CoStar wants to add $1.25 billion to its war chest.
The commercial real estate data giant announced the sale of common stock Tuesday. In a regulatory filing, the company said it would use some of the proceeds to fund new acquisitions and “to finance the growth of its business.”
With a $24 billion market cap, CoStar is already the largest provider of commercial real estate data in the U.S. Since November, it’s spent more than $1.2 billion on acquisitions, including last week’s deal to buy transaction platform Ten-X Commercial for $190 million in cash.
In February, CoStar snapped up troubled rental listings firm RentPath for $588 million, following its $450 million purchase of hotel data provider STR in November.
In a recent interview with The Real Deal, CEO Andy Florance said CoStar has $1.9 billion in cash. In March, it drew $745 million from its credit line as a hedge against the tumultuous market, and to fund acquisitions.
“There’s some relatively young technology where they aren’t going to have a balance sheet to survive this storm,” Florance said. “I’m having a lot of different conversations with people in all kinds of different areas, who need to do something pretty quickly. A lot of the private equity funds or venture funds that were funding these things have just stepped out and they’re gone.”
Even as coronavirus pummeled hotel and broker clients, CoStar’s revenue rose 19 percent during the first quarter of the year to $392 million. But its net income was $73 million, down from $85 million during the first quarter of 2019.
Last week, a group of New York commercial brokerage firms wrote to CoStar asking for a discount on hefty subscription fees. Saying brokerage was “shut down,” they added that CoStar’s offer to defer fees “does nothing other than kick the can down the road and puts small, independent commercial brokerage firms further behind the eight ball.”
In a statement, CoStar said it had offered “thousands” of companies relief, but predicted that commercial leasing activity —and commissions — would bounce back.
In the interview with TRD, Florance was defiant when asked about critics who say CoStar has a near-monopoly on commercial real estate data. “We are never going to pursue a path where we try to get smaller and smaller, and become less effective and provide less solutions,” he said. “We’re never going to listen to a small minority, and often competitors, and say ‘yeah, no, we’re going to stop innovating,’ or ‘we’re going to stop building new things.’”