Birth of a rental monolith? RentPath declares bankruptcy, agrees to sell to CoStar

Technology

CoStar Group could soon be the single biggest name in online rental real estate.

That’s because CoStar, which already owns Apartments.com, ApartmentFinder.com, ForRent.com, ApartmentHomeLiving.com, Westside Rentals, AFTER55.com, CorporateHousing.com, ForRentUniversity.com and Apartamentos.com, announced Wednesday that it has reached a deal to acquire RentPath.

RentPath owns Rent.com, ApartmentGuide.com, Rentals.com and Lovely.com.

This announcement comes after RentPath declared Chapter 11 bankruptcy.

According to CoStar, the company will pay $588 million in cash to buy RentPath, which filed for bankruptcy to facilitate the deal.

RentPath’s bankruptcy documents list the company’s assets at between $100 million and $500 million and its liabilities between $500 million and $1 billion.

The bankruptcy documents also show that the company has been in financial trouble for some time and began searching for a buyer in July 2019 through a “robust sale process.”

According to the documents, RentPath’s advisors contacted 43 different companies to gauge their respective interest in buying RentPath. Then, after “several months of constructive dialogue and extensive negotiations,” the company received a cash bid from CoStar.

But the deal is not a sure thing.

According to RentPath, CoStar will serve as a “stalking horse bidder” in a court-supervised auction and sale process that will conducted as part of RentPath’s bankruptcy proceedings.

During the process, other companies could submit a higher bid, which would trigger an auction for RentPath.

In the meantime, RentPath received a commitment for $74.1 million in debtor-in-possession financing from its existing lenders that will allow the company and its websites to continue operating.

“RentPath’s operations will continue as normal throughout the sale process, including ongoing work to increase consumer traffic and grow the company’s new business segments, such as social advertising, lead management and reputation management,” the company said in a statement.

According to RentPath, its sites receive an average of 14 million unique visitors per month.

As for what led RentPath to this point, CoStar Group Founder and CEO Andrew Florance said that the company struggled to keep pace in the increasingly competitive digital marketplace.

“RentPath has a 30-year track record of outstanding service to the multifamily industry, developing thousands of meaningful customer relationships,” Florance said.

“Obviously, it is very challenging for newspapers, magazines, and print directories to reinvent themselves as profitable digital businesses. RentPath was burdened with a heavy debt load that prevented the company from making the necessary investments in building brand recognition and generating traffic from Google,” Florance continued. “As the cost of Google traffic soared, RentPath was unable to keep pace.”

And as for why CoStar is moving to buy RentPath, Florance said the company views RentPath’s websites as a growth opportunity for the company.

“Following restructuring in bankruptcy, CoStar Group expects the combined companies to benefit from synergies and plans to invest in building RentPath’s online brands and traffic to provide improved quantity and quality of lead flow to advertising clients,” Florance said.

“The Apartments.com network of sites generated 842 million visits last year, and we intend to use this valuable audience to generate leads for RentPath clients as well. We believe there is untapped potential to serve the millions of landlords traditionally overlooked by online apartment marketplaces, which tend to focus on large apartment communities with over 100 units,” Florance continued.

“We believe that investing in an excellent URL like Rent.com is the perfect vehicle for reaching that underserved audience. CoStar Group operates a number of large and growing online marketplaces,” Florance added. “We believe that RentPath’s talented and experienced employees will become valuable contributors not only to our Apartments.com network of sites but across all of our marketplaces.”

As for RentPath, CEO Marc Lefar said the deal will serve the company’s customers, employees, and renters themselves well.

“CoStar’s interest in RentPath is a testament to the value they see in what we have created, in our talented team, and in the strong relationships we have built with our customers,” Lefar said.

“Those will be enhanced in the combined company and we appreciate the support of our customers, partners, and above all, the continued dedication of our dedicated team of employees as we enter this next chapter,” Lefar continued.

“We are very excited to be joining CoStar as part of the Apartments.com network. Our customers have an ever-increasing number of choices when considering where to spend their marketing dollars,” Lefar added. “With CoStar’s commitment to invest in the RentPath family of sites, we will be in a position to offer our customers the best options to reach potential renters.”
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