Private equity firm Thomas H. Lee Partners is set to lay down in excess of $1 billion for a controlling stake in Auction.com operator Ten-X, Inman has learned.
Company officials declined to comment on the terms of the deal, which is expected to close in the third quarter.
The planned acquisition underscores the growing investor appetite for real estate tech companies, coming after Redfin went public to the tune of an initial valuation of $1.2 billion before closing on its first day of trading at a market cap north of $1.7 billion. (Redfin’s market cap is now around $2.5 billion.)
Ten-X’s online marketplaces, which include Auction.com, Ten-X Homes and Ten-X Commercial, allow individuals and investors to find, purchase and sell homes in an auction format.
In a press release, Ten-X said it “empowers consumers, investors and real estate professionals with unprecedented levels of flexibility, control and simplicity to easily complete real estate transactions entirely online.”
Ten-X claims to have “enabled” over $50 billion of residential and commercial property sales on its platform.
Thomas H. Lee Partners will support Ten-X’s continued growth by “contributing operational and financial resources and strategic expertise as the Company builds on its proven platform, pursues additional monetization opportunities, and executes on its growth objectives,” Ten-X said in a statement.
Thomas H. Lee Partners recently signed a definitive agreement to acquire a controlling stake in Ten-X.
CapitalG, along with other Ten-X investors such as Ten-X senior managers and Stone Point Capital, will continue to hold minority stakes in Ten-X. The deal is expected to close in the third quarter of 2017, “subject to customary closing conditions.”
Ten-X (previously known as Auction.com) was valued at $1.2 billion by CapitalG (formerly Google Capital) in 2014, when the Google-owned equity fund poured $50 million into Ten-X.
Since then, Ten-X has grown in the last three years and Thomas H. Lee Partners is reportedly ponying up $1 billion or more for only a controlling interest in Ten-X (not the entire company). Ten-X could easily have been valued at north of $1.5 billion — though Ten-X officials declined to comment on this.
While Thomas H. Lee Partners will gain a majority of seats on Ten-X’s board of directors, the private equity firm won’t be replacing Ten-X’s management team, according to Rick Sharga, chief marketing officer at Ten-X.
Ten-X is “going to continue to run the business as we’ve been running it,” he said.
“We don’t know if the long range objective is to take it public or to execute another sale or something else entirely,” Sharga said. “Clearly, they want us to continue to grow the business.”
Transactions closed through auction.com, which are usually foreclosure sales, have continued to grow, contrary to expectations that they would subside as the foreclosure crisis receded, Sharga said.
Ten-X is also growing its commercial businesses — Ten-X Commercial — and is working through a “successful test” of its newer consumer service, Ten-X Homes, he added.
Ten-X Homes recently launched a property search app that thousands of homebuyers have downloaded to search listings and connect with real estate agents, according to Sharga.
Ten-X Homes is “absolutely not going to become another Zillow,” he said, adding that the company’s existing search tools are “part of a much bigger ecosystem that has to do with online real estate transactions.”
Ten-X Homes has experimented with various features, including an offer-submission tool for buyers that “worked reasonably well” when it was live (it’s since been removed), Sharga said.
One aspect of Ten-X that sets it apart from some other real estate tech firms is that, far from trying to “disintermediate” real estate agents, Ten-X’s platform depends on them, Sharga said.
