In a bid to expand its coverage in New York, Zillow has entered into a definitive agreement to acquire listing site StreetEasy, Zillow announced today.
Zillow will pay $50 million under the terms of the merger agreement. The merger is expected to close in the next few weeks and is still subject to the satisfaction of customary closing conditions, according to Zillow.
The company also announced today that it intends to offer an additional 2.5 million shares of Class A common stock, priced at $82 per share. The company said it would use the cash for “general corporate purposes,” but also potentially ”for the acquisition of, or investment in, technologies, solutions or businesses that complement its business.”
Several hours after news of the acquisition broke, Zillow’s stock was $86.83 at 10 a.m. Eastern time, down 4.41 percent from its closing price on Friday.
The deal marks the latest planned acquisition to be announced by a major listing portal. Jockeying for market share as the housing recovery heats up, rivals Zillow, Trulia and realtor.com have recently been snapping up companies to strengthen or round out their services.
The acquisition that’s turned the most heads so far this year has been Trulia’s purchase of real estate software provider Market Leader for a whopping $355 million.
“StreetEasy is an excellent strategic fit with Zillow, as we share a common goal: to help consumers become smarter about real estate by communicating comprehensive, unbiased information about apartments and homes,” said Zillow CEO Spencer Rascoff in a statement.
“StreetEasy is an incredibly strong and recognized brand in New York City, and complements Zillow’s dominant and growing national brand. We’re delighted to welcome the enormously talented and knowledgeable StreetEasy team on board,” Rascoff added.
StreetEasy claims to have nearly 1.2 million monthly unique users, most of them homebuyers in the New York region.
The acquisition will supply StreetEasy with resources to further invest in growth, while offering Zillow a dominant position in the New York market, Zillow said in a statement.
“This is Zillow clearly putting their money where their mouth is in terms of data accuracy,” said Phil Faranda, co-owner of Briarcliff Manor, N.Y.-based broker J. Philip Real Estate.
“And when you factor this with their acquisition of Buyfolio last year, they won’t settle for just being a player in NYC real estate — they want to set the pace.”
The Manhattan and Hamptons housing markets as well as trendy sections of Brooklyn and the Bronx pose unique challenges for listing portals because they have a fragmented network of listing services instead of a central one, and listing syndicators like ListHub and Point2 have not managed to comprehensively harvest listings from those services to feed to portals, according to Derek Eisenberg, founder of Hackensack, N.J.-based Continental Real Estate Group,Inc.
Against this backdrop, Eisenberg said StreetEasy has emerged as “the closest thing to an MLS” by aggregating listings across some exclusive areas of the broader NYC region.
“Zillow went where the data was,” he said.
To parry Zillow’s play for the NYC market, Eisenberg suggested that Trulia or realtor.com could potentially purchase PropertyShark, a New York-centric listing site that is owned by Yardi Systems. The real estate investment and property management software company also owns Point2.
“It’s a weak second to Street Easy but the next best thing,” Eisenberg said of PropertyShark.
Zillow purchased Buyfolio, a collaborative homebuying platform, in October of last year, and launched it in a handful of markets as Agentfolio in June. That purchase followed a string of others including the acquisition of RentJuice Corp. for $40 million, Diverse Solutions for $7.8 million and Postlets for an undisclosed amount.
The portal’s most recent acquisition was map-based search site HotPads, which it entered into a definitive agreement to purchase for $16 million last November.
Zillow and Trulia have seen explosive growth in the last year as the housing rebound has stoked investors’ interest in the companies. As of Aug. 9, the price of a share of Zillow’s stock had shot up 233 percent this year, while Trulia’s share price had jumped 158 percent.
The share price of Move Inc., operator of the National Association of Realtors’ official listing portal, realtor.com, is also up 77 percent, but its improvement has been overshadowed by the meteoric rise of Trulia and Zillow, whose growth in monthly users has aggressively outpaced that of realtor.com.
Editor’s note: This story has been updated to note the price for Zillow’s Class A common stock offering has been set at $82 per share.