Noncontrolling Interest

12 Months Ended

Dec. 31, 2011

Noncontrolling Interest [Abstract]

Noncontrolling Interest

14. Noncontrolling Interest

Noncontrolling interest recorded in the consolidated financial statements of HFF, Inc. relates to the ownership interest of HFF Holdings in the Operating Partnerships. As a result of the Reorganization Transactions discussed in Note 1, partners’ capital was eliminated from equity and a noncontrolling interest of $6.4 million was recorded representing HFF Holdings remaining interest in the Operating Partnerships following the initial public offering and the underwriters’ exercise of the overallotment option on February 21, 2007, along with HFF Holdings’ proportional share of net income earned by the Operating Partnerships subsequent to the change in ownership. As discussed in Note 1, HFF, Inc. is a holding company and, as such, does not generate income other than through its proportional share of net income earned by the Operating Partnerships. However, HFF, Inc. does incur certain costs which are not allocated or shared with the Operating Partnerships or their direct or indirect partners (including HFF Holdings) and, therefore, the net income as shown on the consolidated statements of income is not proportionately shared between the noncontrolling interest holder and the controlling interest holder.

As a result of the Reorganization Transactions, HFF Holdings beneficially owned 20,355,000 partnership units in each of the Operating Partnerships. Pursuant to the terms of HFF, Inc.’s amended and restated certificate of incorporation, HFF Holdings can from time to time exchange its partnership units in the Operating Partnerships for shares of the Company’s Class A common stock on the basis of two partnership units, one for each Operating Partnership, for one share of Class A common stock, subject to customary conversion rate adjustments for stock splits, stock dividends and reclassifications.

The table below sets forth the noncontrolling interest amount recorded during the years ending December 31, 2011 and 2010, which includes the exchange of 1,113,691 partnership units for 1,113,691 shares of Class A common stock during the three months ended March 31, 2011, 25,444 partnership units for 25,444 shares of Class A common stock during the three months ended December 31, 2011, 1,738,266 partnership units for 1,738,266 shares of Class A common stock during the three months ended March 31, 2010 and 15,836,108 partnership units for 15,836,108 shares of Class A common stock during the three months ended June 30, 2010 (dollars in thousands).

	Three Months Ended 3/31/11			Three Months Ended 6/30/11			Three Months Ended 9/30/11			Three Months Ended 12/31/11			Year Ended 12/31/11
Net income from operating partnerships	$	7,753		$	22,733		$	17,562		$	22,529		$	70,577
Noncontrolling interest ownership percentage		(A	)		2.78	%		2.78	%		(B	)
Noncontrolling interest	$	297		$	632		$	488		$	614		$	2,031
	Three Months Ended 3/31/10			Three Months Ended 6/30/10			Three Months Ended 9/30/10			Three Months Ended 12/31/10			Year Ended 12/31/10
Net income from operating partnerships	$	1,234		$	9,962		$	8,063		$	8,233		$	27,492
Noncontrolling interest ownership percentage		(C	)		(D	)		5.80	%		5.80	%
Noncontrolling interest	$	625		$	4,528		$	468		$	477		$	6,098

(A) During the three months ending March 31, 2011, the ownership of the Operating Partnerships changed due to the exercise of exchange rights of HFF Holdings. HFF Holdings’ ownership percentage in the Operating Partnerships was 5.8% during January and February 2011 and 2.8% during March 2011.

(B) During the three months ending December 31, 2011, the ownership of the Operating Partnerships changed due to the exercise of exchange rights of HFF Holdings. HFF Holdings’ ownership percentage in the Operating Partnerships was 2.8% during October 2011 and 2.7% during November and December 2011.

(C) During the three months ending March 31, 2010, the ownership of the Operating Partnerships changed due to the exercise of exchange rights of HFF Holdings. HFF Holdings’ ownership percentage in the Operating Partnerships was 53.6% during January 2010, 53.2% during February 2010 and 49.9% during March 2010.

(D) During the three months ending June 30, 2010, the ownership of the Operating Partnerships changed due to the exercise of exchange rights of HFF Holdings. HFF Holdings’ ownership percentage in the Operating Partnerships was 48.8% during April 2010, 48.1% during May 2010 and 44.3% during June 2010.

Under the terms of the Exchange Right put in place in connection with the Reorganization Transactions, beginning in February 2009, HFF Holdings had the right to exchange 25% of its partnership units, with an additional 25% becoming available for exchange each year thereafter. However, these contractual provisions could be waived, amended or terminated by the members of HFF Holdings following consultation with the Company’s Board of Directors.

In June 2010, following consultation with the Company’s board of directors, the members of HFF Holdings agreed to modify the Exchange Right in connection with the extension of the Company’s employment agreements with certain participating members of HFF Holdings. These modifications permitted certain members of HFF Holdings to exchange in June 2010 all of its partnership units in the Operating Partnerships that corresponded to participating members’ interests in HFF Holdings for shares of Class A common stock. The participating members of HFF Holdings were then entitled to redeem all of their respective membership units in HFF Holdings for such shares of Class A common stock. This modification was conditioned upon each participating member’s agreement to extend the term of his or her existing non-competition and non-solicitation agreement to March 2015 and the imposition of resale restrictions on a portion of his or her shares of Class A common stock received pursuant to the Exchange Right exercise. The shares of Class A common stock subject to the resale restrictions equal 4,020,640 shares in the aggregate, which is equal to 25% of the original number of shares of Class A common stock that such participating members would have received following an exchange of 100% of their membership units in HFF Holdings held at the time of the initial public offering. The restrictions will begin to be released in March 2013. In March 2013, 33% or approximately 1.34 million of such restricted shares of Class A common stock will be eligible to be freely sold, with a like amount of such restricted shares of Class A common stock becoming eligible to be freely sold in each of March 2014 and March 2015. The contractual provisions setting forth these new resale restrictions can be waived, amended or terminated by the members of HFF Holdings following consultation with the Company’s board of directors. Members choosing not to participate in the modification of the Exchange Right continued to be subject to their existing non-competition and non-solicitation agreements and the Exchange Right restrictions that were effective at the time of the initial public offering.

Twenty-nine members, including the four inside directors of the Company, representing approximately 91% of the voting equity interests in HFF Holdings, elected to become subject to the conditions described above. On June 30, 2010, HFF Holdings exchanged all of its partnership units in the Operating Partnerships that corresponded to such participating members’ interests in HFF Holdings for shares of Class A common stock. These shares were then distributed to such participating members upon the members’ redemption of their respective membership units in HFF Holdings.

Nine members, representing approximately 9% of the voting equity interests in HFF Holdings, elected not to become subject to the conditions described above. HFF Holdings’ partnership units in the Operating Partnerships that correspond to these members’ interests in HFF Holdings continue to be subject to the Exchange Right restrictions effective at the time of the Company’s initial public offering.

The following table reflects the exchangeability of HFF Holdings’ rights to exchange its partnership units in the Operating Partnerships for shares of the Company’s Class A common stock, pursuant to contractual provisions in the HFF Holdings operating agreement. As reflected in the following table, as of January 31, 2012, HFF Holdings’ rights to exchange its partnership units for shares of Class A common stock are no longer subject to any restrictions.

	Original Exchange Rights Following the Reorganization Transactions					Reflects the June 2010 Modification of the Exchange Rights
Exchangeability Date:	Number of HFF Holdings’ Partnership Units in the Operating Partnerships Available for Exchange as a result of the Reorganization Transactions		Percentage of HFF Holdings’ Partnership Units in the Operating Partnerships Becoming Eligible for Exchange			Number of HFF Holdings’ Partnership Units exchanged for Shares of Class A Common Stock Exchanged Through December 31, 2011		Number of Additional HFF Holdings’ Partnership Units Expected to Become Available for Exchange		Percentage of HFF Holdings’ Remaining Partnership Units in the Operating Partnerships Becoming Eligible for Exchange
January 31, 2009		5,088,750		25	%		5,088,750		—		0	%
January 31, 2010		5,088,750		25	%		5,088,750		—		0	%
January 31, 2011		5,088,750		25	%		5,063,307		25,443		3	%
January 31, 2012		5,088,750		25	%		4,117,104		971,646		97	%
Total		20,355,000		100	%		19,357,911		997,089		100	%

On September 30, 2009, a Registration Statement on Form S-3 relating to the offering and sale from time to time by the members of HFF Holdings of such 20,355,000 shares of Class A common stock became effective. At December 31, 2011, 19,357,911 partnership units in each of the Operating Partnerships beneficially owned by members of HFF Holdings immediately following the Reorganization Transactions had been exchanged for an equal amount of shares of HFF, Inc.’s Class A common stock pursuant to the Exchange Right. After giving effect to these changes, HFF Holdings owned 2.7% of the Operating Partnerships at December 31, 2011.

If all of the remaining partnership units held by HFF Holdings were exchanged for shares of Class A common stock of HFF, Inc. on December 31, 2011, 997,089 shares of Class A common stock with a fair value of $10.3 million would be issued and 36,981,054 shares of Class A common stock would be outstanding.

On February 29, 2012, HFF Holdings exchanged 839,947 partnership units for 839,947 shares of the Company’s Class A common stock. After giving effect to such exchange, HFF Holdings’ ownership percentage in the Operating Partnerships was approximately 0.4%.

As a result of the Reorganization Transactions, HFF Holdings was issued one share of the Company’s Class B common stock. Class B common stock has no economic rights but entitles the holder to a number of votes that is equal to the total number of shares of Class A common stock for which the partnership units that HFF Holdings holds in the Operating Partnerships are exchangeable.