Douglas Elliman lost $8.1 million during the first quarter due to sluggish sales in New York City and costs associated with acquiring Los Angeles-based Teles last year, the firm said Wednesday.
The New York-based brokerage reported $159.4 million in first-quarter revenue, up from $155.5 million during 2017’s first quarter, according to Vector Group Ltd., which owns Elliman and New Valley, a real estate investment vehicle. Last year, Elliman’s first-quarter net income was $100,000.
“The New York real estate market has been challenging thus far in 2018,” chairman Howard Lorber said during an earnings call Wednesday. He said Elliman has $72 million in cash — while Vector has $282 million in cash — which would allow the company to invest in opportunistic acquisitions to deliver shareholder returns and weather the short-term challenges.
Bryant Kirkland, Vector’s chief financial officer, pointed out that the $8.1 million loss was offset by a $2.5 million judgment Elliman received from William Raveis Real Estate in an agent-poaching case.
Kirkland also cited the Teles acquisition. “There’s still [an] up front cost,” he said.
New York has traditionally been a money-maker for Elliman, thanks to lucrative new developments. (Commission payouts are also lower in New York than in markets like L.A., where brokers command splits of 85 percent or higher.) But fewer new development closings have hurt Elliman in recent months.
The brokerage sold $6.1 billion worth of real estate during the first quarter, up from $5.6 billion in 2017’s first quarter. Vector received $27.3 million on the sale of 20 Times Square on its initial investment of $19.5 million.
Lorber said the New York market is starting to pick up, as sellers come to terms with prices that are down around 15 percent. “They’re finally starting to realize that they have to drop their pricing,” he said.
Elliman’s struggle with profitability speaks to broader challenges in the residential brokerage world. Last month, Town Residential shuttered its resale and leasing operation after CEO Andrew Heiberger said competition and high commission costs made it impossible to sustain a profit.
Overall, Vector reported $429 million in revenue for the first quarter, up from $415.2 million in 2017. Net income was $7.2 million, compared to a net loss of $4.2 million in 2017’s first quarter.