Why rental arbitrage doesn’t work: Knotel vs. Industrious
Knotel, once gleeful over WeWork’s downfall, succumbed to the pressure of rental arbitrage last week by (finally) filing for bankruptcy.
In recent months, the startup led by CEO Amol Sarva faced mounting lawsuits alleging it stopped paying rent. In a Chapter 11 filing, the flex-office provider listed assets and liabilities between $1 billion to $10 billion.
The bankruptcy filing includes $20 million in financing to aid with Knotel’s sale to Newmark Group — a deal that implies there’s a future for flex-office, just not as Knotel had imagined.
And then there’s Industrious. The Brookfield-backed startup, which signs management agreements with landlords, has 3 million square feet of space and plans to add another 1 million in 2021. It has opened three New York locations since the pandemic hit.
Industrious is taking over space from failed operators, but said it’s racing to meet growing demand from businesses that no longer want 10 to 15-year leases.
Industrious’ operating partnerships with landlords run deep: TF Cornerstone invested in its $80 million Series D in August 2019.
“SPACs may be easy to raise … but they are hard to execute and success isn’t guaranteed. Good luck to all the players.”
Another day, another SPAC
The list of blank-check firms looking for proptech deals just keeps growing.
The latest is from Scott Seligman, a real estate investor and minority owner of the San Francisco Giants, who is teaming up with cousins Brian and Ben Friedman to raise $175 million for BOA Acquisition Corp. Notably, former Miami heat star Shane Battier is on the board, along with Sri Batchu, head of advertising at Instacart and an early Opendoor exec.
Wait — there’s more.
Fifth Wall upsized its SPAC offering this week to $300 million from $250 million, as the proptech VC looks to make its mark. Shares started trading Friday and immediately jumped 12 percent to $11.27.
Benchmark Real Estate Group’s Jordan Vogel and Aaron Feldman are also looking to raise $250 million for a blank-check firm. The real estate investors filed for their second SPAC this week, and are targeting a proptech startup. Vogel and Feldman’s first SPAC merged last month with Faraday Future, a financially troubled luxury electric car maker.
Opendoor beefs up war chest to double footprint
Six weeks after its IPO, Opendoor upsized its follow-on public offering and is looking to raise $770 million.
With $1 billion on its books, the iBuyer is taking advantage of a favorable capital market and is offering 28.5 million shares at $27 per share. Gross proceeds from the offering will accelerate the company’s growth. Now in 21 markets, Opendoor plans to double that footprint in 2021.
In conjunction with the raise, Opendoor disclosed preliminary financials for 2020, which show a 45 percent drop in annual revenue after the company was forced into a five-month homebuying hiatus. It projected $2.58 billion in revenue, down from $4.7 billion in 2019. It anticipates losing $98 million to $103 million on an EBITDA basis, compared to a net loss of $339 million in 2019.
Going, going … gone for $6B
CoStar lost its bid to buy CoreLogic. Let that sink in for a minute.
After a dramatic few months of speculation and bidding, PE firms Stone Point Capital and Insight Partners beat out the industry giant to buy CoreLogic for $6 billion, or $80 per share. CoStar and Warburg Pincus made a higher, all-stock bid that was rejected, reported the Wall Street Journal.
Activist investors Senator Investment Group and Cannae Holdings stirred the post this spring, when they offered $65 per share.
CoreLogic competes with Zillow, Redfin and Realtor.com to provide residential listings data.
STAT OF THE WEEK
Premium that Stone Point and Insight Partners will pay to buy CoreLogic, whose shares were trading at $48.38 a year ago
The attack on security deposits continues
LeaseLock, an insurtech startup, is the latest to take aim at security deposits, with a $52 million funding round led by Westerly Winds and Wildcat Venture Partners. SoftBank Ventures Asia also participated along with Liberty Mutual and AmFam’s VC arm.
Unlike the flurry of startups that provide rental-deposit alternatives — including Rhino, The Guarantors and Obligo — LeaseLock offers insurance to landlords via its property management system. Renters pay a monthly fee to cover that insurance.
In 2020, LeaseLock quadrupled the number of homes on its platform to 1.5 million. Customers include Greystar, Cushman and Wakefield, Goldman Sachs, Harbor Group and others.
Divvy’s $110M plan to tackle mortgages
Buying a home ain’t easy. Divvy Homes, which just raised $110 million, aims to help customers who can’t secure a traditional mortgage.
Tiger Global Management led the round, bringing Divvy’s total debt and equity to $500 million. Divvy buys homes on behalf of customers, who chip in 1 to 2 percent of the equity and sign a three-year lease. By paying rent, they build up equity and can cash out after three years.
As mortgage lenders tightened requirements, Divvy’s business grew five times over the past year. “Ultimately, it’s similar to a mortgage,” said CEO Adena Hefets. “It’s just that Divvy is in there instead of the bank.”
🏡 Digital mortgage servicer Valon (formerly known as Peach Street) closed a $50M Series A led Andreessen Horowitz.
💰 Built Technologies, a fintech company with construction payment software, raised $88M to work with more bank and non-bank lenders.
🏡 HousingAnywhere, a European rental housing marketplace catering to international students, raised $29 million.
💸 PGIM Real Estate bought into Australia’s Tarona Ventures, which is targeting a $100M proptech fund.
📢 EasyKnock, a home sale and leaseback startup, named Fundation Group’s Barry Feierstein as COO to focus on expansion and B2B partnerships.
📢 Knock, which helps people buy homes before selling their old one, said Vijaya Kaza, Airbnb’s chief security officer, joined its board.
📢 Home-services startup Porch Group tapped Manisha Patel as VP of finance; Adam Kornick, Andrew Beck and Malcolm Conner also joined the exec team.