The Real Deal New York

Elliman’s profits plunge 75% in 2018 amid resi market slowdown

Howard Lorber-led firm said revenue rose to $754.1M; he said Elliman would review expenses in coming year
By E.B. Solomont | February 28, 2019 10:35AM

From left: 432 Park Avenue, Howard Lorber, and 157 West 57th Street (Credit: Getty Images)

Stung by a slowdown in the residential market, Douglas Elliman pocketed $5.2 million in 2018 profits — a quarter of last year’s net income — parent company Vector Group reported Thursday.

The New York-based brokerage, led by Howard Lorber, reported total revenue of $754.1 million in 2018, up 4.4 percent year over year. During the fourth quarter, the brokerage lost $2.6 million, compared to net income gain of $900,000 in 2017’s fourth quarter. Revenue remained relatively flat at $177.6 million.

“It was surely a tough year in general in real estate; we fared better than most,” Lorber said during an earnings call Thursday. “Obviously, our margins have declined because the business has been more competitive.”

During the fourth quarter, Elliman’s adjusted EBITDA was negative $500,000, down from $2.4 million a year prior. For the full year, Elliman’s EBITDA was $11.3 million, down from $26.1 million.

Despite the slower market, Elliman sold $28.1 billion worth of real estate in 2018, up from $26.1 billion in 2017.

With nearly 2,000 agents in Manhattan, Elliman recently claimed the No. 1 spot on The Real Deal’s annual ranking of residential firms, besting rival the Corcoran Group. Thanks to closings at buildings like 432 Park Avenue and One57, Elliman’s closed deals soared 72 percent to $8.99 billion, according to TRD’s analysis.

To improve profitability, Lorber said Elliman would be reviewing its expenses in the coming year. “We’re doing a lot of volume,” said Lorber, “but the idea is to make a lot of money. That’s our plan this year.”

One area that won’t be cut is agent commissions, he said, citing competition from new and established competitors angling to recruit top agents. “We’re not really planning on opening new markets; we’re not making any big acquisitions,” he said. “We’re trying to pare down where we can but keep the company running.”

On Dec. 31, 2018, Vector paid $40 million to buy Elliman CEO Dottie Herman’s 29.41 percent stake in the firm. Vector already owned 70.59 percent of the brokerage.

Overall, Vector said its total revenue was flat in 2018, at $1.87 billion compared to $1.81 billion. Net income dropped to $58.1 million, a 31.3 percent drop from $84.6 million in 2017.