Elliman forecasts long commission lawsuit fight

Four months after the Sitzer/Burnett verdict, the mounting antitrust litigation over broker commissions are still front and center for Douglas Elliman. 

Chairman Howard Lorber once again kicked off the firm’s quarterly earnings call by addressing the lawsuits — seven of which the firm is named as a defendant in — as well as the Department of Justice’s involvement. 

The executive declined to answer questions about the cases, but he said the company is defending the lawsuits and has or will file pre-trial motions. 

“We believe the lawsuits, which are still in the very early stages and will likely take years to litigate, lack merit, and we intend to challenge them,” Lorber said. He added that a federal panel of judges will consider whether to consolidate the cases on March 28. 

Elliman posted its sixth consecutive quarterly loss. The company lost $14.8 million last quarter, which was less than the $18.4 million it lost in the same period in 2022 and more than double its losses in the prior quarter.

The firm posted a $17.5 million loss in adjusted EBITDA — earnings before interest, taxes, depreciation and amortization — in the fourth quarter last year, compared to $17.1 million the year prior. 

The company reported $214 million in revenue, up slightly from the $207 million it earned in the same period in 2022. The uptick marked the company’s first year-over-year increase in revenue since the first quarter of 2022, which Lorber attributed in part to elevated activity in Florida. 

Elliman’s real estate segment had an operating loss of $16.4 million last quarter, which is about $1 million more than its operating loss one year ago. The segment also lost $12.5 million in adjusted EBITDA, which was on par with its losses in the same quarter in 2022. 

Its real estate brokerage had a gross transaction value of $7.9 million in the fourth quarter, about the same as that of the same period in 2022. The average price per transaction was $1.6 million. 

“High mortgage rates have driven sustained listing inventory shortages across our luxury markets for almost two years,” Lorber said. “These shortages have resulted in significantly lower transactions during this time.”

Total listing volume increased last quarter by 25 percent annually, an uptick Lorber credited to the Federal Reserve signaling it would lower interest rates this year. The executive said he expects to see the impact of the listing growth in the second half of 2024. 

The company upped its commission split by 210 basis points in the fourth quarter, a similar increase to the previous period. Lorber attributed the jump to a competitive recruiting landscape, but said it’s started to slow down. 

“Companies are trading agents back and forth, and many times they’re giving cash bonuses when they sign up and higher splits. This has been going on now for a number of years,” Lorber said. “My guess is that, as the market improves and brokers are doing better and better, that maybe will come down.”

Lorber touted the firm’s development marketing business, which he said is a “competitive advantage” and is “creating a foundation for long-term value as transactions close over the next several years.”

By the end of 2023, the firm had an active pipeline of signed and new projects totaling $21.6 billion in gross transaction value, with projects in Florida accounting for $13.8 billion of that. The company expects another $9.7 billion to hit the market in 2024. 

The company plans to “[make] more meaningful cuts” this year, Elliman’s chief financial officer Bryant Kirkland said, including to its property management division with expectations that the cost reduction strategy will extend to other areas of the business. 

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