Realogy losses narrow to $15 million
$3.4 billion in debt remains within stipulated limits
By Inman News, Tuesday, August 11, 2009.
Drastic cost-cutting measures helped real estate franchisor Realogy Corp. limit second-quarter losses to $15 million, despite a $371 million decline in revenue from a year ago.
Realogy -- which in February was forced to respond to rumors that it could be forced to seek bankruptcy protection -- had posted a $259 million net loss in the first three months of the year, due in part to interest payments on its massive debt (see story).
The company said today that it had $356 million in cash on hand as of June 30, and that the 5.1-to-1 debt ratio on $3.4 billion in senior secured debt remains within the maximum 5.35-to-1 ratio stipulated in its credit agreement.
The maximum steps down to 5.0-to-1 on Sept. 30, however, and then to 4.75-to-1 on March 31, 2011. Realogy has said private-equity firm Apollo Management LP has pledged to help the company maintain its debt ratio and cash flow through the end of this year (see story).
At $1.018 billion, second-quarter net revenue was down 27 percent from a year ago. Gross commission income fell by $294 million, to $746 million, a 28 percent decrease from a year ago.
But Realogy also slashed $400 million in expenses, reducing spending by 28 percent from a year ago to $1.036 billion.
Realogy has "worked diligently to create efficiencies and act upon cost-saving opportunities within our businesses, and we will continue to do so," Chief Financial Officer Anthony Hull said in a press release.
Commissions and other agent-related costs were down 30 percent, to $477 million, while operating expenses for the quarter were down nearly 26 percent, to $313 million. Realogy slashed spending on marketing for the quarter by 25 percent, to $45 million.
Transaction sides and average home-sale price were down at both NRT, the company's owned brokerage unit, and at companies within the Realogy Franchise Group, including Better Homes and Gardens Real Estate, CENTURY 21, Coldwell Banker, ERA, and Sotheby's International Realty.
Transaction sides within Realogy Franchise Group fell 8 percent, to 259,476, and the average home-sale price fell 15 percent, to $188,489. Transaction sides at NRT were down 9 percent from a year ago, to 72,362, and the average home-sale price was off 24 percent, to $378,870.
Compared to a year ago, average broker commission rates were up at NRT and companies within the franchise group.
Within Realogy Franchise Group, average broker commission rates per transaction side were 2.57 percent, up five basis points from 2.52 percent a year ago but unchanged from the first quarter.
At NRT, the 2.52 percent average broker commission was up four basis points from a year ago, but down three basis points from the first quarter.
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Submitted by Don Gurney on August 11, 2009 - 1:39pm.
I wonder how this compares to other large groups such as RE/MAX and Home services of America.
Submitted by Ralph M on August 11, 2009 - 10:50pm.
Realogy is a privately owned company that provides real estate and relocation services. It owns and franchises several of the industry's leading real estate brands and brokerages. Along with its relocation services, it also provides title and settlement services.
Realogy was created as a result of an October 24, 2005 announcement by Cendant that it had decided to split into four separate companies, citing a necessity to diversify in appealing to stockholders and in an attempt to increase the value of the post-split up company. These four categories include "Real Estate, Travel Distribution, Hospitality and Vehicle Rental Companies."
On July 31, 2006, the separation was completed, and Realogy became a self-operating company. Subsequently, the Cendant name has been completely retired. On August 1, 2006, Realogy went public, trading on the New York Stock Exchange under the ticker symbol "H" - for homes and housing.
On December 18, 2006, Realogy announced it had accepted a $8.5 billion buyout offer from private equity group Apollo Management. The transaction closed on April 10, 2007. Realogy will no longer be listed on the New York Stock Exchange.
Today, Realogy has operations throughout the United States and around the world, with over 15,000 affiliated real estate offices and roughly 315,000 affiliated brokers and agents. Its headquarters is located in Parsippany, New Jersey. In 2006, Realogy earned $6.492 billion in revenue.
On December 2008, bond holder, Carl Icahn, filed suit against the company over a debt exchange plan announced in November.
Real estate broker Realogy Corp, owner of Century 21 and Coldwell Banker, reported a net loss of $15 million for the second quarter and said the pace of declines in home sales was slowing, but it was too soon to call a rebound.
Sales fell 27 percent to $1.02 billion, but expenses fell more steeply and the company's net loss narrowed from $27 million a year ago.
Parsippany, New Jersey-based Realogy said it was well positioned to capitalize on a recovery in the U.S. housing market, but said it was too soon to say a rebound has gotten under way.
The company, owned by affiliates of Apollo Management LP, said it had $356 million in available cash at the end of the quarter. They need more than instant cash to regain the amount that was lost to them. To read more: http://personalmoneystore.com/moneyblog/2009/08/10/kathy-griffin-levi-jo...
Submitted by jim canion on August 12, 2009 - 5:35am.
THE WORLD IS CHANGING AND BIG FRANCHISE MODELS
CAN NO LONGER SQUEEZE ENOUGH OUT OF AGENTS TO
SURVIVE. THEIR NEED TO CHARGE AGENTS MORE AND
OFFER LESS IS EVIDENT FROM THIS REPORT. THEIR
AGENTS ARE SLOWLY RECOGNIZING THIS AND MAKING
CHANGES. THERE ARE MANY GREAT AGENTS THAT WILL
ADAPT AND DO JUST FINE.
THE FUTURE IS BRIGHT.....
JIM CANION
CONNECT REALTY.COM