How Douglas Elliman will deliver stock-based compensation

Douglas Elliman Inc. CEO Howard Lorber and 4400 Biscayne Boulevard, Miami, Florida 33137 (Getty, Google Maps)

The new publicly traded Douglas Elliman will look a lot like the old one, but if investors cooperate he will be taller, richer, and based more than 1,200 miles from his longtime home on Madison Avenue.

And no, it’s not just about severing ties with its parent company, tobacco conglomerate Vector Group, as Elliman said when he announced the spin-off last week. In documents filed with regulators Nov. 10, the company touted its ability to retain talent with stock-based compensation and use access to capital markets to target acquisitions and invest in cutting-edge technology. .

While some details remain vague – and the company declined to comment – it is clear from the record that executives envision a company better equipped to compete nationally with public competitors ranging from Realogy’s brands to Compass.

Biggest change: Elliman’s corporate headquarters will be located at 4400 Biscayne Boulevard, the same address as Vector, instead of the New York offices that have long housed CEO Howard Lorber and most of the senior executives and agents of the brokerage house. Although Elliman has not detailed his decision to move, many companies have moved to Florida in recent months citing lower taxes and a more user-friendly business environment. The brokerage itself, run by Scott Durkin, as well as property management and development marketing, will remain in New York City, Elliman said.

While strengthening his position in New York, South Florida, California, Colo and Texas, Elliman said he also plans to enter and expand into new markets. He’s bullish about the market: Average home prices, in New York City in particular, will rise through the remainder of 2021 and through 2022, Elliman said.

Elliman also hopes his new structure will allow the company to offer more attractive incentive compensation that will “improve” hiring and retention and be more aligned with its business and growth plans. Hopefully, the company said a sustained stock price will support merger opportunities without diluting Vector shareholders.

He also hinted that the average commissions earned by agents, 5.3% in 2017 and 4.9% in 2020, could increase. The national rate is now around 5.8%, Elliman said, citing data from HomeLight.

“This expanding market presents significant commission income opportunities,” Elliman wrote.

Risks abound, as the company noted on the file.

Elliman said his stock, which will trade under the symbol DOUG on the New York Stock Exchange, could be volatile as his fortunes will be inextricably tied to the plight of the housing market without the “more predictable cash flow” of tobacco and money. real estate. investment firms.

Here’s a breakdown of Elliman’s new features once the spin-off ends. It is subject to approval by Vector’s board of directors and the SEC and is expected to be completed by the end of the year.

Action rewards

Only one other major New York brokerage, Compass, provides the opportunity for agents to tap into their own firm’s equity, and this quickly became a sought-after advantage during the firm’s aggressive recruiting drive. Eight months after its IPO, however, the stock has lost 45% of its value.

Now Elliman can bring his own actions to the table. The company will have 10 million shares to offer as a reward to agents, employees, executives and acquisition targets, according to a management incentive plan filed by the company. This figure will increase by up to 4 percent per year. Elliman has set general criteria for qualifying for stocks, although he hasn’t revealed exactly how he would structure them.

“The purpose of the plan is to attract and retain employees, non-employee directors and consultants and to provide additional incentives to these people in line with the long-term success of the business of the company,” Elliman wrote. in the file. Retention has averaged around 90 percent over the past three years.

Cash

The company is also setting the stage for cash awards, which will be set by Elliman’s compensation committee, made up of directors appointed by the board. The committee will administer all of the company’s actions and cash rewards and may delegate its duties to Lorber, who will continue to use Vector’s private jet, car and driver, $ 7,500 per month in expenses, and two memberships to one. club, according to the record.

Not for everybody

However, Elliman’s new stock and cash rewards will not be standard company policy. The terms of Elliman’s 10-year management plan specifically state that the rewards will not be standardized.

“The company is not obligated to extend uniform treatment to participants under the plan,” Elliman said in the filing. “The terms and conditions of the rewards do not have to be the same for each participant. “

Participants have been defined in the plan as employees, non-employee directors and agents who have been “selected” by the compensation committee to receive awards.

UPDATE: This story has been updated to add in the fourth paragraph that the brokerage itself will remain in New York.

About Teresa G. Wilson

Check Also

Investors are buying houses in Tampa Bay at record rates, creating stiff competition

For Lou Brown, a real estate agent for a company in Midtown St. Petersburg, it …