Marcus & Millichap has made an equity investment in the New York-based real estate investment tech platform EquityMultiple.
While its exact stake in the platform remains undisclosed, the firm said this partnership, which was initiated last month, allows sponsors and operators to connect with supplemental sources of private capital.
“Our investment into EquityMultiple allows Marcus & Millichap to be part of a leading innovative technology platform that further expands our array of capital sources and solution and creates synergies to facilitate the acquisition, recapitalization and restructuring needs of any commercial real estate transaction,” said J.D. Parker, the chief operating officer of the firm’s eastern division.
Founded in 2015, EquityMultiple now boasts a network of 50,000 accredited investors and has participated in more than $5 billion in commercial real estate transactions since its inception.
The platform, operating as both a website and an app, partners with real estate investment managers to access non-traded real estate investment trusts for accredited investors with a minimum of $5,000 to invest.
This marks Marcus & Millichap’s second recent proptech investment. In November, the firm announced an equity investment and commercial relationship with the San Francisco-based underwriting platform startup Archer. Archer focuses on automation in data collection and property analytics. Tapping into the latest networks for investors and machine learning may provide a needed boost for Marcus & Millichap. Significant real estate market headwinds, including record-high mortgage and interest rates continue to hinder deal flow and turn away institutional investors. Moody’s warned in this year’s commercial real estate report that the sector’s outlook will remain muted, as office vacancy rates remaining stubbornly high.
According to its third-quarter earnings Marcus & Millichap reported a net loss of $23.8 million in the first nine months of the fiscal year, a deficit that could be attributed to its sales volume, which was half of the volume recorded in 2022’s same period.
On its earning call, the firm’s chief executive, Hessam Nadji, said the economy’s high degree of uncertainty has widened the bid and asking price spread.
“Transaction timelines extended significantly beyond historical norms, and many deals fell out of contract multiple times, creating a drag on our team’s productivity,” Nadji said.
Investors experienced steep cuts in earnings per share – a 91% drop over the course of a year as of its latest earnings report for the third quarter ending on Sept. 30.
Other broker competitors reported significant pressure from property sale and debt financing slowdowns. CBRE Group Inc., the Dallas-based commercial real estate brokerage firm, which topped the Business Journal’s deal value list for the Valley last year, reported a 56% decline in its earnings per share for the third quarter. Throughout this period, major individual Marcus & Millichap shareholders sold significant amounts of stock – including Parker and board member Don Watters. No insiders have bought stock since August of last year.
Despite this, Marcus & Millichap’s leadership team ensured investors its balance sheet is strong enough to incorporate new tech and brokerage tools the firm hopes will expedite deal brokering when the market thaws. In partnering with a real estate crowdfunding concept, Marcus & Millichap opens various lines of capital, as well as preferred equity.
“EquityMultiple’s diverse array of real estate investment products expand a service line and broadens our spectrum of debt and equity sources,” Parker said.