Brendan Wallace

Susan Freeman

Hi I am Susan Freeman and a huge welcome to the very first edition of our PropertyShe Podcast where we will be hearing from a selection of brilliant property personalities that I think make a massive difference to our sector. They will be collected and selected by me so they are likely to be a pretty eclectic mix. As you may or may not know, I already enjoy interviewing for all manner of print and on-line platforms so this is going to be a very exciting new departure. Be sure to check out our PropertyShe website, you will find it on Mishcon.com/PropertyShe for programme notes from our guest interview today plus it is your opportunity to tell me what you think with your feedback and importantly to make your suggestions for future guests. You can also follow me on Twitter handle @propertyshe.

Today as our very first guest I am absolutely delighted to welcome serial entrepreneur, Brendan Wallace. He is the co-founder of Fifth Wall Ventures who is making a lightening visit to London from his Venice Beach California home.

One of the biggest challenges for real estate companies right now is how to build bridges with the new technology that is taking the sector by storm. Fifth Wall was founded in 2016, that's just two years ago, by Brendan Wallace and his co-founder Brad Greiwe, as the worlds' first pure real estate venture capital fund which invests solely in real estate tech.

Well Brendan welcome to London. When did all this start, was there any early indication that you were going to go in this direction?

Brendan Wallace

It is a tough question right, because its kind of what leads you to start a venture capital fund focussed on real estate technology which I think is not the most intuitively obvious opportunity but I think actually my background was this unique hybrid of real estate experience and just a profound interest in technology and innovation so I actually, I grew up in New York City. I grew up in a real estate family in New York. I grew up with real estate in my blood and it is something that I loved…

Susan Freeman

Ahh okay.

Brendan Wallace

…and then right after college I worked in real estate, in finance at Goldman Sachs, I worked in banking there covering real estate and then I worked at Blackstone, investing in real estate and their real estate private equity group and then 2008 came along and I decided at that point that I wanted to go to business school and I went to business school at Stanford and you know, in Stanford you are just, you are surrounded by the Silicon Valley eco-system and this culture of innovation and venture capital that surround you.

Susan Freeman

I have a question for you – having been through business school, London business school in London I was really surprised at the way real estate was viewed as a sector, it was regarded as a dinosaur, people weren't that interested in it, it didn't come up on the syllabus at all and I was just looking, you know, I was looking at Stanford and I just wondered if it was different there and that real estate is, is seen as very much part of what is going on?

Brendan Wallace

I think there is that impression. At the same time I think it is hard to read too much into the views of MBA students. I actually think you might be able to predict the next financial bubble based on what MBA students are most interested in so in some ways the fact that MBA students are not interested in real estate right now which I think is a truism, it sounds like in London as well as in the US, I don't think speaks to the opportunities in real estate. It might just speak to a hype-cycle or kind of where we are in the media frankly around this kind of acute focus on technology but I think what some people miss is the opportunities to apply technology to, as you put it, dinosaur industries, to asset heavy brick and mortar traditionally under technologized industries like real estate and that's, that's something you know, we love doing at Fifth Wall and I know you are incredibly passionate about and I think there is these growing voices that have focussed on this unique opportunity. So, I at Stanford, I got really into technology and I launched a company with a classmate totally outside of the real estate sector in data analytics, grew that company, raised a lot of capital and then we sold that company. I then started another company, also in tech, focussed on transportation and then I had these two experiences and I couldn't quite figure out how to marry them and how to bring them together and that was the lightbulb moment when Brad and I had the idea for Fifth Wall back in 2016.

Susan Freeman

And where does the name come from? Because it is an interesting name.

Brendan Wallace

So it is an interesting name. We actually strangely enough, we raised the first fund without a name. We didn't know what it would be called and we always knew that was a problem and I think we went out one night, had some drinks and talked about what we wanted to name it and the idea was how do we kind of properly capture this notion that real estate is traditionally thought of as a four wall business, you think of four wall economics and four wall dimensionality but technology has this unique ability to change the economics and change that dimensionality, almost adding like a fifth wall which is frankly where we settled on the name.

Susan Freeman

Now I was quite intrigued by the fact, I think on your Facebook site you have a Henry Ford quote that if you had asked people what they wanted they would have said faster horses and it just made me think when you talk to real estate people now, what do they, what do they think they want? I mean is it a case of faster horses and you have to sell them something slightly different or are people aware of what's possible for them?

Brendan Wallace

Well that's my favourite quote and so…

Susan Freeman

It's a good one.

Brendan Wallace

Thank you. I've never been asked that. It's a quote that is like especially dear to me given what we do at Fifth Wall which is we, we try to strike this balance between being corporate and listening to these large super institutional real estate owner operators and at the same time pushing them forward into this new frontier of technology and there is a delicate balancing act there and the way I think about it is real estate owners are acutely good at understanding their own pain points, what they don't like about their business, the inefficiencies that they see and therefore the opportunities for technology to solve them. They understand that. What they are not so good at understanding is what they are ultimately going to do to change or implement change to effect solutions to those problems and what they are especially bad at doing is predicting where their industry is likely to go over a five to ten year time horizon or even their own business. I mean this is the kind of crux of the innovator's dilemma and I think real estate as a hard asset industry suffers from it.

Susan Freeman

Yes I can see, I can see the problem and I think you've, you've made the point that actually a lot of the tech, start-up tech solutions that are sort of coming up in real estate are quite low tech, they are sort of an incremental way of changing things, there isn't really anything that is really you know, that drastic but it takes people, I think in real estate there is a lot of you know, people putting their head in the sand, trying to ignore that things are changing and the sort of solutions that they can deal with are quite incremental.

Brendan Wallace

I think it's a mix, I think there are definitely some solutions I agree with you that are incremental, you kind of forget real estate is you know, an industry that basically sat on the side lines for two decades worth of innovation in IT. I mean they more or less missed the entire internet and all of mobile so it's an industry before which there is a lot of low hanging fruit and so as a result a lot of the companies that we look at don't have enormous technical risk so they don't have what I would call existential risk, the questions of can you build it? Does it work? Is it better than the status quo? But what they do have very clearly is very high go to market and distribution risk which was the whole thesis behind Fifth Wall that we could help mitigate that risk by virtue of raising capital from the largest owners and operators of real estate globally. However I think those opportunities miss some of the more disruptive kind of frontier expanding opportunities of how technology in some really creative way can re-imagine how you monetise physical space and it can be as simple as co-working right. Very, very simple. You just make space more dense. You position it differently. You structure leases differently but in so doing you fundamentally re-imagine the entire business model or it can be frankly a bit more out there like Airbnb who said 'maybe I can turn a spare bedroom into a hotel room' or Clutter which says 'do you actually need to store your items that you are putting in self-storage very close to where you live or could you actually pick up those items, put them on a truck, make it very easy for the customer to have someone take those items away and store them very efficiently and very densely in a huge industrial warehouse far outside the city' and effectively have inventory management for all the items I am storing. So I think it's a mix and I think often times we see real estate owners very focussed on the former category the low hanging fruit opportunities which there are plentiful and maybe slightly less attuned to the more disruptive opportunities out there.

Susan Freeman

Yeah and I find, I mean, I think it's a little bit worrying with the, with the focus on space as a service now which is a completely different way of reviewing real estate assets, you are seeing new companies coming into the sector who are tech companies rather than property companies who seem to be actually providing the service that perhaps property companies should be providing but I guess that one of the things that you do at Fifth Wall is that you bring the encumbrance and the disruptors together so it is actually a joint enterprise rather than you know, one actually taking out the other.

Brendan Wallace

Yeah I think that's true and sometimes you know, being that arbiter in effect between these large incumbents and these fast growing dynamic disruptive early stage companies sometimes it's as simple as a mind-set shift where you have a start-up that is extremely customer centric but in so being they are able to provide a service that a real estate owner never could and co-working is a good example of that. You know, what did WeWork fundamentally do differently than Regis right or than a lot of real estate owners? Not a whole lot right. The business model was more or less the same, the assets were more or less the same, the audience was marginally different but they had a customer centricity which I think was really unique and really special and ultimately was the difference maker and deterministic I think in helping them build that brand.

Susan Freeman

Yeah you raise, you raise a very interesting point. When I came out of business school having spent two years focussing entirely on you know, customer service, businesses, you know just the whole time obsessing about customer service and I look round real estate and I thought actually does anybody know who the customer is and you know, at that time the customer was still the tenant. I think we may have got to occupier but you know, the type of sort of lease system certainly that we had here meant that you just would grant a long lease and you wouldn't necessarily have to bother terribly much with the, you know, with the customer so you know I think the sector has been a little bit late coming you know to this focus on customer.

Brendan Wallace

I think it's totally true and I feel like it's, it's that real estate owners sometimes think their basic job is to provide a roof over someone's head and some windows and a secure way of getting in and out and maybe some parking , right?

Susan Freeman

Yeah.

Brendan Wallace

And make sure the electricity works. But I think if you look at it through a different lens, real estate owners are starting to recognise that the product they have is actually more of a building a relationship between a tenant and the physical space they use to be either productive or to live or to shop. It's the relationship, it's note the space, it's the relationship and if you conceptualise real estate in that way the onus then falls on the real estate owner to do a whole lot more. Not just provide safe, clean, well-lit spaces but provide spaces that are dynamic, provide spaces that are personalised, provide spaces that are more efficient, that are more modular and can be changed and are like very, very sensitive to how tenants are using space differently. Which is something that I think, you know, brands like we work that are industrious and all the other flex office concepts have done in different ways and fashions.

Susan Freeman

So what we haven't actually spoken about is how you've structured Fifth Wall and how you chose the partners that you have, you know the big corporates that are supporting the business and how that works in terms of the start-ups that you are investing in so I think for our listeners it might be sort of quite useful just to run through that?

Brendan Wallace

Sure yeah, no it's a unique model that we've tried to build. So the concept is quite simple and elegant I think. It's we take the largest users, potential users of real estate technology and we have them invest in our fund and then we actively advise and collaborate, very interactively with those strategic LPs, understand what they are focussed on, find relevant companies that could be fantastic partners for them and connect them and in connecting them it's, you know, a contract, it's a potential investment, it's a partnership that we help orchestrate and so in that way we kind of serve as a adjunct to these large real estate corporates who are increasingly aware that they can't keep track of just the volume and the breadth and the depth of the you know, start-ups out there that could help them. And so in fund 1 we did that with eight strategic real estate LPs; it was CBRE in brokerage, Prologis in industrial, Linear in home building, Hinds in office, Equity Residential in multi-family, Macerich in retail and Host Hotels in hospitality and as we thought pro-forma which maybe harks back to your question of why am I in London, we saw that there was a real power in the consortion itself. So when we first launched this I remember when we actually first spoke about Fifth Wall the idea was very much that our engagement would be one-to-one, would be kind of singular and unitary where we were serving idiosyncratic needs for each one of our real estate owner operators. But in investing fund 1 we saw all these opportunities for collaboration between them where we would invest in a particular company that was relevant we thought to just one strategic LP but then many strategic LPs would adopt it or they would share ideas amongst themselves and there was power in that network. I will give you an example of that. I think you are familiar with Industrious which is a co-working company that Fifth Wall invested in and we invested in that company as part of running a large RFP for Hinds to provide a co-working provider for their very, very large portfolio and ultimately selected Industrious as a winner to that RFP. But then Macerich who is our retail partner in the funds said 'well we'd actually love to work with Industrious as well because we think co-working is uniquely suited to the malls that we have because it is really interesting, it has this recurring use case, people are coming and going on a daily basis' and actually now Macerich has signed three leases with them and is rolling them out across the country and so when I thought about where we should take Fifth Wall – where Brad and I should take Fifth Wall – we thought how can we better serve start-ups by having more strategic LPs and how can we better serve our strategic LPs by having more strategic LPs. Thinking about it almost as like a network effect and we thought that was constrained not by asset class. So we would do this across all asset classes and frankly I don't think it's constrained by geography either. I think when we spent time learning the businesses of large international real estate owners we found that the business of owning an office building in say Tokyo or London or Chicago is marginally different at an operational level but when it comes to what they are focussed on from a technology and innovation prospective, the pain points and the opportunities are largely the same – there is quite a bit of overlap – and so that network effect applies geographically as well and that's kind of a long-winded answer I guess to your question – we think there is an amazing opportunity to work with owner operators here in the UK and serve their interest in technology.

Susan Freeman

Since you've been in London, I mean is… what's the difference? Is there any difference in attitude in real estate here towards tech from what you've been used to seeing in, in the States?

Brendan Wallace

You know I would say it is actually pretty consistent. I would say the, the level of adoption is pretty consistent between the UK and the US. You have similar levels of institutionalisation, maybe slightly less so in multi-family but I'd say an equivalent level of institutionalisation of the office asset class. I think what is different is that there is an ocean in between the UK and you know, where a lot of the great technologies come from which is North America. It is not to say that all of them come from there but overwhelmingly a lot of innovation and technology companies come from North America and so if their lens just doesn't have the aperture to reach those North American start-ups, they are just not going to see great technologies so I would say from a psychology and from a mind-set perspective they are very much in the same place as North American real estate owners, those from our fund 1 but there is just not that connective layer. There is no-one, there is no diplomat over here who is kind of shepherding these early stage companies from North America here and I actually think the inverse is true as well and I think you know and you are very familiar with this kind of emerging eco system of, I think they call it PropTech over here.

Susan Freeman

They do. You call it real estate?

Brendan Wallace

We call it real estate tech but it's very vibrant and I spoke at a conference last year.

Susan Freeman

Future PropTech.

Brendan Wallace

Future PropTech which is an outstanding conference and I would say there is not a conference even like that in the US. There is amazing conferences in the US but it is quite dynamic and it was filled with people.

Susan Freeman

Yeah we had I think two thousand people and we just set up a Future PropTech Advisory Group to try and bring like top people and thinkers in real estate together with the top thinkers in tech to actually focus on what are the, you call them pain points, the problems and try and you know, work out what the solutions are so it is probably very much what you are, what you are looking at. So you actually could provide the lens for people into the start-ups and what's going on in the States?

Brendan Wallace

And the reverse. I actually think there is a lot of amazing PropTech companies here in the UK that because there is an ocean in between are not accessing North American owners to the same extent they could and so the hope is that there is a network effect there as well. That by having all real estate owners, all potential customers in a single platform you can singularly serve all start-ups needs from a distribution perspective because there is just not that much variance in the business of owning an office building and the opportunities for innovation are quite consistent.

Susan Freeman

No I think that, I think that, that is definitely moving in the right direction because I talk to quite a lot of the start-ups over here and you know, one of the issues is you know, when they actually want to raise, raise money they are not quite sure where to go, you know, who are the right people to go to, should they go to the property companies, should they go to the funds so I think there is definitely bridges to be built.

Brendan Wallace

That's a shame right because I think the fact that the venture capital universe in Europe is just inherently smaller than it is in the US it just doesn't afford the same opportunities for growth to amazing start-ups that are based in Europe. So the hope is that not only does kind of distribution become more international and global but so does capital. And real estate owners I think are increasingly recognising that corporate VC is kind of a… has largely been an ineffective strategy for them, at least if you look at kind of the examples in real estate that are out there and so it is unfortunate that capital is a barrier to entry for so many great entrepreneurs in the space.

Susan Freeman

And do you have any sort of particular advice to PropTech, real estate start-ups here who are sort of you know, thinking well where shall we go, we've got this great idea, we've got this great business plan you know, where should we go with it?

Brendan Wallace

So you know there is in the UK, there definitely are quite a few kind of very early stage funds and accelerators that I think can provide that, that seed, that spark capital to kind of incubate the idea and take it from you know, not existing to existing or I think the capital runs a little dryer is around that growth capital. When you have some product market fit, its working but there's maybe some things that need to be refined. There are some reference customers but you'd like to get more. The capital you really need to accelerate your business it seems insufficient what exists in Europe today. So I mean, my self-interest advice is of course contact us but I'd say generally you know, there are a lot of great venture funds and I am sure there will be more in the UK and in Europe but you really want to find a great series A fund that has real estate relationships and can help distribute your business.

Susan Freeman

And I can provide our listeners with your email address I suppose?

Brendan Wallace

Of course yeah, absolutely.

Susan Freeman

Okay, I know from having obviously kept in contact over the last few months that you have spent a lot of time on and off planes, I mean you seem to spend you know, if I am looking at your social media, sort of you know one minute you're travelling round various parts of North America, next minute you are in the Far East and then you are in Europe. I mean how, how do you do it?

Brendan Wallace

That's a good question. I ask myself that a lot. You know, I am just really excited by the opportunity globally. I just think that there is a very clear and obvious and natural network effect to the Fifth Wall model and I love doing what we are doing at Fifth Wall. I love the business of connecting large real estate owners, these huge potential customers to these start-ups that depend on them and in so doing making the built environment better, more efficient, more cleaner, more accessible, all of the merits that come from what we do and so I guess I am more tired, I am a little tired right now, I am on California time but yeah I just think there is such a big opportunity and we are at this point in the cycle where I think this is the moment in time to truly make this kind of see change that's happening in the real estate industry and around PropTech or real estate tech or built world tech of whatever you want to call it more global and so it is a very motivating force for me and I would say the markets we have been particularly interested in are the markets where there are large institutional real estate owners who want to innovate and those are Western Europe, I'd say overwhelmingly in the UK, China, especially South China and Hong Kong, Japan. I think Japan is obviously a fantastic market, extremely institutional and South East Asia for growth opportunities. So we have focussed a lot on those markets and as you have probably seen, I have been in those markets quite a bit.

Susan Freeman

Yeah a lot of… well you've actually answered the question I was going to ask you about you know, what drives you, what makes you get up in the morning and I agree, I mean it is so exciting. I mean the opportunity to make those connections and actually change things I think definitely, definitely is worth doing so did I read somewhere you have a dog called Bandit – is that right?

Brendan Wallace

That's actually… it's my, it's my parent's dog.

Susan Freeman

Okay because I was worried about Bandit because I was thinking you know…

Brendan Wallace

He's very particular by the way. He only goes by The Bandit.

Susan Freeman

Oh The Bandit, sorry, sorry.

Brendan Wallace

Yeah he'll be sure to correct you if you meet him.

Susan Freeman

Yes well he will have to meet Rupert The Dog who has his own Twitter account but I don't know…

Brendan Wallace

It is Rupert The Dog?

Susan Freeman

Mmm.

Brendan Wallace

Oh nice.

Susan Freeman

No because I was worried about The Bandit because I thought if Brendan's on a plane the whole time who is actually looking after, who is looking after the dog?

Brendan Wallace

No fortunately he is, he is, my parent's look after him.

Susan Freeman

Oh good.

Brendan Wallace

A kind of co-opted ownership of him.

Susan Freeman

Okay. Okay. Because that was, that was worrying me a little bit.

Brendan Wallace

You know one thing I am curious about is actually your perspective as someone who has been so close to this market and had your finger on the pulse of you know, British PropTech in particular. How do you think it's changed over the last three years? How have you seen it changing since say 2016?

Susan Freeman

Okay well I mean there has been exponential change. I mean we were talking about it this morning at the Future PropTech Advisory Board meeting because when Future PropTech started just a few years ago you know, there were fifty people in a room and people you know, weren't quite sure why it was relevant and then you know the audiences originally were mainly tech people and a few property people but they didn't really think it had very much to do with them so you know, that, that has all changed. So I think you know, now there is this welcome focus on actually do we have any problems and I mean if you are running a property company you think it's okay to just carry on doing things the way you've always done it. You are not going to think you need a solution but I think most people are now thinking about you know, how could we do better and where do we have to go to find the solution. So I think you know, there's a lot of change just year on year and then every so often there is something completely new. I mean I was going to ask you about Amazon investing in plant which you know is something, you know something new, you know the idea that Amazon should actually be moving into the off-site construction, you know, prefab market and putting its technology into the houses and they are going to come ready made with the technology. Again, you know that's something new to think about. So every day seems to bring something new where you think 'oh I hadn't thought about that'. So there is a lot to think about.

Brendan Wallace

I think you know, what you saw with Amazon investing in modular construction. Well one, that's got to be a scary day for anyone in construction. Amazon decides they want to come in to your space changes things quite a bit.

Susan Freeman

Yeah and retail. I mean they are in retail as well.

Brendan Wallace

They are in retail now as well and I actually think that in some ways the fact that they are entering retail so boldly and so aggressively is in many ways a counter narrative to what you read in the press around the death of retail or the death of malls which I do believe is a largely kind of over blown kind of media cycle driven narrative.

Susan Freeman

Yeah I am with you and you know we've talked a bit in the past about on line brands needing to go off line to create a customer experience so yeah I think, I think retail is changing and you are absolutely right. You look at Amazon, they obviously see an opportunity so why doesn't everybody else?

Brendan Wallace

You know it's a great topic actually because something we focus on a lot, we are actually building out an entirely new strategy, investment strategy focussed on this exact thesis which is that there have been these kind of paradigm examples of digitally native brands that have gone off line and built physical brick and mortar fleets of stores, built this footprint and done so, so extremely successfully. Done so in a way that is true to the brand they built on line, is resonant with consumers in the store where consumers can build an intimacy with the brand and the products and you develop this almost virtuous omni channel cycle. I think the examples are the BINobo's of the worlds or the Casper's or the Warby Parkers but what people often miss is that behind those companies in a slightly smaller scale there is a cohort of new brands, of new digitally enabled brands that are born on line that have grown to ten, twenty, thirty million dollars' worth of sales that are just now starting to think about opening their first stores and the question I often get is why? Why would you open stores, isn't retail dying? But actually what's interesting is that on line commerce is actually changing at a far faster rate. Amazon has radically changed on line commerce. Amazon today represents 50% of all e-commerce's growth. So e-commerce's growth means Amazon's growth in the large part and so if you are a small brand trying to market directly to consumers it is quite expensive and the net effect of that is that the costs of customer acquisition for these brands have gone up so dramatically in the last few years they can't get or retain customers the ways they used to however there is all this retail space and I don't know the stats for the UK but in the United States 90% of US commerce still happens off line.

Susan Freeman

Which is why you've invested in AppearHere I guess?

Brendan Wallace

Yes exactly.

Susan Freeman

Because it's an on line platform to provide short-term space and I think you know, it gives these brands the opportunity just to try bricks and mortar, see how it works, see what the foot fall is and then decide where to go from that.

Brendan Wallace

It's exactly why and Bader, which is another example which is trying to just provide this different product to brands that want to open stores and make it very easy from a store design and site selection and staffing and point of sale solutions for them. But we've actually invested in now seven digitally native brands or retail concepts that are expanding off line very aggressively and the intent of this whole strategy that we've now built and are kind of running with the whole team is to connect landlords, connect retail landlords that of course want to lease space, that is their focus but change how they interact with tenants and provide a more full service solution.

Susan Freeman

The High Street is reinventing itself and you know, there are just going to be different experiences and people are going to expect they will buy on line or they will buy, they will want to go into the store to touch things and see things but they also are going to want the facility of actually ordering on the app or you know, having a look at other things.

Brendan Wallace

I feel like that it's a truism of all real estate. I mean I am sure this is a crowd pleaser for anyone who owns really valuable, well located real estate but I always say this, well located real estate is under monetised and it's not valued as highly as it should be today because people I think view real estate and they view the commercialisation of space into one dimensional fashion, they think about it as tenants selling the space to someone but they don't think about how valuable it is to be that close to the edge of where consumers are. From so many different perspectives, from a connectivity perspective, from a data perspective, from a last mile logistics, like how are you going to get things to people. From even consider an investment that we made in Lime which is you know, the largest…

Susan Freeman

I was just thinking, I was just wondering about Lime because I know I keep saying to you when are we going to get Lime bikes in London?

Brendan Wallace

I hope soon. I am sure they would be an amazing asset. I sat in some traffic on the way over here and I would have loved to take a scooter over here so there is obviously some complexities around Government relation…

Susan Freeman

And the space problem I mean you know, some parts of London just are so crowded with pedestrians I think if you tried to sort of cut swathe through the middle with a, with a Lime bike you may have a sort of slight problem. So I think with scooters that they just wouldn't be able to get through.

Brendan Wallace

It could be but there's probably ways to navigate that as well but I guess the way I look at it is changing how people move about a City is… and making it more efficient and cleaner is fundamentally a good thing to do right? For the world, for society but it's also great for the real estate business. I mean fundamentally like the reason assets are what they are today in a City is because of mobility right. The car has more or less conditioned the entire value of real estate within London, within New York, within Los Angeles and if mobility is changing the meaning and the value of real estate will also change and so we looked at bikes and scooter sharing. We said this is really not about a last mile transportation issue or solution. It's about the last ten feet of the last mile which is what is right outside your door. Because whatever is right outside your door you are going to take and if you can solve this through ubiquity, having these devices everywhere, people will change their behaviour. I don't know if you have been to West Los Angeles recently but…

Susan Freeman

Not for a while.

Brendan Wallace

…in Venice, California right now if you stood on Abbot Kinney where our office is located and looked around you would see one of the most profound behaviour changes. There are people, probably 10% of the people that go by you are on scooters. I mean that is a radical settle but if you think about it in kind of a broader context, it is quite a radical behaviour change. Those are would-be drivers, would-be parked cars that are now people scooting.

Susan Freeman

And are they motorised?

Brendan Wallace

They are electric which actually speaks to the other real estate kind of dimensionality to the business which is the devices are everywhere right, they are designed to be ubiquitous but they need to be charged and you have to do charging in a physical centralised location and that location needs to be as close to the edge and when I say edge I mean like where the consumers are, the office buildings, the multi-family buildings, the apartments, the malls where people are living, buying, working and so you need to have this distributed network of charging stations and so the opportunity for collaboration that we saw was could we help a company like Lime build a network of charging stations in collaboration with landlords in such a way that the landlords benefit because now their tenants don't have to park as much in their parking lots and can freely come and go without kind of straining urban infrastructure as much as you do when you fire up a 2,000 lb you know, encased metal mobility tool which is the car. So I just found it such a fascinating business because it connected so many currents of where we were focussed as a firm and frankly my personal passion for mobility. And it's also amazing that a lot of the innovations, the technological innovations that you know, consumers have adopted haven't really taken cars off the road. Think about delivery. More and more things are getting delivered and what that means is there is more and more delivery trucks on the road and delivery trucks are big and they stop a lot so they take up a lot of space and they cause congestion and that is not slowing down, that is accelerating so that is one factor and then take Uber and Lift and all the other ride-sharing services, people I think initially thought oh this will reduce traffic but most of the studies actually suggest the opposite. They increase traffic because of idling time; people waiting to get a ride. So what is so fascinating about a company like Lime is that if you are taking cars off the road at a time when you really need it and certainly in compliment to what London is doing and you know, improving its urban infrastructure it can change the whole character of a City, it can change what a streetscape means.

Susan Freeman

Yeah well I've got, I've got great hopes for drones because you know, if we could actually start getting some of these deliveries by… just dropped in by drone rather than all these delivery vans that are on the road the whole time then that would also improve things.

Brendan Wallace

I am glad you mentioned that because that's actually another area where I think real estate is undervalued. I think most people when you talk to a real estate owner and you say have you thought about the value of your, your air rights, they think about how much they can build right. So if they are under built, can they build more stories on top of their current building but I actually think that misses the whole point. If things are going to be delivered aerially and you are going to have parcels moving through the air by drones and by the way potentially people at some point as well.

Susan Freeman

Yeah.

Brendan Wallace

So you have Ariel movement of people and things you are going to want to fly as close to the ground as possible from an energy efficiency stand point and at least in the US building owners have the right to generally quiet enjoyment of up to 400 feet above their asset so you have this problem of you've like a multi-jurisdictional issue, you have air space issues probably related to any nearby airport or parks but then you also have private air spaces and so I think that very shortly there are going to be freeways built in the sky, effectively right of ways, thoroughfares, major arteries where people or parcels might move and they will cut through the private and public air spaces that are overlapping and multi-jurisdictional and real estate owners could effectively have a highway above them that they charge a toll on, a digital toll but a toll.

Susan Freeman

It's going to be a bonanza for the real estate owners.

Brendan Wallace

It could be. I think if real estate owners recognise it and think about it and kind of see it the right way but I don't think, and this actually speaks to the very reason why you know, Brad and I wanted to build Fifth Wall, is I don't think if you ask real estate owners today are you thinking about you know, monetising these future thoroughfares in the sky, moving people and parcels around they will think you have had too much to drink right, they won't think of that as a viable business idea and we are here to push them in that direction.

Susan Freeman

Yeah well it almost goes back full circle to that Henry Ford quote doesn't it.

Brendan Wallace

Exactly.

Susan Freeman

It's just you know people don't necessarily have the, you know, imagination to think and you know, there is going to be a lot of change.

Brendan Wallace

That was very astute. They have brought it full circle and honestly that's exactly why I love that quote because it's, it gives everyone, including Fifth Wall, including our real estate partners, including start-ups, a certain humility over how much you think you know and I think in business when you become successful as many of these real estate owners have, you think you know the future but usually the future just finds you and you have to be able to have that plasticity as an organisation and have that adaptability and be thoughtful about what are the tools and what are the solutions and what are the best practices in my organisation that set me up flexibly to adapt to a future I can't know with certainty and that's what we do. That's what we try to do at Fifth Wall and so you know, I get very excited and obviously passionate about this and it's awesome to talk to you about it.

Susan Freeman

Yeah I have really enjoyed it, it's been absolutely brilliant Brandan thank you very much for finding time for us this afternoon and I look forward to the next session.

Brendan Wallace

Definitely. Thank you.

Brendan Wallace is a Co-founder and Managing Partner at Fifth Wall. Brendan was Co-founder & CEO of Identified, a data & analytics company focused on workforce optimization that raised $33 million of venture capital and was acquired by Workday (WDAY) in 2014. Brendan co-founded Cabify, the largest ridesharing service in Latin America. Brendan has been an active angel investor and manages one of the largest syndicates on AngelList, having led over 60 angel investments including Bonobos, Dollar Shave Club, Lyft, SpaceX, Clutter, Philz Coffee and Zenefits.

Brendan started his career at Goldman Sachs in investment banking in the real estate, hospitality, and gaming group where he worked on $22 billion in M&A Advisory work. Brendan also worked at Goldman Sachs’ CMBS and structured finance group where he worked on over $10 billion in commercial real estate debt originations and securitizations. He then worked at The Blackstone Group in real estate private equity where he worked on the $26 billion acquisition of Hilton Hotels and the $39 billion buyout of Equity Office Properties, the 3rd largest leveraged buyout in history.

Brendan is from New York, NY, and graduated from Princeton University where he received his BA in political science and economics. Brendan received his MBA from the Stanford Graduate School of Business.

Brendan Wallace

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