Property Broker Douglas Elliman Starts Trading in Spinoff

(Bloomberg) -- Luxury real estate brokerage Douglas Elliman Inc. began trading as a public company Thursday, at a time when home sales are hot but competitors’ shares have struggled.

The stock is a spinoff from Vector Group Ltd., which will continue as a tobacco company. Current investors received one share of the real estate unit for every two shares of Vector they own. The goal is to offer a choice, which could lead to volatility in the two separately traded stocks, Vector Chief Executive Officer Howard Lorber said in an interview before the opening.

The new company, trading as DOUG on the New York Stock Exchange, was up 5.1% from its $10 opening at 11:07 a.m. New York time. Vector fell 12%. 

“Certain people owned Vector for the tobacco and didn’t really care about Douglas Elliman,” said Lorber, who will serve as executive chairman of the spinoff. “On the other hand, there are people who would’ve invested in Douglas Elliman but by charter can’t invest in tobacco.”

The spinoff comes to market as U.S. home prices climb to all-time highs amid low mortgage rates and surging demand, with scarce inventory fueling bidding wars. But the hot market hasn’t helped shares of all companies involved in the business of selling homes.

Zillow Group Inc., Redfin Corp. and Compass Inc. are ending this year with declines of more than 40%, although Realogy Holdings Corp. -- owner of brands including Century 21 and Sotheby’s International Realty -- has edged out most stock indexes.  

Douglas Elliman has been expanding from its New York area roots to luxury markets in California, Florida, Texas and other states. The company is following buyers migrating to lower- tax states, many of whom won’t return to New York, Lorber said.

“We’ll do more business in Florida this year than we did in New York City,” he said in a Bloomberg Television interview Thursday.

Vector Group’s revenue from real estate jumped 94% to $1 billion through the first three quarters of this year, accounting for more than half of the company’s sales. Douglas Elliman is a member of the S&P SmallCap 600 index.

Shares of Vector, with a $2.6 billion market value, had climbed 47% this year through Wednesday. Its products include Eagle 20’s, Pyramid and Eve cigarettes.

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