"We continue to maintain, and are committed to, our commercial real estate advisory business and its related fee-based initiatives and remain focused on supporting our existing client relationships," the spokesperson explains, noting that this is part of a broader announcement that was make in the company's earnings report released in mid-January.
A source familiar with the situation tells GlobeSt.com that CIT has only a few people left in the real estate group "temporarily for now." The source also explains that CIT was hit hard by the subprime losses and the new business development sides were let go, real estate being one of them.
The CIT spokesperson says that the company hasn't closed the real estate group completely. He notes that "the reductions were made in our commercial real estate financing group; however, there is also the advisory side of the business."
On Jan. 17, CIT reported a net loss of $130.7 million, or $0.69 per share, for the fourth quarter of 2007 versus net income of $259.3 million, or $1.28 of diluted earnings per share, for the 2006 quarter. "We were not pleased with our reported loss this quarter, which primarily related to charges on our home lending and student lending businesses--two sectors that have recently experienced significant change," noted Jeffrey Peek, chairman and CEO of CIT in the earnings report.
"CIT retrenched back to core businesses and real estate was one of the newer groups formed, so although the real estate group performed well, it was caught up in the whole mess," the unidentified source explains. Roughly 50% of CIT staff were let go across the board, the source estimates.
"Our commercial finance businesses performed well and continue to demonstrate the value of the CIT franchise in our core markets," Peek explained in the earnings report. "We ended the year with strong capital ratios. Our strategic focus for 2008 is centered on our core commercial finance segments and maintaining balance sheet strength."
The earnings report also noted that CIT expects "overall market conditions to remain challenging for some time. Key to our success this year will be our ability to reduce expenses through improved efficiencies and further diversify our funding sources. To that end, we are right-sizing the business to better support our core commercial finance segments and creating a more streamlined organization focused on delivering value to our customers and shareholders." In addition, CIT expects to record a pre-tax restructuring charge of approximately $50 million in the first quarter of 2008 for severance and related costs, with expected annual savings of $60 million."
"Wall Street analysts have a negative outlook on commercial real estate going forward, and companies--including CIT--are making decisions based on that outlook," the source believes, adding that this may have contributed to cuts in the real estate department and is very troubling for the industry.
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Natalie Dolce
Natalie Dolce, editor-in-chief of GlobeSt.com and GlobeSt. Real Estate Forum, is responsible for working with editorial staff, freelancers and senior management to help plan the overarching vision that encompasses GlobeSt.com, including short-term and long-term goals for the website, how content integrates through the company’s other product lines and the overall quality of content. Previously she served as national executive editor and editor of the West Coast region for GlobeSt.com and Real Estate Forum, and was responsible for coverage of news and information pertaining to that vital real estate region. Prior to moving out to the Southern California office, she was Northeast bureau chief, covering New York City for GlobeSt.com. Her background includes a stint at InStyle Magazine, and as managing editor with New York Press, an alternative weekly New York City paper. In her career, she has also covered a variety of beats for M magazine, Arthur Frommer's Budget Travel, FashionLedge.com, and Co-Ed magazine. Dolce has also freelanced for a number of publications, including MSNBC.com and Museums New York magazine.
