C2 Communities, founded by former advertising entrepreneur Hadar Goldman, has announced the completion of its first financing round, in which it raised $1.2 million. Prominent investors in the company, which has developed a technological platform for making the US rental market more efficient, include former Israel Ministry of Finance Accountant General and Ampa Group controlling shareholder Shouky Oren, Aspen Group CEO Guy Elias, Clal Insurance Enterprises Holdings Ltd. (TASE: CLIS) chairman Danny Naveh, Universal McCann Israel CEO Alon Stern, Roladin owner Kobi Hakak, and Delta Galil Industries Ltd. (Pink Sheet: DELTY; TASE: DELT) CEO Zvika Schwimmer.
Goldman, who according to C2 Communities' announcement owns thousands of housing units in Chicago and Houston, asserts that that the US rental real estate market is lagging behind the times, because it is controlled by money men and real estate developers indifferent to the needs of renters of 100 million US housing units.
There are 42 million rental apartments and houses in the US. According to US real estate company Zillow, people in the US spent $535 billion in 2015 on rent, including $239 billion on renting apartments and $245 billion on renting private homes. C2 Communities says that 40% of the buildings and sites are managed by small management companies with up to 500 housing units, and the rest by medium-sized (up to 3,000 housing units) and large companies. Greystar, the largest company in the market, reports that it manages over 400,000 housing units.
"I learned about this sector during seven years as a private investor," Goldman says. "There is very little technology there, and almost zero innovation, because people in the US say that there's no need to fix what isn't broken. Prices fell so low following the 2008 crisis that the market could only go up, so that if a tenant was dissatisfied and left, a new victim appeared willing to pay $50 more a month. This exploitation is about to change."
Goldman founded C2 Communities as a US company in late 2015, and development of software, which has been tried out on nearly 1,000 housing units in Chicago and Houston, began in mid-2016. The current financing round is designed to continue improvement of the software according to the lessons learned, and to carry out a broader pilot with 7,000-8,000 housing units. Another and significantly large financing round is slated for mid-2018 in order to promote the solution in the US market. "The platform has four props," Goldman says. "One prop is handling all the tenants' needs - reporting malfunctions, payment of rent, communications between tenants, and ordering services. A second prop is an interface for internal use by the management company and its communications with the tenants. A third prop is a connection with local merchants, who can offer the tenants in the area services and products at a discount, up to the level of ordering and payment through the platform. The fourth prop enables the management companies to create a rapid connection with professionals, say electricians and plumbers, through small tenders for carrying out work that has to be done."
Goldman bases the business model on the high cost of tenant turnover, reflected in the length of time during which the housing units are unoccupied, real estate agents' commissions, and repairs required for every such event. "Our working assumption is that you can no longer make a living in 2017 by exploiting someone else. This business model in the US has come to an end," Goldman declares. As an alternative, he is offering management companies software according to two models: $2 a month "for each door" managed or a commission on improvement of their business results caused by an improvement in service for the tenants. Another model is sharing the profits with local business owners doing deals with tenants in the area though the application.
Published by Globes [online], Israel Business News - www.globes-online.com - on November 22, 2017
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