After the FTC spiked CoStar Group’s bid to buy RentPath, Redfin has stepped in to buy the embattled operator of rental portals
Redfin announced early Friday morning that it is set to acquire RentPath for $608 million, in a move that signals Redfin’s entrance into the real estate rental marketplace. The deal comes two months after the Federal Trade Commission blocked CoStar’s attempted acquisition of RentPath.
“When approved, this acquisition will bring together a leading site for buying a home with a leading site for renting a home, giving anyone trying to move a complete view of her options,” Redfin CEO Glenn Kelman, said in a statement announcing the news.
The acquisition is partially a move aimed at bolstering traffic to Redfin’s online real estate portal, which has the biggest audience for any brokerage website. RentPath — which owns the consumer-facing rental portals Rent.com and ApartmentGuide.com — can draw in a younger audience of consumers that aren’t yet searching for a home.
“Redfin’s brand will get bigger,” Kelman wrote. “We’ll show up higher for Internet searches on Phoenix housing or St. Louis real estate.”
Redfin’s acquisition will require FTC approval, but the company likely won’t face the same hurdle as CoStar’s bid for the company as Redfin currently has no presence in the rental space. The acquisition will also need the approval of the bankruptcy court.
The logic of the deal — and why Kelman said he believes that RentPath and its properties were worth $608 million — is that it in essence combines the audience of two portals. Redfin drew an average of more than 40 million monthly visitors in 2020, while RentPath’s properties saw 13 million visitors in December 2020.
“Redfin’s 2020 rapid traffic growth has already transformed our prospects, giving us a powerful channel for meeting customers and marketing listings directly to buyers,” Kelman said. “Together with RentPath, which grew traffic by more than 25 percent in 2020, Redfin will aim to compete with the largest portals on every front, for every visitor. It’ll be a wild battle.”
The nation’s most-visited real estate portal Zillow had more than 200 million unique visitors to its website in the fourth quarter of 2020 and already has a rental marketplace.
Redfin — which operates under an employee model rather than the independent contractor model under which most of the real estate industry operates — doesn’t immediately have plans to hire rental agents in 2021, according to Kelman.
The goal for Redfin in the immediate future is to get RentPath’s 250-person sales team, “to sign up thousands of new apartment buildings, one building at a time,” Kelman said.
For Redfin’s residential real estate search portal, the listings are populated by the multiple listing service, which doesn’t exist for the rental space. The inventory that RentPath brings was another big reason for the acquisition, Kelman revealed in a call with investors Friday morning.
“We’re going to have to go hand to hand, streetfighting for properties,” Kelman said.
Redfin has been working on creating a presence in the rental space for months, Kelman revealed on the call. But he projected that it would have taken our years to reach the amount of inventory that the company gets with buying RentPath.
With the immediate goal of building its audience and signing up new customers, Redfin doesn’t plan to share any financial projections until at least May.
Redfin’s acquisition comes on the heels of the FTC filed a lawsuit in late 2020 alleging CoStar’s acquisition of RentPath would increase concentration and eliminate competition in the rental listing space.
The acquisition had been nearly a year in the making before the FTC stepped in with an administrative complaint. CoStar — which operates rivals sites Apartments.com, ApartmentFinder.com and ForRent.com — announced in February 2020 it was purchasing RentPath for $587.5 million. The acquisition came on the heels of RentPath filing for bankruptcy, after failing to restructure $650 million in debt.