Friday, November 11, 2022
Big tech has jumped into the real estate industry in the past few years — Compass, Redfin, and Opendoor raised billions and entered the Rhode Island market.
But now, these companies are hemorrhaging cash.
Compass, which bought Lila Delman in Rhode Island, released its third-quarter financial on Thursday afternoon.
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The company reported in its 3Q22 “Financial Highlights.”
Revenue decreased by 14% year-over-year to $1.49 billion as transactions declined 12%.
GAAP Net Loss was $154 million, compared to a loss of $100 million in 3Q21. The net loss includes non-cash stock-based compensation expenses of $50 million, depreciation and amortization of $21 million, restructuring charges due to the cost saving actions of $29 million, and litigation charges of $11 million.
Cash and cash equivalents: Compass’ net change in cash and cash equivalents from the end of 2Q22 to the end of 3Q22 was a decrease of $76 million from $431 million to $355 million. In addition to the $355 million in cash and cash equivalents as of the end of 3Q22, the Company had approximately $300 million of availability under its revolver.
Adjusted EBITDA1 was $(42) million, compared to $12 million in 3Q21.
On Wednesday, Redfin laid off 13% of its staff and closed its home-flipping unit, saying the operation was both too expensive and too risky to continue. Redfin operates in Rhode Island, but is a Seattle-based company that operates a real estate brokerage and home-listings website. It previously laid off 8% of its workforce in June of this year.
The closure of Redfin’s home-flipping business, RedfinNow, follows Opendoor Technologies Inc. posting record losses last week. The biggest home-flipping company sold too many homes for less than their purchase price. Opendoor blamed the pace of rising interest rates for throttling the housing market faster than the company could predict.
Opendoor last week announced the layoff of about 550 people, or 18% of the company, across all functions.
According to Bloomberg, in a Wednesday morning email to staff, Redfin’s chief executive, Glenn Kelman, cited difficulties with the changing housing market that echoed comments made by Zillow Group Inc. last year when it decided to close its home-flipping outfit.
“iBuying is a staggering amount of money and risk for a now-uncertain benefit,” Mr. Kelman wrote. “We’ve tied up hundreds of millions of dollars in houses that you yourself wouldn’t want to own right now.”
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