US online real estate player Compass plans to go public

Summary

  • Real estate markets have been resilient, given the lack of supply and rising demand for housing, owing to lower interest rates. 
  • US online real estate marketplace Compass has reportedly hired Wall Street banks to take the business public. 

Compass, a new age property broker, is believed to have hired investment bankers to take the company public, according to reports.

It uses technology and talent to deliver real estate broking services in the US markets, operating across coasts and in major metropolitan cities. Compass has over 17,000 agents serving customers in its markets. 

The real estate brokerage firm was founded in 2012 and trades in the real estate market through Urban Compass and Compass. It provides a host of services, including buy, sell, rent, listings, new development, commercial, bridge loan services, and market research. 

Since its establishment, the company has also acquired several small brokers and agents in over a dozen markets across the US. 

Investors

The tech real estate broker counts a number of sophisticated investors as its backers, including some CEOs of Fortune 500 companies. 

According to its website, investors in the company include SoftBank Group, Goldman Sachs, Advance Publications, Fidelity, Wellington Management, Dragoneer, IVP, Founders Fund and the Canada Pension Plan Investment Board. 

American Express CEO Kenneth Chenault and Salesforce.com CEO Marc Benioff have also invested in the real estate broker. Family-owned property business LeFrak is also an investor in the company.

Compass has raised over US$1.5 billion from investors, and its last funding round valued the company at US$6.4 billion. 

Real Estate Markets

Despite the pandemic, the US real estate market is booming as people are rushing to find homes, sending the prices soaring. 

The Federal Reserve has pushed policy interest rates to near-zero level, thus a lower mortgage rates for home buyers.

People who have not lost jobs during the pandemic now have a greater buying power. They are also working remotely, which is partly aiding the demand for housing. 

Given there are lesser spending avenues for households because of restrictions on travel and other activities, some families are looking to move to new house or upgrade the existing ones. 

According to the National Association of Realtors, October sales of built homes were at the highest level since early 2006. 

A lack of supply in the housing market with a dip in the number of available homes has sent the prices soaring. As a result, affordability remains a challenge for the first-time buyers. 

Compass Peers 

A fellow American online real estate marketplace Zillow Group is also riding higher this year. The stock has skyrocketed in 2020, owing to tailwinds from the real estate sector. 

Zillow Class A shares closed at US$109.5 on 25 November 2020 after closing at US$23.51 on 18 March 2020. 

Another real estate and relocation services company Realogy Holdings has also recovered sharply from the March lows. Although Realogy shares are lower than their February highs, shares were last quoted at US$12.35 on 25 November as against US$2.29 on 18 March. 

Airbnb shares are set to hit the markets in December 2020. The home-sharing business would have a valuation of around US$30 billion, according to reports. 

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