Allocations to proptech-focused investment vehicles among institutional investors are just beginning, says Monica O’Neill, the private real estate capital-raising veteran who has just joined MetaProp, the New York-headquartered proptech investment manager.
MetaProp, the early-stage proptech firm, ranked ninth in PERE’s inaugural Proptech 20 ranking having raised $140 million in the past five years. The ranking’s aggregate fundraising total was $5.5 billion. But O’Neill believes that, as investors continue recognizing the intrinsic value of an allocation to technologies underpinning the evolution of the built environment, the potential for the ranking to expand exponentially is clear.
“Allocations are only going to increase,” O’Neill said. “This is just the beginning. It could get to 10 times where it is now. We haven’t really even tapped into it. We’ve just scratched the surface.”
Indeed, according to the firm’s Year-End 2020 Global PropTech Confidence Index, 94 percent of the investors polled believe the pandemic will accelerate the adoption of proptech in the sector. Further, 59 percent said they expected to make more proptech investments in 2021.
MetaProp was formed in 2015 by ex-Millenium Partners developer Zach Aarons and Aaron Block, formerly the chairman of BayRu and head of broker Cushman & Wakefield’s Chicago office. The firm has invested in more than 130 technology companies, many of which have enabled real estate owners to improve their ESG activities. That aspect was a major draw for O’Neill to pivot from a career raising capital for the acquisition of properties to one focused on the acquisition of technologies designed to make these properties more sustainable.
O’Neill was previously at London-based manager Tristan Capital Partners, where she was head of client relations and marketing for 10 years after the firm spun out of AEW.
“The reason I moved to proptech and joined MetaProp is because proptech is going to make buildings cleaner, safer and greener. I’ve been working with institutional investors for 30 years now. But in the last few years, those investors have begun to care deeply about the UN Social Compact. They care very much about ESG and also about diversity. It seemed to be a perfect pivot for me to help all the institutional investors that I know to find a way to augment their real estate portfolios in a meaningful way.”
Reflecting on PERE’s Proptech 20 ranking, she observed that much of the equity raising happened in the last one to two years. Indeed, last year MetaProp itself raised $100 million for MetaProp Ventures III. The firm is currently raising capital for a fourth vehicle called MetaProp Growth Select I, according to SEC filings.
O’Neill declined to discuss the firm’s capital-raising activities. But commenting on the proptech capital market space generally, she said: “There were only a handful of individuals investing in proptech early on. Then, each began to expand and build teams around themselves. Some teams remained [small]. Others chose to expand their networks beyond friends and family and build firms. So, if you’re ranking them, 20 is probably a good number when counting those actually talking to institutional investors.”
MetaProp raises capital to invest in the early stages of a company’s growth, typically making seed investments or commitments to Series A funding rounds. Commitments can range from $100,000 for companies in its accelerator with Columbia University for the former and up to $3 million for the latter.
In terms of performance expectations for MetaProp’s vehicles, O’Neill said they would typically be higher than those of conventional real estate investment funds. A typical approach to investing would be to expect approximately one-third of investments to outperform, one-third to meet performance expectations, and one-third to underperform, as opposed to a traditional private real estate fund in which all assets are expected to perform to target.
“It is different to a private equity real estate fund in that it is more like venture capital,” she said. “You can have a couple of stars independent of the portfolio concentration.”