Opendoor builds $ 9 billion war chest to buy US homes – press enterprise
By Patrick Clark | Bloomberg
Opendoor Technologies is adding billions of dollars in borrowing capacity as it rushes to buy and sell more homes.
The company, the largest of an emerging tech-powered home pinball group called iBuyers, has entered into a modified mezzanine debt facility with a $ 3 billion limit, according to an Oct.4 filing. The move, combined with other recent transactions, allows the company to borrow up to $ 9 billion through non-recourse asset-backed facilities.
Read more: IBuyer home sales soar 123% in Southern California
Opendoor’s main business is buying a house, repairing it and putting it back on the market. Access to short-term debt is a crucial ingredient in the process, which also depends on home rating algorithms and home improvement contractor networks.
He uses senior debt to pay 80% to 90% of a given home, and mezzanine debt for the balance, according to an August file. The company’s new $ 3 billion mezzanine facility enables it to acquire more than 40,000 homes, based on an average home price of $ 350,000. The company would need more senior debt to reach this number.
Opendoor’s main competitor, Zillow Group, has also taken on Wall Street for debt, seeking more than $ 1 billion in two unrated bond offerings.
Opendoor rose 1.5% to $ 19.28 at 1:37 p.m. Tuesday. The stock had slipped more than 16% this year until Monday’s close. Zillow shares have also fallen so far in 2021. After nearly tripling last year, the stock has fallen by more than 35%.
Soaring house prices and rents are fueling the appetite of real estate companies for homes, adding unwanted competition for many potential buyers.
Residential real estate purchased by businesses or institutions reached an all-time high of 67,943 properties in the second quarter, according to Redfin, a Seattle-based online brokerage firm.
This is more than double compared to the previous year, when the pandemic temporarily hampered the real estate market. It also accounts for 15.9% of all properties sold in the April to June quarter, just below the record 16.1% sales share in the first quarter of 2020, Redfin said.
The data, which goes back to 2000, includes all types of residential properties, including apartment buildings and condos. It excludes purchases made by small individual investors.
Related: Real estate agents have little to fear from iBuyers, real estate leader says
The Associated Press contributed to this report.