If Newmark Group goes ahead with its planned acquisition of Knotel, does that make the commercial real estate services firm a competitor to its landlord clients?
“Just the opposite,” CEO Barry Gosin said during the company’s fourth quarter earnings call Thursday morning, throwing cold water on the notion that buying the struggling short-term office company out of bankruptcy creates a conflict of interest for Newmark. “We see it as a benefit and an opportunity.”
Knotel has struggled to pay rent amid the pandemic and filed for Chapter 11 bankruptcy earlier this month. Newmark, which invested in Knotel in 2018, is providing the company with $20 million in debtor-in-possession financing and plans to acquire the firm out of bankruptcy.
That would put Newmark in the business of renting short-term space to tenants, creating a potential conflict with landlords or other flex-space firms that hire Newmark as a broker.
In fact, Knotel CEO Amol Sarva in 2018 said his company would no longer hire CBRE after the brokerage launched its own short-term office company.
Gosin said he thinks Knotel can be a service to Newmark’s landlords and clients. He added that it was too early to tell if the flex-office provider is a long-term hold for them, or an investment Newmark will look to exit once the company is stabilized.
As for Newmark’s own results, adjusted EBITDA for 2020 fell 36.6 percent year-over-year to $357.7 million. Fourth-quarter earnings fell 34.3 percent from a year earlier to $171.7 million, led by a 45 percent drop in revenues from leasing commissions.
If there was a bright spot, though, it was in the company’s capital markets and mortgage-banking activities. Revenues from capital markets grew more than 15 percent in the fourth quarter, even as the overall market saw a decline. Mortgage-banking revenues doubled in the quarter to $100 million.