(Bloomberg) — Luxury real estate brokerage Douglas Elliman Inc. begins 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 receive 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.
“Certain people owned Vector for the tobacco and didn’t really care about Douglas Elliman,” Lorber, who will serve as executive chairman of the spinoff, said in a phone interview. “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. 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.
Shares of Vector, with a $2.6 billion market value, climbed 47% this year through Wednesday. Its products include Pyramid and Eve cigarettes.
Douglas Elliman shares will trade on the New York Stock Exchange under the ticker DOUG.
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