After cashing out from a failed try to remodel the business property market, Adam Neumann’s second act will apparently be failing to shake up residential actual property.
Andreessen Horowitz is reportedly investing $350mn in Neumann’s start-up Flow, after being “thrilled by the scope and aspiration” of the shoe-resistant WeWork founder’s pivot from firm landlord to particular person landlord. Here is a weblog publish from Marc Andreessen asserting the deal:
Make no mistake, this type of mission is a heavy raise. Only by means of a seismic shift in the best way business relationships are structured and the mechanisms by means of which worth is delivered can we hope to deal with the underlying issues of the present system and construct the answer. Doing this requires combining community-driven, experience-centric service with the newest know-how in a manner that has by no means been finished earlier than to create a system the place renters obtain the advantages of homeowners. This means rethinking the complete worth chain, from the best way buildings are bought and owned to the best way residents work together with their buildings to the best way worth is distributed amongst stakeholders. And given the fragmented nature of the ecosystem right now, we will solely hope to perform any of this by bringing each side of the residing expertise collectively.
Andreessen’s publish is brief on particulars about how, precisely, Flow is “rethinking the entire value chain”, or which “benefits of owners” renters will be capable to obtain.
He writes longer on the US housing disaster, the place Americans are apparently each 1) pressured to stay in costly cities for work, and a pair of) shifting away from costly cities after the Covid-19 pandemic. In this view, possession is unattainable and renting is soulless, friendless, disconnected and embarrassing. But what Flow will truly do is murkier than a VC’s marks.
Flow’s personal web site is even much less useful. But over on the NYT, Andrew Ross Sorkin provides not less than some flesh on the bone.
Neumann has bought greater than 3,000 house items in Miami, Fort Lauderdale, Atlanta and Nashville. His purpose is to rethink the housing rental market by making a branded product with constant service and neighborhood options. Flow will function the properties Neumann has purchased and likewise supply its companies to new developments and different third events.
Now, some FTAV readers would possibly at this level be shouting “you’re just reinventing multifamily Reits without the tax benefit”, or perhaps “Neumann is flipping second-tier flats he bought with money wrung out of SoftBank to Andreessen Horowitz at a mark-up”.
Perhaps you’re merely dumbstruck that Neumann is ready to extract a fats $350mn cheque from a giant know-how investor for one more actual property play after the entire WeWork asset-liability mismatch experiment.
Unfair! says Marc Andreessen:
Adam is a visionary chief who revolutionised the second largest asset class on the planet — business actual property — by bringing neighborhood and model to an business wherein neither existed earlier than. Adam, and the story of WeWork, have been exhaustively chronicled, analysed, and fictionalised — typically precisely. For all of the vitality put into overlaying the story, it’s usually underneath appreciated that just one particular person has basically redesigned the workplace expertise and led a paradigm-changing international firm within the course of: Adam Neumann.
This is reportedly the most important cheque Andreessen Horowitz has ever reduce. One of its earlier massive investments was its $100mn funding into GitHub in 2012, which was then purchased by Microsoft for $7.5bn.
We can’t assist however surprise in regards to the objective right here.
This may very well be a GitHub sort of deal, the place the enterprise capital agency makes a giant funding with plans to dump it to an institutional competitor. There are loads of skilled gamers on this market, together with Blackstone’s rent-to-buy enterprise, or Invitation Homes, which is publicly traded.
But the outline from Dealbook—“a branded product with consistent service and community features” — makes Neumann’s enterprise sound much less like renting houses and offering the choice of shopping for them, and extra like constructing flats with sport nights and facilities. Those exist already in loads of cities across the US. It’s principally pupil lodging for adults.
So we aren’t certain what to make of Dealbook highlighting the next sentence in Andreessen’s description of the issue going through the US housing market right now: “You can pay rent for decades and still own zero equity — nothing.”
Andreessen continues:
There’s a cause the federal authorities began subsidising dwelling mortgages: somebody who’s purchased in to the place he lives cares extra about the place he lives. Without this, flats don’t generate any bond between particular person and place and with out neighborhood, no bond between individual to individual.
It appears like he’s arguing possession is needed for an individual to have a stake in a neighborhood, and as our colleagues on the FT have coated, rent-to-buy ventures aren’t actually an incredible path to possession.
So it stays unclear whether or not this enterprise will look to offer precise possession, or just a “sense” of possession. The most fascinating choices fall within the gray space in between these two classes: Say, for instance, house buildings the place a share of residents’ month-to-month funds are put aside to be invested within the fairness of the corporate itself.
Perhaps it is going to flip into one thing vaguely wise and undramatic, akin to a collection of cookie-cutter flats with a proper to purchase, tequila on faucet and a skinny patina of glamour. But for FTAV’s sake we’re hoping for one thing extra grandiose, ingenious and ill-fated. A WeWork 2.0.
Source: www.ft.com