Interest Rates Hit Cushman’s Bottom Line, But Brokerage Beats Expectations

Interest rates pecked away at both sides of Cushman & Wakefield’s balance sheet last year, with the company reporting a net loss for 2023 but beating analysts’ expectations.

Cushman’s top executive expressed optimism about the possibility of interest rate cuts this year. Reduced rates could not only get capital markets business flowing again but also reduce interest expenses, a significant line item for Cushman, which carries roughly $3B in debt.


1290 Avenue of the Americas, where Cushman & Wakefield maintains its New York City office.

“With the inverted curve that we have today, people are hesitant to borrow and lend,” CEO Michelle MacKay said during the company’s earnings call Tuesday. “Once the Fed begins to cut rates, which seems likely to happen later this year, we set the yield curve to begin a process of normalizing.”

Cushman spent a net $281.1M on interest in 2023, a 46% increase over the $193.1M it paid in 2022, according to the company’s annual report. Combined with a drop in revenue from major service lines, including capital markets, which fell 41% annually to $695M, the company ended 2023 with a net loss of $35.4M. In 2022, it reported a net gain of $196.4M. 

About $193M of Cushman’s debt is expected to mature next year, with the rest coming due in 2028. The company also has access to a $1.1B revolving credit facility.

Restructuring and impairment charges for Cushman & Wakefield rose precipitously as well last year, coming in at $38.1M for 2023, up from $8.9M the year before.

Like most brokerages, Cushman has endured a rough couple of years. The company spent much of 2023 in cost-cutting mode, and in November it was dropped by property giant Brookfield as the listing agent on many of its office and industrial properties.

In some markets, top Cushman & Wakefield brokers have left, such as Michael Joyce in Boston leaving for CBRE in January and Phil Brodkin in Los Angeles in November.

But despite the challenges posed by the fourth quarter, Cushman posted quarterly earnings per share of 45 cents, above analyst expectations

Other green shoots came in the form of a 3% gain in property management revenues and smaller losses tied to the company’s investment in WeWork, which filed for bankruptcy in November

The investment falls into the other expenses bucket on the company’s balance sheet, which showed a $12.6M loss. That is an 86% decrease from 2022, “principally driven by lower net unrealized losses on our fair value investments, primarily related to our investment in WeWork,” the company said in a press release. 

Chief Financial Officer Neil Johnston said on the call that sustained growth for commercial real estate and capital markets was unlikely during the first half of this year, but more so in the second half during “a more conducive interest rate environment.”

Though the Fed hinted that it would drop rates this year, it has not yet done so, and unexpectedly sticky inflation has dimmed the prospects of a cut, at least in the very short term.

Otherwise, MacKay said the company expects only stable to moderate growth in leasing in 2024, supported by lease expirations. Last year, she said, the average deal size increased in office in particular as the result of larger transactions, especially in the Northeast and Midwest. Internationally, she pointed out the UK and India as more active in lease transactions.

MacKay also referenced the amount of dry powder in the marketplace and Cushman’s opportunity to capitalize on it, particularly relating to distressed assets. The company launched an asset optimization group at the end of 2023 focused on helping clients interested in distressed or underperforming properties. 

Cushman expects Q1 2024 to bring relatively flat revenue but declined to offer full-year guidance, repeating a choice it made last year. 

Investors have been unimpressed with Cushman & Wakefield stock recently, including TPG, which took the company public. It sold about 10 million Cushman & Wakefield shares in November at $7.63, compared with nearly $18 when the company went public.

The move made TPG Cushman & Wakefield’s second-largest shareholder, behind the Vanguard Group. Compared with a year ago, Cushman’s stock price is down over 16% at $11.14 per share in after-hours trading Tuesday.

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