Fifth Wall Taking SmartRent Public At Over $2B Valuation Despite SPAC Slump
Though the pace of special-purpose acquisition company formation has slowed to a trickle from its previous torrent, SPAC Fifth Wall Acquisition Corp. I, which was established in January, is planning to take SmartRent.com Inc. public in a $2.2B deal. SmartRent specializes in smart-home technology systems for apartment building owners and developers.
When proptech investor Fifth Wall set up its first SPAC early this year, the company said it was looking to invest in a proptech entity that led in its category and that large real estate organizations were already using. It was also looking for a solid management team and a highly predictable revenue trajectory.
"We set these incredibly ambitious, lofty criteria to characterize a target for Fifth Wall’s first SPAC," Fifth Wall co-founder and Managing Partner Brendan Wallace wrote on Thursday in a blog post. "And it’s hard to imagine a company that could more authoritatively meet these criteria than SmartRent."
Scottsdale, Arizona-based SmartRent was founded in 2017 with the goal of providing smart-home features to apartment buildings, which typically lag behind single-family houses in the adoption of such proptech. Founder Lucas Haldeman was the former chief technology officer of Colony Starwood Homes, which later became part of single-family rental giant Invitation Homes.
SmartRent tech allows landlords to operate thermostats, utilities, security and other features of their properties from a computer or smartphone. It also provides tenants apps to support such smart-home tech as virtual assistants Siri and Alexa. SmartRent has an opportunity to generate up to $1.5B in annual revenue from existing customers alone, according to the company.
A number of major apartment landlords, who also tend to be customers of SmartRent, plan to invest $155M in the startup. Investors include Blackstone Group, Starwood Capital Group, Lennar Corp., Koch Real Estate Investments, Baron Capital Group and Invitation Homes, among others.
SPACs, also called blank check companies, surged in popularity over the last year by allowing private companies to go public with more speed and price certainty than traditional initial public offerings. Recently, however, the pace of their formation has slowed drastically.
In March 2021, 109 new SPACs came to market, according to SPAC Research. In April so far, only 10 have.
The slowdown came after the Securities and Exchange Commission issued accounting guidance in mid-April that would classify SPAC warrants as liabilities rather than equity instruments. But there is evidence that investors were already growing skittish about the mania associated with SPACs in recent months.
“Early data from April suggest that retail [investors] may be returning back to their ‘traditional’ roots, favoring more established companies over low-priced, speculative securities,” Bank of America analysts said in a note on Monday, as reported by CNBC.