Keyway, the proptech that purchases properties from small and medium-sized business and leases them back, has raised $70 million in debt financing led by Cross River, i80 Group and a number of community banks.
Founded in September 2020 – and formally known as Unlock – Keyway’s tech stack offers a sale-leaseback option for SMB owners looking for liquidity.
According to Keyway, these owners are then given the opportunity to access capital that is currently tied up in their real estate while remaining in the same location with a long-term lease, removing the costs and revenue losses generated by moving.
The solution uses machine learning to source and underwrite real estate and aims for a closing in just four weeks. The proptech then leases it back to the SMBs allowing them to access capital quicker and with fewer restrictions.
In its current state, the traditional sale-leaseback process can be painful for business operators as it can take months to complete a transaction with added closing costs. Keyway, however, provides an all-cash offer with a four-week closing.
There has to be more flexibility and more optionality for these complex small and medium business owners,” CEO and co-founder Matias Recchia said at the time of KeyWay’s seed round. “A large player like Starbucks has a variety of means for sourcing locations, but a very successful mom-and-pop coffee shop on the corner doesn’t have the same alternatives. So we want to be the group for them.”
So far, Keyway has entered into contracts to acquire over $50 million in properties in several states, including Georgia and Texas. Recchia estimates the company will transact “at least $200 million” by year’s end, TechCrunch reported.
The $70 million in debt financing will go toward securing more property across the U.S.
In November, the proptech emerged from stealth alongside a $15 million seed financing round led by Canvas Ventures with participation from Montage Ventures, FJ Labs and Crosscut.
At the time of its seed round, the proptech was focused on targeting the under $10M net-lease contracts; however, Keyway’s expansion has shifted its plans to focus on the “under $20 million in assets” segment.
Sale-leasebacks no doubt can feel like a lifeline for SMB owners and homeowners. Still, there is market wariness because of how cheaply some owners sell their property to these proptechs and the fact the property is no longer considered an asset for the owner.
During the pandemic, real estate tech company EasyKnock shifted its focus towards marketing its sale-leaseback program to distressed homeowners financially impacted by the pandemic who needed quick cash. In 2021, only about a quarter of Easy Knock customers had bought back their home.
Regardless, the model is growing in popularity and giving many property owners a leg up in capital access.
“We see business owners as long-term partners and look to build creative solutions that fit their short-term and long-term goals and can adapt to changing environments,” Recchia told TechCrunch.