PropTech in Real Estate: Updates | The Stoler Report-New York’s Business Report
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PropTech in Real Estate: Updates | The Stoler Report-New York’s Business Report


♪ [ THEME MUSIC] ♪>> PROP TECH, WHAT IS PROP TECH? EVERYONE TALKS ABOUT PROP TECH AND REAL ESTATE. WHAT’S GOING ON? LET’S REALLY EXPLAIN PROP TECH AND REAL ESTATE. TODAY I HAVE ASSEMBLED A GROUP OF PEOPLE MUCH YOUNGER THAN ME, TO TALK ABOUT PROP TECH AND REAL ESTATE. MY GUESTS INCLUDE, FROM PARIS, FRANCE ORIGINALLY, CYRIL BERDUGO. WHO IS THE COFOUNDER OF LANDIS. ORIGINALLY FROM SOUTH AFRICA, NOW FROM ISRAEL, JEREMY ESEKOW, FOUNDER OF HELLO RENTED. AND FROM NEW YORK CITY, NEW YORK, NYU GRADUATE, JOHN CATSIMATIDIS, JR. WHO IS THE PRINCIPAL AT THE RED APPLE GROUP. WHO WILL EXPLAIN WHAT PROP TECH MEANS?>> I CAN GO. I THINK THERE’S A CYNICAL WAY AND A MORE REALISTIC WAY OF LOOKING AT IT.>>I WILL TAKE THE COMBINATION.>> THE CYNICAL WAY IS VENTURE MONEY IS EASIER TO HAVE ACCESS TO THAN REAL ESTATE MONEY THESE DAYS. IF YOU WANT TO SOUND COOL AND TRENDY, AND HAVE AN EASIER TIME RAISING CAPITAL, YOU SHOULD BE A PROP TECH COMPANY THESE DAYS. THAT IS THE CYNICAL VIEW. IF YOU ARE MORE REALISTIC, MY PERSONAL DEFINITION OF PROP TECH IS ANYTHING THAT HAS TO DO WITH AUTOMATION OF PROCESSES. IT IS A VERY BROAD CATEGORY.>> WHAT IS LANDIS TODAY AND WHAT WAS LANDIS BEFORE?>>I CAME HERE ABOUT A YEAR AGO WITH A DIFFERENT COMPANY.>>BUT YOU HAD THE SAME NAME.>>IT WAS FOR SINGLE-FAMILY RENTALS TO BE TRADED BETWEEN INVESTORS. WE HAD THE LARGEST SINGLE-FAMILY RENTAL HOLDERS IN AMERICA, TRANSACTING PORTFOLIOS OF PROPERTIES ALL THE TIME. WE REALIZED THAT, TENANTS OF THE PROPERTIES WERE ACTUALLY TRYING TO BUY THE HOMES BUT THEY COULD NOT. BECAUSE THEY DIDN’T HAVE THE RIGHT CREDIT SCORE OR NOT ENOUGH FOR A DOWN PAYMENT. SO WE DECIDED TO GO AFTER THAT OPPORTUNITY. SO LANDIS IS A COMPANY THAT TRANSITIONS RENTERS INTO HOMEOWNERS. WE BELIEVE THAT HOMEOWNERSHIP IS A FUNDAMENTAL RIGHT AND PART OF THE AMERICAN DREAM. IF YOU WANT TO BE HAPPY, YOU WANT TO BE A HOMEOWNER. A HIGHER CORRELATION BETWEEN HAPPINESS AND HOMEOWNERSHIP.>> HOW DO YOU MAKE MONEY IN THIS BUSINESS?>> SO, WHAT WE DO IS WE — >>WHAT IS THE MODEL?>>WE PREQUALIFY PEOPLE PREDICTING WHETHER THEY WILL BE ABLE TO OWN A HOUSE IN THE NEXT YEAR, IF SO, THEY GO OUT AND SHOP AROUND FOR A HOUSE WITH A BUDGET THAT WE GIVE THEM, THEY IDENTIFY THEIR DREAM HOME, WE BUY THE HOME FOR THEM AND THEY CAN BUY IT BACK AT ANY POINT IN TIME IN THE NEXT 12 MONTHS AFTER THEY MOVE IN.>>–>>WE KNOW HOW MUCH YOUR PROPERTY IS WORTH. WE KNOW HOW MUCH ANY CUSTOMER CAN AFFORD. AND WHAT WE DO IS, WE BUY A PROPERTY, THE RENT IT AND BUY IT BACK. SO THERE ARE TWO SOURCES OF REVENUE. ONE IS THE RENT, SECOND IS, WE CHARGE A THREE PERCENT PREMIUM ON THE RESALE. THAT’S HOW WE MAKE MONEY.>>IF SOMEONE BOUGHT A HOUSE FOR $300,000, YOU CHARGE $309,000 TO THEM. THE 9000 IS PART OF YOUR PROFIT. THEN EACH MONTH’S RENT, WHAT DO YOU TAKE OF THAT?>>ABOUT 3000.>>DURING THE PERIOD ON THE EXAMPLE OF THE $300,000.>> THAT’S RIGHT.>> WHAT HAPPENS IF THE PERSON DOES NOT BUY THE HOUSE?>> THEY CAN EITHER STAY AS A RENTER OR THEY CAN LEAVE AND WE WILL SELL THE PROPERTY.>> HOW MANY PEOPLE HAVE SIGNED UP FOR THIS?>> A LOT AND WE ARE GROWING VERY FAST.>> IS THERE ANY REGULATIONS WITH REGARD TO THE STATES TO DO THIS TYPE OF BUSINESS?>> YES IT’S BEEN QUITE PAINFUL TO GO AFTER EVERY STATE. WE’VE OPENED ABOUT ONE STATE A MONTH IN THE LAST YEAR. EVERY STATE IS DIFFERENT. THE AGREEMENTS ARE DIFFERENT TO EACH STATE. IT HAS BEEN QUITE A FUN RIDE.>> HOW MANY STATES ARE YOU LEGAL?>>WE ARE IN 10.>>HOW ABOUT THE METROPOLITAN AREAS? ANY DIFFICULTY TO OPEN UP HERE?>> WE WILL NOT BE IN MARKETS WHERE OWNING IS ABOUT THE SAME AS RENTING. FOR EXAMPLE IN NEW YORK CITY, IT IS BETWEEN THREE AND FIVE PERCENT. THAT IS THE SAME AS OWNING, INTEREST RATES ARE ABOUT THE SAME. IN THE SOUTH RENTING COSTS YOU KNOW 10 TO 15 PERCENT WHEREAS OWNING COSTS THREE TO FIVE PERCENT. THESE MARKETS MAKE A LOT MORE SENSE FOR US.>>OKLAHOMA.>>OKLAHOMA IS GREAT. WE’RE IN STATES LIKE INDIANA, OHIO, PENNSYLVANIA, GEORGIA, TENNESSEE, THE CAROLINAS. THOSE ARE THE BETTER MARKETS FOR US.>> OKAY SO THE PROP TECH COMPANIES, JEREMY, LET’S TALK ABOUT YOUR COMPANY AND THE OTHER COMPANIES THAT YOU HAVE FOUND BUT SPECIFICALLY HELLO RENTED. WHAT DO YOU DO?>>WHEN YOU SAID DEFINE PROP TECH, I WAS THINKING TO MYSELF, I CAN BE IN FINTECH OR — IT WILL BE LIKE CHANGING A FEW OF THE WORDS BUT A SIMILAR PRESENTATION FOR YOU. I THINK PROP TECH IS A VERY BROAD CATEGORY. IT ENCOMPASSES A BUNCH OF DIFFERENT POSSIBILITIES AND TECHNOLOGIES AND WE JUST KIND OF LUMP IT AS SUCH BECAUSE WE ARE KIND OF IN REAL ESTATE. BUT FOR US, WE LOOK AT OURSELVES AS EQUALLY AS THAT WE ARE PROVIDING — >> JEREMY SAID BEFORE, IT’S AN ALL-INCLUSIVE TERMINOLOGY, SEXIER WHEN YOU CALL IT FINTECH OR IF YOU CALL IT PROP TECH.>>DEPENDS ON THE AUDIENCE.>>AS OPPOSED TO JUST TECHNOLOGY.>> LET’S TALK ABOUT “HELLO RENTED” AND WHY YOU CREATED IT?>> “HELLO RENTED” IS A DATA AND TECHNOLOGY FOCUSED COMPANY. WE SERVE THE RESIDENTIAL RENTAL SECTOR ACROSS THE US. WE PROVIDE A SECURITY DEPOSIT REPLACEMENT, AND RENTAL GUARANTEE PROGRAM WHICH BOTH SITS ON A DATA PLATFORM. WE ARE ABLE TO GIVE TENANTS SIGNIFICANT CASH FOR SAVINGS AT THE COMMENCEMENT OF A LEASE. AND WE GIVE THE LANDLORDS INCREASED PROFITABILITY AND INCREASED PROPERTY ASSET VALUES.>>EXPLAINE TO ME HOW, I GOT THE PROFIT FORMULA FROM HIM –>> SECURITY DEPOSIT REPLACEMENT, WHEN YOU’RE RENTING AND MOVING, FROM A TENANT PERSPECTIVE, IT’S VERY EXPENSIVE. BROKER FEES, FIRST MONTH’S RENT, MOVING, FURNISHING AND ALL THE REST. THERE ARE DIFFERENT NUMBERS. WHAT WE DO IS TAKE CARE OF THE SECURITY DEPOSITS FROM OUR BALANCE SHEETS. IT REDUCES THE CASH FLOW FOR THE TENANT AT THE COMMENCEMENT OF THE LEASE. FROM THE LANDLORDS PERSPECTIVE WE PROVIDE THEM THE ABILITY TO MARKET PROPERTIES AS SECURITY DEPOSIT FREE. AND IF I CAN DIGRESS TO WHERE IT ALL CAME FROM, I THINK ENTREPRENEURIAL INNOVATIONS COME FROM OUR CAREERS AND OUR LIFE EXPERIENCES. MY BACKGROUND WAS VERY MUCH IN CREDIT AND RISK AND THEN FINANCE. AT THE BEGINNING OF THIS COMPANY WE WENT TO LANDLORDS AND WE TRIED TO UNDERSTAND THEIR PAINS. AND WE SAW THE SECURITY PROGRAMS BUT STILL SUFFERING FROM LOSSES AND BAD DEBTS. SO BUNDLING DATA AND CASH AND INSURANCE, WE CREATED A LANDLORD-FOCUSED SOLUTION. WE WERE ABLE TO REDUCE BAD DEBT, PROVIDE EXTRA REVENUE STREAMS FOR LANDLORDS AND FROM THE WHOLE SECURITY ANGLE, A MUCH LESS RIGOROUS — >>NOW WE HAVE A PERFECT COMBINATION. BECAUSE IN ADDITION TO BE INVESTING COMPANIES, WE HAVE A LANDLORD. HOW MANY RENTAL APARTMENTS DOES RED APPLE GROUP HAVE?>>ABOUT 1500.>>DO YOU REQUIRE A SECURITY DEPOSIT?>>WE DO.>> HAVE YOU DONE THIS WITH AN INSURANCE COMPANY PRODUCT AS OPPOSED TO REGULAR SECURITY DEPOSIT?>> WE HAVE AND WE FOUND A LOT OF SUCCESS WITH USING PROGRAMS FOR FOREIGN STUDENTS TO DO THAT. AND WE HAVE SEEN HUGE INFLUXES ESPECIALLY WITH STUDENTS. A LOT FROM CHINA.>> YOU LIKE IT?>> WE DO. AND WE ARE KIND OF LAPPING OUR FIRST INITIAL BOOKING OF THE STUDENTS. WE ARE COMING TO THE POINT WHERE WE HAD A TREMENDOUS AMOUNT OF LEASES JOIN US EXACTLY A YEAR AGO AND ALL OF THOSE ARE COMING DUE. IT IS INTERESTING TO BE ABLE TO COMMUNICATE WITH ALL OF THOSE FOREIGN STUDENTS. BUT IT IS GOING WELL.>>AND A COMPANY SIMILAR TO HELLO RENTED?>> YES.>> WE’VE HAD GOOD EXPERIENCES WITH FOREIGN STUDENTS.>>HERE’S THE QUESTION, WHAT DOES IT COST YOU AS A LANDLORD TO UTILIZE THIS SERVICE?>> IT IS FREE.>> YES, IT IS FREE.>> THE TENANT IS PAYING THE COST. WHAT DOES THE TENANT PAY TO USE YOUR SERVICE?>> WE CHARGE A $95 MEMBERSHIP FEE AND A SUBSCRIPTION WHICH IS BETWEEN ONE PERCENT OF THE RENT, UP TO ONE AND A HALF PERCENT.>> SO SIMILAR TO MY FRIEND CYRIL OVER HERE YOU’RE USING AN ALGORITHM I ASSUME TO FIGURE OUT WHAT IS THE POSSIBILITY ON THE ACQUISITION AND YOU’RE USING IT ON THE DEFAULT POTENTIAL OVER THERE.>> VERY MUCH SO. PORTABILITY — DEFAULT>>COLLECTING A PREMIUM ON TRUST.>> YEAH, RISK-BASED PRICING.>> LET’S TALK ABOUT JOHN, YOUR OTHER INVESTMENTS IN THE PROP TECH THAT WE HAVE. AND THEN WE WILL GET TO THE SUBJECT THAT WE WILL TALK ABOUT OFFICE SHARING COMPANIES.>> JUST TAKING A QUICK STEP BACK A LITTLE BIT. THERE IS HISTORICALLY MORE — OUR BIGGEST BUSINESSES ARE ENERGY PRIVATE EQUITY REAL ESTATE DEVELOPMENT. INSURANCE, SUPERMARKETS, FINANCE AND INVESTING. WHEN I LOOK AT COMPANIES, I’M TYPICALLY LOOKING AT THOSE INDUSTRIES ATTEMPTING TO DISRUPT OR ENABLE OUR EXISTING BUSINESSES. WHEN I LOOK FOR THEM, I’M NOT LOOKING FOR THE ONES THAT ARE COMPLETELY TURNING THE INDUSTRY ON ITS HEAD. YOU’RE LOOKING AT LEGACY BUSINESSES IT’S OFTEN DIFFICULT. SOME OF THE OFFICE TECH COMPANIES, IS TYPICALLY LESS LIKELY THAN NOT. I LOOK FOR COMPANIES THAT ARE DECREASING THE AMOUNT OF FRICTION WITHIN TRANSACTIONS. WHETHER IT IS MONETARY OR BOOKING. BY CREATING PLATFORMS TO ENABLE PARTICIPANTS AND SUPPLY AND DEMAND SIDE TO COMMUNICATE MORE EFFECTIVELY OR BRING MORE OF THE ASSETS INTO THE MARKETPLACE WHICH IS SOMETHING THAT WE SAW IN AIRBNB. SOME OF THE INVESTMENTS WE’VE MADE IN THE PAST, THE FIRST ONE WE MADE WAS CALLED — ESSENTIALLY CREATING A BLOOMBERG FOR REAL ESTATE. DECREASING — >>YOU WENT INTO THAT BECAUSE YOU ARE SELLING A PROPERTY AND YOU NEEDED INFORMATION.>> EXACTLY. WE SOLD THE PROPERTY, GOT A GREAT PRICE. WE DID A 1031 EXCHANGE AND INSTEAD OF COMMUNICATING WITH THE BROKERS OUT THERE, I THOUGHT WHY NOT START USING DATA TO TRY TO ANALYZE WHERE WE SHOULD BE LOOKING IN THE CITY. WE FOUND THIS PLATFORM, WE ENDED UP USING IT AND IT WAS TERRIFIC. I COMMUNICATED WITH THE CEO, WHO IS ABSOLUTELY TERRIFIC AND WE BUILT A GREAT RELATIONSHIP.>> NOW IS AROUND THE COUNTRY.>> NOW IT IS NATIONAL.>>ANY OTHER INVESTMENTS?>>ONE THAT WE RECENTLY MADE AND I AM VERY EXCITED ABOUT. IT IS CALLED — IT IS ALTERNATIVE ACCOMMODATIONS SORT OF LIKE AIRBNB. THE ISSUE WITH AIRBNB IS THAT EVEN THOUGH THERE ARE REVIEWS YOU NEVER REALLY KNOW WHAT YOU WILL GET OUT OF IT. WITH THESE GUYS DO IS THEY TAKE DOWN ENTIRE BUILDINGS AND COMPLETELY, LEGALLY OPERATE AIRBNB IN THE CITY AND NATIONALLY AND — >>TAKING AN ENTIRE BUILDING AS OPPOSED TO A COUPLE OF APARTMENTS AND THEY ARE ALSO OPERATING WITHIN THE LAW, AS OPPOSED TO THE ILLEGAL APARTMENT.>> YES. IF YOU THINK ABOUT THE ALTERNATIVE ACCOMMODATION INDUSTRY MOST OF THE VALUE HAS BEEN WITHIN THE PLATFORM BECAUSE THE DEMAND SIDE, PEOPLE ACTUALLY RENTING ARE DISAGGREGATED AND WHENEVER AGGREGATE INTO GROUP BUYING. THE SUPPLY SIDE BEING APARTMENT OWNERS ARE, WHO ARE LISTING ARE DISAGGREGATED, BUT OVER TIME, WHAT THEY ARE DOING IS AGGREGATING THOSE AND YOU’RE SEEING A SHIFT IN BARGAINING POWER TOWARDS COMPANIES THAT ARE CONSOLIDATING AWAY FROM AIRBNB. IT WILL NEVER BE FULLY TAKEN AWAY FROM AIRBNB BUT JUST A POSITIVE LONG-TERM MARKET STRUCTURE.>> YOU’RE WORKING WITH OTA CONCEPTS.>>WORKING WITH OTA AND THE STRUCTURE IS DIFFERENT, LIKE SPOTIFY — THAT’S AN INCREDIBLE COMPANY BUT IF YOU LOOK AT THE MARKET STRUCTURE, THEY ARE PLATFORM AND THEN IN ORDER TO HAVE A SUCCESSFUL MUSIC PLATFORM, YOU NEED TO HAVE KIND OF THE BACK MUSIC LIBRARIES AND THREE, FOUR OR FIVE STUDIOS CONTROL ALL OF THOSE.>> ALL OF THE LICENSES.>> ALL OF THEM.>> WHAT OTHER COMPANIES?>> WE RECENTLY MADE AN INVESTMENT IN A COMPANY THAT IS ATTEMPTING TO CHANGE THE RETAIL LANDSCAPE THROUGH SMART SHOPPING CARTS BUT EVENTUALLY JUST USING COMPUTER VISION IT IS CALLED CAPER. THEY ARE WITH GROCERY STORES AND PEOPLE HAVE BEEN SENDING ME ARTICLES FOR YEARS NOW SAYING THAT AMAZON GO STORES WILL COMPLETELY TAKE OVER. A COUPLE OF PROBLEMS WITH THAT. TECHNOLOGY IS WONDERFUL BUT THE COSTS ARE EXPONENTIAL BECAUSE AS YOU SQUARE THAT SIZE YOU ARE SQUARING THE COST BECAUSE YOU NEED SENSORS THROUGHOUT THE STORE. ONE OF THE FIRST AMAZON STORES COST OVER $1 MILLION TO OUTFIT WITH SENSORS. BUT THE GROCERY MARKET, THE PROFIT MARGIN, THEY ARE NOT SPENDING $1 MILLION. WHAT THEY DO IS PRACTICALLY WITH ZERO HARDWARE, MODIFICATIONS WITHIN THE STORE. THEY JUST DROP A CART SECTION AND YOU HAVE THE SMART CARDS THE PEOPLE CAN GO AROUND THEY HAVE AISLE MAPS, SO YOU ARE IN INSTACARD AND NEED TO EFFICIENTLY FIND 11 ITEMS. IT WILL SHOW YOU WHERE TO GO. BUT IF YOU THINK ABOUT THE ADVERTISING PLATFORM THAT THE CUSTOMERS IN POSITION TO SHOP IN THE MINDSET TO SHOP IN THE ACTUAL LOCATION TO SHOP. I DON’T WANT TO GET TOO MUCH INTO IT –>> YOU BRING UP AN INTERESTING POINT FOR AMAZON GO. THEY OPENED UP IN MIDTOWN MANHATTAN, TWO AMAZON GO SHOPS. I WENT TO THE FIRST ONE ORIGINALLY AND I DID NOT HAVE MY AMAZON APP AND IS AND I DIDN’T HAVE MY PRIME MEMBERSHIP AND I HAD NOTHING. THEY DIDN’T LET ME IN.>> NO LUNCH FOR YOU.>> NO LUNCH FOR ME! AND YOU’RE RIGHT WITH THE SENSORS. THEN THEY OPENED UP NOT TOO FAR AWAY FROM THE OTHER LOCATION, A HUGE LOCATION IN A FORMER COFFEE SHOP, FAST FOOD TYPE OF PLACE. I CAN UNDERSTAND THE EXPENSE OF ALL OF THE SENSORS OVER THERE. IT’S NOT JUST THE SENSORS, IT IS ALL THE COMPUTING POWER AND ENERGY POWER REQUIRED FOR THAT.>> SINCE YOU HAVE BEEN — YOU’VE BEEN INVOLVED WITH MANY FINANCIAL TECHs, WHERE ARE THE OPPORTUNITIES TODAY IN THE “FINTECH” AND PROP TECH WORLD?>>IN THE LANDING SPACE THERE IS THE UNDERWRITING, THE ABILITY TO ASSESS RISK, WHICH I THINK IS BECOMING LARGELY COMMODITIZED. I THINK YOU KNOW AS WE TALK ABOUT BIG DATA, DATA STARTED TO MERGE AND PEOPLE STARTED TO GET SMART HOW THEY ARE USING IT. I THINK THAT IS GOING TO BE A BIG OPPORTUNITY IN THE FUTURE. BOTH IN TERMS OF RISK ANALYSIS AND ALSO ACROSS SELLING. I THINK CUSTOM ACQUISITION IS ONE OF THE MAIN PAINS I THINK IN FINANCE AND INSURANCE AND YOU KNOW, WHAT WE HAVE DONE IS WE’VE CREATED ANOTHER NICHE. WE’VE GOT A VERY GOOD SUPPLY, I THINK, OF TENANTS, CUSTOMERS FOR OUR SERVICE. MANY ARE GREAT CREDIT QUALITY.>>SO, YOU CAN SELL THEM YOUR PRODUCTS.>> AND WE CAN SUPPLY THEM — >> HERE IS THE QUESTION. CERTAIN COMPANIES, WE COMPANIES, BELIEVE THAT THEY ARE A PROP TECH COMPANY AND THEY TAKE AS LONG AS AMAZON TOOK, YEARS BEFORE IT TAKES PLACE. MY QUESTION IS, HOW IMPORTANT — I KNOW THAT THE DATA IS IMPORTANT. KEEPING THE DATA IS IMPORTANT, THAT IS HOW THE OTHER COMPANIES HAVE INVESTED, THE QUESTION IS, IS THE DATA WORTH THAT MUCH TO HAVE AN EVALUATION OF $47 BILLION?>>I HAVE A TREMENDOUS AMOUNT OF RESPECT FOR THE FOUNDER AND ANYONE THAT FOUNDED A BUSINESS, YOU GUYS AS WELL. THE ECONOMICS OF THAT BUSINESS ARE TOUGH. MAKING FIXED COSTS VARIABLE AND ALLOWING EASIER AND CHEAPER ACCESS TO GET SPACE IS GREAT BUT WHEN YOU’RE TAKING LONG-TERM EXPENSES AND CHOPPING THEM UP TO BAD CREDIT TENANTS YOU MIGHT HAVE A HARD TIME DOWN THE ROAD. I DON’T WANT TO CALL IT A CRAP COMPANY CAN’T REALIZE A PROFIT BUT –>> AND HERE’S AN INTERESTING SITUATION, JEREMY HAS SPACE IN ONE OF THE COMPANIES LIKE WeWORK.>> IS NOT A LONG-TERM — I THINK IT IS — >>BUT THE QUESTION COMES, WHY ARE YOU UTILIZING THE SPACE? I HAD A SITUATION THAT I HAD TO RELOCATE OFFICES. I WENT TO THE WeWORK MODEL. AND I WENT TO ANOTHER SHARED COMPANY WHO IS A TRADITIONAL COMPANY, BEEN IN THE SPACE, MAKING ROOMS. I WAS UNHAPPY WITH THE FACILITY. I MET SOME VERY YOUNG PEOPLE THAT WERE UNHAPPY, THEY WERE IN A MAZE LIKE MARBLES BEING HIT OVER THERE.>> TO BE HONEST I AM SURPRISED WE’RE TALKING ABOUT WeWORK. I THOUGHT THIS WAS PROP TECH — [LAUGHTER] WE LOVE IF THE CUSTOMER EXPERIENCE IS FANTASTIC. WE ARE BEING SUBSIDIZED BY SOFTBANK. RENT IS VERY CHEAP, WE LOVE IT. BUT I THINK IT IS NOT A PROP TECH COMPANY SO, TO ANSWER QUESTION BY THE BIGGEST TREND IN PROP TECH AND I THINK THE BROADER OPPORTUNITY OF PROP TECH, AND I AM BIASED IN SAYING THIS BUT IT’S HOUSING. ALL THE COMPANIES THAT ARE IN THE NEW YORK COMMERCIAL SPACE ARE FANTASTIC COMPANIES, I RESPECT THEM A LOT. AT THE END OF THE DAY THEY CERTAINLY MAKE PEOPLE LIKE ZUCKERMAN WEALTHIER AND — >> YOU ARE TALKING ABOUT HOUSING. I HAD A COMPANY A NUMBER OF MONTHS AGO WHO WAS I THINK — BASICALLY TRYING TO WORK AS A BROKERAGE.>>SQUARE FOOT.>> YES, SQUARE FOOT. BASICALLY HE’S A BROKER. THERE IS NOTHING UNIQUE ABOUT HIM IN THIS SITUATION. HE HAS BROKERS OVER THERE AND THEY BASICALLY, IF YOU REGISTER OVER THERE, SOMEONE CALLS AND IT BECOMES A PAIN IN THE REAR.>> AUTOMATED PROCESSES MAKE IT EASIER FOR HIM TO FIND GOOD SPACE. AND IT IS MAKING IT CHEAPER FOR LANDLORDS AND TENANTS TO SIGN CONTRACTS. IT IS AN INTERMEDIARY BUSINESS. THERE IS STILL AUTOMATING PROCESSES AND DEVELOPING TECHNOLOGY AROUND THE AUTOMATION OF WHAT IT’S LIKE TO FIND A SPACE AND SIGN A LEASE.>> HOUSING IS IMPORTANT. WHAT OTHER BUSINESSES DO YOU SEE? OKAY, JOHN, WHAT DO YOU SEE AS THE NEXT OPPORTUNITY?>> I LOVE THE ALTERNATIVE ACCOMMODATION SPACE I TALKED ABOUT SAUNDER WITH SHORT-TERM RENTALS. WE ARE LOOKING AT LONGER TERM RENTAL AS WELL.>>ISN’T IT JUST A HOTEL? I’M SORRY BUT — WHEN YOU SAY — >> YES! IT’S NOT — IT’S NOT — IT’S TECH ENABLED BUSINESS. IT’S NOT A TECH BUSINESS.>>WHEN YOU SAY THEY HAVE A BUILDING AND THEY HAVE STANDARDIZED ROOMS, BECAUSE AIRBNB IS NOT STANDARDIZED, IT SOUNDS LIKE MARRIOTT TO ME. SO WHAT’S TECH?>> THE TECH IN SAUNDER — THEY’VE BUILT AN INCREDIBLE SYSTEM TO IDENTIFY WHERE THEY SHOULD GO AND THEIR BOOKING PLATFORM IS EXCELLENT. BUT IT IS NOT PROPRIETARY IN THAT SENSE.>> IS THE UNICORN VALUATION JUSTIFIED IN YOUR OPINION?>> FOR SURE.>> BASED ON THE REAL ESTATE OR BASED ON THE TECH?>> BASED ON FINANCIALS I’VE SEEN.>> AND A QUESTION FOR ALL THREE OF YOU. HOW DO YOU MAKE A DETERMINATION OF THESE VALUATIONS ? WHO IS THE GURU? WHO IS THE CORRECT PERSON FOR WHAT EVALUATION IS? WHEN YOU’RE INVESTING, WHEN YOU’RE TRYING TO GET INVESTORS.>> MARKET-DRIVEN. A NUMBER EMERGES. I THINK IT IS VERY DIFFICULT TO VALUE A COMPANY USING THE OLD METRICS WHEN YOU DON’T — YOU’RE DEALING WITH PROFIT. YOU’RE TRYING TO, AS AN ENTREPRENEUR, PRESENT A VISION WHERE YOU CAN SCALE.>> HERE’S A QUESTION PEOPLE COME TO ME. THEY TELL ME THAT THEIR BUSINESS IN THE PROP TECH, FINANCIAL TECH IS WORTH X, I SAY HOW MANY YEARS WILL IT TAKE BEFORE YOU MAKE ANY MONEY? AND THEY ALWAYS UTILIZE THE CONCEPT OF TELLING ME ABOUT AMAZON.>>AMAZON HAS BEEN CASH FLOW POSITIVE SINCE 2001.>>NOT TRUE.>>CFO. CASH FLOW OPERATIONS.>>YEAH BUT, THEY REINVESTED EVERYTHING, WHICH IS THE ARGUMENT THAT EVERY TECH COMPANY IS MAKING, RIGHT?>> WHAT YOU COUNT AS PROFITABILITY?>> BOTTOM BOTTOM LINE.>> NET INCOME? WHAT ABOUT DISTORTIONS AND GAP COUNTING? HOW DO YOU DETERMINE THAT?>> TALK ABOUT ANY COMPANY GOING PUBLIC RIGHT NOW.>> NIGHTMARES.>> BUT SO IS AMAZON BACK THEN.>>THEY’RE NOT CFO POSITIVE.>>THIS IS VERY INTERESTING AND I THINK THERE ARE THREE WAYS OF LOOKING AT EVALUATIONS IN TECH; THERE IS CASH FLOW, WHICH IS THE OLD-FASHIONED WAY AND THAT IS THE PREFERRED WAY. AND I AGREE WITH YOU. THERE IS REVENUE, WHAT A LOT OF PEOPLE ARE USING IN THE LATER STAGE. AND WHAT YOU’RE TALKING ABOUT THERE IS MARKET DRIVEN BASED ON HOW MUCH MONEY YOU NEED TO GRAB YOUR MARKET SHARE AND THAT IS GOING TO BE A FUNCTION OF HOW MUCH YOU ARE RAISING AND HOW MUCH EQUITY OR OWNERSHIP INTEREST YOUR INVESTORS WANT. IT IS A SIMPLE FORMULA. THAT’S THE LAST DESIRABLE FUNCTION FOR THIS CONVERSATION BUT UNFORTUNATELY IT IS WHAT’S BEEN GOING ON IN EARLY STAGE VENTURE. IF YOU DO NOT WANT TO INVEST IN EARLY STAGE VENTURES BECAUSE THE FINANCIALS DON’T MAKE MUCH SENSE, THEN DON’T. IT’S OKAY, YOU DON’T HAVE TO.>> VERY WELL SAID.>> IN SUMMATION, WE WILL SEE CONTINUED INVESTMENT IN PROP TECH, FINANCIAL TECH. WE WILL SEE SOME BRIGHT YOUNG OPERATORS, ENTREPRENEURS CREATING NEW COMPANIES. AND THE STRONG WILL SURVIVE. I WOULD LIKE TO THANK CYRIL, JEREMY AND JOHN. THANK YOU FOR BEING HERE. WE WILL SEE YOU NEXT WEEK.>> THANK YOU.>> THANK YOU VERY MUCH. ♪ [THEME MUSIC] ♪

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