Keyway secures financing to buy property from small business owner and lease it to him – TechCrunch

Groovea startup that buys properties from small and medium-sized business owners and then leases them to them, secured $70 million in debt financing following a $15 million capital raise.

Founded in September 2020, the New York-based company – formerly called Unlock – says so uses data science to “identify, underwrite and close deals 10x faster than incumbents. He describes himself as a “managed market.”

Keyway’s first product is a sale-leaseback offering for business owners. The company buys the building from an owner and then signs a long-term contract with him. CEO and co-founder Matias Recchia says it empowers business owners to free up capital to grow their business while staying in one place.

“We close deals with 100% cash payouts in 4 weeks or less with no fees,” he said. “Typically, sale-leasebacks on the long tail of commercial real estate take 13 months to complete, with 10-15% of transactions going towards fees. And 20% of deals fail because the buyer didn’t have secured financing.

To date, Keyway has secured deals to acquire over $50 million in properties across multiple states, including Georgia and Texas. Recchia estimates that the company will process “at least $200 million” by the end of the year.

“We made more transactions in February this year than in all of last year compared,” he said. Keyway currently has 15 clients with closed deals and an additional 100 clients in its near-term pipeline. Recchia said the company was initially focused on the medical sector with plans to expand to dental and veterinary companies.

The $70 million debt financing – which was led by Cross River, i80 Group and several community banks – will be used to secure more properties in the United States.with participation from Montage Ventures, FJ Labs and Crosscut.

“We expect to significantly ramp up portfolio acquisition over the coming months,” Recchia said. “Additionally, we are launching an expansion product to help business owners expand to a new location. We will acquire a new location for them, finance construction costs and sign a long-term lease for them. »

Keyway says it focuses on the “under $20 million in assets” segment, which it says is underserved. The company says the majority of real estate investment trusts (REITs) focus on deals over $10 million, but properties valued below that price account for a third of the value of commercial real estate in the United States. .

“There is a great opportunity within the CRE industry for a technology-based capital solution to streamline underwriting processes and shorten transaction times,” said Peter Frank of i80 Group, in a written statement. . Keyway claims that by using data and machine learning, it can reduce closing time by 90% and costs by 50%.

One wonders if the sale-leaseback model is ultimately just for the business owner in that the property is no longer considered an asset, which may impact its ability to obtain lines of credit or future loans. A sale-leaseback also means that a seller cannot deduct property depreciation, property taxes and mortgage interest from their tax liability. However, the model seems to be gaining popularity. TechCrunch recently reported on withco raise $32 million for a similar offer with the biggest difference being that it buys properties from a business owner – rather than from them – then rents it out to them, giving them the opportunity to buy it back from them in the future. EasyKnock, a startup that buys homes and rents them out to sellers, recently raised $57.2 million in Series C financing.

Recchia said Keyway is “capable of including buyout clauses” in its sale-leaseback agreements.

“We view business owners as long-term partners and seek to create creative solutions that align with their short- and long-term goals and can adapt to changing environments,” he said.

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