The SPAC boom may have cooled off in recent weeks, but it isn't exactly dead. In fact, we just learned that another leading property technology company, SmartRent, has agreed to go public via SPAC merger in a $2.2 billion deal with blank-check company Fifth Wall Acquisition Corp I (NASDAQ: FWAA). Here's a rundown of what SmartRent does and the key details we know about the deal.
What is SmartRent?
SmartRent is a provider of smart home operating systems for property owners, managers, homebuilders, and residents. The company's software is designed to bring modern technology to residential real estate, allowing the automation of functions such as property management, building access, self-guided tours, and much more.
Simply put, SmartRent was founded to narrow the smart home technology gap between the consumer homeowner market and the multifamily rental market, the latter of which has fallen behind. (If you want to learn more about SmartRent and management's vision for the future, SmartRent CEO Lucas Haldeman was recently on an episode of our Millionacres podcast.)
The company has grown dramatically since it was founded in 2017 and has nearly 1 million units installed, boasting a 100% customer retention ratio. In addition, 75% of the 20 largest multifamily landlords in the United States are already SmartRent customers, and the company sees a $200 billion global addressable market opportunity when it comes to adding modern technology to multifamily, residential, and commercial properties.
SmartRent is currently not profitable, which is fairly common among new and rapidly growing tech companies, but expects to reach positive EBITDA by 2022.
Details of the deal
Technically speaking, Fifth Wall Acquisition I is merging with SmartRent, and when the merger is complete, the combined company will assume the SmartRent name. However, unlike most other announced SPAC mergers, we don’t yet know what ticker symbol the combined company will trade under.
The deal values SmartRent at $2.2 billion, which includes $513 million in cash that the company will have after the transaction closes. Most of the cash will be provided by the $345 million the SPAC raised in its IPO, as well as a $155 million PIPE (private investment in public equity), which is a financing round that includes investments from industry heavyweights including Starwood Capital Group, Lennar (NYSE: LEN), Invitation Homes (NYSE: INVH), and Koch Real Estate Investments, among others.
Management expects the deal to close in the third quarter, and the boards of both SmartRent and Fifth Wall Acquisition have unanimously approved the transaction.
It's notable that this is the first SPAC sponsored by Fifth Wall Ventures, but it isn't going to be the last. Fifth Wall Acquisition Corp II filed its initial registration paperwork in March and aims to raise $150 million, and the venture firm just recently filed paperwork for another upcoming SPAC, Fifth Wall Acquisition Corp III, which plans to raise $250 million in an upcoming IPO.
Should you invest?
There's quite a bit we don't know yet. Like most SPAC deals, we have limited information about SmartRent's financial performance to date. The press release announcing the deal says that SmartRent has the opportunity to generate $1.5 billion in annual revenue from its existing customers, but it doesn't provide any details about how much revenue it's actually generating.
That said, the property technology, or proptech, market is certainly an exciting opportunity, so if you're a long term-oriented investor with a relatively high risk tolerance, SmartRent could be worth a closer look.