if any, payment of dividends, payments for stock repurchases, and advances to our investment sales and financing professionals.
Recent Accounting Pronouncements For information regarding recent accounting pronouncements, see Note 2 – “Accounting Policies and Recent Accounting Pronouncements” of our Notes to the Consolidated Financial Statements set forth in Item 8 of this Annual Report on Form 10-K.
Recent Accounting Pronouncements For information regarding recent accounting pronouncements, see Note 2 – “Accounting Policies and Recent Accounting Pronouncements” of our accompanying Notes to Consolidated Financial Statements set forth in Item 8 of this Annual Report on Form 10-K.
Our actual results may differ materially from those anticipated in these forward-looking statements as a result of certain factors, including those factors set forth under Item 1A – “Risk Factors” and Item 7 – “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Overview – Factors Affecting Our Business ” of this Annual Report on Form 10-K.
Our actual results may differ materially from those anticipated in these forward-looking statements as a result of certain factors, including those factors set forth under Item 1A – “Risk Factors” and Item 7 – “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Overview – Factors Affecting Our Business” of this Annual Report on Form 10-K.
As a result of our expansion into the middle and larger transaction market segments, we have seen our overall commission rates fluctuate from period-to-period as a result of changes in the relative mix of the number and volume of investment sales transactions closed in the middle and larger transaction market segments as compared to the $1 million to $10 million private client market segment.
As a result of our expansion into the middle and larger transaction markets, we have seen our overall commission rates fluctuate from period-to-period as a result of changes in the relative mix of the number and volume of investment sales transactions closed in the middle and larger transaction markets as compared to the $1 million to $10 million private client market.
The commission rates we pay to our investment sales and financing professionals vary based on individual contracts negotiated and are generally higher for the more experienced professionals. Some of our most senior investment sales and financing professionals also have the ability to earn additional commissions after meeting certain annual financial thresholds.
The commission rates we pay to our investment sales and financing professionals vary based on individual contracts negotiated and are generally higher for the more experienced professionals. Some of our most senior investment sales and financing professionals can also earn additional commissions after meeting certain annual financial thresholds.
The significant components of our expenses are further described below. 38 Table of Contents Cost of Services The majority of our cost of services expense is variable commissions paid to our investment sales professionals and compensation-related costs related to our financing activities. Commission expenses are directly attributable to providing services to our clients for investment sales and financing services.
The significant components of our expenses are further described below. Cost of Services The majority of our cost of services expense is variable commissions paid to our investment sales and financing professionals and compensation-related costs related to our financing activities. Commission expenses are directly attributable to providing services to our clients for investment sales and financing services.
Comparison of Years Ended December 31, 2021 and 2020 A discussion regarding our results of operations for the year ended December 31, 2021 compared to the results for the year ended December 31, 2020 can be found under Item 7 – “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Results of Operations” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021, filed with the SEC on March 1, 2022, which is available on the SEC’s website at www.sec.gov.
Comparison of Years Ended December 31, 2022 and 2021 A discussion regarding our results of operations for the year ended December 31, 2022 compared to the results for the year ended December 31, 2021 can be found under Item 7 – “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Results of Operations” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022, filed with the SEC on February 28, 2023, which is available on the SEC’s website at www.sec.gov.
The Company estimated the probability of achievement of contractual EBITDA and other performance targets was between 0% to 100.0% based on each acquisition’s historical and estimated future performance and risk adjusted discount rates of between 6.0% to 7.0%, which resulted in a recorded fair value for the contingent consideration of $7.1 million and $9.3 million as of December 31, 2022, and 2021, respectively.
The Company estimated the probability of achievement of contractual EBITDA and other performance targets was between 11.1% to 100.0% based on each acquisition’s historical and estimated future performance and risk adjusted discount rates of between 5.3% to 6.4%, which resulted in a recorded fair value for the contingent consideration of $5.5 million and $7.1 million as of December 31, 2023, and 2022, respectively.
The Company estimated the fair value of the deferred consideration using a discounted cash flow estimate using market rates, with the only remaining condition on such payments being the passage of time which resulted in a recorded fair value of $5.1 million and $9.8 million as of December 31, 2022, and 2021, respectively.
The Company estimated the fair value of the deferred consideration using a discounted cash flow estimate using market rates, with the only remaining condition on such payments being the passage of time which resulted in a recorded fair value of $1.6 million and $5.1 million as of December 31, 2023, and 2022, respectively.
The weighted average incremental borrowing rate was 3.9% in 2022 and 2.9% in 2021. Any payments for completed improvements, determined to be owed by the lessor, net of incentives received, are recorded as an increase to the ROU asset and considered in the determination of the lease cost.
The weighted average incremental borrowing rate was 4.7% in 2023 and 3.9% in 2022. Any payments for completed improvements, determined to be owed by the lessor, net of incentives received, are recorded as an increase to the ROU asset and considered in the determination of the lease cost.
We define Adjusted EBITDA as net income 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 42 Table of Contents expense, (iii) provision for income taxes, (iv) depreciation and amortization, (v) stock-based compensation, and (vi) non-cash MSR activity.
We define Adjusted EBITDA as net (loss) income 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) provision for income taxes, (iv) depreciation and amortization, (v) stock-based compensation, and (vi) non-cash MSR activity.
GAAP. Adjusted EBITDA is not calculated in the same manner by all companies and may not be comparable to other similarly titled measures used by other companies. A reconciliation of the most directly comparable U.S.
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.
Financing Fees We earn financing fees by securing financing on purchase transactions or by securing refinancing of our clients’ existing mortgage debt. We recognize financing fee revenue when the loan closes and we have no remaining significant obligations for performance in connection with the transaction.
Financing Fees We earn financing fees by securing financing on purchase transactions or by securing refinancing of our clients’ existing mortgage debt. We recognize financing fee revenue at the time the loan closes, and we have no remaining significant obligations in connection with the transaction.
Estimates of expected future cash flows are our best estimate based on past events, current conditions, and reasonable and supportable economic forecasts. To date, the Company has not recorded any credit losses or impairments on its portfolio of marketable securities, available for sale.
Estimates of expected future cash flows are our best estimate based on past events, current conditions, and reasonable and supportable economic forecasts. To date, we have not recorded any credit losses or impairments on our portfolio of marketable securities, available for sale.
Off Balance Sheet Arrangements The Company, in connection with the Strategic Alliance with 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.
Off Balance Sheet Arrangements 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.
The maximum undiscounted future settlements of contingent and deferred consideration was $21.3 million at December 31, 2022, and the Company is uncertain as to the extent of the volatility in the judgments and unobservable inputs will have on the ultimate settlement of these amounts in the foreseeable future.
The maximum undiscounted future settlements of contingent and deferred consideration was $14.7 million at December 31, 2023, and the Company is uncertain as to the extent of the volatility in the judgments and unobservable inputs will have on the ultimate settlement of these amounts in the foreseeable future.
Amortization expense consists of (i) amortization recorded on our mortgage servicing rights (“MSRs”) using the interest method over the period that servicing income is expected to be received and (ii) amortization recorded on intangible assets amortized on a straight-line basis using a useful life between one and seven years.
Amortization expense consists of (i) amortization recorded on intangible assets amortized on a straight-line basis using a useful life between one and seven years and (ii) amortization recorded for the 2022 and 2021 periods on our mortgage servicing rights using the interest method over the period that servicing income was expected to be received.
Calculating some of the amounts 46 Table of Contents involves a high degree of judgment. Our state taxes, net of federal benefit, has ranged from 4.3% to 5.0% over the past 3 years. We evaluate our tax positions quarterly.
Calculating some of the amounts involves a high degree of judgment. Our state taxes, net of federal benefit, has ranged from 1.5% to 4.8% over the past 3 years. We evaluate our tax positions quarterly.
Liquidity We believe that our existing balances of cash, cash equivalents, and restricted cash, cash flows expected to be generated from our operations, proceeds from the sale of marketable debt securities, available-for-sale, and borrowings available under the Credit Agreement (defined below) will be sufficient to satisfy our operating requirements for at least the next 12 months.
Liquidity We believe that our existing balances of cash and 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 beyond.
Unrealized losses aggregated $5,508,000 and $511,000 as of 47 Table of Contents December 31, 2022 and 2021, respectively. We review our investment portfolio quarterly for all securities in an unrealized loss position to determine if an impairment charge or credit reserve is required.
Unrealized losses aggregated $2,635,000 and $5,508,000 as of December 31, 2023 and 2022, respectively. We review our investment portfolio quarterly for all securities in an unrealized loss position to determine if an impairment charge or credit reserve is required.
These additional commissions are recognized as cost of services in the period in which they are earned. Payment of a portion of these additional commissions are generally deferred for a period of one to three years, at our election, and paid at the beginning of the second and fourth calendar year.
These additional commissions are recognized as cost of services in the period in which they are earned. Payment of a portion of these additional commissions are generally deferred for a period of three years, at our election, and paid at the end of the third calendar year.
In addition, these costs include facilities expenses (excluding depreciation and amortization), staff related expenses, sales, marketing, legal, telecommunication, network, data sources, transaction costs related to acquisitions, changes in fair value for contingent and deferred consideration, forgiveness of advances and loans issued to investment sales and financing professionals and other administrative expenses.
In addition, these costs include facilities costs (excluding depreciation and amortization), staff related expenses, sales, marketing, legal, telecommunication, network, data sources, transaction costs related to acquisitions, changes in fair value for contingent and deferred consideration and other administrative expenses.
Investors’ desires and need to engage in real estate transactions are dependent on many factors that are beyond our control. The economy, supply and demand for properly positioned properties, available credit, and market events impact investor sentiment and, therefore, transaction velocity.
Investor Sentiment and Investment Activity We facilitate investors buying, selling, and financing properties in order to generate commissions. Investors’ desires and need to engage in real estate transactions are dependent on many factors that are beyond our control. The economy, supply and demand for properly positioned properties, available credit and market events impact investor sentiment and, therefore, transaction velocity.
Other Income (Expense), Net Other income (expense), net primarily consists of interest income, net gains or losses on our deferred compensation plan assets, realized gains and losses on our marketable debt securities, available-for-sale, foreign currency gains and losses, and other non-operating income and expenses.
Such servicing rights were terminated in June 2022. Other Income, Net Other income, net primarily consists of interest income, realized gains and losses on our marketable debt securities, available-for-sale, net gains or losses on our deferred compensation plan assets, foreign currency gains and losses and other non-operating income and expenses.
(2) Forecasted principal payments are based on each participant’s estimated retirement age and current contractual interest rate of 3.630% as of January 1, 2022 and reflect required payments that resulted from the retirement of certain executives. See Note 7 – “Selected Balance Sheet Data” of our Notes to the Consolidated Financial Statements. (3) Includes short-term and long-term deferred commissions payable.
(2) Forecasted principal payments are based on each participant’s estimated retirement age and current contractual interest rate of 5.79% as of January 1, 2023 and reflect required payments that resulted from the retirement of certain executives. See Note 7 – “Selected Balance Sheet Data” of our accompanying Notes to Consolidated Financial Statements.
Our effective tax rate fluctuates as a result of the change in the mix of our activities in the jurisdictions we operate due to differing tax rates in those jurisdictions and the impact of permanent items, including principally compensation charges, qualified transportation fringe benefits, uncertain tax positions, meals and entertainment, and tax-exempt deferred compensation plan assets.
Our effective tax rate fluctuates as a result of (i) changes in our annual effective tax rate applied to current pre-tax income (loss), (ii) the change in the mix of our activities in the jurisdictions in which we operate due to differing tax rates in those jurisdictions and (iii) the impact of permanent items, including compensation 40 Table of Contents charges, qualified transportation fringe benefits, uncertain tax positions, meals and entertainment and tax-exempt deferred compensation plan assets.
On a loan-by-loan basis, the Company, at its option, can agree to assume a portion of MTRCC guarantee obligation of loan opportunities presented to and closed by MTRCC. As of December 31, 2022, the Company has agreed to a maximum aggregate guarantee obligation of $55.7 million relating to loans with an unpaid balance of $334.0 million.
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 December 31, 2023, the Company has agreed to a maximum aggregate guarantee obligation of $152.6 million relating to loans with an unpaid balance of $915.4 million.
GAAP financial measure, net income, to Adjusted EBITDA is as follows (in thousands): Years Ended December 31, 2022 2021 2020 Net income $ 104,225 $ 142,470 $ 42,838 Adjustments: Interest income and other (1) (7,951) (2,496) (5,048) Interest expense 708 580 900 Provision for income taxes 37,804 50,833 16,526 Depreciation and amortization 13,406 11,721 10,899 Stock-based compensation 17,312 10,361 9,905 Non-cash MSR activity (2) — (467) (321) Adjusted EBITDA (3) $ 165,504 $ 213,002 $ 75,699 (1) Other includes net realized gains (losses) on marketable debt securities, available-for-sale.
GAAP financial measure, net income, to Adjusted EBITDA is as follows (in thousands): Years Ended December 31, 2023 2022 2021 Net (loss) income $ (34,035) $ 104,225 $ 142,470 Adjustments: Interest income and other (1) (17,890) (7,951) (2,496) Interest expense 888 708 580 (Benefit) provision for income taxes (6,366) 37,804 50,833 Depreciation and amortization 13,627 13,406 11,721 Stock-based compensation 24,146 17,312 10,361 Non-cash MSR activity (2) — — (467) Adjusted EBITDA $ (19,630) $ 165,504 $ 213,002 (1) Other includes net realized gains (losses) on marketable debt securities, available-for-sale.
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 income, operating income, or any other measures calculated in accordance with U.S.
Adjusted EBITDA is not a measurement of our financial performance under U.S. GAAP and should not be considered as an alternative to net income, operating income or any other measures calculated in accordance with U.S. GAAP.
During the year ended December 31, 2022, we closed 12,272 investment sales, financing and other transactions with total sales volume of approximately $86.3 billion. During the year ended December 31, 2021, we closed 13,255 investment sales, financing, and other transactions with total sales volume of approximately $84.4 billion.
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. During the year ended December 31, 2022, we closed 12,272 investment sales, financing and other transactions with total sales volume of approximately $86.3 billion.
The annual inflation rate in the U.S. increased to 9.1% in June 2022, the highest annual inflation rate since November 1981, but decreased to 6.5% in December 2022.
The annual inflation rate in the U.S. increased to 9.1% in June 2022, the highest annual inflation rate since November 1981, but has fallen to 3.4% in December 2023.
We generate revenue by collecting real estate brokerage commissions upon the sale, and fees upon the financing of commercial properties and by providing consulting, advisory, and other real estate 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.
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 providing consulting and advisory services.
In order to enhance yield to us, we have invested a portion of our cash in money market funds and fixed and variable income debt securities in accordance with our investment policy approved by the Board of Directors.
In order to enhance our yield, we have invested a portion of our cash in money market funds and fixed and variable income debt securities, in accordance with our investment policy approved by the Board of Directors. Certain of our investments in money market funds may not maintain a stable net asset value and may impose a discretionary liquidity fee.
Key Financial Measures and Indicators Revenue Our revenue is primarily generated from our real estate investment sales business. In addition to real estate brokerage commissions, we generate revenue from financing fees and from other revenue, which are primarily comprised of consulting and advisory fees.
In addition to real estate brokerage commissions, we generate revenue from financing fees and from other revenue, which are primarily comprised of consulting and advisory fees.
The following table sets forth our summary cash flows for the years ended December 31, 2022, 2021, and 2020 (in thousands): Years Ended December 31, 2022 2021 2020 Net cash provided by operating activities $ 13,629 $ 255,903 $ 38,088 Net cash used in investing activities (53,975) (108,356) (17,228) Net cash used in financing activities (105,555) (5,919) (10,330) Effect of currency exchange rate changes on cash, cash equivalents, and restricted cash (366) (2,640) (48) Net (decrease) increase in cash, cash equivalents, and restricted cash (146,267) 138,988 10,482 Cash, cash equivalents, and restricted cash at beginning of year 382,140 243,152 232,670 Cash, cash equivalents, and restricted cash at end of year $ 235,873 $ 382,140 $ 243,152 Operating Activities 2022 Compared to 2021 .
The following table sets forth our summary cash flows for the years ended December 31, 2023, 2022, and 2021 (in thousands): Years Ended December 31, 2023 2022 2021 Net cash (used in) provided by operating activities $ (72,430) $ 13,629 $ 255,903 Net cash provided by (used in) investing activities 74,867 (53,975) (108,356) Net cash used in financing activities (67,679) (105,555) (5,919) Effect of currency exchange rate changes on cash, cash equivalents, and restricted cash 122 (366) (2,640) Net (decrease) increase in cash, cash equivalents, and restricted cash (65,120) (146,267) 138,988 Cash, cash equivalents, and restricted cash at beginning of period 235,873 382,140 243,152 Cash, cash equivalents, and restricted cash at end of period $ 170,753 $ 235,873 $ 382,140 44 Table of Contents Operating Activities Cash flows used in operating activities were $72.4 million in 2023 compared to cash flows provided by operating activities of $13.6 million in 2022.
Financing Activities 2022 Compared to 2021 . Cash flows used in financing activities were $105.6 million in 2022 compared to $5.9 million in 2021.
Financing Activities Cash flows used in financing activities were $67.7 million in 2023 compared to $105.6 million in 2022.
Ultimately, the market velocity will be dictated by a combination of the economic outlook, Federal Reserve action, interest rates, and the narrowing of the buyer/seller expectation gap. If the Federal Reserve raises rates minimally throughout the year and the economy avoids a significant recession, we believe commercial real estate sales activity should return toward its historical norm in 2023.
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. If, and when, the Federal Reserve reduces rates, we believe commercial real estate sales activity should begin to increase toward its historical norm in 2024.
See Note 6 – “Acquisitions, Goodwill and Other Intangible Assets” and Note 9 – “Fair Value Measurements” of our Notes to the Consolidated Financial Statements. (6) Relates to amounts that may be advanced to sales and financing professionals and uncertain tax positions.
(5) Relates to contingent and deferred consideration in connection with our business acquisitions. See Note 6 – “Acquisitions, Goodwill and Other Intangible Assets” and Note 9 – “Fair Value Measurements” of our accompanying Notes to Consolidated Financial Statements. (6) Relates to amounts that may be advanced to sales and financing professionals.
During the year ended December 31, 2022, seasonal fluctuations were disrupted by changes in overall market conditions and rising interest rates, and going forward our historical pattern of seasonality may or may not continue to the same degree experienced in prior years.
During the year ended December 31, 2023, seasonal fluctuations were disrupted by changes in overall market conditions and increased interest rates, and going forward our historical pattern of seasonality may or may not continue to the same degree experienced in prior years. Key Financial Measures and Indicators Revenue Our revenue is primarily generated from our real estate investment sales business.
Liquidity and Capital Resources Our primary sources of liquidity are cash, cash equivalents, and restricted cash cash flows from operations, marketable debt securities, available-for-sale, and, if necessary, borrowings under our credit agreement.
(2) Non-cash MSR activity includes the assumption of servicing obligations. Liquidity and Capital Resources Our primary sources of liquidity are cash and cash equivalents, cash flows from operations, marketable debt securities, available-for-sale and, if necessary, borrowings under the Credit Agreement (as defined herein).
Leases Our leases consist of purpose built-out office space, which reverts to the lessor upon termination of the lease and operating leases for autos. We determine if an arrangement is a lease at inception.
See Note 12 – “Income Taxes” of our accompanying Notes to Consolidated Financial Statements for additional information. 47 Table of Contents Leases Our leases consist of purpose built-out office space, which reverts to the lessor upon termination of the lease and operating leases for autos. We determine if an arrangement is a lease at inception.
Commercial Real Estate Supply and Demand Our business is dependent on the willingness of investors to invest in or sell commercial real estate, which is affected by many factors beyond our control.
That in turn could lead to modest declines in debt capital interest rates, which could support increased commercial real estate transaction activity. Commercial Real Estate Supply and Demand Our business is dependent on the willingness of investors to invest in or sell commercial real estate, which is affected by many factors beyond our control.
The above factors create volatility in our effective tax rate from quarter to quarter and have caused our effective tax rates to range from 26.3% to 27.8% over the past three years. We recognize interest and penalties incurred as income tax expense. See Note 12 – “Income Taxes” of our Notes to the Consolidated Financial Statements for additional information.
The above factors create volatility in our effective tax rate from quarter to quarter and have caused our effective tax rates to range from 15.8% to 26.6% over the past three years. We recognize interest and penalties incurred as income tax expense.
The ultimate resolution depends on many factors and assumptions; accordingly, we are not able to reasonably estimate the timing of such payments, if any.
Accordingly, we are not able to reasonably estimate the timing of such payments, if any.
Although we have historically funded our operations through operating cash flows, there can be no assurance that we can continue to meet our cash requirements entirely through our operations, cash, cash equivalents, and restricted cash, proceeds from the sale of marketable debt securities, available-for-sale, or availability under our credit agreement. 43 Table of Contents Cash Flows Our total cash, cash equivalents, and restricted cash balance decreased by $146.3 million to $235.9 million at December 31, 2022, compared to $382.1 million at December 31, 2021.
Although we have historically funded our operations through operating cash flows, there can be no assurance that we can continue to meet our cash requirements entirely through our operations, cash and cash equivalents, proceeds from the sale of marketable debt securities, available-for-sale or availability under the Credit Agreement.
As of December 31, 2022, we had 1,904 investment sales and financing professionals that are primarily exclusive independent contractors operating in 81 offices, who provide real estate brokerage and financing services to sellers and buyers of commercial real estate. We also offer market research, consulting, and advisory services to our clients.
As of December 31, 2023, we had 1,783 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.
(7) Amounts in Other represent amounts where payments are dependent on future events, which may occur at any time from less than 1 year to more than 5 years and relates to our deferred compensation liability and uncertain tax positions.
See Note 15 – “Commitments and Contingencies” of our accompanying Notes to Consolidated Financial Statements. (7) Amounts in Other represent amounts where payments are dependent on future events, which may occur at any time from less than 1 year to more than 5 years and relates to our deferred compensation liability and certain advances to sales and financing professionals.
Accordingly, these are the policies we believe are the most critical to aid in fully understanding and evaluating our consolidated financial condition and results of operations. See the notes to our consolidated financial statements for a summary of our significant accounting policies. Income Taxes We account for income taxes under the asset and liability method.
See the notes to our consolidated financial statements for a summary of our significant accounting policies. Income Taxes We account for income taxes under the asset and liability method.
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.
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.
The factors are the economy, commercial real estate supply and demand, capital markets, and investor sentiment and investment activity. The Economy Our business is dependent on economic conditions within the markets in which we operate. Changes in the economy on a global, national, regional, or local basis can have a positive or negative impact on our business.
The factors are the economy, commercial real estate supply and demand, capital markets, and investor sentiment and investment activity. 36 Table of Contents The Economy Our business is dependent on economic conditions within the markets in which we operate.
The increase was due to increases in cost of services, which are variable commissions paid to our investment sales professionals, and compensation-related costs in connection with our financing activities, selling, general and administrative costs and depreciation and amortization expense, as described below. Cost of services.
Cost of services decreased by $444.2 million and selling, general, and administrative expenses decreased by $15.0 million, as described below. 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.
Movements of interest rates in one direction, whether increasing or decreasing, could adversely or positively affect the operations and income potential of commercial real estate properties, as well as lender and equity underwriting for real estate investments. These changes directly influence investor demand for commercial real estate investments.
Real estate purchases are often financed with debt, and as a result, credit and liquidity impact transaction activity and prices. Movements of interest rates in one direction, whether increasing or decreasing, could adversely or positively affect the operations and income potential of commercial real estate properties, as well as lender and equity underwriting for real estate investments.
In addition, our private clients, who make up the largest source of revenue, are often motivated to buy, sell and/or refinance properties due to personal circumstances, such as death, divorce, partnership breakups, and estate planning.
In addition, our private clients, who make up the largest source of revenue, are often motivated to buy, sell and/or refinance properties due to personal circumstances, such as death, divorce, partnership breakups and estate planning. Commercial real estate sales activity remained constrained through 2023 as tightened lender underwriting, significantly higher interest rates, recession risk and broad-based uncertainty impacted investor decisions.
Investing Activities 2022 Compared to 2021 . Cash flows used in investing activities were $54.0 million in 2022 compared to $108.4 million in 2021.
Investing Activities Cash flows provided by investing activities were $74.9 million in 2023 compared to cash flows used in investing activities of $54.0 million in 2022.
We also believe these metrics are relevant to investors’ and others’ assessment of our financial condition and results of operations. During the years ended December 31, 2022, 2021, and 2020, we closed more than 12,000, 13,200, and 8,900 investment sales, financing, and other transactions, respectively, with total sales volume of approximately $86.3 billion, $84.4 billion, and $43.4 billion, respectively.
During the years ended December 31, 2023, 2022, and 2021, we closed more than 7,500, 12,200 and 13,200 investment sales, financing and other transactions, respectively, with total sales volume of approximately $43.6 billion, $86.3 billion and $84.4 billion, respectively.
Selling, General and Administrative Expenses The largest expense component within selling, general and administrative expenses is personnel expenses for our management team and sales and support staff.
Selling, General and Administrative Expenses The largest expense component within selling, general and administrative expenses is personnel expenses for our management team and sales and support staff, as well as business development, marketing, and expensing of forgivable loans over the retention period of our sales and financing professionals.
Critical Accounting Policies; Use of Estimates We prepare our financial statements in accordance with U.S. GAAP. In applying many of these accounting principles, we make assumptions, estimates and/or judgments that affect the reported amounts of assets, liabilities, revenue, and expenses in our consolidated financial statements.
GAAP. In applying many of these accounting principles, we make assumptions, estimates and/or judgments that affect the reported amounts of assets, liabilities, revenues and expenses in our consolidated financial statements. We base our estimates and judgments on historical experience and other assumptions that we believe are reasonable under the circumstances.
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. Key Operating Metrics 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.
Key Operating Metrics 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.
Our provision for income taxes includes the windfall tax benefits and shortfall expenses, net, from shares issued in connection with our 2013 Plan and ESPP.
Our (benefit) provision for income taxes includes the windfall tax benefits and shortfall expenses, net, from shares issued in connection with our 2013 Plan and ESPP. We record deferred taxes, net based on the tax rate expected to be in effect at the time those items are expected to be recognized for tax purposes.
Also included in selling, general and administrative are expenses for stock-based compensation to non-employee directors, employees, and independent contractors (i.e. investment sales and financing professionals) under the Amended and Restated 2013 Omnibus Equity Incentive Plan (“2013 Plan”) and the 2013 Employee Stock Purchase Plan (“ESPP”).
Also included in selling, general and administrative are expenses for stock-based compensation to non-employee directors, employees and independent contractors (i.e. investment sales and financing professionals) under the 2013 Plan and the ESPP. Depreciation and Amortization Expense Depreciation expense consists of depreciation recorded on our computer software and hardware equipment, as well as our furniture, fixtures and equipment.
To a lesser extent, we also earn equity advisory services, loan sales, and ancillary fees associated with financing activities. We no longer hold any mortgage servicing rights, but prior to the third quarter of 2022, recognized mortgage servicing revenue upon the acquisition of a servicing obligation.
We no longer hold any mortgage servicing rights ("MSRs"), but prior to the third quarter of 2022, we recognized mortgage servicing revenue upon the acquisition of a servicing obligation. We generated mortgage servicing fees through the provision of collection, remittance, recordkeeping, reporting, and other related mortgage servicing functions, activities, and services.
As of December 31, 2022, cash, cash equivalents, and restricted cash and marketable debt securities, available-for-sale, aggregated $557.9 million, and we had $59.5 million of borrowing capacity under our credit agreement. 44 Table of Contents Credit Agreement We have a Credit Agreement with Wells Fargo Bank, National Association for a $60.0 million principal amount senior secured revolving credit facility that is guaranteed by all of our domestic subsidiaries and matures on June 1, 2025 (the “Credit Agreement”).
Credit Agreement We have a credit agreement with Wells Fargo Bank, National Association (as amended, the "Credit Agreement") which 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, 2024.
During the year ended December 31, 2022, approximately 90% of our revenue was generated from real estate brokerage commissions, 9% from financing fees, and 1% from other real estate related 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 year ended December 31, 2023, approximately 87% of our revenue was generated from real estate brokerage commissions, 10% from financing fees and 3% from other revenue, including consulting and advisory services.
GAAP”) and should not be considered as an alternative to net income, operating income, or any other measures derived in accordance with U.S. GAAP.
GAAP and should not be considered as an alternative to net income, 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) income, which is the most directly comparable U.S. GAAP financial measure, see “Non-GAAP Financial Measure” below.
Amounts assume no increase or decrease in the liability due to future returns or losses. See Note 7 – “Selected Balance Sheet Data” of our Notes to the Consolidated Financial Statements. (5) Relates to contingent and deferred consideration in connection with our business acquisitions.
We hold assets in a rabbi trust of $10.8 million to settle outstanding amounts when they become due. Amounts assume no increase or decrease in the liability due to future returns or losses. See Note 7 – “Selected Balance Sheet Data” of our accompanying Notes to the Consolidated Financial Statements.
These factors include the supply of commercial real estate, coupled with user demand for these properties, and the performance of real estate assets, when compared with other investment alternatives, such as stocks and bonds. Fourth quarter national average occupancy levels decreased in apartment, office, and industrial properties, reflecting elevated uncertainty surrounding the economy and interest rate climate.
These factors include the supply of commercial real estate, coupled with user demand for these properties, and the performance of real estate assets, when compared with other investment alternatives, such as stocks and bonds. Space demand remained positive in 2023 for most commercial real estate property types, with office being the notable exception.
Economic indicators and projections related to job growth, unemployment, interest rates, retail spending, and consumer confidence trends can 35 Table of Contents have a positive or negative impact on our business. Overall market conditions, including global trade, interest rate changes, inflation, and job creation, can affect investor sentiment and, ultimately, the demand for our services from investors in real estate.
Changes in the economy on a global, national, regional, or local basis can have a positive or negative impact on our business. Economic indicators and projections related to job growth, unemployment, interest rates, retail spending and consumer confidence trends can have a positive or negative impact on our business.
See Note 7 – “Selected Balance Sheet Data” of our Notes to the Consolidated Financial Statements. (4) Represents current estimated payouts for participants currently receiving payments based on their elections at the time of deferral. We hold assets in a rabbi trust of $9.6 million to settle outstanding amounts when they become due.
(3) Includes short-term and long-term deferred commissions payable (excludes commissions currently payable on closed transactions). See Note 7 – “Selected Balance Sheet Data” of our accompanying Notes to Consolidated Financial Statements. (4) Represents current estimated payouts for participants currently receiving payments based on their elections at the time of deferral.
Non-GAAP Financial Measure In this Annual Report on Form 10-K, we include a non-GAAP financial measure, adjusted earnings before interest income/expense, taxes, depreciation and amortization, stock-based compensation and other non-cash items, or Adjusted EBITDA.
Non-GAAP Financial Measure In this Annual Report on Form 10-K, we include a non-GAAP financial measure, Adjusted EBITDA.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeThe functional currency of our Canadian operations is the Canadian dollar. We are exposed to foreign currency exchange rate risk for the settlement of transactions of the Canadian operations as well as unrealized translation adjustments. To date, realized foreign currency exchange rate gains and losses have not been material. Item 8.
Biggest changeThe functional currency of our Canadian operations is the Canadian dollar. We are exposed to foreign currency exchange rate risk for the settlement of transactions of the Canadian operations as well as unrealized translation adjustments. Historically foreign exchange rate risk has not been material. Item 8. Financial Statements and Supplementary Data See pages beginning at F-1. Item 9.
While our intent is not to sell these investment securities prior to their stated maturities, we may choose to sell any of the securities for strategic reasons including, but not limited to, anticipated capital requirements, anticipation of credit deterioration, duration management and because a security no longer meets the criteria of our investment policy.
While our intent is not to sell these investment securities prior to their stated maturities, we may choose to sell any of the securities for strategic reasons including, but not limited to, anticipated capital requirements, anticipation of credit deterioration, duration management, yield management and because a security no longer meets the criteria of our investment policy.
We do not use derivatives or similar instruments to manage our interest rate risk. We seek to invest in high quality investments. The weighted average rating (exclusive of cash, cash equivalents, and restricted cash) was AA+ as of December 31, 2022. Maturities are maintained consistent with our short-, medium- and long-term liquidity objectives.
We do not use derivatives or similar instruments to manage our interest rate risk. We seek to invest in high quality investments. The weighted average credit rating of our portfolio investments (exclusive of cash, cash equivalents, and restricted cash) was AA as of December 31, 2023. Maturities are maintained consistent with our short-, medium- and long-term liquidity objectives.
Contraction in market liquidity may adversely affect the value of portions of our portfolio and affect our ability to sell securities in the time frames required and at acceptable prices. Uncertainty in future market conditions and interest rates may raise market participant’s expectations of returns, thus impacting the value of securities in our portfolio as well.
Contraction in market liquidity may adversely affect the value of portions of our portfolio and affect our ability to sell securities in the time 49 Table of Contents frames required and at acceptable prices. Uncertainty in future market conditions may raise market participant’s expectations of returns, thus impacting the value of securities in our portfolio as well.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk We maintain a portfolio of investments in a variety of fixed and variable debt rate securities, including U.S. Treasuries, U.S. government sponsored entities, corporate debt, asset-backed securities, and other. As of December 31, 2022, the fair value of investments in marketable debt securities, available-for-sale was $322.0 million.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk We maintain a portfolio of investments in a variety of fixed and variable debt rate securities, including U.S. Treasuries, U.S. government sponsored entities, corporate debt, asset-backed securities and others. As of December 31, 2023, the fair value of investments in marketable debt securities, available-for-sale was $236.3 million.
The following table sets forth the impact on the fair value of our investments as of December 31, 2022 from changes in interest rates based on the weighted average duration of the debt securities in our portfolio (in thousands): Change in Interest Rates Approximate Change in Fair Value of Investments Increase (Decrease) 2% Decrease $ 5,094 1% Decrease $ 2,547 1% Increase $ (2,546) 2% Increase $ (5,091) Due to the nature of our business and the manner in which we conduct our operations, we believe we do not face any material interest rate risk with respect to other assets and liabilities, equity price risk, or other market risks.
The following table sets forth the impact on the fair value of our investments as of December 31, 2023 from changes in interest rates based on the weighted average duration of the debt securities in our portfolio (in thousands): Change in Interest Rates Approximate Change in Fair Value of Investments Increase (Decrease) 2% Decrease ….................. $ 4,624 1% Decrease ….................. $ 2,312 1% Increase ….................. $ (2,311) 2% Increase ….................. $ (4,621) Due to the nature of our business and the manner in which we conduct our operations, we believe we do not face any material interest rate risk with respect to other assets and liabilities, equity price risk or other market risks.
The primary 48 Table of Contents objective of our investment activity is to maintain the safety of principal, and to provide for future liquidity requirements while maximizing yields without significantly increasing risk. While some investments may be securities of companies in foreign countries, all investments are denominated and payable in U.S. Dollars.
The primary objective of our investment activity is to maintain the safety of principal and to provide for future liquidity requirements while maximizing yields without significantly increasing risk. While some investments may be securities of companies in foreign countries, all investments are denominated and payable in U.S. Dollars. We do not enter into investments for trading or speculative purposes.
Financial Statements and Supplementary Data See pages beginning at F-1. Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None.
Removed
We do not enter into investments for trading or speculative purposes.

Other MMI 10-K year-over-year comparisons