The platformization of various industries promises that the digitization of processes and discovery — where supply meets demand — improves the experience.
However, not all platforms prove to be as disruptive as they and their investors would hope. Sometimes the disruptors get disrupted.
Case in point: Divvy Homes, a rent-to-own real estate company and platform that launched in 2017, is being acquired — for a fraction of recent valuations.
The deal includes Divvy’s property portfolio — which once included 7,000 homes — and the platform itself, according to a Wednesday (Jan. 22) press release. The buyer, Maymont Homes, which operates as a division of Brookfield Properties, is shelling out about $1 billion.
In 2021, the company was valued at $2 billion.
Maymont will “manage the portfolio on an ongoing basis,” per the release. The transaction is slated to close next month.
“Since inception, Divvy has helped over 15,000 residents across 20 cities start their journey to homeownership and has created 2,000 homeowners to date,” the release said.
The sale caps a multiyear journey that saw hundreds of millions of dollars of capital invested into the firm by the likes of Andreessen Horowitz, Singapore’s GIC and GGV Capital, among others. In October 2021, Divvy took on roughly $735 million of debt financing.
TechCrunch reported Wednesday that a letter it saw from Divvy CEO and co-founder Adena Hefets said the transaction would mean that, after paying down debt and other obligations, shareholders would receive nothing.
Divvy Homes has not replied to PYMNTS’ request for comment.
Divvy’s platform is based on giving people a budget to look for a house and then charging a deposit of 1% to 2% of the property value. The platform buys the home, and monthly rental payments are made to Divvy, where up to 25% is set aside for a deposit so renters have a better chance of getting a mortgage down the road. Along the way, customers build their credit profiles.
The flexible nature of the model — where buyers can adjust their monthly savings contributions — is a way to onboard applicants who may not be able to qualify for a traditional mortgage. When the lease term is up, usually after two to three years, would-be owners opt to buy the house or vacate, with the initial payment and savings in hand.
From 2022 into 2023, the company reportedly made three rounds of layoffs due to the pressures of rising interest rates.
“This past year has seen rapid rises in interest rates, with most economists believing that rates will remain higher for longer,” Divvy said in an August 2023 company blog post. “At Divvy, we are exposed to interest rates through our cost of financing. Given the current interest rate outlook, we are pausing new home acquisitions with a plan to reopen once rates sufficiently decline.”
There were no market updates on Divvy’s website afterward.
As PYMNTS Intelligence has chronicled, the cost of housing has been rising, and housing expenditures stand at about 37% of take-home pay for households earning less than $50,000 annually and about 13% of take-home pay for households earning more than $50,000 annually.