Ladies and gentlemen, thank you for standing by and welcome to the CoStar RentPath Acquisition Conference Call. At this time, all participants are in a listen only mode. Later, we will conduct a question and answer session. Instructions will be given at that time. As a reminder, today's call is being recorded.
Replay information will be given out at the conclusion of the conference. I would now like to turn the call over to your host, Terra Spray. Please go ahead.
Good morning, and thank you all for joining us to discuss yesterday's announcement that the CoStar Group has agreed to acquire RentPath from Chapter 11 bankruptcy. Before I turn the call over to Andy Florence, CoStar's CEO and Founder and Scott Wheeler, our CFO, I would like to review our Safe Harbor statement. Certain portions of the discussion today may contain forward looking statements, which involve many risks and uncertainties that can cause actual results to differ materially from such statements. Important factors that can cause actual results to differ include, but are not limited to, those stated in CoStar's CoStar Group's February 11, 2020 press release and in our filings with the SEC, including our most recent annual report on Form 10 ks and quarterly report on Form 10 Q under the heading Risk Factors. All forward looking statements are based on information available to CoStar on the date of this call.
CoStar assumes no obligation to update these statements whether as a result of new information, further events or otherwise. As a reminder, today's conference call is being broadcast live on our website, where you can also find CoStar's Investor Relations page. Please refer to yesterday's press release on how to access the replay of this call. And back over to Andy.
Thank you, Sarah. I appreciate that. That was really well done. That was Sarah's first Safe Harbor statement. I think she's brilliant.
Welcome and thank you for joining us today to discuss CoStar's proposed acquisition of RentPath. As you saw in our press release issued yesterday evening, I'm very happy to announce that we have agreed to acquire RentPath for approximately $588,000,000 in cash. And we've entered into a purchase agreement with RentPath as the stalking horse bidder in connection with their Chapter 11 bankruptcy filing. The transaction is subject to customary closing conditions, regulatory review, as well as approval by the bankruptcy court. RentPath has long been an industry leader in advertising for multifamily properties and owns a number of valuable and recognized websites including rent.com, Apartment Guide and Rentals and livelovely.com.
RentPath has approximately 7 70 employees located throughout the United States and is headquartered in Atlanta, Georgia. The RentPath headquarters in Atlanta is literally across the street from our headquarters there and we see each other from our conference rooms. We have approximately 350 CoStar employees in Atlanta and we recently expanded our office there to accommodate growth. RentPath has an outstanding sales force of approximately 300 people across the country who have done an excellent job building deep relationships over many years with thousands of customers. We hold this sales team in the highest regard.
The company can trace its roots back to the late '70s as Haas Publishing Company, one of the nation's largest publishers of printed apartment guides at the time. The company continued in the print publication business for over 30 years until it was purchased by private equity owners in the midst of the company's transition from print to digital apartment rental publications. Unfortunately, during this critical change from print to digital, the new owners of RentPath load the company with significant amounts of debt, leaving it unable to invest in the products and marketing required to ensure long term success in a digital marketing environment. Currently, Google and other search engines increasingly place the paid advertising at the top of search results, which has driven the price of marketing those search engines up dramatically. For example, not more than 3 years ago, the cost of a headline term for apartment rental in Atlanta was $0.51 Today, the same headline term costs over $6 a 1000% increase over 2 or 3 years.
As a result, the cost to RentPath of purchasing consumer traffic nationwide to sustain the number of leads required by their advertisers increased by tens of 1,000,000, if not 100 of 1,000,000 of dollars, money that was not available because it went to pay interest on almost $700,000,000 of debt. RentPath was also unable to invest in B2C marketing similar to our Brad Bellflower campaigns starring Jeff Goldblum. Without significant consumer branding, they had lower click through rates on Google, lower unaided awareness, lower consumer intent and lower direct traffic. In 2019, RentPath revenue was approximately $227,000,000 and adjusted EBITDA was approximately $47,000,000 compared to 2018 rent pass revenue declined 9%, while adjusted EBITDA declined 24%. Financially, we expect the addition of Rent Pass business will significantly contribute to the top line growth and profitability of our multifamily business.
Beginning with our acquisition of Apartments.com back in 2014, we have since successfully integrated and invested in our apartments businesses, including acquisitions of Apartment Finder and ForRent, creating the presence necessary to sustain and grow marketing investments while leveraging efficiencies of a single technology and operating structure. One thing we're particularly proud of is the diversity of each of these acquisitions brings to our combined businesses and the opportunity it creates for employees of the acquired brands. When we look across our Apartments.com leadership and sales team, we have highly effective mix of talented people from all of our previous acquisitions. Paige Forrest, our national sales leader came to us for rent. Marcia Bollinger and Jamie Jump, 2 of our most successful senior sales leaders were formerly with Apartment Finder.
And finally, from Apartments.com, James Moon and Brian Henry currently lead 2 of our biggest regional sales teams. I believe this proposed acquisition significantly expands the range of opportunity for the great team at RentPath. CoStar Group operates a number of successful and rapidly growing online marketplaces, including loopnet.com, Lands of America, BizBuySell, Reala and obviously Apartments dotcom and others. These marketplaces need talented staff to fuel their growth and we believe that the team from RentPath is ideally qualified to help us grow them. We expect to achieve we do expect to achieve significant cost reductions in RentPath operations after integration, allowing us to increase our investment in marketing
rent.com, while
also improving margin.
We believe that the rent.com and Apartment Guide brands have significant future value with the right improvements. We know that renters like to visit multiple sites when searching for a place to live, and we customize our individual sites to cater to the specific needs of different consumers. We plan to invest in rent.com as the lead brand to reach potential renters of small properties and single family homes. A portion of the market that is often overlooked by the large apartment marketing sites that have historically catered to buildings with 100 units or more. Our investments in building online, integrated screening, leasing and rent payments into Apartments.com is beginning to gain traction.
In the past several months, more than 2,000 landlords of small properties have used our e commerce tools and to purchase online advertisements and leasing tools on Apartments.com. These ads are priced from $99 to $3.49 This is a very exciting opportunity because there are millions, if not tens of millions of small landlords who need a similar service. We feel that rent.com is the ideal URL to use to build out this new high potential business. At the same time, we plan to continue our investment in apartments.com as the lead brand for people searching for apartments. RentPath currently has approximately 28,000 properties advertised across its network of websites.
While we do have a certain amount of properties that overlap with the RentPath network, we expect the following integration, we could add over 7,000 incremental properties to the 52,000 properties advertised currently on the rent on the apartment.comnetwork, bringing us to 60,000 properties combined. As with our recent acquisition of ForRent, we are confident that properties currently advertising both on Apartments.com and RentPath will find even greater value for their current advertising spend when we combine the two networks. As you know, we have extensive experience successfully managing integration of overlapping revenue streams. Ultimately, our clients have saved money and enjoyed greater and higher quality lead flow. We are most proud of how satisfied our CUS clients tell us they are with our results that we're delivering.
Over tens of thousands of customer satisfaction surveys, Apartments dotcom has earned an incredible Net Promoter Score of 95. The transaction is subject to customary closing conditions, regulatory review, as well as approval by the bankruptcy court. As of this morning, RentPath secured lenders have agreed to provide funding for RentPath's continued operations throughout the bankruptcy and regulatory review process. Over the next several months, the debtors will conduct an auction that will be supervised by the bankruptcy court with CoStar Group serving as the stalking horse bidder. We expect the bankruptcy process to take approximately 4 to 5 months to complete and we expect potential regulatory reviews to take 3 to 12 months.
Regardless of the transaction timing, we are encouraged that all parties, owners, debtors and management agree that this transaction represents the best possible future for the RentPath business. We look forward to welcoming the RentPath network of websites and the hard working team to the CoStar Group family. I will now turn the call over for the best part to our Chief Financial Officer, Scott Wheeler. Get ready to be riveted. Wow, that's such a great introduction.
I'm
really feeling inspired and encouraged. Thank you, Andy, and good morning, everyone. Thanks for joining us today. So yes, we are excited to have the RentPath team join us and join up with Apartments dotcom and our network. We believe that combining RentPath's websites and deep customer relationships with our technology platform and marketing expertise will certainly provide the best value equation for our combined customers, consumers, employees and investors.
The purchase price specifically is $587,500,000 and is contingent on the business emerging from bank's fee process and the transaction receiving any and all approvals under the antitrust laws. The purchase agreement includes a break free of 10% or $58,750,000 if the deal is terminated because it does not receive antitrust approval as expected. Expect to acquire substantially all of the principal operating assets of the business and all of the employees post bankruptcy. We also expect to use a significant chunk of our current cash balance to pay for the acquisition. As Andy noted, the company's unaudited 2019 revenue was 2 $27,000,000 which represented a year over year revenue decline of 9% from $249,000,000 of revenue in 2018.
RentPath 2019 revenue includes approximately $198,000,000 of subscription advertising revenues and approximately $29,000,000 in revenues from various digital marketing services. These digital marketing services include direct search engine marketing campaigns for advertising clients, social and reputation management services, call center support and display and email marketing services. In 2019, the subscription advertising revenue declined approximately 13%, while the digital marketing services revenues increased around 40%, although the increase is on a much smaller base. Based on our preliminary estimates, we believe that the run rate revenue for the subscription advertising products was in the $180,000,000 to $185,000,000 range exiting 2019. Also based on our preliminary estimates, we believe the run rate revenue for the digital marketing services products exiting 2019 was in the $30,000,000 to $35,000,000 range.
As Andy mentioned, at around January RentPath had approximately 28,000 core advertising customers, of which approximately 21,000 also advertised with Apartments.com, leaving approximately 7,000 customers as unique customers to RentPath. With our prior acquisitions in the space, we believe the value proposition of advertising on a combined Apartments.com and RentPath network is exceptional, regardless if the customers are common to both companies or unique. Our focus will be to maintain and convert all advertising customers to the combined network, although we do anticipate a certain amount of revenue erosion may occur. Also, we'll need to become familiar with the digital marketing services product offerings and consider whether or not we continue certain non advertising related revenue streams. That's similar to prior acquisitions that we've performed in the rental marketplace.
RentPath's adjusted EBITDA for 2019 of approximately $47,000,000 dropped 24% when compared to $62,000,000 of adjusted EBITDA in 2018. RentPath capitalized approximately $17,000,000 of labor costs in 2019, which when adjusted back to operating costs would result in 2019 adjusted EBITDA of approximately $30,000,000 We expect the post integration earnings potential from this acquisition to be highly accretive, resulting in post synergy profit margins at or above those achieved recently with the acquisition of ForRent. I can remind you that was in the range of around 45% to 55% of the subscription advertising revenue. Integration synergies would be realized approximately 12 to 18 months following the receivable of any necessary approvals for the transaction. This transaction is a bit more complicated than the prior deals given the bankruptcy process, which is expected to play out over the next 4 to 5 months or so.
Bankruptcy process will involve CoStar as a stocking horse bidder for substantially all RentPath assets, will include proper notifications and possibly an auction provide by the bankruptcy court according to the timetable set out in the RentPath bankruptcy filing documents. We hope the bankruptcy court will approve our purchase of RentPath by the end of the Q2 of 2020. We expect to make our HSR filing in the coming days and plan to seek Federal Trade Commission approval in parallel with the bankruptcy process. As always, the exact timing and ultimate outcome of the antitrust review process not known at this time, we expect to comply with the FTC's process as quickly as possible. Given these uncertainties associated with the exact timing of Similarly, we don't expect Similarly, we don't expect to include the acquisition in our 2020 financial outlook that we will provide on our February 25 earnings conference call.
As we gain further visibility in the months ahead, we'll certainly provide updates as they become available. In summary, we have a strong track record of successfully acquiring and integrating companies. I believe the combined Apartments.com, RentPath network will be beneficial to our combined customers, consumers and our hard working teams. I look forward to providing more information on our progress as the process moves forward. With that, we can now open up the call for questions.
Thank you.
Your first question will be from the line of Ryan Tamesela, KBW. Please go ahead.
Before we begin, I would just like to remind everybody that there's no double dipping. We're going to have one question per person. And if we have time, we'll go back and re queue. Thank you.
Okay. Mr. Tumicelli, your line is open. Please go ahead.
Hello, Ryan. Don't be shy.
One moment please. Mr. Tomasella, your line is open.
Hi, can you hear me?
There we go.
Sorry about that. Technical difficulties. Hi, everyone. Thanks for taking the one question. Congrats on the deal announcement.
I guess for this one question, I'll stick with this. Can you help us understand why acquiring RentPath through bankruptcy makes the most sense strategically for CoStar and Apartments.com. I guess why go this route instead of letting RentPath continue through this inevitable bankruptcy process, which I guess unfortunately wouldn't continue to lead to revenue deterioration, which would I assume inevitably also lead to those revenues accreting to Apartments.com over time. And on the revenue front, it would also be helpful if you can just maybe help frame what the addressable revenue opportunity is, post the potential attrition. Is it reasonable to assume something in the $100,000,000 to $150,000,000 range?
Thanks.
It is the decision to acquire the asset in bankruptcy rather than to wait for that revenue to dissipate out over the course of 12 months to 24 months is really based on the fact that we have a lot of good experience dealing with this kind of situation where an ILS has tried to convert from print to digital and it has not been successful. And we have the ability to in an organized fashion bring a substantial amount of the revenue. And it's difficult to tell at this point, but $125,000,000 to $150,000,000 of that revenue over into our network. We are much more cost efficient. We have access to large lead flow.
I keep releasing his line.
Okay. Ryan, well and so the we have the ability to capture a fair amount of that revenue back into Apartments.com in an orderly fashion. And we think that the URLs have real value. So all in just on analyzing the potential EBITDA benefit of acquiring versus picking it up as it disperses into the ether. We think it's more organized to try to acquire it and translate those resources into additional scale and ability to drive more marketing into our clients.
I think that answers that roughly.
Sorry for the interruption. Going over to the next line is going to be George Tong. Please go ahead, sir.
Hi, thanks. Good morning. You had previously planned to increase your marketing spending by $100,000,000 in Apartments dotcom this year. Can you discuss your plans for this incremental spending now that you're planning to acquire RentPath?
We're going to continue on the path for that incremental spending and in the year, so we're not changing anything. First of all, the deal is subject to regulatory approval, bankruptcy approval, a bunch of other conditions. We also we believe that the investments we're making driving greater lead flow to our customers, creating greater brand awareness, greater unaided awareness has a direct flow through to our bottom line. We think that these are good incremental margin investments and the scale of the opportunity warrants the investments we're making. So I would say that it would appear that competitively, those investments are paying off, but we're also seeing great results around that.
We want to continue that.
Got it. Thank you.
I think we have Brett Huff as the next call.
And Brett Huff, your line is open this time sir. Please go ahead. One moment please. It looks like Brett Huff may have dropped from the queue.
We can get Brett back in the queue, but we should move to the next call, next answer.
Next will be Pete Christensen. Please go ahead.
Thank you. Good morning and congrats on the announcement.
Thank you.
Thanks. I was wondering, obviously, this is a much lower EBITDA margin business, given its financial condition and competitive position. I was just wondering if you could comment, is the lower margin a function of their specific market focus being at that mom and pop level? And how do you think about the long term margin potential for the combined assets here longer term?
Yes. I think the function of the lower margin they experience is they came into the transition from print to digital at significant scale. They were clearly the biggest player in the space by a wide margin. So they had a large in place cost structure. And as they fail to get traction in the digital world, that cost structure stayed in place and they just it just hasn't been a great margin.
Apartments.com obviously is operating much more efficiently. And when you combine the 2 business together and dedupe overlapped areas, we expect very high margin even with being able to support incremental marketing investments at scale. So I think that I wouldn't look at their margins as any sort of predictor of the kind of margins we would experience with that revenue stream. And I think there's a little bit of a misnomer out there that they are focused on the smaller properties, the 5 to 20 unit apartment communities. They actually are heavily focused on the traditional 100 unit plus apartment communities.
Even though their URL rent.com which has great unaided awareness is ideally suited to being that sort of smaller property houses, townhouses, condos, sub 20 unit apartment communities. It has that has potential hasn't been recognized yet. We have a lot of content and tools around that, that we've already covered the cost for. And we can run that content through rent.com. So having more sites, more different targeted consumer site consumer segments across these various sites, we can operate that very efficiently, keep the cost per lead down really low for our customers.
And so it actually is all about margin. Thank you.
All right. We'll go back to the line of Brett Huff. Hold on please. Okay, Mr. Huff, your line is open.
Great, thanks. Can you guys hear me okay?
We sure can.
Great, congrats on the deal. So I dropped out of the queue earlier. My question is around the revenue and I wanted you explained a little bit you had experience doing taking care of consolidating some of these ILS assets. Can you just explain the $125,000,000 I think you said revenue that you would expect to get from this and that's compared to the $180,000,000 $185,000,000 run rate for the subscription ad business that Scott mentioned. And so I'm just curious about the difference there.
And then more generally, just kind of give us more color on your experience of when you have an advertiser on each site, kind of does 1 plus 1 equal 2 or 1.5 or 2.5? Thank you.
Great. So, we anticipate so one of the things we want to do is, we work very closely with these advertisers and we want to make sure they're good value as we go through one of these integrations. So if someone is operating advertising on both, just to simplify it, say, rent.comandapartments.com, they're basically looking at their investment as a cost per lead or a cost per lease. And we're and apartments.com is extremely efficient on that. We put the 2 sites together, they're still evaluating that way, but we have the ability to serve more traffic against their rent.cominvestment.
And so we actually send them more leads at the same cost, their cost per lead comes down. And their tendency is to keep buying ads on both platforms because they're getting value. I mean the incremental value that they're getting is there and they measure it closely and they are well aware of it. Inevitably, we like to give people some recognition of the efficiencies we are creating. So we typically when they're buying on both sites, we give them some recognition of the bulk buying and we give them some pricing efficiency.
So historically, I think that we retain probably 80%, 85% of the revenue and pass some additional value back to the advertisers.
And Brett to get to your specific question around the business being at about $180,000,000 to $185,000,000 run rate on their subscription advertising. Again timing of the closing is in question that revenue has been declining recently. So you factor that in and then a bit of this overlap that Andy just mentioned at 80%, 85%. You come up with something in that $125,000,000 to $150,000,000 range that Andy mentioned. But again, keep in mind, this is also very preliminary.
There's so much that happens in here with timing and with the uncertainty of the close. So that's just ballpark things for now, but obviously as we get closer and time goes on, we know more, we'll get closer to it and let you know what we see.
And we would also anticipate during the course of if we're in a regulatory process any number of months, we would anticipate that revenue continues to flow from RentPath to Apartments.com. That's a general direction it's been going. So if we say 125 at the end of the process, it could effectively be 140, 150, but it's just flowed through prior to a deal close.
Great. Thank you.
Yes.
Next we go to the line of Sterling Auty, JPMorgan. Please go ahead.
Yes. Thanks. Hi, guys. So obviously, you wouldn't have announced this if you didn't think it was going to get through the regulatory approval. But just on that front, you've long talked about the 2 companies being the leaders in this space.
How do you think about the market share that CoStar already has? What market share and how do you measure Rempath? And as you're kind of making out the case to the regulators, what are the other significant competitors and maybe some ideas of their share that kind of shows that this still is a competitive space moving forward?
Well, thanks for the question. Good question. The reality is the marketplace is very dynamic and moving quickly. And so you can no longer really it's not relevant to measure traditional ILS share where it was transitioning from print directories into nascent online presence. Really the reality is that 93% of all renters going to the Internet to search for an apartment go to Google, not to direct traffic, not to a direct site other than Google.
So the organization with the monster market share is absolutely Google and they aggressively monetize it through SEM and through upcoming, which they have local packs and find the local pack into a widget. So while we have a great partnership and relationship with Google, the reality is we acquire most of our traffic from Google through SEO or through SEM and they monetize that. And they have the ability to move that traffic around as they wish. So we have we get about 2% of Internet traffic around rentals. Google is getting about 93%.
We're consolidating in a company that has 1%. So 1% is merging with 2%, when there's a player with 93%. You also have players like Zillow, who obviously have amazing strong direct traffic. And then you also have Facebook that is building out an apartment marketplace. So it's a very dynamic competitive space.
And I think you can't I think it's a little bit like looking at with the merger of the Baltimore Sun and the Philadelphia Inquirer be a monopolistic move in print, I don't really think so. All
right. Thank you so much.
Yes.
Our next question is from the line of Bill Warmington of Wells Fargo. Please go ahead.
Good morning, everyone. Good morning, Bill. So first of all, congratulations on the deal. I wanted to ask about brand strategyoperating strategy because you're going to have a number of live URLs that you already have and then adding rent.com to that as well along with apartments.com, forrent.com, apartmentfinder.com. And I wanted to just ask if you could talk about how you're going to segment it?
You mentioned rent.com for kind of the independent owner. How large is that in terms of the number of units, the number of owners, the TAM essentially in dollars that you can go after for each of the segments as you're thinking about them now? And then to just be clear, the back end is going to be just one back end, right? Just wanted to clarify that.
Yes. So it will absolutely be one back end and we're still somewhat preliminary here. But what we do see is that, without a doubt, I mean, just look at these various URLs, Apartments.com is the ideal URL and name for any apartment north of 20, any building north of 20 units can't come up with a better URL. And rent.com is the absolute best URL for anything under 20 units without a doubt. So that would probably be the focus.
I think we have to refine our strategy on how we split our investments between apartments.com, Jeff Goldblum playing Brad Pelfower there, building a great brand there. And then also, do we want to do something separate around rent.com going after that lower end market? I tend to think that there'll be some shift between the marketing budgets between apartments.comrent.com, we'll refine that strategy. But rent.com has without any investment whatsoever in any sort of B2C marketing, rent.com has unaid awareness of 16%. Apartment Guide has unaided awareness, I believe, somewhere around 5%.
So rent.com is the valuable one. And Apartment Guide realistically has the name, Apartment Book is the synonym. So it's like not ideal for the Internet. But we it still has millions and millions of visits every month. So it's very low incremental cost for us to keep all these sites up there.
And we make a very, concentrated effort to make sure that each site has its own value proposition, personality. So Apartment Finder is more around people trying to find the best deal. Apartments dot com is more is actually the whole spectrum, but it's particularly strong in finding the right quality of place you want to be in. Rent.com would appeal to people that may not be focused on renting in a larger community. So we'll build out these personalities and typically to maintain these 12 different URLs well is a couple of development teams, a product management team, a small marketing team.
So it's small investments, but you get lots and lots of traffic off them. And then we have the ability when someone enters our ecosystem from one of these sites to identify them, retarget them, bring them into other sites and move that traffic around very cost efficiently. So we actually think it's an ideal situation. And the only question would be is, how all in we go on that rent.com URL.
Got it. Thank you.
Our next question is from the line of Mario Cortellacci of Jefferies. Please go ahead.
Hi. Thank you for your time. I appreciate it. So you guys mentioned that you were going to be the stalking horse bidder in the debt process. I didn't know, do you expect other bidders?
Is there potential for you to be outbid? I just didn't know if there are any other outcomes or risks to that situation. And if you if there are other bidders and I don't know if you are able to lose it, if you do, is there some kind of breakup fee for you being outbid?
Sure. So we always could be outbid in the process. The company RentPath was aggressively shopped as I understand it for about 18 months or so. I believe that they solicit interest or had meetings with over 40 different companies, none of whom remained in the process. So the fact that RentPath is on the market would not be new as it goes into bankruptcy.
So if there's no interest in the past 18 months despite aggressive efforts, It would be unlikely to see something come up, it could. But ultimately, we have in place 80% of the investments necessary to operate RentPath and most other companies don't have that ability to operate Rent Pass so cost efficiently. So likely would not find much value in the company as a standalone. So I wouldn't anticipate and then what is the reverse break? Yes.
I don't know the specifics how that one works. I know that our standard break fee obviously is the 10%.
Yes. When we landed the boats on the beach, we burned them. So we're not sure what the break reverse break fee is. So, yes, I think it gives you some sense. Someone could jump in, but it would probably be a surprise.
Great. Thank you so much. Yes. Thank you.
Thank you.
And next we have a question from the line of Mayank Tandon of Needham. Please go ahead.
Thank you. Good morning. Andy, is there any difference in the pricing model at RentPath? And if so, is there any room to raise prices or change the pricing structure that would be more comparable to the CoStar multifamily segment? Sure.
Historically, the pricing on if you go back a couple of years ago, the pricing on RentPath was on Apartment Guide was dramatically higher than Apartments dotcom, significantly higher. As they've lost some share, they've signed up a lot of new business at much lower pricing. So they have sort of barbell pricing. They have some pricing that's a lot higher than our site and they have some pricing a lot lower than our site. So one of the things we'd have to do is just sort through and it would be customized client by client just looking at what they're paying.
In some cases, their price would go down. I don't think we'd be bringing people up dramatically, but we wouldn't pull someone from a low traffic site at a low price into a high value, high traffic price site at the exact same price. Just mainly our concern is to make sure that all of our customers are getting roughly the same deal and that we're not treating people differently for no good reason. But we'll sort through all that. Big picture, and when we look back at say ForRent when we went through that customer base, I think they felt that the process we went through to rationalize what their lead flow was from the different sites and what pricing they were paying and how we could help them recognize some scale efficiencies, they were really quite happy with the way that all sorted out.
And again that net promoter score running 95 is only outclassed by Tesla at 96, but I'm not aware of any other major company running that high. So obviously, how we sorted through the pricing with folks last time was well received. And we want to be we want to be and we can be very profitable at a low cost per lease basis and that thereby get a lot of share. That's helpful. Thank you.
And next we have Stephen Sheldon, William Blair. Please go ahead.
Hi, thanks. So it sounds like you'll be pushing the digital leasing tools that you're in the process rolling out to RentPath customers. So I wanted to ask how much did that opportunity factor into the decision here given RentPath at least heavier weighting in your existing assets with smaller communities. And along those lines, does integration of those tools with rent.com and having their salespeople maybe pushing those tools make even more sense than with Apartments.com just given the different customer bases?
Yes. So, I think that there was an article written this morning that may have, let people believe that RentPath had more of content around the single family homes, condos, townhouses, apartments under 20. That's not really the case. Actually Apartments dotcom has 1,400,000 apartments available right now, many, many, many or most of which are actually really small units. So the content is over on the apartment side, but the URL that really means houses and condos and small walk up apartment units, which is a massive market is rent.com.
That is more of an e commerce marketplace than a salesperson marketplace that low end side, but the URL for rent.com is just perfect for it. So we will likely shift some of those online leasing tools over to rent.com. We'll have them on both sites, we'll have them across all sites actually, but we may market it more aggressively on the rent.com side. It's all the same back end. It's all the same software.
It's just where you shift your marketing focus. Now the market itself, that lower end market, just to remind everybody, because of the nature of print guides back in the day, where you had to print a full page color ad, you had to it was a 60 day lead time to be in there. So you had to have enough content, you always had an apartment available. You weren't changing the data constantly. That meant that they only went they only marketed to communities 120 units plus.
That is a small segment of the market. That is about 14,000,000 units in the United States and you got 30,000,000 units in the sub-one hundred and twenty unit category. And the sub-one hundred and twenty unit category actually spends more money in marketing and leasing costs than the larger category because they don't have the scale efficiencies. So we came into Apartments.com. They had almost no customers below 100 units.
One of the really exciting things that's happened is that over the last couple of years, we've actually built up very substantial business below 120 units, which is just common sense. If you own a 50 unit apartment community, you're wealthy, you have a big asset worth tens of 1,000,000 of dollars and you have a constant leasing problem. That is not something that RentPath or Apartments dot com has historically tried to deliver a service to. We're now Apartments.com is delivering a service successfully at that level. And now when I'm looking at some of the early returns on the online leasing tools where we're targeting the condo, the townhouse, the house, the 5 unit community, the results are surprising and promising.
So when we started delivering those tools about, gosh, a couple of months ago and I get a report here and there and I got the first report a couple of weeks in and we had picked up 4 ads, 5 ads, 10 ads, like, okay, so what? And then yesterday, I had to ask 3 times, I had to ask Fred Saint 3 times like, I'm sorry, how many do we have? It's 2,000. You're like, I'm sorry, for what? 2,000 in that category?
Now that category is really exciting to me. So if I take below 5 units, I you have a part of building with 5 units or less, we had no adds there 3 years ago, 0. We now have 3,000 ads in that 5 units or less. We almost had 0 ads below 100 when we bought a partnership comp, but 5 units or less, near 0 jumps to 3,000. It's tripled in the last 6 months.
And that segment is the biggest segment. That segment has maybe 20,000,000 units. 20,000,000 is much bigger than the 120 unit plus. So we feel comfortable this is a north of $5,000,000,000 market opportunity overall with a lot of the value at that lower end. So the opportunity to have a place to really build this brand new we have less than 0.5% penetration of that lower end market.
It's wide open. And obviously, RentPath has less than 0.25% penetration of that lower end market. It's a whole new market segment we're going after and rent.com is a great URL to try to build out that massive untapped market that's wide open.
Did you even ask that?
Thank you, Prash.
Prish. You really got on a roll there.
That was good. Appreciate the color. Thank you.
Just shifting back real quick to Mario's question on the reverse break fee, that's a 2% of that 10% would come back as a reverse break fee if we were outbid in the auction process. Just wanted to clarify that for you Mario. And that looks like it covers money.
All that 2%. All that 2%.
Spend it on marketing, of course. Grow our brands. All right. It looks like we've covered all of our questions today. So I want to thank you very much for your time and interest and look forward to updating you soon on our Q4 results and forecast conference call in February.
Talk to you soon. Thank you very much.
Thank you. Ladies and gentlemen, this conference call will be available for replay and that's after 9:30 am Eastern Time today and will run through March 12 midnight. You may dial the AT and T replay service by dialing 1-eight sixty six two zero seven-ten forty one with the access code 9,109,916. International callers may dial 4029700847. Again, that access code 9,109,916.
And that does conclude your conference. We do thank you for joining. You may now disconnect.