Anywhere’s layoffs were a long time coming

UPDATED, Sept. 20, 4:12 p.m.: When Anywhere Real Estate announced layoffs last month, it wasn’t a knee-jerk reaction to an unforgiving decline in home sales. Though other firms had corrected course only after riding the wave of the sizzling 2021 market, Anywhere’s reductions look to have been premeditated.

Filings show Anywhere, the nation’s largest real estate brokerage holding company and parent to Corcoran Group, Coldwell Banker and Sotheby’s International Realty, started planning cost-cutting late last year. In earnings reports and investor presentations, executives said they were dialing back debt and looking to boost profitability, with a target of trimming expenses by $70 million by the end of this year and by more than $300 million through the end of 2026.

In the first quarter, the company reported one of the best starts to a year in its history with $23 million in net income, on the heels of a blockbuster 2021 in which it profited $343 million. But the rosy figures didn’t stop it from simultaneously playing defense.

“We have years ahead of us where we have still additional cost savings that we can go get through efficiencies, automation, more systems integration, things like that,” CEO Ryan Schneider said during first-quarter earnings call of the company, formerly called Realogy.

The company did not file a labor-law notice in New Jersey, New York or California, which could mean the number of layoffs was below 50 in each state.

Anywhere representatives did not respond to a request for comment. The company previously provided The Real Deal with a statement describing the layoffs as part of “ongoing cost management.”

Anywhere has “been relentless on costs and proactive on strengthening our balance sheet,” a company spokesperson said in the statement. “We continue to make decisions that enable us to both navigate today’s environment and further invest in our future.”

When Schneider took the helm in 2017, the company was in a more precarious financial position. Its net debt leverage ratio, defined as net debt divided by adjusted EBITDA, was 3.9 in quarter two of 2017. It had been losing agents and missed earnings projections in the fourth quarter of 2016, according to MarketWatch. It then offered more generous commission splits, and by the third quarter of 2017 was paying $53 million more to its brokers. That quarter its profits were down $9 million from the year prior, though other factors played a role.

“When I joined Realogy in 2019, the balance sheet was a little bit daunting and there were two big walls of debt that were coming due in 2023 and 2025,” Anywhere CFO Charlotte Simonelli said at the company’s investor day earlier this year.

By May 2019, the firm’s market cap had fallen below $1 billion, down from a peak of $7 billion in 2013. At the end of August 2019, its market cap had slipped to $559 million. That year, it became mired in an ugly legal dispute with Compass and was hit with a securities fraud lawsuit. And it launched TurnKey, a partnership with Amazon that has failed to boost its stock.

But 2019 was also the year Schneider and Simonelli announced the first round of cost-cutting. Anywhere reduced its total debt by $113 million by the end of the second quarter, but still had $3.5 billion in debt at the end of June.

The company continued to pay down its debt through 2021’s hot market and used its strong performance to refinance. It is now on the hook for $2.9 billion, with most of it coming due at the end of the decade. Its net debt leverage ratio is now 3.4.

The numbers suggest Anywhere is in a much stronger position than before the pandemic. But there’s still a long road ahead.

Correction: This story was updated to reflect Anywhere’s true net debt leverage ratio.