CoStar Losing One Of Its Top Execs As It Makes Big Spending Push
Real estate data giant CoStar Group is losing one of its top executives as it places major bets on the office and residential markets.
Chief Financial Officer Scott Wheeler is retiring and plans to leave CoStar in June after serving in the role for eight years, CEO Andy Florance announced on the company's fourth-quarter earnings call.
Florance said a search to replace Wheeler will begin immediately, and the previous two CFOs will aid in the transition.
“During those eight years, [Wheeler has] done a fantastic job at the helm of our finance department,” Florance said. “We've seen our revenues triple in that time period, and we've gone from strength to strength.”
The CEO said Wheeler, who was 60 at the end of the year, is retiring to enjoy his passion of mountain climbing. Wheeler and his daughter Anna in 2017 completed a challenge to summit the tallest mountain in all 50 states.
“Scott leaves with no disagreements or issue. He simply wants to enjoy the fruits of his labor. Godspeed, Scott,” Florance added, closing out the call.
The CFO's retirement comes as the company makes a big spending push, allocating more than $1B on advertising to expand its presence in the residential market and investing $339M on a 31-story office building.
Earlier month, CoStar acquired a 552K SF office tower in Rosslyn, Virginia, where it plans to move its headquarters into 150K SF after being located in downtown D.C. for the last 14 years.
Florance said the company looked at more than 25 sites as its 15-year lease at 1331 L St. NW near the White House was expiring, and it decided on JBG Smith’s building at 1201 Wilson Blvd. He said the company was able to purchase the property at a “significant discount to both recent valuations and current replacement cost” and that it received nearly $7M in tax and economic incentives from the state.
Florance said the company purchased the building intending to eventually execute a sale-leaseback, as it did with its downtown property after buying it during the Great Financial Crisis. The company purchased 1331 L St. NW for $42M in 2010 and sold it less than two years later in a sale-leaseback for $101M.
“We are betting that the office market is at a nadir again,” he said.
CoStar, which first grew into a dominant player in the commercial real estate sector, is pursuing the residential market. The company is working to expand market share for its Homes.com platform, which it acquired in 2021, and OnTheMarket in the UK, which it bought at the end of last year.
CoStar is spending $1B on a marketing campaign that kicked off with four Super Bowl advertisements. Three of those were for residential listing service Homes.com, and one was for Apartments.com. The company reported that the ads garnered 123 million live viewers and 560 million impressions in the week following.
This year, CoStar is buying ads for televised events including the Olympics, the Oscars, the Emmys, March Madness, the Stanley Cup playoffs and Major League Baseball, Florance announced. He said Homes.com would generate 80 billion impressions, reaching 90% of U.S. homes in 2024.
“We believe that no other competitor is investing close to what we're investing in this effort,” Florance said. “We believe we can grow share. We believe that we have a better product and can significantly shift share and create a very attractive ROI for investors.”
Florance said Homes.com was the fastest-growing real estate website at the end of the fourth quarter, with more than 600% year-over-year growth, according to Google Analytics. He said Q4 residential traffic totaled 95 million unique monthly visitors, representing 94% year-over-year growth.
He said the residential platform could also benefit from a legal battle that could change decades-old rules for residential brokerage commissions.
“I think we're going to do well and win, whatever happens, but I think it would create tailwinds if we ended up with a settlement that required buyers to pay their buyer broker a commission,” he said.
Overall, CoStar reported $2.2B in revenue last year, a 13% year-over-year increase. Q4 revenue was 12% above the same time the year prior, at $573M.
