Since its inception in 2018, limehome has expanded its property portfolio by at least 50 per cent a year to a current total of 7,100 apartment units across Europe. Co-CEO and co-founder Josef Vollmayr gives Hospitality Investor a look inside his “expansion factory.”
For a company of 250 employees with offices in Munich, Berlin, Madrid, and Milan, and an extensive network of serviced apartments in 10 countries, limehome has a relatively low profile. “As long as we are known in the real estate markets, that’s the most important thing and it’s there that we invest most of our time,” says Vollmayr.
Behind this ability to scale rapidly is a suite of proprietary software created by the company’s team of 60 software engineers and data scientists. This includes an algorithm that trawls real estate platforms looking for opportunities.
“With our scraper methodology, we cherry pick from real estate platforms. So, if there is a conversion space in an attractive city on Idealista, for example, our expansion manager in Italy gets a notification. We’re able to assess hundreds of locations a day, and we send out four or five proposals a day. We’ve built an expansion factory.”
Once an opportunity is selected, limehome quickly establishes feasibility and P&L forecasts, again, with its own software. “We can type in the address and, based on the scraper and data pool we have built, it tells us exactly what ADRs we’ll achieve for the next 12 months. Also, knowing our operational costs with a very high accuracy, the only uncertainty that remains is the rental contract. We can basically calculate backwards how much margin we want, how much cash per unit we need to invest and so forth, and we set up offers quite quickly.” For all limehome serviced apartments, ADR for the year to date stands at €110 with a daily variance between €161 and €93.
Using its own technology to establish what rent it is willing to pay, limehome typically signs 20-year lease agreements. “What sets us a little bit apart is that on 80 to 90 percent of the deals we are looking into, we don’t have any competition, because first, we’re quite successful on the conversion side and have built up an internal team to support and make the conversion as easy and risk-free as possible. Secondly, we can go into much smaller properties which are less relevant for other operators. Our model’s efficiency extends beyond A cities, we also go into B and C cities. All in all, we can source our locations from a huge pool of supply. With the A city deals, everyone is on them, and they get very expensive.”
“Two or three years ago we were fighting against office or retail, and it was basically a bidding process. Now developers will say: ‘I need this yield. Can you make this rent? Does it work for you?’ And we get the deal.”
A high proportion of limehome apartments are conversions, but up to 40 per cent of former office and retail floor plans do not work because of the dead space in the middle of these buildings.
“Still, there are sometimes creative solutions,” says Vollmayr. “We have one property that was a well-known department store in Germany and we built an atrium so there are sometimes solutions to bring in additional light.”
A major contributor to profitability is limehome’s tech-first consumer-facing operating model which keeps labour costs to a bare minimum: “From day one, we built a model that allows us to manage the guest stay without manual interaction: maintenance tasks, cleaning, answering the guests’ questions, checking them in, payment. For 75% of our stays, everything runs automatically through our systems and applications so there is not one single manual interaction.”
The company’s first focus was the DACH region, then Spain, now Italy, and elsewhere in Europe. “We hope to announce our market entry in the UK very soon, also another signing in Belgium, and we have openings in Lisbon, Porto and Barcelona to announce, among others. The only major country in which we are currently not investing major resources is France. France in general is a bit difficult, as the regulation is complex and especially Paris is quite overheated due to the Olympics. We prefer to grow sustainably, but we are always open to opportunities in France.”
Looking to the Middle East, the region is very promising for the company’s business model. limehome is exploring opportunities, together with one of its investors, a large family office from the region. But timing matters, and the region’s real estate prices have skyrocketed after becoming a safe haven amid geopolitical crises, says Vollmayr.
“We look opportunistically at a few opportunities. However, the market will require some significant adjustments to our product and service level as well as require a larger team on the ground. only makes sense if we started with a larger portfolio right away.”
limehome has eight investors and has secured a total of €80m in funding. Its lead investors are HV Capital, Picus Capital, Lakestar, Capital Four and AW Rostamani Group. Its most recent funding of €45m was a Series B round in November 2022.
“We’re in a privileged situation. We do not need any further funding. Why would we give away shares? We can execute our pipeline and we are still very aggressive on the signing side. We have become very cash efficient. And basically, we can organically grow by 50% plus every year. But of course, if there are some strategic options, we may consider doing an additional funding round,” he says.
Vollmayr adds that consolidation is happening, and he expects plenty of M&A activity over the next two years: “We hear of a new M&A opportunity every month. Many people think now is a good time to sell.”