There were times that I looked up at the largest brokerage in America and the largest Franchisor in America and wondered if it was built to last. They have been struggling through a rough patch with the rest of our industry, but they had the added pressure of managing the erratic public stock market and a challenging corporate lending environment. WAV Group does not have any broker clients that trade as public companies.
WAV Group consulting has omitted Realogy franchise and NRT performance from benchmarks among brokerages over the past few years. They were fighting battles that private brokerage was not fighting. During the hard times of the real estate crash, Realogy entered into a phantom value plan for common stock. They also paid 11.5% interest on loans. Despite these unfavorable operating terms, they fought through with the strength of their business model, the strong performance of management, and the great fortune of the housing market recovery that was widespread.
Now they are operating more in line with private brokerage, and offer private brokers decent barometers for business performance comparisons.
In the second quarter report, Realogy reported that they were able to restructure their debt from 11.5% down to 3.375%, reducing its annual cash interest run rate to approximately $255 million per year. This accomplishment in and of itself made a significant contribution to the Company’s adjusted EBITDA performance of $278 Million for the second quarter and will continue to support profits through interest rate cost reduction in the long run.
Realogy realized combined transaction volume growth of 21% compared to the same period last year. That is a good benchmark for other brokers to use as a comparative measuring tool. The franchise and NRT segments reported closed home sale transaction side gains of 10% and 12% respectively. It is interesting to note that company owned brokerages are outperforming franchise brokerages by 2%. Average home sale price per transaction improved 10% for the franchise, 7% for NRT. It is interesting to note that franchise brokers are experiencing higher growth in sales prices than the company owned brokerages. It would be interesting to learn why.
Realogy’s guidance for the third quarter remains bullish. Realogy’s executive vice president, CFO and treasurer Anthony Hull is expecting 17% to 19% growth in transaction volume in Q3.