UPDATED 7:30 p.m., May 13: Commercial real estate data giant CoStar Group is purchasing Ten-X for $190 million, a move that would increase the publicly-traded CoStar’s presence in the distressed real-estate space.
The all-cash deal for the online real estate transaction platform could be finalized Wednesday, the Wall Street Journal first reported. Thomas H. Lee Partners, the private equity firm that owns Ten-X Commercial, had previously been in talks with CoStar, but when those talks did not lead to an agreement, Ten-X laid off nearly half its workforce in November, The Real Deal reported.
“They have actually streamlined and consolidated some of their staff since we were last in conversations with them,” CoStar CEO Andy Florance said in an interview with TRD Wednesday evening. “Which makes them a closer to a profitable company. And probably strikingly, they were also sitting here at a time where their services in combination with our services are likely much more relevant.”
Ten-X claims that more than $50 billion in real estate transactions have been done through its platform. It was founded in 2007 as Auction.com, a residential real estate deal platform, and has been backed by firms such as Barry Sternlicht’s Starwood Capital, Stone Point and CapitalG. In 2016, it launched a separate platform known as Ten-X Commercial, which provided a marketplace for commercial properties. Thomas H. Lee bought a majority stake in the company for nearly $1.6 billion in 2017, and split it into Auction.com and Ten-X Commercial.
In February, CoStar, which has a current market cap of $22.6 billion, reported that net income for 2019 was $315 million, up 32 percent year-over-year. Florance expects the effects of the pandemic to usher in a very busy era for distressed investing, and said the Ten-X platform would help CoStar take a piece of the action.
“Our sense is that over the course of the next three to five years, there will unfortunately be a tsunami of distressed deals,” he said. “I think that in this time, having a mechanism to clear these distressed properties I think will be very valuable.”
CoStar’s recent acquisitions include the $450 million purchase of hotel data provider STR in November, and the $588 million purchase of apartment-listing firm RentPath out of bankruptcy in February. Asked Wednesday about concerns that CoStar was monopolizing the market for commercial real estate data, Florance said “we are never going to pursue a path where we try to get smaller and smaller and smaller and become less effective and provide less solutions.”
This story was updated to include comments from CoStar CEO Andy Florance