Brendan Wallace has a lot of what is going on in his mind recently. Wallace is the co -founder of Fifth Wall ProjectsIt is a nine -year real estate project company and has assets under management of $ 3.2 billion. He is also the owner of a house in Los Angeles, who Continuing To fight raging forest fires. While his place is still intact, many of his friends were not lucky.
Wallace became accustomed to the external forces outside his will. First, the epidemic changed the scene radically for many limited Fifth Wall partners, which is read like those of real estate (CBRE, Cushman & Wakefield, Lennar). Unfortunately for many of these players themselves, vacancies in offices are still about 20 % in the country, and analysts do not expect this number to budge with many companies abandoning the idea of full return to the office.
PROPTECH has also taken its position in recent years, which is partly due to the leading figures whose wealth quickly turned, such as WeWork, which came out of bankruptcy last June in the wake of the failed public subscription and the huge restructuring.
Change usually provides hidden benefits, and Wallace believes that the industry is prepared for recovery. As he sees, there are increasing opportunities related to the flexibility of assets – or the use of technology to help real estate assets tolerate damage and turmoil. He also sees a great opportunity to help the limited partners of Fifth Wall in seizing the technology industry request for data centers – and the energy needed to supply it with fuel.
We recently talked about some of these trends, along with Los Angeles life during what seemed to many as if it were the end of the world. You can listen to that The full chat here Or continue reading to get excerpts from our conversation, which were slightly edited for length.
You are in Los Angeles, how are you?
It is just a tragic thing. Everyone in our team is safe. We are in Santa Monica and they had to evacuate our office. This is a decisive moment for Los Angeles, and there will be a lot of thinking on the other side of this, with the emergence of the large political and economic issues that California was struggling with for a long time in the foreground. This is a positive thing, but for the time being, it is destroyed to see parts of this beautiful and amazing city devastating.
How do you think about what will come after that? There will be a lot of cleaning operations, and a lot of reconstruction. This should represent unexpected opportunities, although this is inappropriate.
I will not say opportunities. . I do not think that on the other side of this crisis, people will stop the desire to live in Los Angeles. . So I am still optimistic that this will be the moment of rebuilding and re -perception of one of the greatest American cities. I would like to say that we are in Fifth Wall are excited to be part of it. How does it seem to be part of that? i don’t know yet.
One of the main issues that homeowners and business owners were dealing with is (even before fires) the escape of insurance providers from the state. . .
We are one of the most active investors in the field of financial technology for residential industry. Invest in the fifth wall hippopotamusAnd a home insurance company was very active in California. (Editor’s note: HPPO has stopped writing new homeowners insurance throughout the country Last summer))
I mean that many of the systems that were very good and focused on the benefit of consumers had actually had a reverse effect, and they create inconsistency in the market, which leads to the exacerbation of the same problems that we face now, which is that many homes are not insured or people to cancel Their insurance. So what we are enthusiastic about is two things: there are better solutions for consumers that can be developed, and we are interested in the possibility of investing in them. The other thing that I would like to see is to simplify the amount of bureaucracy required to launch insurance companies.
Regardless of the regulations, do the accounts succeed? It is difficult to understand how startups that have different regulations (insurance) California when these destructive things that make it very difficult for insurance companies can recover their investments.
It is very difficult to answer this question without looking at the analysis of each province separately. Some areas can be insurance, but it is also possible that some areas are not insured otherwise He was It is without organization, and the latter is what I focus on mitigating.
This is not just a California problem. It may be more severe in California and the value of homes may be higher in California, but we have to solve this problem as a nation.
Do you think that forest fires may reshape the way real estate is evaluated in these high -risk areas? This does not seem to have happened in Miami, for example.
I think the prices will rise for several reasons. There will be a lot of new construction work in southern California, which will increase the cost of home replacement. People still want to live in these beautiful parts of the country; You will not see a collective displacement of people simply because of this.
The increase in insurance premiums will also lead to a decrease in the ability to withstand the costs of homes, and this may lead to downtown pressure (meaning that the cost of homes may be slightly lower because sellers should take into account the high cost of insurance). However, the net matter is that this will lead to a significant increase in home prices throughout southern California, especially in West Los Angeles.
You are an ICON investor, the 3D printer for ready -made homes. Do you see a possible opportunity for that company? We reported that she had only had a quarter of her employees this month before the outbreaks of the fires.
ICON is a truly exciting work. Vetetle Wall is a small investor in that company. Our thesis was not about the prevention of forest fires or rebuilding after natural disasters, but about how to build homes faster, cheaper and less materials than you do today? What they built is an effective way to print the house, and in this process, the waste associated with building the house is dramatically reduced.
One of the crazy statistics that most people do not know is that about 5% of all the materials in waste burials in the United States are materials that went to the construction site and then went directly to the landfill. It is a huge problem that leads to a high cost for the consumer, makes it difficult to operate construction companies, and has a huge carbon imprint. I think the question is: How can you expand the scope of that? Can you make this cost effective?
Have you investing in companies that focus in particular on the manufacture of non -flammable materials?
No, but we should, and I think it is a space that will receive a lot of attention at the moment. . (To move forward) The update will be the big problem. Most of the houses we need to protect are already built, and are built with materials that may be very difficult to uproot. Thus in the field of real estate technology, the largest part of the problem and the largest part of the value that you can add to the community is through the update modification of the assets that we already have, whether these buildings, homes or infrastructure assets.
Of course, in rebuilding, we must be very aware of the materials used, and we must use the best solutions. But the vast majority of homes at risk in southern California are already present today.
In general, the real estate technology sector has seen less than deals in recent years. Is it fair to say that public interest in the industry has slowed down?
It has been completely cooled. I think we just lived – and we still live – the cold and bitter capital markets for real estate technologies. She had not seen any major incidents of integration and acquisitions. Basically, none of the concentrated investment funds, including Vetetle Wall, were able to collect any capital during that period. There was a very little investment capital flow to space.
The other aspect of this is what you see now – the companies that survived this Darwinian extinction event. The companies that carried out the correct costs in the costs, which changed their business model, which changed its marketing, which passed through the restoration operations, appear on the other side of this strongest, the most vibrant and the most sustainable in the long run. I think the spring has spread in the supportive technology industry, and you see a lot of positive indicators for the area at the present time. (Editor’s note: Here, Wallace refers to the initial public subscription of Servicitan, one of the company Fifth Wall company that manufactures contractors for contractors and Open In December, the last sale of another wallet company, indostria, to its partial owner, CBRE.)
What about this existential threat to the office industry that we had heard about for years?
In the long run (there are questions) about the office industry, but besides you see a huge growth in the categories that have not been thought of as real estate before. Data centers completely explode. Some believe that this explosion forces the real estate industry to deal with major questions. For example, the artificial intelligence revolution that stunned everyone will not be possible at all without expanding the scope of databases on a large scale in the United States. However, the expansion of the database on a large scale in the United States is absolutely not possible without producing large amounts of new energy.
I continue. . .
We need groups of servers that can perform training and inference all over the world – and we need a lot of them. This is not a surprise or secret in the real estate capital markets; Data centers over the past two years may have been the hottest asset category in the real estate industry. But now there is a problem related to appearing. . . It is that the data center consumes a lot of energy, and local facilities will not allow you to connect this network. . .
This forces the real estate industry to say: “We have to be in the field of energy ourselves if we want to be in the field of computer data centers.”
What is expected by LPS to do? Will you invest in the emerging integration companies now?
It is clear that the merger is really exciting, but we have a problem in the short term. We need energy now or next year. Ideally, we do not want these sources to rely on fossil fuels or dirty energy sources. . This really leads to renewable energy sources that we know are costly, (which is) solar energy. (Therefore) the bottom line is, yes, we are investing in solutions to accelerate the development of solar energy along with our real estate investors, and real estate companies will become the energy development companies themselves.
