CoStar Group to Acquire Loopnet

April 28, 2011

COSTAR GROUP TO ACQUIRE LOOPNET

Combination of the Most Comprehensive Commercial Real Estate Information Service With the Leading Online Commercial Real Estate Marketplace Is Expected To Deliver More Value From the Internet For the $11 Trillion Commercial Real Estate Industry

WASHINGTON, DC and SAN FRANCISCO, CA (April 27, 2011) – CoStar Group, Inc. (Nasdaq:CSGP), the leading commercial real estate information company announced today the signing of a definitive agreement to acquire LoopNet, Inc. (NASDAQ: LOOP), the leading online commercial real estate marketplace. Pursuant to the merger agreement, LoopNet shareholders will receive $16.50 in cash and 0.03702 shares of CoStar Group common stock for each share of LoopNet common stock, representing a total equity value of approximately $860 million and an enterprise value of $762 million. The boards of directors of both companies have unanimously approved the transaction which is expected to close by the end of 2011.

“CoStar revolutionized how the industry researches commercial real estate and LoopNet revolutionized the way the industry markets commercial real estate,” said Andrew C. Florance, President and Chief Executive Officer of CoStar. “We expect the combination of our companies to give the $11 trillion commercial real estate market the full benefit of the internet.”

“CoStar and LoopNet have been at the cutting edge of innovation in their respective businesses and we believe the two companies will be even stronger together,” said Richard Boyle, Chairman and Chief Executive Officer of LoopNet. “This transaction combines the capabilities and best practices of two successful and very complementary companies. We are excited about the possibilities that can be created together.”

The commercial real estate market is one of the largest asset classes in the United States with over $11 trillion in value and the potential size of the industry providing marketing and information services to commercial real estate professionals is approximately $30 billion, according to CoStar. Based upon the first quarter of 2011, the combined companies have annualized revenue of approximately $321 million.

The transaction will double the size of CoStar’s paid subscriber base to at least 160,000 which represents approximately 15% of the estimated one million participants in the commercial real estate market. CoStar’s market studies have indicated that customers view the services of the two companies as serving two very different but complementary needs and that the overlap between CoStar and LoopNet subscribers is estimated to be relatively low. As a result, CoStar expects significant cross-selling opportunities between the two customer bases.

The combined company will be the premier resource for researching, analyzing, and marketing commercial real estate properties online and will be positioned to provide more widespread market coverage for customers ranging from large, national brokerage and institutional market players to small, local brokers and owners. With the addition of LoopNet’s complementary listings, CoStar will have a database with approximately two million active listings, giving customers a more comprehensive and efficient view of the market. “CoStar and LoopNet truly bring together Wall Street and Main Street,” added Florance. “We expect the scale, complementary service capabilities and diversified client and geographic footprint created by the combination of CoStar and LoopNet will drive significant revenue opportunities and cost saving synergies.”

CoStar has successfully integrated over a dozen acquisitions.

LoopNet.com is the industry’s largest and most heavily trafficked online marketplace with 4.8 million registered members and more than 6 million unique visitors quarterly, according to Google Analytics. LoopNet is also the leading website for marketing commercial property listings. As commercial real estate brokers and owners continue to move property listings to online channels, we fully anticipate LoopNet’s marketplace will become increasingly important to those marketing or searching for properties.

CoStar operates the largest and most robust commercial real estate information database with over 77 billion square feet of office, retail, and industrial inventory, 1.5 million listings, and 10.6 million images.

Highlights of the Combination

  • Combines industry-leading large scale, game-changing technology platforms
  • Maximizes customer value with highly complementary operations that create a larger more robust marketplace with hundreds of thousands of participants and billions of potential connections
  • Combines two profitable companies with strong cash flows while creating potentially significant opportunities to cross-sell services and reduce costs
  • Represents a substantial investment in a company whose performance is correlated with general commercial real estate markets as they emerge from historic lows and move towards recovery
  • Both companies announced very strong first quarter 2011 financials further signaling an emerging strong sector recovery

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Industrial Warehouse Vacancies Filling Up in South Florida

April 24, 2011

Industrial Warehouse Vacancies Filling Up in South Florida

Sharpe Properties, which manages commercial retail and industrial warehouse properties throughout South Florida, has slowly seen improvement with the vacancy rates in Miami Dade County, specifically the Hialeah industrial area.  Although the rental rates on a per square foot basis have dropped dramatically over the past several years, demand for industrial warehouse space has picked up.

The industrial warehouse market typically lags behind the residential home market.  For example, when the news started reporting that the residential home market was in a downward spiral, the South Florida industrial market was still strong.  However, while the industrial market eventually plummeted, the industrial warehouse market appears to be recovering quicker in time than expected.  There are various reasons for why this has happened.

Lack of Industrial Warehouse Zoning

Homes can be built almost anywhere.  Developers can find and convert swap land into a vibrant residential community seemingly overnight.  However, because industrial warehouses typically need to be near airports, seaports, railroads; and restricted by various environmental concerns, locations are inherently limited.  Consequently, during the big real estate boom several years ago, the industrial market did not increase at the same rate as the residential market.

Industrial Warehouse Supply vs. Demand

While the demand for residential and industrial markets are both slowly recovering, the limited supply of available industrial properties is providing for a faster recovery.   In contrast to the industrial warehouse market that has remained relatively the same size over the recent years, so long as the South Florida residential market is filled with an over-abundance of vacant homes and condos, their recovery will remain prolonged.

Foreclosure Rates: Commercial vs. Residential

When the residential home market in South Florida began to tumble, the banking industry was quick to commence foreclosure proceedings.  Once the banks retook possession of their assets, the foreclosed homes just sat and remained vacant for months…if not years without finding a home buyer.  For commercial investment properties, the banking industry is apparently reluctant to foreclose and take over the properties.  One reason could be due to the added responsibilities banks would take on once they took possession of the commercial properties.  While banks can easily sit on doormat homes and condos, and wait for the residential market to rebound, commercial properties require constant management and attention.  Otherwise, tenants would quickly vacate their premises, and the income producing property’s value would rapidly spiral downward.  Because banks are not set up to properly manage commercial properties, they may have realized that it is best to keep the properties under the management of the property owner, and instead just pretend and extend their mortgages.

Industrial Warehouse Recovery

So long as the demand for industrial warehouse property increases and the supply remains stagnant throughout South Florida, the recovery will continue.  With the recovery of the industrial market, and confidence of business owners to expand, Sharpe Properties expects rental rates on a dollar per square foot to start increasing by the end of this year.

Please visit www.sharpeproperties.com to view the industrial warehouse properties Sharpe Properties currently has available for rent.

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Property Insurance Reform Bill Passes Final Senate Committee With Name Change For Citizens

April 5, 2011

Property Insurance Reform Bill Passes Final Senate Committee With Name Change For Citizens

A sweeping property insurance reform bill passed its final Senate committee on Tuesday. Among other things, the bill would free insurance companies from paying replacement costs of losses up front and from a requirement to offer comprehensive sinkhole insurance. With some critics arguing that means that no private insurers would offer sinkhole coverage, the bill requires the state-run Citizens Property Insurance to offer sinkhole coverage.

That didn’t sit well with Sen. Gwen Margolis, D-Miami. “We are going to have a full-blown disaster one day,” she said. “This is simply taking all of the people who have sinkhole coverage in their community and putting them in Citizens. Then in another bill we’re raising the cost of Citizens.”

The bill also includes other gifts to private insurers, prompting Margolis to call it the most anti-consumer bill offered up by the Legislature.

But Garrett Richter, R-Naples, the sponsor of SB408, said the point is to make Florida more appealing to private insurers, who say they can’t charge high enough premiums to cover potential losses and they can’t compete with the low rates of Citizens.

“The ultimate goal of this bill is to increase competition, to attract underwriters into the Florida market, to attract capital to Florida, to reduce fraud,” he said.

Sen. J.D. Alexander said the growth of Citizens, which has 1.3 million policy holders, is potentially the “biggest single financial crisis facing this state.”

“If we ever have a major storm, we are in deep trouble,” he said. Citizens officials have warned their premiums aren’t high enough to cover all their payouts in the case of a huge hurricane or series of storms. That means all insurance policy holders, including those that aren’t in Citizens, would have to pick up the tab. To underscore that fact, Alexander introduced an amendment to SB408 that would change the name of the state-run insurer to the Taxpayer Funded Property Insurance Corporation. The measure passed.

John Thompson, a Spring Hill resident, panned the entire bill, saying homeowners had no voice in developing the legislation. Private insurers, he said, are not about to go under. Thompson said his homeowner policy was canceled by four private insurers and forced him into Citizens, even though hurricanes and sinkholes are not new phenomena in the state.

“This legislature is condoning cherry-picking. Let them write what they want, when they want and charge what they want,” he said, pointing out that State Farm offered to cover his automobile even though it’s parked in the garage of a home the company won’t cover. The company, he said, is using money earned from policy holder premiums to pay expensve endorsement contracts to LeBron James and sponsor the NCAA basketball tournament.

“They should not be knocking on your door, the Florida legislature, asking for handouts and crying about losing money,” he said. “Yes, losing money on a specific market products possibly, but not on the verge of going broke. No way. No how. It’s greed.”

The bill passed the Senate Rules committee by a vote of 9 to 3, with Republicans Anitere Flores, R-Miami and Dennis Jones, R-Seminole, voting with Margolis against it.

The House version of the bill gets its first hearing on Tuesday in the insurance and banking subcommittee.

Source: Miami Herald Blog

By:  Janet Zink, April 5, 2011

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