RISMEDIA, May 16, 2008-Realogy Corporation, a global provider of real estate and relocation services, reported results for the first quarter 2008. Specifically, first quarter 2008 net revenue totaled $1.05 billion; EBITDA was $4 million, modestly above the Company’s earlier guidance; and net loss was $132 million, due mainly to interest expense of $164 million.
“The first quarter of any year is historically our slowest from an earnings perspective almost entirely due to the seasonality of the residential real estate market,” said Richard A. Smith, Realogy’s president and CEO. “We still have most of our annual EBITDA opportunity in front of us and, of course, that’s where our focus lies.”
Smith continued, “Realogy’s first quarter 2008 operating results reflected the continued industry-wide slowdown in U.S. existing home sales but were partially offset by management’s focus on overhead, productivity and growth. In April, we saw some early indications that the improving year-over-year unit change trends being forecasted by the National Association of Realtors and Fannie Mae in the back half of 2008 may be starting to develop. While we expect to see some mixed results in the coming months, we are encouraged by these positive signs of activity in April.”
Consistent with the first-quarter reports issued by the National Association of Realtors (NAR) and Fannie Mae, year-over-year home sale transaction sides declined by 25% at the Realogy Franchise Group (RFG) and by 27% at NRT, the Company’s owned brokerage unit, during the three months ended March 31, 2008 compared to the three months ended March 31, 2007. As of March 2008, NAR’s reported seasonally adjusted annualized home sales unit number has remained constant at 4.9 to 5.0 million units for the past five months.
For the first quarter of 2008, RFG’s average home sales price decreased 7% and NRT’s average home sales price declined 1% compared to the same period in 2007. These price declines were driven by a number of factors, including overall market conditions and, as it relates to NRT, a relatively minor shift in the mix of property transactions from the high range to lower- and middle-range homes.
At Cartus, the Company’s relocation services segment, relocation initiations increased 6% in the first quarter. This comes as a result of contract expansions and new client signings in late 2007. Cartus’ referral volume declined by 22%, which tracks similarly to the volume declines experienced by RFG and NRT.
Title Resource Group (TRG), the Company’s title and settlement services unit, benefited from a refinance unit volume increase of 16% in the first quarter of 2008 compared to the first quarter of 2007. This was offset by a 25% decline in purchase title and closing units, which is in line with the sales volume declines experienced at NRT.
“Despite the current real estate market and general economic downturn, our positive, long-term view remains intact,” said Smith. “Housing and housing growth are fundamental to our national economy. Moreover, we believe that Realogy’s size, scale and strong franchise brands, along with increasing efficiencies and new initiatives put in place across all of our businesses, will enable us to capitalize on the recovery, which is inevitable.”
Strategic and Operational Accomplishments
The Company highlighted the following accomplishments for the first quarter 2008:
• Net domestic franchise sales for Realogy’s leading brands CENTURY 21®, Coldwell Banker®, Coldwell Banker Commercial®, ERA® and Sotheby’s International Realty® totaled $97 million in gross commission income (GCI) for the first quarter of 2008, a year-over-year increase of 13%.
• Attesting to the resiliency of its exceptional franchisees and brands, RFG’s attrition of GCI due to lost franchisees was limited to $219 million over the 12 months ended March 31, 2008 compared to growth of $1.2 billion of GCI from new franchise sales and an aggregate of $6.8 billion of GCI generated by RFG’s third-party franchisees during that same period.
• The Better Homes and Gardens® Real Estate brand is on schedule to become operational in July 2008. Since October 2007, Realogy has assembled a top-notch management team and built a strong offering of values around one of the best trademarks in residential real estate. There continues to be strong interest from brokers around the nation, and we are building a pipeline of prospective franchisees who are interested in affiliating their companies with this brand.
• NRT was named as the No. 1 residential real estate brokerage company in the nation by REAL Trends magazine for the 11th consecutive year, in both the transaction rankings by sales volume and transaction sides.
• NRT retained more of its strong team of sales associates in the first quarter of 2008 than it did during the same period last year as retention of its top two quartiles of productive sales associates topped 92%, an improvement of approximately 100 basis points.
• Cartus continued its very impressive new client signings, earning contracts with Accenture LLP, Rolls-Royce International, Louis Dreyfus Corp and other leading firms in the first quarter. In addition to Cartus’ strong new business development pipeline, it also has a significant number of existing clients who are expanding their agreements to include additional services, including clients such as Daimler Financial, Jones Lang LaSalle, and GTECH.
• Title Resource Group continued to grow its lender channel business as a provider of settlement services for three of the top 10 national lenders. TRG experienced 50% growth in refinance closing volume during the first quarter of 2008 with lenders using its Mail Away Closing product.
Covenant Compliance
As of March 31, 2008, the Company’s senior secured leverage ratio was 4.2 to 1. This is 140 basis points below the maximum 5.6 to 1 ratio permitted for Realogy to be in compliance under its Credit Agreement. The senior secured leverage ratio is determined by taking Realogy’s senior secured net debt of $3.2 billion at March 31, 2008 and dividing it by the Company’s combined Adjusted EBITDA of $768 million for the 12 months ended March 31, 2008
For more information, visit www.realogy.com.
