SmartRent’s eyes may be bigger than its stomach. The smart home automation firm is looking to grow internationally even as it seeks to meet untapped demand at home.
The Scottsdale-based company, which went public last week in a $2.2 billion merger with the proptech venture capital firm Fifth Wall’s first SPAC, may also become a strategic acquirer to boost its in-house product development, founder and CEO Lucas Haldeman said.
“The addressable market is every rental unit and every single-family rental home in the U.S., and then around the world,” Haldeman said. “It is so massive, it’s staggering.”
As the universe of smart homes expands, there likely will be a convergence of the multifamily and single-family rental spheres, the executive said. Large-scale multifamily operators increasingly are looking at opportunities in home rentals, and single-family rental players are looking to expand operations into the apartment business.
“I know a lot of them that are studying it and thinking about it,” Haldeman said, declining to name specific companies.
SmartRent received roughly $450 million in cash as part of the merger with Fifth Wall Acquisition Corp. I, which included a $155 million private placement from investors, among them the homebuilder Lennar, Barry Sternlicht’s Starwood Capital and the single-family rental giant Invitation Homes.
Founded in 2017, SmartRent offers landlords, property managers and renters a comprehensive platform from which to manage smart home devices, such as locks, cameras, thermostats, plugs and sensors.
The company had written off going the SPAC route until Fifth Wall came along, Haldeman said. Other suitors did not have real estate experience.
“They obviously have great strategic significance and they truly understand our business,” Haldeman said of Fifth Wall. “It felt like one of those 1+1=3 scenarios, where it was actually more strategic to go that route versus a traditional IPO or a [Series] B round for us.”
SmartRent has pilot projects running in Canada and the U.K. The company expects to grow in those two markets before moving into Western Europe and other foreign markets where Fifth Wall has influence, the CEO said.
The company now bills itself as a provider of smart building automation, not merely smart home automation — suggesting it will expand into other property types including data centers and office buildings. The company recently ventured into student housing.
Haldeman described integrated software management as a “commercial real estate problem,” not merely a multifamily or single-family rental problem.
SmartRent’s clientele includes more than 180 property managers with a combined 3.5 million apartments. But through June, SmartRent had installed its technology in just 211,000 units. The company aims to be in 350,000 by year-end, Haldeman said.
On Aug. 30, the company reported $21.7 million in quarterly revenue, up from $5.8 million in the 2020 second quarter — a 274 percent gain.
The company’s biggest opportunity — rolling out services in full to its existing clients — is also its biggest challenge, the executive said. Supply chain issues threaten the availability of hardware, and on-site installation is a large-scale, delicate operation that the company manages itself.
John Helm, founder of Real Estate Technology Ventures, an early SmartRent backer and still the company’s largest shareholder, described the greenfield opportunity in multifamily for integrated software management as massive and rare. The U.S. alone has more than 40 million rental units, only a tiny fraction of which are outfitted with the technology.
SmartRent’s offering is unique for its comprehensiveness and the company’s ability to execute at a large scale, according to Helm. He sees the company’s product line as particularly attractive for retrofitting older buildings.
“SmartRent’s advantage is they have the installation resources to go out in the field and get it done,” Helm said. “They’ve done it already.”