When Tech Companies Buy Apartment Portfolios
man holding apartment building model, with overlay of tech graphics

By Paul Bergeron |

July 21, 2022 |

Updated August 1, 2022

7 minute read

Two recent acquisitions have captured the attention of third-party managers and industry analysts.

A rumbling is quietly building momentum within the apartment industry’s third-party management model that could have some companies thinking differently about offering short-term rentals and partnering to improve their operational technology.

Twice this year, short-term housing platforms have purchased property management portfolios. In January, The Guild purchased CREA Management and in March, Alfred purchased RKW Residential. 

While not monumentally sized acquisitions, both turned a few heads among apartment management circles as many are looking to see what could happen next. Some industry observers see similar deals ahead.

These acquisitions effects are many-fold. Namely, these tech companies are now operators that firmly believe they can better drive net operating income (NOI) at the property level. 

They are finding the apartment industry is ripe for innovation and that there’s little better way to incorporate, help develop and test their technology through their own housing portfolios.

Alfred reports that today on average, less than 1% of a property’s budget is put toward technology, unlike other innovative industries, which invest closer to 10%, based on recent research from Statista, McKinsey and Deloitte.

The Guild, a tech-enabled hospitality startup delivering community-based flexible living experiences in urban areas, added 5,000 apartment homes to its portfolio with the purchase. It now operates 7,000 units across more than a dozen communities and seven markets, including Denver; Bay Harbor, Fla.; Miami; Cincinnati; Austin, Texas; Dallas; and San Antonio.

The Guild merges the traditional hotel and urban living experience, creating a sense of home for travelers or renters, according to its website.

The Guild has plans to expand to 10,000 units in the top 25 markets during the next 18 months; target markets include Atlanta, Boston, Los Angeles, Nashville, Tenn., New Orleans, Philadelphia and Washington, D.C.

The Guild views the acquisition as something that not only will drive portfolio growth, but will add senior talent to its executive team, including Katya Watson, who will serve as President of Multifamily Operations for The Guild.

Welcoming 40+ Data Scientists

For RKW Residential, it also views the merger as one that will boost its technology capabilities, says its Executive Vice President of Marketing, Joya Pavesi.

Launched in 2014, RKW quickly became one of the fastest-growing property management companies in the U.S. Headquartered in Charlotte, N.C., the company’s portfolio is 90% Class A units including 2,200 single-family rental units, with 40% representing lease-up in core locations.

“Generally speaking, right now, the apartment industry is thriving,” Pavesi says. “We’re seeing double-digit rent increases on lease trade-outs. Demand right now is the highest I’ve seen in my 17 years in apartment management.”

Says Pavesi about having RKW Residential under Alfred, a residential technology and management platform: “We are excited about the emerging trend of tech and management coming together under one umbrella in multifamily. It’s been a bonus, because we now have Alfred’s 40+ software engineers working on our behalf – that’s more engineers than what some of the biggest apartment operators employ. 

“This helps us to continue to advance our platform, and for a company like Alfred, it gives them us: An apartment management company that can roll out new technology, provide an accelerate feedback loop and deeply measure how it performs across a large portfolio.”

Alfred CEO Marcela Sapone, with a footprint that expands to over 300,000 residents in single-family and multifamily rentals, says bringing that level of expertise to operations “is massive, and it speaks to why RKW was uniquely suited for this acquisition. 

“RKW’s leadership has long sought to stay ahead of the curve when it comes to innovation and, for instance, was an early industry adopter of AI for prospecting and lease-ups. It has done an incredible job educating and incentivizing its teams on the ground to utilize tech like our platform.

“The teams will know how to uncover the practical applications of the predictive analytics produced by the data scientists.”

Sapone says she saw this acquisition as an opportunity to transform the multifamily housing industry, and specifically multifamily property management, during a time when more Americans are opting to rent and to do so for longer periods of time. 

“Despite the fact that 40 percent of Americans are now renting their homes, the landlord and renter dynamic is fragmented,” she says. “Renting is often the greatest expense a renter has, so the expectations for the renting experience have changed dramatically. Marrying our technology platform with a best-in-class operator like RKW positions us to offer the most innovative and rewarding renting experience.”

Trending: Tech Companies Buying Apt Portfolios

For these reasons, Pavesi said she senses the industry will see more tech companies buying property management owners and operators. 

The merger also gives Alfred the chance to have executive oversight into how its technology is being used by its clients –us – to ensure that its capabilities are being fully realized. 

Pavesi said that a major challenge for third-party operators during the past 18 months was the large volume of property transactions taking place.

“For third-party managers, that can be tough because you the chances of maintaining management is largely dependent on who has the highest bid and ultimately buys to asset. 

“Many new apartment property ownership groups have their own management platform or have preferred national third-party management partners in place. This makes it harder for us to retain assets. With interest rates climbing recently, I can see how the transaction volume could decline and relieve some of that anxiety.”

A Sign of Things to Come

Sapone says she thinks the apartment industry will see the appetite for such acquisitions increase, but the barriers to entry are significant. 

“We did extensive industry research to identify RKW, which proved to be the ideal partner with inherent synergies to Alfred’s mission,” Sapone says. “Any tech company looking for a comparable multifamily property manager to partner with would have its work cut out to find [its ideal match] like this one. 

“From there, your investors and the capital markets must share the same belief in the opportunity. So much of the interest and discussions in the months ahead might not lead to successful acquisitions.”

Zain Jaffer, Investor and Entrepreneur, Zain Ventures, a venture capital group that is focused on housing technology, said that as the sophistication of AI technologies increases, “we will start to see more and more industries – including some unexpected ones – taking advantage of the opportunities it presents. 

“The recent boom in PropTech has caused some understandable excitement throughout the commercial real estate market,” Jaffer says.

“These technologies, which can make nearly all aspects of the business more efficient and transparent, will be a game changer in the years to come,” he says. “Their impact is already becoming apparent as more property management PropTech companies begin to acquire traditional property management firms, and I think that this a sign of exciting things to come.”

AI ‘Can Reduce Labor Requirements by 92 Percent’

Jaffer says these companies have strong incentives to acquire property management companies to scale their portfolios quickly. “Though an essential, ever-present service, property management is a notoriously fragmented and labor-intensive industry in which it is very difficult for businesses to scale effectively. At a certain point, it becomes nearly impossible for companies to grow without completely overhauling their technological infrastructure: There’s only so many hands you can realistically have on deck at any given time.

“What we are seeing now is that firms that don’t want to implement these new technologies are simply selling. This allows tech-enabled firms to buy these companies and bring costs down by automating and streamlining management practices. Doing so enables these firms to make individual enterprises more profitable – doubling and sometimes even tripling their margins—while also helping consolidate the market as a whole.”

He said that one company he recently invested in, Poplar Homes, has been able to reduce labor requirements by up to 92% without seeing any negative effects. 

“Beyond – and, in fact, because of – its capacity to take on the workload of almost an entire team, AI can also help property management companies extend their services beyond what they have traditionally been able to do. This includes automating both paid marketing and lead generation, making it easier for renters to find properties and property managers to find renters.

“It’s clear that AI has the potential to completely reshape the nature of property management as we know it. As more and more tech companies buy into the property management space, we will start to see some truly accelerated growth. I think this is a trend to keep a very close eye on.”

What’s Next for RKW

Sapone says that through this acquisition, Alfred is now able to offer property owners and building partners new and enhanced management and operations capabilities – all under one roof.

“This acquisition gives us the edge to offer our partners an end-to-end solution,” she says.

Sapone says her research led her to find strength in the RKW Residential management team.

“RKW Residential has one of the most agile and innovative teams, deeply rooted by people-first initiatives and technology,” Sapone says. “RKW’s reputation as a premier management company is backed by consistent placement in the top management companies for resident and operator satisfaction. 

“It demonstrates their commitment to the resident experience, so it was evident there were philosophical services and cultural synergies with Alfred.”


Paul Bergeron is a contributor to units Magazine.