History

The company has been in its current form since 1998, and has operated continuously as an independent company.  Since 2003, the company has operated as a private partnership with John Pelusi as the CEO.

Timeline:

Business & Industry Overview

The company is a strict advisory business, and does not manage assets, or compete with its clients in any way.  The company believes this is a key selling point of its firm; most of its competitors house asset management businesses.  Another benefit of the strict advisory model is that there is almost no capital expenditure requirement for expansion, therefore a % of incremental revenue flows straight to the bottom line.  The company’s two primary businesses are investment sales (46% of revenues), and debt placement (~50% of revenues) and as such is highly levered to the real estate capital markets—the outlook for capital flows is the strongest its ever been, and continues to grow rapidly (see 1/31/07 JLL earnings report / conference call transcript).

The above growth has been supported, and will remain robust because of capital inflows, and increased allocations to real estate.  Since 1995, the average pension fund allocation to real estate has grown from under 4% to 9% (and growing) currently—this capital will need to be deployed.  Blackstone (a loyal client of HFF) is in the midst of raising its largest real estate fund ever, Angelo Gordon recently raised a fund, and thousand of other real estate funds have cropped up, and will have deploy capital over the next few years.  This capital will need to be deployed over the next few years and support continued record high transaction volumes.

In addition to being able to ride favorable macro trends, the company has aggressively been building its business organically and has hired 40 new professionals in 2006, or about one quarter of its professional staff—these new producers have yet to add to HFF’s bottom line, and this future production is not at all reflected in street estimates.  Production from these new employees is just now starting to ramp up (1^st half of 2007 according to management), and the company will see the benefits from these employees in 2007 and 2008.  Unlike its competitors, HFF has yet to expand internationally, which may be a future growth vehicle for the company.

And for a more immediate catalyst, HFF is engaged by Blackstone to raise financing and sell assets for its EOP transaction.  This should provide a nice windfall for HFF in 1Q and 2Q of 2007.  The CEO’s ties to Blackstone run deep as HFF also worked on a host of very successful Blackstone transactions over the past few years, and the founder of the Blackstone Real Estate Group is Chairman of HFF.

The company has a best of breed board of directors including George Miles (AIG, Wesco), John Kukral (former Blackstone real estate CEO), and Deborah McAneny (John Hancock).  CEO John Pelusi (51) has led the company since its founding, and spearheaded the MBO from Lend Lease in 2003.  The company has had remarkably low turnover and the top 25 transaction professionals have average tenure with HFF of 13.5 years.