With the funding, Kennedy Lewis co-founder and Co-Managing Companion David Chene will be part of Douglas Elliman’s board. Douglas Elliman additionally launched preliminary Q2 2024 monetary outcomes.
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New York-based Douglas Elliman has closed a $50 million progress funding from Kennedy Lewis Funding Administration, executives introduced Tuesday.
The funding by the credit-focused various asset administration agency can be deployed to strengthen Douglas Elliman’s stability sheet and bolster progress.
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Howard M. Lorber | Douglas Elliman
“Kennedy Lewis’ investment in Douglas Elliman is a testament to our agents, business model and strategic plan,” Douglas Elliman CEO Howard Lorber stated in a press release.
“With deep experience in residential real estate, we are pleased Kennedy Lewis has chosen to support Douglas Elliman’s strategic initiatives and look forward to tapping into the firm’s network and knowledge base as we work together to drive long-term stockholder value. We are also encouraged by stronger performance in the second quarter of 2024 compared to the prior quarter and expect to be cash flow positive in the second quarter.”
With the funding, Douglas Elliman issued $50 million senior secured convertible notes due on July 2, 2029 to Kennedy Lewis funds. The convertible notes carry an rate of interest of seven.0 p.c every year payable in money or, at Douglas Elliman’s discretion, a price of 8.0 p.c every year paid in form (various property), and due semi-annually.
The notes could also be transformed into inventory at an preliminary price equal to $1.50, topic to anti-dilution changes, Douglas Elliman added. Typical anti-dilution adjustment clauses enable traders to take care of their share of shares by buying a proportionate variety of further shares at their new value after securities are issued, in line with the Company Finance Institute.
One other time period of the funding settlement is that Kennedy Lewis will be capable to nominate one director to Douglas Elliman’s board, so long as their funds maintain not less than one-third of that preliminary funding into Douglas Elliman.
Darren L. Richman | Kennedy Lewis
As such, Kennedy Lewis co-founder and Co-Managing Companion David Chene will be part of Douglas Elliman’s board, efficient instantly. Patrick Bartels, an unbiased director from Redan Advisors, can also be becoming a member of the board. The brand new members succeed Ronald J. Kramer and Lynn Mestel.
Kennedy Lewis has a historical past of investing in actual property, together with with Lennar Properties and Toll Brothers. With the funding, Douglas Elliman stated it anticipates the asset administration agency will draw on that wealth of expertise.
Kennedy Lewis’ Chene and Darren L. Richman, co-founders and co-managing companions of the agency, expressed enthusiasm in regards to the alternative.
“We are excited to partner with Douglas Elliman, a firm with one of the strongest brands and most reputable agents in residential real estate and a compelling growth opportunity, and work with the management team to fully capitalize on that opportunity,” the companions stated in a joint assertion.
David Ok. Chene | Kennedy Lewis
“Douglas Elliman operates in an industry we understand well, having studied and invested in residential real estate and homebuilders through multiple cycles. We see attractive long-term market dynamics in the growing, luxury markets Douglas Elliman focuses on, and believe the firm is well positioned to utilize additional financial and strategic resources to build on its leading position in the space.”
The transfer comes about three years after Douglas Elliman charted its personal path away from mother or father firm Vector Group in 2021 and made plans to go public. Since then, the agency has seen gradual losses over time, like many actual property corporations, because the residential actual property market cooled down from its pandemic frenzy. At the moment, Q3 2021 revenues had been as much as $350 million and the agency’s internet earnings was about $25 million. It additionally had about $200 million in money at hand.
Along side Tuesday’s announcement, Douglas Elliman additionally launched some preliminary second quarter monetary outcomes.
The corporate stated its unaudited gross transaction worth throughout Q2 2024 is predicted to hit between $10.25 billion to $11.25 billion, in comparison with simply $7.1 billion one yr in the past. Money and money equivalents are anticipated to hit about $92 million, up from $91.5 million as of March 31, 2024. As a part of the fee lawsuit settlement, Douglas Elliman needed to pay out $7.75 million throughout the second quarter, the agency added.
The agency’s precise second quarter outcomes could differ from these projections.
