Real estate brokerage and franchise company Realogy Corp. on Wednesday reported a net loss of $27 million in the second quarter, with a 21 percent year-over-year decline in home-sale transaction sides within its franchise unit and a 19 percent decline at company-owned offices.
The average home-sale price fell 5 percent within Realogy’s franchise group and dropped 8 percent among company-owned offices during the second quarter compared to the same quarter last year, the company reported (see related story here on Realogy’s latest earnings).
"In the midst of a very difficult housing market, Realogy remains focused on increasing productivity and reducing our operating costs to enhance our ability to manage through this protracted downturn and, ultimately, be well-position to capitalize on the real estate market when it recovers," said Richard A. Smith, Realogy’s president and CEO, in an earnings announcement. The company last month launched an additional franchise brand, Better Homes and Gardens Real Estate — other Realogy brands include Coldwell Banker, Century 21, ERA and Sotheby’s International Realty, among others.
Realogy had net revenue of $1.4 billion in the second quarter, compared to estimated net revenue of $1.78 billion for the same period last year.
The company’s division that specializes in bank-owned properties that were subject to a foreclosure process — also known as real estate-owned properties or REOs — saw its transaction volume roughly double to about 10,000 units in the second quarter compared to the same quarter last year.
Realogy also announced that its net domestic franchise sales among the company’s leading brands totaled $171 million in gross commission income in second-quarter 2008, which is a year-over-year increase of 24 percent.
And as of June 30, the company’s senior secured leverage ratio was in compliance with the company’s mandated levels under its credit agreement. The company’s senior secured leverage ratio was 4.9 to 1, which is 0.7 times below the maximum 5.6 to 1 ratio under the company’s credit agreement. The company’s earnings release noted that this ratio is determined by taking the company’s senior secured net debt of $3.3 billion at June 30 and dividing that by the company’s adjusted earnings before interest, taxes, depreciation and amortization, or EBITDA, as of June 30, which was $679 million.
Realogy was acquired by an affiliate of private equity firm Apollo Management LP in a buyout deal finalized in April 2007 that was valued at about $8.5 billion. The company had an estimated net loss of $226 million during the period from April 1, 2007, through June 30, 2007.
The leveraged buyout of Realogy had caused some concern among analysts, and the company noted in a Jan. 9 filing with the U.S. Securities and Exchange Commission that it was "significantly leveraged," with about $6.26 billion of total long-term debt as of Sept. 30, 2007.
The latest earnings announcement also notes that the company’s "substantial debt leverage" is among various factors that could impact future results.
Realogy officials will hold a webcast at 10 a.m. EDT on Thursday, Aug. 14, to discuss the company’s latest earnings. Questions can be submitted in advance to Investor.Relations@Realogy.com by 5 p.m. EDT on Wednesday, Aug. 13. The conference call will be aired live at the Investor Information section of the Realogy.com site, and a replay will be available from Aug. 14-28.
The company’s franchise systems have about 16,000 offices and 300,000 sales associates working in 92 countries, according to the announcement.
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