Costar Stands Firm On Homes.com Amid Investor Pressure

The activist investors at Third Point Investors Ltd may be calling on CoStar Group to divest or shutdown its residential real estate arm, including Homes.com, but it appears that CoStar has no such intentions.

“One thing we know for certain is that abandoning Homes.com now that the investment phase is tapering would be a certain way to destroy long-term value for stockholders,” CoStar wrote in a press release published on Wednesday in response to Third Point’s demands.

In a letter published on Tuesday, Third Point claimed that CoStar’s “anemic performance” could be contributed to “the misallocation of billions of dollars into Homes.com, overseen by a feckless board of directors that has failed to protect shareholders from [Andy] Florance’s quixotic quest while rewarding him with exorbitant pay packages.” 

The activist investors also claimed that since they first took action last spring, CoStar almost no progress has been made toward correcting the company’s course. 

“So little progress has been made that we are convinced the Company never intended to do any of the things we discussed when we entered into the agreement,” the investor letter stated. 

CoStar responds to investors

In response to this letter, CoStar wrote in its release that its board of directors and management team are taking “decisive action to prioritize profitable growth and increase long-term value for all stockholders.” The company said that since Third Point and D.E. Shaw’s first letter last year, it has “conducted extensive engagement” with its shareholders including Third Point and that the feedback gained helped inform the “meaningful steps” it has taken to deliver shareholder value. 

Some of these actions include the appointments of John Berisford, Rachel Glaser and Christine McCarthy to the firm’s board of directors, replacing Michael Klein, Christopher Nassetta and Laura Kaplan, who all retired from the board; the appointment of Louise Sams as the independent board chair; forming the Capital Allocation Committee.

It also says it is reducing net investment in Homes.com by $300 million in 2026 and at least $100 million annually thereafter; accelerating the completion of its $500 million share repurchase program in 2025 and launching a new $1.5 billion repurchase program in July of 2026.

The firm will also be deploying AI initiatives across the organization and investing to enhance its commercial product offerings like its loan origination module and real estate lease benchmarking and approving a redesigned executive compensation program for 2026. 

According to CoStar, it is through the review process suggested by Third Point and D.E. Shaw last year and, with the help of the board members they nominated, it arrived at its recently announced profitability plan for Homes.com.

Third Point is “spinning a yarn”

“Third Point appears intent on spinning a yarn of Board complacency and ‘quixotic’ investment. Their story is completely detached from reality,” the press release states. “Unhappy with the conclusions of the independent Board they helped pick, Third Point, like a child with a board game, wants to throw the pieces off the board.”

CoStar argues that the activist investor’s demands that it “abandon Homes.com” indicates that they completely misunderstand CoStar’s business, the progress it has made and the real estate industry in general. 

“Third Point would have you believe that Homes.com could be jettisoned or shut down with no negative impact on our business or competitive positioning,” the release states. 

Divesting of Homes.com would have negative impact

CoStar argues that providing “comprehensive digital solutions” to the entire real estate ecosystem would not be possible for it to do without its residential real estate venture. 

“Homes.com complements and meaningfully expands our residential portfolio alongside Apartments.com, Domain, OnTheMarket and Land.com, significantly increasing our global addressable market to more than $100 billion,” the release states. “Without Homes.com, we would lose a critical partner for Apartments.com and a key component of our digital ecosystem.”

Despite the claims made by Third Point, CoStar argues that Homes.com is performing well, noting that its subscriber count has risen by 337% since Q1 2024.

Ready to rapidly scale the platform

“With the investment phase now complete, we expect to rapidly scale the platform while lowering its capital intensity,” CoStar wrote. 

The company has said that it expects revenue of roughly $3.8 billion in 2026, up 18% annually and an adjusted EBITDA margin of 20% compared to the 13% margin recorded last year. 

“We are confident that the continued execution of our key strategic initiatives in our core platform, the implementation of our proven playbook at Homes.com, and our capital allocation and investment priorities will allow us to build on our long track record of driving total stockholder return outperformance,” the release states. 

CoStar also wrote that its other shareholders “should carefully consider the source of their advice,” noting that Third Point has consistently underperformed relative to the Russell 3000 stock index in nine of the last 10 years. 

“CoStar Group has always grown by investing with long-term vision. The investment periods, whether for CoStar, Apartments.com, LoopNet, or our other platforms always took time, and we asked investors to trust that we have the expertise to make the vision a reality,” the release states. “The CoStar Group Board and management team look forward to continuing to engage with stockholders as we advance our proven strategy to unlock the tremendous value of our digital real estate ecosystem for their benefit.” 

Third Point did not return HousingWire’s request for comment on CoStar’s release.