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HFF, Inc. Reports Fourth Quarter and Full Year 2008 Financial and Transaction Production Results and Receipt of Notice Regarding NYSE Listing

2009 MAR 27 - (VerticalNews.com) -- HFF, Inc. (NYSE:HF) reported its financial and production volume results for the fourth quarter and full year 2008. HFF, Inc. (the Company), through its Operating Partnerships, Holliday Fenoglio Fowler, L.P. (HFF LP) and HFF Securities L.P. (HFF Securities), is one of the leading providers of commercial real estate and capital markets services to the U.S. commercial real estate industry based on transaction volume and is one of the largest full-service commercial real estate financial intermediaries in the country. Consolidated Earnings Full Year Results The Company reported revenues of $131.7 million for the year ended December?31, 2008, a decrease of $124.0 million, or 48.5% compared to the same period last year. Operating income was $1.3 million compared to $48.0 million for 2007, representing a decrease of $46.7 million, or 97.3%. This decrease in operating income is primarily attributable to the decrease in production volumes and related revenue from the prior year in several of the Company's capital markets services platforms brought about, in significant part, by a slowing economy as well as the unprecedented disruptions in the global capital and credit markets. Offsetting this decrease in revenue of approximately $124.0 million is a reduction in total operating expenses of approximately $77.3 million during 2008 compared to the same period of the prior year. This reduction in operating expenses is a result of a decrease in cost of services of approximately $62.7 million, which is primarily due to the decrease in commissions and other incentive compensation directly related to the lower capital markets services revenues, and a decrease in operating, administrative and other expenses (including depreciation and amortization) of approximately $14.6 million, which is related to, in part, a reduction in other performance-based accruals.

Income tax expense for the year ended December 31, 2008 was approximately $5.0 million, compared to approximately $9.9 million of income tax expense for the same period in 2007. This decrease is primarily attributable to lower pre-tax book income, which is partially offset by the effect of changes in the rates used to measure the deferred tax assets. The largest component of the deferred tax assets relates to the tax basis step up resulting from the reorganization transactions completed in 2007 in connection with the Company's initial public offering. The effect of changes in the rates used to measure the deferred tax assets on income tax expense was approximately $4.6 million. This additional tax expense due to the remeasurement of the deferred tax assets resulted in a higher effective tax rate. The effective tax rate for the year ended December 31, 2008 was 94.7% as compared to 45.3% for the year ended December 31, 2007. This tax expense and its impact on net income was partially offset by a decrease of $3.9 million in the payable under the tax receivable agreement (as shown on the consolidated operating results before the line item "income before income taxes and minority interest"). The effect of changes in the rates used to measure the deferred tax assets and the corresponding effect of the related remeasurement of the payable under the tax receivable agreement resulted in an overall net decrease to net income of approximately $0.7 million, or an estimated $0.04 per share on a fully diluted basis.

The Company reported net income of $0.2 million for the year ended December 31, 2008 (after an adjustment to the full year results of $4.8 million to reflect the impact of the minority ownership interest of HFF Holdings, LLC (Holdings) in the Operating Partnerships), compared with net income of $12.5 million for the same period last year (after adjustments to the results for the year ended December?31, 2007 of approximately $29.7 million to reflect the impact of the minority ownership interest of Holdings in the Operating Partnerships following the Company's initial public offering on January 30, 2007 and approximately $1.9 million to reflect the net income earned prior to the initial public offering and reorganization). Net income attributable to Class A common stockholders for the year ended December 31, 2008 was $0.2 million, or $0.01 per diluted share.

EBITDA (a non-GAAP measure whose reconciliation to net income can be found within this release) was approximately $13.6 million for the year ended December 31, 2008, a decrease of approximately $44.8 million or 76.8% compared to $58.3 million in the same period in the prior year. Fourth Quarter Results In the face of the continuing deterioration in the domestic and global capital markets coupled with a domestic and global economic recession that has created unprecedented credit and liquidity issues as well as a global re-pricing of debt and equity risk in all global capital markets including the U.S. commercial real estate capital markets in which we operate, the Company generated fourth quarter total revenue of $24.9 million, a decrease of $27.4 million or 52.4% from the fourth quarter of 2007. The Company experienced an operating loss of $0.5 million for the fourth quarter of 2008, a decline of approximately $7.8 million, or 106.9%, when compared to the fourth quarter of 2007. This decrease in operating income is directly attributable to the decreases in production volumes from the prior year in several of the Company's capital markets service platforms. Partially offsetting this decrease in revenue of approximately $27.4 million is a reduction in total operating expenses of $19.6 million in the fourth quarter 2008 compared to the same period of the prior year. This reduction in operating expenses is a result of a decrease in cost of services of approximately $15.2 million, which is primarily due to the decrease in commissions and other incentive compensation directly related to the lower capital markets services revenues, and a decrease in operating, administrative and other expenses (including depreciation and amortization) of approximately $4.4 million, which is related to, in part, a reduction in other performance-based accruals.

The Company reported a net loss for the fourth quarter 2008 of $0.2 million compared with net income of $2.1 million for the same period in 2007 (after an adjustment to the fourth quarter 2008's results of approximately $0.6 million to reflect the impact of the minority ownership interest of Holdings in the Operating Partnerships as compared to an adjustment to the prior year three months' results of $5.5 million to reflect the impact of the minority ownership interest of Holdings in the Operating Partnerships). Net loss attributable to Class A common stockholders for the fourth quarter 2008 was $0.01 per diluted share.

EBITDA for the fourth quarter 2008 was $1.5 million, a decrease of $9.1 million or 85.6% compared to the same period last year. This decrease is primarily attributable to the decrease in our operating income as discussed above.

The financial results presented in this earnings press release reflect the consolidated financial position and results of operations of Holliday GP Corp., HFF, Inc.'s wholly-owned subsidiary and sole general partner of each of the Operating Partnerships (Holliday GP), HFF Partnership Holdings LLC, the Operating Partnerships, and HFF, Inc. for all periods presented. The minority interest relates to the ownership interests of Holdings in the Operating Partnerships following the initial public offering. For a discussion of the adjustments relating to the reorganization transactions and the initial public offering, see Note (1) to the financial statements included in this earnings press release. For more information regarding the transactions associated with the initial public offering, please refer to the Company's prospectus filed with the Securities and Exchange Commission on January 31, 2007. HFF, Inc. Consolidated Operating Results (1) (dollars in thousands, except per share data) (Unaudited) ?

? For the Three Months Ended Dec. 31 For the Twelve Months Ended Dec. 31, 2008 2007 2008

2007

Revenue

24,884

52,306

131,687

255,666

Keywords: Professional Services, Banking, Finance, Construction and Property, Commercial Building and Real Estat, Capital Markets, Common Stock, Economic Recession, Economics, Finance, Financial, Income Tax, Investing, Investment, Real Estate, Stock Market, HFF Inc.