Real estate mergers and acquisitions were on pause for much of this year, but they've started to heat up again and one company has been particularly voracious. CoStar Group (NASDAQ: CSGP), the leading provider of commercial real estate data, has grown by acquisition quite a bit in recent years, buying Lands of America, Ten-X Commercial, STR, LoopNet, and Apartments.com.
That last purchase has been a huge revenue driver for the company. In its third-quarter earnings, CoStar reported that revenue was up 23% year over year. Clearly CoStar sees great promise in residential real estate, as it just inked a $250 million deal to buy Homesnap, a real estate search app.
An agent favorite
Homesnap began in 2012 as a type of "Shazam for real estate," allowing users to take a picture of a home and learn data about it. It has evolved into a popular app used by real estate agents. It has agreements with 240 MLS organizations that provide data to Homesnap and use the Homesnap Pro+ service for their agents. Homesnap is also the company behind the Broker Public Portal, a national home search platform powered by real-time MLS data.
In the press release announcing the acquisition, CoStar said that the over 300,000 agents who use the application every month are among the nation's most productive real estate agents. Homesnap is expected to bring in about $40 million in revenue in 2020.
Building a data-driven empire
CoStar is also focused on international growth. During its third-quarter earnings call it announced the purchase of Emporis, a German commercial real estate data provider that will let CoStar integrate 700,000 building records across 100 countries into CoStar. The company plans to roll out data services in 50 more international cities within the next two years.
But CoStar's most interesting next move might be a lot closer to home. CoStar is just one of several groups looking to snap up property analytics firm CoreLogic (NASDAQ: CLGX). As of last month, CoStar was in negotiations to buy CoreLogic for over $80 a share, a nice increase from the $66 a share offered by Cannae Holdings Inc. and Senator Investment Group. There hasn't been an update on the sale lately and it may not go through, but it shows how aggressively CoStar is looking at opportunities.
CoStar was already having a good year. It reported revenue of $425.62 million for the third quarter of 2020 compared to $352.81 million one year ago.
What will CoStar do with Homesnap? Could it pour money into the product and create a search platform that could rival Zillow (NASDAQ: ZG) (NASDAQ: Z)? Perhaps it could find a way to integrate it with Apartments.com or even LoopNet, its commercial real estate search platform.
A clue may exist in the press release. CoStar CEO Andy Florance noted that: "the acquisition of Homesnap will enable us to enter a new space and expand the total addressable markets in which we can compete." He followed up by saying that the company will "continue to differentiate our residential real estate portal and solutions by working solely to help agents market their listings and their brands, which is in sharp contrast to other portals that increasingly advertise on top of agent listings and offer brokerage services directly.” That last line sounds like a direct shot across the bow at Zillow and its Premier Agent services.
CoStar has developed Apartments.com into a juggernaut with over 25 million visitors to the group of rental sites in the third quarter, but that's a drop in the bucket compared to Zillow's 236 million average monthly users. With Homesnap, CoStar may be able to take a run at residential real estate search.