eXp Commercial is one of the fastest-growing national commercial real estate brokerage firms. The Chicago Multifamily Brokerage Division focuses on listing and selling multifamily properties throughout the Chicago Area and Suburbs.
Last year was a particularly unique year for the real estate industry as it pertains to the residential trends and migration patterns left in the pandemic’s wake. With a majority of the corporate real estate sector opting to implement work-from-home or work-from-anywhere models in order to retain staff and reduce overhead, there was a significant surge throughout the country in workers relocating to more suburban areas.
This occurred for a variety of reasons, such as individuals seizing the opportunity to live farther away from their offices and others realizing the potential financial savings and change of scenery that suburban living can provide. From a health and wellness perspective, moving to areas with smaller populations appeared as a practical solution in terms of lowering the risk of virus transmissions as well as a way to reduce the sources of stress that often accompany urban life, such as noise pollution and smaller living spaces.
With the worst of the pandemic appearing to be behind us, these migration trends are beginning to shift once again. However, instead of an outright reversal of the exodus seen in 2020, the population has found a middle ground. Urban areas are seeing a surge in new residents while the suburbs continue to thrive. New York City, as an example, is seeing almost twice as many new residents compared to 2019 figures while Chicago’s urban market continues to be outpaced by the suburbs. The city of Chicago itself, however, continues to retain its title as the third most populous city in the United States despite 2020’s notable outbound migration.
Chicago in focus
The unique migration patterns in and out of the Chicago metropolitan area, have resulted in an incredibly diverse multifamily market landscape. The demand in this area mirrors the broader multifamily trends being seen throughout the entire country, with some residents continuing to demonstrate a heightened interest in the suburbs while others begin returning to the inner city.
This dichotomy is likely attributable in part to the vaccine and booster shots now being more widespread and available as well as businesses beginning to bring workers back into the office. Certain companies opting to continue using their WFA models or adopt hybrid strategies, however, present one possible explanation as to why the post-pandemic world is not simply snapping back to its 2019 landscape.
My firm Pensam has been consistently exercising its team’s market insights to meet this spectrum of demand. Over the past year, the firm has acquired four multifamily properties in Chicago and its surrounding suburbs as well as preferred equities and other transactions throughout Illinois and the rest of the country. This focus on the Chicago MSA is not by chance, as the area’s multifamily market activity over the past year has shown a clear interest in both urban areas and their surrounding suburbs. This interest has paved the way for firms like Pensam to execute deals inside of a particularly diverse pool.
Transactions across the spectrum
1900 at Canterfield, a 260-unit stabilized multifamily community in West Dundee, Illinois, acquired by Pensam in the summer of 2021, provides an example of the types of suburban properties that saw a surge in interest following the pandemic. 1900 at Canterfield contains 18 buildings across 23.6 acres, providing the suburban atmosphere, low density, and spacious design that city emigrants are seeking, but is located less than a mile from I-90, granting easy access to the Schaumburg job market.
The building’s amenities also include a clubhouse, outdoor lounge area, and swimming pool–amenities that today’s suburban residents are expecting to accompany the increased space available.
More recently, Pensam also acquired Lakeside Apartments in Wheaton and Aspen Place in Aurora, both Chicago suburbs. These two properties, containing 204 and 416 units respectively, demonstrate not only a high level of interest in the Chicago MSA but an interest that is continuing to grow. Combined with the firm’s latest acquisition, the 336-unit Butterfield Oaks in Aurora, Illinois, evidence points to this momentum carrying forward.
A promising 2022
Pensam’s strong focus on Chicago and its surrounding suburbs indicates that the firm is placing great confidence in the real estate industry’s continuing rebound from the pandemic, poising itself to keep both the urban and suburban multifamily markets in focus throughout 2022.
Against the backdrop of Pensam’s performance in the national multifamily market throughout last year, this is further evidence that the worst of the pandemic’s effects on the U.S. multifamily market are likely behind us. Going forward, all signs point to this sector continuing to improve in 2022 and lead the country to pre-pandemic levels of activity and beyond.
While investors and homebuyers’ focus has been on Chicago’s soaring single-family market, multifamily properties in and around the city are also hot.
The trend is driven by migration patterns in Chicago as workers reassess their situations now that the availability of vaccines and booster shots makes living with Covid more manageable, according to an analysis by Hen Shoval, principal and director of Investment at Pensam Capital, a Miami-based real estate investment firm, in REjournals.
“The demand in this area mirrors the broader multifamily trends being seen throughout the entire country, with some residents continuing to demonstrate a heightened interest in the suburbs while others begin returning to the inner city,” said Shoval.
Chicago’s housing market is seeing record activity. The supply of suburban homes earlier in February fell below one month and realtors say sellers can expect $20,000 over asking price. The multifamily sector is setting records as well. A suburban multifamily complex in January sold for $73.5 million, a DuPage County record.
Pensam is one such out-of-state buyer. It bought four multifamily properties around Chicago last year and expects activity to continue. Pensam bought a 260-unit stabilized multifamily community in West Dundee, Ill. last summer and more recently bought two properties in Aurora, Ill.
“Against the backdrop of Pensam’s performance in the national multifamily market throughout last year, this is further evidence that the worst of the pandemic’s effects on the U.S. multifamily market are likely behind us,” Shoval said. “Going forward, all signs point to this sector continuing to improve in 2022 and lead the country to pre-pandemic levels of activity and beyond.”
As an astute investor, you know that long-term capital gains taxes can quickly eat away at the profits you make on your investments. Consequently, avoiding or at least deferring payment of these taxes for as long as possible is likely one of your main objectives.
For real estate investments, this usually means doing a 1031 exchange whereby you exchange your substantially appreciated real estate for other “like property,” placing your sale proceeds with a qualified intermediary (QI), also called an accommodator, who holds them until the exchange completes.
Failed 1031 Exchanges
One of the biggest downsides to 1031 exchanges, however, is that they don’t always complete. In fact, they often fail. Why? Because 1031s have many moving parts. Not only must you find “like property” to invest in, but you must also designate this replacement property within 45 days of your sale and close on the replacement property within 180 days. If you miss either deadline, 1031 fails, your sale proceeds revert to you, and you are immediately liable for payment of the capital gains tax on your sale.
DST Rescue
If you find yourself facing a potentially failed 1031 exchange, you likely are in a state bordering on panic. But what if you could rescue yourself and avoid immediate payment of your capital gains taxes? You can. The mechanism is called a Deferred Sales Trust. This legal, tested, and innovative option allows you to engage with Reef Point’s Estate Planning Team and its tax attorneys, who will create a DST specifically structured to accommodate your needs as well as your overall investment goals.
You then transfer your funds from your qualified intermediary-held funds into your new DST. In other words, the sale proceeds from your failed 1031 revert to the DST, not to you. You thus have no constructive receipt of them and consequently have no capital gains tax liability. Nor do you have any liability for depreciation recapture.
The DST option also works as a rescue for a failed 721 exchange.
Additional Advantages
Your DST doesn’t just rescue you from a failed 1031 or 721 exchange, however. It gives you far greater investment flexibility because it allows you to acquire assets or financial instruments disallowed by 1031s and 721s. Nor does a DST involve strict time frames in which you must make and implement your investment decisions.
Finally, a DST does not limit you to “like-kind” property. In fact, it doesn’t limit you at all regarding what types of “prudent investments” your DST Trustee can make on your behalf. For instance, you can instruct your Trustee to invest in any of the following:
Stocks
Bonds
Mutual funds
Securities
Annuities
Real Estate Investment Trusts (REITs)
Start or acquire a business
This extraordinary investment flexibility makes a DST an extremely useful tool, especially if you want to diversify your investment portfolio as part of your retirement planning strategy.
Tune in on Wednesday, Feb 23 at 2 pm EST for a conversation about the current state of US commercial real estate markets and a look at key investment trends.
Experts from NYU Schack Institute of Real Estate, the Federal Reserve Bank of Atlanta, and CBRE will discuss recent macroeconomic and market data and the recovery outlook for multifamily, industrial, office, and retail properties as the 2022 kick-off.
You'll learn about:
How last quarter's macroeconomic, public, and private market data will impact your business
Industry outlook for 2022
Economic recovery implications across property types and markets
Data-backed areas of opportunity and risk for your business
eXp World Holdings Reports Record Full-Year 2021 Revenue of $3.8 Billion
2021 Marks Highest Revenue and Profit Year in Company History, Driven by a 72% Increase in Agent Growth
Company Declares Cash Dividend for Q1 2022 of $0.04 per Share of Common Stock
BELLINGHAM, Wash., Feb. 24, 2022 (GLOBE NEWSWIRE) — eXp World Holdings, Inc. (Nasdaq: EXPI), (or the “Company”), the holding company for eXp Realty®, Virbela and SUCCESS® Enterprises, today announced financial results for the fourth quarter and full-year ended Dec. 31, 2021.
Fourth Quarter and Full-Year 2021 Financial Highlights as Compared to the Same Year-Ago Period:
Revenue increased 110% to $3.8 billion in 2021 and increased 77% to $1.1 billion in the fourth quarter of 2021.
Gross profit increased 85% to $296.0 million in 2021 and increased 65% to $83.1 million in the fourth quarter of 2021.
Net income increased 162% to $81.2 million in 2021 and increased 101% to $15.5 million in the fourth quarter of 2021. An income tax provision benefit of $47.5 million and $14.2 million, respectively, is included in the full year and the fourth quarter 2021 net income.
Earnings per diluted share increased 143% to $0.51 in 2021 and increased 100% to $0.10 per diluted share in the fourth quarter of 2021.
Adjusted EBITDA (a non-GAAP financial measure) increased 35% to $78.0 million in 2021. Adjusted EBITDA was $13.1 million in the fourth quarter of 2021 compared to $16.6 million in the fourth quarter of 2020. Excluding a $10 million one-time legal settlement in the fourth quarter, adjusted EBITDA increased 52% to $88.0 million in 2021, and increased 39% to $23.1 million in the fourth quarter of 2021.
As of Dec. 31, 2021, cash and cash equivalents totaled $108.2 million, compared to $100.1 million as of Dec. 31, 2020. The Company repurchased approximately $172.0 million of common stock during 2021.
The Company paid a cash dividend for the fourth quarter of 2021 of $0.04 per share of common stock on Nov. 15, 2021. On Feb. 17, 2022, the Company’s Board of Directors declared a cash dividend of $0.04 per share of common stock for the first quarter of 2022 expected to be paid on March 31, 2022 to shareholders of record on March 11, 2022.
Management Commentary
“2021 was another year of tremendous growth for eXp, as our core focus on innovation enabled us to welcome nearly 30,000 new agents across six continents to eXp,” said Glenn Sanford, Founder, Chairman and CEO of eXp World Holdings. “As real estate professionals increasingly turn to technology-based solutions for productivity and collaboration, our cloud-based platform has given us a first-mover advantage to scale our brokerage at the fastest rate in the industry. We attract top agents that value freedom, compensation and community.”
“We evolved our robust suite of products and services last year as we made preparations to launch SUCCESS Lending, a synergistic mortgage solution that aims to provide greater efficiencies and clearer communication between agents and their customers. To deepen our commitment to developing and inspiring our community of real estate professionals, we launched SUCCESS Coaching, our new business that provides a results-driven approach to personal development. Looking ahead, we believe there is a significant opportunity to capture additional market share in the real estate and adjacent industries as people and companies adapt to a digital future. We will remain focused on fostering collaboration and building an unparalleled network of industry professionals around the world,” concluded Sanford.
“In 2021, we achieved a record $3.8 billion in revenue by focusing on our growing, global community of real estate agents,” said Jeff Whiteside, CFO and Chief Collaboration Officer of eXp World Holdings. “Our year-over-year increase in transaction volume proves that the eXp model is resonating with top-producing agents and our ability to maintain this momentum underscores the strength of our competitive position. Reinvesting incremental cash flows generated by our business in products, services and technologies that further enhances the eXp platform for agents remains a priority as we scale, both within our existing markets and globally.”
Fourth Quarter and Full-Year 2021 Operational Highlights as Compared to the Same Year-Ago Period:
Agents and brokers on the eXp Realty platform increased 72% to 71,137 as of Dec. 31, 2021.
Real estate transactions closed increased 86% to 444,367 in 2021 and increased 52% to 125,029 in the fourth quarter of 2021.
Real estate transaction volume increased 116% to $156.1 billion in 2021 and increased 82% to $44.9 billion in the fourth quarter of 2021.
eXp Realty expanded into nine new international locations in 2021, including Puerto Rico, Brazil, Italy, Hong Kong, Colombia, Spain, Israel, Panama and Germany. In February 2022, the Company successfully launched in the Dominican Republic and announced plans to establish operations in Greece and New Zealand in the first quarter of 2022.
SUCCESS® Lending, LLC – a residential lending joint venture with Kind Lending, LLC – was established and SUCCESS Coaching™ – a coaching program for entrepreneurs and business professionals – was launched.
eXp Realty ended 2021 with a global Net Promoter Score of 71, a measure of agent satisfaction as part of the Company’s intense focus on improving the agent experience.
Fourth Quarter and Full-Year 2021 Results – Virtual Fireside Chat
The Company will hold a virtual fireside chat and investor Q&A with eXp World Holdings Founder and CEO Glenn Sanford and CFO Jeff Whiteside on Thursday, Feb. 24, 2022 at 8:30 a.m. PT / 11:30 a.m. ET. The discussion will be moderated by Tom White, Managing Director and Senior Research Analyst at D.A. Davidson.
The investor Q&A is open to investors, current shareholders and anyone interested in learning more about eXp World Holdings and its companies.
Date: Thursday, Feb. 24, 2022
Time: 8:30 a.m. PT / 11:30 a.m. ET
Location: EXPI Campus. Join at https://expworldholdings.com/contact/download/Livestream: expworldholdings.com/eventsAbout eXp World Holdings, Inc.
eXp World Holdings, Inc. (Nasdaq: EXPI) is the holding company for eXp Realty®, Virbela and SUCCESS® Enterprises.
eXp Realty is the fastest-growing real estate company in the world with more than 75,000 agents in the United States, Canada, the United Kingdom, Australia, South Africa, India, Mexico, Portugal, France, Puerto Rico, Brazil, Italy, Hong Kong, Colombia, Spain, Israel, Panama, Germany and the Dominican Republic and continues to scale internationally. As a publicly traded company, eXp World Holdings provides real estate professionals the unique opportunity to earn equity awards for production goals and contributions to overall company growth. eXp World Holdings and its businesses offer a full suite of brokerage and real estate tech solutions, including its innovative residential and commercial brokerage model, professional services, collaborative tools and personal development. The cloud-based brokerage is powered by Virbela, an immersive 3D platform that is deeply social and collaborative, enabling agents to be more connected and productive. SUCCESS® Enterprises, anchored by SUCCESS® magazine and its related media properties, was established in 1897 and is a leading personal and professional development brand and publication.
For more information, visit https://expworldholdings.com.
Use of Non-GAAP Financial Measures
To provide investors with additional information regarding our financial results, this press release includes references to Adjusted EBITDA, which is a non-U.S. GAAP financial measure and may be different than similarly titled measures used by other companies. It is presented to enhance investors’ overall understanding of the company’s financial performance and should not be considered a substitute for, or superior to, the financial information prepared and presented in accordance with U.S. GAAP.
The company’s Adjusted EBITDA provides useful information about financial performance, enhances the overall understanding of past performance and future prospects, and allows for greater transparency with respect to a key metric used by management for financial and operational decision-making. Adjusted EBITDA helps identify underlying trends in the business that otherwise could be masked by the effect of the expenses that are excluded in Adjusted EBITDA. In particular, the company believes the exclusion of stock and stock option expenses, provides a useful supplemental measure in evaluating the performance of operations and provides better transparency into results of operations.
The company defines the non-U.S. GAAP financial measure of Adjusted EBITDA to mean net income (loss), excluding other income (expense), income tax benefit (expense), depreciation, amortization, impairment charges, stock-based compensation expense, and stock option expense. Adjusted EBITDA may assist investors in seeing financial performance through the eyes of management, and may provide an additional tool for investors to use in comparing core financial performance over multiple periods with other companies in the industry.
Adjusted EBITDA should not be considered in isolation from, or as a substitute for, financial information prepared in accordance with U.S. GAAP. There are a number of limitations related to the use of Adjusted EBITDA compared to Net Income (Loss), the closest comparable U.S. GAAP measure. Some of these limitations are that:
Adjusted EBITDA excludes stock-based compensation expense and stock option expense, which have been, and will continue to be for the foreseeable future, significant recurring expenses in the business and an important part of the compensation strategy; and
Adjusted EBITDA excludes certain recurring, non-cash charges such as depreciation of fixed assets, amortization of acquired intangible assets, and impairment charges related to these long-lived assets, and, although these are non-cash charges, the assets being depreciated and amortized may have to be replaced in the future.
Safe Harbor StatementThe statements contained herein may include statements of future expectations and other forward-looking statements that are based on management’s current views and assumptions and involve known and unknown risks and uncertainties that could cause actual results, performance or events to differ materially from those expressed or implied in such statements. Such forward-looking statements speak only as of the date hereof, and the company undertakes no obligation to revise or update them. These statements include, but are not limited to, statements about the continued growth of our agent and broker base; expansion of our residential real estate brokerage business into foreign markets; demand for remote working and distance learning solutions and virtual events; development of our commercial brokerage and our ability to attract commercial real estate brokers; and revenue growth and financial performance. Such statements are not guarantees of future performance. Important factors that may cause actual results to differ materially and adversely from those expressed in forward-looking statements include changes in business or other market conditions; the difficulty of keeping expense growth at modest levels while increasing revenues; and other risks detailed from time to time in the company’s Securities and Exchange Commission filings, including but not limited to the most recently filed Quarterly Report on Form 10-Q and Annual Report on Form 10-K.Media Relations Contact:
eXp World Holdings, Inc.
On Wednesday, Feb 23 at 2 pm EST a conversation about the current state of US commercial real estate markets and a look at key investment trends.
Experts from NYU Schack Institute of Real Estate, the Federal Reserve Bank of Atlanta, and CBRE will discussed recent macroeconomic and market data and the recovery outlook for multifamily, industrial, office, and retail properties as the 2022 kick-off.
You’ll learn about:
How last quarter’s macroeconomic, public, and private market data will impact your business
Industry outlook for 2022
Economic recovery implications across property types and markets
Data-backed areas of opportunity and risk for your business
Speakers
Brian BaileySubject Matter Expert, CREFederal Reserve Bank of Atlanta
Bryan DoyleManaging Director, Capital MarketsCBRE
Timothy SavageProfessorNYU Schack Institute of Real Estate
When it comes to cash flow, the Chicago multifamily is the king of the world. Or at least the country, with capitalization rates, a measure of rental income, well above the national average.
Yet, uneasy lies the head that wears the throne. Now, some investors see better room for growth in places like Phoenix and Salt Lake City, where rents have risen faster and more consistently, while Chicago may have peaked.
“We shifted a bit more to Phoenix because we see this huge opportunity,” Drew Breneman, founder, and CEO of Chicago-based multifamily firm Rise Invest said in an interview.
Cap rates, a measure of rental income after expenses divided by a property’s purchase price, are as high as 8 percent on some Chicago area properties, and half that elsewhere. The difference is growth potential.
“It’s not necessarily all about the cap rate being higher to attract investment,” Breneman said.
His company owns rentals in Chicago but has recently focused on acquisitions in markets like Phoenix where rents on some properties haven’t been raised in step with the surging market, he said.
“Rents are 15 percent to 40 percent below market there. You’re going to buy something at a 3.5 percent cap in Phoenix. I can make that almost a 5.5 percent cap pretty quick,” Breneman said.
It’s not a one-way street out of town for multifamily investors, though. Chicago’s brokers boast of the city’s healthy returns, and out-of-state buyers optimistic about entering northern Illinois’ multifamily market.
“We’re on a record-breaking pace with our team. We’re seeing no slowdown in interest. For every investor that says I’m pulling out, there are still 14, 15, 16 offers on properties that aren’t in the most attractive places,” said Tony Hardy, head of a Chicago Keller Williams multifamily team that brokered a $10.35 million sale of a 40-unit mixed-use building in Hyde Park last month, a neighborhood record price for a mixed-use property with fewer than 100 units, according to RE Journals.
High margins have helped the Chicago area’s multifamily market keep its hot streak alive to start the year, with multiple offers being made on rental and mixed-use properties. A rare Wrigleyville asset garnered a record price per unit in a sale The Real Deal reported last week.
Even Chicago investors sending capital outside Illinois concede the city still offers chances to make money on multifamily assets.
“What the brokers are saying is half-correct. It’s the third-largest city in the country. I believe Chicago and Illinois long-term will be successful because there is just too much critical mass here for them not to be,” Frank Campise, principal at Chicago-based JAB Real Estate, said in an interview.
Still, investors like Campise see chances to make more money elsewhere, as Chicago’s double-digit rent growth last year ended up getting outpaced by an even bigger rise for the national average.
Campise’s firm has also recently broadened its holdings from Chicago into Denver, Salt Lake City, and Phoenix markets where he said rent, jobs, and income increases have been more consistent than in Illinois, giving landlords more reasons to justify hiking prices when leases expire than they have in Chicago.
