Douglas Elliman is preparing for an unforgiving market ahead.
During an earnings call for the brokerage’s parent company, Elliman chairman Howard Lorber said the firm cut staff by 25 percent, reduced all salaries by 15 percent and is seeking to consolidate offices and negotiate “rent reductions, deferrals or holidays” with landlords nationwide. And that’s despite not yet feeling the full effects of the “severe decline” in sales activity.
At the end of last year, the brokerage had 125 office leases in the seven states where it operates.
Elliman reported a net loss of $69 million, having lost $10.4 million in the same period last year.
Quarterly revenues were at $165.6 million, up 2.3 percent year-over-year from $161.9 million. The firm said closed sales volume for the quarter was $5.9 billion, up 1.7 percent year-over-year from $5.8 billion.
The firm’s cost-cutting measures — similar to those of many peers — began in April at the height of the coronavirus pandemic in the U.S. and were prompted by a slowdown in sales as New York enacted a stay-at-home order for non-essential workers.
“We began to experience a severe decline in closed sales volume in mid-March and this continued in April and May,” Lorber said. “We anticipate that this sales volume will continue to be slow until the fall, possibly longer.”
Lorber attributed the March drop-off in closed sales to the state’s ban on in-person showings. He said the New York market accounts for 70 percent of Elliman’s brokerage revenues and business has been “tough” without “being able to show anyone’s apartment.”
Though Lorber said virtual tours have led to some “surprising” deals and that “people are starting to get used to it,” he doesn’t expect business to rebound until in-person showings can resume, which he thinks would be in mid-June.
His agents have actively been discouraging homeowners from listings properties.
“We don’t think it really makes sense [to list],” he said.
Since stay-at-home measures were not enacted until mid to late March, the full toll of the pandemic isn’t reflected in the firm’s first-quarter numbers. For the third year, the brokerage’s losses continued to grow, despite a strong quarter in New York City.
Elliman’s parent company Vector Group, which also has a tobacco business and a new-development investing arm, reported a net loss of $3.2 million for the quarter, compared to net income of $15 million in the first quarter of 2019. Quarterly revenues grew to $454.5 million, up 8 percent year-over-year from $420.9 million.
Together, Vector’s real estate businesses reported a net loss for the quarter of $54.4 million from a net loss of $9.1 million a year earlier.
At one point during the call, Vector’s chief financial officer, Bryant Kirkland, said Vector had received $650,000 in distributions from three of its investment properties. “It was a very slow quarter,” he said. New Valley has invested in Bizzi & Partners’ 125 Greenwich, Ian Schrager’s 160 Leroy and HFZ Capital Group’s the XI.
Lorber attributed that to the pandemic, and said that projects where sales were expected to start were delayed.
Robert Sullivan, an analyst at MidOcean Partners, asked how the company would generate liquidity for its real estate businesses. Kirkland deflected the question.
“We have significant liquidity at Vector,” he said, “and we always evaluate the capital markets on an ongoing basis.”
Correction: A previous version of this article identified Sullivan’s first name as Richard, not Robert.
Write to Erin Hudson at [email protected]