RealPage To Acquire CRE Global For Hipercept Real Estate Data Tech

Summary

• RealPage has agreed to acquire CRE Global Enterprises for an undisclosed sum.
• CRE is the holding company for Hipercept, a suite of data aggregation and analytics tools for the commercial and multi-family real estate industry.
• RP will acquire a significant piece to be able to offer a full investment tracking and management suite for real estate firms.
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Quick Take

RealPage (NASDAQ:RP) announced it has agreed to acquire CRE Global Enterprises, a holding company for Hipercept for an undisclosed amount.

Hipercept provides data services and data analytic solutions to institutional real estate owners with over $500 billion in assets.

With the deal, RP is gaining the potential to provide an ‘all-in-one’ solution for real estate investors and asset managers throughout the investment lifecycle.

Target Company

New York-based Hipercept was founded in 2009 to provide advisory, data management, partner management, as well as application management services to real estate owners in the US, Asia, Canada, and Europe.

Management is headed by CEO Colin Kovas, who has been with the firm since 2014 and was previously a director at NewOak Capital.

Below is an overview video of the company’s offerings:

Source: Hipercept

Additionally, the company provides FUEL, a cloud-based commercial and multifamily real estate valuation cash flow forecasting solution, and Foundation - a data storage, governance, and analytics platform.

Company partners or major customers include insurance companies, pension funds, major banks, and asset management firms.

Market And Competition

According to a market research report by McKinsey, real estate analytic technologies provide developers and asset owners with the tools necessary to rapidly gain relevant property insight and take informed actions based on both traditional and recently-emerged non-traditional data points.

Real estate analysts have to sift through numerous records and data points to discern clear patterns and place their bets with few supporting tools, and by the time the investor collects, compiles, and processes the data needed to distill action - the best opportunities are gone.

Moreover, new and unconventional data sources, such as resident surveys, mobile phone signal patterns, and Yelp reviews of local restaurants are becoming increasingly relevant for the identification of “hyperlocal” patterns - granular trends at the city block level rather than at the city level.

Using machine learning algorithms, real estate analytic technologies automate the data collection process by accessing application programming interfaces [APIs] and connecting various databases before preparing the data for analysis.

Other benefits of real estate analytic technologies include pressure-testing expectations for individual properties, identifying individual assets that would hold their value in declining markets, making capital expenditure decisions on specific properties, and comparing predictive-model outputs to the forecast of traditional sources of market information among others.

Competitive vendors that provide real estate analytics include:

• CoStar Group (CSGP)
• CARTO
• Real Capital Analytics
• Digital Property Group
• Quantarium
• Gnowise

Source: Sentieo

Acquisition Terms And Financials

RP didn’t disclose the acquisition price or terms and didn’t file a Form 8-K or provide a change in financial guidance, so the transaction was likely for a financially non-material amount.

A review of the firm’s most recent 10-Q filing indicates that as of March 31, 2019, RealPage had $252.7 million in unrestricted cash and equivalents and $1.1 billion in total liabilities, of which $283.7 was long-term debt and $126 million was deferred revenue.

Free cash flow for the three months ended March 31, 2019, was a negative ($7.0 million).

In the past 12 months, RP’s stock price has risen 3.8% vs. CoStar’s (CSGP) rise of 28.1%, as the chart below indicates:

Source: Sentieo

Earnings surprises have been positive in 11 out of the last 12 quarters:

Source: Seeking Alpha

Analyst sentiment in recent earnings calls appears to have dropped sharply in recent periods as the linguistic analysis shows below:

Source: Sentieo

Commentary

RP is acquiring CRE for its Hipercept data tracking and analytics system.

As RealPage Chairman and CEO Steve Winn stated in the deal announcement:

With the addition of this acquisition to RealPage’s previously developed capabilities, RealPage will offer an integrated platform to serve the end-to-end needs of an institutional real estate and alternative asset owner. No longer will customers need to cobble together applications and services to run their business. RealPage can offer a complete solution, supported by managed services, to run their entire operational process.

RealPage intends to integrate Hipercept’s technologies as a combined ‘asset & investment management platform that integrates its existing portfolio asset management and portfolio investment management products with [Hipercept’s] Foundation and FUEL [products].’

With the deal, RP will be able to offer what it calls ‘the industry’s only fully integrated platform that aggregates and manages data across the entire investment lifecycle for real estate and alternative investments.’

If so, that’s quite a tall offering, and assuming RP didn’t overpay, would appear to provide the firm’s sales teams with a differentiated offering, probably more relevant for smaller and mid-sized real estate firms that may value an all-in-one solution.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.