Pacaso, the company responsible for formalizing the co-ownership model, and founded by former Zillow executives Austin Allison and Spencer Rascoff, announced Tuesday it is reducing staff by 30 percent.
Pacaso employees impacted by the cuts will be provided severance, health care coverage and career help, Allison told employees on Tuesday during an all-hands conference call.
Brian McGuigan, Pacaso’s Director of Corporate Communications, told Inman the September 21 rate hike combined with the high cost of housing led to the decision, which “will put us back to January, 2022 headcount levels of just above 200 employees.” Pacaso had 300 staff before today’s announcement. The layoffs will impact the company across the board, with no single department baring the brunt of the cuts, McGuigan said.
“It’s just completely different environment now,” he said. “The Q3 report showed a decline in rate locks quarter over quarter of 28 percent for luxury second homes.”
In a company blog post on the matter, Allison reiterated McGuigan’s comments, also sharing the executive team’s belief that a global recession is imminent.
“Like any business in this environment, Pacaso must make proactive changes to ensure that our expenses align with revenue,” Allison said. “A big part of my job as CEO is to make tough decisions based on what is best for Pacaso, and to be transparent with you about why we’re making them.”
“Early in 2022, the capital markets—venture capital firms and public market investors—were enthusiastically funding growth stage companies,” Allison’s post reads. “Our business expansion and headcount were designed for this hyper-growth environment, which was appropriate for the market conditions at the time. Fast forward ten months and we now must prepare for a recession. This change reverts our headcount back to January 2022 levels, and right-sizes our team for the immediate road ahead.”
The company reiterated that no services to current Pacaso owners will be altered, nor will the commission structure paid to real estate agents who sell shares to buyers and list their properties.
Pacaso pays three percent to buyer agents and offers 500 restricted stock units. The company will focus for the time being on growing in its existing markets instead of looking to establish operations in additional second home destinations.
“We prioritize anyone outside the company being able to interact with the company in the same way, it will look and feel the same with them,” McGuigan told Inman.
Allison’s blog post also pointed out that demand for second luxury homes remains well above pre-pandemic levels—152 percent.
Read Austin Allison’s blog post in full:
Crew – Today is a difficult day. In the last few weeks, the economy has become more unstable and a global recession now seems likely. Like any business in this environment, Pacaso must make proactive changes to ensure that our expenses align with revenue.
As a result, we will be reducing our workforce by 30% while we streamline operating costs. There will be no change to owner services or in-market home operations. Our long-term relationship with owners, and their homes, remains our top priority and will continue to receive exceptional service.
A big part of my job as CEO is to make tough decisions based on what is best for Pacaso, and to be transparent with you about why we’re making them.
Early in 2022, the capital markets – venture capital firms and public market investors – were enthusiastically funding growth stage companies. Our business expansion and headcount were designed for this hyper-growth environment, which was appropriate for the market conditions at the time. Fast forward ten months and we now must prepare for a recession. This change reverts our headcount back to January 2022 levels, and right-sizes our team for the immediate road ahead.
We all should be proud of what we have achieved in just two years of operation:
- We operate in 40 top destination communities in four countries
- Our portfolio of Pacaso homes is valued at more than $1B
- Pacaso continues to grow and we forecast 100% year-over-year growth in 2022
- We have many happy owners and continue to add new owners every week
- We continue to see liquidity in our resale marketplace as owners are selling shares with an average of 12% appreciation
As we reported last week in our Q3 Second Home Analysis, the luxury second home tier declined 28% quarter-over-quarter, however, demand is up 152% since the beginning of the pandemic. This is why we remain as excited as ever about the future of co-ownership and the mission of Pacaso to enrich lives through second home ownership, but we have to be realistic about the impact a recession could have on demand in the near-term.
I want you all to know that we will do our best to help our impacted crew make the transition. We will provide them with severance, health care coverage and career help.
To those of you we will be saying goodbye to, I am sorry. We will miss you dearly and will be forever grateful for your contributions to Pacaso and our community of inspiring Owners.
To those of you who will continue on, I’m honored to serve you as CEO as we work together to build an enduring business and enrich millions of lives through second home ownership.
This is a developing story.