Insignia Financial Group, Inc., a leading provider of international real estate and financial services, today reported results from operations for the quarter and the nine months ended September 30, 2002. For the third quarter of 2002, the Company reported income from continuing operations of $4.1 million ($0.14 per diluted share), an improvement from a loss of $5.4 million ($0.25 loss per diluted share) in the third quarter of 2001. For the third quarter of 2002, Net EBITDA was $13.0 million ($0.50 per diluted share), up 271% from $3.5 million ($0.14 per diluted share) in the third quarter of 2001.
The Companyâ€™s third quarter 2002 results continue a pattern of steady improvement throughout the year. Net EBITDA totaled $12.3 million for the second quarter of 2002 and $6.0 million for the first quarter of 2002.
The Company also announced that, after the end of the quarter, it paid down $22 million of its debt, bringing its outstanding balance under its senior credit facility below $100 million. Third quarter 2002 results were highlighted by very strong year-over-year performance in Europe, especially the United Kingdom, where a strong investment market and Insignia Richard Ellisâ€™ market-leading position fueled a 195% EBITDA gain over the third quarter of 2001. The Companyâ€™s residential sales and brokerage unit, Insignia Douglas Elliman, has benefited from continued strength in the New York co-op and condo sales market, albeit at a slower pace compared with the first two quarters of 2002. The Companyâ€™s U.S. commercial real estate services business, Insignia/ESG, continues to face soft markets, but benefited from the stronger relative performance of its flagship New York operation and expense containment measures. For the third quarter of 2002, EBITDA for Insignia/ESG increased to $7.5 million, up from $2.9 million in the same period for 2001.
Total real estate service revenues for the third quarter of 2002 were $187.8 million, a 28% increase from the $146.3 million for the same period in 2001. The increase is attributable, in part, to the $11.5 million in contributions from the Companyâ€™s French business unit, Insignia Bourdais, which was acquired in late December 2001, as well as a 37% increase in Insignia Richard Ellis revenues over the comparable period a year ago. The Insignia Douglas Elliman residential unit saw year-over-year revenues increase 18% to $29.5 million, while U.S. commercial property services saw a similar 18% revenue increase to $103.3 million. Net income for the 2002 third quarter totaled $8.8 million (income of $0.34 per share), compared with a net loss of $4.5 million (a loss of $0.21 per share) in the comparable period in 2001. Earnings for the 2002 third quarter were aided by a $4.7 million tax benefit in discontinued operations resulting from the elimination of a valuation allowance on the loss on the sale of Realty One recorded at December 31, 2001. The tax benefit had been fully reserved due to uncertainty of the deductibility of the loss. In the third quarter of 2002, it was determined that the loss would be fully deductible, resulting in the recognition of the tax benefit. The 2001 third quarter was adversely affected by Internet losses of $1.8 million.
Real Estate FFO for the quarter was significantly below the prior-year period. FFO was $683,000 for the third quarter of 2002, down 62% from $1.8 million generated during the third quarter of 2001. As with our second quarter results, this decrease was not unexpected. Approximately half of the decrease was attributable to the sale of co-investment properties, including, most significantly, the Fresh Meadows apartment complex in Queens, N.Y., which had contributed $418,000 of FFO in last yearâ€™s third quarter. (Insignia recognized a $10.4 million pre-tax gain on the sale of that asset in November, 2001.) Most of the remaining year-to-year reduction in FFO stems from two development assets that are in the early stages of their operations.
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