New markets — not new dev — boosted Elliman’s 2017 earnings

UPDATED, March 1, 4:55 p.m.: Douglas Elliman’s expansion tear paid off in 2017.

Despite a slower new development market, the brokerage pulled in $722.3 million in revenue, a 7 percent jump from 2016, parent company Vector Group reported Thursday. Douglas Elliman had a net income of $21.4 million in 2017, up 1.4 percent year over year.

“I would not say it was a stellar year,” said Chairman Howard Lorber, who attributed increased sales volume to Elliman’s new markets. The New York firm acquired Los Angeles-based Teles and Boston-based Otis & Ahearn in 2017.

Despite the higher sales volume, Lorber said fewer new development closings hurt profits in 2017. “We’re hoping 2018 will be a better year in closings in new development,” he said, “but many times, due to construction delays and so forth, it’s hard to pin down when the closings will occur.”

During the fourth quarter of 2017, the brokerage reported $900,000 in net income, an improvement from a loss of $6.1 million in 2016’s fourth quarter.

Vector, which has significant holdings in tobacco, reported a total of $1.81 billion in 2017 revenue, up 7 percent year over year. Net income rose 18.9 percent to $84.6 million.

During an earnings call Thursday, Lorber weighed in on the so-called market correction in real estate. He cited a slew of pricey deals at 432 Park Avenue in 2017 as evidence that the ultra-luxury market is strong (as is the low-end). The $10 million to $20 million residential market is a “little softer right now” because sellers are still overpricing units, he told shareholders.

“As the sellers realize that the market is a little bit lower than they thought it was, and start lowering their prices, activity picks up,” Lorber said. “Hopefully that’s starting to happen.”

Vector finished the year with $301 million in cash and cash equivalents — including $89 million at Douglas Elliman.

Elliman, which has 2,350 agents in Manhattan, was the largest firm on The Real Deal’s 2018 ranking of top brokerages. It closed $5.23 billion in sell-side deals in Manhattan last year.

Earlier this week, Realogy Corp. — which claims 15.9 percent market share nationwide — said it hit $6.1 billion in revenue in 2017, a 5 percent gain. The company’s net income of $431 million was up 102 percent year-over-year thanks to a new corporate tax rate in 2017.