UPDATED Nov. 8, 2021, 6:30 p.m.: Douglas Elliman is going public.
The brokerage plans to spin off from Vector Group, the conglomerate that also owns tobacco company Liggett Group and real estate investment firm New Valley LLC, among other holdings, according to an SEC filing Monday.
If Vector’s board approves the move, Elliman will become a publicly traded company on the New York Stock Exchange under the ticker DOUG. Vector shareholders will receive one share of DOUG for every two shares of Vector.
The rationale for the split appears to be enticing socially minded investors wary of backing a cigarette manufacturer, according to Bloomberg, which first reported the news.
“Tobacco has good, consistent cash flow, but there are still certain funds and institutions that won’t invest in it,” Howard Lorber, CEO of Vector Group and chairman of Douglas Elliman, told the outlet. “This opens up the capital markets directly for our real estate business.”
“It will be easier to put a deal together,” he continued.
Lorber told investors Monday that the spinoff was a reaction to the booming housing market, which grew Elliman to a “critical mass positioning us well to succeed in the market as a standalone company.”
He added that the company would be more competitive in M&A now that it can offer up DOUG stock isolated from Liggett.
Elliman CEO Scott Durkin will remain in the top role at the brokerage, but Lorber will be the CEO of the new company, which will include the company’s property management and new development marketing divisions in addition to ancillary real estate businesses like mortgage lending, title and escrow, and Vector’s proptech investment arm, New Valley Ventures, according to an inside source. New Valley LLC, the real estate development division, will remain part of Vector.
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Richard Lampen, who will be the chief operating officer of the new company, told investors the new development division was left behind because the new Elliman is envisioned as an “asset-light” entity driven by technology.
The spinoff is expected to be completed by the end of the year, pending approval from the SEC, according to Vector Group.
Vector’s shares closed at $14.21 on Monday, but by 6 p.m. had risen $0.25 in after-hours trading after the announcement, which was made along with Vector’s third-quarter earnings.
Elliman reported $354.2 million in revenue for the third quarter, up 70 percent from $208 million in the same period last year. The brokerage’s net income was $25.1 million, compared to $11.8 million last year. Closed sales volume was $12.6 billion, a 62 percent increase from $7.8 billion a year ago.
Vector’s real estate segment, which includes Elliman, proptech and new development investment arms, reported $354.7 million in quarterly revenue, compared to $229 million last year. The segment’s net income was $15.5 million, up from a net loss of $4.1 million during the third quarter of 2020.
Overall, Vector reported a net income of nearly $49 million, up from $38.1 million in the same period last year.
This article was updated with additional information from Vector Group’s earnings call Monday evening.