Greetings and welcome to the Marcus & Millichap’s Fourth Quarter 2014 Earnings Conference Call. At this time, all participants are in a listen-only mode. A 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, Mr. Steve Swett. Thank you, you may begin.

Thank you. Good afternoon and welcome to Marcus & Millichap's fourth quarter and full year 2014 earnings 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 questions may contain forward-looking statements. Words such as may, will, expect, intend, plan, believe, seek, could, estimate, judgment, targeting, should, anticipate, goal and variations of the these words and similar expressions are intended to identify forward-looking statements. Actual results could differ materially from those implied by such forward-looking statements due to a variety of factors including but not limited to general economic conditions and commercial real estate market conditions including the recent conditions in the global markets and in particular the U.S. Fed 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 which is expected to be filed with the Securities and Exchange Commission on/or about March 9, 2015. 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 represents 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 measure 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 Chief Executive Officer, John Kerin. John?

Thank you, Steve. And thank you for joining us today as we discuss results for the fourth quarter and full year 2014. I’ll begin today’s call with an overview of the Company’s performance and a review of our operational highlights. 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. Before I get started, let me just say we’re very proud to have completed our first year as a public company with very positive results and we want to thank our clients, our sales professionals, managers and employees for this company’s success. Let me begin with a review of our 2014 results, which reflect strong year-over-year growth across the board. 2014 revenue and real estate brokerage commissions and financing fees totalled $572 million, which is an increase of 31% from 2013. Full year adjusted EBITDA was 92.8 million, which was approximately 52% higher than the previous year. With this growth we achieved significant improvement in our adjusted EBITDA margin to 16.3% from 14.1% a year ago. In 2014, we closed the record 7,667 transactions, up 16% over the prior year with a total volume of $33.1 billion, which represents an increase of 38.2% and also a new record for the company. Turning to the fourth quarter with the strong finished of 2014 as we continue to execute our growth initiatives that drive the performance of our key metrics. These include growth in a number of sales professionals, total number of transactions and sales volume. Fourth quarter revenue of $172.4 million increased by 15.7% compared to the same period in 2013. At the same time net income rose to…

Thank you, John. Good afternoon everybody. My comments today are intended to provide an overview of the commercial real-estate market and therefore are not necessarily specific to Marcus & Millichap. Overall 2014 was a strong year for the economy and for the commercial real-estate sector. Economically, we saw an acceleration of employment growth, low inflation and lower interest rates. In fact the 10 year treasury yield closed the year at 2.2% and certainly 2.9% at the end of 2013 as a result of capital [flight to] safety, geopolitical issues, falling energy prices and expectations that the federal remained accommodative for some time. We added a total of 3.1 million jobs the best year since 1999 and announced to bring total employment in the U.S. 2.5 million above the prior peak. Commercial real-estate saw further gains in demand for space across all property sites with industrial office and retail showing the most improvement in overall occupancy. At the macro level, new supply remained in check industry wide including the apartment sector which is the only property sites that is seeing an above average level of the new development. Apartments ended the year at a healthy 95.3%, occupancy retail was at 93.4, industrial at 92.8 and office ended the year at nearly 85% occupancy. Specialty segments including hotels, self-storage, seniors housing all ended the year at their best occupancy levels since recovery began in 2010. In the property sales market, we saw an increase of 12% in the number of transaction and 14% gain in sales volume which points to a period of more normalized and sustainable expansion ahead. Higher was strong across the board particularly for the sub $10 million apartments and single tenant net leased retail properties. These two private investor dominated sectors comprised 39% of total sales in the…

Thanks Hessam. Now I would like to discuss our fourth quarter 2014 numbers in more detail. Total revenues in the fourth quarter of 2014 were $172 million compared to $149 million for the same period in the prior year for an increase of nearly 16%. This increase in total revenues was primarily driven by increases in our real estate brokerage commissions which grew to $157 million from $134 million for the same period in 2013 an increase of nearly 17%. This growth was driven by both an increase in the number of investment sales transactions as well as larger average commission size, partially offset by a slight decrease in average commission rates. Average commission rates decreased due to an increase in the proportion of commissions from larger transactions which generally earned lower commission rates. Revenue from financing fees generated principally by MMCC increased to $12 million from $7 million in the fourth quarter of last year for an increase of 59%. Other revenues of $4 million were down compared to $7 million last year driven primarily by a decrease in referral fees from other real estate brokers at a decrease in fees generated consulting and advisory services. Our strategy has produced strong growth over the past year; looking ahead we expect that market conditions will remain favorable with continued demand for commercial real estate. We also believe however that growth moving forward will be at more normalized rate. Now let me provide some color on the revenue drivers within the real estate brokerage, which generated more than 90% of Marcus & Millichap's total revenue in the fourth quarter. For the fourth quarter, the total sales volume was $7 billion up approximately 27% from almost 6 billion for the same period of the prior year. This was driven primarily by favorable…

Thank you. At this time, we will be conducting a question-and-answer session. [Operator Instructions] Our first question is from Brandon Dobell from William Blair.

Focus first on headcount, as you guys think about the people that you added during 2014, any sense of experienced guys versus fresh out of college guys and obviously pretty strong finish to the year in terms of adding headcount. Was there any difference in the fourth quarter adds as we think about experience versus not experienced compared to as a full year look?

I think throughout the year it's probably been about the same each quarter, In our prepared remarks we talked about 141 new experienced agents that joined our firm and we still take some inexperienced agents and they have their roles with whatever office they are in. But I don’t think there is really any big difference. In the fourth quarter sometimes we hire more people because after Labor Day things get really moving in a number of different areas, but I think it's been pretty normalized throughout the year.

From I guess headcount relative to different property types, are you getting to the point where you can or want to be specific in certain markets, we’re going to go after these kinds of specific people that are good in retail or are good in secondary office, stuff like that and are different at holes across the platform where certain cities are better and certain property types than others, I guess I am trying to get how specific you're getting in filling those property type holes or opportunities by different market?

Each regional manager, each region has needs to hire people in different product types. So yes they’ll come look specifically in a particular product type, you’ll have our recruiter there actually out looking step aside product type or geographical area. So you’re right along the lines there, that’s what happens typically when we’re looking for experienced agents.

Also Brandon, Hessam here, remember that our specialty divisions are each chart with growing their own segments so office, retail particular hospitality, self-storage, we are very specifically shooting targets by market for each of those specialties.

Thinking about that the market in general maybe sound for you, are you seeing any signs well maybe it’s the LTVs, debt covenants, assumptions that guys are making on their pro forma financials, is there any signs that are worrying you about the health on the debt markets or just peoples perspective on health of the properties that they’re acquiring?

We monitor that very closely as you know based on our previous discussions. The LTVs in particular is something that we track very, very closely we’re averaging 59.7% which is very healthy and well below other periods. We do sense that there is a lot of competition among vendors; they’re trying to put dollars out to the marketplace. But because the recoveries broadened so much you would occupancy improvement really across different kind of metros including secondary and tertiary markets now we’re seeing across the property size. The fundamental looks very good, even though there is a lot of competition among vendors we’re still seeing pretty good underwriting pretty good buyer qualification and really no sign that there is a crack in the integrity of the loan to values or how debt is been placed just yet, but we’re monitoring it very closely.

And then final one from me as we think about 2015 a couple of questions. Should we expect you guys to open any new offices or how many should we expect you guys to open? And then maybe Marty remind us as you think about the first quarter of '14, was there anything in there that was kind of out of usual transaction size, transactions got pulled or pushed into or out of the first quarter that would recognize your comments about seasonality, just want to make sure we don’t have -- we’re not missing anything from last year that would make the first quarter look a little strange?

This is John, I will answer your first question and I’ll let Marty answer after myself. As far as office openings, I think that most of what we’ve talked about over the last year has been really going into the offices that we have opened already and to fortify them in a number of ways specifically Manhattan where our headcount is growing a lot. I think we’ve talked about Boston where we opened up our strong regional office and our headcounts growing there. I mean there may be and we have -- I mean there is always on the horizon about purchase a small little team in that area that we do not have representation. So that’s always a possibility but there isn't any grand scheme because we’re in a sort of location that we don’t really -- it’s something that we’ll look for an opportunity but it’s not something we’re actually out there planning to open a large officer in place. And Marty.

Yes, right and Brandon, in terms of your second question for 2015, I think we’ve mentioned that we were expecting more normalized growth. We had a fantastic growth rate for 2014 obviously that’s not going to be sustainable. In terms of Q1 last year there wasn’t anything materially large what we call unusually large with respect the numbers.

Our next question is from Mitch Germain from JMP Securities.

Just curious you guys have in the past provided a slide that offered up your market share ranking relative to peers, I noticed that slide was included in the quarterly presentation. Just curious has there been any change there, I know that certainly given some of the hiring efforts I was hoping that we might see a change to the upside?

Sure, Mitch its Hessam. There should have been I’ll double check the overall $1 million to $10 million ranking of brokerage companies with our current market share of 7.5% and that has increased gradually over the past 18 months. We’re seeing the biggest movement in our market share in the retail and office segments. Obviously that it is a major focus of ours, especially multitenant retail and our apartment share is also inching up but at a slower pace than retail and office, just given the fact that we have much bigger presence already in the apartment market.

Just back to the hiring, I am just curious maybe John do you expect it to continue hiring at similar levels in 2015 or do you think that maybe you’re just going to be -- look you talked about keeping the office count relatively flat. I am just trying backfill a little more or rather than continued growth in new markets?

Well, really the experienced agent hiring is really more of a big focus, so if we're looking for experienced agents in the retail and a certain marketplace we're going to be going after those agents. So I mean looking hire 500 people not necessary but looking to strategically four offices with good people and move forward. That’s the ability we have right now because we did do a lot of recruiting from 2010 on. We're still going to recruit, we always recruit because there is always a need in each marketplaces so many transactions in $1 million to $10 million marketplace that we do recruit and it's a everyday business for our managers, our special group directors and our in-house recruiters. But the bottom line really is strategy trying to figure out exactly; who we need where we need it; it's not just put a number of people into an office and see what happens. So it's a little bit more to it than creating large numbers, creating quality numbers is really what we're looking for.

And then with regards to the financing business, I think you guys added about 10 professionals and see some really good growth clearly Hessam's commentary regarding lending markets strong why not try to make a greater effort in placing an emphasis on building that out to an even greater extent.

That’s pretty much our strategy for the point in time. And you're right we've had great success and growth in MMCC and there is probably where we have the ability to bring on a number of more people which we're focusing on at this point in time. You hit that around the head.

Last one from me, I believe its 150 million, sorry I don’t have now open in front of me. But of cash -- any thoughts about potentially instating some sort of recurring or special dividend?

Mitch it's Marty. Right now we don’t like I said we don’t have a dividend policy and quite honestly we think having a good strong balance sheet and amount of cash that we have is really a huge strong strategic advantage for us. So right now we view the cash needs and the cash balances within quarter every quarter and right now we've decided not to issue a dividend just yet.

Our next question is from Philip Stiller from Citigroup.

I guess I just wanted to follow up on the comments around more normalized growth in 2015. Just wondering what that’s in relation to whether you're talking about relative to the full year growth rate of 31% revenue growth or what you posted in the fourth quarter which seemingly was normalized already.

Right exactly, great so you can see that, the transaction volume our growth is moderating during the fourth quarter. So we kind of see more that growth rate being in line for this next coming year. So more normalized there will be high single-digits low-teens growth rates.

For transactions or for revenue?

Revenue.

And then you guys have talked about in the past agent productivity improving that it was up nicely this year and obviously with the higher and experience agent should in benefit from that. But is there much further room for that to go up? I know the part of what we've talked about in the past that kind of a maturation of maybe you've hired in the past just wondering how that mixes in with obviously new people coming in?

Yes I mean it can go up, sure could go up. I mean we have more mature agents that are going to get better and better each year and it will go up. The question is that we bring our experienced agents and keep in mind sometimes they have to close up their book of business from the previous broker. So sometimes the first six months of their tenure of Marcus & Millichap may be a little bit slower because they're still closing out on the transaction. So really it should go up based on be in the higher more seasoned professionals. So I am willing to tell you how much is going go up but I think there is a swing you could look at, it would make sense that there would some rise in productivity.

Can you guys perhaps comment on the competitive environment both from a hiring perspective as well as a competition levels on transactions or commissions rates?

I'll jump in, it's Hessam. On the commission rate front we're not seeing any pressures especially in our core business of the $1 million to $10 million segment as we've discussed before. The commission rates are very stable and remain stable from a competitive perspective, we've made our headway since the becoming a public company and then a lot more people are aware of the company's strength and are hearing the story much more often. We're in dialogue with a number of groups across the country that have interest in joining the firm. And so if anything, acquisition is really been boosted in past 18 months or so and it's a competitive market out without any question. So there is a lot going on the competitive front, but I think we're at the forefront of it and getting all attraction.

Last question perhaps for Marty. The tax rate in the fourth quarter was down a bit, just wondering how we should think about the tax rate going forward?

I think if you look at the annual number, I think that’s a good starting point.

Ladies and gentlemen, we have reached the end of our Q&A period. I'd like to turn the call back over to John Kerin for closing comments.