CoStar Group to Acquire ForRent for $350M

9/12/17

CoStar Group, Inc. (NASDAQ: CSGP) the leading provider of commercial real estate information, analytics and online marketplaces, announced today that it plans to acquire ForRent, a division of Dominion Enterprises, pursuant to a definitive agreement for $350 million in cash and $35 million in CoStar Group stock.

ForRent's primary service is digital advertising through a network of four multifamily websites — which includes ForRent.com, AFTER55.com, CorporateHousing.com and ForRentUniversity.com. ForRent had approximately 17,000 properties advertised on its websites as of June 2017. Through the first six months of 2017, these sites generated over 47 million visits and an average of 3.5 million unique monthly visitors. ForRent is headquartered in Norfolk, Virginia, and has 475 employees located in 38 offices around the United States.

"We are delighted to welcome the ForRent team and their family of sites to the Apartments.com network," said Andrew C. Florance, Founder and Chief Executive Officer of CoStar Group. "We believe this is a beneficial combination for all of our constituents. Prospective renters will have access to the most complete and accurate inventory of apartment availabilities with more than one million rentals spanning apartments, homes, and condominiums. Advertisers will benefit from our unmatched leads-to-lease conversion ratio. ForRent advertisers' properties will be featured on Apartments.com after the transaction closes increasing their exposure by approximately 500%. For the investors and lenders relying on CoStar for multifamily information and analytics, we expect the addition of properties and data from ForRent will further strengthen our information offering."

ForRent's revenue for 2017 is expected to be approximately $100 million and EBITDA is estimated at approximately $15 million, for an EBITDA margin of 15%, based on financial results from the first half of 2017. CoStar expects to achieve synergies of approximately $25 million within 24 months after the acquisition closes, resulting in an adjusted purchase price multiple of ten times EBITDA after synergies.

"110 million renters in the U.S. collectively spend just under half a trillion dollars a year on rent, representing one of the fastest growing consumer market segments," said Florance. "Our commitment to the multifamily industry has been resolute and evidenced by our investment in marketing, technology and the curation and delivery of original content to create the premier marketplace for renting an apartment in the United States."

ForRent.com will remain a distinct, complementary brand to Apartments.com. By offering multiple distinct website marketing solutions, property managers and owners will have more exposure for their listings. CoStar expects to fully integrate the underlying technology that supports its entire multifamily suite of services by mid-2018, thereby efficiently leveraging a common research and listing platform. Following integration, advertisers will be able to manage all of their listings across the combined networks through a single website. CoStar expects this will result in significant operating efficiencies for the Company, its advertisers, and renters.

"We intend to enhance ForRent.com and its related sites as we did with Apartments.com and ApartmentFinder," said Florance. "Our research, technology and marketing initiatives have created the most-visited apartment listing site, which in turn delivers unprecedented levels of leads, leases and value to our advertising customers. We look forward to delivering that same value to all renters and advertisers on the ForRent network of sites."

"We are pleased to become part of the Apartments.com network," said Terry Slattery, President of ForRent. "CoStar's commitment to and investment in the multifamily space has created an exceptional platform that provides renters outstanding visibility with the highest quality of listings while providing property managers exceptional value through tremendous lead conversion. ForRent has partnered with its valued customers for decades and we believe that our customers and users will greatly benefit from this terrific combination."

Florance stated, "I am looking forward to working with the great team at ForRent and welcoming them to the Apartments.com family. The entire team at Apartments.com is dedicated to building and growing commercial real estate's premier online apartment platform across the $3.5 trillion U.S. multifamily asset class."

The transaction is expected to close in the fourth quarter of 2017 subject to customary closing conditions.

Outlook

At completion of integration, CoStar expects the acquisition to add revenue of approximately $75 million - $85 million, after merging the client base as well as discontinuing certain non-core services. Adjusted EBITDA margins are expected to be in a range of 45% to 55%.

"Our revenue in the multifamily space has grown rapidly over the past few years," said Scott Wheeler, Chief Financial Officer of CoStar Group. "When we combine ForRent with our existing advertising and information revenues from the multifamily industry, we expect to approach a $400 million revenue run rate by the end of 2017."

Based on preliminary estimates and assuming an October 2017 close, the Company expects that ForRent will contribute $17 million - $20 million in revenue in the fourth quarter of 2017, and be slightly dilutive on a non-GAAP net income per share basis due to the impact of integration costs and purchase accounting adjustments.

The Company expects to provide updated revenue and earnings guidance in its quarterly financial results release for the third quarter expected to be issued in October 2017.

The preceding forward-looking statements reflect CoStar Group's expectations as of September 12, 2017. We are not able to forecast with certainty whether or when certain events, such as acquisition-related costs, the exact timing of closing of the acquisition, or the exact amounts or timing of any investments related to the acquisition will occur. Given the risk factors, uncertainties and assumptions discussed above, actual results may differ materially. Other than in publicly available statements, the Company does not intend to update its forward-looking statements until its next quarterly results announcement.

About CoStar Group, Inc.

CoStar Group, Inc. (NASDAQ: CSGP) is the leading provider of commercial real estate information, analytics and online marketplaces. Founded in 1987, CoStar conducts expansive, ongoing research to produce and maintain the largest and most comprehensive database of commercial real estate information. Our suite of online services enables clients to analyze, interpret and gain unmatched insight on commercial property values, market conditions and current availabilities. LoopNet is the most heavily trafficked commercial real estate marketplace online with over 5 million monthly unique visitors per month. Apartments.com, ApartmentFinder.com, ApartmentHomeLiving.com, Westside Rentals and Apartamentos.com form the premier online apartment resource for renters seeking great apartment homes and provide property managers and owners a proven platform for marketing their properties. Through an exclusive partnership with Move, a subsidiary of News Corporation, Apartments.com is the exclusive provider of apartment community listings across Move's family of websites, which include realtor.com®, doorsteps.com and move.com. CoStar Group's websites attracted an average of over 37 million unique monthly visitors in aggregate in the second quarter of 2017. Headquartered in Washington, DC, CoStar maintains offices throughout the U.S. and in Europeand Canada with a staff of over 3,500 worldwide, including the industry's largest professional research organization. For more information, visit www.costargroup.com.

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