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Why managers are backing Fifth Wall’s debut European proptech fund

The vehicle’s limited partners, including Azora and BNP Paribas Real Estate, are betting on technology to help them become better property investors.

For Europe’s private real estate managers, maintaining a competitive edge in the sector increasingly means investing in technology, as two recent proptech fund investors will attest.

Last week, Madrid-based manager Azora announced its investment in Fifth Wall’s first Real Estate Technology European Fund. The Los Angeles-based venture capital firm aims to raise €100 million for the fund by the end of 2020 and invest the vehicle’s capital in Europe’s emerging real estate tech firms, with the potential to transform the sector.

This is the first time Azora is officially investing in a specific proptech fund. However, the firm is said to have been focused for a number of years on optimizing its processes and businesses, and especially its residential arm, through the use of technology.

Cristina García-Peri, Azora’s head of corporate development and strategy, told PERE that a key factor behind the manager’s decision to invest in the fund was the ability to access Fifth Wall’s knowledge and expertise in the proptech industry. The firm, founded in 2016 by Brad Greiwe and Brendan Wallace, has raised more than $1.2 billion across its three prior US funds, which similarly target stateside proptech start-ups.

García-Peri: as the sector increasingly turns into a service industry, deploying the best tech is of “paramount importance”

“As the real estate sector increasingly turns into a service industry, rather than a simple own and lease business, understanding and deploying the best technologies is of paramount importance,” García-Peri said. “Our investment into this fund allows us not just to expand our investment horizon, but also to access strategic insight into future innovations and technologies that can help us create value for our investors and deliver better service for our clients and stakeholders.”

Two key areas where Azora is particularly keen to enhance its capabilities are hospitality and residential, both of which require a high degree of management that can be radically improved by technology, according to García-Peri: “As investors in the hospitality and leisure sector, as well as in the world of living, which includes senior and student housing assets, we are very involved in the operation of these assets, so would like to further understand how technologies can help us improve the operation of our hotels [and the] experience of our clients, as well as to identify potential new business models.”

Other limited partners in the fund include German investment firm MOMENI and Finnish family office Pontos Group.

BNP Paribas Real Estate also announced this week that it was among the fund’s LPs. The investment, the first by the firm in a proptech fund to be financed via its dedicated VC fund Opera Tech Ventures, was described by the French manager as a partnership between the two firms.

Cardona: the pandemic could quicken the proptech sector’s growth in Europe

Kevin Cardona, head of innovation at BNP Paribas Real Estate, told PERE that the two firms’ different strengths and capabilities were the perfect combination to give the European proptech universe a boost: “We see ourselves as the gateway for Fifth Wall to the best real estate technology in Europe, thanks to our European footprint and local presence, but they are better equipped than us to analyze the tech potential of these companies. The combination of our expertise in the entire value chain of real estate, coupled with their ability to address start-ups’ potential, is a perfect match to help create European unicorns.”

Cardona argued that the pandemic had been an accelerant for pre-virus trends – including digitization, the shift towards a low carbon economy, and agile working – and could speed up the growth of the proptech sector in Europe.

“Now it is the perfect momentum to help proptech start-ups to grow to the benefit of the whole industry,” he said. “Innovation from these firms also offers new opportunities for our clients and the sector more broadly. In the aftermath of this unprecedented crisis, this strategic step will make us better equipped to meet new challenges and to develop better places for people to live and work.”