Blackstone makes first RE tech investment

The New York-based private equity and real estate firm’s backing of technology firm VTS will be made on behalf of its BREP VII fund. 

The Blackstone Group is investing in a real estate technology firm for the first time. The New York-based firm is putting $3.3 million of capital from its latest real estate fund, Blackstone Real Estate Partners VII, into New York-based technology company VTS, formerly known as View the Space.

PERE understands that the company will take an approximately 10 percent stake in VTS, which provides real-time leasing and portfolio information to 5,000 brokers and owners. Among those clients are some of the largest US office landlords, including CBRE Global Investors, Hines and Bentall Kennedy, according to VTS’ website.

“The commercial real estate industry has long relied on static information,” said Jacob Werner, managing director at Blackstone, in a statement. “VTS has been the driving force behind the industry’s much needed shift towards real-time data and has quickly become the clear leader in the marketplace. We are excited to partner with the team at VTS to grow the business and accelerate the shift toward a single industry-standard.” 

Blackstone, which itself has been a customer of VTS for the past eight months, is investing in VTS to help improve its product and participate in some of the upside of its future growth, according to sources familiar with the matter. One of Blackstone’s objectives is to expand the startup firm’s scope, both in terms of geography and property type. While a small percentage of its US office portfolio already has been loaded into the VTS system, Blackstone intends to migrate the vast majority of both of its US and international office portfolios – which total about 100 million square feet – onto the platform in the near term. Currently, VTS’ data is predominantly concentrated on US real estate.

Longer term, the firm expects that the VTS technology, which right now is focused on office properties, will also be used for other property types, such as industrial and retail. Despite its ownership stake in VTS, Blackstone will not have special access to the data of the company’s other clients.

The company previously has made investments in other technology companies of which it is a customer, such as CloudTheory, Cylance and iSight, but those investments were made on Blackstone’s balance sheet. The VTS deal is being executed on behalf of BREP VII because only Blackstone’s property business, rather than the entire company, will be utilizing the VTS technology. While small, the investment in VTS had to meet the same criteria as other investments in the fund, such as return targets, quality of management and growth potential. However, unlike with other BREP investments, Blackstone will not have a controlling interest in the VTS deal.

VTS, which was founded three years ago by Nick Romito, Karl Baum and Ryan Masiello, currently manages more than one billion of square feet worldwide. The firm has grown from 15 to 47 employees in five markets in less than 12 months.