CoStar Group to acquire STR for $450M

private equity investment
CoStar Group anticipates the acquisition will close in the fourth quarter of 2019. Photo credit: Natee Meepian/Getty Images

CoStar Group plans to acquire hotel data analytics company STR for $450 million in cash. The transaction, subject to customary closing conditions, is expected to close in the fourth quarter of 2019.

In a call with investors, Andrew Florance, founder/CEO of CoStar Group, said the acquisition strengthens the company’s product offerings and “positions CoStar as the information and analytics leader for the $3 trillion hospitality commercial real estate sector.”

CoStar Group provides commercial real estate information and analytics and operates several online marketplaces, including Apartments.com, ApartmentHomeLiving.com, ForRentUniversity.com, Apartamentos.com and more. Its websites attracted an average of more than 52 million unique monthly visitors in aggregate in the second quarter of 2019.

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In hospitality specifically, CoStar Group currently provides basic building information on 80,000 hotels, 45,000 hotel sale comparables and 4,500 hotels offered for sale. Comparatively, STR aggregates data on occupancy rates, average room rates and revenue per available room from more than 65,000 hotels worldwide, which together represent nearly 9 million rooms in more than 180 countries. CoStar Group plans to integrate STR data within CoStar to create new products that provide building data, income and occupancy information, trend reports, sales comps, for sale information and more.

“Combining STR’s capabilities with the significant CoStar data assets will allow for creation of new benchmark products for commercial leases and multifamily operating metrics that would be extremely valuable to owners and brokers and property managers,” said Florance. “Our combined technology, design and development capabilities will accelerate STR’s product development pipeline. In addition to enhancing its current online products, CoStar plans to invest in and grow STR’s net operating income and forecasting products.”

According to Florance, STR’s revenue for 2019 is expected to be approximately $64 million, with adjusted earnings before interest, tax, depreciation and amortization of $16 million for an EBITDA margin of 25 percent. CoStar anticipates investments in new products will generate annual revenue growth of about 20 percent—roughly two times its current growth rate—and profit margins in line with its long-term goal of 40 percent adjusted EBITDA margins by 2023.

Florance told investors STR will continue to be led by its current management team, which includes Amanda Hite as president, Elizabeth Randall Winkle as chief strategy officer and Robin Rossman as managing direct of STR Global.

"We are very excited to become part of CoStar," Hite said in a statement. “CoStar brings leading technologies, analytics and sales capabilities that we believe will enable STR to accelerate growth and increase the value and insights we provide to our hospitality clients. This combination also represents an outstanding career opportunity for all of our employees around the world.”

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