Closing of Berkeley Point Acquisition and the Company Investment
On September 8, 2017, BGC closed the transactions contemplated by the previously announced Transaction Agreement, dated as of July 17, 2017 (the
“Transaction Agreement”), by and among BGC and one of its operating partnerships, BGC Partners, L.P., and Cantor Fitzgerald, L.P. (“Cantor”) and several of Cantor’s affiliates, specifically Cantor Commercial Real Estate
Company, L.P. (the “Partnership”), Cantor Sponsor, L.P., the general partner of the Partnership, CF Real Estate Finance Holdings, L.P. (the “Real Estate LP”), and CF Real Estate Finance Holdings GP, LLC, the general partner of
the Real Estate LP (the “Real Estate LP General Partner”). Specifically, BGC completed (i) the acquisition of Berkeley Point Financial LLC, including its wholly owned subsidiary, Berkeley Point Capital LLC (together, “Berkeley
Point” or “BPF”), from the Partnership (the “Berkeley Point Acquisition”); and (ii) an investment of $100 million in the Real Estate LP (the “Company Investment” and, together with the Berkeley Point
Acquisition, the “Transactions”).
At the closing of the Berkeley Point Acquisition, BGC acquired all of the outstanding membership interests of
Berkeley Point Financial LLC for an acquisition price equal to $875 million, subject to a post-closing upward or downward adjustment to the extent that the net assets of BPF as of the closing of the Berkeley Point Acquisition were greater than
or less than $508.6 million. BGC paid a portion of the acquisition price for the Berkeley Point Acquisition in the form of 215,403 partnership units in BGC Holdings, L.P.
At the closing of the Company Investment, which occurred contemporaneously with the closing of the Berkeley Point Acquisition, BGC invested $100 million
of cash in the Real Estate LP for approximately 27 percent of the capital of the Real Estate LP. Cantor also contributed approximately $267 million of cash for approximately 73 percent of the capital of the Real Estate LP. The Real
Estate LP may conduct activities in any real estate-related business or asset-backed securities-related business or any extensions thereof and ancillary activities thereto. The Real Estate LP is operated and managed the Real Estate LP General
Partner, which is controlled by Cantor.
At the closing of the Company Investment, BGC and Cantor entered into the Amended and Restated Agreement of
Limited Partnership of the Real Estate LP (the “Real Estate LP Agreement”), the terms of which are described in BGC’s Current Report on Form
8-K
filed with Securities and Exchange Commission
(the “SEC”) on July 21, 2017, which description is incorporated herein by reference. The foregoing description of the Real Estate LP Agreement does not purport to be complete and is qualified in its entirety by reference to the actual
terms of the Real Estate LP Agreement, a copy of which is attached hereto as Exhibit 10.1 and is incorporated herein by reference.
Upon the closing of
the Transactions, Berkeley Point and the Company Investment became part of Newmark, the Company’s Real Estate Services segment.
Credit Facilities
and Borrowing
On September 8, 2017, the Company entered into two credit agreements by and among the Company, the several financial institutions
from time to time party thereto, as Lenders, and Bank of America, N.A., as Administrative Agent (collectively, the “Credit Agreements”), pursuant to which it borrowed an
aggregate of $975 million (the “Borrowing”). The first Credit Agreement provides for a $400 million
two-year
unsecured senior revolving
credit facility (the “Revolving Credit Facility”). The second Credit Agreement provides for a $575 million unsecured senior term loan (the “Term Loan Facility”), maturing on the second anniversary of the closing date of the
Term Loan Facility.
The Borrowing under the Revolving Credit Facility and the Term Loan Facility will bear interest at a per annum rate equal to, at the
Company’s option, either (a) LIBOR for interest periods of one, two, three or six months, as selected by the Company, or upon the consent of all Lenders, such other period that is 12 months or less (in each case, subject to availability),
as selected by the Company, plus an applicable margin, or (b) a base rate equal to the greatest of (i) the federal funds rate plus 0.5%, (ii) the prime rate as established by the Administrative Agent, and
(iii) one-month
LIBOR plus 1.0%, in each case plus an applicable margin. The applicable margin will initially be 2.25% with respect to LIBOR borrowings in (a) above and 1.25% with respect to base
rate borrowings in (b) above. The applicable margin with respect to LIBOR borrowings in (a) above will range from 1.5% to 3.25% depending upon the Company’s credit rating, and with respect to base rate borrowings in (b) above
will range from 0.5% to 2.25% depending upon the Company’s credit rating. In addition, (x) if there are any amounts outstanding under the Term Loan Facility as of December 31, 2017, the pricing shall increase by 0.50% until the Term
Loan Facility is paid in full, and (y) if there are any amounts outstanding under the Term Loan Facility as of June 30, 2018, the pricing shall increase by an additional 0.75% (and 1.25% in the aggregate) until the Term Loan Facility is
paid in full. From and after the repayment in full of the Term Loan Facility, the pricing shall return to the levels described above, as applicable. The Credit Agreements also provide for certain upfront and arrangement fees and for an unused
facility fee with respect to the Revolving Credit Facility.
The Credit Agreements contain financial covenants with respect to minimum net worth, minimum
net excess capital and minimum interest coverage, as well as a maximum leverage ratio. The Credit Agreements also contain certain other customary affirmative and negative covenants and events of default. The Term Loan Facility is also subject to
mandatory prepayment from 100% of net cash proceeds of all material asset sales and debt and equity issuances (subject to certain customary exceptions, including sales under the Company’s CEO sales program).
On September 8, 2017, the Company drew $400 million from the Revolving Credit Facility and $575 million from the Term Loan Facility, both at an
interest rate to be
one-month
LIBOR plus 2.25%, currently approximately 3.5%
per annum, subject to adjustment.
The Company used these funds, together with cash on hand, to repay outstanding indebtedness of the Company (as
described below), to finance the Transactions and to pay expenses related thereto and to the Credit Agreements. The Company expects to repay the Borrowing from future financing arrangements, existing financing sources, cash on hand and/or future
equity issuances. Any amounts repaid under the Revolving Credit Facility may be reborrowed for general corporate purposes.
A portion of the Borrowing has
been used to repay in full the outstanding balance of $150 million under the Company’s existing revolving credit agreement, dated as of February 25, 2016, by and among the Company, certain direct and indirect subsidiaries of the
Company, the several financial institutions from time to time party thereto, as Lenders, and Bank of America, N.A., as Administrative Agent (the “Prior Credit Agreement”). The Prior Credit Agreement has been terminated in connection with
the entry into the Credit Agreements. In addition, in connection with the Transactions and the Borrowing, an affiliate of Cantor repaid in full the $150 million of indebtedness owed to the Company pursuant to the revolving credit facility,
dated as of April 21, 2017, between the Company and such affiliate of Cantor.
The foregoing descriptions of the Credit Agreements do not purport to
be complete and are qualified in their entirety by reference to the actual terms of the Credit Agreements, copies of which are attached hereto as Exhibit 10.2 and Exhibit 10.3, respectively, and are incorporated herein by reference.
Discussion of Forward-Looking Statements
Statements
contained or incorporated by reference herein regarding BGC, Berkeley Point, the Real Estate LP, the Berkeley Point Acquisition, the Company Investment, the Credit Agreements or the Borrowing that are not historical facts are “forward-looking
statements” that involve risks and uncertainties, which could cause actual results to differ from those contained in the forward-looking statements. Factors that could cause actual results to differ from those contained in the forward-looking
statements include, but are not limited to: the possibility that there may be an adverse effect or disruption from the Berkeley Point Acquisition, the Company Investment, the Credit Agreements or the Borrowing that negatively impacts BGC’s
businesses; the possibility that the anticipated benefits of the
Transactions to BGC may not be realized as presently contemplated or at all; and the possibility that changes in interest rates, commercial real estate values, the regulatory environment, the
effects of weather events or natural disasters, pricing or other competitive pressures, and other market conditions or factors could cause the results of BGC, Berkeley Point or the Real Estate LP to differ from the forward-looking statements
contained or incorporated by reference herein. For a discussion of additional risks and uncertainties, which could cause actual results to differ from those contained in the forward-looking statements, see BGC’s SEC filings, including, but not
limited to, the risk factors set forth in the most recent Form
10-K
and any updates to such risk factors contained in subsequent Forms
10-Q
or Forms
8-K.
Except as required by law, BGC undertakes no obligation to update any forward-looking statements.