BGC Partners, Inc. (NASDAQ: BGCP), a global brokerage company servicing the financial and real estate markets, today announced that it has agreed to acquire Berkeley Point Financial LLC.
Berkeley Point is a commercial real estate finance company focused on the origination and sale of multifamily and other commercial real estate loans through government-sponsored and government-funded loan programs, as well as the servicing of commercial real estate loans, including those it originates. Berkeley Point was acquired by an affiliate of Cantor Fitzgerald, L.P. on April 10, 2014.
The Board of Directors of BGC, upon the unanimous recommendation of a Special Committee consisting of all four independent directors (the “Special Committee”) assisted by independent advisors, has unanimously approved the acquisition of Berkeley Point and the related transactions. The total consideration payable by BGC for the acquisition of Berkeley Point is $875 million, subject to certain adjustments at closing. After the proposed acquisition is completed, Berkeley Point and the investment in the new real estate business described below will become part of Newmark Knight Frank (NKF), BGC’s Real Estate Services segment.
The acquisition of BPF is expected to be immediately accretive to BGC’s earnings per share upon closing.
- Berkeley Point is a Fannie Mae, Freddie Mac and FHA Multifamily Finance Company and Commercial Loan Servicer
- Acquisition is Expected to Dramatically Increase Revenues and Earnings
- Will Expand Product Offerings and Generate Synergies with Newmark Knight Frank, BGC’s Real Estate Services Business
- BGC to Take Minority Stake in a New Real Estate Finance and Investment Business
- Conference Call and Webcast with Accompanying Investor Presentation Scheduled for 8:30 AM ET on Tuesday July 18
Howard W. Lutnick, Chairman and Chief Executive Officer of BGC Partners, said:
We believe that the addition of Berkeley Point will significantly increase the scale and scope of Newmark, as well as substantially improve upon its already strong financial performance. BPF’s revenues increased by more than 55 percent year-over-year in the 12 months ended March 31, 2017. Over the same timeframe, Berkeley Point’s GAAP3 pre-tax income grew by approximately 169 percent, while its pre-tax income, excluding GAAP net non-cash MSR income,4increased by over 52 percent. BPF is also expected to generate strong double-digit revenue and earnings growth for full years 2017 and 2018.
Berkeley Point is a low-risk intermediary in commercial real estate finance for the multifamily market. It originates and services multifamily loans as part of programs run by U.S. government-sponsored enterprises such as Fannie Mae and Freddie Mac, as well as by the U.S. Department of Housing and Urban Development.5 This means that unlike traditional lenders, Berkeley Point originates loans that meet strict criteria set by the U.S. government. These loans are guaranteed by GSEs, and are pre-sold.6 Berkeley Point is entirely consistent with our low-risk business model.
Berkeley Point’s net asset or book value was $509 million as of March 31, 2017. BPF generated revenues and pre-tax income under GAAP of $314 million and $143 million, respectively, for the trailing 12 months ended March 31, 2017. The latter two results represented year-on-year increases of 55 percent and 169 percent, respectively.
BPF’s GAAP pre-tax income includes non-cash GAAP gains attributable to originated MSRs and non-cash GAAP amortization of MSRs. Excluding the net impact of these non-cash items, Berkeley Point’s pre-tax earnings would have increased by 52 percent to $64 million for the same trailing 12 month period. Following the completion of the proposed transaction, BGC’s calculation of pre-tax distributable earnings and adjusted EBITDA will exclude the net impact of these same non-cash GAAP items. Investors should note that the cash received with respect to these MSRs, net of associated expenses, is expected to increase pre-tax distributable earnings and adjusted EBITDA recorded by the Real Estate Services segment in future periods.