Opendoor accumulates $ 9 billion in borrowing capacity
Opendoor is trying to outshine its competition in the iBuying Wars, amassing billions in new borrowing capacity to buy more homes.
The company recently put in place a modified mezzanine debt facility with a $ 3 billion limit, Bloomberg reported, which, combined with other transactions, increased its borrowing capacity to $ 9 billion.
Bloomberg noted that with the facility of $ 3 billion plus senior debt, Opendoor has the capacity to acquire over 40,000 homes at an average price of $ 350,000 per home.
Opendoor isn’t the only iBuying company looking to increase its buying capacity, as Bloomberg reports that Zillow is looking for more than $ 1 billion for a few unrated bond offerings. In August, the company raised $ 450 million through a home-backed bond it planned to overturn.
Buying businesses make a profit by buying a home, making the necessary repairs, and putting it back on the market as quickly as possible. Bloomberg noted that short-term debt is vital for the industry so that companies can continue to shop.
iBuying is still a nascent factor in the housing market. In the second quarter, iBuying’s four largest companies made about 15,000 home purchases, or just 1% of all homes purchased across the country during the same period.
Opendoor is in good company with competitors like Zillow and Offerpadis who aspire to do more. Bloomberg has already reported the company hopes to account for 4 percent of all home sales in 10 markets.
Opendoor has overcome its share of struggles during the pandemic.
Shares of the company were down more than 16% at Monday’s close since the start of the year. In 2020, the company reported a 45% drop in revenue, from $ 4.7 billion to $ 2.6 billion. CEO Eric Wu previously attributed the drop to the pandemic, as most iBuyers suspended home buying during the early days of the pandemic due to difficulty valuing homes.
[Bloomberg] – Holden Walter Warner