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Altus to pay $249.5M to acquire AI data platform Reonomy

Altus Group (AIF-T) says it has an agreement to expand its data offerings and client base by acqu...

Altus Group (AIF-T) says it has an agreement to expand its data offerings and client base by acquiring U.S.-based Scryver Inc., the company behind the AI-powered Reonomy platform, for $249.5 million.

Toronto-based Altus is already one of the leading providers of software, data solutions and independent advisory services to the global commercial real estate industry. The transaction is slated to close today (Nov. 12).

“When the opportunity with Reonomy emerged we wanted to move quickly as high-quality assets like theirs are rare in our space and the strategic fit was spot-on,” CEO Mike Gordon said during Altus Group’s Q3 2021 financials call with investors and analysts Thursday afternoon. “We’re extremely excited about coming together.

“We’re inheriting a very well-run business with a talented team that aligns with our Altus Group employees.”

Increase Altus AI, predictive analytics capability

He said the acquisition will considerably accelerate Altus’ ability to integrate AI predictive data analytics into its offerings, noting it will be able to not only see what has happened, but also to assist in predicting what might be ahead.

“We’ve been accelerating our efforts on driving product innovation with predictive analytics and data organically through our data strategy initiatives and through the acquisition of the StrataDem analytics platform earlier this year. The timing is indeed critical,” Gordon said.

“The CRE tech market is maturing and consolidating point solution providers at a much faster pace than in the past.”

Founded in 2013, Reonomy employs the capabilities of artificial intelligence and machine learning technologies to provide data-driven insights and solutions for its commercial real estate users. The platform assists industry professionals in acquiring and analyzing market information, discovering opportunities and automating workflows.

The platform connects disparate property information from a wide range of data sources, including multiple public and proprietary data feeds, together with AI machine learning to aggregate market intelligence on commercial properties across the U.S.

Sources include assessor, census, transaction, geospatial, ownership and occupant data, which is then linked to each commercial asset via a property ID.

The resulting dataset covers over 52 million tax parcels and over 38 million commercial properties, “accounting for nearly all of the commercial inventory in the U.S.,” Altus says in the announcement.

“This acquisition is also highly strategic for us. The combination of Reonomy’s AI-powered data platform with Altus’s suite of software, data and analytics capabilities creates a very compelling offering that will enable our clients to better manage performance and risk within their CRE portfolios,” Gordon said.

“Real estate investment activities are becoming more complex as equity investors chase alpha while managing data, manage risks, take advantage of the growing demand for real estate as an alternative investment and given the global fight for talent are looking to do all of this at scale with more automation and intelligence.”

Increase Altus’ recurring revenue stream

Reonomy currently employs a team of approximately 115, who will be integrated into Altus’ workforce.

Altus forecasts the acquisition will add $25 million or more in recurring annual revenues by the end of 2022.

“I co-founded Reonomy with a very direct mission to solve a pressing pain-point in the CRE industry – to connect data and bring greater transparency to the CRE market at a time when credible information on this significant asset class was still scarce,” said Richard Sarkis, executive chairman and co-founder of Reonomy, in a release Thursday.

“Altus Group shares in our mission and has played a pivotal role in advancing the transformation of the CRE industry.

“We are very excited about the opportunities that joining Altus Group will bring and how it paves the way for continued innovation.

“Leveraging Altus’ unique position in the CRE value chain with our data and analytics capabilities is exceptionally powerful and I’m confident that together we will create considerable value for our industry and combined stakeholders.”

Reonomy has received the support of many top industry investors over the past few years, including SoftBank Capital, Wells Fargo, Citi Ventures, Bain Capital Ventures, Georgian Partners, Sapphire Ventures and others.

Financial details

The firm has received $128 million US in venture capital and has successfully launched two U.S.-based platforms, most recently in 2017.

“The Reonomy team has done an exceptional job leveraging AI machine learning to solve key data management challenges in the CRE industry and unveil hidden data relationships,” said Jorge Blanco, chief product officer of Altus Group, in the announcement.

“Integrating Reonomy’s data and technical capabilities with our recently acquired StratoDem Analytics platform for predictive analytics will enable us to deliver analytics at scale, and when integrated together with our foundational ARGUS software solutions, will be transformative for the CRE industry.”

Reonomy’s trailing 12-month to Sept. 30 revenues were US$18.3 million. The company had an adjusted EBITDA loss of $23 million reflecting its investment focus on user growth, platform development and revenue acceleration.

The acquisition is expected to be accretive to Altus’ adjusted EBITDA in 2023.

Altus is funding the acquisition via a payment of $245.8 million in cash, (cash on hand and its credit facilities), as well as a $3.7 million share issue to Reonomy employees.

The transaction is expected to increase Altus’ debt-to-adjusted-EBITDA-leverage ratio to approximately 3.0x. Altus expects to de-lever to a ratio in the low 2.0x range by the end of 2022.

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