New York City-based startups VTS and Hightower have merged to create the commercial real estate industry’s leading leasing and asset management platform. Though company executives did not disclose financial details, the all-stock transaction values the new company at about $300 million, according to industry observers. Under the agreement, the combined companies will operate as VTS with the strongest features from Hightower integrated into VTS’s platform. The collective customer base manages over 5 billion square feet of commercial real estate.
Nick Romito, Co-Founder and CEO of VTS, told propmodo.com that merger conversations began in June and proceeded quickly because both parties were motivated to get a deal done. “Brandon and I see each other on panels just about every week. We have a lot of respect for one another, the platforms and the teams that each have developed. Over the course of the last few months, a casual conversation about shared goals eventually led to what we’d be able to achieve, and how fast we could do it, if we put our efforts together.”
Romito will remain in his role as CEO. Brandon Weber, Co-founder and former CEO of Hightower, will assume the role of Chief Product Officer at VTS, leading the charge for product development. Weber will join the VTS Board of Directors along with former Hightower board member Ethan Kurzweil, Partner at Bessemer Venture Partners.
“Our companies have a lot in common — we care deeply about the success of our customers and are committed to solving the industry’s most significant pain points,” said Weber. “By joining forces, we’re combining the technical horsepower and industry expertise of two very strong teams. In the coming months, we’ll accelerate our product roadmap and, most importantly, work side-by-side with customers to ensure they have a lasting competitive advantage.”
For the past several years, both VTS and Hightower have been very active players in the rapidly expanding commercial real estate technology space, at times going after the same customers and racing to bring new products to market. For example, in May of this year, the companies both announced retail specific software on the same day. According to Romito, operating in such an ambitious environment has pushed both companies to build stronger products that have propelled the industry forward and fundamentally changed the way the world’s leading commercial real estate professionals operate.
“We’re at a pivotal moment in commercial real estate, with the industry beginning to realize technology’s true potential,” explained Romito. “With our combined expertise, we can elevate our service offering and partner with customers to solve their most complicated problems in real estate. We’re broadening our vision to tackle even more ambitious industry challenges around the globe.”
Ryan Masiello, Co-founder and Chief Revenue Officer at VTS, said the merger presents a huge opportunity to create a single platform the industry can rely on for real-time intelligence and seamless communication. “Our vision is to create the standard solution that landlords, asset managers and brokers want to make more informed decisions, improve efficiency, and ultimately drive better performance across their portfolios and the entire marketplace.”
With an increasing number of commercial real estate technology startups and products competing for customers and venture funding, the merger may portend more M&A activity. Both Hightower and VTS have raised significant cash, including a $55 million Series C for VTS earlier this year, which could be used to fuel more growth through acquisitions. In addition, both companies have been expanding internationally. Investors in VTS include Blackstone Group LP, Insight Venture Partners, OpenView and Trinity Ventures. Hightower’s major investors are Bessemer Venture Partners and Thrive Capital.
Commercial real estate technology blogger Duke Long is cautiously optimistic about VTS’s future: “We think the merger is great and it is. But for whom? Possibly a select few. If so then it will be all for nothing. I’m betting Nick and Brandon know better. Actually, I’m not betting, I’m praying.”
Zach Aarons, co-founder of real estate tech accelerator MetaProp NYC, believes the merger will help accelerate innovation within the commercial real estate industry. “If this merger didn’t happen, Hightower was probably going to go out and raise another $30-$40 million. This merger is essentially Hightower’s Series C. But now these companies don’t have to spend money competing with each other in sales and they can reallocate some of that to R&D.”
Likening the merger to other real estate technology milestones including the launch of Argus in the ’70s and CoStar’s 1998 IPO, Aarons added: “These are the first two companies to consumerize the enterprise for real estate. There is now a market leader that has solid footing and is positioned to change the way business is done.”
VTS will expand its current space near Bryant Park in Midtown Manhattan by leasing the floor below it. “We feel that it’s incredibly important for us to come together, and begin working as one company,” said Romito. “We searched extensively for an office space that could accommodate our bigger company. In the end, it was most cost effective for us to expand VTS’s current headquarters.”
Combined VTS and Hightower employ about 275 people but, according to Romito, they will need to trim some positions because of overlapping roles. Hightower’s employees will begin moving in January. In the meantime, the teams will be introduced to each other and begin collaborating.