Brazilian Digital Real Estate Firm Loft Buys Mexican Startup

(Bloomberg) -- Digital real estate platform Loft Holdings Ltd., whose founders met as junior bankers at Goldman Sachs Group Inc., purchased a Mexican startup, kicking off its Latin America expansion.

Loft, which was valued at $2.9 billion at a private fundraising earlier this year, purchased Mexico’s TrueHome in a cash-and-equity transaction, Loft’s chief executive officer, Mate Pencz said in an interview. Similar to Loft, TrueHome is a tech-enabled real estate broker, which buys and sells homes using e-commerce-like tools. But while Loft has grown focusing on major cities in Brazil, TrueHome has targeted Mexico.

“We had been looking at expanding to Mexico almost since the very beginning and we have a global ambition for the company,” Pencz said. “Mexico has very similar pain points to Brazil: The lack of transparency, the lack of data, the lack of trust.”

Latin American startups have attracted record sums of venture capital money this year, fueling their dreams of creating cross-border giants within the region. Loft’s main rival, QuintoAndar, a company valued at $5.1 billion, has set sights on Mexico, competing with Colombia-based startup La Haus, which already operates there. Others like digital bank Nubank and payment firms Ebanx and dLocal have also branched out to a number of countries in the region. 

Loft had already become a minority investor at TrueHome when the Mexican firm did its last private funding round, back in early 2020, Pencz said. TrueHome lists about 10.000 properties across five cities on its platform, making it one of Mexico’s biggest brokers, according to Pencz. 

TrueHome’s founders, Raul Villarreal and Alvaro Cepeda, are going to stay at the helm of the business and TrueHome shareholders will become Loft investors. Eventually, the Mexican startup will take on the Loft brand. Pencz declined to provide the total transaction value. 

The region’s venture capital largess has sparked a flurry of acquisitions. After raising $525 million in early 2021, Loft made four purchases, including TrueHome, Pencz said. It scooped up a traditional broker in Brazil and bought a firm that helps sell mortgages. It also acquired CredPago, which deals with guarantees for rental contracts. That transaction made Banco BTG Pactual one of Loft’s shareholders and valued CredPago at $530 million.

“We may still do some acquisitions opportunistically, but now the focus is to grow organically the new pillars we’ve added to our business,” Pencz said.

Residential real-estate transactions in Brazil and Mexico are often plagued with similar problems, being carried through small, brick-and-mortar brokers, with abundant red-tape and no centralized price database. Loft estimates over 600,000 used residential real-estate transactions are carried out in Mexico every year, while Brazil has about double that. They are both “large markets, but very concentrated in big cities,” Pencz said.

Pencz and Florian Hagenbuch created Loft in 2018 and the startup raised $950 million through venture capital and real-estate funds since inception, with backers including Andreessen Horowitz, D1 Capital Partners and Advent International. With some of Loft’s startup peers getting ready to go public on U.S. exchanges, Pencz said there are no specific plans, but that the company “is thinking about it.”

“Some of the acquisitions have already happened above the $2.9 billion valuation, reflecting our business growth,” he said.

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