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Redfin’s coronavirus response: CEO forgoes salary for 2020; agent base pay increases; and more

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Redfin’s coronavirus response: CEO forgoes salary for 2020; agent base pay increases; and more

Redfin CEO Glenn Kelman on the 2018 GeekWire Summit. (GeekWire Photo / Dan DeLong)

Redfin is making changes amid the COVID-19 disaster and uncertainty surrounding the true property market.

The Seattle actual property firm wrote a letter to shareholders Thursday outlining cost-cutting strikes and different modifications being made, together with:

  • CEO Glenn Kelman is not going to take wage for the remainder of 2020.
  • Management workforce will forego money bonuses for 2020; all Redfin staff at its Seattle HQ will forego bonuses for first half of 2020.
  • Board members will forego all money charges related to serving on Redfin’s board for 2020.

Redfin may even quickly enhance the fastened portion of agent pay provided that compensation is taking successful because of diminished home-buying and promoting exercise.

“We’re dedicated to this enhance within the brief time period, but when we see proof that the downturn is prone to be extended, we should should make the painful option to furlough some staff and lay off others, choices that may apply to each headquarters staff and actual property brokers,” Redfin Chairman Bob Mylod wrote within the letter.

Coronavirus Live Updates: The newest COVID-19 developments in Seattle and the world of tech

Redfin had 3,377 staff as of Dec. 31.

The strikes are available in response to social distancing mandates in numerous locales associated to the coronavirus disaster and bigger financial downturn. Redfin reported Wednesday that there have been 27% fewer clients requesting to see houses over the previous week in comparison with final 12 months.

Last week Redfin introduced that RedfinNow, an arm of its enterprise that buys houses immediately from owners and resells them to homebuyers, will quickly pause making affords on houses.

Mylod stated Redfin’s stability sheet is robust, with $328 million in money as of March 1. The firm can be shifting shortly to promote RedfinNow houses that it owns.

“Redfin is a comparatively new firm,” Mylod wrote. “But we’re sufficiently old to have operated by means of the monetary disaster of 2008 with a far much less confirmed enterprise and a tiny fraction of the capital that we now have right now. That expertise has helped inform among the defensive measures that we’re implementing. Nevertheless, we now have each confidence that we are going to come out on the opposite aspect of this tough time able to go on offense and additional speed up our market share positive factors.”

Redfin is specializing in its digital instruments akin to video-chat excursions to adapt to the brand new actual property local weather.

Redfin rival Zillow Group outlined its personal coronavirus playbook this week, noting that it’s going to slash bills by 25% this 12 months, freeze hiring throughout the corporate, reduce practically all advertising and marketing spend, and droop home-buying by means of its Zillow Offers enterprise.

Here’s the complete letter to shareholders from Redfin Chairman Bob Mylod:

To My Fellow Redfin Shareholders:

Last week, your board of administrators held an unscheduled assembly with Redfin’s administration workforce to evaluate the influence that the COVID-19 virus is prone to have on our operations and monetary place. We resolved in that assembly to undertake instant actions to guard the belongings of our firm.

Near the very prime of the record of these belongings is our nationwide community of actual property brokers who’ve made Redfin the best actual property brokerage within the United States. The compensation of our brokers is closely variable and pushed by dwelling gross sales. However, with an anticipated materials drop-off in transactions within the coming weeks and months, our brokers’ wages are prone to be harm disproportionately. Accordingly, we moved to quickly enhance the fastened portion of agent pay whereas we wait to raised perceive the size and severity of the financial downturn that may be very probably coming. We’re dedicated to this enhance within the brief time period, but when we see proof that the downturn is prone to be extended, we should should make the painful option to furlough some staff and lay off others, choices that may apply to each headquarters staff and actual property brokers.

Recognizing for now that rising brokers’ base pay will quickly enhance working losses, our administration workforce has determined to forego money bonuses for 2020 and all the staff at Redfin’s headquarters have agreed to forego money bonuses for the primary half of 2020. Our CEO, Glenn Kelman, has elected to not take a wage for the rest of 2020. Inspired by our administration workforce’s strikes, our board of administrators unanimously voted on Monday in favor of foregoing all money charges related to serving on Redfin’s board for 2020. From a pure {dollars} and cents perspective, these strikes assist offset a few of these prices. In actuality, these strikes are demonstrative of Redfin’s most necessary asset: its tradition. At its core, Redfin is a tradition of service–wherein your board of administrators serves you, wherein executives serve staff, wherein engineers and analysts serve brokers… and all of us serve clients.

In a scenario akin to this, we’re additionally fairly targeted on our stability sheet and our liquidity. We consider that regardless of the challenges forward of us, our stability sheet is robust. We started March with $328 million of money, money equivalents, and short- and long-term investments, which consisted solely of U.S. authorities securities. Our $144 million of convertible debt doesn’t mature till July 2023. Most importantly, we now have been cautious with our stability sheet dedication to RedfinNow dwelling stock. On March 17 RedfinNow suspended making additional on the spot affords on houses. And we now have moved with haste to promote RedfinNow houses that we personal. As of March 26, 2020 we held roughly $68 million of RedfinNow houses in stock, of which roughly $23 million are below contract to be bought by shoppers. This is down from December 31, 2019, once we held roughly $75 million in RedfinNow houses in stock. We’re below contract to buy roughly $7 million in further stock from dwelling sellers.

Redfin is a comparatively new firm. But we’re sufficiently old to have operated by means of the monetary disaster of 2008 with a far much less confirmed enterprise and a tiny fraction of the capital that we now have right now. That expertise has helped inform among the defensive measures that we’re implementing. Nevertheless, we now have each confidence that we are going to come out on the opposite aspect of this tough time able to go on offense and additional speed up our market share positive factors.

Finally, this pandemic appears prone to change all the pieces about actual property in favor of a technology-driven brokerage like Redfin. Rest assured that Glenn and your complete Redfin workforce are working at an accelerated tempo to develop the instruments that may additional rework the best way wherein houses are purchased and offered.

Sincerely,
Bob Mylod, Redfin Chairman

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