Lennar, Opendoor & Fifth Wall: Transforming the US Residential Housing Ecosystem in a Landmark Partnership for Real Estate Tech
Buying a home is the most important financial decision an American consumer makes in his or her lifetime. Home equity is the largest source of consumer wealth, and home mortgages the largest consumer obligation. And yet, despite the profound impact of home ownership on the U.S. economy and individual families, it remains slow, arduous, and hopelessly antiquated. Increased liquidity, consumer transparency, and greater mobility has remained elusive, and one need look no further than the 2008 housing crisis and ensuing recession to see how far-reaching the economic and social implications of this are.
To that end, we’re thrilled to share the news that Fifth Wall has expanded its investment to $135 million in equity and debt with its anchor LP Lennar in Opendoor, the largest strategic technology investment ever made by a real estate company. Following on Fifth Wall’s $35 million equity investment in Opendoor’s Series D in 2016, we have now also invested $100 million in debt financing. (Third party funds managed by LP Rialto Capital Management funded a significant portion of the investment.) With this deal, the nation’s largest home builder is joining together with the most disruptive company in residential real estate to solve a pervasive problem plaguing the industry, consumers, and the broader U.S. economy today: the painfully inefficient process of buying and selling a home.
Making homes more liquid is the single most transformative event that could happen today in the U.S. economy, well outsizing the potential impact of blockchain, autonomous driving and, yes, even tax reform. With Lennar and Fifth Wall investing and partnering with Opendoor, first time homeownership is being completely re-imagined. Seeing the opportunity for Lennar to be a “kingmaker” for Opendoor and dramatically accelerate the company’s pace of growth, Fifth Wall brought these two firms together through this significant investment and helped orchestrate this partnership to address this market at scale.
A Perfect Match of Supply and Demand
The alignment of Lennar and Opendoor addresses one of the hardest parts about buying a new home — selling your existing home.
Lennar is not only the nation’s largest home builder, but also the most technology-forward. Given their goal of providing high-quality, affordable homes to consumers in the most efficient way possible, Lennar has amalgamated a robust ecosystem of financial products that make it easier to transact a home, from mortgages, to title insurance, to home insurance, etc. Digitizing these residential financial products has been a strategic priority for Lennar and Fifth Wall, as digitization holds the potential to increase both transparency and affordability of U.S. housing.
Opendoor is further increasing that transparency through a pioneering technology platform where consumers can get a quote with a fair market off on their home in a few clicks and gain access to liquidity the moment a homeowner is ready, increasing the potential frequency of homes sales by making it easier and less costly to transact. Opendoor is injecting liquidity into a marketplace where none has existed, and streamlining the transaction which traditionally involves a months-long closing process.
The partnership is a paradigm of the kind of win-win-win scenarios we seek at Fifth Wall: a win for Lennar, a win for Opendoor, and a win for homeowners! Furthermore, this deal validates the Opendoor model, and integrating the companies gives customers a complete, end-to-end home buying and selling experience. Opendoor learns daily from Lennar’s best-in-class operational experience, and further benefits from Lennar’s unmatched distribution through its Trade-Up Program — providing a new channel to access customers, which will broaden Opendoor’s scope and scale.
The Opendoor investment is not only smart market economics for Lennar, but allows them to more deeply understand their consumers — using Opendoor data to drive insights on emerging cities and communities of interest, as well as home style, size preferences, etc. The partnership also allows existing Lennar homeowners to leverage the Opendoor platform as they look to move into a new home.
This is incumbent-disruptor symbiosis at its finest and is characteristic of all of the deals Fifth Wall has executed across its portfolio. Industry disruption doesn’t have to end with a company’s demise. When incumbents embrace startups, businesses are not only enhanced, but they thrive. And the validation on both sides is clear: Lennar is establishing themselves as the leading tech-enabled home builder and Opendoor is going to market with buy-in and support from the largest incumbent in its category. And consumers across the country benefit: when homes become more frictionless to transact, imagine the wealth creation for tens of millions of Americans, especially lower and middle income families, who can finally make a homeownership decision they never otherwise could without this safety valve.
This record-breaking investment is the epitome of a Fifth Wall deal, and we’re looking forward to forging many, many more. Congratulations to the Lennar and Opendoor teams on this landmark deal!