Alfred, the largest property-technology company, looks poised for a spending spree. Alfred said Tuesday it raised $50 million in private equity funding, purchased property manager RKW Residential, and can tap another $75 million for future acquisitions.
Buying Charlotte-based RKW for an undisclosed price is a geography play that gives Alfred instant access to 30,000 single-family and multifamily homes in hot Southeastern markets, including Raleigh, Atlanta, Orlando and Miami – direct access for Alfred's operating software that helps property owners cut costs and centralize tasks.
In an interview with Multifamily Dive two weeks before the announcement, Marcie Williams, president of RKW said that the company wanted "to be able to give the prospects and residents what they want when they want it," but still saw the importance of providing residents with face-to-face interactions with on-site associates.
"If they want to talk to somebody, we also want to be available and on-site to take care of the residents and prospects," Williams said. "We have not gone to centralized leasing to leave the properties empty. But we have done a hybrid where we have been using artificial intelligence and automation to help with the leasing aspect."
Marcela Sapone, Alfred's co-founder and CEO, said in a press release that RKW's platform will allow the company to deploy its technology "to learn, innovate and continually elevate the rental experience for all."
Alfred's operating system is in more than 143,000 units in the U.S. and Canada. The technology provides resident management and communication, on-site operations and maintenance functionality, payments and community and resident wellness amenities.
The RKW transaction is Alfred's fourth acquisition since 2015. It had previously bought wellness and events platform HOM, property management technology platform Bixby and on-demand service platform WunWun.
Active M&A environment
The Alfred-RKW deal came together in an environment ripe for mergers and acquisitions for real estate services businesses, according to Michael P. Feldman, co-founder and CEO of New York-based property management firm Choice New York Cos.
In December 2021, Houston-based manager Asset Living acquired Atlanta-based manager and developer JMG Realty. In early 2021, Toronto-based FirstService Residential acquired Midboro Management, which had 15,000 condominium and co-op units under management in New York.
Feldman says that low interest rates have allowed buyers to pay more for these services businesses, while potential capital gain tax rate increases have motivated some companies to sell. When the market shut down in March 2020, many buyers sat on the sidelines for a few months. Since things have opened back up, Feldman says there has been strong pent-up demand for acquisitions.
"People had to get money out," Feldman said. "These funds were promising returns to investors and they had money to go to work."
While many businesses suffered during the pandemic, Feldman says real estate owners needed to rely on good services businesses during COVID-19, which increased their value even more.
"Property management or residential brokerage, for example, are recurring [cash flow] businesses that have more growth potential than hard assets like real estate," Feldman said. "Anyone selling anything manufacturing had to deal with supply chain issues. These [service business] assets carry very, very little risk."
Alfred's strategic financing round was led by Rialto Capital with participation from NEA, 166 2nd Financial Services and Holland Management. Greystar Founder and CEO Bob Faith, Grubhub/Seamless Founder Jason Finger, and RKW Co-founder Jay Massirman also joined the funding round.
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