Compass Real Estate losses continue

Boston Condos for Sale and Apartment Rentals

Compass Real Estate losses continue

Let’s start off with the good news. Compass was bigger and better in the first quarter.

Brokerage, bolstered by acquisitions, grew revenue and market share.

Compass posts $51M loss in banner quarter

The residential giant reported a net loss of $51 million in the first quarter, compared to $133 million loss in the same period in 2024, according to its earnings report.

The firm’s revenue increased 29 percent to $1.4 billion, with just over 9 percent of the growth attributed to its acquisition of @properties and Christie’s International Real Estate — a deal the company closed in January. The company reported that its organic revenue growth accounted for 15 percent.

Compass nabbed record free cash flow in the first quarter with $19.5 million. After going public in 2021, Compass set its sights on becoming cash flow positive, a goal it achieved in the second quarter of 2023.

Following the milestone, the firm logged its first cash flow positive year in 2024 and has reported cash flow positivity in seven of the last eight quarters.

“Our strategy remains unchanged,” CEO Robert Reffkin said on the Thursday earnings call. “Compass will continue to outgrow the market.”

Headcount, deal count on the rise

Compass’ revenue expansion was powered by a 28 percent rise in transactions, despite a disruption in deals in March following concerns over President Donald Trump’s talk, and later, implementation of wide-ranging tariffs. Reffkin said that in March, deals fell to their lowest levels since 2009.

“It’s not a surprise that there’s volatility,” Reffkin said, adding that the implementation of the policies drove deals down in April as well. The executive said he expects prices to remain stable for the remainder of the year as more inventory hits the market.

Transactions, minus mergers and acquisitions, rose 7 percent compared to the previous year, which beat a transaction decline of 2 percent across the overall market.

The company posted an adjusted EBITDA — earnings before interest, taxes, depreciation and amortization — of $16 million, up from negative $20 million in the first quarter last year.

Compass ended the quarter with $127 million in cash. The firm paid $105 million in cash during the period as part of the Christie’s acquisition.

Earlier this quarter, Compass finalized its $444 million deal to buy @properties and Christie’s, which the firm estimated will boost its revenue by $500 million this year. During the period, Compass also acquired the D.C.-based luxury brokerage, Washington Fine Properties, and its 150 agents.

With the acquisitions under its belt, Compass increased its principal agent count by 42 percent, most of them as a result of bringing new firms into the fold.

“There is a significant amount of brokerage fragmentation that exists in the market today,” Reffkin said. “Our M&A pipeline remains healthy.”

Platforms, policies and private exclusives

Reffkin has been at the forefront of the industry’s battle over private exclusive listings, which heated up at the start of the year when the company began implementing its three-phased marketing strategy. The company reported that 48 percent of homeowners who listed with Compass in the first quarter first listed their home as a private exclusive.

Reffkin’s war path has included campaigning for the end of the National Association of Realtors’ Clear Cooperation Policy. The chief executive on Thursday’s earnings call addressed the trade group’s decision in March to keep the policy and emphasized that office exclusives, or Compass private exclusives, are allowed to continue.

“Over the next year, I expect to see more private listings than ever before, which will add to Compass’ inventory advantage,” Reffkin said.

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Compass Real Estate losses continue

Brokerage continues streak of losses, this time $133M

Compass' Robert Reffkin (Compass, Getty) — Compass’ Robert Reffkin (Compass, Getty)

Compass’ earnings in the first quarter didn’t quite deliver on CEO Robert Reffkin’s optimistic forecast for 2024.

The company reported a net loss of $132.9 million.

The loss, down $17.5 million from the first quarter of last year but up from $83.8 million reported in the fourth quarter, includes the first traces of the brokerage’s proposed $57.5 million settlement of claims by home sellers in a series of class action lawsuits.

But Reffkin said in Wednesday’s earnings call he anticipates it will remain cash flow positive for the remainder of the year despite its settlement, which it will begin paying in the second quarter.

“I still believe 2024 will be better than 2023, and 2025 will be better than 2024 with a mid-cycle coming in 2026,” Reffkin said.

The lawsuits centered around accusations that the company conspired with other brokerages and trade groups to hike agents’ fees. It is similar to class action lawsuits filed against the National Association of Realtors, which struck a $418 million deal with sellers and agreed to change several of its policies, including eliminating the field for buyers’ commissions in the Multiple Listing Service.

The potential impact of changes to how buyers’ commissions can be paid has been top of mind for investors, Reffkin said. He said he is confident that Compass brokers are well prepared to handle these changes in a time when some fear losses to buy-side commission revenue for brokerages.

“Since the verdict, we have provided our agents with 57 national training sessions and hundreds of local training sessions,” he said. “With these efforts, I’ve seen our agents transition from initially being worried to now being confident.

My thoughts as a Boston real estate broker

For Massachusetts, the exact settlement for MLSPIN still hasn’t been totally resolved, I keeping checking once a week with MLSPIN. My point, the buyer agent side can have a huge impact on Compass bottom line, not just Compass but all real estate offices. I don’t see buyers paying for the services provided, especially seasoned home buyers.

My belief is that commissions with be cut, and eventually it will be just the listing agent in a Boston condo for sale transaction. I think with in 5 years the buyer agent will be mostly eliminated in any real estate deals.

Please note, Robert Reffin the CEO of Compass, is a smart executive and mostly likely will adapt to the changes ahead. With that said, I don’t see a very bright future for their share holders. But I’ve been wrong before, and by the way at the time of this writing Compass stock is up $3.85 per share. Still off from its 52 week high.