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Real EstateM&A / Funding

Compass eyes IPO in 2021: report

Resi brokerage has raised over $1.5 billion since its founding in 2012

Venture-backed residential brokerage Compass has hired bookrunners ahead of an independent public offering in 2021, according to a new report.

Compass, most recently valued at $6.4 billion, is working with Goldman Sachs and Morgan Stanley to underwrite the IPO, according to Bloomberg, which cited anonymous sources.

Like other real estate companies of late, SoftBank-backed Compass has benefited from low interest rates and changing consumer behavior that’s driven new home purchases across the country.

Founded in 2012 by Robert Reffkin and Ori Allon, New York-based Compass has raised more than $1.5 billion from blue-chip investors, including SoftBank, Fidelity, Wellington Management, Goldman Sachs, Dragoneer, Canadian Pension Plan Investment Board, IVP, LeFrak and others.

Compass positions itself as a tech-forward brokerage that has gradually branched out beyond brokerage – it offers a concierge service, facilitates bridge loans, has a title-and-escrow arm, and has deployed a bevy of resources into tech centers in Seattle and Hyderabad.

The residential brokerage has also spent heavily to acquire smaller brokerages and top agents in over a dozen markets across the country since its founding, which led to accusations of agent poaching and issuing huge splits and signing bonuses that drove up costs to unsustainable levels.

There are also open questions about how much expansion is possible for the brokerage, which currently boasts more than 18,000 agents and sold over $91 billion worth of property in 2019, according to Real Trends.

In the early days of the pandemic, when lockdowns prevented Compass from showing homes in its strongest market, the brokerage elected to cut 15% of non-agent staff. Compass subsequently rebounded to cash in on record home sales in the summer and into the fall.

Realogy, the largest brokerage conglomerate in the U.S., is currently trading at $12.35 a share, up dramatically from a low of $2.09 in March. Despite its heft, Realogy’s market cap stands at roughly $1.43 billion, less than Compass has raised across several funding rounds.

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