| Schedule I - Parent Company Only Financial Statements | NEWMARK GROUP, INC. (Parent Company Only) BALANCE SHEETS (in thousands) December 31, 2019 2018 Assets: Current assets: Cash and cash equivalents $ 101 $ 24 Total current assets 101 24 Investment in subsidiaries 543,412 501,000 Receivables from related party 589,294 593,517 Other assets 179,813 152,027 Total assets $ 1,312,620 $ 1,246,568 Liabilities: Current liabilities: Accounts payable and accrued expenses $ 74,564 $ 84,436 Payable to related parties 49,098 56,637 Total current liabilities 123,662 141,073 Long-term debt 589,294 537,926 Total liabilities 712,956 678,999 Total stockholders’ equity 599,664 567,569 Total liabilities and stockholders’ equity $ 1,312,620 $ 1,246,568 NEWMARK GROUP, INC. (Parent Company Only) STATEMENTS OF OPERATIONS (in thousands, except per share data) Year Ended December 31, 2019 2018 2017 Revenues: Interest income $ 39,069 $ 27,249 $ 1,433 Total revenue 39,069 27,249 1,433 Expenses: Professional and consulting fees 763 277 — Interest expense 39,069 27,249 1,499 Other expenses 930 344 — Total expenses 40,762 27,870 1,499 Loss from operations before income taxes (1,693 ) (621 ) (66 ) Equity income of subsidiaries 168,358 190,826 199,166 Provision for income taxes 49,360 83,473 54,608 Net income available to common stockholders $ 117,305 $ 106,732 $ 144,492 Per share data: Basic earnings per share Net income available to common stockholders (1) $ 104,406 $ 101,641 $ 144,492 Basic earnings per share $ 0.59 $ 0.65 $ 1.08 Basic weighted-average shares of common stock outstanding 177,774 157,256 133,413 Fully diluted earnings per share Net income for fully diluted shares $ 108,160 $ 105,571 $ 117,217 Fully diluted earnings per share $ 0.58 $ 0.64 $ 0.85 Fully diluted weighted-average shares of common stock outstanding 185,016 163,810 138,398 NEWMARK GROUP, INC. (Parent Company Only) STATEMENTS OF COMPREHENSIVE INCOME (in thousands) Year Ended December 31, 2019 2018 2017 Net income $ 117,305 $ 106,732 $ 144,492 Total other comprehensive income, net of tax 117,305 106,732 144,492 Comprehensive income available to common stockholders $ 117,305 $ 106,732 $ 144,492 NEWMARK GROUP, INC. (Parent Company Only) STATEMENTS OF CASH FLOWS (in thousands) Year Ended December 31, 2019 2018 2017 CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss) $ 117,305 $ 106,732 144,492 Adjustments to reconcile net income to net cash (used in) provided by operating activities: Equity income from subsidiaries (168,358 ) (190,826 ) (199,166 ) Deferred tax provision/(benefit) (29,127 ) 14,197 47,548 Changes in operating assets and liabilities: Receivables from subsidiaries 4,223 22,717 (2,342 ) Payable to subsidiaries (7,539 ) 120,483 1,157 Other assets 2,711 (1,655 ) — Accounts payable, accrued expenses and other liabilities (9,873 ) 68,123 8,311 Net cash (used in) provided by operating activities (90,658 ) 139,771 — CASH FLOWS FROM INVESTING ACTIVITIES: Payments for acquisitions, net of cash acquired (17,726 ) (6,691 ) — Contribution to subsidiary — — (304,290 ) Net cash used in investing activities (17,726 ) (6,691 ) (304,290 ) CASH FLOWS FROM FINANCING ACTIVITIES: Distributions from subsidiaries 236,074 107,000 — Proceeds from the Initial Public Offering, net of underwriting discounts — — 304,290 Repayment of long-term debt (105,000 ) (670,710 ) (304,290 ) Borrowings of long-term debt 155,000 537,926 — Reinvestment of cash in subsidiaries (71,000 ) (65,000 ) — Dividends to stockholders (69,245 ) (41,787 ) — Treasury stock repurchases (37,368 ) (486 ) — Repayment of related party receivable — — 304,290 Net cash provided by (used in) financing activities 108,461 (133,057 ) 304,290 Net cash and cash equivalents 77 23 — Cash and cash equivalents at beginning of period 24 1 1 Cash and cash equivalents at end of period $ 101 $ 24 $ 1 Supplemental disclosures of cash flow information: Cash paid during the period for: Interest $ 36,959 $ 21,751 $ — Taxes $ 90,813 $ 1,165 $ — Supplemental disclosure of noncash investing and financing activities: Treasury stock repurchases $ 4,732 $ — $ — Net assets contributed by BGC Partners’ $ — $ — $ 795,497 Note receivable from related parties $ — $ — $ 975,000 Debt assumed from BGC $ — $ — $ 975,000 Accrued offering costs $ — $ — $ 8,870 Organization and Basis of Presentation The accompanying Parent Company Only Financial Statements of Newmark Group, Inc. (“Newmark”) should be read in conjunction with the accompanying consolidated financial statements of Newmark Group, Inc. and subsidiaries and notes thereto. Newmark, a Delaware corporation, was formed as NRE Delaware, Inc. on November 18, 2016. Newmark changed its name to Newmark Group, Inc. on October 18, 2017. Newmark Holdings, L.P. (“Newmark Holdings”) is a consolidated subsidiary of Newmark for which Newmark is the general partner. Newmark and Newmark Holdings jointly own Newmark Partners, L.P. (“Newmark OpCo”), the operating partnership. Newmark is a leading commercial real estate services firm. Newmark offers commercial real estate tenants, owner-occupiers, investors and developers a wide range of services, including leasing and corporate advisory, investment sales and real estate finance, origination of and servicing of commercial mortgage loans, valuation, project and development management and property and facility management. Newmark was formed through the purchase by BGC Partners Inc. (“BGC Partners” or “BGC”) of Newmark & Company Real Estate, Inc. and certain of its affiliates in 2011. A majority of the voting power of BGC Partners is held by Cantor Fitzgerald, L.P. (“CFLP” or “Cantor”). Subsequent to the Spin-Off, as defined below, the majority of the voting power of Newmark is held by Cantor. On November 30, 2018 (the “Distribution Date”), BGC completed its previously announced pro rata distribution (the “Spin-Off”) to its stockholders of all of the shares of common stock of Newmark owned by BGC as of immediately prior to the effective time of the Spin-Off, with shares of Newmark Class A common stock distributed to the holders of shares of BGC Class A common stock (including directors and executive officers of BGC Partners) of record as of the close of business on November 23, 2018 (the “Record Date”), and shares of Newmark Class B common stock distributed to the holders of shares of BGC Class B common stock (consisting of Cantor and CF Group Management, Inc. (“CFGM”)) of record as of the close of business on the Record Date. The Spin-Off was effective as of 12:01 a.m., New York City time, on the Distribution Date. Berkeley Point Acquisition and Investment in Real Estate LP On September 8, 2017 , BGC acquired from Cantor Commercial Real Estate Company, LP (“CCRE”), 100% of the equity of Berkeley Point Financial LLC (the “Berkeley Point Acquisition”). Berkeley Point Financial LLC (“Berkeley Point” or “BPF”) is a leading 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. Concurrently with the Berkeley Point Acquisition, on September 8, 2017 Newmark OpCo invested $100.0 million in a newly formed commercial real estate-related financial and investment business, CF Real Estate Finance Holdings, L.P. (“Real Estate LP”), which is controlled and managed by Cantor. 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. In addition, Real Estate LP may provide short-term loans to related parties from time to time when funds in excess of amounts needed for investment are available. As of December 31, 2019 and 2018 , Newmark’s investment in Real Estate LP was accounted for under the equity method. Separation and Distribution Agreement On December 13, 2017, prior to the closing of Newmark’s initial public offering (“IPO”), BGC, BGC Holdings, BGC Partners, L.P. (“BGC U.S. OpCo”), Newmark, Newmark Holdings, Newmark OpCo and, solely for the provisions listed therein, Cantor and BGC Global Holdings, L.P. (“BGC Global OpCo”) entered into a Separation and Distribution Agreement (as amended on November 8, 2018 and amended and restated on November 23, 2018, the “Separation and Distribution Agreement”). The Separation and Distribution Agreement sets forth the agreements among BGC, Cantor, Newmark and their respective subsidiaries regarding, among other things: • the principal corporate transactions pursuant to which BGC, BGC Holdings and BGC U.S. OpCo and their respective subsidiaries (other than the Newmark Group (defined below), the “BGC Group”) transferred to Newmark, Newmark Holdings and Newmark OpCo and their respective subsidiaries (the “Newmark Group”) the assets and liabilities of the BGC Group relating to BGC’s Real Estate Services business, including BGC’s interests in both BPF and Real Estate LP (together with the proportional distribution and assumption and repayment of indebtedness described in the following bullets the “Separation”); • the proportional distribution in the Separation of interests in Newmark Holdings to holders of interests in BGC Holdings; • the IPO; • the assumption and repayment of indebtedness by the BGC Group and the Newmark Group, as further described below; • the BGC Holdings distribution; and • the pro rata distribution in the Spin-Off of the shares of Newmark Class A common stock and the shares of Newmark Class B common stock held by BGC, pursuant to which shares of Newmark Class A common stock held by BGC would be distributed to the holders of shares of BGC Class A common stock and shares of Newmark Class B common stock held by BGC would be distributed to the holders of shares of BGC Class B common stock. The Spin-Off distribution is intended to qualify as generally tax-free for U.S. federal income tax purposes. As part of the Separation described above, BGC contributed its interests in BPF and Real Estate, L.P. to Newmark. Initial Public Offering On December 15, 2017, Newmark announced the pricing of the IPO of 20 million shares of Newmark’s Class A common stock at a price to the public of $14.00 per share, which was completed on December 19, 2017. Newmark Class A shares began trading on December 15, 2017 on the NASDAQ Global Select Market under the symbol “NMRK.” In addition, Newmark granted the underwriters a 30 -day option to purchase up to an additional 3 million shares of Newmark Class A common stock at the IPO price, less underwriting discounts and commissions. On December 26, 2017, the underwriters of the IPO exercised in full their overallotment option to purchase an additional 3 million shares of Newmark Class A common stock from Newmark at the IPO price, less underwriting discounts and commission. As a result, Newmark received aggregate net proceeds of $295.4 million from the IPO, after deducting underwriting discounts and commissions and estimated offering expenses. Debt As part of the Separation, on December 13, 2017, Newmark OpCo assumed all of BGC U.S. OpCo’s rights and obligations under the 2042 Promissory Note in relation to the 8.125% Senior Notes due 2042 of BGC (the “ 8.125% Senior Notes”) and the 2019 Promissory Note in relation to the 5.375% Senior Notes due 2019 of BGC (the “ 5.375% Senior Notes.”) Newmark repaid the $112.5 million outstanding principal amount under the 2042 Promissory Note on September 5, 2018, and repaid the $300.0 million outstanding principal amount under the 2019 Promissory Note on November 23, 2018. In addition, as part of the Separation, Newmark assumed the obligations of BGC as borrower under the Term Loan and Converted Term Loan. Newmark repaid the outstanding balance of the Term Loan as of March 31, 2018, and repaid the outstanding balance of the Converted Term Loan as of November 6, 2018. In addition, on March 19, 2018, BGC loaned Newmark under an unsecured senior credit agreement (the “Intercompany Credit Agreement”) on the same day. All borrowings outstanding under the Intercompany Credit Agreement were repaid as of November 7, 2018. The Spin-Off On November 30, 2018, BGC completed the Spin-Off to its stockholders of all of the shares of Newmark common stock owned by BGC as of immediately prior to the effective time of the Spin-Off, with shares of Newmark Class A common stock distributed to the holders of shares of BGC Class A common stock (including directors and executive officers of BGC Partners) of record as of the close of business on the Record Date, and shares of Newmark Class B common stock distributed to the holders of shares of BGC Class B common stock (consisting of Cantor and CFGM) of record as of the close of business on the Record Date. Based on the number of shares of BGC common stock outstanding as of the close of business on the Record Date, BGC’s stockholders as of the Record Date received in the Spin-Off 0.463895 of a share of Newmark Class A common stock for each share of BGC Class A common stock held as of the Record Date, and 0.463895 of a share of Newmark Class B common stock for each share of BGC Class B common stock held as of the Record Date. BGC Partners stockholders received cash in lieu of any fraction of a share of Newmark common stock that they otherwise would have received in the Spin-Off. Prior to and in connection with the Spin-Off, 14.8 million Newmark Holdings Units held by BGC were exchanged into 9.4 million shares of Newmark Class A common stock and 5.4 million shares of Newmark Class B common stock, and 7.0 million Newmark OpCo Units held by BGC were exchanged into 6.9 million shares of Newmark Class A common stock. These Newmark Class A and Class B shares of common stock were included in the Spin-Off to BGC’s stockholders. In the aggregate, BGC distributed 131,886,409 shares of Newmark Class A common stock and 21,285,537 shares of Newmark's Class B common stock to BGC’s stockholders in the Distribution. These shares of Newmark's common stock collectively represented approximately 94% of the total voting power of Newmark's outstanding common stock and approximately 87% of the total economics of Newmark's outstanding common stock in each case as of the Distribution Date. On November 30, 2018, BGC Partners also caused its subsidiary, BGC Holdings, to distribute pro rata (the “BGC Holdings distribution”) all of the 1,458,931 exchangeable limited partnership units of Newmark Holdings, held by BGC Holdings immediately prior to the effective time of the BGC Holdings distribution to its limited partners entitled to receive distributions on their BGC Holdings units (including Cantor and executive officers of BGC) who were holders of record of such units as of the Record Date. The Newmark Holdings units distributed to BGC Holdings partners in the BGC Holdings distribution are exchangeable for shares of Newmark Class A common stock, and in the case of the 449,917 Newmark Holdings units received by Cantor also into shares of Newmark Class B common stock, at the applicable exchange ratio (subject to adjustment). As of December 31, 2019 , the exchange ratio was 0.9400 shares of Newmark common stock per Newmark Holdings unit. Following the Spin-Off and the BGC Holdings distribution, BGC Partners ceased to be Newmark’s controlling stockholder, and BGC and its subsidiaries no longer held any shares of Newmark’s common stock or other equity interests in it or its subsidiaries. Therefore, BGC no longer consolidates Newmark with its financial results subsequent to the Spin-Off. Cantor continues to control Newmark and its subsidiaries following the Spin-Off and the BGC Holdings distribution. Other assets consisted of the following (in thousands): As of December 31, 2019 2018 Deferred tax assets (1) 179,501 150,373 Prepaid assets 312 1,654 Total $ 179,813 $ 152,027 Accounts payable and accrued expenses consisted of the following (in thousands): As of December 31, 2019 2018 Corporate taxes payable 67,700 79,079 Accrued interest 4,369 5,149 Other 2,495 208 Total $ 74,564 $ 84,436 6.125% Senior Notes On November 6, 2018, Newmark closed its offering of $550.0 million aggregate principal amount of 6.125% Senior Notes due 2023 (the “ 6.125% Senior Notes”). The 6.125% Senior Notes were priced on November 1, 2018 at 98.937% to yield 6.375% . The 6.125% Senior Notes were offered and sold by Newmark in a private offering exempt from the registration requirements under the Securities Act of 1933, as amended (“Securities Act”). The 6.125% Senior Notes were subsequently exchanged for notes with subsequently similar terms that were registered under the Securities Act. The 6.125% Senior Notes bear an interest rate of 6.125% per annum, payable on each May 15 and November 15, beginning on May 15, 2019, and will mature on November 15, 2023. The carrying amount of the 6.125% Senior Notes was $540.4 million , net of debt issue costs of $5.0 million and debt discount of $4.7 million for the year ended December 31, 2019 and $537.9 million , net of debt issue costs of $6.6 million and debt discount of $5.8 million for the year ended December 31, 2018 . Newmark uses the effective interest rate method to amortize the debt discount over the life of the notes. Newmark amortized $1.0 million and $0.2 million of debt discount for the year ended December 31, 2019 and 2018 , respectively. Newmark uses the straight-line method to amortize these debt issue costs over the life of the notes. Newmark amortized $1.3 million and $0.2 million of debt issue costs for the year ended December 31, 2019 and 2018 , respectively. Newmark recorded interest expense related to the 6.125% Senior Notes of $34.7 million and $5.5 million for the year ended December 31, 2019 and 2018 , respectively. These amounts are included in “Interest expense” on the accompanying statements of operations. Credit Facility On November 28, 2018, Newmark entered into a credit agreement by and among Newmark, the several financial institutions from time to time party thereto, as Lenders, and Bank of America N.A., as administrative agent, (the “Credit Agreement”). The Credit Agreement provides for a $250.0 million three-year unsecured senior revolving credit facility (the “Credit Facility”). Borrowings under the Credit Facility will bear an annual interest equal to, at Newmark’s option, either (a) LIBOR for specified periods, or upon the consent of all Lenders, such other period that is 12 months or less, 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 0.1% . The applicable margin is 200 basis points with respect to LIBOR borrowings in (a) above and can range from 0.25% to 1.25% , depending upon Newmark’s credit rating. The Credit Facility also provides for an unused facility fee. As of December 31, 2019 , borrowings under the Credit Facility carried an interest rate of 3.76% . The carrying amount of the advance as of December 31, 2019 was $48.9 million , net of debt issue costs of $1.1 million . There were no borrowings outstanding under the Credit Agreement as of December 31, 2018 . Newmark uses the straight-line method to amortize these debt issue costs over the life of the loan. Newmark amortized $0.6 million of debt issue costs and recorded interest expense of $2.5 million for the year ended December 31, 2019 , respectively. These amounts are included in “Interest expense” on the accompanying statements of operations. On February 26, 2020, Newmark entered into an amendment to the Credit Agreement (the “Amended Credit Agreement”), increasing the size of the Credit Facility to $425.0 million (the “Amended Credit Facility”) and extending the maturity date to February 26, 2023. The interest rate on the Amended Credit Facility is LIBOR plus 1.75% per annum, subject to a pricing grid linked to Newmark’s credit ratings from Standard & Poor’s and Fitch. Converted Term Loan On September 8, 2017, BGC entered into a committed unsecured senior revolving credit agreement with Bank of America, N.A., as administrative agent, and a syndicate of lenders (the “Converted Term Loan”). The revolving credit agreement provides for revolving loans of up to $400.0 million . The maturity date of the facility was September 8, 2019 . Borrowings under the Converted Term Loan bore interest at either LIBOR or a defined base rate plus an additional margin, which ranged from 50 basis points to 325 basis points depending on BGC’s debt rating as determined by S&P and Fitch and whether such loan was a LIBOR loan or a base rate loan, and whether there were amounts outstanding under the Term Loan. The Term Loan was paid in full on March 9, 2018. Since the Term Loan was repaid in full, the pricing of the Converted Term Loan returned to the levels previously described. On November 22, 2017, BGC and Newmark entered into an amendment to the unsecured senior revolving credit agreement. Pursuant to the amendment, the then-outstanding borrowings of BGC under the revolving credit facility were converted into a term loan. There was no change in the maturity date or interest rate. As of December 13, 2017, Newmark assumed the obligations of BGC as borrower under the Converted Term Loan. On June 19, 2018, Newmark repaid $152.9 million , and on September 26, 2018, Newmark repaid $113.2 million of the Converted Term Loan using proceeds from the Newmark OpCo Preferred Investment. On November 6, 2018, Newmark repaid the remaining $134.0 million outstanding principal amount of the Converted Term Loan using the proceeds from the sale of its 6.125% Senior Notes. Therefore, there were no borrowings outstanding as of December 31, 2019 . Newmark recorded interest expense related to the Converted Term Loan of $12.9 million and $0.7 million for the years ended December 31, 2018 and 2017 . As of December 31, 2019 , and prior to the Spin-Off, the outstanding amount under the Converted Term Loan was repaid in full. Term Loan On September 8, 2017, BGC entered into a committed unsecured senior term loan credit agreement with Bank of America, N.A., as administrative agent, and a syndicate of lenders (the “Term Loan Agreement”). The term loan credit agreement provides for loans of up to $575.0 million (the “Term Loan”). The maturity date of the Term Loan Agreement was September 8, 2019 . Borrowings under the Term Loan bore interest at either LIBOR or a defined base rate plus an additional margin which ranged from 50 basis points to 325 basis points depending on BGC’s debt rating as determined by S&P and Fitch and whether such loan was a LIBOR loan or a base rate loan. On November 22, 2017, BGC and Newmark entered into an amendment to the Term Loan Agreement. Pursuant to the term loan amendment and effective as of December 13, 2017, Newmark assumed the obligations of the BGC as borrower under the Term Loan. The net proceeds from the IPO were used to partially repay of $304.3 million of the Term Loan. Newmark recorded interest expense related to the Term Loan of $2.6 million and $0.7 million for the years ended December 31, 2018 and 2017 , respectively. Prior to the Spin-Off, Newmark repaid the outstanding balance of $270.7 million Fourth Quarter 2019 Dividend On February 12, 2020 , Newmark’s Board of Directors declared a quarterly qualified cash dividend of $0.10 per share payable on March 23, 2020 to Class A and Class B common stockholders of record as of March 5, 2020 . Amendment to the Credit Agreement On February 26, 2020, Newmark entered into the Amended Credit Agreement, increasing the size of the Credit Facility to $425.0 million and extending the maturity date to February 26, 2023. The interest rate on the Amended Credit Facility is LIBOR plus 1.75% |
