The Real Deal New York

Who’s bankrolling real estate’s tech boom?

The money behind the startup sector. Think Rudin, LeFrak and Wilpon

January 14, 2016
By E.B. Solomont

SilverTech partners Charlie Federman, Lawrence Wagenberg and Tal Kerret

SilverTech partners Charlie Federman, Lawrence Wagenberg and Tal Kerret

Roughly $1.5 billion flowed into real estate tech companies in 2015, and those funds came from an increasingly diverse pool of investors.

In addition to about a dozen venture capital firms, institutional and family organizations  — which wouldn’t have touched real estate tech 10 years ago — are expanding their hold on the nascent industry.

“You have everyone from the Milsteins to the Rudins to the Wilpons to the LeFraks all doing deals,” said Zachary Aarons, an angel investor and co-founder of MetaProp, a New York City-based real estate technology “accelerator,” which mentors tech startups.

Aarons said the shift came after many of those companies began using tech platforms in their own businesses. “They were like, ‘Why am I just a customer?’” he said. “That’s a major tectonic shift that’s going to accelerate.”

The move comes as several developers have been getting increasingly involved in technology at large.

In 2015, Silverstein Properties — which invested in Washington, D.C.-based crowdfunding platform Fundrise — launched SilverTech Ventures, an accelerator that houses startups in a cross section of industries.

In a similar vein, in 2014 the Milstein family offered 15,000 square feet of rent-free space across the street from Grand Central to a new tech incubator called Grand Central Tech.

Other real estate families have invested in technology that’s applicable to their day-to-day real estate business. The LeFraks, for example, invested in residential brokerage Compass and the Rudin family is a backer of both the shared office provider WeWork and Hightower — a leasing-management software that Newmark Grubb Knight Frank and Starwood Capital’s Barry Sternlicht have also invested in.

In 2013, Rudin Management also rolled out its own real estate tech venture, Di-BOSS, which stands for “digital building operating system” and automates tasks like managing heat and air conditioning to reduce energy consumption.

The William Kaufman Organization is also an active investor, although it maintains a low profile, said Jonathan Iger, CEO of Sage Realty Corp., the company’s leasing and management arm. Iger said a few years ago, as Sage was looking to integrate data from different departments, companies like VTS and Hightower were hitting the market.

“We stopped in our tracks,” he recalled. “We said, ‘People are finally dedicating resources, time, money and brainpower to these issues, let’s work with them. Let’s be a first mover and partner with them so we can get the product we want.’”

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