Douglas Elliman’s third summer as a public company has been even worse than the first two.
Pick your problem: a share price dipping as low as $1, its eighth quarterly loss in a row, an activist calling out the chairman for poor financial performance, or sexual assault allegations against two of the brokerage’s former top agents.
As Elliman hangs on for a savior in the form of lower mortgage rates, the brokerage is enduring a steady stream of turmoil.
After its second-quarter earnings missed expectations, a media-savvy investor called for an end to chairman and CEO Howard Lorber’s reign in the face of its string of losses, its shaky share price and a report that Lorber knew of an agent’s claim that she was drugged by then-Elliman brokers Oren and Tal Alexander. (A spokesperson said Lorber had heard of an incident but maintained that it was confidential and not an official human resources complaint.)
The activist investor also pushed back against Lorber’s multimillion-dollar compensation package, which has so far been spared from the company’s cost-cutting campaign, arguing the executive was underperforming.
“The board rewards [Lorber] for losing money,” said the investor, Brad Tirpak, who wrote a letter urging shareholders to vote against the chairman. “Your boss fires you if you lose money — that’s what happens in the real world.”
As the Aug. 21 shareholder vote approached, independent advisory firms backed some of his demands, setting the stage for a tense meeting during which shareholders weighed in on Lorber’s re-election for the first time since Elliman was spun off by Vector Group in 2021.
Shareholders backed Lorber’s compensation package and his re-election to the board, though he received just 70 percent of the vote, compared with 88 percent for the other directors up for re-election.
The episode showed how two years with nothing but losses can wear on even some of the industry’s biggest names.
A losing streak
Elliman wasn’t the only brokerage to fall on hard times during the housing market downturn, but it has struggled to recover. At one point its stock price tumbled to $1, below which a company’s stock faces delisting from the NYSE.
The brokerage began 2024 more than a year into a quest to trim its spending. The effort has not been nearly enough to offset declines in revenue, and Elliman posted a $42 million loss in the first quarter, compounded by a nearly $18 million agreement to settle antitrust litigation. Despite questions from analysts, executives remained tight-lipped about any plans to right the ship.
BTIG analyst Soham Bhonsle wrote after the firm’s first-quarter earnings call that “absent a marked improvement in the overall market or clear steps to reach profitability, it may be difficult for the stock to work from here.”
“Absent a marked improvement in the market or clear steps to reach profitability, it may be difficult for the stock to work from here.”
Elliman started making moves in July. The firm took on a $50 million loan from asset manager Kennedy Lewis to bolster its cash stores. To close the deal, Elliman forfeited a board seat and a potential quarter stake in the company, as the lender can opt to swap the debt for equity at $1.50 a share.
“We are always long- and short-term focused on growth and expansion — while also being focused on running our business with enhanced operational efficiency and productivity,” the spokesperson said in a statement.
The company touted the loan as an investment for growth, but critics weren’t impressed. In a letter weeks after the announcement, Tirpak called the deal a “massive dilution” and later told The Real Deal that Elliman “basically sold” 25 percent of the company.
The following week, Elliman executives started buying up shares. The purchases helped rescue the company’s stock price, which rose above $2 for the first time since March. Lorber and chief operating officer Richard Lampen purchased a combined 255,000 shares for about $284,000. Other directors scooped up 385,000 shares.
A spokesperson for Elliman said that “executives continuing to buy stocks reflects their strong belief that the company is uniquely positioned for long-term growth and value creation.”
At the time, the firm also hinted that it expected to report numbers showing signs of a rebound in the second quarter. And it did, hitting the lower end of the gross transaction value threshold identified in the previous month. Elliman managed to close the gap on its losses in the quarter, though its results fell short of some analysts’ expectations.
A report from BTIG indicated the company missed the mark on unit growth, consolidated revenues and adjusted EBITDA, despite a sizable reduction in administrative and technology expenses.
On the earnings call, executives said the firm’s cost-cutting spree was finally yielding results, especially as a costly office lease expired, saving the company millions in rent.
The company declined to share specifics about its priorities for more reductions, though an Elliman spokesperson said the firm’s cutbacks would stop short of affecting the agent experience.
“Management has been very deliberate on these expense cuts and has been focused on continuing expenses in a judicious manner,” chief financial officer Bryant Kirkland said on the earnings call. “We’re not penny wise and pound foolish.”
“Your boss fires you if you lose money — that’s what happens in the real world.”
The company’s cuts have centered largely on corporate sponsorships, office space and personnel, including a round of layoffs targeting 100 employees last year. While Lorber and Lampen collected incentive awards totaling $2.7 million and $675,000, respectively, the firm cut bonus packages for other employees.
Still, in terms of stock performance, Elliman has fared worse than other real estate companies. Mortgage industry experts say it will take a while for home inventory to loosen up enough to make a meaningful difference in transaction volume.
Points of contention
The company’s efforts to halt the downward spiral weren’t enough to placate Tirpak, who penned his letter at the end of July. The investor took aim at Lorber’s compensation, criticizing the firm for lowering the threshold for performance metrics that trigger his bonuses and urging the board to shop for a new CEO.
In his missive, Tirpak called for the firm to claw back the chairman’s bonus and cut the firm’s costly deal for the use of Vector’s private jet. One perk of Lorber’s position is up to $200,000 in expenses for personal use of the aircraft.
Though the vote marked a show of faith for the chairman, the meeting was the first time shareholders had taken issue with the structure of the board, which has been criticized for insulating executives from accountability. In an advisory vote — meaning the board can disregard the results — shareholders recommended elections to the board be held on an annual basis.
“Douglas Elliman’s board of directors and management team maintain an open dialogue with, and value constructive input from, our stockholders,” a spokesperson for Elliman said.
Tirpak’s demands ultimately went unheeded. But it’s likely not shareholders’ last call for action from the company as pressure mounts on its finances and Lorber.
If interest rate cuts are the boon to business that Elliman executives have predicted, the deal with Kennedy Lewis could be seen as an unnecessary act of desperation. But if the boon doesn’t materialize at all, that would be a much bigger problem for the brokerage and its longtime leader. Big bonuses and private jets would be the first things to go, and perhaps not the last.