SmartRent funding heralds new wave in 'smart home' market
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[June 19, 2019] By
Herbert Lash
NEW YORK (Reuters) - A producer of "smart
home" software that helps landlords cut operating costs such as
shuttling keys to waiting maintenance workers or guiding tours for
prospective tenants has raised $32 million from Bain Capital Ventures
and the owners of nearly 1 million U.S. apartments.
Bain led the Series B fundraising round with $25 million on Wednesday
for SmartRent, which is up against Latchable Inc and Google Nest for a
foothold in the market for technology that helps property owners boost
profit margins and generate new revenue streams through add-on services
for tenants.
The remaining funds came from RET Ventures, a venture capital fund of 18
U.S. and Canadian property management or investment companies, including
five real estate investment trusts. Apartment owners Essex Property
Trust Inc and UDR Inc, along with Starwood Capital, the investment arm
of billionaire property mogul Barry Sternlicht, also made separate
investments in addition to their stakes in RET Ventures.
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The companies declined to comment on what valuation the funding round
places on SmartRent. Among other services, the Scottsdale, Arizona,
startup allows owners to set up self-guided tours for prospective
residents and give maintenance and others access to homes with a door
lock code.
Investors are betting smart home technology such as remote access to
cooling and heating systems and water leak detection will become
standard at apartments. These functions will reduce operating costs,
including insurance premiums to cover water damage, which can run to
more than $10,000 per occurrence.
Access through a mobile device or a numerical lock already has saved
Denver-based UDR money, kept residents happy and reduced the hassle of
losing or forgetting a key, often late at night, said Jerry Davis,
president and chief operating officer.
"We've experienced a reduction in lock-outs, so that increases resident
satisfaction. It also means our guys aren't getting called out in the
middle of the night and being paid overtime," he said.
At the REITweek conference earlier this month, UDR said it has generated
a 25% to 30% return in a pilot program involving 13,300 of its 49,795
apartment units and expects to have SmartRent installed in 20,000 units
by the end of summer.
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A view of a neighborhood in the town of Superior, Colorado, a Denver
suburb February 27, 2006.
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SmartRent's cost, including installing door locks, water sensors and other
hardware, ranges from $900 to $1,000 a unit, Davis said. UDR expects residents
to pay a $20 to $25 monthly fee, with the program's cost paid off in three to
four years and a unit's life estimated at six to seven years, he said.
There are about two dozen connected home or remote-access providers in the
market, such as Latchable, maker of the Latch digital lock system, and Alphabet
Inc's Google Nest. Last year, Latchable raised $70 million, much of it from real
estate heavyweight Brookfield Asset Management Inc, which valued it at $250
million.
SmartRent Chief Executive Lucas Haldeman is a former chief technology officer of
Colony American Homes, now Invitation Homes. UDR's Davis said Haldeman impressed
RETV members with his knowledge of the apartment market and its needs.
There are about 23 million U.S. apartment units and if each delivers $1,000 in
revenue, the market is north of $20 billion, said Matt Harris, a New York-based
partner at Bain.
Bain believes smart apartments will become ubiquitous as the technology is
rolled out over the next five to 10 years. But apartment owners who get in early
will be able to charge for the service, an opportunity that eventually will
pass.
Remote access is increasingly an essential feature as package and food
deliveries proliferate and baby sitters, dogwalkers and maintenance personnel
require access while residents are away, said Yishai Lerner, co-chief executive
of JLL Spark, the venture capital fund of Jones Lang LaSalle Inc.
"The adoption curve has gotten from nice to have to must have," said Lerner.
(Reporting by Herbert Lash; Editing by Dan Burns)
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