Douglas Elliman tried to get into fighting shape last quarter, trimming $20 million in costs through layoffs, furloughs and salary cuts. Still, it wasn’t enough to avoid a beating: the residential brokerage, New York’s largest, reported a net loss of $5 million for the quarter.
During the same period last year, Elliman, a subsidiary of Vector Group, reported net income of $15.1 million. Year-over-year, revenues have also plummeted, dropping 45 percent to $132.9 million from $243 million.
Howard Lorber, chair of Elliman and CEO of Vector Group, said the drop was most acute in Elliman’s main market, New York City, which accounts for 70 percent of the firm’s total revenues. Revenues from the New York metropolitan area were down 52 percent year-over-year, he noted, blaming the decline on Covid-related state and local restrictions on movement. He also said that the highs of last year – which saw a record number of luxury sales ahead of the imposition of a new mansion tax – were a tough act to follow.
Elliman’s performance did improve from the first quarter, when it reported a net loss of $10 million. Lorber sounded an optimistic note on the market ahead. He pointed to low mortgage rates, and said Aspen, California and South Florida showed promise.
“I think the future looks good. Not every market will perform the same,” he said. “So we hope to continue those and to hopefully return to better days in the New York City market.”
He acknowledged that the city is seeing an outflow in buyer interest to Long Island, Westchester and the Hamptons. He also weighed in on the raging debate about the future of offices, saying that Elliman would slash its space needs.
“Obviously every company here in New York City has too much real estate today,” he said.
At the top of the call, Lorber said Vector would make changes to address racial inequality.
“Recent events have demonstrated that systemic racism and social injustice continue to exist today,” he said. “We all have significant work ahead of us as meaningful actions bring meaningful change.” His comments come days after Gov. Andrew Cuomo signed legislation empowering state regulators to revoke real estate licenses for violating anti-discrimination laws, a push made after an investigation by Newsday last year found systemic discrimination among Long Island real estate agents, including some in Elliman’s ranks. (At the time, a spokesperson for Elliman called the findings “an unreliable, unethical, and unscientific attempt to create a news story where there is none.”)
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Vector also owns New Valley, an investor in luxury new development projects including 125 Greenwich Street, 111 Murray Street and The XI in New York and Monad Terrace in Miami Beach. Though it does not break out New Valley’s earnings separately, the division looks to have deepened the parent company’s losses, as the real estate division as a whole had a net loss of $12.4 million last quarter, compared to net income of $15.3 million during the same period last year. Total real estate revenues dropped to $133.3 million from $243.9 million.
Vector’s chief financial officer, Bryant Kirkland, said the firm received $2 million in distributions from an undisclosed Florida property, up from the $650,000 received last quarter.
Lorber said New Valley is funding two hotels, the Edition in West Hollywood, and an unnamed New York property. Both were shuttered due to the pandemic but are expected to reopen this fall. At the start of the year, New Valley held stakes in several Manhattan properties with hotel components, including HFZ Capital’s The XI and 20 Times Square.
Overall, Vector, whose businesses include tobacco brands, reported a net income of $25.8 million, down 34 percent year-over-year from $39.3 million. Revenues for the company fell 17 percent year-over-year to $445.8 million from $538.4 million, due to losses at Elliman and New Valley.
Write to Erin Hudson at ekh@therealdeal.com
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