REAL ESTATE TECHNOLOGY PERSPECTIVES THAT COUNT

An Affordable Housing Crisis

From 1985 to 2020, median rent prices increased by nearly 150 percent despite overall household income growing just 35 percent — and this spike shows no sign of slowing any time soon. In May, the median monthly rent in Manhattan hit a historic high of $4,000, representing ​​a year-over-year increase of more than 25 percent. This rise in rental price has been driven by various factors, from an increase in inflation rates to pandemic-related drivers, including remote work, the expiration of rent freezes and a general return to major metro markets.

This rental environment points to a larger affordability issue in the sector, which ultimately places many renters in a precarious position financially and, for many of them, makes homeownership virtually unattainable. A study released earlier this year found that 61 percent of renters across the country’s largest metropolitan markets could not afford to purchase a home in the area they’re residing in, even if they spent years saving for a down payment.

Wealth Building for Renters

As this dynamic persists and rent prices remain at or near record highs, it is more important than ever for renters to consider impactful pathways to building their savings.. At RET Ventures, we’re committed to supporting this journey, driving our most recent investment in Stake. The platform, which sits at the intersection of proptech and fintech, is one of the first companies to receive funding from our recently-launched, ESG-centric ‘Housing Impact Fund.’

Leveraging behavioral science, Stake empowers renters by providing them with Cash Back on their rent, rewarding them for taking positive actions like signing a lease and paying rent on time while also offering no-fee banking services with cashback on spend to build savings. The solution also mitigates pain points for building owners and saves them money by increasing lease-ups, reducing economic vacancy, and decreasing delinquencies.

Using the platform, property managers receive a 130 percent return on every dollar spent, while renters earn an average of four percent Cash Back on their rent. In the simplest terms, Stake has reimagined the classic ‘rainy day fund’ for renters to build wealth traditionally associated with home ownership. Now, their largest expense is also a significant source of savings.

This Cash Back model also uniquely positions Stake against the other fintech solutions for renters that we have reviewed in the past, all of which are credit- or debt-based and ultimately encourage dangerous behavior as part of their proposed solution.

A Brighter Future for Renters

With Stake, renters have a risk-free, accessible and maintainable roadmap to building meaningful savings. Across the $385 million in annual leases currently connected to the Stake platform, 65 percent of renters have more money in their Stake account than any other banking account. And in the past year, the number of residences that offer Cash Back with Stake has grown by 10x as the mutual benefit that the platform provides for owners is clear; on average, renewals at Stake properties have been 30 percent higher than the rest of the market.

While renters’ current financial landscape has heightened the immediate demand for affordable housing solutions, Stake’s unique offering has immense potential to become a long-term resource in renters’ financial toolkit. We look forward to working in partnership with Stake, leveraging the symbiotic renter-owner relationship to actively combat the growing affordability crisis while creating a healthier financial future for renters and owners alike.

RET Ventures (‘RET’), a venture capital firm focused on technologies for the multifamily, single-family rental (SFR) and broader real estate asset classes, today announced that it has appointed former UDR President Jerry Davis as a senior advisor. Concurrently, RET announced that it has promoted three members of its existing investment team and brought on venture capital finance veteran Jacob Zornes as CFO.

For RET, the corporate expansion follows the launch of its “Housing Impact Fund,” an investment vehicle that will focus exclusively on technology solutions that address ESG-related issues, including climate and environmental impact, housing access and affordability and resident/tenant engagement and wellness. This expansion will enable RET to continue to find and back promising technology companies out of its Housing Impact Fund, its core early-stage venture capital funds and other investment vehicles, which now include more than $375 million in committed capital.

A 33-year veteran of the real estate sector, Davis spent approximately 30 years at UDR, including serving as the firm’s president and COO from 2013 to 2020. In addition to his experience overseeing operations for one of the country’s largest apartment portfolios — comprising some 50,000 rental units — Davis serves as a widely recognized thought leader in the rental housing sector, speaking widely at industry panels on topics including the intersection of real estate and technology.

“Technology’s potential to improve real estate has been apparent for more than a decade, but multifamily tech solutions have become much more sophisticated in the past few years,” said Davis. “Having worked closely with the RET team in my role at UDR, I know the impact they have in investing in and nurturing technologies that benefit the entire rental real estate ecosystem. RET’s approach of bridging the gap between user and technology has already delivered material benefits to many apartment REITs and private operators, and I look forward to continuing to guide the industry’s digital transformation in the years ahead.”

Zornes is an accomplished corporate finance professional with approximately 15 years of experience in the private equity/venture capital and real estate sectors. Most recently, he was a managing director at UMB Fund Services; prior to that, he served as director of finance at Peterson Partners. A CPA, Zornes also has an MBA from Weber State University and a BS in business administration from Brigham Young University.

“As technology investors, we are best positioned to address the real estate industry’s needs by leveraging the knowledge of market participants, and adding Jerry Davis to our team will enable us to better identify the inefficiencies the industry faces,” said RET Ventures Partner Christopher Yip. “With a labor shortage, rising cost of capital, inflation and other macroeconomic issues impacting development, asset management and operations, the importance of technology solutions has never been greater. With three significant promotions and the addition of Jerry and Jake, we have now shored up our team, enabling us to ramp up our investment velocity and lead the industry toward a more efficient, technology-driven future.”

In addition to its recent senior hires, RET also announced three promotions:

• Aaron Ru was promoted to Principal. Since joining RET in 2021, Ru has been a critical member of the RET investment team, spearheading investments in a wide range of companies, including several focused on the SFR sector, serving on portfolio company boards and leading a range of RET initiatives. Prior to joining RET, Ru invested in early-stage and growth-stage technology companies at Naspers Ventures, led strategic initiatives and M&A at Pinterest and United Talent Agency and served as an investment banker at UBS.
• Jameson Hartman and Sam Kroll were each promoted to Vice President. Both Hartman and Kroll joined RET in 2020, and were instrumental in helping the firm and its portfolio companies navigate unprecedented business challenges in the early days of the COVID-19 pandemic. Over the past two years, each has become a key member of the RET investment team, sourcing, vetting and underwriting dozens of potential investments for the firm and guiding its portfolio companies as they scale their growth. Although both work across the real estate technology sector, Hartman has heavily focused on solutions relating to property operations and sustainability, while Kroll’s has built expertise in technologies that enhance the real estate underwriting, acquisition and asset management process.

Davis and Zornes join a growing team at RET Ventures which also includes Senior Advisor Shawn Mahoney, who spent decades at owner/operator GID, retiring as CIO and CTO; and Venture Partner Fred Tuomi, who had previously served as president and CEO of Invitation Homes and as an EVP at Equity Residential. As RET continues its growth, the venture capital firm plans to announce other senior additions to the team later this year.

Since its launch in 2017, RET Ventures has backed more than two dozen real estate technology companies, including category leaders in smart home technology, leasing tech, construction tech and sustainability technology. As a result, RET Ventures Fund I has had four successful portfolio company exits to the public markets or strategic/financial acquirers and is delivering top decile fund returns. Among its most prominent portfolio companies are:

• SMARTRENT, a provider of enterprise smart home automation for property managers and renters, which went public via SPAC in 2021
• CHECKPOINTID, deploying technology that verifies government-issued ID to reduce rental fraud, which was acquired by MRI Software in 2021
• SIGHTPLAN, the multifamily industry’s premier provider of maintenance and resident service software, which was acquired by SmartRent in 2022
• FUNNEL, the leading marketing and leasing software provider for multifamily owners and managers
• ENGRAIN, the market leader in interactive mapping technology and data visualization software for the built environment
• KASA – a flexible accommodations company that partners with rental properties to increase their income streams
• JUNO, a construction tech company that brings a productized approach to ground-up development, bringing new precision, speed, and sustainability to the building process
• MARKERR, an analytics platform providing unique insights about real estate demand and supply tied to any location
• MEASURABL, the world’s most widely adopted ESG technology platform for real estate

The Rise of Industrial and NNN

Fueled by the explosive growth of e-commerce, industrial real estate has been thriving for years, and 2022 is set to be another record-breaking year for the sector. According to NAIOP, a staggering total of 401.4 million square feet of industrial space is forecasted to be absorbed this year. Pandemic-era trends like the e-commerce boom and the switch to remote work have caused already strong demand to skyrocket, and even as supply chain bottlenecks eventually subside, the overarching market trends that have driven industrial success are here to stay.

As more and more players enter the thriving sector, there is a growing need for purpose-built technology solutions that support the management of industrial properties. Particularly complex are the net-leasing structures that dominate the industrial sector; because most maintenance items are ostensibly managed by tenants, owners and asset managers of NNN facilities have extremely limited visibility into the upkeep and day to day condition of their properties.

Bridging the Gap Between Owners and Tenants

As the industrial asset class continues to overperform and attract mass amounts of capital, RET Ventures has kept its pulse on the quickly evolving market. We are constantly on the lookout for emerging solutions that address common friction points felt across the industry, which led us to our most recent investment in Fyxt.

A cloud-based commercial real estate platform supporting the management and operation of commercial properties, Fyxt is uniquely capable of bridging the disconnect between NNN owners, managers, tenants, and service providers. The platform facilitates increased transparency surrounding building performance by allowing all stakeholders to efficiently communicate through one system – eliminating the frequent confusion often felt by NNN owners with limited visibility into building maintenance.

By building the platform from the bottom up to digitize lease contracts and integrate with accounting, data visualization, vendor compliance, and insurance software, Fyxt streamlines operations dramatically, allowing warehouse owners and operators to efficiently run true capital cost analyses and manage operations through a NNN lens.

Broader Applications

Although we typically focus on value-add investments for the single and multifamily space, RET always seeks to identify solutions that make an impact on the real estate industry as a whole. Fyxt’s ability to solve a real problem for the industry — and the ease of use it provides landlords, tenants, and vendors — has driven the company’s significant traction, and, and we consider Fyxt a natural addition to the RET portfolio of companies.

While the proliferation of NNN industrial assets — and national portfolios — has made Fyxt a valuable tool for operators of warehouses and logistics facilities, the technology transcends the industrial sector. The pain points felt by these industrial owners mirror those of NNN operators of healthcare, retail, office and other historically net-lease asset classes, and, with features like a vendor procurement platform, Fyxt can benefit stakeholders in any lease structure.

The Future of NNN Asset Management

Many of the macroeconomic tailwinds that support multifamily are bolstering the industrial asset class as well, causing increased attention and capital to flow into the market. Fyxt’s ability to modernize NNN asset management and increase line of sight into operations for warehouse owners with national portfolios will be extremely beneficial as the market continues to grow.

As energy costs rise and ESG mandates grow more prevalent across a growing number of markets, portfolio visibility has never been more imperative for property owners. Fyxt’s ability to address this need has already streamlined operations for its early clients. As the company refines its integration strategy and partners with more NNN owners, it will continue to play an outsized role in helping landlords address operational inefficiencies enabling better tenant experience and increased NOIs.

An Industry Partner

RET Ventures was created in 2017 in close collaboration with some of the most prominent REITs and private owner-operators of multifamily and single family properties in the United States. Along with our strategic partnerships, we had a unique mandate: identifying and nurturing companies that did not just have growth potential, but would tangibly address the very real technology and operational challenges that managers of rental real estate face.

Five years and 25 portfolio companies later, our approach has not changed. While we are opportunistic in assessing compelling solutions across the real estate spectrum, the vast majority of our efforts are focused on technologies that solve issues for rental operators — smart home technology, building-wide wifi, modular construction, fintech/insurtech solutions, and much more.

Growing Focus on ESG

Over the years, however, we’ve been spending more and more time on technologies that impact explicit “ESG” (environmental, social and governance)-related goals — and for good reason. The housing sector has a significant impact on society in terms of both its critical role in the lives of residents and its resource footprint. Many of our strategic investors as organizations are leaders among their peers, and set an example with respect to reducing energy and resource consumption, improving housing affordability and other environmental and social objectives. (It’s also worth noting that ESG efforts are also good business; according to a recent resident survey from RET strategic investor AMLI Residential, 59% of residents are open to paying a premium to live in a green community.)

To bring the collective insight and problem solving of the RET group to address these opportunities, we started an ESG working group made up of more than 20 leading multifamily and single-family rental executives. In this working group, which has been meeting regularly for over a year, we have focused entirely on identifying and evaluating pressing needs within the existing proptech ecosystem, and evaluating which technologies could make a real impact.

Launching a Dedicated Fund

And now, we’re excited to announce that we’re taking our ESG commitment to the next level with the official launch of a “Housing Impact Fund,” which will invest exclusively in technologies that address the pain points and opportunities identified via the group’s work. The vehicle — which is targeting an $80 million capital raise and is initially backed by two of our most prominent Strategic Investors in UDR and Essex Property Trust — will fuel the identification and growth of ESG solutions for the housing industry, including technologies that improve the environmental and social outcomes of new developments and existing properties.

Of the 25 investments we’ve made out of our core funds, many already address pressing ESG pain points, including Conservation Labs, Falkbuilt, Juno, Measurabl, PassiveLogic, and SmartRent. This new fund will allow us to delve even more deeply into this expanding space, and bring aligned capital, development partners and customers to startups that will help our many partners create more sustainable outcomes at their properties. Some of the areas within the ESG spectrum we hope to address include housing affordability, building health and safety, resident well-being, building energy reduction / reducing carbon emissions, efficient waste management, and ESG data collection and reporting.

As the real estate sector takes an increasingly visible role in shaping its impact on both the environment and society at large, we hope that the deployment of this fund will ultimately have an outsized positive impact for real estate operators, residents and other stakeholders.

Data is King

In recent years, big data has emerged as an important tool for guiding operational efficiencies and driving increased ROI across all business sectors — and real estate has been no exception. From uncovering granular geographic insights to fine-tuning risk analysis and mitigation and beyond, the application of data in the real estate industry has propelled significant, market-wide improvements.

As the single-family rental (SFR) sector continues to gain momentum ($50 billion of capital is chasing SFR, more than a tenfold increase since 2020), industry experts are increasingly interested in how the practice of leveraging data-backed insights can improve operations for institutional investors throughout SFR. Many SFR investors are new to the sector, and are grappling with the reality that the complexities of acquiring and managing SFR properties is different than those associated with the multifamily complexes that have traditionally received the bulk of institutional capital. While operating in this unfamiliar territory, investors are increasingly looking for tools that will give them access to datasets and data science that supports the intelligent deployment of their capital. Enter, Picket Homes.

Transforming the SFR Experience for Investors and Renters

RET Ventures’ recent role in leading Picket’s Series A round is the latest in the firm’s ongoing investment efforts focused on rent tech solutions for the SFR market, demonstrated by previous investments made earlier this year in platforms such as Lula and Azibo.

Built with advanced data science, institutional-quality automated modeling, machine learning, and local market data, Picket’s Decision Science platform helps investors acquire and manage SFR buildings across regions, providing a personalized experience based on each investor’s unique ’buy box’. This acquisition technology works to instantly identify listings on the multiple listing services (MLS) that fit users’ specific investment criteria, subsequently delivering custom return analyses for all of the potential assets identified. Beyond this platform, Picket offers a data-backed property management software that fuels cross-market efficiency and automation to create a better renting and living experience.

Through these integrated tech solutions, SFR owners and operators are given the necessary insights to improve quality-of-life for residents, accelerate portfolio growth, and streamline portfolio management. The company’s innovative technologies are supported by a seasoned team dedicated to upgrading the SFR rental process; together, these resources have powered the company’s explosive growth — annualized revenue has grown more than 35% month over month for each of the last 12 months and exceeded 50% month-over-month growth over the last six. The demand for tech that strengthens the investment and management of SFR assets for institutional players is clear, and Picket has emerged as the leading solution.

An Informed Future for SFR Investment

Our investment in Picket comes amidst a tangible market shift driving an influx of institutional capital into the SFR sector. The firm is uniquely and strategically positioned to support this transition and improve the SFR experience for all stakeholders by immediately identifying key opportunities and risks through a data-backed process.

We are eager to work in partnership with the Picket team to offer and expand upon this revolutionary solution for top SFR operations, and we are confident in the platform’s potential to create major efficiencies for the entire industry.

The secret sauce driving RET Ventures’ success is our collaborative, innovative ecosystem of real estate technology solutions and multifamily operators. These industry leaders have worked alongside our team to develop and deploy leading tech platforms across the residential rental market for nearly five years.

In a new video, RET’s John Helm, Christopher Yip and Fred Tuomi are joined by some of the proptech and multifamily experts from across the RET ecosystem to discuss how a unified approach to vetting, testing, and improving rental technology is driving growth and uncovering opportunities across the rental industry.