HFF Marks Calendar to Launch $214M-Plus IPO

DALLAS-In yet another cliffhanger for the industry, HFF Inc. is planning to launch its IPO Jan. 31. The goal is to gross at least $214.5 million with the sale of 14.3 million shares of class A common stock.

Industry sources tell GlobeSt.com that the plan--right now--is to lock in pricing Jan. 30, the final detail for the next day's NYSE sale. In yesterday's SEC filing, HFF says the price will be in the $15 to $17 per share range. HFF's underwriters have a 30-day option for an additional 2.14 million shares. The IPO is being underwritten by Goldman, Sachs & Co., Morgan Stanley & Co. Inc., Banc of America Securities LLC, Wachovia Securities LLC, JPMorgan Securities Inc. and Lehman Brothers Inc. In the SEC filing, calculations are based on $16 per share, which would bring the offering to $228.8 million.

HFF's senior executives, attending their annual meeting in Miami, can't discuss the plan that's in play. Analyst David Menlow of Millburn, NJ-based IPO Financial Network tells GlobeSt.com that he expects the launch will be well received by the market, but it will face a major hurdle. "People are going to be deeply immersed in discussing the collapse of the real estate market and going to miss out on the benefits of the antithesis of that market," he explains. "The biggest obstacle is the misperception that real estate in general is not the right place to be with their money. They could miss what could be a good offering."

Menlow says HFF's "cross to bear" is proving to the market how it differs from its competitors. "If they can communicate that effectively, either as a company or through the underwriters, their job will be a lot easier," he says. "At this point, the company is going to have to be very specific about what makes it distinct."

Based on the SEC filing, HFF expects to realize $209 million from the sale or $240.9 million if the full option is exercised. Under the offering, HFF's class A shareholders will have 39% voting power, full economic rights and 39% equity in the business. Class B shareholders of HFF Holdings LLC will have 61% voting power and 61% equity, but no economic rights. If the full option is exercised, stockholders would have 45% and HFF Holdings, 55%. An additional 3.28 million shares of class A stock is earmarked for "future grant under our proposed stock incentive plan," the company reports in the filing.

Also in the SEC filing, HFF says about $56.3 million from the stock sale will be used to repay all outstanding debt of a Jan. 1, 2007 credit agreement. The loan has a weighted average rate of about 7.7% and matures March 29, 2010. HFF also has a commitment letter from Bank of America for a $40-million credit line that takes effect when the offering is consummated.

John J. Pelusi Jr. in Pittsburgh is the managing member of HFF Holdings. The HFF network has 18 offices in the US with 130 transaction professionals and 270 support associates. In 2005, HFF advised on nearly $32 billion of completed commercial real estate transactions, ending the year with $205.8 million of revenue and $46.8 million of net income. Through Sept. 30, HFF's revenues totaled $156.5 million and net income, $31.7 million.