Casago, backed by investor Roofstock, is looking to solve the issue of scaling in property management with its pending $128 million acquisition of Vacasa, the largest U.S. based property manager with 36,500 homes under management. Vacasa had struggled with the issue of homeowner churn after acquiring many local property managers over the years. They switched to relying on their salespeople to find new homes to manage but still faced high homeowner turnover rates.
To address the scaling issue, Casago plans to sell off some of the merged company’s local operations and enter into franchise agreements with the new owners. This strategy allows the new company to make money by selling assets and earning franchise fees. Jeff Hurst, CEO of Furnished Finder, believes that franchising will be the superior model for a company of this size, as it allows for better buy-in from local operators who have superior knowledge of the market and how to grow their businesses.
In a strategy that has not been widely reported, Casago also brought on former Vacasa chief operating officer John Banczak as their own chief operating officer. The announced $128 million merger between Casago and Vacasa could be adjusted downward depending on factors such as homeowner churn and Vacasa’s liquidity. The deal price could be reduced if Vacasa’s number of units under management drops below a certain threshold or if Vacasa’s liquidity falls below a certain amount.
The specifics of the asset sales and franchising strategy were confirmed in a financial filing between Vacasa and Casago. While Vacasa currently does not have any franchises, Casago operates both company-led businesses and franchises. By implementing this strategy, the new company can capitalize on the expertise of local operators and potentially reduce homeowner churn. The deal price of $128 million represents a significant decline from Vacasa’s private valuation of $4.5 billion in July 2021 before going public. Vacasa declined to comment on the matter, while Casago did not respond to requests for comment.
In conclusion, Casago’s acquisition of Vacasa seeks to address the scaling issue in property management by implementing a strategy that involves selling off local operations and entering into franchise agreements. This approach aims to capitalize on the expertise of local operators and potentially reduce homeowner churn. The deal price of $128 million could be adjusted depending on factors such as homeowner churn and Vacasa’s liquidity. John Banczak, the former Vacasa chief operating officer, was hired as Casago’s COO. The success of this merger and the effectiveness of the proposed strategy remain to be seen.
