To buy Teles, Elliman will crack open its $102M war chest
Elliman's revenue rose 9.4% to $199M in Q2
UPDATED, August 4, 11:54 a.m.: The ink’s not quite dry on Douglas Elliman’s acquisition of Beverly Hills-based Teles Properties — a fast-growing firm that claimed $3.4 billion in revenue last year — but the New York -based brokerage will use its ample war chest to finance the deal.
“We have the cash for it,” Elliman chairman Howard Lorber assured investors during a second quarter earnings call Friday for parent company Vector Group. Though Lorber wouldn’t share the purchase price until the deal is closed, Vector had $410.4 million in cash on its books, including $102 million at Douglas Elliman, he said.
The deal will add 500 agents and 20 offices to Elliman’s California operation, which reported about $700 million in sales volume in the Los Angeles area last year.
Overall, Vector’s real estate segment — which includes Douglas Elliman and New Valley Realty — generated $199.8 million in revenue, up 9.3 percent from $182.8 million. Net income was $16.1 million compared to $11.4 million last year — and far greater than the $100,000 in profits the brokerage reported during the first quarter. Vector as a whole, including a cigarette business, pulled in $472 million in second-quarter revenue, with net income of $26.8 million.
On the call, Lorber challenged the narrative that ultra high-end sales are soft, and said the market over $20 million has been “pretty strong.”
“The traditional high-end — $8 million to $20 million — has been softer,” he said. Lorber predicted sales would stay strong as long as the stock market is up. “The big unknown is tax reform,” he said, adding that tax form would be a boon to the real estate market. “When people feel like they have more money in their pocket, they’re likely to spend more money and to spend more money on real estate.”
On Thursday, Realogy — the parent company of Elliman’s rival, the Corcoran Group — said second-quarter revenue rose 8 percent to $1.8 billion thanks to a stronger high-end market and successful agent recruitment. Net income rose 18 percent to $109 million.