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Fifth Wall raises $503 mln from property owners seeking tech edge

By Herbert Lash
Brendan Wallace, a co-founder and managing partner of venture capital fund Fifth Wall, is interviewed in New York City

By Herbert Lash

NEW YORK (Reuters) - Fifth Wall, a venture capital firm focused on real estate technology, raised $503 million from a group of 50 large U.S., European and Asian property owners who will provide a market for the start-ups and their products it invests in.

Venice, California-based Fifth Wall said on Wednesday its real estate venture capital fund is the largest "proptech" investment pool raised to date and its investor base is the largest consortium of property owners ever assembled.

Property owners have been slow to adopt technologies that use predictive analytics and sensors, for example, to slash energy consumption or increase efficiency. Fifth Wall, founded in 2017, is seeking to fill a void as functions such as data collection are increasingly being computerized.

Fifth Wall invests in companies that will benefit its group of property owners, which include Gecina SA in France, Spain's Merlin Properties and British Land Co Plc in Europe, and Mitsubishi Estate in Japan, said Brendan Wallace, a managing partner at the VC fund.

Fifth Wall targeted the largest homebuilders, brokerages, office and retail building owners in Europe, Asia and the United States, he said.

The consortium's size increases access, insight, collaboration and the sharing of ideas among the investors and portfolio companies, Wallace said, calling it a network effect.

Fifth Wall noticed the nine investors in its first proptech fund sought not only a financial return but also synergies and cost savings with the technologies they adopted, he said.

In the aftermath of the global financial crisis real estate owners have recognized their business no longer is buying and selling assets, but being a better operator, Wallace said.

Stuart Miller, executive chairman at Lennar Corp, told analysts in June that the use of Fifth Wall portfolio companies Opendoor, a direct home buyer, title insurer States Title, and digital mortgage platform Blend has cut expenses and increased operating margins.

"What we've been seeing is 10 basis points here, 20 basis points there over the last quarter, year," Miller said, according to transcripts of the call. "Technology has made us better at what we're doing."

The money Fifth Wall raised more than doubled the size of its first fund, which closed in May 2017 at $212 million. With a third, retail-oriented fund, Fifth Wall now oversees more than $1 billion, the company said.

Fifth Wall said it has delivered more than $340 million in revenue to companies with its portfolio, an increase from over $100 million in May 2018.

Venture capital funding for real estate technology has surged in recent years, rising to $8.1 billion in 2018 and $4.8 billion in the first quarter of this year, according to Keefe, Bruyette & Woods, citing various sources.

(Reporting by Herbert Lash; Editing by Richard Chang)