Opendoor amasses $9B in borrowing capacity

iBuyer’s new able to purchase more than 40,000 homes with mezzanine debt facility

Opendoor CEO Eric Wu (Opendoor)
Opendoor CEO Eric Wu (Opendoor)

Opendoor is trying to outgrow its competition in the iBuying wars, amassing billions in new borrowing capacity to purchase more homes.

The company recently arranged an amended mezzanine debt facility with a $3 billion limit, Bloomberg reported, that combined with other transactions, has increased its borrowing capacity to $9 billion.

Bloomberg noted that with the $3 billion facility and more senior debt, Opendoor has the capability to acquire more than 40,000 homes at an average price of $350,000 per home.

Opendoor isn’t the only iBuying company looking to increase its spending capacity, as Bloomberg reports that Zillow is seeking more than $1 billion for a couple of unrated bond offerings. In August, the company raised $450 million from a bond backed by homes it planned to flip.

iBuying companies turn a profit by purchasing a home, making the necessary repairs and putting it back on the market as quickly as possible. Bloomberg noted short-term debt is vital to the industry so the companies can keep making purchases.

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iBuying is still a nascent factor in the housing market. During the second quarter, the four biggest iBuying companies accounted for about 15,000 home purchases, only 1 percent of all homes purchased across the nation in the same period.

Opendoor is in good company with competitors like Zillow and Offerpadis with its aspirations to do more. Bloomberg previously reported the company hopes to account for 4 percent of all home sales across 10 markets.

Opendoor has weathered its share of struggles through the pandemic.

The company’s stock was down more than 16 percent as of Monday’s close from the beginning of the year. In 2020, the company reported a 45 percent drop in revenue from $4.7 billion to $2.6 billion. CEO Eric Wu previously attributed the drop to the pandemic as most iBuyers paused home buying during the early days of the pandemic due to the difficulty in valuing homes.

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[Bloomberg] — Holden Walter-Warner

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