Costs associated with its October initial public offering pushed Realogy Holdings Corp. into the red during the fourth quarter, although adjusted earnings were up 61 percent from a year ago, to $167 million.
Realogy’s IPO helped the real estate brokerage and franchising giant reduce its debt by $3.1 billion. But the company posted a $292 million fourth-quarter loss after recognizing $400 million in IPO-related costs, $18 million in debt extinguishment charges, and $42 million in depreciation and amortization.
Revenue for the quarter was up 30 percent from the same period a year ago, to $1.2 billion, thanks in large part to a 35 percent annual increase in sales volume (transaction sides multiplied by average sale price) at franchised and company-owned brokerages.
"The strength of the year, and in particular our strong fourth-quarter results, supports the growing consensus of a housing recovery," said Realogy CEO Richard A. Smith in a statement. "The favorable housing trends we experienced early in 2012 were evident in the fourth quarter, and our first-quarter 2013 closed sales volume and open contracts indicate the continuation of the housing recovery."
Revenue for the year was up 14 percent, to $4.7 billion, but after paying expenses that included $528 million in interest expenses on outstanding debt, Realogy posted a 2012 net loss of $543 million.
Adjusted earnings before interest expenses, taxes, depreciation and amortization (EBITDA) for the year were up 18 percent, to $674 million.
Realogy finished the year with $5.9 billion in total liabilities, including long-term debt and deferred income taxes, down from $8.8 billion at the end of 2011.
The company expects to use the remaining proceeds from its IPO to redeem $200 million of subordinated notes during the second quarter, and reduce its interest expenses to between $315 million and $320 million in 2013.
Realogy provides franchise services to brokerages operating under the the Century 21, Coldwell Banker, ERA, Sotheby’s International Realty, Coldwell Banker Commercial, and Better Homes and Gardens Real Estate brand names.
It’s also the nation’s largest real estate brokerage company, with subsidiary NRT operating offices under the Coldwell Banker, ERA, Corcoran Group, Sotheby’s International Realty and CitiHabitats brand names.
As of Sept. 30, 2012, the Realogy franchise system had approximately 13,500 franchised and company-owned offices and 239,500 sales associates operating under its brands, including approximately 720 company-owned and -operated brokerage offices with approximately 41,800 sales associates.
In 2012, brokerages that Realogy provides franchise services to boosted closed home-sale sides by 9 percent, while transaction sides were up 14 percent at company-owned brokerages. Average sales price increased 8 percent at brokerages affiliated with Realogy brands, and 4 percent at company-owned brokerages.
In the fourth quarter, brokeages affiliated with Realogy brands boosted transaction sides by 14 percent, and company-owned brokerages handled 22 percent more transaction sides than during the same period a year ago. Home sale prices were up 14 percent at brokerages affiliated with Realogy brands, and 18 percent at company-owned brokerages, pushing combined transaction volume up 35 percent.
"Our closed home-sale transaction volume drivers outperformed our expectations in the fourth quarter, especially with respect to average sales price," said Realogy CFO Anthony E. Hull in a statement. "We believe that the fourth-quarter volume increase was partially aided by tax-related selling, particularly at the high end of the market."
Hull said that based on January closed sales data and open contracts in January and early February, Realogy expects first-quarter transaction sides to be up 4 to 5 percent from a year ago. The company is also expecting an 8 to 9 percent increase in sales price.
Together, the increase in transaction sides and sales price would equate to a 14 to 16 percent sales volume increase from a year ago.