|Shares Out. (in M):||38||P/E||14.5||12.2|
|Market Cap (in $M):||940||P/FCF||7||6|
|Net Debt (in $M):||-212||EBIT||117||132|
Marcus & Millichap (MMI) $24.99
Marcus & Millichap (MMI) is a national commercial real estate brokerage firm focused on properties in the $1MM - $10MM price range. In addition to brokerage services, MMI also provides financing and research services. MMI has a leading market share in a highly fragmented market and benefits from its national footprint and longstanding customer relationships developed over its 45-year history. The equity has sold off significantly since late 2015 on macro concerns regarding rising interest rates and the real estate cycle. I believe that the macro concerns are overblown – particularly in light of the impact of the UK voting to exit the EU – and MMI’s strong balance sheet, variable cost operating model and experience in operating across several real estate cycles provide substantial downside protection.
Marcus & Millichap is a leading commercial real estate brokerage firm offering sales, financing and research and advisory services. The company focuses on the private client market which it defines as properties trading in the $1MM - $10MM range. Compared to the middle market ($10MM - $20MM) and the institutional market ($20MM+), the private client market is the largest segment characterized by a greater number of transactions and dollar volume and less volatility across the real estate cycle as transactions are often triggered by individual events (death, divorce, partnership breakup, etc.) than by macroeconomic factors.
MMI exhibits a great deal more stability than its competitors given its exposure to a large number of relatively small dollar value transactions across a diverse range of property types and geographies. It’s larger public competitors like CB Richard Ellis (CBG) and Jones Lang LaSalle (JLL) focus on the institutional marketplace characterized by a smaller number of larger transactions which is inherently more volatile and subject to greater correlation to macroeconomic factors.
MMI was founded in 1971 and went public in late 2013. 55% of the stock is owned by Phoenix Investors which represents the interest of the founder, George Marcus (age 75).
The company has 79 offices in the US and Canada. Canada represents 3 offices and around 1% in revenues. MMI has over 1,600 sales and financing agents. The sales agents are independent contractors and 34% have been with the company in excess of 5 years.
The private client market is highly fragmented with the top 10 US brokerage firms having 24% combined market share. MMI is the market leader with 8%, almost twice the share of #2 player CB Richard Ellis. In the highly competitive office segment, MMI ranked third in transactions in 2015 behind CB Richard Ellis and Cushman & Wakefield. In the apartment and retail segments, MMI is the clear leader over CBRE.