Drastic cost-cutting measures helped real estate franchisor Realogy Corp. limit second-quarter losses to $15 million, despite a $371 million decline in revenue from a year ago.
Realogy — which in February was forced to respond to rumors that it could be forced to seek bankruptcy protection — had posted a $259 million net loss in the first three months of the year, due in part to interest payments on its massive debt (see story).
The company said today that it had $356 million in cash on hand as of June 30, and that the 5.1-to-1 debt ratio on $3.4 billion in senior secured debt remains within the maximum 5.35-to-1 ratio stipulated in its credit agreement.
The maximum steps down to 5.0-to-1 on Sept. 30, however, and then to 4.75-to-1 on March 31, 2011. Realogy has said private-equity firm Apollo Management LP has pledged to help the company maintain its debt ratio and cash flow through the end of this year (see story).
At $1.018 billion, second-quarter net revenue was down 27 percent from a year ago. Gross commission income fell by $294 million, to $746 million, a 28 percent decrease from a year ago.
But Realogy also slashed $400 million in expenses, reducing spending by 28 percent from a year ago to $1.036 billion.
Realogy has "worked diligently to create efficiencies and act upon cost-saving opportunities within our businesses, and we will continue to do so," Chief Financial Officer Anthony Hull said in a press release.
Commissions and other agent-related costs were down 30 percent, to $477 million, while operating expenses for the quarter were down nearly 26 percent, to $313 million. Realogy slashed spending on marketing for the quarter by 25 percent, to $45 million.
Transaction sides and average home-sale price were down at both NRT, the company’s owned brokerage unit, and at companies within the Realogy Franchise Group, including Better Homes and Gardens Real Estate, CENTURY 21, Coldwell Banker, ERA, and Sotheby’s International Realty.
Transaction sides within Realogy Franchise Group fell 8 percent, to 259,476, and the average home-sale price fell 15 percent, to $188,489. Transaction sides at NRT were down 9 percent from a year ago, to 72,362, and the average home-sale price was off 24 percent, to $378,870.
Compared to a year ago, average broker commission rates were up at NRT and companies within the franchise group.
Within Realogy Franchise Group, average broker commission rates per transaction side were 2.57 percent, up five basis points from 2.52 percent a year ago but unchanged from the first quarter.
At NRT, the 2.52 percent average broker commission was up four basis points from a year ago, but down three basis points from the first quarter.
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