KoStar has doubled down on its Homes.com strategy, a day after a prominent hedge fund investor launched a hostile takeover of KoStar’s board citing concerns about the property portal.
A day after a prominent hedge fund investor launched a bid to force CoStar Inc. to stop building a fourth major real estate portal, Homes.com’s parent company opposed the idea.
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Third Point founder Daniel Loeb issued a scathing open letter on Tuesday, calling KoStar’s large investment in residential real estate a “disastrous failure” and calling for new members of the company’s board to consider a move away from Homes.com.
But it would be premature to abandon Homes.com or the company’s other residential real estate investments, CoStar responded Wednesday, trying to instill confidence that its strategy will work.
“Third Point’s request to abandon Homes.com reflects their complete misunderstanding of our business, our industry, and the significant progress we have made,” the company said. “Third Point would have you believe that Homes.com could be abandoned or closed without adversely impacting our business or competitive position.”
Much of the battle focuses on the ability of commercial real estate giant CoStar, which has pushed into the residential sector in recent years, to generate bigger returns for investors.
But at its core, the question is whether CoStar can turn Homes.com into a behemoth residential real estate tool on par with Zillow, Realtor.com and Redfin.
The company suggests it’s friendlier to real estate agents than its competitors and has taken particular aim at Zillow, building a model that makes it easier for consumers to connect directly with listing agents.
In Tuesday’s letter, Loeb suggested that consumers are already entrenched in the other top three portals and the ease with which they can access property information via other MLS syndicators means Homes.com lacks “meaningful differentiation.”
Mr. Loeb’s promise to name a new director and Kostar’s response spark a battle over whether shareholders agree with Mr. Loeb or Kostar’s management.
After years of spending heavily on marketing to increase awareness of the Homes.com brand, CoStar announced earlier this month that it would make significant spending cuts in 2026 and continue those spending cuts through 2030.
The cuts follow a $1 billion marketing spend starting in 2024 and a $1.6 billion acquisition of 3D scanning company Matterport, which will apply across CoStar’s brands.
In Wednesday’s letter, CoStar characterized spending cuts as the end of an investment period, which is the company’s standard strategy. He said the residential real estate market is too big to ignore.
“CoStar Group has always grown by investing with a long-term vision. Whether it’s CoStar, Apartments.com, LoopNet, or any of our other platforms, the investment horizon has always taken time. And we asked our investors to trust that we had the expertise to make our vision a reality,” the company said. “We have never failed to realize our vision and we never will.”
“One thing we know for sure is that abandoning Homes.com now, as the investment stage is winding down, will absolutely destroy long-term value for shareholders,” Koster said.
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