Do real estate brokerage firms have any intrinsic value?

David Goldsmith

All Powerful Moderator
Staff member
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

All Powerful Moderator
Staff member
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
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

All Powerful Moderator
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

All Powerful Moderator
Staff member
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

All Powerful Moderator
Staff member
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

All Powerful Moderator
Staff member
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.”