The Closing: Brendan Wallace

Brendan Wallace has been everywhere these days. The co-founder and managing partner of Fifth Wall Ventures — a venture capital fund focused on bridging the gap between real estate and technology — has taken up the cause of reviving the beleaguered retail sector. And while he’s been sounding off in the media about the firm’s efforts to pair mammoth retail REITs with innovative tech and online brands, he’s also attracted the attention of the tabloids, having been romantically linked with more than one Hollywood starlet. But the 38-year-old was all business as he sat down with TRD to discuss his firm’s projects and origins.

Wallace entered the finance world with a job at Goldman Sachs and went on to join the real estate private equity division at Blackstone Group, where he would be connected to Fifth Wall co-founder Brad Greiwe. After breaking away from the firm to launch two startups, Identified and Cabify, Wallace teamed up with Grewei in 2016 to launch Fifth Wall. The Venice-based firm recently closed a $503 million fund, bringing its assets under management close to $1 billion. Its 49 partners on that fund include heavy-hitters like Macerich, Prologis, CBRE and, most recently, Hudson Pacific Properties and Related Cos. In this interview, which has been edited and condensed for clarity, Wallace chats about the future of retail, co-living and working alongside startups he’s invested in on Abbot Kinney.

Age: 38
Hometown: New York City
Lives in: Venice
Family: Single, no kids

Did you always know what you wanted to be when you grew up? I went through Princeton without having a super clear-cut vision of what I wanted my career to look like. I actually worked in domestic banking in real estate at Goldman, which is how I first got my foray into real estate. I naturally gravitated towards it. Real estate is one of these industries that’s so intimate to people’s lives, and I thought that was fascinating.

What went into the decision to launch Fifth Wall? [There] is this odd slingshot effect that’s occurring right now, where the largest owners and developers of real estate in the U.S. and globally are looking to technologies and saying, “What are the synergies we can capture by adopting technology?” However, it’s not quite as simple as solving their pain points because you truly have to understand the mindset of the people that manage these real estate companies and also how they’re operated. Brad [Greiwe] and I had this experience of having worked in and experienced what it’s like to be inside a real estate company.

How did you get big names like CBRE, Macerich to invest in the first fund? It started with a fundamental belief that, if real estate organizations acted in a consortium fashion and collaborated, there were synergies that Fifth Wall and the portfolio companies would realize. That was actually a pretty novel approach. Many of these companies had tried at that point to do corporate venture capital on their own but had been plagued by the stigma associated with it. Fifth Wall was able to come to them with a product that represented the best of corporate venture capital in the sense that we could identify companies that would give them strategic value, but we were also independent.

You followed that $212 million fund with a second $500 million fund, comprising  49 partners from nine different countries. How did that come together? Our funds have always been a mix of strategic and traditional financial Limited Partners [LPs]. We started to see that Fifth Wall, as a venture fund, was realizing network effects. So we saw this opportunity to really build a large consortium — the largest consortium of corporates that have ever invested in a venture fund. The reason they’re doing that is because it’s a better model than operating independently.

We’re constantly hearing, “Retail is dead.” What are your thoughts on that? Retail is not dead — it’s changing. There will never be a 1,500-store retailer that is truly ubiquitous. You will never see a Gap again. There’s an interesting dichotomy in the sense that, yes, there is a bankruptcy that’s happening in the retail industry, but there’s also a lot of life and birth that’s happening in the real estate industry. You will see more 25 to 200-store brands that emerge as consumer choice expands.

Tell me about the retail-focused fund. It’s a consortium-based model where we brought all the largest retail real estate owners together to say, “Can we support this growing ecosystem of new brands and retail concepts that are growing and want to collaborate with large landlords?” That fund invests exclusively in brands that are opening up stores. Heyday and Untuckit [are both] digitally native brands that had been selling directly to consumers online but now have opened stores.

You recently invested in Aurora Solar, a solar software provider. What other types of companies are interesting to you in terms of their investment potential? We’ve started to look beyond the obvious opportunities to see where technologies can be very strategic to real estate owners. You have to build trust with these corporates to find those so-called “adjacent opportunities” to real estate tech. Increasingly, real estate owners are coming to Fifth Wall and asking us to help them unlock the real estate opportunities that are almost derivative opportunities from birth. We’ve seen that with co-working and co-living.

Do you think co-living will be as successful as co-working? The premise of co-living at a business model level is fundamentally the same as co-working. You’re taking an established real estate business model with long-term leases, and you’re consumerizing it. In one sense, it’s a bigger opportunity [than co-working] because everyone needs a roof over their head. In the other sense, it’s a little bit more niche in the sense that not everyone is going to want to live in a shared living space.

Neither you nor your co-founder are from L.A. Why be based in Venice — specifically Abbot Kinney? L.A. is a hub for the entertainment industry, but it’s also a hub for the real estate industry. There’s a number of our real estate partners that are based here, and technology is kind of mixing with all those industries in a unique way. Plus, I think the answer to that question is obvious if you just walk down the street.

Your company has been in the press a lot, but recently, your love life has been fodder for the tabloids. How does that feel? [Wallace was linked to actress Emma Watson earlier this year and was photographed with actress Alexandra Daddario days after TRD‘s interview with Wallace.] I don’t want to comment on that.