Do real estate brokerage firms have any intrinsic value?

David Goldsmith

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Judge says Realogy’s suit against Compass can stand
Decision leaves opening for arbitration with Corcoran

A New York judge has denied Compass’ motion to dismiss an explosive lawsuit accusing the brokerage of “predatory” poaching and other wrongdoing.
Realogy, the parent company to the Corcoran Group and Coldwell Banker, filed the wide-ranging suit last year, alleging its SoftBank-backed rival engaged in illicit business practices to gain market share “at all costs.”
In addition to its motion to dismiss, Compass sought arbitration on the grounds that it and Corcoran are members of the Real Estate Board of New York, which requires members to resolve disputes through mediation.

After hearing oral arguments via Skype on Friday, Judge Barry Ostrager denied Compass’ motion to dismiss the suit and compel arbitration. But he carved out an exception for Corcoran, giving Realogy the opportunity to clarify what allegations related to Corcoran will be litigated as opposed to resolved outside of court.
“Arguments advanced by [Compass] with respect to Corcoran could have been advanced against at least one other plaintiff and were not,” Ostrager said. “In the circumstances of this case, the issue of arbitrability is for the Court to determine as there is no unequivocal agreement by Corcoran to arbitrate the issues in this case.”
Both sides interpreted the ruling as a win.
In a statement, Realogy said: “Open and honest competition in our industry is something we take very seriously, and we are pleased that the New York Court today agreed that our stated claims against Compass are viable and should move forward.”
A Compass spokesperson said the brokerage “strongly believes” in the industry’s ability to settle disputes outside of court and maintained the position that Compass and other REBNY members are required to arbitrate disputes.
“The Court’s order today upheld those principles and, after Realogy files its amended complaint, Compass intends to enforce them again if needed,” the spokesperson said. “While we’re disappointed that the Court did not grant our motion to dismiss other claims, we’re steadfast in our assertion that these claims are without merit and look forward to demonstrating this fact regardless of the venue.”
Realogy hit Compass with a wide-ranging suit last summer, in which the conglomerate accused its rival of “predatory” poaching and collusion.
In an interim decision in February, which only took into account some of the allegations, the judge also denied Compass’ motion to dismiss. “This case appears to be the culmination of years of informal and formal disputes among the parties,” he wrote at the time, noting that the defendants “have not satisfied the burden” to justify a dismissal.
 

David Goldsmith

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Judge rejects Realogy’s bid to force $400M sale of Cartus
Brokerage giant is now fighting to secure $30M breakup fee for scuttled deal to unload relocation business

A judge has rejected Realogy’s bid to compel the would-be buyer of its relocation business, Cartus, to close the $400 million purchase. And now, the brokerage giant is pursuing a $30 million breakup fee for its trouble, according to Inman.
Realogy sued Madison Dearborn Partners and subsidiary SIRVA in an effort to finalize the deal on a contract the firms entered into late last year. Realogy accused SIRVA and Madison Dearborn of using the coronavirus as an excuse to back out.

But SIRVA and Madison Dearborn said it called off the sale out of fear Realogy was near insolvency.
On Tuesday, a chancery court judge in Delaware sided with the defendants, according to Inman. The judge ruled that Realogy’s decision to sue Madison Dearborn and SIRVA violated the terms of the parties’ purchase agreement.

“Realogy, not SIRVA, caused the conditions to fail,” the judge said, according to a Bloomberg report.
Realogy will continue to operate Cartus and pursue its breakup fee from Madison Dearborn and SIRVA.
 

John Walkup

Talking Manhattan on UrbanDigs.com
I haven't followed this story so not sure what the $400M purchase price was for? Is there some tech and expertise, or is it an expensive Rolodex?
 

David Goldsmith

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Staff member
Look out below: Major real estate services firms brace for falling earnings
Coronavirus-related inactivity and volatility in Q2 will likely spell big trouble for giants like CBRE, JLL and Cushman, analysts say

The latest earnings reports are approaching for major real estate services firms like CBRE, JLL and Cushman & Wakefield, but there likely won’t be much in the way of optimism in the industry.
The U.S. economy bore the brunt of the coronavirus pandemic in the second quarter, and some analysts expect those April through June declines to be more drastic than the ones experienced a decade ago, according to Business Insider.

“During the last recession, you saw an 80 percent to 90 percent drop in real estate transactions over a two-year period,” said William Blair analyst Stephen Sheldon told the outlet. “This time you’ve seen nearly the same decline in a much shorter time frame year-over-year.”

Sheldon said he expects 40 percent to 50 percent year-over-year declines in earnings for the four biggest firms — CBRE, Cushman & Wakefield, JLL and Colliers International. He predicts as much as a 100 percent drop for Marcus & Millichap, because the firm relies so heavily on sales.

Cushman reported a 70 percent decline in net income in the first quarter. Declines in leasing and capital markets business were buoyed by steady income from property management. As of May, the firm had put acquisitions and mergers on hold.

Shares for Cushman were trading below $11 as of Friday morning, down from highs of around $20 earlier this year. CBRE shares were down 30 percent for the year. JLL and Colliers shares were both down around 40 percent.
 

David Goldsmith

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Realogy’s Q2 profits plunge after “unprecedented” drop in sales
Brokerage giant’s Q2 revenue dropped 25% year-over-year

Realogy’s profits plunged during the second quarter, after coronavirus slowed home sales across the country, the brokerage giant said Thursday.
Realogy reported a $14 million loss during the quarter — a huge drop from $69 million in profits during the same period last year. Citing a “massive drop-off” in transactions, Realogy said revenue also fell 25 percent to $1.2 billion, from $1.6 billion a year ago.

During an earnings call with analysts, CEO Ryan Schneider cited an “unprecedented” drop in home sales in March, April and May. But Schneider said open transaction volume — which represents new deals — is showing “very strong” growth. Preliminary data for July show open volume rose about 30 percent.

To stem its losses during the height of the pandemic, Realogy took drastic cost-cutting steps, including slashing executive pay and marketing expenditures.
CFO Charlotte Simonelli told analysts that Realogy reduced expenses by $95 million during the pandemic. Most of the temporary cuts, she said, would be pulled back by the end of the year. But going forward, she said Realogy expects to reduce its lease expenses by $10 million to $15 million.

As the housing market picks up, Realogy said it’s seeing demand in the suburbs. In New York City, where sales declined 50 percent at one point during the pandemic, sales are still down about 30 percent to 40 percent, Schneider said.
By contrast, New Jersey is “on fire,” Schneider said, with sales up 50 percent.

Realogy, the parent of the Corcoran Group and Coldwell Banker, said it finished the quarter with $686 million of cash, including $400 million of credit it drew down in March. Realogy still has north of $3.5 billion in corporate debt, however.

During the quarter, Realogy said its agent headcount was up 2 percent, the fifth consecutive quarter of year-over-year growth.
Schneider said that during the pandemic, agents have become even more valuable to their clients. “All of the iBuyers shut down, and the agents powered on,” he said. “Realogy agents and others.”
 

David Goldsmith

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Douglas Elliman’s New York revenues fall by half
Brokerage reports $5M loss in Q2; NYC is only pain point, Lorber says

Douglas Elliman tried to get into fighting shape last quarter, trimming $20 million in costs through layoffs, furloughs and salary cuts. Still, it wasn’t enough to avoid a beating: the residential brokerage, New York’s largest, reported a net loss of $5 million for the quarter.
During the same period last year, Elliman, a subsidiary of Vector Group, reported net income of $15.1 million. Year-over-year, revenues have also plummeted, dropping 45 percent to $132.9 million from $243 million.

Howard Lorber, chair of Elliman and CEO of Vector Group, said the drop was most acute in Elliman’s main market, New York City, which accounts for 70 percent of the firm’s total revenues. Revenues from the New York metropolitan area were down 52 percent year-over-year, he noted, blaming the decline on Covid-related state and local restrictions on movement. He also said that the highs of last year – which saw a record number of luxury sales ahead of the imposition of a new mansion tax – were a tough act to follow.

Elliman’s performance did improve from the first quarter, when it reported a net loss of $10 million. Lorber sounded an optimistic note on the market ahead. He pointed to low mortgage rates, and said Aspen, California and South Florida showed promise.

“I think the future looks good. Not every market will perform the same,” he said. “So we hope to continue those and to hopefully return to better days in the New York City market.”
He acknowledged that the city is seeing an outflow in buyer interest to Long Island, Westchester and the Hamptons. He also weighed in on the raging debate about the future of offices, saying that Elliman would slash its space needs.

“Obviously every company here in New York City has too much real estate today,” he said.
At the top of the call, Lorber said Vector would make changes to address racial inequality.
“Recent events have demonstrated that systemic racism and social injustice continue to exist today,” he said. “We all have significant work ahead of us as meaningful actions bring meaningful change.” His comments come days after Gov. Andrew Cuomo signed legislation empowering state regulators to revoke real estate licenses for violating anti-discrimination laws, a push made after an investigation by Newsday last year found systemic discrimination among Long Island real estate agents, including some in Elliman’s ranks. (At the time, a spokesperson for Elliman called the findings “an unreliable, unethical, and unscientific attempt to create a news story where there is none.”)

Vector also owns New Valley, an investor in luxury new development projects including 125 Greenwich Street, 111 Murray Street and The XI in New York and Monad Terrace in Miami Beach. Though it does not break out New Valley’s earnings separately, the division looks to have deepened the parent company’s losses, as the real estate division as a whole had a net loss of $12.4 million last quarter, compared to net income of $15.3 million during the same period last year. Total real estate revenues dropped to $133.3 million from $243.9 million.

Vector’s chief financial officer, Bryant Kirkland, said the firm received $2 million in net distributions from Eighty Seven Park in Miami Beach, up from the $650,000 received last quarter.
Lorber said New Valley is funding two hotels, the Edition in West Hollywood, and an unnamed New York property. Both were shuttered due to the pandemic but are expected to reopen this fall. At the start of the year, New Valley held stakes in several Manhattan properties with hotel components, including HFZ Capital’s The XI and 20 Times Square.

Overall, Vector, whose businesses include tobacco brands, reported a net income of $25.8 million, down 34 percent year-over-year from $39.3 million. Revenues for the company fell 17 percent year-over-year to $445.8 million from $538.4 million, due to losses at Elliman and New Valley.
 

David Goldsmith

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Cushman & Wakefield reports $101M quarterly loss
Brokerage activities slowed drastically, firm says

Cushman & Wakefield reported a net loss of $100.8 million in the second quarter, down from a $6.3 million profit a year ago.
The loss came despite cost-cutting, as $75 million was trimmed for things such as travel, entertainment, events and incentive compensation.“I think most of us would agree that the impact of Covid-19 is unique and certainly different from previous recessions such as the great financial crisis,” said CEO Brett White during an earnings conference call Thursday. “However, while the shape of the recovery may differ from the GFC in the second quarter, the initial impact of Covid-19 presented similar behavior in our industry, especially across our leasing and capital markets brokerage businesses.”

Revenue from leasing activities during the second quarter was $264 million, down by 46 percent from $489 million in the same period last year. Revenue from capital market activities was $113 million, down by 52 percent from a year ago.

The firm’s total revenue for the second quarter was about $1.7 billion, down by 18 percent from last year’s $2.1 billion.
As in the first quarter, the steady stream of revenue from property management was a bright spot. That business line made up about 40 percent of total revenue in the second quarter.

In May, the company issued $650 million of senior secured notes, which mature in 2028, to expand its liquidity and be ready for merger and acquisition opportunities, White said.
“As many of you know, in this industry, differentiated real estate service platforms do not tend to trade hands often,” he said. “In times of stress, the market for those businesses can provide generational opportunities and Cushman & Wakefield is well positioned to take advantage of these should they arise.”
 

David Goldsmith

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Keller Williams reports 15% drop in sales in Q2
The brokerage’s new home listings in North America fell 23% year-over-year

Keller Williams saw sales volume plunge and the number of new home listings fall, as the pandemic brought many parts of the country to a standstill in the second quarter.
The brokerage’s North American agents closed 272,000 deals last quarter, for a total sales volume of $85.3 billion, down 15 percent from the same period last year, the company reported on Friday.

Its listings in the U.S. and Canada dropped 23 percent, year-over-year, with agents bringing just under 178,000 properties to market during the second quarter.

Written contracts, a harbinger for future closed sales, were down 13.5 percent annually to 315,000, with a total value of $99.4 billion, according to the private company, which voluntarily reports its performance quarterly.
Josh Team, president of Keller Williams, said the brokerage maintained “healthy profit levels” and noted that “we outpaced the industry in terms of closed transactions.”

He pointed to the National Association of Realtors’ report that second quarter closed transactions in the U.S. were down 17.8 percent, year-over-year.
Internationally, Keller Williams’ nearly 11,000 agents closed just over 6,000 deals in the second quarter, a 19 percent drop, year-over-year, as new listings tumbled 16 percent to about 19,200. Agents abroad wrote roughly 8,000 contracts, a 22 percent annual decline.

The quarter ended better than Keller Williams’ estimated after the first quarter. Team said the brokerage was forecasting a 20 to 30 percent drop in sales volume due to coronavirus. In late March, the brokerage announced it was slashing costs related to agent coaching and setting aside $20 million to support agents.

The brokerage is continuing to buckle down on its investment in and development of technology. The firm updated its consumer app to add new features such as scheduling for virtual tours, and Team said the firm’s relationship with Facebook was a “key contributor” to helping agents garner leads at low prices.

“Agents are finding massive success in social ads, often paying less than one to two dollars per lead,” he said in a release.
The firm said its social media advertising tools netted its agents nearly 723,000 leads from Facebook and Instagram, up more than 170 percent from the first quarter, at an average cost per lead of $1.77. Traffic on digital advertising for real estate has skyrocketed as many buyers remained at home, though developers have pulled back on spending, according to advertising agencies.
 

David Goldsmith

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Realogy settled part of its $400M Cartus lawsuit. Now what?
Sale agreement fell apart in April amid pandemic

Realogy settled part of its lawsuit over the aborted $400 million sale of its relocation business.
In a regulatory filing, the brokerage conglomerate said it entered a “confidential settlement agreement” with would-be buyer Sirva Worldwide and its parent company, Madison Dearborn Partners, regarding the sale of its relocation business, Cartus. The two sides have come to terms on the termination fee related to the purchase and sale agreement, according to sources.

A spokesperson for Realogy declined to comment beyond the regulatory filing, which doesn’t indicate whether the brokerage will pursue other legal remedies to force the sale.
Realogy and Sirva announced the deal involving Cartus in November 2019. Realogy said at the time that it planned to use proceeds to pay down more than $3 billion in corporate debt. The firm is the parent company of Sotheby’s International Realty, Coldwell Banker and the Corcoran Group.

But the agreement fell apart when the fallout from Covid became clear. Sirva and MDP backed out of the transaction in April on the grounds that the pandemic had a “devastating” impact on Cartus. It further alleged Realogy was flirting with “insolvency,” which would make it impossible to close the deal. In Realogy’s August lawsuit, filed in Delaware Chancery Court, the company accused Sirva and MDS of buyer’s remorse, and say they made “false claims in an attempt to avoid their obligations under the purchase agreement.”

But on July 17, the court dismissed the suit. Realogy later appealed, asking the state’s top court to revive part of its lawsuit to compel the sale. In an August 7 letter, the lower court judge urged higher-ups to wait.
Representatives of Sirva did not immediately comment. But in a statement after the July 17 ruling, the company said it was pleased with the outcome.

“As the court concluded, Realogy — not Sirva — caused the transaction to fail,” the company said.
Like other players in residential brokerage, Realogy began cutting expenses in March. It slashed marketing expenses and executive pay and shortened employee workweeks.

Last week, Realogy said it lost $14 million during the second quarter, compared to net income of $69 million during the same period last year. Realogy also said revenue fell 25 percent to $1.2 billion.
In 2019, Realogy reduced its net debt by $78 million. CEO Ryan Schneider said at the time that selling Cartus meant the company was “divesting a non-core, very complex business.”
 

David Goldsmith

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Compass went on hiring spree as BHS, Halstead made cuts
Analysis shows which residential brokerages grew and shrunk last quarter

As the coronavirus brought New York’s residential market to a near standstill, some firms axed brokers and one actually ramped up hiring.
The city’s largest brokerage, Douglas Elliman, pared back by 129 agents, or about 5 percent of its headcount, between March and June — the most significant decline in an analysis of Department of State data by The Real Deal. The firm declined to comment.

Nest Seekers International lost 17 agents, about 4 percent of the sales force it had when the pandemic hit.
Eddie Shapiro, CEO of the firm, said the net loss didn’t represent anything unusual.
“I’m not disappointed or alarmed by it,” he said. “I expected it to be a lot worse.”

Shapiro said when transaction volume fell off a cliff, Nest Seekers buckled down to weather the storm. Indeed, many firms cut marketing budgets, laid off or furloughed administrative staff, trimmed executive salaries and even announced plans to consolidate offices.

Compass took many of those measures, but also made a concerted effort to continue recruiting. The firm grew by 11 percent, adding close to 250 to its ranks during the second quarter.
Rory Golod, Compass New York regional president, said that was a 91 percent year-over-year increase in its hiring.

The only other firm that saw a net gain was the Corcoran Group, which added 10 agents to raise its agent count to 2,405.
Statewide, the number of licensed real estate agents and brokers declined by about 4 percent, or 2,300, between the start of the state’s shutdown in late March and late June.

It is not clear if agents and brokers exited the business for good or just delayed renewing their licenses. New York City gets about 2,000 newbies per month while about 1,600 licensees drop off for a net gain of 400, according to an estimate by New York City-based real estate data firm Space.

TRD’s analysis found that about 767 real estate licensees dropped off each month last quarter.
But brokerage leaders deny there’s been any unusual number of exits from their ranks. In fact, many say churn was fairly normal despite the housing market seizing up. Calls from recruiters, offers of six-figure signing bonuses and decisions to terminate agents — all part and parcel of the business in normal times — continued during the second quarter of 2020, they said.

“A lot of agents had a moment to reassess where they were and what company they wanted to be a part of,” Golod said, touting Compass’s lending and technology services. The firm also forged ahead with new offices in New Jersey and on Long Island’s Gold Coast.

For some firms, declines were by design. Brown Harris Stevens and Halstead, which announced a merger in June but were considered as separate firms in TRD’s analysis, saw a net loss in headcount of 1.6 percent and 2.8 percent, respectively. That pencils out to approximately 38 agents.

The loss was attributed to letting underperforming agents go, according to both Bess Freedman, CEO of BHS, and Richard Grossman, president of Halstead.
“We did go through our ranks,” said Grossman. “The agents that we asked to leave us during this period of time [were] agents that weren’t making it before Covid … and we just never had that conversation.”

Grossman explained that most of the agents that were asked to leave had not been actively doing business prior to the onset of the shutdown and either exited entirely, or became referral agents with their licenses transferred into a holding company, a common practice among New York City brokerages.

BHS took a similar approach, “pruning” licensees that were no longer active, Freedman said.
She said although some agents did approach BHS and move their businesses over, the firm did not do any recruiting last quarter. Freedman attributed that to hearing from BHS agents who were approached by recruiters. She recalled one agent who fielded a call from a recruiter while recovering from Covid-19.

“It just felt tone deaf,” she said.
Grossman agreed, saying that Halstead also did not partake in recruitment.
“We didn’t feel this was the right time to be doing that during this pandemic,” he said. “Agents [called by recruiters] would come to us and say, ‘Wow, isn’t this the most inappropriate time.’”

Freedman added that BHS agents reported receiving an uptick in calls from recruiters following the merger announcement and that six-figure signing bonuses were offered to some of her agents during the quarter.
Compass’ Golod strongly denied that Compass, which has garnered a reputation for aggressive recruiting, was behind any of the sky-high offers.

“It’s just untrue,” he said, adding that Compass offers recruits a “small financial consideration” that is “closely aligned” with market standards.
“You can’t buy agents. It doesn’t work. Many companies have tried. If that were the case, every agent would be at a 100% split firm,” he continued.

Golod also pushed back on the idea that recruiting during a pandemic was bad form.
“Providing agents an opportunity where they can unleash their potential and make more money, I don’t see how that’s distasteful,” he said. “I think this insinuation that recruiting is distasteful or unethical is really just an excuse for traditional brokerages that don’t want to compete.”
 

David Goldsmith

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CEO shakeup at Keller Williams NYC
Balbuena worked for owner Richard Amato on Long Island

The new owner of Keller Williams New York City is bringing in a new leader.
Richard Amato, who bought the franchise from Ilan Bracha and Haim Binstock earlier this year, has tapped Lauren Balbuena to replace CEO Mark Chin, the company said. Balbuena previously led Keller Williams Points North on Long Island, another franchise owned by Amato.
Chin, who ran the Manhattan franchise during a tumultuous few months, culminating with its sale in February, will stay on to help lead a new training program and consultancy for agents — a move he called a “win-win.”
“I am proud to have guided the organization through a really tough time,” he said, referencing the brokerage’s financial woes and agent churn. Chin said he could have stayed on if he wanted to, but preferred to step back from the daily grind. “We’ve reset all the things we needed to reset… we’ve been profitable every month since March,” he said.

With around 360 agents, Keller Williams NYC is a shadow of its former, 900-agent self. But executives have been pushing hard for a turnaround after the brokerage grew too big, too fast. Bracha and Binstock brought the franchise brand to New York in 2011.
After purchasing their rights to the franchise, Amato consolidated two Keller Williams offices, in Midtown and Tribeca, which were run as separate businesses. In July, the combined brokerage moved into a 20,000-square-foot office at 99 Park Avenue.

Balbuena said key goals going forward are “growth and profitability.” Prior to working for Amato on Long Island, Balbuena was Chin’s No. 2 at Keller Williams Tribeca. She got her start at now-defunct Town Residential.
Over the last 90 days, Balbuena said, Keller Williams NYC has recruited six agents who sold a combined $60 million worth of real estate last year. And since June, the franchise has shared $140,000 in office profits with agents. (Keller Williams’ profit-share program gives agents a portion of the office’s monthly profits.)
In addition to recruiting new agents, Balbuena is looking to Chin’s coaching program to boost productivity and drive business to the franchise.

“The dirty secret is, if a brokerage has a few hundred people, the production is hugely concentrated in the top 5 percent,” said Chin, who is running the program with Janet Wilkinson and Susan LeFevre.
Nationally, Keller Williams is known for its agent coaching and training. Keller Williams Realty International is the largest real estate franchise in the U.S. with 169,317 agents and $351.2 billion in 2019 sales.
But it, too, is going through leadership changes. Earlier this month, founder Gary Keller stepped down as CEO, two years into a $1 billion plan to turn Keller Williams into a technology company. KWRI will no longer have a CEO, the company said. Instead, Josh Team is assuming Keller’s former responsibilities under the title of president.
 

David Goldsmith

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Staff member
Realogy profit surges to $98M as sales rebound
Brokerage giant formalized joint venture for iBuying

Citing explosive growth in the housing market, Realogy’s profit surged during the third quarter and the brokerage giant said it would add to its bet on iBuying.
Realogy said sales volume for the quarter rose 28 percent year-over-year, with September sales up 50 percent. “The volume improved each month during the quarter,” CEO Ryan Schneider said during an earnings call. Through Oct. 29, sales were up 35 percent from a year ago.

Overall, Realogy’s revenue rose to $1.9 billion during the third quarter, up 20 percent year-over-year. Net income for the quarter was $98 million, after a $14 million loss in the second quarter. Realogy lost $70 million in 2019’s third quarter, which the company attributed to an impairment charge.

In a sign of the shifting residential market, Realogy said it will double down on iBuying by formalizing a joint venture with Home Partners of America. The partnership, dubbed RealSure, has been a pilot program in select cities. Schneider said it will expand to a “substantial number of new markets” next year.

Unlike iBuyers, which use debt to purchase homes, Realogy’s iBuying program is “capital light.” Through RealSure, Realogy agents can offer sellers an instant offer from Home Partners of America that is good for 45 days. During that time, however, the agent lists the home on the open market to try to beat that price.
Schneider said Realogy will invest in the joint venture, but home purchases will be “off balance sheet” making it less risky. He described iBuying as another tool for agents, not a replacement of them.

“All the iBuyers shut down in Q2 and agents kept going,” he said.
Asked if he viewed Zillow’s decision to hire agents as a threat, Schneider said consumers would still look to brokers for infrequent, high-dollar transactions that are “different than buying something on Amazon.”
U.S. home prices climbed 5.2 percent in August, according to the S&P CoreLogic Case-Shiller 20-city home price index. And existing-home sales surged in September, with the median price hitting $311,800, up 15 percent year-over-year.
For Realogy’s brokerage group — which includes the Corcoran Group and Coldwell Banker — sales rose 10 percent year-over-year and the average home price jumped 11 percent year-over-year to $563,513.

Schneider said until this year, the U.S. housing market had been “stuck” at 5 million to 5.5 million homes sold each year. Historically low mortgage rates and social shifts have put the market on pace for 6 million sales.
“It’s a silver lining in a terrible year,” Schneider said. “Houses are moving much more quickly.” He cited migration from urban to suburb markets (a trend seen in the Northeast) and demand for housing in tax-friendly states.
Since last year, Realogy has been cutting costs in an attempt to pare down $3 billion in corporate debt. At the end of the quarter, it reduced that amount by $276 million from the prior-year period. It finished the quarter with $380 million in cash.

Realogy’s title and mortgage business benefited from a surge in refinancings, rising 129 percent year-over-year. The title and mortgage business generated $95 million during the quarter.
 

David Goldsmith

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JLL says hasn’t seen “anything worth spending our…money on” after reportedly passing on Cushman
Brokerage reports 19% fall in Q3 earnings but says M&A pipeline is growing

JLL CEO Christian Ulbrich didn’t exactly say Cushman & Wakefield wasn’t worth a page out of its checkbook. But the executive did throw shade on a pipeline of M&A deals rumored to include JLL’s smaller rival.
“The opportunities are increasing quite significantly at the moment,” Ulbrich said during the brokerage’s third-quarter earnings call Monday morning.” At the time we haven’t seen anything we think would be worth spending our shareholder’s money on.”

The statement came after JLL was said to be in discussions with Cushman about a potential acquisition, and as M&A activity in the commercial real estate brokerage industry is on the rise.
JLL and Cushman had reportedly been in talks recently about a potential merger, according to a recent news story. One source at JLL confirmed to The Real Deal that the talks had taken place. Cushman also reportedly made an offer to buy Newmark, which the latter rejected. And Marcus & Millichap recently inked a deal to buy Mission Capital Advisors.

Cushman’s large debt load, however, poses a complication for any potential tie up. The company’s debt of $3.2 billion exceeds its market cap of $2.8 billion. And the company’s earnings are trending in a direction that could trigger a technical default under the loan agreements.
JLL is a much larger company with a market cap of nearly $6.3 billion and also has a stronger balance sheet with a lower debt-to-earnings ratio. On Monday’s call, JLL CFO Karen Brennan said the company reduced its net debt by $320 million in the third quarter, bringing the company’s borrowings down to the level they were prior to JLL’s acquisition of the brokerage HFF in 2019 for $2 billion.

JLL’s earnings for the third quarter declined 19 percent compared to the same time last year to $244 million, driven by large declines in its leasing and capital markets businesses.
One financial indicator did, however, show improvement. The company’s EBITDA margin — a measure of earnings to revenue that filters out some financial variables — increased by 90 basis points to 17.4 percent.
JLL executives said the increase was due largely to layoffs and the benefits of government relief programs tied to Covid-19. The company in mid-October went through a large round of layoffs, as TRD reported last week.

Brennan said the company realized about $135 million in savings from reduced salary and benefits, 50 percent of which came from its Middle East region and 40 percent from the Americas.
 

David Goldsmith

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"All told, Elliman’s net loss is $62.2 million year-to-date, a huge drop from $6.6 million in net income over the same period last year."


Elliman reports $12M profit in third quarter after a year of heavy losses
Brokerage’s Florida, California business made up for losses in New York City

Douglas Elliman is still reeling from New York City’s struggling residential sector, but activity in its other markets has buoyed the brokerage’s earnings.
The firm reported $11.8 million in net income during the third quarter, driven by surge in closed sales in Los Angeles, Aspen, the Hamptons and South Florida markets. That’s up 521 percent from the $1.9 million in net income the brokerage reported in the third quarter of 2019. Quarterly revenues ticked up 3 percent year over year to $208 million.
Howard Lorber, Elliman’s chairman and Vector’s CEO, said the brokerage’s other markets “managed to make up a lot of what we lost in New York,” where sales volume remains down 46 percent year over year.

“We’re in [a] good position because of our strategy of being in other markets,” he told investors during Vector’s third-quarter earnings call Thursday. “Just about every one of our other markets is performing well. Some of them, multiple times of what they were before, especially South Florida.”

Though Lorber admitted New York City’s market was not bouncing back “as fast as we’d like to see,” he said deals at all price points are beginning to get done, signaling a marginal recovery.

Elliman wrote down $58.3 million related to the firm’s trademark and good will for the first nine months of 2020 as a non-cash impairment charge, as previously disclosed.
The brokerage also incurred $3.3 million in expenses from its cost-cutting measures, which include reducing its office footprint and cutting 25 percent of its personnel. Lorber noted that, excluding the associated costs, the firm has saved about $40 million so far this year.
All told, Elliman’s net loss is $62.2 million year-to-date, a huge drop from $6.6 million in net income over the same period last year.

Lorber said it’s difficult to compete with the second quarter of 2019, which was record-setting in terms of closings, particularly considering the “dramatic effect” of Covid this year. Elliman’s revenues sank by 45 percent with the firm reporting a net loss of $5 million last quarter, when the effects of the pandemic were most pronounced.
Vector’s real estate segment, which includes both Elliman and development arm New Valley, saw revenue increase 14 percent year over year to $229 million.
Lorber said New Valley’s contribution to that increase in revenue was the $20.5 million sale of a Hamptons estate he developed at 25 Potato Road in Sagaponack. But Lorder told investors on the call that despite the Hamptons market being red hot, the mansion’s sale in late August did not translate into profits.

“We didn’t make any money on it,” said Lorber. “Maybe we made a few dollars on it but not great because the market sort of collapsed, went down after that.”
The 4,857-square-foot oceanfront mansion was first listed in 2018 for just under $30 million.
Vector’s real estate segment reported a net loss of $4.1 million for the quarter, compared to a net income of $7.2 million last year. It also saw a 25 percent increase in cost of sales to $170 million, from $136 million during the same quarter last year.
Vector’s real estate segment reported a net loss of $4.1 million for the quarter, compared to a net income of $7.2 million last year.

“We have seen a migration of our sales at Douglas Elliman from the higher-margin New York metropolitan area to lower-margins areas such as South Florida and Southern California,” said Bryant Kirkland, Vector’s chief financial officer.
 

David Goldsmith

All Powerful Moderator
Staff member
Newmark reports Q3 earnings down 25%
CEO likens brokerage to “Navy SEAL” of M&A on call with investors

Newmark reported earnings of $152.1 million in the third quarter, down 25 percent from the same time last year. The brokerage said it experienced a drop in sales and leasing commissions due to Covid-related challenges.
On Thursday’s call with investors, the company’s chief executive addressed a question on potential mergers and acquisitions. CEO Barry Gosin likened Newmark’s M&A activity to an elite stealth operator.
“We kind of consider ourself more in the Navy SEAL category,” Gosin said. He added, “We’ve done fairly well by doing acquisitions of the right people that fill the right space in our company.” He noted Newmark acquired 50 smaller companies over the years.
M&A activity has been a hot topic of discussion in the commercial brokerage space lately. Newmark reportedly rejected a takeover bid from Cushman & Wakefield recently.

Earlier this week, JLL CEO Christian Ulbrich said the company has a growing pipeline of M&A deals, but hadn’t “seen anything we think would be worth spending our shareholder’s money on.”
JLL and Cushman had reportedly been in talks about a merger, but they ultimately fell apart.
 

David Goldsmith

All Powerful Moderator
Staff member
Virtual brokerage eXp notches most profitable quarter ever
Sales rose 112% to $23.6B during Q3

eXp Realty’s profits soared during the third quarter thanks to the booming housing market and the firm’s virtual operations.
Parent company eXp World Holdings said sales more than doubled during the third quarter to $23.6 million, compared to $11.1 billion in the third quarter of 2019. The company’s net income hit a record $14.9 million, compared to a loss of $1.8 million during the same period last year.

“Despite the unprecedented in-person business restrictions related to Covid-19, our agents were able to continue leveraging our virtual platform to conduct business as usual,” founder and CEO Glenn Sanford said in a statement.
eXp, founded in 2009 and based in Bellingham, Washington, went public in 2018. Last year, it reported its first profitablequarter. For all of 2019, eXp generated $980 million in revenue, up 96 percent year over year. It lost $9.6 million, compared to a net loss of $22.4 million in 2018.

Following several months of lockdown during the pandemic, eXp said revenue during this year’s third quarter surged 100 percent to a record $564 million. That’s up from $282.2 million in the third quarter of 2019. During the quarter, agents logged 75,392 transactions, up 95 percent year over year. Cash flow rose 188 percent year over year to $43.2 million, the firm said.
eXp, which operates entirely in a virtual world, now has 35,877 agents, up 56 percent year over year.
In a statement, CFO Jeff Whiteside said eXp would continue its international push, focusing on South Africa, India and Mexico. It also plans to launch a commercial brokerage arm.
 

David Goldsmith

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Staff member
CoStar to acquire Homesnap for $250M
Deal is expected to close later this year

CoStar Group is set to buy Homesnap, an app and technology provider for residential real estate agents, for $250 million, the Wall Street Journal reported.
The all-cash acquisition is expected to close later this year.

The acquisition would mark CoStar’s first major step into the single-family-home market, which dwarfs the size of the commercial real estate market. CoStar bills itself as the world’s largest provider of commercial real estate information and analysis.
Homesnap has about 150 employees, with this year’s revenue expected to be about $40 million, up about 45 percent form 2019. About 300,000 residential agents use the company’s app to manage and analyze their listings and others.

By merging, CoStar and Homesnap would expand each others’ reach, said Andrew Florance, CoStar’s founder and CEO.
“I would say that 50 percent of our broker clients do some residential and, of the top 100 residential firms, 80 percent do some commercial,” he said. “So we would think these tools as they come together would be pretty powerful.”

CoStar has also expressed interest in acquiring CoreLogic, one of the largest residential real estate companies valued at $6 billion, according to the Journal.
 
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