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CoStar Closes LoopNet Acquisition To Begin New Chapter in CRE Technology

Industry's Leading Information Service Combines With Leading Online CRE Marketplace
April 30, 2012
CoStar Group, Inc. (NASDAQ:CSGP) this week completed its previously announced acquisition of LoopNet, Inc., bringing together commercial real estate's leading provider of information and analytic services with the leading online commercial real estate marketplace. The closing occurred Monday April 30, after the combination cleared regulatory review last week.

CoStar Group's founder and CEO Andrew C. Florance said work would begin immediately on integrating the two leading firms to create the premier information, marketing and analytics company in commercial real estate.

"We are very pleased that we can begin integrating these two successful companies that have been at the forefront of innovation in the commercial real estate industry," said Florance. "We believe that the combined company will be the premier resource for researching, analyzing, and marketing commercial real estate properties online and will be positioned to provide more widespread market coverage for customers ranging from large, national brokerage firms, property owners and institutional players to small, local brokers, owners and investors."

CoStar operates the largest and most robust commercial real estate information database with 81.8 billion square feet of office, retail and industrial inventory, 1.5 million listings and 12.7 million images.

LoopNet.com is the industry’s largest and most heavily trafficked online marketplace with 5.8 million registered members and 3.6 million unique monthly visitors, according to Google Analytics. LoopNet is also the leading website for marketing commercial property listings.

The combined company will retain the name CoStar Group, Inc. and will continue to trade on the NASDAQ Global Select Market under the ticker symbol CSGP. CoStar plans to continue to operate LoopNet as a separate brand.

"With 5.8 million registered users and 3.6 million monthly unique users on LoopNet, it is clear the Internet has become an essential tool for effectively marketing commercial real estate with hundreds of thousands of brokers seeking investors and tenants for over a million commercial real estate listings across the U.S.," Florance said. "We believe that LoopNet.com and its strong group of vertical platforms is the number one solution meeting this growing demand.

"As commercial real estate brokers and owners continue to move property listings to online channels, we fully anticipate LoopNet’s marketplace will become increasingly important to those marketing or searching for properties," he added. "Our strategy is to build upon LoopNet’s position as the premier online marketplace for commercial real estate and strengthen its products and services."

Florance also said he sees the combination and resulting integrated technology platform bringing new innovation and services for commercial real estate professionals serving the $11 trillion U.S. commercial real estate asset class. He said numerous analysts and observers have for years under-estimated the size of the commercial real estate market, which he believes has more than a million participants.

"The commercial real estate market is vast, and information is constantly changing. It requires high quality research, advanced analytics and more efficient marketing solutions," Florance said in a follow up conference call with investors Wednesday, adding he expects the combination will also result in tremendous growth opportunities.

"CoStar's research department of 900 individuals captures details on over a million listings which we believe can result in over a hundred thousand new leads to LoopNet's sales team," said Florance. "In addition, there are hundreds of thousands of industry participants searching LoopNet who do not yet subscribe to CoStar and access to the leads represents a significant cross selling opportunity for CoStar. CoStar's clients can benefit from even more comprehensive coverage of the commercial real estate market since we believe that LoopNet contains hundreds of thousands of listings not yet found in CoStar. We plan to identify these properties, then validate and add them to the CoStar database."

Also on the follow-up call, CoStar CFO Brian Radecki provided a financial outlook for the combined companies, noting the transaction is expected to be accretive to non-GAAP net income per diluted share in 2012 and beyond on a combined basis. Consolidated annual revenue in 2012 for CoStar to be approximately $343 million to $349 million.

"We believe that the combination of these two companies will create a business with outstanding revenue growth potential, as well as a strong earnings profile with the ability to generate high margins and cash flow," said Radecki.

Editor's Note: This news report was updated since its original publication date to add new information and details released by the company in a conference call on Wednesday, May 2, 2012.

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