Carrollton, Texas-based RealPage announced its acquisition of San Francisco-based Propertyware this week at the National Multi Housing Council (NMHC) Technology Exposition and Conference in Phoenix. The announcement had been expected for several weeks as the companies were finalizing details of the deal, the terms of which were not released. 

For RealPage, the multifamily on-demand technology and services software firm that has been on an acquisition tear since hiring Michael Britti as senior vice president of the company’s newly formed mergers and acquisitions group in August, the addition of Propertyware offers immediate penetration into smaller-scale, middle-market multifamily operations, but more importantly marks the company’s entry into the single-family shadow rental sector, a core market for Propertyware, which also provides cloud computing-based property management software for condominiums, town homes, duplexes, small apartment buildings, mobile homes, and even boat docks.

“This acquisition will enable managers of single-family rentals and smaller apartment communities that are centrally managed to leverage the infrastructure, controls, financial backing, and integrated services offered by RealPage,” said RealPage CEO Steve Winn in conjunction with the announcement. “Propertyware has traditionally marketed to companies that manage single-family homes, which are typically managed centrally just like small apartment communities,” says Winn. “If you have a small real estate broker managing 10 houses I’m not so sure whether they need anything. But what is happening is that larger fee mangers are getting into that space and managing thousands or in some cases tens of thousands of properties and you absolutely have to have sophisticated systems to do that. That’s where RealPage and Propertyware make such a great fit.”

To that end, RealPage will integrate virtually all of the company’s on-demand multifamily services—including tenant screening, renters insurance, eProcurement, group purchasing, and billing—into the Propertyware platform over the next six to 12 months. As part of that process, the Propertyware data center will be moved into RealPage’s SAS70 and PCI compliant cloud computing infrastructure in Dallas.

But will single-family home shadow market rental managers even want to avail themselves of utilities either originally or specifically designed for larger-scale multifamily operations? Propertyware president Sina Shekou—who will remain onboard to operate the company as part of RealPage—says yes. "This will tremendously benefit a segment of the real estate market that has largely been underserved from a technology standpoint," Shekou says. “In reality, the management challenges on the single-family side of the rental market are not all that different, particularly on the back-end. Your typical Propertyware user is going to be able to take immediate advantage of RealPage applications to help them better manage efficiencies, particularly when it comes to procurement solutions offered by OpsTechnology and utility billing solutions on the Velocity platform.”

The addition of Propertyware largely brings RealPage into the middle-multifamily (sub-1,000 units) and single-family shadow markets for the first time and marks a widely held belief throughout both companies that the shadow market, in particular, has grown exponentially, creating a large demand for self-provisioning property management software. “This market used to be dominated by regional brokerages and entrepreneurial, localized property managers," Shekou says. “But within the current economy, we’re seeing centrally managed multifamily companies and banks combine to begin management, particularly of REO single-family assets. The ante is going up with the expectation that the shadow market will be getting much bigger into the summer of 2010, and we’ve seen a massive increase in the amount of multifamily operators adding single-family assets management to mixed portfolios.

Case in point: Layton, Utah-based Real Property Management, a national property management franchise specializing in lower-density, middle-market multifamily, and single-family rental portfolios with approximately 30,000 units in management across the United States and Canada. "The inventory of foreclosed rental properties now includes pools of thousands of properties held by institutions that simply don't have the systems at hand to manage properties effectively,” says Real Property Management president Kirk McGary. “We think the combination of Propertyware and RealPage will fill a gap to deliver the technology they need."

Despite the claimed scalability of the combined Propertyware / RealPage solutions set, not everyone in the multifamily middle-market arena thinks continued consolidation on the tech vendor side of the industry is necessarily a good thing for smaller, regional operators. “It seems that technological consolidation historically does not turn out to be such a great thing for the user base, and most of the middle market is still trying to leverage what they already have available in their systems, not look to bolt on additional funcitonality” says Brian Donahoo, president of Goleta, Calif.-based AppFolio, which provides web-based property management software targeted to the multifamily middle-market. “Still, the RealPage acquisition is a double-edged sword: it can be great for a company like mine because it really says that software as a service is becoming the de facto standard in this industry, and I am a player in that game, so I like it.”

Indeed, the acquisition of Propertyware further establishes RealPage’s move into cloud computing centric, on-demand software as a service. Propertyware’s browser-based software systems are recognized as early pioneers of Web-enabled, cloud computing solutions for property management technologies. “Propertyware’s founders are visionaries who understood the significance of leading-edge cloud computing and built their on-demand platform using the latest, scalable cloud computing technology,” says RealPage president Dirk Wakeham. “They are a great fit with our on-demand delivery model and have some of the most advanced Internet marketing campaign solutions available, and we intend to adapt these for our enterprise property management systems over time.”