Britt Zaffir: The Real Estate Business Case For Co-Living

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Britt Zaffir, Director of Real Estate for co-living company Common discusses the concept around their shared homes. The basis for this model is derived from a changing housing landscape and the need to design housing for the roommate generation.  

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Britt Zaffir, Director of Real Estate, Common

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VIDEO TRANSCRIPT:

Hi everyone, I'm super excited to be here today. My name is Britt Zaffir and I run real estate acquisitions at Common. For those of you who don't know who Common is we are a residential operator of modern living focused primarily on the management of both traditional and co-living units. So I'll talk a little bit about who we are how we got here and where we're going, but first let me dive into a little bit of the background. So to give a little bit of a lay of the land, the way that people are living has fundamentally shifted and cities and property managers are not really prepared to keep up with these societal shifts. Around the world we see that cities do not have adequate or affordable housing for their young working professionals. So why is this happening? One of the reasons is that people are delaying getting married.

So, in 1960 the average age of a bride was 20. The average age of a groom was 23. Fast forward to today and the average age of both the bride and groom is just shy of 30 years old. So we've seen marriage be delayed by almost a decade. We see that people are living with roommates. More people are living with roommates and for longer into their lives. So according to Pew Research data seventy eight million Americans live with someone that they are not married or related to. This is definitely largely driven by the millennial generation though as you can see on the slide this is driven by older generations as well. But you know the fundamental reality is that the two parent, two child dog nuclear family is just not the way that things are trending anymore.

You see that real wages have stagnated and particularly in the last 15 years they've declined. While rents have done nothing but increase and so the gap between what people can and should pay on rent and what they actually are spending on rent has significantly widened. And lastly our cities are comprised of mostly single people so this is 2011 data. New York City we see that more than 50 percent of people are either single and living alone or single living with someone that they are not married or not related to. This is obviously New York data but we see this similar trend in sort of many cities in the United States and across the globe. So that's sort of where Common comes in, and what we're doing is designing and operating housing for the roommate generation. I think the main thing sort of to consider here is that this isn't anything new or different people have been living with roommates for you know tens of years and you know even for centuries. What Common is doing is really just making the process of finding and living with roommates better and easier than in the past.

So how are we making it better and easier? Three main ways: The first is convenience. The second is community and the third is flexibility. So in terms of convenience we're remove removing a lot of the annoyances of living with roommates. So we furnished the units we have weekly cleaners who come through the apartments. We pay all the bills. So really trying to strip away the pain points of living with other people so that we could focus on the good part which is the community. So we provide and program community spaces that really allow organic communities to generate from the ground up from within the units. And we also provide flexibility. So while most of our members are on 12 month leases and just a quick side note we call our tenants our members so when I use the word members it just means a tenant. Most of our members are on 12 month leases. However we provide the flexibility to transfer from any home in the common portfolio to any other home seamlessly and easily so when we say flexibility that's sort of what we mean.

So this is just sort of you know a typical common home. This one is in New York. I think the the key takeaways here is that these really are beautiful elevated homes. And another side note we call our properties, our buildings, homes. And that's really because we're trying to inspire a feeling of home. So some examples: every member has their own bedroom, there's no bunk beds there's no Murphy beds. Every unit has its own living rooms so this is a typical living room as I said. This is an actual property in New York. We have a vertically integrated team which includes an in-house design and construction team that spends their entire day thinking about how to optimize space for roommates and how to make the homes really feel like home. I think this really two ways one it really helps with lease up so people come and they see the beautiful spaces and you know they realize that you know for the price point it's quite frankly much nicer than whatever else they would be able to afford and I'll get into price point a little bit later. But it also helps with retention because you know people really feel attracted to these spaces and get really comfortable and so end up staying.

This is a home in D.C., Common Bowman, again just to show you high quality furniture lots of windows lots of lights so really inspiring a feeling of home. This is a typical bedroom. This is in a separate home in D.C.. As you can see the bedrooms are are quite minimalist and quite basic and this is done intentionally. We really want to provide members the ability to have a blank canvas with which they can express themselves. So all the furniture and the mattress is provided by Common. The walls are left intentionally blank. You could see in the top right corner there's a little hook that we provide for people to be able to personalize the space themselves.

So our story, we were founded three years ago almost exactly. We just had our three year anniversary by a gentleman named Brad Hargraves who previously was co-founder at a company called General Assembly, if any of you are familiar with General Assembly. We started with a 19 bedroom brownstone in Brooklyn. And fast forward three years and we're at 700 members in six cities in the U.S. So the six cities that we're in are New York, D.C., Chicago, San Francisco, Seattle and Los Angeles. What have we seen in the last three years? We've seen really really strong demand. So we have less than 3 percent vacancy across our entire portfolio. We have 80 percent of our members that are on one year leases. So again, we don't do any month to month leases and we do some six month leases but the majority of members really are on regular 12 month leases and we have 70 percent renewal rate on those 12 month leases. So this is a number that's typically pretty staggering to real estate developers because in traditional multifamily your retention rate is closer to 50 percent. So we see people really you know as I said loving the spaces and loving the living solution and really staying. We get 1300 applications a week, so we could fill our entire existing portfolio of 700 bedrooms in literally half of a week based on current demand.

So why is the demand so strong? You know what's in it for the member. I think there's a lot of things I think there's the community, the convenience, the flexibility that I talked about earlier but I think another big one is certainly the affordability so members will save anywhere from 20 to 30 percent a month by choosing to live in Common rather than living in their own studio so this is sort of New York pricing. We have a bedroom available for $2,200 a month that would include all your furniture your utilities your Wi-Fi a weekly cleaner all your shared goods pots pans salt pepper olive oil all of that stuff. And so if you were to do that yourself, and live in your own studio, the comparable pricing would be about $2,200 dollars a month or more. So definitely significant cost savings for individual members. This is what a typical common suite looks like. They typically range from three to six bedrooms. This is a five bedroom three bathroom apartment. What you could see is there's lots of storage. There's built in closets in every individual bedroom. There's a shoe and coat storage closet up front. There is in unit washer dryer. So again trying to inspire that feeling of home and of comfort elevated living. And then there's you know very regularly sized living rooms dining rooms kitchens so the only difference here is really that you're sharing your unit with more people that you otherwise would in a more traditional multi-family apartment. Otherwise the apartment really looks and feels the same. So that five bedroom suite is down below, that's what I just walked through it's 1370 square feet. If a traditional developer were to try and create bedroom rentals for five people that would be about 3000 square feet. So more than doubled the amount of space. And so the result of that is about 100 to 200 basis points in terms of annual yield for real estate developers and that sort of driven through a combination of the efficiency that I just talked about as well as the common brand which is really due to our proprietary technology, our hands on management, and our creative design. So not only sort of does it make sense for the member but from the real estate perspective it's certainly an interesting alternative as well.

Where are we going? This is our sort of existing portfolio in New York as well as our pipeline of what's to come. Right now we have 320 beds that we operate in New York they're all located in Brooklyn but we are expanding to Newark, New Jersey, midtown Manhattan and Harlem as well with hundreds of more beds in our portfolio under construction and sort of looking to be in all five boroughs and beyond. So definitely actively growing. I wanted to just highlight this slide quickly it's one of our upcoming projects that's being delivered in the third quarter of 2019 in Newark, New Jersey. It's interesting for a couple reasons. The first is the blended price point. So a member will be able to live at this home Common Sussex for $1250 a month and it will be a 20 minute train ride from Penn Station. So that's a pretty staggering price point with all sort of you know services and amenities that I mentioned earlier included. Secondly this one's interesting because it's an adaptive reuse of the former St. Mike's hospital. So I think you know a really creative use of space in a really creative you know repurposing of a real estate asset. And third the financing is interesting. It is both located in an opportunity zone and it was financed using a new market and historic tax credits. So we think a couple of different elements on this one that were worth highlighting.

I'm obviously happy to talk about anything else sort of in our portfolio or anything else that's that's coming up, but if there's one thing I want to leave with everyone here today is that co-living is not really a new fad it's something that's been around for tens and hundreds of years and it's it's not only is it here to stay, but it's here to grow. We started with 1 19 bedroom brownstone in Brooklyn and just yesterday we signed a upcoming site for 600 bedrooms. So co-living is real and I'm looking forward to sharing and all of that with all of you.

Thank you.

Andrew Farah: People Are Weird

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Andrew Farah is the Founder & CEO of Density, a sensor technology company who measures the, at times, unusual behavior of people and how they interact with the space around them.

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Andrew Farah, CEO, Density

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My name is Andrew Farah Co-Founder and CEO of a company called Density. My talk is called People are weird. So I'm going to explain a little bit more about what we're going to go through today.

So first off, the population has grown into a fixed amount of space, like we're not creating more earth. So the way that we solve that problem is obviously by building in three dimensions. This is kind of a staggering number. Now this is 10 billion humans by 2040. But this curve actually shows what would happen in the event of some serious catastrophe. So we're going to skip that and sort of look at the general trend is up and to the right.

It turns out that you all are very weird. You walk in different directions. You bring stuff with you. Sometimes you even will hide in your natural environment, so these are like beneath hinges. Often times there are packs of people and you tend to bring plates with you which is very difficult for us to count. This happens usually very late at night about 2:00 o'clock in the morning. People come by and pick up all the stuff that we've left behind. And then sometimes you bring your dogs, and that's also very challenging because that's an organic object inside of a space where we should be counting the human. OK. So how we know all of this is that we built a people counter.

Density is essentially a space analytics company, we measure how people use space inside of large corporate buildings that we work with predominantly the Fortune 1000 and we build this device. And so it gets mounted above an entryway, it is powered with PoE (power over ethernet) connected to the Internet and we essentially anonymously count entrances and exits as people go through space.

Kind of looks like this and can support any double or single entryway. There's a lot of complexity inside the device. It looks super simple. I'm not going to go into the engineering behind it, more years of my life have been poured into this than I care to admit, but all this happens locally so none of this is streamed to our system. Instead it's just happening on the device and we process plus one minus one and all the errant behavior that humans exhibit inside space.

We built this because we just wanted to know how busy our favorite coffee shop was when we first started about four years ago. It turns out it's a much more interesting problem when you deploy this into really large corporate space just because the size of the the square footage is colossal. This is observed behavior about 40 to 60 percent of all entrances to secure doors include tailgating. If you're familiar with tailgating it’s just essentially two people going into a secure door and it's typically because someone's being polite and there's holding the door for another employee. But that's a problem, it's a very serious problem. In fact it's so much of a problem that they've created these ridiculous products called people leaders. Does anyone know what a people eater is? It is not this.

This is definitely not it although as much as I would love a giant purple person to come running after the person who tailgates. It is also not this although we're getting closer. It is not a door. It's actually this. This is the people here and this sort of ensures that only one person goes through an entryway at a time. Do we know what a man trap is? OK. This is not a man trap. This is a bear trap. This is also not a man trap. This is a mouse trap. This is a man trap and these are both very unfortunate names for products.

But this is how we solve tailgating today. You'll see these at airports where people will go through and it can ensure that only one person goes through. So this video actually came from one of our partners who solved tailgating in a slightly different way. They deployed our product on the inside of the store and as the person goes through there using our API in real time, like 400 second latencies spare a milliseconds, very very quickly count the number of people who go through and then compare it with the badge data. And if there's a discrepancy, they take a photograph. We don't build the camera but they set up a process that takes a photograph. I was really hoping there might be like a trapdoor or some other type of interesting thing like a net.

So we periodically will do space studies so it will take data and help answer what to deploy into different rooms and then we'll analyze the data and we'll provide a customer with what's happening inside their space. We answer questions like are people using these conference rooms? Is the conference room or space sized properly? And what are the most used rooms or least used rooms? So we are going through this data but we were going through this with one of our customers and we sort of pointed out that one of the rooms that they had was essentially used by two people but it was designed for 12 and it is a really large space and they decided that they were going to break it up into essentially a space that was more like a lounge.

And we sort of went through each of these rooms and we landed on one of the last ones. We said this one is actually optimally used. It's designed for four people it's consistently used by three or four people and it's the most popular room.

Now we have no idea why but it just is. And they said oh my god it's the television. And we said what does that mean. And they said well it's the only room that we put a television in. So everyone goes to that room because there is a television there. Now I'm not suggesting that you should put televisions everywhere, I'm simply suggesting that once you understand how people use space you can draw some very interesting conclusions about what to do next.

10.9 billion square feet. That's cumulative leased or owned corporate office space in the U.S.. It is an enormous amount of square feet. So periodically we'll go to the SEC and we'll scrape the 10k filings and just to pull interesting data. And one of the things that we found was that these companies own just incredible amount of space and they are constantly recalibrating, they're either constantly acquiring or they're consolidating. This is just a snapshot of the numbers.

You'd think with this problem of human population rapidly growing and our willingness to sort of solve the problem in three dimensions that we'd be constantly trying to catch up with the population but that's actually not true. So 41 percent of all leased or owned corporate office space in the U.S. is empty but paid for it. It's just not used. I mean it's not used. It's just empty. And the problem isn't that people don't know they have a problem, they know they have the problem. They just can't agree on which 41 percent. And so that's one of the reasons we get it we get a call periodically. The cost is roughly 150 billion dollars in the U.S. spent on space that's not used. And what's really cool actually about this is that the percentages are pretty consistent internationally. So 41 percent 39 percent 40 percent is pretty consistent although China is more like 28 percent although I’m not exactly sure how they did that. Japan is like is like 49 percent or something. It's really amazing.

Does anyone know what COPPA is? It is a federal legislation that came about in 1988 and it has to do with Child Online Privacy Protection and even updating this periodically, they updated it in 2013, they updated it in 2017, so as the technology has changed they've made changes to the rules. So you may not be familiar with COPPA but you may be familiar with how YouTube requires you to be a certain age or certain systems require you to be a certain age. This is why. And I bring this up for a particular reason. COPPA has never encountered smart cameras before. When you encounter smart when you sort of mash up smart cameras and the requirement to have parental consent on any data that you're collecting about someone who's below 13, then you run into some pretty interesting issues. As you think about sort of your space, public spaces are perfectly OK with cameras but you should sort of be mindful as you're deploying cameras inside of spaces. I don't believe that most of you are are employing 12 year olds but just something to bear in mind.

So we did a deployment inside of a large corporate in a financial institution and it was the head of global I.T. who was our was our primary point of contact and he had a bunch of engineers that were milling about and this is a couple of years ago and we had deployed one of our devices which is about four times the size of the device that I had here is a prototype that we're collecting data trying to understand how the space is being used and also just trying to improve accuracy. And ahead of I.T. looks at the the engineer and says “Hey that thing you're looking at it's a camera and it's spying on you.” And he was he was joking. And this is what the engineer did.

The thing that was very interesting about this, is that this is culture.

This is not rules. This is not policy. This is not your employment contract. This is what people feel and what's really funny it was so he turns around because we were laughing we're about ten feet behind we were on our laptops and we were like “Oh hey we heard laughing over want to show you what you look like on the device.” He came over and we showed him the algorithm we showed him the the depth data this is all depth data. And and he started laughing like man that's so cool like you have no idea who I am. I can literally stare up at it and have no idea. So anyway I just sort of another point is you really can't put cameras in conference rooms you really have to be able to protect privacy especially inside of secure facilities and so building something anonymous was very important to us and it's very important to the Fortune 1000 that we work with.

One last story and then I’ll wrap up. So we're in all U.S. cafeterias, culinary has sort of been a an interesting space that we work with heads of global real estate who we're trying to consolidate. We work with facilities managers who are trying to automate cleaning rooms. So it turns out that we clean rooms that are clean as opposed to clean rooms that have been used. So we help automate some of that. We also work with heads of workplace strategy who are trying to understand how to optimize space or better improve the space design or the furniture that goes into that. And we also work with culinary which was surprising to us. So we get deployed into this very large floor, there were five entrances to one cafeteria and we we started counting over a period of time the number of people that go through each of the points of entry and we can we reconciled count for that one space. And when we looked at the data we showed up to a meeting and we we presented the client with data. They had 91,000 entrances and exits through one door. One of these five doors over 120 day period. The next door over had 131,000 entrances and exits over the same 120 day period and then two, not one, but two doors to the elevators had 515,000 entrances and exits over the same 120 day period. They employ 5,000 people like it's one floor. It's five doors.

And we told them this and they said you’re lying. And we said we're not lying. It's 96.68 percent accurate or whatever it was at the time.

And we start going back and forth. They immediately deployed US sort of nationally which was cool but but the thing that I thought was really neat was one guy spoke up and said oh my god I think that's why our hinges are failing the doors just kept getting opened and closed and opened and closed.

So the point is your space is big, people are weird and it's totally normal to not know what's happening inside that space. And I think if there's sort of anything that I would leave everyone here with it's just simply that as you're thinking about space like why build any space without knowing how it's used thank you very much.

Guy Zipori: Artificial Intelligence & Real Estate Investment

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Guy Zipori, CEO of Skyline AI walks us through the history of artificial intelligence and how it’s evening the playing field of real estate investment for development firms of all sizes.

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Guy Zipori, CEO, Skyline AI

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Over the past 10 years the main ingredient for success in real estate investing is investing in real estate. Some have done better than others. But the market was on a steady incline and we all know that the next 10 years will probably look different. I'm Guy Zipori, I'm the co-founder and CEO of Skyline AI and I'm going to speak to you today about the meeting point between artificial intelligence and real estate. Personally I'm coming from a technology background, not from real estate background in fact, it took a team of four to get me into this suit.

In artificial intelligence we hear this all the time, it's changing the way we work, the way we do business, the way we discover and vet new information. But it also comes with fears. Many people are speaking about how AI’s coming for jobs. Hearing about driverless cars and other things makes people fear and no wonder. Hollywood has done a wonderful job terrifying us about new technology. It turns out that a story about how technology and AI will take over the world sells a little bit more tickets than how AI helps us improve our company's revenue. By the way Skynet from from the Terminator has nothing to do with Skyline AI, just clarifying this, and the fears that people experience today are pretty similar to the fears that people felt back then in the industrial revolution. Hearing that machines will come and take over their jobs. But eventually the industrial revolution created new jobs, new opportunities and transformed economies for the best. Of course it's much easier to look at innovation when looking retrospectively and now it's time for a change.

Real estate is at all time high with dry powder of about 280 billion dollars that is sitting there un-deployed just this June, and AI technology is very advanced. Computers today can find anomalies much better than humans. Looking at the history of AI, there's always the one theme, men versus the machine. Whether it's Deep Junior or defeating Gary Kasparov in chess, or Watson beating trivia at Jeopardy. By the way Shay Bushinsky, the creator of Deep Junior who was responsible for defeating Gary Kasparov is our Chief Data Scientist. But this is not how real life implementation of AI looks like. Men together with the machines work in many ways in a very powerful force. For example, using A.I. and the CIA to capture bin Laden or predicting flooding in India to save lives. The combination of human and machine is powerful. If you take the best out of both of them keeping the machines doing the repetitive tasks, such as data crunching, and leaving the humans for creativity and strategy and other things that we still do much better than machines. AI is not replacing lawyers in court but is helping them review contracts finding mistakes and helping doctors with X-ray scanning allowing them, helping them to identify cancer.

Do you know how much time out of a 16 hour flight from New York to Tokyo is manually flown by a pilot? Only 8 minutes. So we trust AI today with our lives. But what about our investments. This is Tom. He's 14, my nephew and shockingly he's even geekier than I was at his age. Today he sells Superhero Toys on Amazon. And this is Jennifer. I admit I don't know her personally but I do know for sure that even though she's managing billions of dollars of our pension funds, she has less technology than my nephew. And this shouldn't be the case. Computing power today is much more powerful than it was in the past. Computers that were once a luxury for only companies with supercomputers or seven digit budgets, is now in our hands in every handheld device and more data is available. Take Planet Data for instance. This company has 21 satellites and they are taking one point five million photos every day covering about two hundred twenty million square miles.

Advanced technology computing power and data enable us to sequence the DNA of Real Estate Investing. For example, instead of looking at comparable assets by looking at vintage or location or other static characteristics, we can today use data such as internet browsing data, where people are, what people are looking for online to better understand and analyze what assets really are comparable. Skyline AI is a commercial real estate asset management technology company. We partner with top commercial real estate players to establish investment vehicles augmented by AI. Today were connected to more than 130 different data sources. We try to put our hands on every piece of information that may affect real estate value. We then use our artificial intelligence technology to extract insights and generate predictions based on this data. And together with our partners it helps us making better real estate investment decisions and achieving better results than the industry benchmarks.

Our technology is impacting the lifecycle, the entire lifecycle of real estate investing. Whether it’s deal sourcing, allowing us to find the best opportunities available no matter where they are hidden, or analyzing those opportunities much faster in seconds instead of weeks and with hyper accuracy. Or during the ownership period, understanding the situation in our asset and compare it constantly to competing assets surrounding us. So we put our technology to a test. We took a portfolio of one of the top real estate investors here in New York and we allowed our technology to determine which asset we would participate if we would support this this firm. So we have two portfolios. One is their portfolio that is managed only by the human and the second is a subset of this portfolio only with the asset that the technology would recommend to acquire. And the result were groundbreaking. The technology together coupled with the human perform 21.87% IRR compared to just 15.6% IRR for the real estate investment firm alone. That’s 40% higher returns. The AI revolution has started. So what part of this history are you going to be on?

Thank you.

Angie Lee: What Working Outside Teaches Us About Working Inside

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Angie Lee, Head of Brand and Marketing for Industrious presents their outdoor co-working project with L.L. Bean and how owners and developers of office space need to embrace new lessons on creating an amazing day at work. 

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Angie Lee, Head of Brand & Marketing, Industrious

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Hi my name is Angie Lee and I'm the Head of Branding and Marketing for Industrious but I'm here to talk to you a little bit about a collaboration we did with L.L. Bean. It was an exciting opportunity for us to really understand what working outside teaches us about working inside.

We are committed to delivering an amazing day at work where thousands of members across our 50 locations across the country and over the past five years. Since we were founded we've helped over 2000 companies actually really grow and scale their businesses. And what makes it really interesting what really helped us stand apart is the fact that we can look across all of these 2000 companies to really distill what delivers on an amazing day at work and really the secret sauce boils down to two things that our ability to marry gorgeous high quality spaces that are designed really to drive productivity not just by creating beautiful spaces but about spaces that drive productivity and the other is to marry that where the workplace experience it really makes people proud and excited to come to work.

So we're talking about scale in terms of office space but then individualising the workplace experience and we're incredibly proud of what we've done. We have amazing space. This is actually our space in Chicago Fulton Market and of course we have our Center City location out in L.A. And what we've done is an amazing job of flooding all of our spaces with so much light and really filling it with green to really bring the outside in because we've all read the same research that having a lot of sunlight, having a lot of greenery can actually increase productivity in the workplace. But really at the end of the day what all of our 50 locations share is the fact that they're inside office buildings. So as much as we want to bring all of this outside in, we're still inside. And so when L.L. Bean came to us and said you know, what would it look like if we were to redefine what an office looks like when you actually have no walls? We really jumped at this opportunity ask ourselves if we're really challenging ourselves to deliver an amazing day at work. What can we learn from working outside that can actually influence the way we design spaces inside? So thus was the L.L. Bean be an outsider campaign.

So this past summer what we did is we built these amazing outdoor pods these pods were designed using some basic principles around the cost of the building itself but then what we did was peppered in the principles that really drive productivity and effectiveness in an Industrious space. And then we took this pod on the road. So first we started out in New York City Madison Square Park typical tenant doing a typical conference call except he's doing and stationary bike. Right. And you see a bunch of people on the corner of here who are kind of sitting around milling around outside. We went to Boston, we went to Philadelphia, and we went to Madison Wisconsin.

So in the course of taking this thing on the road four locations, three to four days in each location we spoke to over 15 hundred people who showed up to really take advantage of this opportunity to work outside. We learned some really interesting things that really reinforce some of the principles we knew already deliver an amazing day at work but also then helped us translate what working outside could tell us about creating productive workplaces inside.

So because these talks always end up with three takeaways I’m going to walk you through three of those ideas. So first and foremost working outdoors really drives productivity indoors. Now to some of you guys this may be a little bit counterintuitive because when you think about going outside when you're at work you think of it as a break from productivity. I'm going to take a walk to clear my head. I'm going to get away from my desk, you take a walk when you go out for lunch. Those are the moments in which we're thinking about that as being a break. But let's take a step back and ask ourselves what defines a modern workplace today? What's fundamentally changed the modern workplace from say a factory in the eighteen hundreds. Is the idea that we don't believe that individuals are cogs in a machine but that our role is to really design workplaces that bring out the best in individuals and bringing out the best in individuals means you have to offer different productivity based types throughout the day.

So think about your day, you start the morning you're a little tired you're getting kind of settled in, you might go into BuzzFeed you're sitting at your desk right. You go to get coffee to kind of stand up walk around and you go to the kitchen and all of a sudden you're interacting with your colleagues. You then have to go to a conference room and so on and so what you see is these spaces can actually either contribute to your productivity or they can actually in some cases zap your productivity. So if you take an average person's energy levels throughout the day you might see some patterns so here's an anonymized individual over a five day period and what you see is every morning they would sit down on their desk and you would see that they're not really a morning person. They start out on their energy levels starts to climb and then eventually they go through lunch and then they end up going to a conference room in the conference room either zap's their energy because meetings zap and diverts energy or because it's just later in the day your sugar levels are dropping or increasing. You are getting sleepy and then you go back to your desk. And so the idea is that if you actually design a space for humans you're designing them not to force humans into the spaces that they're in but to give as many opportunities for individuals to kind of work in those spaces.

Now what happens if we start to treat the outdoors not as a novelty as this crazy idea that we're encouraging people to work outside but we simply treat it as another productivity space time. All of a sudden you're like oh I'm going to have my conference meeting I'm going to do this I'm going to have a meeting outside. You go to S.F. people in S.F. are notorious for their walking meetings and that's kind of the same thing, if you're already having a one-on-one with someone, why not go outside get a little bit that the energy in and get the endorphins running. But if you start to think of it as simply another productivity space type and not as a novelty, then you start to think of it as well, what could the impact be? So you take that same person and you stick them inside for a little bit and all of a sudden you start to see spikes in energy that actually exist once they return back indoors.

Now all of you guys know this you take a walk at lunch and you come back feeling refreshed. How amazing does it feel? It feels like it can give you the energy to get through the rest of the day. But that brings it to the second principle is that simply being outdoors is not enough. Delivering an amazing day at work, what we have found across all of our members is that you really give folks the energy or the environment to feel truly productive. So even just take a moment to think about what makes an amazing good day for you, it might be that you felt proud about the accomplishments that you achieved or that you felt incredibly productive and you got a lot of things done. If you're a checklist person, you are checking things off.

Let's have some honest talk.

Landlords a while back. You guys come onto the idea that being outdoors is a really great idea. And so you build these things right. And this all of a sudden was your outdoor space. Hard surfaces, completely rigid. I mean you spend two minutes eating a bad pizza out there and you're ready to go back inside. So landlords are putting these up outside these pavilions and then they said well no one uses them. It's not a good use of my time or energy. So therefore this willy nilly stuff about creating outdoor workspaces is just a fad. But what we found working with L.L. Bean and creating this space is that in the same things that you need indoors you need outdoors and you begin to make those outside spaces as productive. So if you look at the way that we've designed these spaces you have a mix of task seating and you have soft seating.

So are you being heads down and working on that memo. Oh you're boss or are you having a conversation to further further the relationship you have with a colleague. Are you. Do you have a convening space where you and your team can stand around Jim white board where you can actually collaborate and kind of be on the same page and putting things up on a screen. Is there fast reliable Wi-Fi. I mean anyone who's been stuck in an airport with no Wi-Fi knows that without Wi-Fi in this modern age it's a little hard to be productive and most specifically is just screen friendly shade. I mean if you think about using a laptop outside the one thing that gets in the way is glare and if you have an old school I mean this compared to this is obviously a completely different experience.

And so what this tells us is that yes people want to be outside but in order to be outside you actually need to have a space that's designed for productivity outside. This brings us to our third principle which reinforces what many of us already know is that outdoor amenities can create an outsize workplace experience. Now in the course of going on the road with L.L. Bean we had 1500 people show up and the response was overwhelming. Teams show up to hold their weekly check ins outside. We had people coming up to us saying you know I feel so refresh I can go back and you know kind of really work.

But what was really interesting is a lot of the team members the individual that came to us had smaller offices they came from smaller companies and they were so excited to be have a novel experience but to be able to leave their smaller offices or come outside. And so when you zoom out a bit and you take our installation in Philadelphia which is in the middle of the park what you see all around it are big office buildings right. And so imagine if you were a landlord and you have large office buildings around it it's just a very small leap forward to think of it as a campus right. It's really the difference when you want to brag about having a campus is about activating the outdoor spaces and the common areas.

And what we're seeing more and more is more landlords are recognizing that by partnering by using your outerspace as an act of being a common areas you can actually optimize the tenant experience but also increase revenue. Right here you have a rendering of the partnership that we set industrious is working with Blackstone Q in order to reposition the Howard Hughes campus out in L.A. And essentially what that is is it is a reinvention of what the modern campus looks like.

And what we're doing is we're building up entire outdoor spaces you see over here as we're moving some of the walls completely and putting glass doors or bringing the outside in. We're creating all these areas. Everything is going to be a Wi-Fi optimize everything has to be designed for a truly mobile workplace. Now L.A. is the perfect place for this where you have I mean sunshine all the time. And so when we designed is really a campus that can reflect that coastal lifestyle. But then also just use all of the available real estate to create a truly modern workplace campus.

So what does that look like so you notice here you have convening spaces here like we talked about you have taxiing back here with tables and chairs you have open places where people can walk and talk. There is a lot of variety of spaces so they even within the outdoor space were bringing those same principles into creating a modern workplace experience.

So if we look at the outdoor areas you can also see that the the opportunities are to activate the indoor areas as well. But again removing some of the doors and designing experiences that bring the outside in means that we get the best of both worlds you have climate control here 5 all those details that enable folks to be productive throughout and so on reflection if we look at what we learned going through what many people look at perhaps as a novel stunt that we did with L.L. Bean what you really can take away is that there are many principles that really define how working outdoors can help define what happens indoors and if you go back to the ultimate question of what delivers on an amazing day at work.

Well we would argue, that an office with no walls is actually looks like just an amazing day at work.

Shane Eten: What If Water Pipes Could Talk?

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What if your water pipes could talk? Shane Eten, CEO of Lotik discusses how water prices in NYC have tripled over the last few years and how water intelligences is saving residential developers millions of dollars each year.

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Shane Eten, Co-Founder & CEO, Lōtik

WEBSITE | TWITTER | LINKEDIN

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VIDEO TRANSCRIPT:

My name is Shane Eden I'm the Co-Founder of Lotik. I'm a plumber in residence so I'm in training to listen to how pipes do talk so if we can hear them, we would understand a whole lot more. We believe that there's the ability to drive water efficiency in multifamily buildings. We believe that you could save around 40 to 50 percent on water costs in a multifamily building. But there is a lot of different reasons why this is possible and why it's important and when you first look at what the real liability is here it's not only just water cost it's water damage and there's a lot of things going on. It's amazing that we know more about the data that we use on our cell phone than we do about how much water we use. So for a multifamily building owner, surprisingly, water is their number one utility cost. This is a study done in 2005 in Minnesota. So I'm going to get to that number the 305 for water per apartment a little bit later. It's also the highest maintenance costs for a multifamily building.

In New York City, water costs have tripled since 2000. So that graph you saw earlier for the 308 water costs have now tripled which is around nine hundred dollars per apartment and none of the other costs have gone up.

We saw the same thing happening with electricity prices in the late 1970s. You see this curve right there, electrical sub metering started in 1985. So a lot of this is happening. We believe that water sub-metering is going to start to happen in New York City and it already is. It's not only expensive now but it's going to get a lot more expensive. So it's not just the water that we're using, we have quite a bit of water in New York City, but we have to then treat it. So if water is used inefficiently it then goes to a wastewater treatment system the taxpayer dollars are paying for it. We talked to a lot of building owners and they basically just think it's a tax. And what's fascinating about the building is you have a 600 unit building and you have one main meter and you have no other information. So when your water costs go up there's nothing you can do about it.

Surprisingly in California most of the water is used by farmers in New York City most of the water is used by multifamily buildings. So how do we apply something like this? We would argue that it's a lot easier to install a water submeter or do something new when it's for a new building, but 100 percent of the market right now is the buildings that already exist and the older buildings are what used the most amount of water. So what's difficult about water sub metering is that these buildings are built on stacked risers. So unlike electricity where there's one place or one panel that you can actually put a sub meter, you'd have to put it in six different locations on six different pipes so you can't just install one meter to understand what's going on. If you could understand what was happening at the fixture level, so tell me what's happening with the toilet or with the shower, you understand if there was a leak you would then drastically reduce the amount of insurance claims for a building and therefore insurance costs. And you would drastically reduce the amount of water that was actually being used.

With no transparency at all. The bar is set very low.

So how do we do this? It's almost like imagine if you could create a FitBit for a pipe.

So typically a toilet is sold to last for 20 years. What if you could embed an operating system into toilets so that you could upgrade the toilet? You could actually understand what was happening and a toilet is very easy to understand if you just listen to it. So what if you could create a Fitbit for a pipe? I spend a lot of years doing this. We've been working on it for four years.

We've been financed by Samsung and we found some very interesting findings here. Most of the time it's installed closer to the toilet so it's on the supply line. We have an accelerometer in there it's battery operated.

The key here is when you go into someone's apartment you want to make sure that you don't have to go back in and you want to make sure you're not there for a very long time. That's something that we learned over time but a leaky toilets very easy to identify.

All we're doing is tracking the amount of water that's being filled in a toilet so, when is toilet filling? And it doesn't matter how the leak occurred as long as it's basically an activity tracker and if you have an entire building you have 600 units and you know you have a leaky toilet. The research says that one in five toilets is leaking, we found that usually like two and five toilets is leaking. So just identify the places where when a pipe is talking and it's talking a lot, that's when you should definitely listen.

In the future we see embedding this stuff into every single picture. So imagine installing a building you commission the plumbing system for the first time and you have all green lights a lot of the insurance cost associated with water damage happens really really early on when a plumbing system is first installed.

So what did we learn doing this? Doing wireless in this type of environment is very very tough especially when you're in a bathroom. So a bathroom has glass, it has porcelain, and it has cabinets, so you go underneath the sink. You put a wireless system in there. You then closed the cabinet door you then closed the bathroom door. We need to figure out a way and everyone does need to figure out a way how to train how to send data a really long way in these places. We also realize that you can't have a gateway or a hub and connected the Internet in every single apartment. This has to be like to call it the silent censor. Had the building owner install it very very quickly but have a gateway that can be installed anywhere in the building. So instead of a gateway to every apartment we can now send data to twenty five floors. We did this by doing machine learning.

So in order to get data to listen to pipes we have customers but you don't want to necessarily go in there when you don't have a solution that works well. But I would suggest for a lot of building owners, letting new technology companies come in and actually collect data in the building is very important. So we looked at the numbers and Airbnb’s are very cheap so we would rent an Airbnb and sit there and hang out next to the plumbing systems which allowed us to collect all the data and then build the machine learning model on the actual sensor so that we're only sending the data that we need to and we can send it a lot further and a lot of times in certain industries. It's the language that we're talking about. So when I first started to dive into this as plumber and residence, I still do not know what a cubic foot is. I think a gallon is even hard to understand.

So instead of saying cubic feet, why is this not about time the tenant can't control how how often or or how much volume is coming out of their shower or their toilet. They can control how many times they flush and how long they turn the shower on for.

So we believe that in the future it will be based on time and so that you can actually comprehend it so someone can actually change their habits if they knew if they took a five minute less shower. And most importantly is that data when you can capture this and you can actually listen to the pipes you start to see a cadence of the buildings so you can tell when people are waking up, you can turn your heat on a little bit later. So this data is not just a real physical act. Someone has to go to the fixture and turn something on. And if someone is not there and there's water flowing we should know about it so we can stop it. Thank you very much.

Laura Patel: Building for the 21st Century

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We’ve been building in the same ways since 1916, and they’re all expensive. Laura Patel, Global Head of Partnerships for DIRTT takes us through the evolution of construction methodologies and how technology is able to solve for time and cost efficiency.  

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Laura Patel, Director of Global Partnerships, DIRTT

Website | Twitter | Linkedin

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VIDEO TRANSCRIPT:

My name is Laura Patel and I am one of your local DIRTTbags. I work for DIRTT environmental solutions and this morning we're going to talk to you about construction for the 21st century and why we need digital construction.

I gave a talk last week at the University of Buffalo, they asked me to come up and do a TED talk for some of the real estate community and their students. And in preparing for that TED talk, some of my research brought me to this postcard which is a postcard from 1890. So let that sink in. This is 126 years ago and in this postcard you can see that they predicted that by the year 2000, this is in 1890, we would have architects sitting in a fun little box somewhere far far away pushing buttons and through a series of mechanical levers and pulleys and robots, we would be building onsite, using no human beings. And at first I thought this is crazy. This is mind blowing to me that this is what they thought we would be doing in 126 years. And yet as I started to study this more, I realized that they actually got it half right. Because by the year 2000 we had started to make huge advances on the design side.

We went from hundreds and hundreds of years of paper drawings to CAD in the 1970s through the 1990s and this introduced some process and some standardization to the design industry, whereas two drawing sets may have been dramatically different for the last couple of hundred years before that. Then in the 90s we started to introduce different BIM technologies and this allowed for on the fly problem solving by smaller groups of teams, whereas making a building like this would have required dozens of people in the past to try and collaborate and figure out how to actually get this built. Then more recently, moving into the early 2000s up until today, we've obviously seen this onsurge of different design technologies that now allow us to actually visualize the space before it's even built. Yet, this is our graph for technological adoption in design.

So a pretty steep curve and only getting steeper. If we contrast that with construction though it looks like this. This is a study by McKinsey and Company and you can see green is high adoption of technology red is low adoption of technology and for this study of McKinsey and Company polled 23 different industry sectors and if you scroll all the way to the bottom just above agriculture and hunting you'll find construction. So construction innovates only more than agriculture and hunting in terms of our adoption of technology in the process. And this is going back again about twenty five years of this study.

I started to think about that and it's true if you look at any other industry, the automotive industry, electronics be that TVs, phones or even healthcare, we like to criticize healthcare but even healthcare has been disrupted multiple times over the last hundred years. Yet if you compare that with construction, we've actually been building the exact same way since about 1916. That was the last great innovation that's when drywall was invented everyone, 1916. Although design has come really far, we've gone from this to this. We're still building the same way which is resulting in what I like to call the Museum of fun things that happen in construction.

The reality is they are all expensive and some of the research that I came across suggests that in the United States and Great Britain for every dollar we spend on construction about 34 cents of that dollar goes towards repairing mistakes that happen on site or towards different costs that arise from schedule overruns related to again, mistakes, miscommunications or challenges throughout the process. And that might not seem like a big number but when you start to factor that into the overall construction that happens annually it actually works out to about 140 billion dollars in wasted money because we are again, not using construction in this process. So how can we use 21st century construction technologies to help bring us into this century and build better? Meet DIRTT.

Now I'm going to talk about how we're taking all of that sophisticated design intelligence and we're actually bringing that one step further into the construction process. So we do that using a really sophisticated pre-construction design technology and it's doing four really important things for us. The first is that it's actually connecting all of the different platforms in one software. So rather than having your architect who's then trying to communicate via paper to the subcontractors how to build the space, this is actually automating between a 3-D view and a 2D view, all of our elevations plan details everything is being sort of streamlined into this one platform. The second thing it's doing is it's engineering the entire building and all of the assemblies that we are producing, it's engineering them custom to a thousandth of an inch. So we never build the same things twice. Just like your general contractor never does. Everything is custom to a thousandth of an inch. And the way we do that is the software is actually behind the scenes doing all that heavy lifting for us. The third thing it's doing so we're engineering it we know it's buildable we're seeing it visually which really helps with the decision making process and we are also streamlining again the backend deliverables out to the design community. But the third thing it's doing is it's pricing everything in real time to the set. So I never have to call my client and say really sorry, but actually it's going to cost us another four thousand dollars or fifty thousand dollars. I know immediately what that cost is and this isn't a high level budget, this is my actual cost to the client.

And the last thing it's doing which is the coolest part is as soon as my client says I love the way it looks, that meets my budget and you haven't told me that I can't build it. It's actually written all of the A.I. required for us to go to work within minutes and start to build every part and piece offsite using robotics and manufacturing. So taking all of that design intelligence and now actually having it produce all of your building materials. So how does it look once we get on site? Well it starts to make the construction industry a lot more akin to what we do in the automotive industry. We're not bringing raw materials to site and then having Joe and his friends hopefully construct the space in a way that reflects the drawings, we're actually producing it all in a factory. And it's coming to site and clicking together kind of like Legos. So everything from the Electrical to the data whether that's Cat 6 or fiber through to all of the wall assemblies which are going to be stood on site and zip together, nothing's being cut or finished or sanded. Those come equipped with whatever they need to from a technology standpoint, with plumbing, with data, with electrical. We're going to level the frames because buildings are never quite straight and then make all of those above ceiling connections that we first installed, install any integrated technology that needs to go within the cavity of those walls and then snap the tiles on and we're done.

So I'm going to walk you through three case studies just to try and land this and show you some examples of the work that we're doing in the U.S. specifically we're a 400 million dollar firm and we operate in 11 countries, the U.S. is our biggest market. Saudi Arabia is actually our second biggest market with Canada coming in third. I'm going to focus on three projects in the U.S. So this is Microsoft's offices in Detroit Michigan. We finished this six months ago a couple of quick highlights and photos from the project you can kind of see the scope of work here so a pretty densely constructed space everything highlighted in blue is DIRTT, along with all of the casework and millwork in the pantry areas and highlights of the scope of construction. So this was about a 40000 square foot space. Our multiyear trade umbrella was forty five dollars a square foot and we had a nine week construction timeline for our scope of work. What was in our scope of work was all of the wall assemblies that you saw highlighted which was all of the interior wall assemblies we didn't do any of the core of the perimeter, all of the wall engineering so that's the acoustical treatment, the blocking any of the utility that was running through the walls. All of the finishes and then integrated technology. We also did all of the pantries and conference room millwork, all of the arm wires and then we took over 40% of the electrical package on this project.

Second project JDA Software in Phoenix. Again some quick project highlights quite a bit more open plan in this project but a ton of technology, they had about 25 integrated monitors throughout the space. They are a software companies so they really wanted this to be a reflection of the fact that they are a tech firm. And some highlights here, 15,000 square feet this was $67 a square foot for our scope of construction and a five week construction schedule for us. Very similar scope of work except that we also did passive optical networks on this job.

So we were providing all of their network infrastructure including the backbone to the building. And then the last project which I can't say the name of but is a confidential financial services firm here in New York City that we're working on some project highlights on that.

This is just in construction so I'm just including some renderings and this is a typical floor plan. We're working with four different architecture firms and for GC's because we are building one point two million square feet in six months so there weren't enough people at each of these firms they couldn't award it to one firm. But they did award it to us as a turnkey prefab method. In order for them to meet their schedule our cost is about $37 a square foot depending on the floor plate. Each building is different. And we have a five week per floor construction schedule, largely very similar scope of work as the other buildings but we're only providing partial electrical assemblies because of the code limitations in New York and we're not doing any data here. So to summarize this is probably a lot of what you guys are currently going through with your existing construction process. You have a lot of uncertainty, you never know exactly what you're gonna get, exactly how much it's going to cost or exactly how long it's going to take and hopefully I've given you some food for thought on how you could be using digital construction and 21st century construction methods to be able to provide cost certainty schedule certainty and ultimately future proof your space. Thank you.

Elena Ashkinazy: Building And Selling A Smart Apartment

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Time Equities Director of Sustainability, Elena Ashkinazy walks us through her smart apartment case study showcasing each component and sharing the amazing returns she garners.

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Elena Ashkinazy, Director of Sustainability, Time Equities

WEBSITE | TWITTER | LINKEDIN

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VIDEO TRANSCRIPT:

Just imagine, thirty nine million people already have Amazon Alexa or Google Home in their apartments. Real estate companies can take advantage of it and start to create value for the customers of new generation who want to just move in to their apartment, plug in their Alexa and be able to control everything with their voice or with their phone. At Time Equities we always strive to be technologically up to date and innovative. So last year, we successfully completed the first smart apartment on the Upper East Side of Manhattan. So we did it in pre-war apartment and when you think about pre-war buildings, a pre-war apartment you would probably never expect to see anything smart, but we did it. The project was so successful it was featured in The New York Times. This apartment was scheduled for renovation so we still have to buy switches, bulbs, kitchen appliances. Now we spent an extra $10,000, however we were able to sell this apartment for $120,000 above similar apartments just one flight down. So in this slide you can see green screen from Zillow.com two apartments, one is in the second floor and smart apartment on the third floor. And the difference in the prices was about 10 percent and the first apartment was on the market a couple of months before our smart apartment. So we sell it quicker and for a higher price. And today I'm going to tell you about all devices we installed and their features and benefits for residents.

One of the main challenge and actually it's become our value proposition for the customers was that old devices can be controlled through one application so the customers don't have to hassle between different apps. Of course we'll also estimated that the smart apartments can be super Energy-Efficient so customers can save up to 20-30 percent on their electric bills. And of course it's all about convenience. You can control everything with your voice. You can say what you want and you get it. And all with your phone. The first thing we installed was smart door lock. So you still can use your traditional keys, however, you don't need to. You can open and close your door from anywhere anytime. So imagine you're standing in a traffic and your guest came early. So now you can just open the door from anywhere. You can see when the door was opened, was closed and you can give access to your housekeeper, dog walker. So people love it, it's so convenient. We’ll also install smart lighting systems throughout the apartment. And before I started to work on this project I actually bought a lot of stuff for my place and I have to tell you it's amazing. I don't touch my switch anymore. Especially when you're tired. You lay down in bed and before my husband told me, “Elena, can you go around and turn off the lights?” And now I just said Alexa turn off all lights and she's like OK your wish is my command. So people definitely love this convenience.

We also install smart color lighting so you can pick any color you want. So for example we have open house for this apartment and a couple came and the lady was pregnant. So we ask, “do you know what's going to be, boy or girl? She's like it's going to be a girl. And we like Alexa make all lights pink, and of course she did it. And that just create this wow factor that you can also use even when you just show an apartment to potential clients. We also install smart shades in the bedroom so first you can open and close them with your voice but you also can schedule and automate them. So if you want, for example, you wanted them to be open Monday through Friday at 6:00 a.m. when you wake up and on the weekend youu want them to stay close until 12:00 p.m..

We also install smart kitchen appliances. So this is a smart refrigerator. This is what a game changer for the customers. First you can see what is inside of your refrigerator while you do shopping. Also your refrigerator will start to track expiration dates. You know we all have some stuff in our refrigerator. We have no idea how long it was there. So now your refrigerator will take care of it and will send you a notification when the milk is about to expire. Also it has a big screen on the door. So instead of putting stickers like we used to, now you can send pictures, voice messages, just messages to your family straight on the fridge door. You also can mirror a TV, play music and even do food shopping from your door. Other kitchen appliances are smart too.

So we have smart range. It's a gas range. So for safety reasons you have to start to cook while you in an apartment and set up a timer. But then again control it remotely. So you can change the temperature where you can turn off range completely. Also you can check the status so if you're worried that you forgot to turn out the gas you always can go on the app and check of that everything is OK. And we have smart dishwasher that sends you a notification when the cycle is over or when there's not enough dish soap. We installed smart outlet. So any appliance you plug into that outlet becomes smart automatically. So in this apartment we know we bought kettle and we teach Alexa when we say Alexa good morning, she started to boil your water tells you the latest news, the weather outside, the traffic situation on your way to work.

We also put that motion sensors in this apartment. So motion sensors can help you to create different scenarios. So for example, you have a scenario like the late snack time at night. So if you want to go after 12 p.m. to get a snack, you don't want to be blind with all these bright lights so you can schedule if some someone enters the room after 12:00 p.m. the lights will be dimmed maybe blue. We also brought some technologies to the bathroom. So we have this shower head with LED lights . So now you don't have to wait to try water and see if it's hot, you just can see if the water is hot, it becomes red, if it's cold, it becomes blue. And especially it's nice when it's a hot summer, you can get blue shower and when it's cold winter you can get a warm red shower. Also kids will appreciate it and love it.

Of course people love to control climate. So this is must have to have a smart thermostat and smart AC. Of course we will see a lot of benefits and opportunities to incorporate smart technologies in multi-family sector. First, it's a great competitive advantage. It's a great marketing tool for you. Also statistics show that you can increase either its rent price or sales price on average by 5 percent. And it's also energy efficient. So if you’re a building owner who’s paying for heating costs you will benefit from this as well. So what I want you to do, what I recommend you to do think where you can start. So for example, renovation is the best time to incorporate smart technologies or if you have a vacant unit so you can pilot. You can see feedback and then scale and roll out across your portfolio. Thank you so much. It was great to speak to this audience and if you have any questions I'm always open. Thank you.

Cindy McLaughlin: Navigating Regulatory Technology To Build The Future

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Cindy McLaughlin, CEO of Envelope discusses the challenges of navigating the current regulatory climate and how technology will level the acquisitions playing field, allowing mom and pop developers to acquire buildings better, faster, and with more information.

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Cindy McLaughlin, CEO, Envelope

Website | Linkedin

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VIDEO TRANSCRIPT:

My name is Cindy McLaughlin and I'm the CEO of Envelope. Somebody pretty smart on Twitter once said that technology is really good at taking what was once available only to the mega rich and bringing it down to the rest of us. So you have a vacation home in every city through Airbnb, you've got a personal driver through Uber, and you're in your bedroom is an in-home movie theater through Netflix. I'm here today to talk a little bit about how regulatory technology can do the same thing for real estate acquisitions. I'm also hoping to convince you that I will admit that regulatory technology is not the most exciting topic, but it's not as boring as you might think.

Before I start talking about regulation in real estate I want to start by pointing out that the vast majority of regulation is made by really thoughtful policy makers who have anti-corruption and safety in mind as well as managing growth and economic development. But as they say the road to hell is paved with good intentions. And regulation has a nasty habit of piling up. It happens because each new political administration has its own priorities that need to be encoded. It happens because you find loopholes that need to be closed and it happens because unintended consequences of prior regulation need new rules to dial them back.

To get very concrete about the problem in New York City, the index for amendments alone and to the construction code are 400 pages single spaced. The building code is 35 chapters with 19 appendices. The zoning code is 4,000 of legal text. It fits inside one of those big boxes of printer paper. As you can imagine an enormous cottage industry of lawyers, lobbyists, consultants, advisers, have sprung up to help real estate industry professionals access, understand, navigate, sometimes evade and often times lobby to change the rules.

I'm going to talk a little bit about zoning because it's the regulation that I know best. Practically speaking if you're a real estate developer in New York City and you want to know what's possible to build on a particular address you're probably going to call an architect or a zoning attorney. If they have time, they're probably going to print out the relevant portions of the zoning resolution with a highlighter pen. They're going to understand the rules and if they're fancy they're going to build a three dimensional model either hand drawn or they're going to build it in desktop software. They'll email it over to you, you'll take a look and you'll say, well what if I were to add a community facility to the ground floor of my building? Or what if I were to change the floor to floor height? What would happen. How much square footage could I get out of that building? And you're going to kick off a game of email ping pong that can take days or weeks and can rack up fees between twenty five hundred dollars up to twenty five thousand dollars depending on the complexity of the development. Assuming that you're going to look at more than one property before you make an offer on a single one, you need to have a cool 25 to 50 thousand dollars sitting around just to explore your options. To put this kind of capital in context. The median income of New York City households is fifty thousand dollars. So if you're an individual if you're a mom and pop development company you simply don't have the means to do smart real estate acquisition because you need to be able to do the level of analysis that I just addressed. But the big guys are very willing to pay.

Like most good government tools zoning sounds boring, but it is in fact a secret means by which cities are shaped and fortunes are made. Zoning essentially serves as a paywall. Only those who can afford to navigate it can make their fortune in the industry it regulates.

So circling back to the point of this talk, can regulatory technology help with this problem? I'm going to talk a little bit about my company envelope. There are companies like mine that are handling different portions of the regulation. We happen to be building the three building the 4,000 page zoning resolution into three dimensional software.

To walk you through what the software is doing, we let you enter an address and very quickly we show you what's built there today and we show you what the three dimensional spatial constraints of zoning allow you to do. So where there are height limits, where there are setbacks, where there are yard requirements and we do that across all of the cellblock conditions of that particular parcel. We then make a recommendation as to the use type that's going to allow you to maximize your floor area. This is a commercial building. But you could play. You could say what if I were to do a residential building with a commercial ground floor. Or have three floors of commercial. Or what if I were to change my floor to floor height, how much extra extra square footage could I get out of my building. Or what if I were to take that inclusionary housing bonus that happens to be available on that parcel. Or add air rights from my neighbor or my other neighbor. And what if I were to caterpiller my way around the block until I can fill out the zoning envelope. What would happen if I were to add dormers to get a little bit of extra square footage. And anything I can do on a single lot. I want to be able to do across multiple adjacent lots as an assemblage.

In essence we're building sim city for real life, trying to take the wild complexity of zoning and build it into something that's accessible, useful and even kind of beautiful. Companies like mine have started out working with industry because frankly, they're the ones who can pay us in a way that we can invest back in our technology but eventually we hope to be able to provide our software so cheap or free so that anybody who has a parcel of land can understand how to maximize the value or the productivity of that parcel. They might find air rights that they didn't know they had that they could sell to their neighbor and it would allow them to speculate themselves on other lots for investment properties.

Regulatory software is pretty siloed. We do zoning, it's our area of expertise. Somebody else does building codes, somebody else does mechanical code, but in the not too distant future, we're all going to be holding hands. And well we're showing you what you could build in terms of square footage. We'll be partnering with companies that are already building in three dimensions, the building code that shows you the egresses and and mechanical code, and plumbing code software. And eventually will form in three dimensions a regulatory scaffolding that will allow you as a potential acquirer to say, very quickly, what are the bones of my development going to look like, what is this going to take and is it worth it for me to acquire this parcel. In this way we think that regulatory software is going to level the playing field in acquisitions allowing mom and pops to be able to do the same kind of exploration as the big guys. We're going to try to make this industry a little bit more fair and a little bit less rigged in favor of the very wealthy. Thank you very much.

Marshall Cox: Intelligent Residential Heating

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Marshall Cox, CEO of Radiator Labs discusses the problems with steam heat. He explains how using heat data can solve for comfort and lower cost.  

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Marshall Cox, CEO, Radiator Labs

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VIDEO TRANSCRIPT:

My name is Marshall Cox, the Founder and CEO of Radiator Labs and I’m going to tell you about steam heat which is always a super exciting topic. So first of all steam has a lot of problems. We all know this we we've lived in an apartment or a house in New York City in particular. And the problem isn’t with steam. Steam is actually a pretty awesome technology that has been in these building since they were built often a hundred years ago, decades at least and they’re super overheated. The problem is that it's very hard to control where steam flows from that building and you can try to do that and they were really well balanced when they were built. But then the biggest change that we've we've seen is that we've invented nearly universally retrofit, windows with a double pane insulating glass and that completely changed the balance of our buildings. And now you have apartments that are cold and need a lot of heat and people who are super hot and open the windows as a result.

Obviously people are really uncomfortable because of this so it's a problem for tenants. It's a problem for maintenance staff because these things are hard to maintain. But it's an enormous financial and ecological disaster about seven billion dollars is wasted every year in the 10 percent of the U.S. residential housing market that uses steam as a primary source of heat. in New York City alone it's one point two billion dollars and you can imagine literally taking one point two billion dollars of fuel and burning it in the streets that's essentially what we're doing every year.

I want to get some perspective on this problem so steam has been around for a long time. It's been around for a approximately the same time as the phones. This is Alexander Graham Bell invented the harmonic telegram which is here. And think about how many changes have gone through that technology in the past hundred years. We all have supercomputers in our pockets now. The amount of change is dramatic and contrast that with steam, it's not necessarily a fair comparison. We have new better heating technologies but the radiators that have been in these buildings haven't really seen anything happen in the last 100 years and this is particularly relevant here because this Alexander Graham Bell standing next to a radiator and I can guarantee you that that building is probably still here and that radiators are probably still there. These things have been stalled for literally a century sometimes more than a century and they still work which is amazing but they have a lot of issues. So I got my P.H.D. at Columbia University. I invented this technology there. My research had nothing to do with steam or radiators but I lived in a unmitigated hellhole apartment. I was super hot. The technology worked really well. We went to compete at the MIT Clean Energy Prize, won that which was amazing and was essentially the beginning of our company. We developed a full building system and iterated over the past few years and most recently NYSERDA has supported an evaluation of that technology in a bunch of buildings and I'll talk about the results later. It was very good and we were really excited about what we're doing.

Briefly, what are the things you can do to solve this problem and overheating and buildings? Most people have tried to address this from a plumbing perspective but steam is a hundred degrees Celsius gas. It's a very caustic when it condenses into water and you're talking about a two phase distribution problem that's really hard to control that kind of distribution system with a valve or other kinds of plumbing solutions doesn't really work. We've approached it from a different direction. We actually control the area around a radiator and thermodynamically manipulate the steam flow within a building by doing that. Has the benefit of being easily installed you don't have to have any contact with plumbing is especially nice not to have to mess with 100 year old pipes and it works really well. Every one of these systems says a wireless radio we communicate data in real time to the cloud that lets us learn how buildings heat up and cool down and optimize that heat generation on a building by building basis. It also lets us connect this data to people's cell phones so they can control their temperatures even setting setbacks and different time based things you can do with a normal thermostat. This is a level of control that these buildings have never had in their entire history. So it's a pretty big deal for the people who live in these buildings.

These are those results I told you about from NYSERDA. Seven buildings of the past five years. We found 25 percent average savings maximum savings was forty five percent. And I just want to point out the minimum savings over there 15 percent. That building is a LeFrak building out in Brooklyn. It is now the most efficient single pipe building in all of New York. So even in buildings that start out very efficient we can still save a lot of energy. There's a lot of waste here. To put into perspective for income for for a portfolio, if you can save 30 percent of your heating costs that translates into a net operating income increase of 10 percent because 30 percent operating costs are often in heating the building itself. So that's a big deal for for portfolios.

Now I want to transition to talk about data. The first thing, the most obvious thing is what can you do with data in real time in a room? We take temperatures and we obviously feedback that temperature into our system is pushing down to a room when it's needed that allows us to do away with the drastic overheating under heating that you get in these kinds of buildings. This is real data. You basically turn an apartment into a flat lined temperature at your set point. It's a very important and nice change. My apartment obviously has these installed.

You can get a little deeper into the data as well. So in most bigger buildings you have what's called the two pipes steam system, and every radiator has a steam trap at that point and when we installed in buildings we typically find that about 25 percent the steam traps are blown and malfunctioning which means that steam is flowing into the that line being wasted. Every broken steam trap wastes about 200 to 400 dollars a year. So you can see how this adds up very very quickly. We can use the data that we're gathering to analyze steam trap health in real time and you can imagine that maintenance programs and buildings. It's hard to measure this stuff because it's in someone's home. We can just do it in real time remotely and tell people when things break and they need be fix which increases dramatically the maintenance efficiency of portfolios.

Very quickly looking dig digging deeper into the data there are some really interesting things here. If you can look at this and the left is these are two buildings top and bottom on the left is before we installed an app on the right is after we installed each one little block in these graphs shows a apartment that's been categorized by temperature. So the red blocks are apartments that are Saunas above 80 degrees. The blue blocks are apartments that are freezing below 62 degrees and you can see that before we retrofit is a pretty even distribution of very hot apartments and very cold apartments where you'd imagine sitting in a building. After retrofit if you could see the screen here, we've dramatically increased the number of green building the green apartments. So most of the apartments now are comfortable. Of course there's still outliers on the hot side. So this is on first level to point out that our technology is awesome, it works really well but this is a very rich data set. Of the apartments that are still hot. Why are they still hot?

It turns out that we can do some some interesting cluster analysis and apply algorithms to this data to figure out what characteristics those apartments share. So maybe they're on the top floor and the roof is uninsulated maybe on the bottom floor and there's infiltration problems but they're all on on the north side and don't get sun. You can essentially figure out what's wrong with these buildings. Then no one even knew existed. And that's interesting because you can take that data. We control the boiler we know how much fuel you'll save additionally if you fix that problem. And then if you know how much that problem cost to fix you can calculate a pretty efficient pretty accurate return on investment. And that basically will unlock a significant amount of capital. People want to fix their buildings. But the capital to do so is not really available because no one knows how long they're gonna take to pay back. No one knows how much it’s going to cost to fix. No one even knows what the problems are. So what we're trying to do here is take the data that we're gathering to figure out what those problems are to go how much going to cost to save and unlock that capital to fix the big problems in our infrastructure which is primarily located in our older buildings that no one has the time or money to evaluate properly. We have a big grant from the National Science Foundation to do this. So we're pretty excited about we're doing. Thank you so much.

Landon Tucker: The Future of Residential Connectivity

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Landon Tucker, CEO of Honest Networks helps us navigate the current state of multifamily connectivity. He touches on how 5G is changing the connectivity game and the notion of connectivity being as ubiquitous a utility as water and electricity.

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Landon Tucker, Co-Founder & CEO, Honest Networks

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VIDEO TRANSCRIPT:

My name is Matt and tucker with honest networks and I'm here to discuss the future of residential connectivity. Really exciting time for connectivity because we are at the epicenter of two trends. The first is accelerating shifts in consumer behavior, how consumers are consuming content and we are also in the midst of the very early stages of 5G technology. The ability to use wireless technology that's becoming very efficient to effectively recreate and build on the incumbent business models and do it in a much more efficient and friendly way.

For real estate owners and managers the key is not only will there be new service providers that have a lot more new innovative business models, but what we're also going to see is a real opportunity for differentiation in terms of residential connectivity. What we're seeing is that property owners and managers are looking to use connectivity to drive relative positioning with the new and and existing tenants are using connectivity to really differentiate their product and drive pricing and value. They're also using it to improve tenant satisfaction. In terms of consumer behavior, what we're seeing is that there's an accelerating shift in terms of cord cutting that we have. More and more Millennials and Gen Xers are getting rid of cable. In fact, 94% of 18 to 29 year olds are primarily streaming and they're not doing it for price. They're doing it because they see less perceived need for a cable television package. And what's really interesting about that is when you have this massive cord cutting you see a transition in connectivity. Internet is no longer complementary to a cable television package.

It's actually a utility in and of itself for building owners. It's as ubiquitous and as important as water and electricity. So what's actually happening though is that consumers aren't really happy with what they have now. They are being pushed to bundle product. They're being trained to have an internet solution in their building that's built on promotional offers. And because these companies in your buildings today, the larger cable companies and the telcos, they haven't had to build a really great customer service culture because they've been effectively monopolies. What's really exciting is this is about to change in a dramatic fashion. And what we're able to do now with the combination of fiber optics and 5G technology is to effectively build and improve upon and recreate what the cable companies and the telcos have done in building out a new great Internet network over the air and in the streets. And if you deploy internet networks in this way, it's a massive improvement in terms of efficiency. It's an incredibly capital efficient way to build out networks and it's also a very timely way to add connectivity to your building.

You can be installing new internet networks in days or weeks not months or years. You all have internet in your buildings. So the question you might be asking is, Is this better or is this the same or worse than what I already have in my building? Let's go back to what we said before which is if internet is becoming a utility how do we think about valuing the utility of a utility. We think about the speed.

This is Honest Networks we're the fastest residential internet provider in the country. We offer only gigabit. One to ten gigs of capacity, fastest speeds in the world. Ultralight connectivity for fifty dollars a month or less than half of the cost of the incumbent providers. And because of the way we architected our network at ultra low latency which means there's essentially no delay in which tenants request service and then receive it. And so we're becoming an alternative option in multi-family properties and seeing amazing customer transactions and uptake in the buildings. If you see here tenants have been really excited by having an alternative choice in the building effectively saying they are blown away by the service, the price, the quality of the network they're getting. And when you have a product it's becoming utility. As a real estate owner or manager, how can you take advantage of this? How are you going to use this innovation and connectivity to differentiate your buildings? The number one differentiation opportunity we see, and this is from mom and pops with with smaller multifamily buildings all the way up to the largest developers in all of Manhattan, is performance. People want to say you come into this building and you have the fastest residential internet in the entire country because we have Honest Networks.

Imagine you have a 300 unit building. You're seeing about 140 of those units turnover every year. Take out seasonally adjusting you're looking at 12 different conversations you're having with the existing tenants who are thinking about moving out and going to a competitor. You have 12 conversations with new residents that are looking at a wide variety of buildings. If just a few of those say oh you have the fastest Internet in the entire country and you're able to convert them into your building and drive occupancy and drive rate, that's a homerun for you considering that we're actually free for building owners were just another option in the building. Another great opportunity for differentiation is on Wi-Fi. We see a massive gap between ubiquitous Wi-Fi which we believe Millennials and Gen Xers are looking for. There's a massive opportunity for instance when we bring in ubiquitous Wi-Fi into common areas, into fitness centers, rooftops because all of that is complimentary service. Because our goal was to improve tenant satisfaction in the building. Working with a new innovative provider you can have it such that internet is on. It's like water when the tenant shows up. It really drives the tenant experience having unprecedented connectivity visibility in your building could be great in terms of dealing with tenant issues.

We have a connectivity dashboard where we have API integration with all of our connectivity data so that you can know over the past 24 hours or even 24 months the speed reliability and performance of each one of the buildings in your portfolio. And then finally on the left side if you want to give your residents more choice more affordability they can often save a lot of money every month by switching to an Internet product and streaming versus sticking with the incumbent bundled product. And then some final considerations for real estate professionals are future proofing your building when you can for instance at honest we bring fiber into the vertical riser into every building we go into that future proofs the building in terms of giving you outstanding capacity and performance. But it also improves the resident experience when you have great infrastructure in the building and it increases the value of the building to you. So if you can do that and you're thinking about bringing another provider, ask about how they're wiring up their building because you want to make sure that when you're working with a new provider they're future proofing your building and really adding value to it if you're giving them the opportunity to sell into the residence. Second is aesthetics make sure you understand what equipment is going into your building. All providers have a wide variety of equipment they use and there is really great small form factor aesthetically pleasing installations that can be done now where the resident doesn't even really notice the equipment. That's something that we'd be happy to touch on more. And then finally I.T. and security.

Increasingly I know many of you are looking to get more data out of your buildings so you're looking to use IoT BMF system security systems. If you're backing that information up to a public cloud computing provider or you're using the public internet, often times if you work with a provider you can get secure, direct cloud connectivity access which prevents any risks of a security threat to your building. If you have any other questions feel free to reach out to myself or any other member of our team.

Thank you.