US second home unicorn launches in London
Pacaso, a Silicon Valley startup that sells shares in luxury second homes, has expanded into the UK market – with other locations to follow.
The brainchild of Zillow co-founder Spencer Rascoff and Austin Allison, Pacaso sells shares in holiday homes ranging from one-eighth to one-half of their value. How often a co-owner can use the building depends on the size of their holding.
Since launching in the US in 2020, the company has bought second homes in 35 locations globally, making its European debut in November 2021 in Marbella, Spain.
Pacaso’s first London home is at 4-5 Queen Street in Mayfair, where a one-eighth share costs £1,084,000 and monthly expenses total about £675.
The startup taps into the growth of both fractionalised real estate ownership, in which many people own chunks of a single building (e.g. IPSX), and flexible residential ownership and rental products (e.g. JLL Short Stays or Blueground).
“You’re buying real property. You get the value of that appreciation and the liquidity that we get to provide in the Pacaso marketplace,” Razor Suleman, the startup’s global president, told PlaceTech at MIPIM, ahead of the UK launch.
Don’t say the ‘T’ word
Pacaso tries to distance itself from timeshares – so much so that it has a blog on its site explaining why what it offers isn’t a timeshare.
The biggest difference between the two is that Pacaso offers equity in a building, rather than just the right to use a space. Pacaso buys a home, puts it into a limited company and then sells shares in that company. As the value of the building rises or falls, so does the value of the share.
Working on a first-come, first-served basis, Pacaso lets owners book dates in their second home based on how much they own: someone with a half share has access to the building six months of the year, while someone with an eighth can book 44 days.
According to Suleman, Pacaso’s houses are occupied 87% of the year, partly due to its international userbase: “The Spanish school calendar is different than the British school calendar and the German school calendar.” People want to use their second homes at different times depending on their circumstances.
By maintaining consistently high occupancy, Suleman said Pacaso tries to have a positive impact on local economies year-round. “While we take ownership in that first period that we sell through, we’re going to be part of that community forever,” he said.
Shareholders are locked into their investment for 12 months, but there is no limit to how long they can retain it.
No SPAC in sight
Pacaso’s claim to fame is reaching unicorn status – hitting a valuation of $1bn – faster than any other US company, doing so in less than half a year.
To date, the company has raised $170m in equity and is already considering options in other European countries, including France, Italy and Portugal.
In the UK, Pacaso has bought three properties. Following its London launch this week, it expects to open a second location in the Cotswolds in April where shares start at £260,000.
As for the future of the company itself, while it will eventually aim to go public, there are no immediate plans to do so.
Asked whether it would consider a stock market listing via a SPAC in the way several other real estate startups did last year, Suleman said: “I can assure you that Pacaso would not pursue that opportunity.
“I think when you’re thinking about building an infinite business over the long run, we’re going to go through the proper channels to raise capital.”
But after a whirlwind 18 months of fundraising, securing more capital is not an immediate priority, Suleman said: “We’re very well capitalised on the equity side – but we’re always open to having interesting conversations.”