Latch, Inc. (“Latch” or the “Company”), maker of the full-building enterprise software-as-a-service (SaaS) platform LatchOS, and TS Innovation Acquisitions Corp. (NASDAQ: TSIAU) (“TSIA”), a publicly traded special purpose acquisition company launched by leading real estate owner, developer, operator and investment manager Tishman Speyer Properties, L.P. (“Tishman Speyer“), today announced that they have entered into a definitive merger agreement that will result in Latch becoming a publicly listed company. The transaction values the Company at an equity value of $1.56 billion post-money. Upon closing, Latch’s common stock is expected to trade on NASDAQ under the ticker symbol “LTCH”.
Founded in 2014, Latch is an enterprise SaaS provider to buildings and residents that makes spaces better places to live, work and visit. From the beginning, Latch has worked hand-in-hand with many of the country’s largest real estate owners as partners and investors including Tishman Speyer, Brookfield, and more. The Company has booked over 300,000 units across more than 35 states, with one in ten new multifamily apartments in the United States built with Latch in 2019.
The Company’s proven management team, led by co-founder and CEO Luke Schoenfelder, will continue to operate and manage Latch following the transaction. Rob Speyer, President and CEO of Tishman Speyer and CEO and Chairman of TSIA, will join the Company’s Board of Directors upon completion of the transaction.
“Latch has successfully created an entire ecosystem around our full building operating system, devices, and partners that enhances the building experience for both owners and residents,” said Schoenfelder. “This transaction provides the capital for Latch to accelerate our product and market expansion and drive bookings growth. Furthermore, Latch will be able to harness Tishman Speyer‘s global real estate platform to more rapidly create new products, leveraging their vertically integrated real estate business and on-the-ground teams across the globe. We are fortunate to benefit from Rob’s vision and leadership and look forward to partnering with the entire Tishman Speyer team as we create value for our shareholders, customers, and residents by scaling our business in this next phase while we continue to enhance the way people interact with their spaces.”
“As a long-time real estate and capital markets investor, Tishman Speyer has helped accelerate many of the prop tech innovations reshaping our cities,” said Speyer. “We launched our SPAC knowing that our expertise and portfolio could power the next generation of innovators on the public stage. Our mission has been to partner with a growing company; one with a great team, a strong and differentiated business model and the ability to scale quickly through our platform. As both a customer and early investor in Latch, I know Luke and his talented team check all of these boxes. We look forward to serving as an incubator, operational partner and launch customer as Latch develops and expands its exceptional product lines.”
Technology Partner and Operating System for Modern Buildings
LatchOS is the first multifamily operating system that brings together all the elements that make up the modern building for building managers, residents, and service providers. Its core capabilities are designed to unify operations for everyone, and building owners have the flexibility to select the specific capabilities they need to meet their needs.
- Smart Access – The Latch smart access platform includes the Latch M, C, and R Series of digital entry devices that work for each space in a multi-family building, supporting residents, staff, and guests at building entrances, common areas, garages, elevators, and individual apartments.
- Delivery and Guest Management – Latch’s guest management capabilities enable unattended deliveries, package management, and guest reception through the Latch Intercom and Latch Delivery Assistant.
- Smart Home and Sensors – The enterprise device management capabilities of LatchOS integrate smart home and sensor control that work with Latch partners, such as Google Nest, ecobee, Honeywell, and Jasco, enabling management and control over thermostats, lighting and leak detectors, and more.
- Connectivity – Latch enables cellular connectivity through the Latch Intercom and Latch Hub, which bring internet access to new and existing building infrastructure, connecting devices for both new and retrofit customers in more flexible ways.
- Resident Experience – Latch’s mobile interface provides a seamless resident experience and community management capabilities, including resident onboarding, with the average Latch app user interacting with the app 4.6x per day.
With LatchOS, the Company is defining the building operating system category with a unique platform and a highly attractive financial operating profile:
- Deep relationships with many of the country’s largest residential real estate owners including seven of the ten largest NMHC developers, alongside other large NMHC developers like Alliance, Avalon Bay, Greystar, and NRP Group, plus AMLI Residential, Prometheus, RXR Realty, Toll Brothers, and beyond;
- A rapidly growing recurring enterprise software revenue model;
- Highly sticky customer relationships with building owners and residents;
- Long-term, pre-paid enterprise software agreements with high switching cost;
- Capital efficient customer acquisition and clear upsell opportunities; and
- Visibility to sustained Average Revenue per Home Unit (ARPHU) expansion with new and existing customers.
Latch is well-positioned to drive growth through:
- Extensive opportunities to sell deeper into new and existing customer portfolios;
- Further expansion into an enormous and underpenetrated $54 billion TAM through both new project construction and retrofit opportunities;
- Further expansion of ARPHU by delighting customers with new offerings like Intercom, Smart Home, and more, all accessible through the trusted LatchOS interface; and
- The opportunity for further disruptive consumer SaaS/internet businesses on top of the LatchOS enterprise channel.
The Company has generated strong results to date, including $167 million in Booked Revenue1 in 2020, which represents 49 percent growth from 2019; zero customer churn leading to 100 percent Gross Revenue Retention2; and a strong SaaS company Lifetime Value (LTV) to Customer Acquisition Costs (CAC) ratio of 6.8x3.
Partnership to Drive Growth and Accelerate Latch’s Expansion
The market for an apartment building operating system is massive, with an estimated 47 million rental homes in the United States representing an approximately $54 billion total annual market. Latch currently services less than one percent of this market and is well-positioned to drive continued growth. Partnering with TSIA will bring together Latch’s leading software and products with the global real estate platform of Tishman Speyer, the parent of TSIA’s sponsor. With an international portfolio encompassing nearly 80 million square feet of first-class real estate across many asset classes, including residential, commercial office, mixed use and life sciences, among others, Tishman Speyer will deliver synergies to Latch to further its growth and product expansion.
Upon completion of the transaction, Latch expects to have up to $510 million in cash, net of fees and expenses to fund growth initiatives, including growing the number of units on its platform, expanding to additional asset classes and spreading to new geographies.
This includes net proceeds from TSIA’s cash held in trust of $300 million from its initial public offering in November 2020 and approximately $60 million of cash on Latch’s balance sheet. The transaction is further supported by a $190 million PIPE at $10.00 per share from key investors, including funds and accounts managed by BlackRock, D1 Capital Partners, Durable Capital Partners LP, Fidelity Management & Research Company LLC, Chamath Palihapitiya, The Spruce House Partnership, Wellington Management, ArrowMark Partners, Avenir and Lux Capital. Latch’s existing equity holders have agreed to convert 100 percent of their ownership stakes into the new company, and are expected to own 64 percent of the pro forma company at close.
The transaction, which has been unanimously approved by TSIA’s board of directors, is expected to close in the second quarter of 2021, and is subject to approval by TSIA’s shareholders and other customary closing conditions, including any applicable regulatory approvals.
Additional information about the proposed transaction, including a copy of the merger agreement and investor presentation, will be provided in a Current Report on Form 8-K to be filed by TSIA today with the Securities and Exchange Commission (“SEC”) and available at www.sec.gov.