The Real Deal Los Angeles

Thanks largely to new development, Douglas Elliman sold $6.4B in real estate in Q2

Parent company Vector has $475M in cash and plans to increase equity investments: Lorber

July 28, 2016 04:00PM
By E.B. Solomont

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Howard Lorber

Howard Lorber

From the New York site: Bucking the notion that the real estate market is softening like butter on a balmy day, Douglas Elliman sold $6.4 billion worth of real estate nationwide during the second quarter of 2016, up from $5.5 billion a year earlier, the brokerage’s parent company Vector Group reported Thursday.

For the first six months of the year, Elliman closed sales worth $12.1 billion, up from $9.6 billion during 2015’s first half, Vector said. And profits at New York City’s largest brokerage also soared, largely on the back of investments in its development market division, Chairman Howard Lorber said during an investor call.

Elliman generated $11.4 million in net income during the quarter (up from $6.4 million in 2015’s second quarter) and $18.5 million during the first six months of 2016 (up from $7.3 million in 2015). Revenues jumped to $181.7 million from $160.1 million during the second quarter, and $339.3 million up from $290.3 million for the first six months of the year.

With $475 million in cash on hand — $100 million at Douglas Elliman [TRDataCustom] – Vector is poised to reinvest some of that money into real estate development at a time when many banks have pulled back on construction lending.

“Having a lot of cash will give us opportunities to make good investments on the equity side because developers are going to need a lot more equity to get a construction loan than last year,” Lorber said. For the full year 2015, Elliman’s revenue was $637 million, 17 percent more than 2014.

Lorber said the company would invest a “decent portion” of its cash in real estate, where Vector subsidiary New Valley currently has a stake in 12 projects in New York City, including Fisher Brothers and Witkoff Group’s 111 Murray Street and the Park Lane Hotel, a venture with Witkoff, Macklowe Properties and Highgate Holdings. As of March 31, 2016, New Valley had invested $222 million in various projects, mostly condos and hotels. In L.A., the firm in invested in the construction of the Edition Hotel in West Hollywood.

Lorber said as the market evolves, his firm may invest more in rentals. “We’re opportunistic so we don’t care what it is as long as we believe we can make money in it,” he said.

Overall, Vector — buoyed by real estate sales — reported profits of $24 million on $438.3 million of revenues for the second quarter, compared to $17.6 million in profit and revenues of $416.2 million during 2015’s second quarter. For the first half of the year, revenue topped $819.1 million compared to $776.9 million. Vector’s adjusted EBITDA (earnings before interest, tax, depreciation and amortization) was $75.1 million for the second quarter, up from $63.8 million in 2015. For the first half to the year, the company’s adjusted EBITDA was $144.7 million, up from $115 million a year prior.

Elliman has also been pouring “tens of millions” into marketing efforts — including glossy magazines and a sponsorship deal with Madison Square Garden — associated with its expansion into new markets, Lorber told The Real Deal earlier this year. But in May, Elliman’s marketing mastermind Nicole Oge left the firm for unknown reasons, leaving many to wonder if the brokerage will continue with the strategy she put into place.