Douglas Elliman reports flat sales in 2019, blaming soft NYC market

Florida was a bright spot, Howard Lorber said in an earnings call

Feb.February 28, 2020 03:00 PM
Howard Lorber (Credit: Getty Images)

Howard Lorber (Credit: Getty Images)

Douglas Elliman’s sales volume was relatively flat last year as weakness in the New York City market offset an increase in Florida deals, the brokerage’s parent company reported Friday.

In all, the Manhattan-based firm saw sales tick up to $28.8 billion in 2019 from $28.1 billion the year before, according to its parent, Vector Group. Fourth-quarter sales edged down to $6.6 billion from $6.7 billion in the year-earlier period.

But despite gains in the Sunshine State, the company struggled with profitability. “While we made money in Florida, it’s hard to make up for New York City being the way it was during 2019,” said Howard Lorber, Ellliman’s chairman, on an earnings call.

Elliman’s net income was $6.2 million in 2019, up from $5.2 million in 2018. Revenue was $784.1 million, up from $754.1 million, Vector reported.

But Vector’s real estate segment as a whole — which includes Elliman and new development arm New Valley — had a net loss of $11.4 million in 2019, after a $14.8 million profit in 2018. The fourth quarter was a killer, with net losses of $24.9 million, after net income of $15.7 million a year earlier. Its 2019 revenue was $788.9 million, up from $759.2 million.

The 2019 financials reflect an erratic year in earnings: During the second quarter, Elliman, like other firms, benefitted from a flurry of sales before New York’s new mansion and transfer taxes took effect. But its net income plummeted in the third quarter as high-end sales predictably fell and the company invested in new markets.

Lorber said prices in New York were down 10 percent to 20 percent in 2019. As a result, Vector has shifted its focus to low- and no-tax states, including Texas. In August, Elliman announced a joint venture with Houston-based Sudhoff Companies, and Lorber said the firm would probably open in Dallas and Austin “in the near future.”

“That seems to be where the money is going,” he said. While Northeasterners go to Florida to invest in real estate, West Coast natives go to Texas, Nevada and Colorado, he added. “All that moving around will put us in a pretty good position to find some interesting opportunities to invest,” Lorber said.
As Elliman focuses on profitability, Lorber said it would continue to look at overhead. “We spend a lot on marketing. There’s probably some money that can be cut out of marketing,” he said. But he was wary about cutting too much.

“We still want to be in the position to grow the company,” the Elliman chairman said. “It’s hard to cut and cut — then you have nothing left.”

Overall, Vector said its 2019 revenue rose to $1.9 billion from $1.87 billion in 2018. Net income nearly doubled to $101 million, up from $58.1 million in 2018.

Vector reported $439.6 million in fourth-quarter revenues, down from $445.9 million. Net income fell to $10.7 million from $21.1 million.

In November, Vector said it would no longer pay an annual dividend starting in 2020, in order to strengthen the company’s balance sheet and improve liquidity. The cut is supposed to help lower the cost of borrowing leading up to an April 2020 deadline to repay $232 million in 5.5 percent variable-interest senior convertible notes.

Elliman, along with RE/MAX, Coldwell Banker and Keller Williams, were recently subpoenaed by state lawmakers who are investigating unequal treatment of minority homebuyers on Long Island.

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