Greetings and welcome to the Marcus & Millichap’s Second Quarter 2014 Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. (Operator Instructions) As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Lasse Glassen of Addo Communications. Thank you, sir. You may begin.

Thank you, operator. Good afternoon and welcome to Marcus & Millichap 2014 second quarter results conference call. With us today are Marcus & Millichap’s President and Chief Executive Officer, John Kerin; Chief Strategy Officer, Hessam Nadji; and Chief Financial Officer, Marty Louie. Before I turn the call over to management, please remember that our prepared remarks and responses to question may contain forward-looking statements. Words such as may, will, expect, intend, plan, believe, seek, could, estimate, judgment, targeting, should, anticipate, goal and various of the these words and similar expressions are intended to identify forward-looking statements. Actual results could differ materially from imply by such forward-looking statements due to our variety of factors including but not limited to general, economic conditions, and commercial real estate marketing conditions including the recent conditions in the global markets and in particular the U.S. debt markets. The Company’s ability to retain and attract transaction professionals, the Company’s ability to retain its business philosophy and partnership culture, competitive pressures, the Company’s ability to integrate new agents and sustain its growth and other factors discussed in the Company’s public filings, including the risk factors included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 21st, 2014. Although the Company believes the expectations reflected in such forward-looking statements are based upon reasonable assumptions it can give no assurance that its expectations will be attained. The Company undertakes no obligation to update any forward-looking statement whether as a result of new information, future events or otherwise. In addition certain of the financial information presented in this call represent non-GAAP financial measures. The Company’s earnings release which was issued this afternoon and is available on the Company’s website presents reconciliations to the appropriate GAAP measures and an explanation of why the Company believes such non-GAAP financial measures are useful to investors. Finally, this conference call is being webcast. The webcast link is available on the Investor Relations section of our website at www.marcusandmillichap.com along with a slide presentation you may reference during the prepared remarks. With that, it’s now my pleasure to turn to call over to Marcus & Millichap’s President and CEO, John Kerin. John?

Thank you, Lasse. And thank you everyone for joining us this afternoon to discuss our financial and operational results for the second quarter of 2014. I will begin today’s call with an overview of the Company’s performance and a review of our operational highlights for the second quarter of 2014. Hessam Nadji, our Chief Strategy Officer, will follow with an update on market conditions and Marty Louie, our Chief Financial Officer will conclude by providing additional details on the Company’s financial results. We will then open up the call to your questions. The momentum we generated earlier in the year continued into the second quarter producing strong results from Marcus & Millichap. Revenues for the first six months of 2014 increased 42% totaling approximately $249 million with real estate brokerage commissions up over 45% from the first half of the year while the mortgage brokerage fees grew 22%. Net income for the first six months was 19.6 million up 103% from the prior year. Our adjudged EBITDA for the first half was $37.5 million which was approximately 78% higher than the same period last year along with an adjusted EBITDA margin improvement to 15% from 12% a year ago. Year-to-date sales volumes totaled $13.3 billion representing an increase in volume of 32% compared to the first half of 2013. During the first six months of the year, we closed 3,545 transactions, up 19% over the prior year period. During the second quarter, we met or exceeded our goals for nearly all the key metrics vital to our performance including growth in average number of sales professionals, sold number of transactions and total sales volume. At the top line second quarter revenue of $134.3 million increased more than 27% compared to the same period in 2013. At the same time net…

Thank you, John. My comments today are intended to provide an overview of the commercial real estate market and therefore not necessarily specific to Marcus & Millichap. The real estate market in broader economy reached several key milestones during the second quarter of 2014. Employers added 816,000 net new jobs with total employment now exceeding the prior peak by 415,000 jobs. And for the first half of the year, that puts us at 1.4 million jobs added, making the first half of 2014 the best first half since 1999. And absorption of commercial space in the second quarter continued to gain momentum with a shift favoring the lagging office and retail sectors. Also these sectors are now performing much better, thanks to the reduction of excess space held by the tenants for the past several years. As a result of all this, the first half of this year also marked the strongest period of occupancy gains for commercial real estate since the recovery began in 2010. On the sales front, based on preliminary estimates, the market surpassed 20,000 transactions in the first half of 2014, the highest first half since 2007 and 16% higher than last year’s pace. Most importantly, the main forces behind the favorable and investment market outlook are very much intact. These include low interest rates, an expanding array of financing options and competitive yields offered by the sector compared to alternative investments. Apartments maintain their lead with an average occupancy of 95.6% nationally and retail occupancies edged up 30 basis points in the first half to 93.1%. During the quarter, industrial properties showed further strength with a 92.3% occupancy rate followed by office properties which had an 84.5% occupancy rate at the end of the quarter. As John summarized, these underlying market conditions are supportive to…

Thanks, Hessam. Now turning to our second quarter 2014 numbers in more detail. Total revenues for the second quarter of 2014 were $134.3 million compared to 105.5 million for the same period in the prior year at an increase of $28.8 million or 27%. The increase in total revenues is primarily driven by real estate brokerage commissions. Revenues from real estate brokerage commissions increased to $123.3 million from $95.8 million for the same period in 2013, an increase of $27.5 million or 29%. Revenues from financing fees generated principally by MMCC increased to $8.4 million from $6.9 million in the second quarter of last year for an increase of $1.5 million or 22%. Other revenues of $2.6 million were down slightly compared to 2.8 million last year. As John explained earlier, our second quarter revenue growth was strong and we continue to expect positive results for the remainder of the year. Now let’s take a closer look at some of our revenue drivers within our investment sales activities which generated more than 90% of Marcus & Millichap's total revenue in the quarter. For the second quarter, sales volume was $5.6 billion up 36% from 4.1 billion in the last or second quarter of last year. The total number of transactions was 1,392 for an increase of approximately 18% from 1,177 transactions in the second quarter of last year. The increases in sales volume and transactions are driven by key factors underlying our business model where we saw a 15% increase in average number of investment sales professionals with a concentration in experienced sales professionals which contributed to an 18% increase in the number of investment sales transactions. We also saw a 15% increase in average transaction size, this contributed to a 9% increase in the average commission size and a…

Thank you. We will now be conducting a question-and-answer session. (Operator Instructions). Thank you. Our first question comes from the line of Phil Stiller with Citi. Please proceed with your question.

I guess I wanted to ask about the higher average transaction size, it was up about 15% this quarter, it was up 10% last quarter. Just looking for a bit more color on what’s driving that, is that above I guess market from what you're seeing, any contributions from IPA? And then I guess secondly does that tie back to the commission rate decrease that you saw this quarter?

This is John, Phil. Thanks a lot for bringing that up. What we did in this quarter, we had a large transaction closed which skewed the numbers a little bit upwards by typically if you took that transaction out we would be about the same transaction amount we've seen on pricing. And maybe it had a little bit to do with our commissions going down slightly on average.

So there was a single transaction that caused that?

Yes.

So you are saying if that was not included, the average transaction was about 3.5 million?

Approximately right.

And then on the headcount growth, I think John you mentioned. I am sure if I got this number right, the new hires 19% were experienced. Just wondering what the plans were for additional headcount for the remainder of the year and what you think you could get that experienced mix too overtime?

I mean our headcount at this point in time I mean is moving up gradually, but really our strategy right now is to be able to hire more people who have some experience in the marketplace, lot of smaller competitors, local competitors in all of our marketplaces can see the value of our platform we’ve been pretty successful in getting them to come on board which then takes us a less time to get them into becoming revenue producers. It’s hard for us right now because we started this program about three quarters ago maybe at the end of 2013, we’re starting to see some success and then we’re starting to see some better productivity, but right now our goal right now strategically is to continue to try to hire more experienced people. As far as how many at this point in time I really -- we have a goal to hire as many as we possibly can but it’s not necessarily -- we’re saying we’re going to get X amount of people, but that’s our goal right now that you would another quarter or two we might be able to really hone in on the that type of number.

Okay great then last question, I’ll turn it over the SG&A expense was down sequentially, I am just wondering what caused that and what we should look for the remainder of the year?

Hey, Phil, it’s Marty. SG&A, I think I mentioned before typically the run rate for SG&A is around $32 million to $33 million a quarter and it really isn’t a so much as factor of percent of sales or percent of revenues, so I am still confident that, that’s our run rate probably Q4 is just a little bit higher than that at least that’s what we’re seeing right now.

Thank you. Our next question comes from the line of Brandon Dobell with William Blair. Please proceed with your question.

Hoping to focus on the producers for one second, when you hire somebody that's got a couple of years' experience at a smaller shop, I guess a two-part question, one does their book of business follow them over to you guys, and then two kind of related to that are we talking a couple of quarters before they start getting in the flow of producing transactions or is it going to take them a year and half to start making an impact for your guys?

Well, let me answer the first question, the book of business, I mean they have clients that I am sure will follow them over but really I think what we’re looking for more is that they actually know how to do a real estate transaction and then they come into our company I think our value proposition will enable them to be able to do more business because we have more inventory, we have exclusive listed inventory, we have other people that are professional around in their offices that they can actually bounce ideas off of. So we’re looking for their book of business, but the book of business is really more -- it’s really our platform that’s going to help them succeed even quicker. As far as how long it takes, if we get a person that's five years experienced or more it shouldn’t take more than a quarter and a half two quarters when they get their first deal moving forward. If they have limited experience a couple of years in the business, it won’t take them a year and a half but maybe six to nine months until they get their sales moving in the right direction, but it’s a lot better than some of the statistics we’ve had with taking brand new people out and taking nine or 15 months to make a couple of deals.

And I guess sticking with the producers but relative John your comments about the officer sector showing some good traction, are you targeting experienced people with an eye towards a specific property type i.e. see if we can get our office business going faster so let’s go after people that have spent some time in the office market? Or is it really just about let’s go find some good guys in that local market because we think our market share across every property type has some room?

I mean absolutely what you’ve said secondly is a good indication of what we tried to do, but we do look in certain marketplaces and we have our recruiters focused on say office buildings in certain particular marketplace because maybe our market share is little lower and there is a lot of velocity and a lot of stock in the market that fits our parameters. So we do both. I mean strategically we are looking for people in certain areas that do office or retail, but as the same time if we run into people in the market place we’re going to try to get as many people that are qualified as possible.

Okay and then many again sticking with headcount here for a second, as you look across the offices and the guys that are managing those offices, where are you on a scale of one to 10 in terms of how happy the Board and the management team is with the people at those levels and I guess I would ask you would be how much churn should we expect over the next handful of quarters and that kind of managerial or office head layer in the business?

On a scale one to 10, I would say we’re an eight of our satisfaction with the management team. I mean some people manage for four or five years and do a good job and then they really want to go back into production some times, so I would say that currently we have a few offices that are unmanaged that maybe somebody else is managing two offices at one time if they’re nearby. So I would say the churn wouldn’t be that big, but usually in a year, two, three, four people are replaced or moved into different role in the company.

And final one for me, it’s kind of a transaction size question but not only in the brokerage business but in the financing business average transaction size increased, so I guess again two-part question was the one big transaction that impact both regular brokerage numbers we see, but also the capital corporation and if it didn’t, there was something else going on in the capital corporation side just driving the average transaction size higher.

Well in terms of the average transaction size for MMCC, I think it actually -- I think they are starting to do a little larger sized loans, it wasn’t necessarily one or two single transactions that kind of skewed the number. So I mean it’s just kind of the flow of the business right now.

Thank you. (Operator Instructions).

Operator, are there any additional questions?

We have no questions in queue at this time.

Well, thank you very much for participating in today’s call and we would like to remind everyone that we will be presenting at the JMP conference in New York next month and we hope to see many of you there. Thank you very much.