CBRE, Hines and ProLogis along with other large property firms have invested this week more than $100m (£78m) in a fund that invests purely in proptech.
The trio, plus US residential giant Equity Residential, shopping centre operator Macerich, Host Hotels & Resorts and DIY chain Lowe’s, have ploughed $110m into a vehicle raised by real estate venture capital firm Fifth Wall.
The new fund has raised a total of $212m, with the remainder of the equity coming from traditional financial institutions.
It is the first time that the real estate sector has backed a fund of this size to invest entirely in proptech.
Charles Kuntz, head of innovation at Hines, said its investment in Fifth Wall was an attractive prospect because it provided “organised access to what was happening in real estate technology”.
“We have explored tech as a company but we could have been more organised. Often we focused on tech that was already entrenched in the marketplace,” he said. “Access to real estate tech early allows us to understand and partner with these companies early on and trade expertise. We can help them sculpt what the product can do and what we need done.”
Chandra Dhandapani, chief digital and technology officer at CBRE, said investment in the fund would “provide early insight into companies and technologies that have the potential to enhance our ability to deliver great outcomes for our clients”.
She added: “This is one vehicle, among several, that CBRE will use to identify emerging technologies, connect with top talent, build strategic partnerships and make investments that will create further competitive advantages for our clients and our company.”
Brendan Wallace, co-founder of Fifth Wall, said he and partner Brad Greiwe had established the fund because, despite real estate’s slow pace of technology adoption, venture capital investment in real estate technology had already produced more multi-billion dollar companies than any other industry apart from healthcare and life sciences.
He said that in the US, where the fund will initially base its investment, real estate invested on average just 0.5% of its revenues on IT but added that the market for proptech was vast.
“The market is so large in the US,” he said. “There is $2bn to $3bn in proptech and enough capital to support 10 or 15 funds like ours.”
Fifth Wall has already invested more than $60m in seven proptech firms over the past year, including portfolio management and leasing software company VTS, online notarisation firm Notarize, Opendoor, a webuyanycar.com for residential, and b8ta, which provides bricks-and-mortar space for online retailers.
It is also understood to be in discussions to buy Jared Kushner’s stake in Wiredscore. Kushner is US president Donald Trump’s son-in-law and one of his senior advisers. Wiredscore provides internet connectivity ratings for the built environment.
Who’s behind the Fifth Wall?
California-based Fifth Wall was founded by Brendan Wallace and Brad Greiwe in 2016. Wallace was previously the co-founder and chief executive of Identified (acquired by Workday) and co-founder of Cabify (the largest ride sharing service in Latin America). He previously worked in real estate investment banking at Goldman Sachs and in real estate private equity at the Blackstone Group and has invested in more than 60 early-stage companies.
Greiwe co-founded and served as chief technology officer of Invitation Homes, a $6.7bn Blackstone-backed company that pioneered the use of real estate technology to value, acquire, lease, and manage single-family rental properties. Prior to that he worked in real estate investment banking at UBS and in real estate private equity at Tishman Speyer and Starwood Capital.
The pair began advising Blackstone’s real estate group on its strategy for adopting new technologies in 2014. They soon realised that there were no dedicated venture capital firms focused on the rapidly expanding real estate and hospitality technology sector, so they decided to launch Fifth Wall.
To send feedback, e-mail Shekha.Vyas@egi.co.uk or tweet @shekhaV or @estatesgazette
