RICHARDSON, TX – RealPage announced its agreement to acquire Lease Rent Options (LRO) and related assets from The Rainmaker Group for $300 million in cash. LRO is a revenue management solution that empowers optimized pricing for over 1.5 million apartments. LRO, coupled with the recent acquisition of Axiometrics, expands RealPage’s suite of solutions for precision data analytics and asset optimization for the rental housing industry.
According to RealPage, the acquisition will better position RealPage to penetrate an emerging global market opportunity to optimize operational and transactional yields for rental housing assets; Expand the company’s real-time lease transaction data, which is expected to improve optimization of new and renewal prices for rental housing leases; Provide additional data science talent and data modeling tools that allow for better harvesting and placement of capital in the rental housing industry.
The industry is ripe for adoption: RealPage estimates that less than 10% of owners and operators of the 45 million rental housing properties in the U.S. currently utilize data-driven pricing science. International markets are believed to possess an even lower rate of adoption for asset optimization software and data analytic solutions.
Adds 500,000 new units opening up cross selling opportunities for other products and services offered by RealPage.
Steve Winn, Chairman and CEO of RealPage stated, “With many apartment markets softening around the U.S., now is the right time to bring together the best data-science talent, a comprehensive lease-transaction database, and RealPage’s powerful suite of pricing, demand and credit optimization tools into one comprehensive platform. Price optimization creates real opportunity to increase asset values and yields from the nearly $3.0 trillion of apartment stock in the U.S. that turns over at approximately $150 billion per year. As revenue management becomes more broadly accepted, we expect our combined platform to drive accelerated, sustained revenue growth in our Asset Optimization product family over the long-term. We believe we have all of the components necessary to offer solutions that bring efficiency and precision to the apartment real estate sector which has historically lacked the solutions available in other investment classes.”
Bryan Hill, CFO and Treasurer of RealPage added, “The acquisition of LRO fits within our capital allocation strategy of generating the highest risk-adjusted returns for our shareholders. We expect the acquisition to be immediately accretive to our adjusted EBITDA margin, contributing to our ongoing objective to expand adjusted EBITDA margin approximately 200 basis points per year. The transaction will be financed through an expanded debt arrangement with our current bank syndicate.”
The completion of the acquisition remains subject to certain standard conditions, and is expected to close during the second quarter of 2017. The acquisition purchase price of approximately $300 million in cash is subject to working capital adjustments and post-acquisition indemnification claims. For the year ended December 31, 2016, the LRO business possessed revenue and EBITDA of $35.6 million and $10 million, respectively. Integration work is expected to be completed in 2018 and RealPage expects to achieve incremental revenue and expense synergies that will be accretive to its long term revenue growth objectives and Adjusted EBITDA margin expansion.
Bruce Barfield, CEO and Founder, and Tammy Farley, COO and Founder, are expected to remain with The Rainmaker Group to run the gaming and hospitality division, but have agreed to work closely with RealPage during a transition period immediately after the acquisition is closed.