Zillow Buys Real-Estate Site StreetEasy for $50 Million
Zillow Inc. (Z), operator of the largest U.S. real-estate website, agreed to acquire StreetEasy for $50 million in cash to expand its coverage of the New York market.
StreetEasy has about 1.2 million monthly unique users, primarily residential real-estate shoppers in the New York region, the companies said in a statement today. Zillow, which reported 61 million unique visitors at the end of July, separately announced a secondary stock offering.
Facing increased competition from Trulia Inc. and other real-estate listings providers amid a U.S. housing-market recovery, Zillow has been making acquisitions to maintain growth. Chief Executive Officer Spencer Rascoff said purchasing StreetEasy can help Zillow rapidly expand its presence in the largest U.S. market and use its sales team to bolster advertising and subscription revenue faster than StreetEasy could as an independent company.
“You can’t lay claim to being the No. 1 real-estate site nationwide without being No. 1 in New York,” Rascoff said in an interview. “We’ve coveted StreetEasy for several years.”
Zillow, which bought San Francisco-based HotPads in December for $16 million in cash, said it may use proceeds from the share offering to make deals that complement its business.
The shares fell 7.1 percent to $84.74 at the close in New York. The stock has more than tripled this year.
Founded in 2006, closely-held StreetEasy has 34 employees and provides for-sale and for-rent listings through partnerships with the largest brokerages in New York. The deal is expected to close in the next few weeks. Zillow’s 20 employees in New York will move into StreetEasy’s office, Rascoff said.
Most of StreetEasy’s employees are equity holders in the company, said Dawn Lyon, a spokeswoman for Seattle-based Zillow. StreetEasy had about $2.9 million of venture capital backing from investment firm FA Technology Ventures, she said.
The StreetEasy purchase “opens the door to potentially lead the New York City market,” said James Cakmak, an analyst at Telsey Advisory Group in New York. “But they’re paying $50 million dollars for about 1 million users, and that’s a little expensive.”
The acquisition will allow Zillow to expand into the rentals market, and the company will likely use the stock offering to help pay for it, said Cakmak. His company doesn’t have a rating system.
Zillow plans a 2.5 million offering of Class A common stock and said that an additional 2.52 million of shares will be sold by existing shareholders. Zillow intends to use the proceeds for general corporate purposes, including acquisitions or investments in technology and businesses that complement its existing operations, according to a statement.