The Sale Leaseback market reached $24.3 billion in 2021 up from the pandemic induced low of $12.7 billion in 2020, nearly approaching the $27.5 billion market high in 2019, according to SLB Capital Advisors. A sale leaseback enables a company to sell an asset to raise capital then lets the company lease that asset back from the purchaser.
For many small and medium-sized businesses, that asset is typically real estate. In many cases, those firms found out that they were in the real estate business, rather their core mission, tying up much of their capital in long-term real estate deals.
Keyway was founded by Matias Recchia in New York City in 2020 to help small and medium sized businesses unlock their real estate holdings into cash they can then reinvest in the business.
The company offers a commercial real estate platform that makes it easy for business owners to sell their property for the full value while remaining in the same location with a long-term lease. Keyway provides a data-backed offer, standard contract and an online deal process to ensure a fair and fast closing. The company is primarily focused on the medical sector, covering medical office buildings along with dental and veterinarian businesses
“Real estate really plays a crucial role as to whether small and medium businesses survive or not. And a lot of the edge that larger companies have is real estate. Starbucks’ real estate strategy allows it to out compete local coffee shops for the best locations, for example. Also, if a smaller business is in trouble, they’re not able to free up liquidity fast in order to pay their debts and continue to operate, even if they own the real estate. So this idea of real estate playing a huge role in businesses stuck with me. And when I exited my previous business and moved back to New York, I thought we could really enable smaller businesses to thrive if we help them realize the value of the real estate or think about the real estate in more creative ways,” says Recchia.
In parallel, he was seeing how the emergence of dozens of companies that were changing the way in which residential real estate was being transacted through better automation and software platforms. He thought he could apply his knowledge of commercial real estate, focus on the smaller transaction side of the market that the likes of Black Rock didn’t already dominate, automate the onerous paperwork through software and machine learning and make the process simpler for smaller businesses that don’t have real estate expertise. He and his cofounder and COO Sebastian Wilner set about building Keyway.
“It was a blessing and a curse to start the business during Covid-19, but one of the good things that we were able to do is hire a great team to help us during the summer of 2020. To really nail down the idea and look at different verticals, look at different types of transactions and build out a true thesis. That summer, we spoke to over 400 business unit business owners, which were thinking about doing real estate transactions and really understanding how Covid-19 had affected them and what did that mean for them. We learned by doing our first couple of transactions and just did them one by one. And as we transacted more, we started automating parts of that. And then we did a seed round of investments,” says Recchia.
Keyway raises capital to transact their real estate deals with the idea of creating a marketplace in which they connect real estate investors that are really interested in having access to real estate opportunities at scale. Prior to Keyway, closing a $1 million deal took the same amount of time and effort as a $50 million transaction. At the same time, Keyway’s programmatic platform offers small and medium businesses access cheap capital at scale.
“Our vision as a company is not to offer a single product. So it’s not just sale leasebacks or just rent to own, it’s really offering them a suite of products so that they can count on us, whatever their objectives with real estate is. I think a lot of Prop Tech companies are started by trying to disrupt brokers, our view is that brokers have a role in this market. They have local relationships and business owners trust them. So a lot of it is working with brokers as well and explaining to them the benefits of working with us,” says Recchia.
Today, Keyway continues to ramp up its transactions. According to Recchia, the company has $50 million in asset transactions so far, with the average transaction around $2 million. The company is currently focused on single tenant buildings, or buildings operated by only one business. So far Texas and Arizona are high growth markets for them, but they transact in every market and expect to reach $200 million in property transactions by year end.
As a result, Keyway has attracted $85 million in funding to date, including $70 million in debt financing underwritten by Cross River and i80 Group on March 4, 2022. Canvas Ventures led the company’s $15 seed round in November 2021, with participation from Montage Ventures, FJ Labs and Crosscut.
Recchia was born in Argentina. His father was in the oil and gas industry. The family moved to Venezuela when he was young and it’s where he spent much of his childhood. With the political upheavals in 2000, the family moved to the US. Recchia then went to the UK to attend the London School of Economics.
“I came back to Venezuela actually to graduate from from college there. My first job was at Procter and Gamble while I was still at school. I was lucky enough that I basically ended up randomly reporting to the CFO of Latin America. I was participating in M&A transactions in Germany, in the US, travelling over to Mexico or Brazil. I learned a lot about corporate finance, and was inspired by P&G’s CEO at the time A.G. Lafley,” says Recchia.
He went on to get his MBA at Harvard Business School and started working for McKinsey in their New York office after graduating. Then some friends from business school asked him to help them start a “Facebook” for Latin America that evolved into a social gaming platform called Vostu that grew to 400 people, with a large development team in Argentina. But the company was heavily dependent on Google’s Orkut social platform, which Google shut down and the company’s fortune’s followed. After Vostu, he started a company called IguanaFix that was a marketplace for home improvement services, connecting independent contractors to work opportunities and creating transparency in that market. In August, 2021, U.S. toolmaker Stanley Black & Decker Inc acquired a stake in IguanaFix, which it later sold to MadeiraMedeira. He left IguanaFix to bootstrap Keyway.
As for the future? “We want to completely change the way in which real estate is transacted from something that’s painful to what we’re calling internally a ‘joyful experience.’ We think that we will reduce the cost associated with these businesses to operate, give them more flexibility and at the same time, give institutional investors a different and complementary asset class they don’t have now in their books,” concludes Recchia.