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Divvy Homes, Once Valued at $2 Billion, Is in Talks to be Sold for Parts

Divvy Homes, Once Valued at  Billion, Is in Talks to be Sold for Parts


Divvy Homes, a Silicon Valley-backed firm that promised another path to homeownership for customers of modest means, is in talks to be offered to an operator of single-family house leases, partially as a result of excessive mortgage charges has made house shopping for tough, in line with individuals briefed on the matter.

The firm instructed workers of an impending sale, the individuals mentioned, and a number of other employees have been laid off previously few weeks forward of an announcement.

Several officers with Divvy, a so-called rent-to-own firm primarily based in San Francisco, didn’t reply to requests for remark. Fast Company, which first reported the possible sale, mentioned the acquirer was Maymont Homes, a division of Brookfield Properties.

A spokeswoman for Maymont Homes, primarily based in South Carolina, didn’t reply requests for remark. A spokesman for Brookfield declined to remark.

The deal, one of many individuals mentioned, is anticipated to be accomplished subsequent month.

Divvy, which as soon as operated greater than 7,000 properties in 19 metropolitan areas within the United States, had struggled in an period of high-interest charges that made it tough for customers of modest means to get a mortgage. The firm, based in 2017, additionally was tormented by complaints from prospects about failures to make house repairs in a well timed style and the comparatively excessive rents it charged.

Divvy’s portfolio of properties is smaller than it was once as the corporate has sold-off vacant properties lately.

The proposed sale comes because the housing market stays out of attain of many Americans due to a mix of excessive mortgage charges, excessive house costs and a scarcity of provide of latest properties. The common charge on a 30-year mortgage, the most well-liked house mortgage within the United States, is round 7 p.c.

Divvy began with a lot fanfare and monetary backing from two Silicon Valley enterprise capital companies — Andreessen Horowitz and Caffeinated Capital, in addition to the hedge fund Tiger Global and a Singaporean sovereign wealth fund. The agency, which at onetime was valued at $2 billion, mentioned it might reinvent the rent-to-own mannequin and make it extra shopper pleasant.

An aggressive advertising technique led by Adena Hefets, Divvy’s co-founder and chief government, resulted in favorable write-ups on the corporate within the media.

Rent-to-own companies have traditionally crammed a distinct segment in lower-income communities, the place so-called small greenback mortgages are exhausting to return by. But they typically market rundown properties picked up on a budget, and the worst companies — a few of which have been fined and sanctioned by state attorneys basic — are fast to evict renters and reap the advantages from enhancements made by hopeful owners.

Divvy supplied a unique mannequin by which potential owners have been ready to decide on any home they wished on the open market. Divvy would purchase it, after which hire it again to prospects who would have three years to get a mortgage to both purchase the home or vacate. The firm charged tenants greater than market-rate rents as a result of a few of that cash would go towards the down cost on a sale value that was locked in at the beginning of a lease.

Some prospects had success changing from renters to owners. But many have been both unable to get a mortgage or had issues getting Divvy to make repairs to the properties.

The firm’s monetary struggles started to emerge after the pandemic, when rates of interest started to soar due to inflation. Higher charges led to not solely greater mortgage charges but in addition greater borrowing prices for Divvy — funds it wanted to buy properties. Over the previous two years, the corporate has had a number of spherical of layoffs as mortgage charges remained excessive even because the inflation charge started to return down and the Federal Reserve lower rates of interest.

If the deal is accomplished, Maymont, a extra conventional house rental firm, will honor the entire current buy-to-rent contracts with Divvy prospects, mentioned an individual briefed on the matter.

High mortgage charges have affected different massive rent-to-own firms. Home Partners of America, a competitor of Divvy, which Blackstone acquired in 2021, largely paused writing new rent-to-own contracts with prospects when mortgage charges started to surge.

Blackstone has since acquired Tricon Residential, a big single-family rental firm. The non-public fairness agency is within the technique of folding Home Partners into Tricon.

Kirsten Noyes contributed analysis.

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Written by EGN NEWS DESK

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