Real estate brokerage and franchise giant Realogy Corp. reported a $237 million first-quarter loss today, as interest expenses on the company’s debt outweighed improvements in operating income.
Realogy reported that excluding the costs of recent debt restructuring, its operating income — earnings before interest, taxes, depreciation and amortization, or EBITDA — rose 14 percent from a year ago, to $25 million.
The biggest components of Realogy’s loss were interest expenses on its $7.3 billion debt (which totaled $179 million), followed by depreciation and amortization expenses of $46 million. Realogy reported that it took a $36 million loss on the early extinguishment of debt in its restructuring.
Revenue for the quarter was up 1 percent from a year ago, to $831 million.
Most of that revenue came from 740 company-owned real estate brokerage offices, whose 43,000 sales agents generated $587 million in revenue, down 2 percent from a year ago.
Realogy’s company-owned brokerages, which are operated by NRT under the Coldwell Banker, ERA, Corcoran Group and Sotheby’s International Realty brand names, posted a cumulative $37 million loss for the quarter.
Real estate franchise services Realogy provides to independently owned franchisees and NRT brokerages generated considerably less revenue than the company-owned offices’ operations — $118 million — but were Realogy’s most profitable business segment, producing $62 million in earnings for the quarter.
The $118 million in revenue generated by franchise services includes $44 million in intercompany royalties and $45 million in marketing fees paid by company-owned real estate brokerages.
Realogy provides franchise services to independently owned brokerages, which operate nearly 14,000 offices with 217,000 agents worldwide under the Century 21, Coldwell Banker, ERA, Sotheby’s International Realty, and Better Homes and Gardens Real Estate brand names.
Closed home sales among Realogy franchisees were down 4 percent from a year ago, to 184,643. The average home-sale price climbed 3 percent, to $193,710, and the average broker commission rate held steady at 2.54 percent per transaction side.
The royalties Realogy collects from its franchisees on each transaction side were down $1 from a year ago, to an average of $251, as the net effective royalty rate declined 17 basis points to 4.87 percent.
(The net effective royalty rate represents the average percentage of franchisees’ commission revenues collected by Realogy, net of volume incentives achieved).
Company-owned real estate brokerages handled 51,200 transaction sides, down 3 percent from a year ago. Although the average home-sale price was down slightly, to $414,164, the average commission rate per side was up 2 basis points, to 2.5 percent, leaving gross commission income per side essentially unchanged from a year ago, at $11,188.
Revenue from relocation services was up 14 percent, to $87 million, and title and settlement services generated $83 million in revenue, up 28 percent from a year ago.
Both segments were profitable, with earnings from relocation services up 150 percent from a year ago, to $10 million, and title and settlement services generating $2 million in earnings compared to a $5 million loss a year ago.
In the relocation services segment, initiations were up 8 percent from a year ago, to 35,108, and referrals climbed 6 percent to 12,812.
The title and settlement services division saw business from refinancings climb 41 percent, to 16,826, more than offsetting a 5 percent decline in purchase title and closing units, to 18,971.