BETHESDA, Md., July 20, 2009 -- CoStar Group, Inc. (Nasdaq:CSGP), the number one provider of information and marketing services to the commercial real estate industry, today announced the acquisition of Property and Portfolio Research, Inc. (PPR), a leading, independent provider of global real estate analysis, market forecasts and credit risk analytics to the commercial real estate industry.
DMG Information, Inc. (DMGI), a division of U.K.-based Daily Mail and General Trust, plc, agreed to sell PPR in exchange for shares of CoStar common stock valued at approximately $22.0 million. PPR is headquartered in Boston and has offices in London and Hong Kong. PPR has annual revenues of approximately $18.0 million and is profitable.
"Because of this economic environment, demand has never been greater for accurate analysis and forecasting to help our clients manage risk and opportunities in both the debt and equity components of their commercial real estate portfolios," said CoStar President and CEO Andrew C. Florance. "Our customers know that CoStar has the most accurate, timely, and comprehensive commercial real estate information anywhere, so one of the most consistent requests we receive is for forecasting and analytic services that use our unique data assets. Bringing together PPR's outstanding team of approximately 40 economists and analysts with our unparalleled research capabilities will enable CoStar to quickly respond to this customer demand with the best possible solution."
"We are excited about joining forces with the industry's strongest research and data provider," said Bret Wilkerson, CEO of PPR. "We believe this combination will dramatically accelerate PPR's growth and allow us to focus on the core mission of the firm -- to bring a highly quantitative, research-based approach to real estate analysis and forecasting and to help clients better understand risk and return in commercial real estate investing."
PPR's suite of analytic tools helps clients execute strategic real estate investment plans with the added support of a team of economists and market analysts. These tools provide strategic, market and asset-level analysis in support of portfolio management, acquisitions, dispositions, and asset management activities. Additionally, PPR provides risk management analysis, including identification of market risks and a framework for understanding mortgage credit defaults.
"At a time when investors, banks, investment funds and even governments throughout the world are struggling to ascertain the value of real estate assets in the face of the current economic crisis, the need for analysis of commercial real estate supported by comprehensive and accurate data will likely increase in the years to come, and CoStar with PPR expects to be a major player in that business," said Florance.
In addition to expanding CoStar's scope of services, Florance said PPR provided an exceptional fit both strategically and operationally. "The more closely we looked at PPR, the more compelling the combination of our firms became, offering immediate potential to meet the strategic objectives for each of our companies," Florance said. "CoStar has one economist on staff whereas PPR has a team of 40. PPR does not have any primary data collection researchers whereas CoStar has more than 900 market researchers. PPR is covering a global geography with a sales staff of only 6 people, while CoStar in contrast has approximately 150 sales professionals who are ready to market PPR's products to the large number of CoStar Group's clients who do not yet subscribe to PPR's products," added Florance.
Both firms share a focus on the U.S and the U.K. as their primary business markets. PPR's European product offering is somewhat similar to CoStar's Paris-based Grecam real estate information and analytics service, which could further leverage PPR's European reach. PPR has an office in Hong Kong, giving CoStar a presence in Asia for the first time.
CoStar disclosed its strategic commitment to expanding its market analysis and forecasting capabilities last year when it offered to acquire Reis, Inc. (Nasdaq:REIS). While Reis has some similarities to PPR, we believe that PPR is a much clearer strategic fit, has a much larger team of talented economists, and is unfettered by unrelated businesses. CoStar had previously withdrawn its offer to acquire Reis.
The acquisition of PPR is part of a larger strategy to leverage CoStar's strong financial position by acquiring companies that can position the Company for strong future growth. "CoStar is ready to capitalize on the current environment by making additional strategic investments," said Frank Carchedi, Costar's Senior Vice President, Corporate Development. "We welcome DMGI as a strategic shareholder and we share a common vision for the growth potential in commercial real estate information services," said Carchedi.
The Company indicated that the acquisition would have no effect on the second quarter 2009 results, scheduled to be released on July 22, 2009, and reiterates its guidance for the second quarter. PPR currently has EBITDA margins of approximately 5%, with margins that are targeted at 30% over the longer term as a result of expected revenue growth. The Company does not expect the acquisition of PPR to result in any significant investments in the near term. A more detailed discussion of the acquisition is planned for the Company's quarterly earnings call on July 23, 2009.
About CoStar Group, Inc.
CoStar Group, Inc. (Nasdaq:CSGP) is the number one provider of information/marketing services to commercial real estate professionals in the United States as well as the United Kingdom. CoStar's suite of services offers customers access via the Internet to the most comprehensive database of commercial real estate information throughout the U.S. as well as in the United Kingdom and France. Headquartered in Bethesda, MD, CoStar has approximately 1,300 people working for the company worldwide, including the largest professional research organization in the industry. For more information, visit http://www.costar.com .