Not long after announcing an additional $400 million in equity financing this fall, Opendoor has filed paperwork to create a separate “property acquisition fund,” which aims to raise $300 million — presumably for the exclusive purpose of purchasing homes.
A recent U.S. Securities and Exchange Commission (SEC) filing for “Opendoor Property Acquisition Fund” shares the address of Opendoor’s headquarters in San Francisco and lists “Opendoor GP” as its general partner. It’s a $300 million equity and debt securities offering that has clinched $100 million so far.
The offering differs from the sort of funding that Opendoor — a so-called “iBuyer” that uses technology to quickly buy and resell homes — has publicly filed for in the past, appearing to mark a bid by the firm to finance property purchases in a new way, perhaps further widening the company’s access to homebuying capital while limiting its risk.
Previous Opendoor filings have listed OpenDoor Labs Inc. as the issuer and classified the entity as a corporation under the industry category of “other real estate.”
In contrast, the new filing lists a different entity — Opendoor Property Acquisition Fund LP — and is registered as a limited partnership under the category of a “pooled investment fund.” Subcategories of pooled investment funds include hedge funds, private equity funds and venture capital funds. Opendoor Property Acquisition Fund LP is registered under the fourth classification: “Other investment fund.”
In a limited partnership fund, a general partner and limited partners pool their money, and the general partner then selects and manages investments over an extended period of time. The general partner is tasked with the legal responsibility of acting in the best interests of limited partners. The general partner and limited partners typically share in the profits and losses of the fund. One advantage of a limited partnership fund is that a partner’s liability is limited to their commitment amount.
The SEC filing says the fund’s general partner — listed as “Opendoor GP” — “may be entitled to distributions of income after all liabilities of partnership are met and other partners have been returned their capital contributions.” The securities offered under the issuance include both equity and debt.
Opendoor has used entities with many different names to buy homes across its 17 markets, but this appears to be the first SEC filing for one of those entities that can be found on the regulator’s website.
The fund may represent a new financing experiment by Opendoor — which, if successful — could empower the startup to vacuum up much more capital to buy homes. Such financing might help Opendoor limit its downside risk in the event that a fund fails to perform, similar to how a private equity management company can limit its losses when one of its funds performs badly.
It’s unclear if any of the $100 million that has been raised for the fund so far has come from the $1 billion in equity financing that Opendoor has publicly announced to date — including, most recently, an additional $400 million in equity financing from SoftBank.
Opendoor didn’t immediately respond to a request for comment.