Future City: Behind Zillow’s brokerage play, Common’s $50M for co-living

Why Zillow bet on brokerage for profits

For years, Zillow said it wouldn’t become a brokerage. But in a sharp reversal, the Seattle-based listing goliath said it will employ salaried agents to boost its iBuying business.

The move drew immediate backlash from brokers, who didn’t quite buy that Zillow just wants to streamline the process of buying and selling homes. In fact, Zillow has a sharp eye on profits for iBuying, and hiring agents will cut costs.

Previously, the company relied on outside brokers to represent it on home purchases. (Generally, iBuyers buy homes in cash for a fee and aim to sell at a profit.) As a result, Zillow was paying agents on both sides of the transaction. In 2019, Zillow bought 6,511 homes and sold 4,313, losing $300 million in the process.

Traditional brokers, though, reacted swiftly to the news. Bill Raveis, founder of William Raveis Real Estate, predicted agents would stop advertising with a perceived competitor. In 2019, Zillow’s Premier Agent ad program generated $923.9 million in revenue.

Meanwhile, the line between iBuying and brokerage is getting blurry. Brokerage giants Realogy and Keller Williams have iBuying options and in June, Offerpad launched a listings service. Last month, SoftBank-backed Opendoor quietly began recruiting agents. Opendoor has since said it will go public in a $4.8 billion SPAC deal.

Zillow said its agents won’t go after new listings outside of Zillow Offers. But industry analyst Mike DelPrete said one of the biggest opportunities in iBuying is monetizing seller leads (i.e., people who request an offer but ultimately don’t sell through an iBuyer). Brokerage can help with that, he wrote in a recent blog post. “At scale, converting even a portion of these high-intent leads to a traditional listing could be a billion dollar opportunity.”

I’ve heard agents today saying, ‘Well, why am I buying leads from my competitor?’
Hoby Hana, Howard Hanna Real Estate, referring to Zillow become a brokerage

$50M and co-living for remote workers

Co-living startup Common just raised $50 million to expand its footprint — but the big takeaway is the company’s growth beyond shared housing for millennials. Last year, the New York firm launched a family-oriented co-living brand with Tishman Speyer called Kin. It is building affordable housing in East Harlem and recently introduced Noah, a property management division for workforce housing. CEO Brad Hargreaves said housing for remote workers could be next. The round, led by Swedish investment firm Kinnevik, brings Common’s total funding to $113 million since 2015.

Cadre debuts cash savings accounts

Cadre, the Kushner-backed real estate investment startup, is back in “growth-and-offense mode,” according to CEO Ryan Williams. After halting investments in March, the company is launching Cadre Cash, a cash savings account program that comes with a 3 percent reward, CNN reported. The program is open to those who invest at least $50,000 in Cadre, which uses machine learning to assess real estate deals. “We want to allow more people to participate in the recovery,” Williams said. Co-founded by Joshua Kushner, Cadre is also backed by George Soros and Mark Cuban. Jared Kushner is reportedly in the process of selling his $50 million stake in Cadre.

Fresh capital for Better.com?

Better.com, an online mortgage loan startup, is in talks to raise $100 million in new funding at a $4 billion valuation. Backed by Kleiner Perkins, Citigroup and Goldman Sachs, the six-year-old firm is one of the lucky ones that benefited from the pandemic. Thanks to low interest rates and its all-digital model, Better.com expects revenue to grow eight-fold this year and top $800 million, according to The Information. Like its rival Rocket Companies, which went public this year, Better.com avoids traditional loan officers by underwriting mortgages online.

STAT OF THE WEEK

5%

Year-over-year drop in Airbnb listings in July and August, according to AirDNA

WeWork pulls back in China

WeWork is ceding control of its China business by selling a $200 million stake to investment firm Trustbridge Partners. According to the Wall Street Journal, WeWork will give up operational control but will license its name and services for a fee. It will retain a minority stake in WeWork China, which opened its first location in Shanghai in 2016. After a botched IPO last fall under founder Adam Neumann, CEO Sandeep Mathrani has been aggressively cutting costs and minimizing risk.

Small bytes

? Avison Young bought Truss, an online leasing startup that’s raised $24.5M since 2016.

? Regus put 100+ locations into Chapter 11 bankruptcy.

? Furniture rental startup Mobley raised $9M in seed money and rebranded as Conjure.

? Kasa Korea, a property investment platform, raised a $7.8M Series B led by Korea Development Bank. The platform lets retail investors buy and sell commercial real estate in the form of asset-backed securities.

?? Porch.com is bulking up its board before its $523M SPAC IPO with five new directors, including Javier Saade, a former Small Business Administration exec; Chris Terrill, former CEO of HomeAdvisor and Angie’s List; and Margaret Whelan, founder of Whelan Advisory.

? RE/MAX bought Gadberry Group, a location services startup, for an undisclosed price.

? China’s Ming Yuan Cloud Group, which develops cloud-based software for property developers, is planning a $797M IPO in Hong Kong.

Smart-lock startup Latch is branching out

The New York firm has launched LatchOS, an operating system for apartment buildings that can control everything from automatic doors and elevators to package delivery. LatchOS has six distinct functions for residents and property managers, who can also use the platform for workflow management and video security.

Founded in 2014 by CEO Luke Schoenfelder, Brian Jones and Thomas Meyerhoffer, Latch has seen increased demand for contactless solutions as a result of the pandemic. Last year, Latch did $100 million in sales, a figure it expects to surpass this year. To date, it has raised $152 million from investors including Avenir Growth Capital and Brookfield Ventures. It was valued at $400 million after raising $56 million in August 2019.

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