Vector slashes dividends as Elliman’s net income drops over 80%

CEO Howard Lorber cites need to "strengthen the company's balance sheet"

TRD NATIONAL /
Nov.November 06, 2019 08:45 AM
Howard M. Lorber of Vector Group

Howard Lorber, CEO of Vector Group

UPDATED Wednesday Nov. 6, 2019, 1:02 p.m.: Douglas Elliman’s net income plummeted last quarter and its parent company plans to cut back on payouts to investors.

Vector Group will halve its quarterly cash dividend to $0.20 per share starting in the first quarter of 2020 and will no longer pay an annual dividend, CEO Howard Lorber announced Tuesday. He confirmed that investors would receive a dividend of $0.40 per share for the third and fourth quarters.

“The reduced dividend will strengthen the company’s balance sheet and help it maintain its liquidity,” Lorber said on an earnings call.

He added that “hopefully” the cut will “lower the cost of borrowing” leading up to Vector’s April 2020 deadline to repay $232 million in 5.5 percent variable-interest senior convertible notes.

In last year’s annual filings Vector forecasted that 2019 would have “significant liquidity commitments” including outstanding convertible notes and $240 million in dividends. If there wasn’t enough cash on hand, the company had said it would extend its subsidiaries’ credit facilities and liquidate other investments. Vector extended two of its companies’ credit to $60 million on Nov. 1.

The move comes as Elliman reported a net income of $1.9 million for the third quarter, down from $10 million in the same period last year — a stunning 81 percent drop. The brokerage’s quarterly revenue fell by $10.3 million to $201.2 million.

Vector’s CFO J. Bryant Kirkland III said that was “because we’ve made investments in other markets.” In August, Elliman opened a Texas outpost.

Vector reported a slight decrease in quarterly revenue to $504.8 million from Q3 in 2018, but its net income for the quarter soared to $36 million from $12 million in the third quarter of last year.

Elliman’s third quarter results came on the heels of a banner second quarter. The firm had reported an 18 percent increase in revenue following a flurry of high-end sales in New York City before new closing taxes went into effect on July 1.

Lorber noted that when considering the nine months ended Sept. 30, the brokerage’s “adjusted EBITDA” (earnings before interest, taxes, depreciation and amortization, but with other expenses excluded at the company’s discretion) was at the same point as it was last year.

But that’s not necessarily a bellwether for success. In 2018, Elliman’s adjusted EBITDA for the full year was $11.3 million, down from $26.1 million. And the brokerage’s profits plunged by a staggering 75 percent even as revenue grew by 4.4 percent to $754.1 million. Lorber began the year promising “substantial” cost-savings in payroll and office consolidation.

On Tuesday’s call Lorber promised Elliman’s business would turn around, provided there are no further legislative changes.

“Look, I think we’ve somewhat survived,” he said, pointing to the loss of the SALT deduction in 2018, the mansion and transfer taxes introduced by New York State this year and sweeping changes in June to the state’s rent law. “And if nothing else happens, with some cost cutting and so forth, we’re going to be more profitable going forward.”

Editor’s note: The story was updated to note Vector committed to paying a cash dividend of $0.40 per share for the third and fourth quarters of 2019. The reduced quarterly dividend goes into effect in 2020.

Write to Erin Hudson at [email protected]


Related Articles

arrow_forward_ios
Enzo Morabito Team scores honor at Douglas Elliman’s internal awards ceremony

Enzo Morabito Team scores honor at Douglas Elliman’s internal awards ceremony

Enzo Morabito Team scores honor at Douglas Elliman’s internal awards ceremony
Fairfield County market improves, but luxury market sees ‘continued weakness’

Fairfield County market improves, but luxury market sees ‘continued weakness’

Fairfield County market improves, but luxury market sees ‘continued weakness’
Tom Brady (L) and Gisele Bundchen arrive at the 2018 Met Gala on May 7, 2018, at the Metropolitan Museum of Art in New York. (Angela Weiss/AFP/Getty Images)

Tom Brady, Gisele home shop in suburbs, North Jersey industrial site sells for $66M & more Tri-State real estate news

Tom Brady, Gisele home shop in suburbs, North Jersey industrial site sells for $66M & more Tri-State real estate news
Clockwise from top left: Former rail tycoon James Evans' waterfront estate in East Hampton lists for $60M, Water Mill waterfront home sees price dip below $18M, a modern Sagaponack home hits the market at $9.5M and East Hampton's "White House" gets a $3M price cut.

Former RKF chief appears in Southampton court, Water Mill waterfront home’s price drops below $18M & more Hamptons real estate news

Former RKF chief appears in Southampton court, Water Mill waterfront home’s price drops below $18M & more Hamptons real estate news
HFF brokers hit the ground running at JLL in New Jersey, SALT cap hurts Lower Hudson Valley housing market & more Tri-State real estate news

HFF brokers hit the ground running at JLL in New Jersey, SALT cap hurts Lower Hudson Valley housing market & more Tri-State real estate news

HFF brokers hit the ground running at JLL in New Jersey, SALT cap hurts Lower Hudson Valley housing market & more Tri-State real estate news
An aerial view of the Hamptons (Credit: Curbed NY)

The Hamptons just had its worst second quarter for sales in 8 years

The Hamptons just had its worst second quarter for sales in 8 years
Douglas Elliman opens second office in Fire Island, adds Martha Gundersen to Bridgehampton office - Don Fick/Wikimedia Commons, Brown Harris Stevens

Douglas Elliman adds veteran Hamptons broker, opens second Fire Island office

Douglas Elliman adds veteran Hamptons broker, opens second Fire Island office
Sands Point mansion with car wash sees ask dip below $9M, leasing begins at Modera Metro Mineola & more Long Island real estate news

Sands Point mansion with car wash sees ask dip below $9M, leasing begins at Modera Metro Mineola & more Long Island real estate news

Sands Point mansion with car wash sees ask dip below $9M, leasing begins at Modera Metro Mineola & more Long Island real estate news
arrow_forward_ios

The Deal's newsletters give you the latest scoops, fresh headlines, marketing data, and things to know within the industry.

Loading...