-
reAlpha capitalizes on the booming short-term rental market, driven by Airbnb, Inc.
-
Any investor can invest through Reg A Share Offering up to $75 million through December 8
-
The short-term rental market has a gigantic total addressable market (TAM) of $1.2 trillion
-
Short-term rental revenue is more than 70% higher than long-term rental
-
AI algorithm analyzes properties on over 25 factors to determine Airbnb’s viability
-
Founder/CEO Giri Devanur, Led Consulting SAP AMERI Holdings to IPO on Nasdaq
-
reAlpha has already secured a $200 million credit facility to support real estate acquisitions
-
reAlpha will separately offer IPOs of individual properties to further fuel growth
-
Transaction priced at a very reasonable valuation of 0.3x EV to expected AUM
By Jarrett Banks and John Jannarone
Investing in real estate, let alone startups, was once considered a rich man’s game. But the playing field has been leveled, in a sense, with the rise of retail investors using technology through apps like Robinhood, Coinbase and Masterworks.
Enter reAlpha, a real estate technology company breaking down the barriers to investing in ready-to-rent and experiential vacation homes. It uses artificial intelligence to give users of its digital platform an edge over the $1.2 trillion short-term rental industry.
Airbnb hosts earned a record $34 billion in 2021, and that indicates millions more hosts are needed to meet demand. But the costs of buying, renovating and maintaining investment properties are far too high for most investors.
reAlpha makes it easy for them. Its proprietary algorithm, called reAlphaBRAIN, can analyze thousands of properties to determine which may be the most viable for Airbnb revenue generation. It looks at dozens of factors, including crime rates, Airbnb occupancy rates, road conditions, rental availability, proximity to restaurants, walkability, and many more.
Dublin, Ohio-based company raises up to $75 million through a Reg A offer to acquire thousands of short-term rental properties across 220 global Airbnb markets within five years. The company will use a co-ownership model, retaining up to 51% ownership in each of its properties. The remaining 49% will be available to public investors through separate offerings (more on that later).
Partnerships are also a key element to consider. reAlpha is partnering with RARE Treehouse Resorts, a Vancouver-based company specializing in unique, eco-friendly treehouses, to co-develop a treehouse resort in California.
reAlpha is spreading its wings globally. It recently acquired new properties in Orlando and received a $1.3 billion investment from real estate holding company Crawford Hoying, and opened new global offices in India, Nepal and Brazil.
reAlpha has a promising financial trajectory. According to data from Zillow and AirDNA. To further increase revenue, reAlpha may also offer ancillary services such as beach rentals or convenient food delivery to customers through third-party partnerships.
reAlpha is also set to significantly expand its real estate portfolio. By the end of next year, it expects to have 275 units and assets under management (AUM) of $137 million. By year four, reAlpha is targeting over 3,000 units and $1.5 billion in assets under management.
The company has set a reasonable price for its deal, leaving plenty of potential for investors who buy shares in the Reg A offering. The company expects to have 47.5 million shares outstanding after the offering, which which implies a net worth of $475 million. Adjusted for the $75 million in cash raised if it reaches the maximum, reAlpha will have an enterprise value of approximately $400 million.
This puts the company on a multiple of just 0.3 times fourth-year AUM. In comparison, Invitation Homes Inc. (NYSE: INVH) is trading at a multiple of 1.6 times its most recent assets and American Homes 4 Rent (NYSE: AMH) commands a multiple of 1.5 times, according to Sentieoan AI-based research platform.
Above all, reAlpha has powerful financial levers to stimulate growth. Earlier this month, he secured a $200 million financing facility from Churchill Real Estate. The facility, one of the largest ever given to a short-term rental company, is expected to streamline the company’s first round of acquisitions with a single source of financing.
The deal with Churchill is also an institutional validation of reAlpha’s expansion plans. Indeed, reAlpha already has a large and growing pipeline of short-term rental properties that meet its criteria and should allow it to put the money to work right away.
Additionally, reAlpha has a vision to grow by raising more money on a property-by-property basis, effectively introducing IPOs for individual units. These offerings, which are expected to be offered after the Reg A offering closes, will once again allow individual investors to participate (likely at a slightly higher minimum of $2,500 via the reAlpha syndicate portal).
The syndication system will allow reAlpha to refinance itself and reinvest in properties over time. It can also make outright sales of properties that appreciate and reinvest the proceeds in new real estate opportunities.
Individual real estate investments can look a lot like traditional REITs, paying shareholders a distribution derived from unit rental income. This means that investors can choose either a growth investment with reAlpha’s core business or a return-oriented alternative for those looking for income investments in individual properties.
Investors in the reAlpha Reg A offering, which has attracted interest from people in more than 80 countries as far away as Mongolia, can expect unusual benefits. Starting with an investment of just $1,000, shareholders will enjoy free nights at reAlpha properties. The so-called R&R rewards program will allow investors to experience their real estate investments first-hand.
The company also started using a unique marketing style with wrong wrong of well-known celebrities like Elon Musk. In a recent video, Mr. Musk explained Reg A’s investment and went viral with over a million views.
The Reg A offering, while not designed to take the company public, should prepare it for an IPO down the road. And it should be noted that Founder and CEO Giri Devanur has experience in IPO of a Nasdaq company. With over 25 years of experience in the information technology industry, Mr. Devanur in 2017 took AMERI Holdings, Inc. public, now called Enveric Biosciences, Inc. (Nasdaq: ENVB).
Last but not least, reAlpha’s timing is superb. The housing market has eased and could collapse further in the coming months as rates are high and the economy slows. This represents an excellent opportunity to find offers in the most attractive rental markets.
This kind of experience, along with attractive unit economies and cutting-edge AI powering its technology platform, puts reAlpha at the top of a tree ready to be disrupted. This is a stay that investors won’t want to miss.
Contact:
IPO Edge
Comments are closed.