UNISON HOME PRO
Unison does not cover its pro rata share of transaction fees, so this is equivalent to purchasing 10% for the cost of 9%. Unison provides the user with 10% of the home’s purchase price up front, which purchases 10% of the home’s value. The mechanics from Unison’s website are provided here in Unison’s infographic along with a more detailed Rampart Ridge analysis that describes what the user gets net of fees (example home is based in San Francisco fees will vary by state and municipality). Unison’s agreements are structured as option contracts, which are structured in favor of the Wall Street veterans. Per the deal level return table below, it is thereby able to circumvent meaningful transaction costs. Instead Unison invests in the unlevered asset. While it is contributing half the equity by contributing 10% of the home’s value (subject to differences mentioned below), Unison does not collect its pari passu 50% share of appreciation. Unison does not take a conventional equity stake in the property, such that it is subject to the typical SFR’s 80% leverage on its position. Because those seeking to partner with Unison are cash constrained, our hypothetical user in scenarios below purchases with 20% down (Unison provides half). Unison claims it charges users a 2.5% fee for it to invest on one page and 3.9% on others we will assume 3.9%. This unique joint venture arrangement requires that users utilize Unison-approved lenders (likely at higher cost given fewer competitors). Unison can match a user’s equity investment in a home, investing between 5-20% of a home’s value in equity ($500k max for up to 30 years).
Unison offers its equity HomeBuyer co-investment program as well as a home equity cash-out refi offering we will focus on the former. Ethical overlay notwithstanding, risk-adjusted gross returns to Unison’s investors should be highly attractive. According to our analysis below, Unison’s model appears to create value mainly if not only for investors and in a manner that is largely zero sum with users, presenting a form of capitalism that looks more extractive than enlightened. According to its website, Unison “…is pioneering a smarter, better way to own homes…We believe in a world where owning a home is not a zero-sum game, and that with the right partners, everyone can win.” It later states that “We are radical enablers of enlightened capitalism pioneering optimal homeownership for all.” These are pretty strong claims of social impact. Unison is a home ownership model created by a group of Wall Street veterans that fits roughly within the down payment assistance segment.
Why society? Most of these firms claim to advance a social mission, which is particularly true with the firm I discuss today.
UNISON HOME SERIES
This series aims to provide a look beneath the corporate veneer to discern which firms create value for users, investors, and society. As noted in our Divvy Homes analysis, the market has seen a proliferation of sometimes innovative, sometimes value-creating venture-backed home ownership models.
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