Douglas Elliman secures a $50 million growth investment

The funds came from Kennedy Lewis Investment Management

July 2, 2024

Douglas Elliman has secured a $50 million growth investment from Kennedy Lewis Investment Management, according to an announcement on Tuesday. Kennedy Lewis is a credit-focused alternative asset management firm.

According to the release, this investment strengthens Douglas Elliman’s balance sheet and it will fuel its strategic growth and expansion. In the release, the firm noted that Kennedy Lewis has a history of investing in the residential real estate sector and Douglas Elliman expects that as part of this partnership, the investment firm will tap into its industry expertise, which includes experience in land and homebuilder finance investments.

“Kennedy Lewis’ investment in Douglas Elliman is a testament to our agents, business model and strategic plan,” Howard Lorber, the chairman and CEO of Douglas Elliman, said in a statement. “With deep experience in residential real estate, we are pleased Kennedy Lewis has chosen to support Douglas Elliman’s strategic initiatives and look forward to tapping into the firm’s network and knowledge base as we work together to drive long-term stockholder value.”

The brokerage firm has issued $50 million senior secured convertible notes due July 2, 2029, to funds advised by Kennedy Lewis. In the release, the brokerage stated that the convertible notes bear interest at a rate of 7.0% per annum payable in cash, or, at Douglas Elliman’s election, 8.0% per annum paid in kind, due semi-annually.

Additionally, the firm said that the notes are convertible into common stock at an initial conversion rate equal to $1.50, subject to certain customary anti-dilution adjustments. Douglas Elliman notes that as part of the agreement, Kennedy Lewis will have the right for so long as such funds hold at least one-third of their initial investment, to nominate one director to Douglas Elliman’s board.

The first board appointment as part of this investment is David Chene, who is the co-founder and co-managing partner of Kennedy Lewis. The firm also announced that Patrick Bartels Jr., an independent director from Redan Advisors LLC, will join the board.

Chene and Bartels are succeeding Ronald Kramer and Lynn Mestel in their board positions.

“We are excited to partner with Douglas Elliman, a firm with one of the strongest brands and most reputable agents in residential real estate and a compelling growth opportunity, and work with the management team to fully capitalize on that opportunity,” Chene and Darren Richman, the co-founder and co-managing partner of Kennedy Lewis, said in a joint statement.

“Douglas Elliman operates in an industry we understand well, having studied and invested in residential real estate and homebuilders through multiple cycles. We see attractive long-term market dynamics in the growing, luxury markets Douglas Elliman focuses on, and believe the firm is well positioned to utilize additional financial and strategic resources to build on its leading position in the space.”

Douglas Elliman also announced that its preliminary unaudited gross transaction value for the second quarter is expected to be in the range of $10.25 billion to $11.25 billion, compared to $7.1 billion in the first quarter of 2024. As of the end of June, the company said it had $92.0 million of cash and cash equivalents on its balance sheet, even after its first payment of $7.75 million as part of its commission lawsuit settlement agreement.