Real Estate Consulting IndustrySenior Analysts: Ying Hang EngJunior Analysts: Jessica, Hannah, Linh, Brandon, Kyle

Industry DefinitionCompanies in this industry provide real estate-related services to businesses and individuals involved in real estate investment, transactions and development. Services include consulting and advisory, real estate asset management, escrow, relocation, tenant representation, listing, and fiduciary activities.

CBRE Group, Inc.(NYSE: CBG)Market Share: 5.9%

Jones Lang LaSalle Incorporated(NYSE: JLL)Market Share: 2.6%

CoreLogic, Inc.(NYSE: CLGX)Market Share: 2.1%

Realogy Holdings Corp.(NYSE:RLGY)Market Share: 0.7%

BGC Partners, Inc.(NYSE:BGCP)Market Share: 0.4%

Real Estate Consulting Industry Index

Nov-05Jan

-06

Mar-06

May-06

Aug-06

Oct-06

Dec-06

Feb-07

Apr-07

Jun-07

Aug-07

Oct-07

Dec-07

Feb-08

Apr-08

Jun-08

Aug-08

Oct-08

Dec-08

Mar-09

May-09

Jul-09

Sep-09

Nov-09Jan

-10

Mar-10

May-10

Jul-10

Sep-10

-50%

0%

50%

100%

150%

200%

AverageRussell 2000S&P 500

Process Flow: Revenue Generation Process

Source: IREM

Clients:Real Estate Developers, Commercial

Banks, Corporations,

Insurance Companies

Property Management

Asset Acquisition

Research Consulting

Financial Management

Marketing

Risk Management

Maintenance

Budgeting

Insurance

InspectionsProperty

Improvement

AccountingFinancial Analysis

Emergency Planning

Government Regulations

AdvertisingNegotiationDisposition/

Lease

Porter’s Five Forces

NEW ENTRANTS

SUPPLIERS INDUSTRY RIVALRY

CUSTOMERS

SUBSTITUTES

HIGH•Low barriers to entry• Low start-up and operational costs (small non-employer firms)•However, firms offering a wide range of services are able to attract and attain customers

LOW/MEDIUM HIGH

• Bargaining power huge impact on revenue creation of real estate consulting firms

MEDIUM

HIGH• Clients may switch to big firms that provide real estate consulting as well as other services

• Many small localized firms• Hard to drive up prices• Nonetheless, if firms provide

high quality service gain reputation increase bargaining and pricing power

• Level of competition is medium•Firms branching out to provide complementary services gain competitive advantage

Increase in Nonresidential Construction Spending and Activities

A CAGR of 11.46% from Jan 2011 to Aug 2014Architecture Billings IndexArchitecture firm building end high on third quarter

• Positive economic outlook and recover consumer confidence increase spending on construction

• Office rental vacancy rate expected to go down 9.6% in 2015

• Total Spending on construction have a R-square of 0.92 with revenue from real estate consulting industry

Increase spending and activities on nonresidential construction will require service from real estate consulting as

companies try to expand

J-11

A-11J-1

1O-11

J-12

A-12J-1

2O-12

J-13

A-13J-1

3O-13

J-14

A-14J-1

4220000

240000

260000

280000

300000

320000

340000

360000

Total Private Construction Spend-ing: Nonresidential

(Mill

ions

of D

olla

rs)

1/1/09 1/1/10 1/1/11 1/1/12 1/1/13 1/1/1430

35

40

45

50

55

60

-5-3-113579111315

Architecture Billings Index

IndexChange

Rising building permits are driving the housing recovery

- Housing starts is growing albeit slowly- CAGR of 15.72% since its lowest

point

Jan-05

Jul-05Jan

-06Jul-0

6Jan

-07Jul-0

7Jan

-08Jul-0

8Jan

-09Jul-0

9Jan

-10Jul-1

0Jan

-11Jul-1

1Jan

-12Jul-1

2Jan

-13Jul-1

3Jan

-14Jul-1

4400600800

10001200140016001800200022002400

Housing Starts From 2005 - 2014

Thou

sand

s of U

nits- Case-Shiller HPI is gradually gaining

footing back to the pre-crisis level- CAGR of 10.22% since 2008- Correlation between Case-Shiller

and Building Permits is 0.9467

Jun-2006

Nov-2006

Apr-2007

Sep-2007

Feb-2008

Jul-2008

Dec-2008

May-2009

Oct-2009

Mar-2010

Aug-2010

Jan-2011

Jun-2011

Nov-2011

Apr-2012

Sep-2012

Feb-2013

Jul-2013

Dec-2013

May-2014

120

140

160

180

200

220

Case-Shiller 20-City Composite Home Price Index

Inde

x Le

vel

- Building permits have rebounded strongly

- Our regression shows a 10% increase in building permits increases industry revenue by 1%

As home values increase, we can expect building permits to increase and therefore continue to drive revenue growth for the RE Consulting industry.

Possibility of increasing mortgage interest rate Industry is highly sensitive to change in interest rate and mortgage rateConsulting service depends heavily on demand for residential housing construction and reconstruction

Decreased demand for real estate due to transition to virtual worldNew business model without ‘brick and mortar’ need might dominate markets Less demand for commercial real estate over time

Impact from economic downturn Economic downturn will affect primary demand for consulting such as construction and expansion of business

Risks

Industry Rating Real Estate Consulting Industry Rating:

Recovering housing market coupled with increasing future demand and rising economy confidence gives the industry an overweight rating

1. Industry Recap & Outlook Increase spending and activities on nonresidential construction will require

service from real estate consulting as companies try to expand Rising building permits are driving the housing recovery

2. Continued Risk Factors Possibility of increasing mortgage interest rate Decrease demand for real estate due to transition to virtual world Impact from economic downturn

OVERWEIGHT

BACKUP SLIDES

Industry SnapshotReal Estate Listing Services

9% Real Estate Auction Services2%

Real Estate Consulting Services43%

Real Estate Relocation Services26%

Other Services11%

Property Management Services10%

Revenue: $61.6BProfit: $9.1BProfit Margin: 14.77%Industry Growth (09-14): 3.6%Expected Growth (14-19): 4.7%

SWOT Analysis

Sources: IBISWorld, Google Finance, Gartner, Booz Allen, KMPG

Strengths WeaknessesPricing power due to high quality serviceFirms with highly skilled staff with specialized knowledge gain reputation for quality service, hence increase their bargaining and pricing power

Ability to raise revenue from additional sources by providing complementary services to clients

Limited to local market Firms need specialized knowledge, hard to expand into different markets and gain economies of scale

Opportunities ThreatsIncreasing demand due to rising construction volumeIncreasing construction volume as market recovers creates demand for consulting and advisory services

Increasing demand from possible injection of new capitalPossible privatization of Fannie Mae and Freddie Mac would provide an injection of new capital into the property market and create demand for real estate asset managers and consultants

Additional capital from international investors

Interest rate increase reduces demand Interest rate increase defers real estate purchases, entitlements and development

Competition from substitutesCompetition from substitutes performing many of the same and additional services brokers, agents, REIT can bring industry services in-house reduces demand

Litigation risk

Key Financials

Company Market Cap(B) % of 52 week high Closing Price P/E Ratio (TTM) EPS(TTM) EV/EBITDA Debt/Equity LTM ROE LTM ROA

CBG 11.07 99.17% 33.49 28.38 1.18 13.14 134.46 19.90% 5.64%

JLL 6.44 99.27% 143.69 19.15 7.51 12.8 24.11 15.36% 7.32%

CLGX 2.98 91.90% 33.26 68.02 0.49 16.22 134.75 4.27% 1.33%

RLGY 6.7 89.17% 45.79 15.24 3.01 14.71 196.63 22.40% 6.00%

BGCP 1.89 96.32% 8.63 1438.33 0.01 13.17 58.47 6.02% 1.02%

High 11.07 99.3% 143.69 1438.33 7.51 16.22 196.63 22.4% 7.3%

Low 1.89 89.2% 8.63 15.24 0.01 12.8 24.11 4.3% 1.0%

Median 6.44 96.3% 33.49 28.38 1.18 13.17 134.46 15.4% 5.6%

Mean 5.816 95.2% 52.972 313.824 2.44 14.008 109.684 13.6% 4.3%

Forecast of revenue

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 20190.00

10,000.00

20,000.00

30,000.00

40,000.00

50,000.00

60,000.00

70,000.00

80,000.00

90,000.00

Back Up

2005 2006 2007 2008 2009 2010 2011 2012 2013 20140

200000

400000

600000

800000

1000000

1200000

1400000

0.00

50,000.00

100,000.00

150,000.00

200,000.00

250,000.00Total construction spending vs. Revenue

total construction spending

Revenue

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 -

100,000.00

200,000.00

300,000.00

400,000.00

500,000.00

600,000.00

700,000.00

800,000.00

0.00

50,000.00

100,000.00

150,000.00

200,000.00

250,000.00Total nonresidential construction spending vs. Revenue

Total Spending on nonresidential construction

Revenue

Linear Regression on total construction vs revenue

Regression Statistics              R 0.96048R Square 0.92253Adjusted R Square 0.91146S 12,304.31466Total number of observations 9

174218.2 =- 119569.0568 + 0.2786 * 1102212.83333333               ANOVA              

  d.f. SS MS F p-level    Regression 1. 1.26199E+10 1.26199E+10 83.35698 0.00004Residual 7. 1,059,773,113.99454 151,396,159.14208Total 8. 1.36797E+10          

Linear Regression on total non-residential construction vs revenue

Regression Statistics              R 0.63004R Square 0.39696Adjusted R Square 0.31081S 34,329.2322Total number of observations 9

174218.2 =- 117336.6409 + 0.4419 * 486070.666666667               ANOVA              

  d.f. SS MS F p-level    Regression 1. 5,430,226,491.27477 5,430,226,491.27477 4.60776 0.06896Residual 7. 8,249,473,285.4452 1,178,496,183.63503Total 8. 1.36797E+10