Dottie Herman and Howard Lorber (Credit: Douglas Elliman)
UPDATED: Dec. 31, 5:40 p.m.: Douglas Elliman CEO Dottie Herman — who partnered with Howard Lorber 15 years ago to buy New York City’s largest residential brokerage — is selling her stake in the firm for $40 million.
Herman will retain her spot on the management team, according to Elliman’s parent company, Vector Group, which is purchasing her 29.41 percent interest, it said Monday afternoon. Vector, which is controlled by Lorber, already owned 70.59 percent of Douglas Elliman.
In a regulatory filing, Vector said it already paid Herman $10 million and will pay the remaining $30 million in 12 equal installments between Jan. 1, 2020 and Oct. 1, 2022. She will also receive interest on the outstanding balance.
In a statement, Lorber said Herman’s “vision for and dedication to Douglas Elliman” helped turn the brokerage into a national brand with 7,000 agents — including 2,600 in New York City.
The pair acquired the brokerage in 2003 for just under $72 million, and its overall success led to Forbes in 2016 naming Herman as the richest self-made woman in real estate, with an estimated net worth of around $260 million.
But lately, the firm has been battered by the national housing slowdown and sluggish new development sales. Elliman reported net income of $7.8 million for the first nine months of 2018— down 62.5 percent from $20.8 million in 2017.
On Monday, shares of Vector closed at $9.73 — down around 54 percent from $20.70 per share in January 2018 — giving the company a market cap of $1.3 billion.
‘End of an era’
In recent years, Herman has retreated from the firm’s day-to-day operations, fueling rumors that she was on her way out.
On Monday, Herman disputed the idea that she has — or will — take a backseat at Elliman, despite selling her stake. “When a company gets to be a size like ours, any CEO should take the time to be strategic,” she said. “I still take every call from agents. Look, I helped four people get listings in the last two weeks.”
Although she will remain as CEO, sources told The Real Deal that Herman forgoing ownership represents the end of an era at Elliman.
While Herman held a significant stake in the company and had a legion of loyal followers, Elliman agents and managers said the balance of power has always favored Lorber. He’s the dealmaker who brings gobs of new development business through his investment vehicle New Valley, which bought into such projects as 111 Murray, 125 Greenwich, 76 11th Avenue and 160 Leroy. Through that connection, Elliman was tapped to market billions in condo product.
“The main impetus behind the company has been Howard for years,” said Andy Gerringer, who ran Elliman’s new development marketing group until he left in 2010. “Dottie was corralling managers and running meetings but when the big decisions had to be made it was Howard anyway.”
The veneer of diplomacy between the owners started to wear thin in recent years, as Herman stayed out of the spotlight (whether by choice or direction). Then in December 2017, Lorber promoted COO Scott Durkin to president — a role previously held by Herman. At the time, Herman and Lorber emphatically denied she was going anywhere. “She’ll have to be carried out,” Lorber said last year. “I’ll be the same way.”
But sources said although Herman resisted the change at first, she acquiesced over time. “In the beginning, she didn’t want to give up the day-to-day operations of the company,” the source said. “At the same time, she’d had enough.”
During a brief phone interview on Monday, Herman, 65, said selling the stock was the “hardest decision” she’s made in her life, and added that she wavered for two years before deciding to cash out. Twenty years ago, she would have kept going, she said.