Spin cycle: Earnings calls optimistic after tumultuous quarter for real estate

Resi and commercial brokerages look for silver linings in dark clouds

Earnings Calls Reveal Difficulties in Real Estate
New York Community Bank's Thomas Cangemi, SL Green's Marc Holliday and Zillow's Rich Barton (New York Community Bank, Getty, Zillow)

It’s earnings call season, when C-suite executives do their best to put positive spin on circumstances that aren’t so good. 

This time around was no different during a period of office and multifamily tumult.

At New York Community Bank, CEO Thomas Cangemi noted the company wasn’t seeing delinquencies on its multifamily loans.

But the truth wasn’t quite so rosy, as the lender’s non-performing debt — multifamily loans that are 90 or more days past due — jumped 154 percent to $33 million in the second quarter.

The firm’s acquisition of Flagstar in December added $17 billion in loans to NYCB’s portfolio but the majority of those were residential mortgages and commercial real estate loans, excluding multifamily. 

Elsewhere, SL Green, New York’s biggest office landlord, also expressed optimism despite seeing  occupancy fall below 90 percent

“We expect that to be a low point,” company’s chair Marc Holliday said. “We expect to gain occupancy regardless of which way the market goes.” 

Holliday said that the company’s leasing pipeline is growing, and if everything falls into place, the company will hit its goal of bringing occupancy back to 92.4 percent at the end of the year.

Zillow reported more losses in the second quarter, but executives — not surprisingly — sounded optimistic despite the company posting a net loss of $35 million, up from $22 million the previous quarter.

But the company’s revenue of $506 million and EBITDA of $111 million, according to CEO Rich Barton, surpassed expectations. 

“You’ve heard me say many, many times that 2023 is a crucial year for Zillow,” said CEO Rich Barton. “We’re pleased with what we accomplished so far.”

At Goldman Sachs, there seemed to be a little less optimism about real estate assets. The investment giant lost $1.15 billion in the second quarter, with real estate bearing much of the blame. The bank said it plans to move away from real estate by exiting roughly half of its alternative commercial investments.

For others, like Chicago-based brokerages JLL and Cushman & Wakefield, the numbers were downright dreadful.

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JLL’s net income last quarter was a fraction of what it was during the same period last year, dropping to $3.2 million from $335.5 million. Equity losses were a major factor, totaling $103.5 million last quarter compared with $53.6 million in earnings in the second quarter of 2022. 

Its adjusted EBITDA was $116.1 million, compared to $359 million in 2022.

The best that CEO Christian Ulbrich could describe the markets on last week’s earnings call was “muted.”

Cushman & Wakefield, meanwhile, saw its net income last quarter drop to $5.1 million, down from $97.2 million in the second quarter of 2022. The brokerage’s adjusted EBITDA was $146.1 million, down from $262.8 million in 2022.

Cushman’s new CEO Michelle MacKay was a bit more optimistic about the performance.

“In challenging market conditions, we were able to quickly pivot and deliver strong financial results with sequential improvement in revenue, EBITDA and margin,” she said.

But it wasn’t all bad news.

On the residential side, Anywhere Real Estate — the parent company of such brands as Corcoran, Coldwell Banker, Century21 and Sotheby’s International Realty — posted a net income of $19 million after losing $138 million in the first quarter. 

CoStar Group also had a solid quarter,  reporting a net income of $100.5 million, up from $83 million the same time last year.

In addition, traffic to the company’s residential platform hit 84 million average monthly unique visitors in the second quarter.

But CoStar also saw downturns on the commercial side.

CoStar CEO Andy Florance acknowledged the troubles the industry is facing, with sales in the second quarter down 63 percent, a wall of debt maturities and increasing office vacancies.