CEO Spotlight: La Rosa Holdings CEO Explains How His Company Can Transform The Real Estate Market Landscape ($LRHC)

Rhea-AI Summary

La Rosa Holdings Corp completes $5 million IPO on Nasdaq and plans to transform the real estate sector with its innovative platform and team-centric approach. The company aims to expedite closing deals and reward agents with 100% of commissions, leading to a nearly 32% pay increase. The IPO capital will be used to expand operations and attract agents in a highly competitive marketplace. La Rosa Holdings generated revenues of over $26.2 million in FY2022 and is confident in scoring higher revenues in the future.

Positive

• La Rosa Holdings intends to transform the real estate sector with its innovative platform and team-centric approach.
• Agents earn 100% of commissions, leading to a nearly 32% pay increase compared to traditional brokerage models.
• The IPO capital will be used to expand operations and attract agents in a highly competitive marketplace.
• La Rosa Holdings generated revenues of over $26.2 million in FY2022 and is confident in scoring higher revenues in the future.

Negative

• None.

CELEBRATION, Fla., Oct. 18, 2023 /PRNewswire/ -- La Rosa Holdings Corp made its Nasdaq debut in October, completing its $5 million IPO by selling one million shares of LRHC stock. While an excellent milestone was reached, it's not the only one LRHC intends to score in 2023 and 2024. In fact, they have quite a story to tell, which could set up Q4 as more than a period of milestones reached but position La Rosa for a catalyst-filled 2024.

To learn how and why post-IPO La Rosa Holdings can become a familiar name in the sector, Hawk Point Media, Llc. reached out to its CEO, Joe La Rosa, to get a first-hand account of how and why he thinks his company is on the precipice of transforming many parts of the real estate sector. Here's what he said.

Q. Joe, after completing your IPO to the Nasdaq markets on Tuesday, your company appears well-capitalized to advance a unique mission in the real estate sector. Please briefly overview what La Rosa Holdings intends to do post-IPO.

A. Foremost, we are better positioned than ever to accelerate our mission of transforming a real estate sector that's been doing things the same way for the past fifty years. And we are more than positioned to take that challenge; it's a mission in progress utilizing an innovative platform and a team-centric approach to real estate transactions that led to us completing $2.9 billion in total transaction volume, opening offices in six states, an agent headcount of 2,450, and, in 2022, led to completing 8,300 total transactions. As impressive as they are, I think those numbers are a precursor of more appreciable news in the coming weeks and months. That's not only because we have motivated agents but instead from doing things differently than a real estate industry stuck on auto-pilot for decades.

Q. Some say your timing to earn your Nasdaq listing comes during a challenging time. Do you agree?

A. Yes, but to an extent. The residential and commercial real estate markets are indeed working through a "challenging" period from a series of interest rate hikes and an imbalance in supply and demand. However, these challenges won't affect every company the same way. La Rosa Holdings provides an excellent example of why doing things differently can create competitive advantages. Remember, the real estate sector is a $113 trillion sector in the U.S. Markets alone. So, there's plenty of deals to be made. We believe we can earn significant deal-making traction this year from our over 35 offices, 2450 agents, and an innovative platform that is designed to expedite closing deals and rewarding listing and selling agents not a "percentage of a percentage" as a commission but instead 100% of commissions, less a $75 monthly dues and a small one-time transaction fee of up to $495. 

Q. That's a big difference. Can you expand on that?

A. Sure. Traditional real estate transactions include having a buyer and a seller. Obviously, that part continues. But from that point forward, La Rosa takes a different approach to how money gets made. Our agents, which can be affiliates or franchised owners, earn 100% of a sales commission less the fees mentioned earlier. For example, assume a home sold for $350,000. On average, a traditional brokerage model would earn a 3% commission. From that $10,500, the brokerage house may make about 30%, or $3,150. The other 70% would then pass to the agent, generating $7,350 as a net commission. Here's the La Rosa advantage. 

Our agents get the entire $10,500, less a current $60 association dues paid once per month no matter how many deals they close, and a transaction fee of at most $595, no matter the sale size. That's a nearly 32% pay increase by utilizing La Rosa tools. Considering Team La Rosa generated $2.9 billion in transactions last year, that's a significant amount of money being kept in agents' pockets instead of the brokers, which we think are not entitled to take that money from a selling agent. 

Q. That may be true, but those brokers have overhead that needs to get paid, right?

A. Absolutely. But in many cases, broker offices have bloated expenses because they also want to make as much money as they can as fast as they can. At La Rosa, we also want to make money, but not at the expense of our agents. Instead, we have developed a platform enabling our agents to find, list, and sell properties faster and with low overhead.

In fact, a La Rosa agent can get all the benefits we offer without a home office. They can meet clients in the field. That's happening as we speak from our current 35 affiliate and franchise offices in California, Georgia, New York, Puerto Rico, South Carolina, and Florida. If they choose that method, they pay $75 a month for dues, which enables them to use our platform, and a one-time transaction fee, currently $495 or less, no matter the transaction size. Thus, an agent can make tens of thousands more dollars on a one-million-dollar property sale. Not only that, in addition to expenses for them capped, La Rosa agents are not dependent on anyone else but themselves to keep the lights on, which we believe is a primary reason that agents are signing on to our team at a faster pace than ever. 

Q. You mentioned the "platform" several times. What is that, exactly?

A. I like to describe the La Rosa platform as facilitating a win-win-win proposition whereby buyers, sellers, and agents benefit. Residential clients benefit from the platform simplifying the buying and selling process and, importantly, enabling them to leverage our strength in limited inventory markets where competitive bidding and multiple offers can create considerable emotional stress. 

Agents win from our providing all the tools needed to meet demanding client expectations, especially the current technologies required to successfully battle intense competition. We don't just get listings and post a flyer. We provide our agents a one-stop shop, providing ancillary services like mortgage insurance and title services. Moreover, La Rosa agents learn proprietary technology, receive ongoing training, and can tap into results-driven coaching from a La Rosa team equally committed to making its representatives deal-making leaders.

Q. Is that primarily what the IPO capital will go toward?

A. Yes, the money raised from our IPO will facilitate expanding our award-winning performances across the country. We at La Rosa believe agents will be receptive to our opportunities, especially in a highly competitive marketplace where fewer deals may happen. In other words, through La Rosa, making fewer deals doesn't necessarily amount to less earnings. That is unique to Team La Rosa and a reason why we are attracting agents at the fastest-ever pace. And if agents are struggling, we provide coaching and market support. So, while you see our name prominently in six states where the largest real estate markets thrive, our use of capital will help expedite expansion into other states via franchise or affiliate agreements. 

Q. You discussed how well agents can do as a Team La Rosa member. What about La Rosa Holdings itself?

A Great question. We earn revenues from franchising, member dues, and a 10% commission from commercial transactions. Again, that 10% is from commercial sales, not residential. The franchisee pays a one-time upfront fee and monthly dues, currently $75. We also earn from the mentioned ancillary services and from late fees, interest, and audits. Remember that we are already a revenue-generating company. We generated revenues of over $26.2 million in FY2022, higher by over 8% from the $24.1 million earned in FY2020. Even during the historic market disruption caused by COVID, we generated FY2021 total revenues of $28.7 million. Going into Q4 and 2024, Team La Rosa is confident that scoring higher revenues is not only a target but is already in the crosshairs. 

Q. At $5.00 a share on your market debut, is La Rosa Holdings appropriately priced?

A. Look, we are excited to be listed and are incredibly proud of the team that helped us reach this historic company milestone. But to answer your question more directly, I'd say yes. That's my biased opinion and not guidance. However, I don't make that statement on blind faith. Instead, it's a sentiment based on industry multiples. 

For example, RMAX scores a P/E of 10.61 as of October 13, 2023, and a company similar in some ways to us, eXp World Holdings an aggressive P/E of 285.8 on the same day. I can further justify my case on a comparatives market cap basis with companies that are more closely aligned with what we do. Fathom Holdings, eXp World Holdings, and The Real Brokerage Inc. increased by 42%, 81%, and 34%, respectively on a comparative quarterly basis. We think we can share that trajectory once people get familiar with our transformative business model. Plus, we intend to keep adding to our portfolio holdings. An example is a deal made on Tuesday, where we acquired a controlling interest in one of our franchisees - La Rosa Realty Lake Nona, Inc. in Orlando, Florida. Lake Nona generated revenue in excess of $9.8 million and positive net income in 2022. Thus, in addition to supporting a higher market cap, it's quickly accretive to our bottom line. Those examples support the case for valuation upside. And I think once the post-IPO turbulence fades, upside is the expected path of least resistance.

Q. Finally, you mentioned markets are "challenging." Can La Rosa succeed in this environment?

A. We will more than succeed; we will thrive. What's important to understand is that while interest rates are at 7% and higher in some cases, that's not out of the "artificial normal" created by the pandemic. While many are getting sticker shock, from a historical perspective, current rates align with decades of precedent. In fact, between April 1971 and September 2023, 30-year fixed-rate mortgages averaged 7.74%. 

Therefore, my team and I expect that once people get accustomed to a more appropriate and historically normal interest rate environment, the real estate market, residential and commercial, can see a tremendous rebound. In the meantime, we are doing what we do best: attracting exceptional talent and letting them accrue the lion's share, 100%, of commissions. Making everyone's world happy is our value driver. Based on awards and recognition earned, we are obviously doing the right things at the right time, which when combined, position La Rosa Holdings to have an excellent 2024.

Forward-Looking Statements

This press release contains forward-looking statements regarding the Company's current expectations that are subject to various risks and uncertainties. Such statements include statements regarding the Company's ability to grow its business and other statements that are not historical facts, including statements which may be accompanied by the words "intends," "may," "will," "plans," "expects," "anticipates," "projects," "predicts," "estimates," "aims," "believes," "hopes," "potential" or similar words. . These statements are not guarantees of future performance and are subject to certain risks, uncertainties and assumptions that are difficult to predict. Actual results could differ materially from those described in these forward-looking statements due to certain factors, including without limitation, the Company's ability to achieve profitable operations, customer acceptance of new services, the demand for the Company's services and the Company's customers' economic condition, the impact of competitive services and pricing, general economic conditions and other risk factors detailed in the Company's filings with the United States Securities and Exchange Commission (the "SEC").. You are urged to carefully review and consider any cautionary statements and other disclosures, including the statements made under the headings "Risk Factors" and elsewhere in documents that we file from time to time with the SEC. Forward-looking statements  contained in this press release are made only as of the date of the this press release, and La Rosa does not undertake any responsibility to update any forward-looking statements in this release, except as may be required by applicable law. References and links to websites have been provided as a convenience, and the information contained on such websites is not incorporated by reference into this press release.

The Private Securities Litigation Reform Act of 1995 provides investors a safe harbor in regard to forward-looking statements. Any statements that express or involve discussions with respect to predictions, expectations, beliefs, plans, projections, objectives, goals, assumptions or future events or performance are not statements of historical fact may be forward looking statements. Forward looking statements are based on expectations, estimates, and projections at the time the statements are made that involve a number of risks and uncertainties which could cause actual results or events to differ materially from those presently anticipated. Forward looking statements in this action may be identified through use of words such as projects, foresee, expects, will, anticipates, estimates, believes, understands, or that by statements indicating certain actions & quote; may, could, or might occur. Understand there is no guarantee past performance will be indicative of future results. Investing in micro-cap and growth securities is highly speculative and carries an extremely high degree of risk. It is possible that an investors investment may be lost or impaired due to the speculative nature of the companies profiled.

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SOURCE La Rosa Holdings Corp

FAQ

What is La Rosa Holdings' innovative platform and team-centric approach?

La Rosa Holdings utilizes an innovative platform and team-centric approach to expedite closing deals and reward agents with 100% of commissions, leading to a nearly 32% pay increase compared to traditional brokerage models.

How will the IPO capital be used?

The IPO capital will be used to expand operations and attract agents in a highly competitive marketplace.

What were La Rosa Holdings' revenues in FY2022?

La Rosa Holdings generated revenues of over $26.2 million in FY2022.

Is La Rosa Holdings confident in scoring higher revenues in the future?

Yes, La Rosa Holdings is confident in scoring higher revenues in the future.