Apartments.com To Acquire Multifamily Websites Of ForRent.com

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The Editors's picture
CoStar Group to acquire multifamily websites of ForRent.com

The CoStar Group plans to acquire ForRent, a division of Dominion Enterprises, pursuant to a definitive agreement for $350 million in cash and $35 million in CoStar Group stock, according to a release.

ForRent's primary service is digital advertising through a network of four multifamily websites — which includes ForRent.com, AFTER55.com, CorporateHousing.com and ForRentUniversity.com. ForRent had approximately 17,000 properties advertised on its websites as of June 2017.

Through the first six months of 2017, these sites generated over 47 million visits and an average of 3.5 million unique monthly visitors. ForRent is headquartered in Norfolk, Virginia, and has 475 employees located in 38 offices around the United States.

"We intend to enhance ForRent.com and its related sites as we did with Apartments.com and ApartmentFinder," Andrew C. Florance, Founder and Chief Executive Officer of CoStar Group, said in a release. "Our research, technology and marketing initiatives have created the most-visited apartment listing site, which in turn delivers unprecedented levels of leads, leases and value to our advertising customers.  We look forward to delivering that same value to all renters and advertisers on the ForRent network of sites."

“Prospective renters will have access to the most complete and accurate inventory of apartment availabilities with more than one million rentals spanning apartments, homes, and condominiums,” Florance said in the release.

 “Advertisers will benefit from our unmatched leads-to-lease conversion ratio. ForRent advertisers' properties will be featured on Apartments.com after the transaction closes increasing their exposure by approximately 500%.

Additional multifamily websites analytics for investors and lenders

“For the investors and lenders relying on CoStar for multifamily information and analytics, we expect the addition of properties and data from ForRent will further strengthen our information offering," Florance said.

"110 million renters in the U.S. collectively spend just under half a trillion dollars a year on rent, representing one of the fastest growing consumer market segments," Florance said. "Our commitment to the multifamily industry has been resolute and evidenced by our investment in marketing, technology and the curation and delivery of original content to create the premier marketplace for renting an apartment in the United States."

ForRent to remain distinct brand

ForRent's revenue for 2017 is expected to be approximately $100 million and EBITDA is estimated at approximately $15 million, for an EBITDA margin of 15%, based on financial results from the first half of 2017. CoStar expects to achieve synergies of approximately $25 million within 24 months after the acquisition closes, resulting in an adjusted purchase price multiple of ten times EBITDA after synergies.

ForRent.com will remain a distinct, complementary brand to Apartments.com.  By offering multiple distinct website marketing solutions, property managers and owners will have more exposure for their listings. CoStar expects to fully integrate the underlying technology that supports its entire multifamily suite of services by mid-2018, thereby efficiently leveraging a common research and listing platform. 

Following integration, advertisers will be able to manage all of their listings across the combined networks through a single website. CoStar expects this will result in significant operating efficiencies for the Company, its advertisers, and renters.

 "I am looking forward to working with the great team at ForRent and welcoming them to the Apartments.com family. The entire team at Apartments.com is dedicated to building and growing commercial real estate's premier online apartment platform across the $3.5 trillion U.S. multifamily asset class," Florance said in the release.

The transaction is expected to close in the fourth quarter of 2017 subject to customary closing conditions.

At completion of integration, CoStar expects the acquisition to add revenue of approximately $75 million - $85 million, after merging the client base as well as discontinuing certain non-core services.  Adjusted EBITDA margins are expected to be in a range of 45% to 55%.

"Our revenue in the multifamily space has grown rapidly over the past few years," Scott Wheeler, Chief Financial Officer of CoStar Group, said in the release.

"When we combine ForRent with our existing advertising and information revenues from the multifamily industry, we expect to approach a $400 million revenue run rate by the end of 2017," he said.

About CoStar Group

CoStar Group, Inc. (NASDAQ: CSGP) is a leading provider of commercial real estate information, analytics and online marketplaces. Founded in 1987, CoStar conducts expansive, ongoing research to produce and maintain the largest and most comprehensive database of commercial real estate information. LoopNet is the most heavily trafficked commercial real estate marketplace online with over 5 million monthly unique visitors per month. Apartments.com, ApartmentFinder.com, ApartmentHomeLiving.com, Westside Rentals and Apartamentos.com form the premier online apartment resource for renters seeking great apartment homes and provide property managers and owners a proven platform for marketing their properties. CoStar Group's websites attracted an average of over 37 million unique monthly visitors in aggregate in the second quarter of 2017.

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