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Douglas Elliman CEO on why the company is on its own

One of real estate’s biggest stories of the new year is that Douglas Elliman broke off from the Vector Group and is now its own publicly traded company.

Headquartered in Manhattan, Elliman caters to a luxury clientele and ranked sixth in RealTrends 2020 list in sales volume with $29 billion homes sold. The brokerage has been known for its continuity in leadership with Vector Group CEO Howard Lorber serving as Elliman chairman for the past 20 years, and Dottie Herman as the brokerage’s CEO since 2003. 

That changed this year when Scott Durkin, Elliman’s former chief operating officer, replaced Herman as CEO. Subsequently, Elliman has broken away from Vector, a company best known for its discount tobacco products, and is now its own publicly traded company. As of Monday, the brokerage was trading on the New York Stock Exchange with a market capitalization of $740 million. 

For this episode of HousingWire Daily, Durkin spoke with HousingWire real estate reporter Matthew Blake about the brokerage’s decision to break away from Vector, whether Wall Street properly values brokerages, and life for real estate agents amid Omicron.

Here’s a small preview of the interview, which has been lightly edited for length and clarity:

Matthew Blake: The fact that Douglas Elliman was the subsidiary of a tobacco company, is that just kind of a reputational hit or did that lead to specific issues with people investing or not investing in the company? What exactly was the issue with that?

Scott Durkin: I think all of what you just said. Tobacco and real estate really don’t go together.

And some people won’t invest in a tobacco company for the sheer reason it’s tobacco and it hurts people. It could be anything like that. 

But also, the real estate part of it is so important right now, because as we can see during the pandemic, the whole world is wanting a piece of real estate. It really is an amazing investment as well as a choice of lifestyle. We felt it important that the brand of Douglas Elliman needed to be out there and needed to be on its own.

HousingWire Daily examines the most compelling articles reported across HW Media. Each afternoon, we provide our listeners with a deeper look into the stories coming across our newsrooms that are helping Move Markets Forward. Hosted by the HW team and produced by Elissa Branch.

Below is the transcription of the interview. These transcriptions, powered by Speechpad, have been lightly edited and may contain small errors from reproduction:

Matthew Blake: Hello, I am here with Scott Durkin, CEO of Douglas Elliman Realty. Scott, welcome to the show.

Scott Durkin: Thanks, Matt, for having me. It’s good to be here.

Matthew Blake: Great. So, Scott, what are your roles and your responsibilities at the new Douglas Elliman, which is a spinoff from the Vector Group?

Scott Durkin: I’m the CEO of Douglas Elliman Realty, which is the luxury resale brand of the company that crosses nine markets in the United States with over 7,000 agents and 111 offices. And so I will be in charge of the U.S. territory for the company, as well as working out of our headquarters at 575 Madison in New York City and as well as managing the ancillary services that are related to real estate in regards to all the other offices.

Matthew Blake: And have those responsibilities changed at all with the recent development that you guys spun off of your parent company or are they pretty much the same?

Scott Durkin: They’re pretty much the same. However, I think with a spin-off, we are able to grow all of these divisions and increase our market share. And so that’s exciting.

Matthew Blake: And in terms of that spin-off, so when we spoke in August, you said that you speak several times a week with the Vector Group and that they are very involved in real estate. So, why the decision to spin off into your own company?

Scott Durkin: There were many reasons but I think the main reason was that we were a subsidiary of a tobacco company. So that really kept us having our own spotlight as well as, it kept people from investing in a clear real estate company. And we were able to spin off this into its own public company. And for us, that was really important because we’re a company that has no debt. We have a large cash reserve. We have an average price of 1,600,000 across the country. And we’re highly profitable. So it seemed like the right time and the right climate.

Matthew Blake: Yeah. And the fact that you were the subsidiary of a tobacco company, like, is that just kind of a reputational hit you feel like the Elliman or did that, like, lead to specific issues with people investing or not investing in the company? What exactly was the issue with that?

Scott Durkin: I think all of what you just said is that the, you know, tobacco and real estate really don’t go together. And some people won’t invest in a tobacco company for the sheer reason of that it’s tobacco and it hurts people. It could be anything like that. But also, the real estate part of it is so important right now because as we can see during the pandemic, and we don’t even have a post-pandemic time yet, the whole world is wanting a piece of real estate and it really is an amazing investment as well as a choice of lifestyle that we felt important that the brand of Douglas Elliman needed to be out there and needed to be on its own.

Matthew Blake: And part of…When I looked through the Vector Group SEC filings and Elliman S1 filing, the New Valley Ventures arm that was of the Vector Group, which invests in you know, what they call prop-tech real estate technology companies. What is the New Valley Ventures that seems to be a pretty big part of the Vector Group from what I can tell? Is that now part of Douglas Elliman or is that still part of Vector? What is the relationship there?

Scott Durkin: That is part of Douglas Elliman now. And they’re the best that we could ask for because they are an internal part of our company. However, they’re heavily focused on the prop-tech industry and technology. So, we’re able to enhance the services to all of our agents and have the best-in-class software companies that are already tested and proven. And when we invest in that sort of the arm of that, we’re able to have a position and skin in the game and also roll it out to our agent pool and make their lives much easier, their businesses run much smarter and offer them a lot of services that normally we would have to think about building ourselves but we’re not building anything in-house. We have no campus of engineers. We’ve got mainly just technology department with the most important people in it, ICIR, CTO, and our helpdesk. So we’re able to test out all of these investment opportunities within the company. And if we feel it works, we’ll invest in it. And then that keeps that company focused on being able to deliver what they’ve promised and also helps our agents to have the best that’s out there in the industry.

Matthew Blake: Could you give an example or two of the New Valley Ventures investment and maybe its interaction with agents?

Scott Durkin: Well, we’ve just invested in Rechat, which is a CRM that it goes within our Douglas program. Our Douglas is our intranet for our agents. It’s called My Douglas. And Rechat is one of the best CRM programs out there right now for real estate agents. And that’s one of the things that we needed most for our agents was the CRM piece because many times that falls on the wayside because the agents are so busy. But this new program for them is really exceptional. We have another one that helps consumers that might have a second or third home, and that’s called Humming Homes. And that gives you the opportunity to have a second or third home but this service, and it’s all done online, and it’s anywhere you want it to be, helps you manage your weekend or vacation home or investment home when it comes to finding the right contractors, the right plumbers, the right painters, the right landscapers. So Humming Homes is one of our new ones. And we’re also investing in electric vehicle chargers across the [crosstalk 00:06:41]. Yeah, because that seems one of the hot things that people want in their house now is that EV charger. We’re also investing in similar to DocuSign and similar to a notarization platform. So, it’s important for us not to build it because you’ll spend all your money and by the time you launch it, it will be obsolete but to spend and invest on what we believe will be the best software out there for our agents and their businesses.

Matthew Blake: I thought the Humming Homes one was particularly interesting because you are a luxury brand in real estate. How many of, kind of, your clients would you say have a second or a third home? How prevalent is that among your client base?

Scott Durkin: It’s very prevalent. I don’t have a number offhand but I would imagine it’s well over 50% of our clients have at least two or three homes.

Matthew Blake: And how do you sort of get those clients to stay with Elliman? I mean, how would you sort of differentiate yourselves as a brand from, say, either compass or maybe other, like, more like Warburg Realty, other kind of more local boutique places in New York City, or Aspen, or elsewhere?

Scott Durkin: I think one of the hallmarks of our brand is that we have connectivity amongst our agents that no other brand has in the country. We are where our clients are. So when you look at our map, where we can be in Palm Beach, Miami, Manhattan, Brooklyn, the Hamptons, Boston, Greenwich, Connecticut, Scarsdale, and then on to Aspen, Austin, Dallas, Houston, Beverly Hills, Malibu, we are in those markets where the client goes. And we find those markets that feed our other markets. We’re now expanding in the West Coast of Florida, and Naples, and Sarasota, St. Petersburg, and then the East Coast, we’re going to be opening up in Vero Beach. For us, we follow the client. And that’s important because the clients that feed our luxury markets need something else in another market. But most importantly, the Elliman agent possesses a drive and something that we help them build on selling in multiple states. So, we have agents that are licensed in all of the states that we have offices in. And more importantly than that is that we have events all over the country where the agents are constantly together. Of course, COVID has kept that from happening. But we do keep our agents together as much as we can. We have events in Florida, and New York, and California, and Aspen, and Texas, where they’re all invited and that they can exchange business. We also have an incredible public relations department. That’s over 10 people that handles the entire country and also handles our relationship with Knight Frank, which is our international partner, which is truly an international partner and someone that we are proud to have in the Elliman family.

Anything that comes into the United States from Europe, and the world through Knight Frank comes to Douglas Elliman, and anything we send out those to Knight Frank. They have over I think 500 offices and 19,000 agents, and they’re really the best in class outside of the U.S. So, we have all of these things that make our agents aware of how they should be doing their business. And it’s all about relationships. And I think that’s important now. The high-end agent is very much the family advisor to the investor on where they may want to go. And if you have an agent in Miami that has a buyer that wants something in Connecticut, they’ll look at their Miami agent and say, “I need you. I want you. Tell me what I need up there. Tell me what’s important. And then the relationship piece of it starts there where the agents and leadership get each other together and we make the best possible choices for the client, in terms of getting to see it, getting in there, becoming familiar with where they’re going. We have a lot of things that are important. And it all comes down to service. And we’re a high-touch service industry. And that’s where I think we excel. We’re not a technology company. That’s important as the engine behind the scenes, but it’s not something that we would be calling ourselves. We transact and sell the best real estate in the world.

Matthew Blake: Yeah, and that’s notable because Compass, Keller Williams, many other brokerages now are calling themselves technology companies. So, it’s notable that you don’t. So, with Douglas Elliman becoming public, you’re now being traded publicly. The last time I checked, your market cap is presently I think less than 1 billion. I could be wrong. It could be hovering around there. And I mean, this compares pretty favorably to other brokerages like Realogy, which has, you know, much larger the size of you guys has, you know, presence in every corner of the United States, Coldwell Banker, Century 21, all parts of Realogy, their market cap is less than 2 billion. I mean, I do not know much about market caps and market values, and how they represent the true value of a company but these numbers do seem arguably at odds with the billions of dollars in sales volume that Douglas Elliman does each year, and the continued role of brokerage in the housing market. I guess my question from all this is, do you see any disconnect between how you perceive the value of brokerage and maybe how Wall Street investors or people who buy stocks might?

Scott Durkin: Well, it’s interesting you say that. I think when you peel back the onion, you realize that we sell real estate, and we know that, and that’s our laser focus. We also appeal it further, and we realize that we should be involved in title, and mortgage, and in Escrow, and other services that help provide revenue to the bottom line. I think the valuations are quite… They don’t compare up. Yeah, well, they don’t…When you look at them, you put them all up there. You’re like, “Wow, this doesn’t make any sense.” And in many ways, we’ve often wondered that too for some of those valuations that are, you know, $4 or $5, $6 billion. But for us, our focus is on luxury real estate. And we are highly profitable. And I think that shows you where they have valued us. And that’s important for us to be able to go to the market with. And when you look at our financials, it’s all very clear on what we’re doing, and how it’s going, and how we’re growing, and what our footprint is, and what our future footprint is. So, I think, for us, we’re in a very good position right now. And it’s a position where you really have to show what you’re doing and you have the market share and you have the average price and you have the profitability. And I think we happen to hit all those marks.

Matthew Blake: Anything else in terms of your pitch as to why someone should buy shares with Elliman whether you think your market value might change as you become more established as a publicly-traded company on its own?

Scott Durkin: Well, I think as a personal pitch, if I was looking…Or even, you know, I often say to people, “What does everyone talk about when they’re in a social setting?” Most of the time it’s real estate. It always is. It’s always about owning or going somewhere fantastic. It could be luxury hotel ownership. It could be staying at the best new property somewhere else. And as you can see in the landscape now, a lot of these hotels are realizing, “Oh, we need to have our branded residences.” So we’re involved in that with Susan DeFrance and the Douglas Elliman development marketing, we’re launching all of those as we can of these luxury brands. So, we’re there for the experience as well. And I think that it’s important for people to be able to invest in things that they know about. And we always used to say real estate, it’s like driving your money right into the ground. And you have the best control of it. So, I think if you look at it historically, and we have the Johnson Miller reports, our relationship with Jonathan, that the trajectory of that has always been really a…It’s been a great investment for so many people. It’s rarely not performed. And we always say, you know, real estate should be something you’re buying to live in. But when you look at it historically, it’s always done well. So I think you should invest in what you know, and what you’re comfortable with, and what you can see the historical values on, and make your decision.

Matthew Blake: Finally, the last topic I wanted to speak with you about is Omicron, obviously, is dominating society at large right now. How has it affected your company and the real estate market generally?

Scott Durkin: I think it’s probably classified under a really big hiccup because, let’s not forget, we’re coming over on our second year at the end of the beginning of March, when all this started. So for us, you know, we’re all set for it, we’ve pivoted. We’ve redone the way we do business, the way we do showings, the way we do contracts, closings, inspections. Everything’s poised that we can operate under any environment right now. It’s unfortunate for Omicron…We’re all hoping we collectively say that we hope it’s just the new flow or the new cold, and it will end everything and we’ll be able to move on. But as you know, if you’re in the densely populated cities like New York, the cases are just all over the place. And it’s 900,000 in one day. But hopefully, this one will be short-lived and we can move on. But yes, it’s…And I think it also has helped the housing market in many ways because people don’t want to be left without having somewhere to go in case they do need a second home, or a third home, or somewhere else to take their family or their friends. So, it works in many ways. There are many silver Llnings about this. But hopefully, we won’t have people dying like we did the first time around. And I think that’s one of what we’re seeing right now as being that it’s not requiring you to be in the hospital on a ventilator. So, we’re hopeful.

Matthew Blake: And in terms of kind of the bread and butter of your brokerage, like, are there any situations where you were kind of maybe bringing people back to the office or maybe doing stuff more in-person and are now scaling back on that?

Scott Durkin: Well, with the exception of New York, all of the other operations have…its business as usual now. Let’s not forget most of the other companies in our footprint, they’re in their cars. They’re not in a train. They’re not in a high rise. They’re not in elevators. They are operating out of their cars. So, they have a whole protocol of how to show a home. And so we had that coming out of the gate about three months after the first COVID. So, they’ve been operating under normal protocol within showings as it relates to COVID. So nothing’s changed for them. They may not even realize how they’re doing it and how well they’re doing it. But it’s been tremendous the way that they’ve been able to grab this and turn that into business. That’s the sign of great agents. They’ll just…You know, give me a way to get the front door open and I’ll be there. And that’s what I have to say is what’s so great about our Douglas Elliman agents, they really pulled this together and we’re obviously seeing that from last year’s numbers.

Matthew Blake: Yeah. Yeah. Thanks so much for your time, [crosstalk 00:19:27], Scott Durkin, CEO of Douglas Elliman. This has been “HousingWire Daily.”

Scott Durkin: Thanks, Matt. Bye-bye.

HousingWire Daily

Hosted by the journalists behind the headlines, HousingWire Daily examines the most compelling mortgage, real estate, and fintech articles reported from the HousingWire newsroom.

3d rendering of a row of luxury townhouses along a street

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