Douglas Elliman narrows losses to $5M in second quarter

Brokerage to continue cost-cutting, exit lease amid slow market

Douglas Elliman Narrows Losses to $5M in Q2
Douglas Elliman's Howard Lorber (Getty, Douglas Elliman)

Douglas Elliman reported its fourth straight quarterly loss, but the brokerage appears to be closing in on the gaps left by the post-pandemic residential market boom.

The company posted a net loss of $5.2 million in the second quarter, a significant improvement from the $17.6 million loss in the first quarter but down from the $10.2 million gain reported in the second quarter of 2022.

While high mortgage rates and persistently low inventory levels continued to plague the industry last quarter, executives at the firm said they were optimistic for the second half of the year as pricing in the luxury market remains stable and buyers adjust to a high interest rate environment. 

“Our industry is cyclical, and the last year has been a difficult part of the cycle,” CEO Howard Lorber said. 

Executives anticipate the current market conditions to continue for the rest of this year, he added, but also expect supply constraints to ease and drive activity. 

“The luxury markets in which Douglas Elliman operates are usually the first markets to emerge from a down cycle, as buyers are less mortgage-reliant,” Lorber said.

Listings continued to increase in the second quarter, up 12 percent from the first quarter, Lorber said. An uptick in inventory could signal an improvement in revenue in the fourth quarter of 2023. 

The company reported an average sale price per transaction of $1.6 million, which Lorber said was the highest since the second quarter of 2022.

Elliman posted a consolidated operating loss of $8.3 million last quarter, down from operating income of $14.6 million in the same period last year. Elliman’s real estate brokerage posted an operating loss of $1 million, down from a gain of $21.6 million in the second quarter of 2022.

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The firm reported a $2.6 million loss in its adjusted EBITDA — earnings before interest, taxes, depreciation and amortization — down from a gain of $19.2 million in the second quarter of 2022. The company’s real estate brokerage earned $2.5 million in adjusted EBITDA in the second quarter of 2023, compared to an income of $24.4 million in the same period last year.

Last quarter, the firm suspended its quarterly cash dividend of $0.05 per share and declared an annual stock dividend on our common stock of 5 percent, which it paid on June 30. 

Elliman continued its cost-reduction strategy, which included reducing its headcount by 45 positions in the first half of this year, as well as cutting expensive sponsorships and reducing office space.

“We are constantly looking at cost-cutting, but we obviously have to be careful that we don’t cut things that would be instrumental to the agents,” Lorber said. 

Executives expect a notable decrease in expenses at the start of 2024 with the expiration of a “very expensive” lease for the firm’s management company, Lorber said. A source with knowledge of the situation told The Real Deal the firm’s space at Durst Organization’s 675 Third Avenue was on the chopping block.

The company said it has already found a smaller, less expensive lease to replace the office space. 

Elliman is also on the hunt for a new chief financial officer following its spinoff from Vector Group in 2021. CFO J. Bryant Kirkland III will remain in the position until the firm finds a successor.

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Correction: An earlier version of this story incorrectly reported Douglas Elliman’s brokerage segment suffered a loss in the second quarter.