Those of us who thought that big-time Wall Street investors disappeared from the housing market after the market plummeted in 2007 were wrong. Those investors merely redefined themselves and kept lower profiles.
Today, big-time Wall Street investors are back in even bigger ways despite the housing market being more tightly regulated than it was during the housing crash and despite credit being tighter for would-be investors/owners.
Who are these investors, where are they investing, how much are they investing, what kind of investments are these investors making and why is so much money going into real estate investing?
A recent guide compiled and distributed by InmanNews has answers to these questions and more. Part 1 of this two-part series about Wall Street and Real Estate takes a look at the who, where and how much. Part 2 takes a look at what kind of investments and why so much money is going into real estate from Wall Street.
Who is Investing and Where Are They Investing?
A significant investor in the US real estate landscape is Japan’s Softbank. Thus far, this behemoth has invested nearly $1B with Compass, +$400M with OpenDoor, $865 with the construction startup Katerra, $120M with the insurance company Lemonade, $6B with WeWork and ongoing investments with the mortgage lending company SoFi and the tech enabled hospitality company OYO.
A comparatively minor real estate investor is the firm of Kohlberg, Kravis, Roberts and Company. KKR has already dedicated $7B to its real estate platform and recently announced a “secondary” investment of $2B dedicated to house flipping.
Wall Street investment dollars are going to such areas as buyer/seller leads, property management, insurance and closing and all of these investments rely on cutting edge technology via algorithms and automation.
“Smaller” investors include the Vanguard Fund (Zillow, Redfin, ETF), Andreessen Horowitz Fund (Divvy, a rent-to-own startup, FlyHomes, an online brokerage, Airbnb, PeerStreet, an investment platform) and Sequoia Capital (Trulia, Airbnb, Houzz, Setter, a home maintenance start-up.)
How Much Wall Street Money to Real Estate?
According to GCA Advisors, an investment bank that tracks different types of funding programs, 289 real estate deals in 2018 added up to a total of $5.4B in equity investments. This $5.4B was an increase of 84% y/y into real estate equity. OpenDoor, Katerra and Compass received 37% of this equity from Softbank.
Chris Gough, a managing director with GCA indicated there were some 463 unique investment firms that participated in these real estate tech investments in 2018. Why? Because the real estate market is the largest asset class “on earth” and because it is the most in need of moving into the present and future ways of doing business. Gough believes, “the real estate market will remain highly active in 2019.
Very special thanks to Jim Dalrymple II, writer of this guide for Inmannews.