Debt, Debt, Debt, Debt, Debt

Debt, Debt, Debt, Debt, Debt The title of this analysis contains the word “debt” five times – the number of times it appears in eXp Realty’s 2023 annual report – compared to Debt, Debt, Debt, Debt, Debt The title of this analysis contains the word “debt” five times – the number of times it appears in eXp Realty’s 2023 annual report – compared to 207 times in Anywhere’s and 254 times in Opendoor’s annual reports.Why it matters: Word count in annual reports isn’t a scientific measure, but it is an interesting reminder of the critical role that debt plays for some real estate tech companies. Mentions of debt, and amounts of debt (not the focus of this analysis), vary greatly between companies. Some companies, like Anywhere, have large amounts of long-term debt that needs to be paid back over time (plus interest). From Anywhere’s annual report: “Our liquidity has been, and is expected to continue to be, negatively impacted by the substantial interest expense on our debt obligations.”   Anywhere goes on to summarize the risks of high debt: “...a substantial portion of our cash flows from operations must be dedicated to the payment of interest on our indebtedness and…is therefore not available for other purposes, including our operations, capital expenditures, technology…” Companies like Opendoor, on the other hand, utilize short-term debt as a core component of its business operations (purchasing houses). From its annual report: “We utilize a significant amount of debt and financing arrangements in the operation of our business.”   For Opendoor, the risks are less about repayment of debt, and more about exposure to changing interest rates: “Our leverage could have meaningful consequences to us, including increasing our vulnerability to economic downturns, limiting our ability to withstand competitive pressures, or reducing our flexibility to respond to changing business and economic conditions.” The number of mentions over time presents a rough corollary to the role that debt plays in the operation of a business.  Debt has been a critical component for Opendoor and Anywhere for years – and as a brokerage, Anywhere has a more intimate relationship to debt than its peers like RE/MAX, Compass, and eXp Realty.   Zillow’s debt mentions fluctuated as the company got into, and then out of, iBuying. The bottom line: Some companies have debt, some don’t, and some have a LOT of debt, which comes with its own set of consequences. There’s nothing inherently wrong with debt, but it does come with risks and needs to be well managed.   And for those companies saddled with debt, it can limit their ability to invest for future growth (read more: Cash Flow is King). I turn data and context into meaning — actionable intelligence that is clear, timely, and informs real estate industry leaders. To see more, check out my website, my podcast, or join my mailing list. Contextually yours, Mike Publications | Consulting | Podcast | Aboutwww.mikedp.comUnsubscribe