Editor’s note: This story has been updated to correct that Realogy is receiving a $12.1 million tax break from the state of New Jersey, and to provide correct third quarter revenue figures for the company as a whole.
In a cost-cutting measure backed by a $12.1 million tax break from the state of New Jersey, Realogy Corp. will move its headquarters seven miles down the road to a 270,000-square-foot office building in Madison, N.J.
Realogy, which has racked up nearly $300 million in losses so far this year, said it’s signed a 17-year lease on a new headquarters facility with a base rent that’s 25 percent less than what it’s paying for its current home office in Parsippany. The move to 175 Park Ave. will take place late next year or in early 2013, the company said.
In an application approved by the New Jersey Economic Development Authority in April, Realogy said its current 377,000-square-foot facility needs significant improvements and is larger than needed for the 713 workers employed there.
Realogy said it was considering moving its entire operation — including 240 workers employed by the company’s title insurance division in Mt. Laurel — to North Carolina or Georgia.
To keep those 953 jobs in New Jersey, the state approved a Business Retention and Relocation Assistance Grant (BRRAG) with $10.7 million in transferable tax credits to be earned over a five-year period, and a five-year sales and use tax exemption of $1.4 million.
The BRRAG is a $2,250-per-employee tax credit worth up to $2.14 million a year from 2013 through 2017. The sales and use tax exemption applies to Realogy’s purchases of machinery, equipment, furniture and furnishings, fixtures and building materials needed to outfit the Madison headquarters building, currently under redevelopment.
The renovated facility will be LEED Silver Certified by the U.S. Green Building Council, employing green roof technology and state-of-the-art mechanical systems, the company said. It will house Realogy Franchise Group employees and serve as the home office of Realogy’s brokerage subsidiary, NRT. The new headquarters will also serve as the base of operations for NRT’s local brokerage, Coldwell Banker Residential Brokerage in New Jersey and Rockland County, N.Y.
"We are pleased to make this long-term commitment to stay in New Jersey, and we thank Gov. Christie, Lt. Gov. Guadagno and their administration for accommodating our long-term needs," said Richard A. Smith, president and CEO of Realogy, in a statement.
In its most recent quarterly report to investors, the real estate brokerage and franchise giant said it posted a net loss of $28 million during the three months ending Sept. 30 and a $287 million loss for the year to date.
Third-quarter revenue was up $103 million from a year ago to $1.2 billion, and adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) were up $10 million, to $187 million.
The company said its short- and long-term debt totaled $7.36 billion, up from $7.22 billion at the start of the year. Interest payments on that debt totaled $159 million for the quarter and $499 million for the year to date.
Realogy provides franchise services to companies operating under the Century 21, Coldwell Banker, ERA, Sotheby’s International Realty, and Better Homes and Gardens Real Estate brand names. As of Sept. 30, there were 14,300 franchised and company-owned offices with 253,000 sales associates operating under those brands in the U.S. and 100 other countries.
Of those, about 730 offices with 43,200 sales associates were company owned and operated, most of them operating under the Coldwell Banker, ERA, Corcoran Group and Sotheby’s International Realty brand names.
Company-owned brokerage services generated $841 million in revenue during the third quarter, up 10.4 percent from a year ago. Realogy also generated $151 million in revenue for the franchise services it provided to both company-owned brokerages and independently owned franchisees, up 9.4 percent from a year ago.
Real estate franchise services were the company’s most profitable line, generating $92 million in third-quarter EBITDA, followed by relocation services ($50 million), company-owned real estate brokerage services ($47 million), and title and settlement services ($8 million).
Realogy’s relocation services, Cartus, offers employee relocation services such as home-sale and home-finding assistance. Realogy’s Title Resource Group, TRG, provides title insurance, settlement and vendor management services to real estate companies.
Companies that Realogy provides franchise services for closed 688,679 transaction sides in the first nine months of the year, down 3 percent from the same period in 2010. Each transaction side — in which a Realogy franchisee represented either a buyer or a seller — generated an average of $257 in royalties for Realogy.
Realogy’s company-owned brokerages closed 195,428 transaction sides through Sept. 30, 2011, generating $11,623 in gross commission income per side. The average home-sale price in transactions handled by company-owned brokerages during the third quarter was $433,003, down 5 percent from a year ago.