CoStar Group, Inc. (NASDAQ: CSGP) the leading provider of commercial real estate information, analytics and online marketplaces, announced today that it plans to acquire Ten-X for $190 million in cash.
Ten-X was launched in 2009 with the goal of providing a digital transaction platform for effectively liquidating the large volume of distressed commercial real estate assets that came on the market during the Great Recession. Ten-X has since become a leading, best-in-class platform for digital commercial real estate transactions with close to $24 billion dollars of sales successfully executed on the platform. The Ten-X platform has transacted approximately $7 billion in retail properties, $6 billion in office properties, $4 billion in multifamily properties, $3 billion in hotel properties, and billions in value in other commercial property types. While Ten-X initially focused on distressed assets, non-distressed sellers and brokerage firms have increasingly come to rely on Ten-X to facilitate faster execution to transact properties.
The Ten-X transaction platform has become the trusted online platform for brokers across the country to execute transactions for their clients, including all of the top 25 US commercial real estate brokerage firms. Leading lenders, special servicers and institutional sellers have relied on Ten-X’s transaction platform to sell billions in assets. Fannie Mae, Bank of America, JP Morgan Chase, Blackstone, Starwood, BlackRock, Capital One, MetLife, LNR, UBS, PNC, and SunTrust are just some of the major institutions that have trusted the Ten-X platform to transact billions in online commercial property transactions.
Ten-X accelerates the property sales process by qualifying and independently evaluating the assets, identifying likely buyers from a database of 400,000 buyers from 73 countries, qualifying the bidders and funds, providing a powerful and flexible digital auction process, and managing online escrow. The online model accelerates the marketing period of the sales process, cutting deal times by up to 50% while providing reliable execution, value maximization and certainty of close.
CoStar Group operates the most heavily trafficked online marketplace for commercial properties and land for lease and sale in North America and Europe with 10 million monthly visitors in April 2020 to its websites including LoopNet.com and CoStar.com. After completion of the transaction, CoStar Group intends to integrate the Ten-X digital transaction platform directly into both LoopNet and CoStar thereby exposing the properties that brokers are selling on the Ten-X platform to millions of potential buyers from around the world.
“Together, Ten-X and CoStar plan to create a new end-to-end commercial real estate platform, combining LoopNet and CoStar’s unmatched online audience of buyers with Ten-X’s clear leadership in online auctions for both performing and distressed assets”, said CoStar Group Chief Executive Officer Andrew Florance. “Combining our complementary capabilities is expected to create significant benefits for brokers and the institutions they represent by exposing their properties for sale to the biggest pool of potential bidders on the most trusted digital transaction platform and delivering fast and reliable trade execution. In the aftermath of the economic disruption which is being caused by the global pandemic, we believe that the volume of distressed properties coming to market will surge and that this combined platform will support the market’s recovery.”
“Today, only 1% of all commercial real estate sales transactions take place online,” noted Steve Jacobs, CEO of Ten-X. “Just like CoStar Group, we are focused on driving volume and efficiency and have devoted ourselves to addressing the massive, untapped demand for digital commercial real estate solutions. We see significant demand for a one-stop shop platform that provides solutions across the entire transaction continuum and we are delighted to combine our complementary capabilities and strengths with CoStar to meet that demand.”
Ten-X Commercial’s 2019 unaudited financial statements reflect revenue of approximately $57 million. “The Ten-X team has worked hard over the past year to position the business for growth and profitability,” said Scott Wheeler, Chief Financial Officer of CoStar Group. Revenue for the first quarter of 2020 was approximately $13 million, representing revenue growth of 35% compared to the first quarter of 2019, and operating profit of approximately zero. “Although we expect a certain amount of revenue disruption from the global pandemic, I am optimistic that transaction volumes could increase materially later in the year as was the case following the last recession,” continued Wheeler. The transaction is expected to close in the third quarter of 2020, subject to customary closing conditions and regulatory review. Assuming the transaction closes in the third quarter of 2020, Ten-X is not expected to have a material impact to CoStar Group Adjusted EBITDA for the year.
Ten-X was acquired by investment funds affiliated with Thomas H. Lee Partners, L.P. and certain co-investors in September 2017, as part of a broader acquisition of a holding company that owned Ten-X, Auction.com and a business formerly known as Ten-X Homes. Following such acquisition, Ten-X was separated from the other businesses, and this acquisition does not include such other businesses. Investment funds affiliated with Thomas H. Lee Partners, L.P. and certain co-investors continue to own Auction.com.
The preceding forward-looking statements reflect CoStar Group's expectations as of May 13, 2020. We are not able to forecast with certainty whether or when certain events, such as the exact timing of closing of the acquisition will occur. Given the risk factors, uncertainties and assumptions discussed above, actual results may differ materially. Other than in publicly available statements, the Company does not intend to update its forward-looking statements until its next quarterly results announcement.
Management will conduct a conference call at 8:00am ET on May 14, 2020 to discuss the acquisition. The audio portion of the conference call will be broadcast live over the Internet at www.costargroup.com/investors/events. To join the conference call by telephone, please dial 866-627-4249 (from the United States and Canada) or 825-312-2385 (from all other countries) and conference ID 7545087. The webcast replay will also be available in the Investors section of CoStar Group's website for a period of time following the call.
About CoStar Group, Inc.
CoStar Group, Inc. (NASDAQ: CSGP) is the 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. Our suite of online services enables clients to analyze, interpret and gain unmatched insight on commercial property values, market conditions and current availabilities. STR provides premium data benchmarking, analytics and marketplace insights for the global hospitality sector. LoopNet is the most heavily trafficked commercial real estate marketplace online with over 6 million monthly unique visitors. Realla is the UK’s most comprehensive commercial property digital marketplace. Apartments.com, ApartmentFinder.com, ForRent.com, ApartmentHomeLiving.com, Westside Rentals, AFTER55.com, CorporateHousing.com, ForRentUniversity.com 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 approximately 55 million unique monthly visitors in aggregate in the first quarter of 2020. Headquartered in Washington, DC, CoStar maintains offices throughout the U.S. and in Europe, Canada and Asia with a staff of over 4,200 worldwide, including the industry’s largest professional research organization. For more information, visit www.costargroup.com.
This news release and the Company’s earnings conference call contain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements include, but are not limited to, statements about CoStar's plans, objectives, expectations, beliefs and intentions and other statements including words such as “hope,” “anticipate,” “may,” “believe,” “expect,” “intend,” “will,” “should,” “plan,” “estimate,” “predict,” “continue” and “potential” or the negative of these terms or other comparable terminology. Such statements are based upon the current beliefs and expectations of management of CoStar and are subject to many risks and uncertainties. Actual results may differ materially from the results anticipated in the forward-looking statements and the assumptions and estimates used as a basis for the forward-looking statements. The following factors, among others, could cause or contribute to such differences: the possibility that the acquisition of Ten-X does not close when expected or at all; the possibility that the parties are unable to obtain regulatory approval, or the risk that any actions required to be taken in order to receive regulatory approval may impact the expected benefits of the transaction; the risk that the businesses of Ten-X and CoStar may not be combined successfully or in a timely and cost-efficient manner, including integration of the Ten-X platform into LoopNet and CoStar and creation of a new end-to-end commercial real estate platform; the possibility that the volume of distressed properties coming to market will not be as expected; the risk that business disruption relating to the Ten-X acquisition may be greater than expected; the risk that demand for a one-stop shop platform is not as expected; the risk that synergies as a result of the acquisition of Ten-X may not be as expected, may not be fully realized, or may take longer to realize than expected; the risk that the acquisition does not produce the expected results for CoStar and Ten-X (or their customers); the risk that the combination and integration of Ten-X will disrupt CoStar’s or Ten-X’s operations or result in the loss of customers or key employees; the risk that the impact from the acquisition to CoStar Group’s Adjusted EBITDA for the year differs from current expectations; uncertainty surrounding the impact of the COVID-19 outbreak, including volatility in the international and U.S. economy, worker absenteeism, quarantines or other travel or health-related restrictions; the length and severity of the COVID-19 outbreak; the pace of recovery following the COVID-19 outbreak; and government and private actions taken to control the spread of COVID-19. More information about potential factors that could cause results to differ materially from those anticipated in the forward-looking statements include, but are not limited to, those stated in CoStar’s filings from time to time with the Securities and Exchange Commission, including in CoStar’s Annual Report on Form 10-K for the year ended December 31, 2019, and CoStar’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2020, each of which is filed with the SEC, including in the “Risk Factors” section of those filings, as well as CoStar’s other filings with the SEC available at the SEC’s website (www.sec.gov). All forward-looking statements are based on information available to CoStar on the date hereof, and CoStar assumes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.