Redfin is making a serious push into the residential residence rental market, announcing Friday morning that it’s paying $608 million in money for Atlanta-based RentPath. The deal, accepted by the boards of each firms, will set up Redfin’s on-line rental market, including on-line locations akin to Hire.com, Leases.com and ApartmentGuide.com that entice about 16 million month-to-month guests.
When the deal closes, it’ll additionally add 700 workers to Redfin’s tally of 4,000 workers. RentPath posted income of $194 million final 12 months, whereas Redfin noticed income of $875 million for the trailing twelve months ended September 30, 2020.
It will mark the most important acquisition in Redfin’s historical past. Since its founding in 2004, Redfin has acquired just one different firm: Stroll Rating.
Analysts at Wedbush Securities stated Redfin’s transfer into rental listings is “very complimentary” to its core enterprise of home-buying and promoting, including that the deal represents “sturdy worth” and can be a major enhance to Redfin’s site visitors.
“We view Redfin’s intention to amass RentPath as a sound strategic transfer that enhances its providing within the near-term and particularly over the long-term,” Wedbush wrote in a analysis notice Friday.
Potential regulatory headwinds await. In December, RentPath terminated an agreement to be acquired by CoStar Group following a Federal Trade Commission lawsuit to dam the deal, citing potential hurt to customers because of consolidation within the residential rental market. That acquisition, initially announced in February 2020, valued RentPath at $588 million and got here as the corporate entered Chapter 11 chapter.
“RentPath has made vital progress and is on an upward trajectory regardless of an undoubtedly difficult 2020,” stated Stephen Spencer, Managing Director at Houlihan Lokey and advisor to RentPath’s lenders in a press launch on the time of the canceled CoStar deal. “The marketplace for actual property know-how companies continues to be very sturdy as latest M&A transactions have highlighted.”
In the meantime, CoStar is pushing again on a $60 million break-up charge that RentPath stated was owed after the deal fell aside, according to The Real Deal.
To ensure that Redfin’s acquisition to maneuver ahead, the FTC and chapter courtroom might want to inexperienced gentle the deal. In a convention name Friday morning, Redfin CEO Glenn Kelman stated he didn’t anticipate the identical regulatory scrutiny that CoStar encountered since Redfin is comparatively new to the rental itemizing house.
Redfin is finest identified for its residence shopping for and promoting companies, however condominium leases is a lovely slice of the house market that the Seattle firm has not but touched in an enormous approach.
“RentPath has greater than 20,000 condominium buildings on its rental web sites, and grew its site visitors greater than 25% final 12 months,” stated Kelman in a press release. “We will virtually double that viewers, as one in 5 of Redfin.com’s 40+ million month-to-month guests additionally needs to see houses for hire. Along with RentPath, we will create an internet vacation spot for each North American to discover a residence.”
We love you RentPath! The oldsters on https://t.co/TdSyB9TW77 who need to see rental listings can virtually double RentPath’s viewers. And you’ll broaden Redfin’s mission to redefine actual property for all customers, not simply those who can afford to purchase a house https://t.co/Bnn07YbRKg
— Glenn Kelman (@glennkelman) February 19, 2021
RentPath is led by Dhiren Fonseca, who was appointed interim president and CEO two months ago simply earlier than the CoStar deal fell aside. Fonseca who serves as an adviser to TPG, one of many non-public fairness homeowners of RentPath, has sturdy ties to Seattle,
He’s the previous Chief Industrial Officer at Expedia, the place he served for greater than 19 years. Earlier than that, he labored at Microsoft for a few years, working alongside Zillow Group CEO Wealthy Barton to spin out Expedia right into a separate firm in 1995. He’s additionally a board member at Alaska Airways.
The deal comes three days after Redfin’s cross-town rival Zillow Group made its own big purchase in the true property market, shopping for residence touring firm ShowingTime for $500 million. Along with showcasing houses on the market, Zillow additionally operates a rental market.
In Friday’s convention name, Kelman particularly cited competitors with Zillow in leases, and tipped his hat to Zillow’s 2013 StreetEasy acquisition which gave it a serious beachhead within the profitable New York rental market. On condition that deal, Kelman stated that New York can be a troublesome marketplace for Redfin to crack, and that they’d doubtless focus consideration elsewhere.
Greater image, Kelman stated that Redfin wanted to be within the condominium and residential rental enterprise, since it’s a typical entry level for customers and serves as a stepping stone to eventual residence possession. He added that it might have doubtless taken 4 years for Redfin to construct out the leases stock by itself, and since it lagged bigger rivals they wanted to purchase their approach into the market.
Redfin’s inventory has greater than doubled prior to now 12 months, and the corporate now boasts a market worth of $8.8 billion. You possibly can learn extra of Kelman’s musings on the acquisition here.