By Lauren Elkies Schram on October 08, 2014.
In the high stakes world of commercial real estate the industry’s leaders have historically been slow to adapt to technology. But there have been some companies and professionals who have embraced new options in technology.
Prominent real estate companies like Time Equities, Cushman & Wakefield, Vornado Realty Trust and Sitt Asset Management are using Honest Buildings as a connection engine for real estate projects. Marty Burger and Tal Kerret, the chief executive officer and chief information officer of Silverstein Properties, Rockrose President Justin Elghanayan and James Ratner, the chairman and CEO of Forest City Commercial Group, have invested in Fundrise, a real estate crowdfunding site. Meanwhile, Stephen Siegel of CBRE and David Falk of Newmark Grubb Knight Frank are customers of real-time data provider View the Space.
The technology runs the gamut from 42Floors, PivotDesk and CompStak for brokerage; View the Space and Hightower for management; Floored for development and architecture; Fundrise for investment and finance; and KISI for services like security, video and/or design companies.
“My favorite tech plays in our space are PivotDesk and CompStak,” said broker Bert Rosenblatt, a principal at Vicus Partners. “I have not seen much action in Manhattan in crowdfunding but I love the idea of it and know that nationwide it is making an impact.”
A lot of commercial real estate firms—from small to large and new to more established—keep their technology usage to a minimum.
“It’s a laggard when it comes to technology,” said Michael Beckerman, the chief executive officer of The News Funnel, a customized newsfeed for real estate professionals. “How many tools are they accessing? Not a lot. It’s not part of their DNA.”
It may be nascent, but Mr. Beckerman finds New York to be the center of commercial real estate tech.
“It’s still early but it’s rapidly accelerating,” Mr. Beckerman said of the number of new companies that are entering the real estate tech space and the amount of money being poured into it.
New York-based Carlton Group, an international real estate investment banking firm, is focused on crowdfunding on a grand scale with deals ranging from $75 million to $250 million with a minimum investment of $1 million to $25 million per investor. The firm established its crowdfunding platform this year and at its helm is Navish Chawla, the firm’s chief investment officer of the Carlton Group, who started at the firm early this year.
“No one does crowdfunding to the scope that Carlton does,” Mr. Chawla said. His firm is doing retail, hospitality and residential deals through crowdfunding, attracting domestic and international capital.
Carlton raised $240 million for a series of developers to acquire 125 Greenwich Street in the Financial District through six investors across five countries.
At Massey Knakal Realty Services, the firm uses LoopNet and CoStar locally and is looking to expand its offerings to listing sites in China, said James Nelson, a partner at Massey Knakal.
Silverstein Properties wants to be at the forefront of technology, according to Mr. Kerret.
Fundrise announced in May that it received more than $31 million in its first substantial capital raising, including the funds from the two Silverstein executives.
“I invested in it because I think it is something that will take shape and grow,” Mr. Kerret said. “Will it be successful? It’s a question mark. Time will tell.”
Silverstein houses 30 tech developers including Fundrise in an incubator at 7 World Trade Center. The development company is providing the space and support services to the start-ups, Mr. Kerret said.
“Crowdfunding gets a lot of attention because it has a lot of big numbers,” said Ashkan Zandieh, the founder of RE:Tech, a national real estate tech coalition which aims to bridge the gap between real estate and tech. “Crowdfunding is interesting. It’s a great opportunity for non-institutional players to get in the game. It’ll be interesting to see where it goes in the next five years.”
New York-based real estate crowdfunding platform Prodigy Network’s founder Rodrigo Niño started crowdfunding after the president’s 2012 signing into law of the Jumpstart Our Business Startups Act, or JOBS Act. It broadly loosened the rules around raising capital by allowing for businesses to provide private offerings to small investors.
In September, Prodigy Network completed its acquisition and planned redevelopment of 17 John Street in lower Manhattan with more than $25 million of crowdfunded equity, as Mortgage Observer previously reported. The same month, Prodigy raised $10 million through crowdfunding for AKA United Nations, an extended-stay hotel at 234 East 46th Street that the company bought for $68.5 million in a joint venture with Korman Communities.
Crowdfunding helps “democratize commercial real estate,” said Mr. Niño, whose firm is creating a new website through which investors can buy commercial real estate in less than nine minutes. “I don’t understand why a smaller investor is excluded from the safety of commercial real estate in Manhattan.”
Brooklyn Standard Properties, a Brooklyn development company founded in 2013, has used Fundrise in two of the three deals it has closed: it raised $250,000 for the $1.89 million purchase of 151 Dupont Street, an eight-unit rental building in Greenpoint, and raised another $250,000 for the $3.25 million purchase of 533 Bergen Street, an eight-unit rental building in Prospect Heights.
David Manheimer, the co-founder of Brooklyn Standard Properties, said his firm is growing and crowdfunding is a great move for a new company like his to connect with individual investors as well as to generate buzz.
But crowdfunding can still be a small firm’s game.
“Right now the big firms don’t need it but they find it interesting,” Fundrise co-founder Dan Miller said. “It’s kinda like ecommerce in the early-’90s.”