Q3 2023 Douglas Elliman Inc Earnings Call
Speaker 1: Please stand by, your program is about to begin.
Please stand by your program is about to begin.
Speaker 1: Welcome to the Douglas Elements 3rd quarter, 2023 earnings conference call. This call is being recorded and simultaneously webcast. An archived version of the webcast will be available on the investor relation section of the company's website located at investors.eleman.com for one year.
Welcome to the Douglas elements third quarter 2023 earnings conference call.
This call is being recorded and simultaneously webcast an archived version of the webcast will be available on the Investor Relations section of the company's website located at investors Dot element dot com for one year.
Speaker 1: During this call, the terms adjusted to Ibadam and adjusted net income will be used.
During this call the terms adjusted EBITDA and adjusted net income will be used.
Speaker 1: These terms are non-GAAP financial measures and should be considered in addition to but not as a substitute for other measures of financial performance prepared in accordance with GAAP.
These terms are non-GAAP financial measures and should be considered in addition to but not as a substitute for other measures of financial performance prepared in accordance with GAAP reckon.
Speaker 1: Reconciliation to adjusted EBITDA and adjusted net loss are contained in the company's earnings release, which has been posted to the Investor Relations section of the company's website. Before the call begins, I would like to read a Safe Harbor State.
Reconciliations to adjusted EBITDA and adjusted net loss are contained in the company's earnings release, which has been posted to the Investor Relations section of the Companys website.
Before the call begins I would like to read a safe Harbor statement.
Speaker 1: The statements made during this conference call are not historical facts, are forward-looking statements that are subject to risk and uncertainties that could cause actual results to differ materially from those set forth in or implied by forward-looking statements. These risks are described in more detail in the company's securities and exchange commission files.
The statements made during this conference call are not historical are that are not historical facts are forward looking statements that are subject to risks and uncertainties that could cause actual results to differ materially from those set forth.
In or implied by forward looking statements. These risks are described in more detail in the company's Securities and Exchange Commission filings I would now like to turn the call over to the Chairman President and Chief Executive Officer of Douglas Elliman Howard Lorber. Please go ahead.
Speaker 1: I would now like to turn the call over to the chairman, president, and chief executive officer of Douglas Eleman. Howard Lorber, please go ahead.
Speaker 2: Good morning and thank you for joining us. With me today, our Richard Lampen, our Chief Operating Officer, Brian Kirkland, our Chief Financial Officer, and Scott Durkin, President and CEO of Douglas Element Realty, our Residential Real Estate Broke, which is...
Good morning, and thank you for joining US with me today are Richard Lamping, Our Chief operating Officer, Brian Kirkland, Our Chief Financial Officer, and Scott <unk>, President and CEO of Douglas Elliman Realty, our residential real estate brokerage business before.
Speaker 2: Before turning to our results for the third quarter, we wanted to address the current litigation in the residential real estate brokerage industry.
Before turning to our results for the third quarter, we wanted to address the current litigation in the residential real estate brokerage industry.
Speaker 2: Given that we are talking about active litigation against Douglas Helman, we're not going to comment extensively on that litigation and potential outcomes. I will make some brief comments and do not intend to comment further or take questions on these issues.
Given that we are talking about active litigation against Douglas Elliman, we are not going to comment extensively on that litigation and potential outcomes.
Some brief comments and do not intend to comment further.
Questions on these issues.
Speaker 2: last week a jury ruled in favor of the plaintiffs in the citzer burnett lawsuit in federal court in Missouri and awarded one point seven eight billion damages which is subject to being tripled under the law
Last week, a Jerry ruled in favor of the plaintiffs and as said Sarah Barnett lawsuit in Federal Court in Missouri, and awarded 1.7 hundred $8 billion in damages, which is subject to being tripled under the law.
Speaker 2: We expect that the defendants, which include the National Association of Realtors and several other residential real estate franchises and brokerages doing business in Missouri, will appeal the verdict, and that the case will take a substantial period of time, possibly years could be resolved.
We expect that the defendants which include the National Association of Realtors and several other residential real estate franchise doors and brokerage is doing business in Missouri will appeal of the verdict and that the case will take a substantial period of time, possibly years.
<unk>.
Speaker 2: The other element is not a party to that lawsuit, but we have been named in two new separate cases, involving customary real estate business practices and the National Association of Realtor Rules that were the subject of the Sitzer-Burgut lawsuit.
Douglas Elliman has not a party to that lawsuit, but we have been named in two new separate cases involving customary real estate business practices and the National Association of Realtors rules that were the subject of the CIT Sir.
Speaker 2: We believe the lawsuits against those black merit and we intend to challenge them. We retain counsel to advise and represent them.
Sure.
We believe the lawsuits against those lack merit and we intend to challenge that we have retained counsel to advisor and represent us.
Speaker 2: We do not anticipate these lawsuits for result in any changes to our business that will significantly disrupt the agent by a relation.
We do not anticipate these lawsuits will result in any changes to our business that will significantly disrupt the agent by our relationship.
Speaker 2: In the meantime, we believe that Douglas Salman is too competitive advantage if our industry landscape evolves. Our first, our agents specialize in high-end home sales across the markets we serve, in which the greater average transaction size makes expert home brokers a necessity.
In the meantime, we believe that Douglas elliman as to competitive advantage, if our industry landscape evolves.
First our agent specializing in high end homes has across the markets, we serve and which the greater average transaction size makes expert home brokers and necessity.
Speaker 2: Second, our Doga Fellemann Development Marketing Business, which represents high-end developers in the sale of such homes, continues to perform well.
Second our Douglas Elliman development marketing business, which represents high end developers in the sale of such arms continues to perform well.
Speaker 2: We will continue to keep a close to iron industry developments and adjust our strategy if and when needed. But we are confident we are in a well positioned to succeed.
We will continue to keep a close eye on industry developments and adjust our strategy if and when needed but we are confident we are well positioned to succeed.
Now turning to Douglas Elliman as financial results for the three months ended September 30 of 2023.
Speaker 2: Now, turning to Douglas Elements' financial results for the three months ended September 30th, 2023.
Speaker 2: Please note that all numbers presented this morning will be as of September 30th, 2023, unless otherwise stated.
Please note that all numbers presented this morning, we will be as of September 32023, unless otherwise stated.
Speaker 2: We have pleased that Doug of Sumbling continue to outperform many of its competitors in the third quarter of 2023, despite ongoing industry-wide headwinds that continue to impact our results.
We are pleased that Douglas Elliman continued to outperform many of its competitive in the third quarter of 2023, despite ongoing industry wide headwinds that continue to impact our results.
Speaker 2: We attribute our solar performance to three factors. Stable pricing in our luxury markets where buyers are more immune to interest rate pressures.
We attribute our solid performance to three factors stable pricing in our luxury markets, where buyers are more immune to interest rate pressures.
Speaker 2: The competitive advantage provided by Douglas element strong development block any business and our world class.
The competitive advantage provided by Douglas Elliman, a strong development marketing business and our world.
Speaker 2: For the third quarter of 2023, Douglas Salman reported 251.5 million revenues compared to 272.6 million in the third quarter of 2022.
For the third quarter of 2023, Douglas Elliman reported $251 5 million in revenues.
<unk> $272 6 million in the third quarter of 2022.
Speaker 2: However, in Florida, one of our largest markets and our strongest market during the pandemic, we experienced a 20% increase in revenues in the quarter.
However, in Florida, one of our largest markets and our strongest market during the pandemic, we experienced a 20% increase in revenues in the quarter.
Speaker 2: We believe the best markets tend to emerge first from any downturn. And if you Florida's strong third quarter as a positive leading indicator, a future performance across our luxury market.
We believe the best markets tend to emerge fresh from any downturn and view, Florida had strong third quarter as a positive leading indicator of future performance across our luxury markets.
Speaker 2: Net law attributed to Douglas Sommon for the third quarter was 4.9 million or six cents per deluded share compared to net laws of 4 million or 5 cents per deluded share in 2022
Net loss attributed to Douglas Elliman for the third quarter was $4 9 million or <unk> <unk> per diluted share compared to a net loss of 4 million or <unk> <unk> per diluted share in 2022.
Speaker 2: Adjusted EBITDA attributed to Douglas Sommel was a loss of a free million compared to income of 124,000 in the 2022 period.
Adjusted EBITDA attributed to the summer was a loss of $3 million compared to income of 124000 in 2022 period.
Speaker 2: For comparison purposes, our real estate brokerage segment reported an operating loss of 2 million this quarter compared to operating income of 1.5 million in 2022. And adjusted EBITDA to the segment was approximately 1.5 million compared to 5.1 million in 2020.
For comparison purposes, our real estate brokerage segment reported an operating loss of $2 million this quarter compared to operating income of $1 5 million in 2022.
And adjusted EBITDA for the segment was approximately $1 5 million compared to $5 1 million in 2020.
Speaker 2: Adjusting that loss attributed to double sum under 4.7 million or 6 cents per share Compared to adjusting that loss of 4 million or 5 cents per share in 2022
Adjusted net loss attributed to Douglas Elliman was $4 7 million or <unk> <unk> per share.
<unk> to adjusted net loss of $4 million or <unk> <unk> per share in 2022.
Speaker 2: Now turning to Douglas Elements' results for the nine months ended September 30th, 2023.
Now turning to Douglas Elliman results for the nine months ended September 32023.
Speaker 2: The other Salomon reported 741.4 million in revenues for the nine months and its September 30, 2023, compared to 945.8 million in 2022.
Douglas Elliman reported $741 4 million in revenues for the nine months ended September 32023, compared to $945 8 million in 2022.
Speaker 2: Net law attributed to Douglas Salman was 27.7 million or 34 cents per deluded share compared to net income of 12.8 million or 15 cents per deluded share in 2022.
Net loss attributed to Douglas Elliman was $27 7 million or <unk> 34 per diluted share compared to net income of $12 8 million or <unk> 15 per diluted share in 2022.
Speaker 2: Adjusted the bethaut to Douglas Salman for the nine month period was a loss of 23.2 million compared to income of 32.1 million in 2022.
Adjusted EBITDA for Douglas Elliman for the nine month period was a loss of $23 2 million compared to income of $32 1 million in 2022.
Speaker 2: Our real estate brokerage segment reported an operating loss of 20.3 million for the period compared to operating income of 37.6 million in 2022.
Our real estate brokerage segment reported an operating loss of $20 3 million for the period compared to operating income of $37 6 million in 2022.
Speaker 2: Adjusted EBITDA attribute into the segment where the loss of 9 million compared to income of 47.2 million in the 2022 period.
Adjusted EBITDA attributed to the segment was a loss of $9 million compared to income of $47 2 million in the 2022 period.
Speaker 2: Finally, a Justin Netloss-intributed to Douglas Salman was 26.4 million or 32 cents per share in the nine-month period compared to a Justin Net income of 12.2 million or 14 cents per share in 2022.
Finally, adjusted net loss attributed to Douglas Elliman was $26 4 million or <unk> 32 per share in the nine month period.
Compared to adjusted net income of $12 2 million or <unk> 14 per share in 2022.
Speaker 2: Now we will discuss a outlook on the current operating environment for Douglas Soman, as well as trends we are seeing in the residential real estate marketplace.
Now we will discuss our outlook on the current operating environment for Douglas Elliman as well as trends we are seeing in the residential real estate.
Marketplace.
Speaker 2: We have previously discussed the cyclical nature of our industry. The last six quarters have been a difficult part of the cycle. As historically high mortgage rates have driven sustained listing inventory shortages. Of course, I'll love to remark.
We have previously discussed the cyclical nature of our industry.
Last six quarters have been a difficult part of the cycle as historically high mortgage rates have driven sustained listing inventory shortages across all luxury markets.
Speaker 2: While we expect these industry-wide challenges will continue to impact our results for the remainder of 2023, we remain encouraged by some improvements in trends we are seeing. Specifically, our average sales price per transaction increased to 1.57 million this quarter, up from 1.49 million in the third quarter of 2022.
While we expect these industry wide challenges, we will continue to impact our results for the remainder of 2023, we remain encouraged by some improvements in trends we have seen specifically our average sales price per transaction increased to one $5 $7 million this quarter up from $1 four 9 million in the third quarter of 2020.
Sure.
Speaker 2: Revenues in the third quarter of 2023 decline, 7.7% compared to the third quarter of 2022.
Revenues in the third quarter of 2023 declined seven 7%.
<unk> to the third quarter of 2020 to the.
Speaker 2: The year-of-year decline narrowed from the first and second quarters of 2023, which saw a decline of 30.7% and 24.3% respectively from 2022.
The year over year decline narrowed from the first and second quarters of 2023, which saw declines of 37% and 24, 3% respectively from 2022.
Speaker 2: We believe this signals that the markers beginning to adjust to interest rates.
We believe this signals that the market is beginning to adjust the interest rates.
Speaker 2: Our commission received an October improved on a year-over-year basis the first time since May 2022.
Our commission receipts in October improved on a year over year basis. The first time since may 2022.
Speaker 2: Total listing volume also improved in the third quarter of 6.2% from the 2022 period.
Total listing volume also improved in the third quarter up six 2% from the 2022 period.
Speaker 2: Due to our solid financial position, and course reduction strategy, the other thumb is well positioned to successfully navigate near-term industry challenge.
Due to our solid financial position and our cost reduction strategy.
Douglas Elliman is well positioned to successfully navigate near term industry challenges.
Speaker 2: The other element's strong balance underscores a long history of profitability and managing various market conditions.
Douglas Elliman strong balance sheet underscores our long history of profitability and managing various market conditions.
Speaker 2: We maintain ample liquidity with cash and cash equivalents of approximately 126 million, or $1.43 per comment share and no debt.
We maintain ample liquidity with cash and cash equivalents of approximately $126 million or $1 43 per common share and no debt.
Speaker 2: In the third quarter of 2023, we continue to adjust our cost structure to better fit our business, including additional headcount reductions, cutting cost-wise sponsorships, streamlining, advertising, and commencing a program to begin consolidating the office space.
In the third quarter of 2023, we continue to adjust our cost structure to benefit our business, including additional head count reductions cutting costly sponsorships streamlining avid streamlining advertising and commencing a program to begin consolidating office space.
Speaker 2: Of course, reduction efforts have been judicious, and the result of our strategy are beginning to flow to the bottom line.
Our cost reduction efforts have been judicious in our result.
Of our strategy are beginning to flow to the bottom line.
Speaker 2: Compared to the year ago period, our real estate brokerage segment reduced its operating expenses, excluding commission expense and restructuring by 7.8 million in the third quarter of 2023, representing a decline of 10.5%.
Compared to the year ago period, our real estate brokerage segment reduced its operating expenses and.
Excluding commission expense and restructuring by $7 8 million in the third quarter of 2023, representing a decline of 10, 5%.
Speaker 2: On a sequential basis, a real estate brokerage segment reduced its operating expenses, excluding commission expense and restructuring by 4.1 million this quarter compared to the second quarter of 2023. We're representing a decline of 5.8%.
On a sequential basis, our real estate brokerage segment reduced its operating expenses, excluding commission expense and restructuring by $4 $1 million this quarter compared to the second quarter of 2023, representing a decline of five 8%.
Speaker 2: We expect the impact of our course reduction efforts will continue to create a more nimble double thumb with that significantly impacting the age and experience.
We expect the impact of our cost reduction efforts will continue to create a more nimble Douglas Amit without significantly impacting the agent experience.
Speaker 2: We are proud to share that our agent retention rate stands at 90% and we continue to attract the industry's best talent.
We are proud to share that our agent retention rate stands at 90% and we continue to attract the industry's best talent.
Speaker 2: Looking ahead, we remain focused on continuing to capture market share by leveraging our key strengths, which include our world-class network of 6,900 agents and our development walk-in-me business.
Looking ahead, we remain focused on continuing to capture market share by leveraging our key strengths, which include our world class network of 6900 agents and our development work in the business.
Speaker 2: Our development marketing business is creating a foundation for long-term value as transactions close.
I developed marketing business is creating a foundation for long term value as transactions close.
Speaker 2: over the next several years and provide a competitive advantage, especially considering the limited inventory of existing homes available for resale.
Over the next several years and provides a competitive advantage, especially considering the room and limited inventory of existing homes available for resale.
Speaker 2: For the 12 months ended September 30th, 2023, our development marketing business signed and brought to market new projects with 5.1 million of gross transaction value, including 4.6 million of gross transaction value added in the 12 months ended September 30th, 2023, and Florida Reload.
For the 12 months ended September 32023, our development marketing business signed and brought to market new projects were $5 1 million of gross transaction value, including $4 6 million of gross transaction value added in the 12 months ended September 32023, and Florida alone.
Speaker 2: In summary, Dougah Feldman continues to meet the current macroeconomic challenges. And we believe our differentiated platform and the underlying strength of our business positions us for long-term growth and success.
In summary, Douglas Elliman continues to meet the current macroeconomic challenges and we believe our differentiated platform.
And the underlying strength of our business positions us for long term growth and success.
Speaker 2: Our proven management team has a successful history of navigating many economic cycles and applying financial discipline that balances the importance of maintaining revenue and managing operating expenses to create long-term stockholder value.
Our proven management team has a successful history of navigating many economic cycles, and applying financial discipline that balances the importance of maintaining revenue and managing operating expenses to create long term stockholder value.
Speaker 2: Looking ahead, in addition to driving operational efficiencies, we have focused on strategic market expansion, continued recruitment of outstanding talent, and further adoption of innovative solutions to empower our growth.
Looking at looking ahead. In addition to driving operational efficiencies. We are focused on strategic market expansion continue recruitment of outstanding talent and further adoption of innovative solutions to empower our brokers.
Speaker 2: With that, we will be happy to answer questions, operator.
With that we will be happy to answer your questions operator.
Yeah.
Speaker 1: At this time, if you'd like to ask a question over the phone, please press the star and one keys on your telephone keypad. Keep in mind you may remove yourself from the question Q by pressing star and two. Again, if you'd like to ask a question today, please connect over the phone and dial star and one.
At this time, if you'd like to ask a question over the phone. Please press the star and one keys on your telephone keypad Keith.
Keep in mind, you may remove yourself from the question queue by pressing star and two.
Again, if you'd like to ask a question today, please connect over the phone and dial star and one.
Speaker 1: We'll take our first question from Dan Fanon with Jeffries. Please go ahead, your line is open.
We will take our first question from Dan Fannon with Jefferies. Please go ahead. Your line is open.
Thanks, Good morning wanted to follow up on I guess more of your latter comments there just in terms of reevaluate reevaluating that your market footprint.
Speaker 3: Thanks, good morning. Wanted to follow up on, I guess, more of your ladder comments there, just in terms of reevaluating that your market footprint, clearly forward it seems to be doing well, but are there areas or markets that your subscale that you might be looking to exit or on the opposite side, potentially in this type of environment areas you're looking to expand and maybe take market change.
Clearly, Florida seems to be doing well, but are there areas or markets that you're sub scale that you might be looking to exit or on the opposite side potentially in this type of environment areas Youre looking to expand and maybe take markets market share.
Well, obviously there are markets that are not performing as well as they've had in the past.
Speaker 2: Well, obviously there are markets that are not performing as well as they've had in the past. New York being one of them, although New York has picked up considerably, it's interesting. It's much more of a downtown market now than it was in the, years ago when everyone was going uptown with the upper east side. But it's okay, it's not terrible. I mean, I think probably one of the not so good markets
New York being one of them, Although New York has picked up considerably.
It's interesting.
It's much more of a downtown market now than it was.
Years ago, when everyone was going up down or to the upper east side.
But.
But it's okay, it's not terrible.
I think I'd, probably one of the not so good markets for everyone is California, and that's basically because of what's going on in California.
Speaker 2: For everyone is California, and that's basically because of what's going on in California, not that some of it's not going on in New York, but they also put in a new tax, which really is hurting the, the realtors because of the additional tax for the buys in the sellers.
Not that some of it's not going on in New York, but they also put in a new tax which really is hurting.
The realtors.
Because of the additional tax for the buyers and the sellers.
Speaker 2: So that is a soft market. On the good side, we've looked at a couple of markets where...
So that is a soft market.
On the good side, we've looked at a couple of markets where.
Speaker 2: One of them being in Nashville, we think that's a good market. And when I say it's a good market, it's also a good market for us because there's a lot of new development projects starting. And we'd like to go into a market when we have a new development signed up or almost signed up. And we know that we'll have a bit real business starting from day one.
One of them being in Nashville, We think Thats, a good market and when I say, it's a good market and it's also a good market for us because there's a lot of new development projects, starting and we'd like to go into a market when we have a new development.
Lined up or almost signed up and we know that we'll have a real business starting from day one.
Speaker 2: We're trying to stay with no surprise, the low tax or no tax states.
We're trying to say with no surprise, the low tax or no tax states.
Speaker 2: Las Vegas is doing okay. We have there in a short time. I think we have at 90, 90 to 100 brokers. We have a couple of new development projects.
Las Vegas is doing okay. We have there in the short time I think we have about 90, 90% to 100 brokers.
A couple of <unk>.
<unk> new development projects.
Speaker 2: signed up. So that's good. And New York, we also have a couple of new ones we're working on. Miami, Miami through.
Signed up so thats good and.
New York, We also have a couple of new ones, we're working on.
Miami.
Miami through.
Speaker 2: All South Florida, I should say, because we're on the West Coast now. We've opened a bunch of offices on the West Coast. We're just open in Sarasota. So we're doing well there and that is a really robust new development marketplace. So that's really-
Well, our south Florida, I should say because we are on the West coast now we've opened a bunch of offices on the West coast, which is.
Self in Sarasota.
So we're doing well there and that is a really robust new development marketplace.
So that's really helping.
Speaker 3: Okay, the tuple. And then you mentioned October receipts improved year of year. So you can just expand upon that. And then also inventories, are you seeing any change or sustained changes? You look at what's happening here in October and November versus what has been happening here obviously in recent years.
Okay. That's helpful. And then you mentioned October receipts.
Improved year over year. So can you just expand upon that and then also.
Inventories are you seeing.
Any change or sustained change as you look at what's happening here in October and November versus what has been happening here obviously in recent months.
Speaker 4: and then that's Brian Kirkland. October , we see through about two and a half percent from October , 2022. November , 2022.
Hey, Dan it's Brian.
October results were up about two 5% for October 2022.
And that was fairly evenly distributed between existing.
The marketing so we feel really positive about that we do think that buyers are now starting to adjust to the mortgage interest rate environment.
Speaker 4: that we've really positive about that. We do think that buyers are now starting to adjust to the mortgage interest rate.
And then your question was.
Speaker 3: Just as whether inventories are also showing similar signs of showing some continued improvement.
Just as weather inventories are also showing similar signs are showing some continued improvement.
Speaker 4: And we're also seeing across the board, I think our listing inventory into third quarter was up 6% from 2022, third quarter. We view that as a positive sign. That's been a trend that has been continuing the entire year. Last year, obviously, there was a solar strike. Now that's returning where the market's really opening up. And this will be gradual, but we're very positive.
We are also seeing across the board I think a realistic inventory in the third quarter was up 6% from 2022 third quarter, we view that as a positive side thats been a trend that has been continuing the entire year last year. Obviously, there were the sellers right now thats, returning where the market is really.
Thanks.
And this will be gradual, but we're very positive on the long term.
Speaker 3: Great, and then just lastly, just the development, marketing business in general, you mentioned some specifics, seems like that is picking up. I guess is there any higher level comments you can talk about in aggregate versus the regions and or I guess thinking about prospectively, is there something that that has continued momentum as you think about this quarter and next year?
Okay, Great and then just.
Lastly, just the developed marketing development marketing business in General you mentioned some.
Some specifics.
Like that is picking up.
I guess is there any.
Higher level comments, you can talk about in aggregate versus the region's <unk>.
I guess thinking about prospectively. There are signs that that is has continued momentum as you think about this quarter and next year.
Speaker 2: Yeah, I look it has quite a bit of momentum.
Yes look it has quite a bit of momentum.
<unk>.
I can give you examples but.
Speaker 2: I don't want to break. So, not going to do it, but I mean, we've opened projects and actually Miami.
I don't want to break so.
We're going to do it but I mean.
We've opened projects.
And actually in Miami.
Speaker 5: where we were shocked how quick they sold and the prices that were getting for them.
Where we were shocked how quick they sold and the prices that we're getting for them.
And.
I think Thats also.
So all the way pretty much in all of South Florida.
Speaker 2: through all the way, pretty much in all of South Florida. It's sort of robust. And I think part of the reason is the fact where you were asking about about the inventory, if there's really no retail inventory, and the only inventory or the biggest inventory on the market is the new development. And realistically, you know,
It's sort of robust and I think part of the reason is the fact that you were asking about about the inventory if theres really no resale inventory the only inventory or the biggest inventory on the market as the new development.
And realistically.
No.
When I speak to people about it.
Speaker 2: I think it's, it's pretty simple. You know, if you're worried about interest rates, the good news about new development that you don't pay up front, you don't close, you put down deposits over the period of time that the buildings started and being built, and probably you end up having cash of about 40 to 50% by the time it's ready to close. And when it's ready to close, which is usually, let's say two to three years after.
I think it's pretty simple.
Worried about interest rates the good news about new development that you don't pay upfront you don't close you put down deposits over the period of time that the buildings.
Started being built.
Probably you end up having cash of about 40% to 50% by the time it is ready to close and when it is ready to close which is usually let's say two to three years after.
Speaker 2: We started we started sales You are sitting with a Probably if you're gonna mortgage it probably lower interest rates We would we would assume so two or three years from now and also with inflation still around You're you're gonna own something that you couldn't build again for the price or couldn't buy again for the price They reported at you know two or three years before
We started we started sales.
You are sitting with a <unk>.
Probably if youre going to mortgage at probably lower interest rates.
We would assume so two or three years from now and also with inflation still around Europe, you're going to own something that you couldnt build again for the price we couldnt buy again for the price that you bought it at two or three years before.
Speaker 2: So that's sort of an interesting way to look at it, which
So thats sort of an interesting way to look at it which.
Speaker 2: I think it's like one of the reasons it's that market is so strong.
I think as like one of the reasons, it's that market is so strong.
Great. Thanks for taking my questions.
Okay.
Thanks Scott.
Speaker 1: We'll take our next question from Simon Bondzli with BTIG. Please go ahead, your line is up.
We will take our next question from Sohrab <unk> with BTG. Please go ahead. Your line is open.
Speaker 6: Good morning guys, hope you're all doing well. I guess first one on the industry headlines, I know you're not commenting there directly on the cases, which I understand, but I guess you guys are in somewhat of a unique position in that you have some experience navigating some class action lawsuits in your legate business. So I guess is there anything that you can draw from your experience just going through that and are there any parallels that you see in the cases that are being brought against the brokerage industry today?
Hey, good morning, guys hope, you're all doing well.
I guess first one on the industry headlines I know youre not commenting there directly on the cases, which I understand but I guess you guys are in somewhat of a unique position and that you have some experience navigating some class action lawsuits in your legacy business.
Is there anything that you can draw from your experience just going through that and are there any parallels that you see in the cases that are being brought against the brokerage industry today.
Speaker 2: We don't really want to comment on it. I mean, you know, obviously we have a long experience in it. And we're hoping that that experience is going to help us navigate this and...
We don't really want to comment on it I mean, obviously, we have a long experience in it and.
We're hoping that that experience is going to help us navigate this and.
Speaker 2: If it turns out as good as the other one, the last one, the last big one we did then would be pretty high.
If it turns out as good as the other one the last one last big one we did then we'd be pretty happy.
Speaker 6: Okay. And then on the new development side, you know, it definitely feels like a differentiator, right? Just because the lack of supply and, you know, because developers need that service. I guess, can you just give us a sense for how large that business is today? And then, you know, how much more can you scale that business up going forward?
Okay.
And then on the new development side definitely feels like a differentiator right just because of the lack of supply and <unk>.
Developers need that service I guess can you just give us a sense for how large that business is today and then how much more can you scale that business up going forward.
So thanks for that question.
Speaker 4: So that business has been gradually growing throughout the year we do. And you can go back to our conference call scripts and you see every quarter we're giving more number.
That business has been gradually growing throughout the year.
And you can go back to prior conference call scripts, when you see every quarter, we're getting more numbers.
Pipeline over the last year. So right now we have about 21 5 billion of pipeline Thats currently on the market.
Speaker 4: So right now we have about 21 and a half billion and pipeline that's currently on the market. That does include many other projects that are coming to market. And that numbers up from about 20 billion.
<unk>. Many other projects that are coming to market and that number is up from about $20 million last quarter 20 billion excuse me.
So $21 5 billion to the pipeline.
Speaker 2: And just to give you some additional. And so I think probably about 13 or 14 billion of it is in South Florida. That's a lot. Yeah, 13 to 14 billion in South Florida.
We will give you some additional and so I think.
Probably about 13 or $14 billion of it is in South Florida.
$13 billion to $14 billion in South Florida.
Speaker 6: And so is there any way we could sort of get a sense for like when this volume should start trickling into the P&L? Right over the next couple years is there any?
And so is there any way, we could sort of get a sense for like when this volume should start trickling into the P&L right over the next couple of years is there any sense, because I mean that seems pretty pretty meaningful there. If you just apply that volume against sort of familiarity PK is going to answer that but I will tell you every time, we think when it's coming it's usually does.
Speaker 4: That seems pretty meaningful there if you just apply that volume against the government. Yeah, the UK is going to answer that, but I will tell you, every time we think when it's coming, it's usually delayed. Sure. Whether it's building or permits or financing, you have no further development. Look up, look up. Right, and how are I don't know what else I can add to that? Yeah. All that being said, it will come into revenue over the next four to five years.
Whether it's building or permits or financing you have no further development.
And Howard I don't know what else I can add to that.
All that being said it.
It will come into revenue over the next four to five years.
Speaker 4: I will be more gradual. And but the point about this business is it has greater inertia and it keeps building on volume.
More gradual.
But the point about this business is it has great inertia and it keeps building.
So it's almost become a residual.
Speaker 6: Yeah, that's right. Okay. And then just on the share repurchases, I know the two-year anniversary of the SPIN is coming up, so that gives you an ability to sort of unlock that. Obviously, a lot of uncertainty right now with the lawsuits, but is there any thought being given to putting a plan in place, even if it's just to send sort of a message to the market here with where the stock's trading?
Yeah, that's right okay.
And then just on the share repurchases I know the <unk> anniversary on the spin is coming up so that's one.
It gives you an ability.
The ability to sort of unlock that obviously a lot of uncertainty right now with the lawsuits but.
Is there any thought being given to putting a plan in place even if it's just to send a message to the market here, where the stocks trading.
Yes.
Speaker 4: So, you're correct, the two years comes up in 50 days.
Youre correct the two years.
50 days from now from the spin off.
Speaker 4: from the spin-off. That's going to be a fourth decision obviously to board meets every quarter. It deliberate well on these matters and
That's going to be a board decision obviously the board meets every quarter is deliberate as well on these matters.
We have very competent board.
Speaker 2: We're surely going to talk about it in great detail and then make a decision.
We're surely going to talk about it in great detail and then make a decision.
Speaker 4: Okay, and then just last one, Brian , on your run rate operating expenses, X the commissions, you know, what's a good ballpark to assume sort of over the next few quarters, and then can you just talk about any opportunities to lower that run rate just in 2024? Because it seems like we're sort of gonna, you know, probably hit a flat market on transaction volumes, but we could be higher on ASP, so just, yeah. Anything there? Okay, and we're very proud of what we've done on the expenses, and we're proud because we have been, okay.
Okay, and then just last one Brian on your run rate operating expenses ex the commissions whats a good ballpark to assume sort of over the next few quarters and then can you just talk about any opportunities to lower that run rate just in 2024, because it seems like we're sort of going up.
Probably hit.
That market on transaction volumes that we could be higher on ASP. So just yet.
Anything there.
And we're very proud of what we've done on the expenses were for all vehicles, we have been judicious because we're taking a long term approach.
Speaker 4: As Howard mentioned earlier, our operating gets finished.
As Howard mentioned earlier, our operating expenses excluding.
Speaker 4: commissions and restructuring, we're down 7.8 million versus the last year quarter. That was comprised of about 3.6 million of personnel costs, and we have reduced about 60 employees over the last year, reduction of 2.2 million in advertising and sponsorships, another 1.8 million in just general type expenses, and 400,000 in travel.
Commissions and restructuring were down seven 8 million versus the last year quarter that was comprised of about $3 6 million of personnel costs.
Reduce about 60 employees over the last year.
Reduction of $2 2 million in advertising and sponsorships another million and just general typhoons passes at 400000 that travel.
Speaker 4: On a sequential basis, quarterly expenses were lower from second quarter by about $4.1 million. About $1.3 million of that was personnel, where some of the cuts we made earlier in the year are now starting to come in on a full quarter. And also $1.3 million on advertising and administration and $250,000 of travel. We've been very mindful of spending.
On a sequential basis quarterly expenses were lower second quarter by about $4 1 million about a million three of that was personnel where some of the cuts. We made earlier earlier in the year are now starting to comment on our fourth quarter.
And also we had three on advertising administration.
$50000 of travel we've been very mindful of spending judiciously.
Speaker 4: Lee and not be penny wise, uncount foolish and not think guine cusuts that would impact.
Why is that.
And.
Any thoughts that would impact the agent experience.
Speaker 4: Um, so, um, you know, rent expenses, one of our big numbers and.
So you know one of our big numbers.
Speaker 4: Occupancy costs just on the pure lease is about $34 million a year. There's another $10 million of other costs associated with the leases But that's about 22 and a half percent of our non activity based expenses We'll start to see
Occupancy costs, just on a pure leases about $34 million a year, there's another $10 million of other costs associated with the leases. So that's about 22, 5% of our non activity based expenses will start to see run off of that.
Before January 25, starting in 'twenty three.
Speaker 4: It reduces about 8.25 million over that two year period. And after then we start running y'all about $3 million.
It reduces about 825 million.
Two year period.
And after then we start running off about $3 million of leases a year.
Speaker 2: So our plan really is to, in less than a specific location that we really need, and it's really being used. It's to basically not renew any leases and consolidate where we have other roles.
Our plan our plan really is to.
Unless it's a specific location that we really need and it's really being used.
It took basically not renew any leases and consolidate where we have other offices.
Speaker 4: Right, and when we give those numbers obviously that's just our pure expense. That's not what we will say.
Right and when we get those numbers, obviously, that's just a pure expense that's not what we will save by doing that.
This one is just on the run rate to understand so we should assume like personnel in those line items sort of stay flat from here on but then where you would really see sort of declined.
Speaker 6: So just on the run rate to understand, so we should assume like personnel and those line items sort of stay flat from here on but then where you would really see sort of declines is on the rent side. Is that fair for over the next few quarters?
The rent side is that fair or over the next few quarters.
Okay.
Speaker 4: We're evaluating our expenses going forward, and we'll continue to analyze the expenses across the board. We're hopeful that we.
I mean, we are evaluating our expenses going forward and we'll continue to analyze.
It is across the board, we're hopeful that we can achieve.
Even more savings, but stay tuned.
Great Alright, thanks, a lot guys.
Speaker 1: and ladies and gentlemen, there are no, those are all of the questions that we have for today. Thank you for joining us on the Douglas Eleman Quarterly earnings conference call. We hope you have a good day, and this will conclude our call.
And ladies and gentlemen, there.
Those are all of the questions that we have for today. Thank.
Thank you for joining us on the Douglas Elliman quarterly earnings Conference call. We hope you have a good day and this will conclude our call.
Thank you.
Yes.
Uh-huh.
Okay.
Okay.
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Speaker 7: Of F.
Alright.
Okay.
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Speaker 8: song