Future City: A steadfast SPAC sponsor

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Jun.June 01, 2022 07:00 AM

Second shot

Joseph Beck and Thomas Hennessy, the investor pair behind Porch’s 2020 SPAC merger, promised a “category winner” when they launched their second SPAC back in 2020, raising $200 million.

They say they have found it in Appreciate, the parent company of single-family rental marketplace and management platform Renters Warehouse. The company will merge with Beck and Hennessy’s PropTech Investment Corporation II in a deal expected to close in the back half of the year.

Renters Warehouse, founded in 2007, operates in 40 markets, helping retail and institutional investors source rental homes and tenants as well as analyze properties’ performance. It will use the net cash from the deal — up to $159 million — to expand geographically.

It’s not exactly a favorable time to go public. The SEC is cracking down on SPACs after a pandemic-era boom-and-bust cycle, and proptech stocks have taken a beating in the recent macroeconomic turmoil. But Hennessy has described the single-family rental sector’s growth prospects as “massive,” with rising interest rates and home prices putting homeownership further out of reach for many Americans.

“We believe the U.S. housing industry is rapidly changing from fragmented, non-institutionally owned to scaled, institutionally-owned SFR,” Hennessy said on a deal call earlier in May.

Appreciate will trade on the Nasdaq with the ticker “SFR.”


“We believe the U.S. housing industry is rapidly changing from fragmented, non-institutionally owned to scaled, institutionally-owned SFR.”

Thomas Hennessy, PropTech Investment Corporation II 

First fund

1Sharpe Ventures, a venture firm founded last year by real estate investor Rob Bloemker and Roofstock co-founder and chair Gregor Watson, closed an oversubscribed inaugural $90 million fund.

The Oakland-based firm, an offshoot of asset manager 1Sharpe Capital, will target 30 to 40 early-stage proptech firms — those in the pre-seed to Series A stages — in North America, Latin America and Europe, making commitments of between $500,000 and $2 million.

Half of the funding will be used for follow-on investments, TechCrunch reported.

1Sharpe will target three categories of companies: those that streamline and expand access to real estate investment, those that automate antiquated, labor-intensive systems, and data companies that advance the industry’s sustainability.

The firm, which has five employees, has so far made investments in five startups, including the construction tech firm Cottage, the rental property platform Flock Homes, and the home renovation service provider Freemodel.


STAT OF THE MONTH

There were 33 proptech M&A deals during the first quarter.


Shrink to grow

More than 15,000 tech employees lost their jobs in May as rising interest rates and inflation roiled the economy, according to layoffs.fyi. Employees in the proptech field have felt the pinch, too.

Latch, the smart lock startup that went public in 2021 via a merger with a Tishman Speyer-backed SPAC, let go 130 people, or about 28 percent of its full-time staff, in two rounds of cuts. Chris Lee, chief revenue officer, and Adam Sold, vice president of sales, were reportedly impacted.

The layoffs, along with some recent restructuring of its business, will save Latch about $40 million and “will position the company for long-term growth while also accelerating its path towards self-sustaining free cash flow and profitability,” the company said.

The restructuring and job cuts will cost Latch as much as $6 million, primarily in the form of severance and benefits expenses, most of which it will record in the second quarter.

Earlier this month, CFO Garth Mitchell left Latch after only a brief tenure in that position “to pursue other opportunities,” per a company announcement.

Flipping the script

While many tech companies are retrenching, startups oriented toward single-family home investment are growing and advancing into new territory.

Arrived Homes, the Jeff Bezos-backed concern that facilitates fractional investment in single-family rentals, scored $25 million in a Series A round led by Forerunner Ventures.

The company did not disclose a valuation figure. It plans to use the cash in part to make new hires and push into Florida, Texas, Nevada and Indiana.

And Stoa USA, the Phoenix-based company behind FlipOS, a tech platform that streamlines so-called “fix and flip” single-family home deals, raised $50 million in equity funding from Zeev Ventures at a “significantly higher valuation,” the company said in a release, without offering a specific figure.

Stoa USA, which launched in early 2021, previously raised $136 million — $36 million in equity funding and $100 million via a securitization deal — in a Series B round in November last year. The company will use the new funds to expand its footprint and make new hires in the Phoenix area, with the goal to quadruple its headcount to 200 over the course of the year.


Small bytes

• Keyway, a company that uses data to identify sale-leaseback deals primarily involving medical office properties, raised $25 million in a Series A round.

• Upflex, a so-called coworking aggregator — technology that helps companies source flex-office space from a range of providers — raised $40 million in Series A funding from WeWork and others.

• Flexspace raised $6 million in seed funding and launched its own on-demand flex workspace network.

• Enertiv, a company that provides ESG analysis for commercial real estate owners, raised $9 million in preferred equity financing.

• Fyxt, a mobile-first management platform for triple net lease properties, raised $4 million in a Series A round led by RET Ventures.

• Peek, a multifamily leasing platform that facilitates virtual tours, scored $2.5 million in seed funding.

• Lex, a commercial real estate securities marketplace that allows retail investors to buy shares of individual properties, launched an IPO for a Seattle multifamily and retail property — its first offering in the city.



 
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