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PITTSBURGH-HFF Inc. generated $79.8 million in revenue during its second full quarter as a publicly traded company. That represents a 39.8% increase in its $22.7 million of revenue from a year ago. Nearly all other measures of performance also rose for the quarter ending June 30, with the exception of net income, which dropped to $5.1 million, down from $12.5 million in Q2 2006.
During a conference call, management attributed the decrease in income to a change in tax structure and costs related to launching its IPO. Income tax expense for the most recent quarter, for example, was $3.8 million, which is $3.7 million more than in second-quarter 2006.At the opening of the conference call, CEO John Pelusi said "we have not been, nor are we currently involved in the for-sale home market or subprime residential market." This clarification, he said, was in response to questions that have arisen from investors.
"Despite the very choppy commercial real estate capital markets that started to become more volatile in late February and continue through today, we are extremely pleased with the outstanding operating performance achieved in the second quarter," Pelusi told analysts and shareholders.
Second-quarter production volume exceeded $14.2 billion for 344 transactions. That represents a 53.9% increase in production volume and 7.8% increase in the number of transactions in comparison with the same quarter of 2006. The average transaction size also significantly increased. HFF's average transaction exceeded $41.5 million or 42.7% higher than the average for last year's Q2.
A portion of the increased production came from two large portfolio sales. Without those, the company's production volume would have risen 25.9% for the quarter and the average size of transactions would have been $34.2 million or up 17.4%.
In response to an analyst's question about the two transactions, COO Nancy Goodson said both were parts of larger transactions and both were in the office sector. One was a $1.1-billion transaction in the Southwest and the other was a $1.4-billion deal in the South Atlantic region, she said without specifically identifying either one.
Pelusi offered the Wall Street analysts a chart-rich presentation of the commercial real estate market's performance for 15 years, which illustrated, he said "that real estate is viewed as a valid asset class." With a hard asset as collateral, investments have the ability to recover and he concluded "there's still a great deal of liquidity in the market that needs to be invested."
The trading range of HFF's shares on the NYSE since the company went public ranges from $21.35 per share Feb. 2 following the IPO to a low of $11.70 per share at the end of the Aug. 6 trading day. Yesterday, shares lifted to $13.38 per share before dropping back to $12.80 per share when trading closed for the day.
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