A Dublin startup selling stakes as low as $1,000 for its AI-guided real estate investments has secured a $200 million credit line to speed up purchases of Airbnb vacation rentals. Meanwhile, it's developing a treehouse resort.
ReAlpha Tech Corp. relaunched its $75 million equity campaign in September after suspending it for several months to deal with regulatory issues. The pause was beneficial for the company to revamp strategy and land strategic partnerships with major industry players, said Mike Logozzo, CFO and COO.
"It allowed us to slow down to enable us to speed up," Logozzo said. "We feel as though the best is yet to come for us."
The credit facility from New York City-based Churchill Real Estate will enable ReAlpha to buy up to 500 properties, he said.
Down payments come from the company's public offering, using Regulation A of the 2012 Jobs Act to sell $10 shares in a "mini-IPO." The offering by subsidiary ReAlpha Asset Management Inc. closes in early December.
Investors are buying into a portfolio of properties that are then listed as Airbnb rentals; they also get discounts on stays based on investment size. Eventually syndicate members would be able to buy fractional shares in individual properties.
"It was really all about democratization and giving people access to an asset class they would not have had access to on their own," Logozzo said. "Having all these investors interested in us as a company and wanting to be syndicate members – if we do this correctly, this could be huge."
ReAlpha had previously raised $6 million in 2021, led by Dublin developer Crawford Hoying, to develop its software. It borrowed from banks to buy its first 16 properties in Dallas and Miami. It plans to expand to Tennessee, Arizona and California.
"If we truly want to continue to grow to be what we aspire to be, we’re going to need institutional investors," Logozzo said. "It’s a capital-intensive business."
The Churchill deal was one of several developments this year:
ReAlpha landed a management agreement with publicly traded vacation rental company Vacasa Inc. (Nasdaq: VCSA). The Portland, Oregon, company has right of first refusal to manage ReAlpha properties when it buys in markets where Vacasa operates.
Vacasa gets a fee of 20% of the gross rental, according to ReAlpha's offering circular. ReAlpha may bring management back in-house once it grows to a larger scale.
"This enables us to focus more on acquisitions and guest experience," Logozzo said. "We can focus on what we do well."
The startup also opened a Florida brokerage to speed property acquisitions.
In October, ReAlpha announced it's developing the first U.S. resort of suspended spherical treehouses built by Canadian developer Rare Treehouse Resorts. That company's first three-sphere resort is on Vancouver Island. If the first site in California succeeds, ReAlpha would seek other markets.
The startup is seeking a separate specialty lender for the project, not using the Churchill debt.
The treehouses reflect ReAlpha's strategic shift over the year, Logozzo said. The company's initial strategy was to buy homes that it would renovate before turning into short-term rentals, but that takes too long.
Now it seeks rental-ready properties, and is increasingly turning to unusual ones like tiny homes and the spheres. Airbnb has reported that demand is soaring for rentals that offer unique experiences, resulting in $1 billion in rent in 2021, prompting the site to add the "categories" search function.
ReAlpha's software searches listings in its target markets that have optimal location and other properties, surfacing the best prospects for humans to evaluate for purchase. It looks for single-family homes, duplexes, triples and quads.
"We want to go into markets where we have a relatively small market share and we're not cannibalizing ourselves," Logozzo said. "It’s really about smart buying, going into areas based on the data."
The mini-IPO had first launched in September 2021, but was suspended this spring after some states objected that ReAlpha had not filed required "blue sky" notices. Following settlements it still can't sell shares in Massachusetts, Maryland or Hawaii, according to a regulatory filing.
The company replaced the outside law firm that had been responsible for the filings, Logozzo said.
"As a startup you rely a lot on other people to help you," he said. "We've been able to resolve the issue."
Another benefit of the pause, he said: ReAlpha wasn't buying properties as prices soared, and now home prices could fall because of interest rate hikes.
Central Ohio is home to other Airbnb investment platforms, including Rhove, which sells fractional real estate ownership at $1 a share, and Airriva, which was the region's fastest-growing private company by three-year revenue in this year's Columbus Business First Fast 50 awards.
"This is a $1.2 trillion industry," Logozzo said. "There's a lot out there for people to come on board."
ReAlpha is not using its Churchill credit facility toward development of a treehouse resort, instead seeking a separate specialty lender. Also, expansion to new states is planned for the future. A previous version incorrectly described the treehouse financing and expansion timing.
