Brookfield’s New $200M+ CRE Tech Fund

The most recent global landlord to create a venture-capital unit to pump money into an increasing amount of disruptive technologies in the real-estate business is Brookfield Asset Management.

Brookfield, based in Toronto, which has $285 billion in assets under management, intends to put $200 million to $300 million into startups over the next three years. The sectors for these investments include:

  • Real estate
  • Infrastructure
  • Power
  • Private equity

This is according to Brookfield managing partner Stewart Upson. Brookfield aims to supplement the investment with third-party capital, he said.

“We’re going to get access to deals that others wouldn’t get access to, and we’re going to be able to add value to things that others wouldn’t be able to add value to,” Mr. Upson said.

This young unit, Brookfield Ventures just made a $15 million investment in BuildingConnected, its first deal. The company is a networking and preconstruction management site for owners, general contractors and subcontractors.

The real estate industry has been dragging its feet in the tech department for some time. With companies like WeWork Cos and Airbnb exposing vulnerabilities of traditional property technology structures. Other dimensions of real estate startups are changing include how buildings are built, sold, leased, marketed and run. The new players are highly valued, some in the hundreds of millions of dollars.

Brookfield is joined by other giants leveraging their established commercial real estate to break into the world of tech innovation. Simon Property Group, Westfield Corp, and Lennar Corp have set up separate investment units.

Blackstone LP, the world’s biggest owner of private real-estate, invested in startups like VTS, a top property management and leasing service, and Entic, which assists owners in saving on energy and water. Blackstone obtained a majority interest in Office Group, which competes with WeWork in the space of flexible co-working.

Brookfield executives felt for years that they were insulated while technology was overturning industries such as music and publishing.

“It didn’t have a real impact on us,” Upson said. More recently, though, “the new wave of technology disruption is getting much closer to our businesses,” Mr. Upson said.

The company invested in Convene, which offers meeting spaces and flexible workspaces prior to creating Brookfield Ventures. However, Brookfield too a defensive approach to new technology at first, according to Upson.

“Every time we made an investment we asked ourselves ‘How will this be impacted by technology?’” he said. But when it came to developing Brookfield ventures, a new line of thought emerged. “Instead of being concerned, we said, ‘Why don’t we leverage what we have and use our unique position to gain a competitive advantage?’” Upson said.

Brookfield hired Josh Raffaelli, a 14-year veteran of venture work with firms like Silver Lake and DFJ to lead the unit. Brookfield decided this would bring the perspective they were looking for more than recruiting from within, where they had a bae of people with a career in real estate investment rather than venture capital.

“We were self-aware enough to realize our real asset approach to investment was very much focused on downside protection and cash flow,” he said. “That wouldn’t necessarily make us successful in the venture industry.”

Raffaelli has assembled a team in San Francisco of five investment professionals. Raffaelli said they are looking at a wide range of potential investments in sectors such as co-working, and distribution facilities for e-commerce supply chains going forward.