Two Sigma, a financial sciences company with $58 billion of assets under management, and exposure to the venture capital and private equity sectors, is launching a real estate investment business.
Two Sigma Real Estate will be part of the firm’s private investment business which has $3 billion in assets under management. Chairman Tom Hill has been appointed to lead the platform as chief executive. The firm has also appointed Rich Gomel, formerly the managing partner of WeWork’s real estate investment platform, as managing director and chief investment officer. They will lead a dedicated team of five investment professionals.
Two Sigma Real Estate is currently being funded with Two Sigma’s balance sheet capital. PERE understands Two Sigma has committed an undisclosed amount of proprietary capital to the platform to start investing.
At its core, Two Sigma Real Estate aims to use data science and technology across all aspects of real estate investing. “Real estate is the largest asset class globally and is ripe for innovation and advancements, specifically by taking a data-driven and technology-enabled approach to both investing and asset management,” said Hill.
And the usage of data and technology could range from “sourcing to sector selection to the geography, and the micro location within a particularly geography, to underwriting, to asset management and to portfolio construction,” Gomel said.
“If you take the whole process from the beginning to the end in the life cycle of an investment, there is a lot that can be derived through data science and technology enhancing that decision,” he said.
Gomel is an experienced real estate investor, having held senior roles at several firms, including as partner and senior investment officer at Junius Real Estate Partners, a specialized real estate investment unit of JPMorgan Asset Management; and as a managing director at private equity real estate giant Starwood Capital Group.
On competing in a crowded manager field, Gomel said: “Real estate is a sector that produces a ton of data and is in the infancy of elements [like] technology, data science and real estate investing coming together. While we all look at data and use technology to be nimble, I have not seen it happening at the scale we plan on doing this at.”
He also acknowledged how the pandemic, and its consequent “seismic shifts” could present interesting opportunities for a new entrant in the industry. “The pace of change, and the scale at which it is happening in real estate, is far more than what I have ever seen in my career. The rapid acceleration of trends that we already knew were happening even before the pandemic is particularly interesting and differentiated from the other macro events and crises of the past decade.”
Two Sigma Real Estate will initially focus on North America and have a multi-sectoral strategy. Gomel said growth sectors such as multifamily and industrial, both of which are currently experiencing tailwinds would be preferred areas of investment, in addition to the hospitality and office sectors in terms of creating value.