Elliman’s revenue rose 18%, after sales frenzy to avoid New York’s new transfer tax
Profits rose to $15.1M from $5.9M a year ago
Douglas Elliman’s revenue soared 18 percent during the second quarter as New York City buyers rushed to close deals before a new transfer tax went into effect July 1, parent company Vector Group said Wednesday.
The New York-based brokerage raked in $243 million during the quarter, compared to revenue of $205.6 million a year ago. Despite pressure on brokerage margins throughout the industry, Elliman reported net income of $15.1 million, up from $5.9 million, thanks to the flurry of sales in late June.
“A lot of people rushed to get deals done to avoid the increase,” Chairman Howard Lorber said during an earnings call Wednesday. Although the tax tacks an additional 1 percent to 4 percent on residential purchases, Lorber said the real estate industry “did a lot of lobbying” to avoid a more onerous, recurring mansion tax.
In addition to the transfer tax boost, Lorber said the market’s well-documented decline “has surely slowed down.”
Like other residential firms, Elliman has not been immune to competitive pressure, particularly from Compass, the SoftBank-backed firm valued at $6.4 billion after its latest funding round.
“There’s no question the margins are down, without question because of increased broker payouts,” said Lorber, who cited the impact on competitor Realogy’s stock price, which was trading around $5 per share on Wednesday morning, down from a 52-week high of $23.27 per share.
Lorber said he thinks Elliman has done “better than most” in moderating payouts to agents. “It’s still a very competitive marketplace for brokers right now, especially here in New York City.” During the second quarter, Vector made “moderate” cuts to some Douglas Elliman subsidiaries, said CFO J. Bryant Kirkland III.
Overall, Vector reported total revenue of $538.4 million for the second quarter, up from $481.5 million. Net income was $39.3 million compared to last year’s $17.8 million. Total real estate revenue, including earnings from New Valley, Vector’s investment arm, rose 17.9 percent to $243.9 million during the quarter. Net income was $15.3 million, up from $2.9 million a year ago.
Though he remains “bullish” on New York, Lorber said New Valley is not investing in new condo projects in the city because high land costs make it nearly impossible to pencil out a profit.
“If you can’t sell for $3,000 a foot, you probably can’t make money,” he said. “So it’s not a market where there’s a lot of new projects in New York City.”
New Valley is still looking in South Florida. In California, it owns 50 percent of the Edition Hotel in West Hollywood, which has 190 hotel rooms and 20 condos (about 15 of which have been sold).