Featured on this episode: Michael Rudin, Senior Vice President, Rudin Management.
Earlier this month, we had the pleasure of attending the pleasure of attending the CREtech conference 2019 in New York as an official media partner, and interviewing some of the leading voices, innovators and disruptors in the Real Estate Industry.
Michael Rudin is a Senior Vice President at Rudin Management Company. He has been with the firm since 2008, and together with his sister Samantha represents the fourth generation to work at the family business. Michael focuses on multiple areas within the company including new developments, capital markets, commercial and retail leasing, sustainability, and technology. Michael also helps lead the family’s venture capital business, Rudin Ventures, which focuses on early-stage startups in the real estate technology sector.
Also featured on this episode:
Michael Beckerman, CEO – CREtech
Michael Beckerman is not afraid to tell it like he sees it. Beckerman spent the past thirty years in the Public Relations, Digital News and Tech sectors, all focused in the real estate industry. Founder of Beckerman Public Relations, one of the top 50 largest independently owned public relations firms in the country, Beckerman currently serves as the full time CEO of The News Funnel and its affiliated brands, The Content Funnel, Real Estate Tech News and CRE // Tech.
Beckerman is a top influencer in the industry and has been named one of the most influential bloggers and social media experts by several leading media sources as well as being named one of the top Commercial Real Estate people you must connect with on LinkedIn.
Gordon Smith, CEO, and Patrick Frank, Head of Sales – Biproxi
Gordon is a seasoned real estate finance and private equity professional with more than 30 years of experience in asset management, brokerage and principal investments. Most recently, he helped build and lead Ten-X’s CRE division (350 professionals) and oversaw product development, marketing, operations and sales. Prior to Ten-X, Gordon spent 20 years at Fortress Investment Group and RSF Partners where he executed on over $10 billion of transactions. Gordon started his career at CBRE in brokerage which gives him a unique understanding of the biproxi marketplace. Gordon has served as a board member for companies with significant real estate operations such as CW Financial Services, Intrawest, Mapeley, and Annington Homes.
David Wind, Managing Member – DAW Partners
DAW Partners is an operations improvement and FinTech consulting firm that provides unique insight and guidance into the development, design, implementation and operation of B2B and consumer-based lending systems.
David Wind, principal consultant, is a high-energy financial technology Senior Executive leader with deep experience in all facets of business management, consumer lending products, capital markets and operations.
Anthony Alvernaz, Product Management – CRE Simple
CRE Simple is a financial services company built on an intelligent lending platform that is reinventing commercial real estate financing.
Founded by a team of successful serial entrepreneurs with deep roots in commercial lending, data services, security, and intelligent automation, we strive to delight our customers by eliminating the complexity and inefficiencies inherent in today’s CRE lending market.
RealCrowd – All opinions expressed by Adam, Tyler, and podcast guests are solely their own opinions and do not reflect the opinion of RealCrowd. This podcast is for informational purposes only and should not be relied on as a basis for investment decisions. To gain a better understanding of the risks associated with commercial real estate investing, please consult your advisers.
Michael Rudin – If it doesn’t help me attract or retain tenants let’s scrap it, because at the end of the day that’s the name of the game.
Adam Hooper – Hey Tyler.
Tyler Stewart – Hey, Adam. How are you today?
Adam Hooper – Tyler, it’s another glorious day. We’re back on the West Coast. Had a pretty full week last week didn’t we?
Tyler Stewart – We were out in Brooklyn at the CREtech conference.
Adam Hooper – Yes, CREtech 2019, amazing conference.
Tyler Stewart – Yes.
Adam Hooper – I don’t know that I’ve been to a real estate tech conference that large. I would think 1,600 people, more.
Tyler Stewart – Or that exciting too.
Adam Hooper – Lot’s of really, really cool stuff. CREtech 2019, Dock 72, Brooklyn, New York. For those listeners that might not be familiar with CREtech, they bring real estate technology news, analysis, events, original content to everybody interested in the space. We’ve got a link in the show notes here. Be sure that you go over to their website and sign up for their newsletters. Really, really awesome content. Big thanks to Michael Beckerman for what he’s done with CREtech. You know as we talked, We remembered being at the very first one, four or five years ago back in San Francisco. It’s phenomenal the amount of growth at this conference and just the space it’s gone through. Really, really awesome event. Great guy, you’ll hear from him in this first episode. Also big thanks to Michael Rudin with Rudin Management for hosting the event at a really, really cool project.
Tyler Stewart – Beautiful building too.
Adam Hooper – Dock 72, Brooklyn, the Navy Yards. You’ll hear Michael Rudin speak about that a bit as well here in this first episode, but very, very full week. Lots of great guests. I think we had 25 different guests on. We’re going to put these in back to back episodes. Almost four hours of conversations.
Tyler Stewart – We’ve got five episodes coming out all focused on the CREtech conference. A lot of exciting guests.
Adam Hooper – Lot’s of them. If you like this episode, please go over to iTunes or wherever you listen to this, leave us a review, subscribe. If you want to learn more about real estate investing also head to RealCrowduniversity.com to get the best of our shared knowledge on the topic. With that Tyler, I think we should probably get to it. To kick things off, we’re going to have a quick chat with Michael Beckerman, CEO of CREtech. We sat down with him after the conference was over. He was a bit swamped the first couple days of the show. Hopefully he’ll give you a good overview of what CREtech is, a little info on the show, and what you can expect for the next few episodes. Michael Beckerman, the man, thank you so much for the opportunity to come and do the podcast here from CREtech 2019 from Dock 72 in Brooklyn.
Michael Beckerman – Well thanks so much for inviting me to speak on your wonderful, wonderful podcast. Welcome to our biggest two-day conference in the history of this young industry here in the US. We welcomed about 2,000 people to the Navy Yard in Brooklyn over the last two days. People from 35 different countries, from basically every food group within the commercial real estate industry The energy and the buzz feels great. And we’re thrilled to have you guys here supporting us.
Adam Hooper – Fantastic event. Again, we’re recording the intro after the wrap up, it’s been a busy couple days. You know it’s been amazing to see what you’ve grown with this conference, again I remember the first one in San Francisco… It was back, what probably 2013, 14? Man it’s grown. It’s grown a bunch.
Michael Beckerman – It’s really the community that has grown. I mean our company’s grown, and we’re thrilled to sort of play a role in helping organize it and bring people together. But you know it’s so much bigger than just us. It’s about this community that’s been built and people are coming to it. In numbers that really just a couple years ago, when we connected in San Francisco, shocking how big it’s gotten and how far it’s reached. As I said both geographically, but just in terms of in the industry. You’ve got office real estate, you’ve got retail. You’ve got multi-family. You’ve got hospitality and hotel. You’ve got brokers here. You’ve got landlords here, You’ve got academia here. You got of course a lot of venture investors that you’ve talked to I’m sure. It’s just really completely organically growing. There’s very little promotion that we do. People just coming and finding out about it, and getting engaged. It’s been really exciting to be a part of.
Adam Hooper – It’s been great to see the industry grow. Don’t sell your self short, I think you’ve been instrumental in getting it to where it’s been. Again, thank you for the opportunity to come here and host the show from this beautiful space.
Michael Beckerman – This activity that you’re talking about around this podcast booth, you guys have been buzzing here. Like every time I turn around there’s some amazing PropTech, you know, thought leader coming out of this media tent that you guys have built.
Tyler Stewart – We got a lot of good stuff coming.
Michael Beckerman – Yeah, I’m really excited to listen to it. And again thank you so much for supporting us because you’re helping get the word out. And you’re really making an impact in terms of the thought leadership, so thank you.
Adam Hooper – Next I had the chance to sit down with Gordon Smith and Patrick Frank of Biproxi to talk about what they’re seeing in the commercial real estate listing space with their innovative new platform here in the US. All right well we’re joined here by Gordon Smith, Patrick Frank from Biproxi. Thank you both for coming to the show today.
Gordon Smith – Yeah, thank you so much.
Patrick Frank – Thanks, Adam.
Adam Hooper – Biproxi, Gordon it’s been a while since we talked. Biproxi’s the new venture. Maybe before we talk about what that is tell us a little bit about your background. I know you, lot of experience in the real estate space. Patrick and maybe get a little bit about yourself, and we’ll talk about what you guys are up to now.
Gordon Smith – Sure, so I spent most my career in private equity. I was at Fortress for close to 17 years, and ended up sort of in a round about way, on the board of a company called Auction.com and Ten-x. I guess in 2014 I was recruited to run the Commercial Group which I did that for almost three years, until it was sold to TH Lee. Took about a year off, and I always had a vision to create kind of a broad end-to-end platform for the broker. Ten-x was an unbelievable platform, but very focused on the transaction side. I really wanted a place where a broker could come, list their asset for free, run a marketing process, get all their data, and really never have to leave our platform. That was kind of the vision for Biproxi.
Patrick Frank – Perfect, Patrick how about yourself? Yeah absolutely. I worked in almost every single legacy industry on the technology side, so healthcare, oil and gas, law, and then most recently real estate. I most recently came from Compass on the residential side. Who just recently makes this huge push on the technology side for resi. But coming onto the commercial side I realize the opportunity is so much larger and it’s more intricate. And so really the vision of building an end to end platform is what entices me, or gets me fired up. And so being here it’s exciting to see what we’re doing in this space.
Adam Hooper – Perfect, so end to end platform sounds like brokers are going to be your primary user. Who’s the user for Biproxi?
Gordon Smith – Generally, our target is really the middle market. Assets under 25 million, which is generally the middle market broker. We felt that that’s really where the product-market fit is best. They can take advantage of the marketing tools we’ve got, access to more buyers. I would say in general our target client is really that middle market agent.
Patrick Frank – And they’re most largely under served. I mean these folks are you know, smaller shops that don’t have the resources of these institutions. And so really the Biproxi platform allows and really gives them that extra firepower that they need to compete with the larger institutions.
Adam Hooper – Where does this fit in the landscape of tools for brokers? I mean obviously you know the costar LoopNet juggernaut, you’ve got Auction.com, Ten-x still.
Gordon Smith – If you think about, we’re really trying to take the four or five tools that agents use. So I would say on the listing side you’ve got LoopNet for instance. On the transaction side it’s Ten-x, on the data side it’s CoStar. And there’s a lot of emerging new companies like Cherry. We’re really just trying to take those four or five tools that an agent would use and allow them to access it on one platform.
Patrick Frank – And there’s no doubt about it that the space is completely segmented, and it’s fractured. So there’s no one stop shop for people to be able to go to, to find everything that they need.
Adam Hooper – And so are you going to be including actual transaction flow, you know the processes from truly end to end? Is this a discovery platform?
Gordon Smith – We don’t really have what I call a deal management platform yet. What we have is the ability obviously, for an agent to run a structured marketing process where we would run a digital campaign for them. They can obviously accept and negotiate offers online, go into contract and close online. But the whole deal flow process is evolving.
Patrick Frank – There’s two really, pathways we have on the transaction side is one, the auction, which we have our live offer, which allows the broker more control on the inputs, in controlling outcomes, rather than having a middle man manage it. And then on the second side, which Gordon was referring to was our marketing concierge, which at the end of the day, just to make it plain and simple, is that we drive buyers to the brokers. They’re not doing the lift of the outbound campaigning on across social platforms, developing landing pages.
Adam Hooper – Because marketing is a very different business practice than finding listings and running a transaction. I don’t know many mid-market commercial brokers that are expert marketers.
Patrick Frank – Right, right, exactly. So our internal campaign managers are the specialists in that field. And really you know we allow the brokers to focus on revenue generating activities, which is you know their network, prospecting. Which really we don’t want them to get lost in what most of them think as the arts and crafts, right? Which is really still very important. And so these campaign specialists are creating customized landing pages, running Google SEO and ad campaigns. So really it’s just driving more unique buyer traffic that they wouldn’t have had elsewhere.
Adam Hooper – Which is a huge amount of value for the brokers because more eyeballs, you get that buyer that you might not know about.
Gordon Smith – If you remember our model, the fee is paid by the buyer. So from a broker standpoint, it’s really kind of a costless–
Adam Hooper – It’s all value at.
Gordon Smith – Exactly.
Adam Hooper – Yeah that’s great.
Patrick Frank – I think one of the biggest differences between us and almost every single one of the competitors in the space is that when we think about partnering with a broker, the way a broker gets paid is that they close a deal. We partner with them in the exact same way. We win when they win, and we get paid when they get paid.
Adam Hooper – Perfect. And so how does a building owner interface with the system? Is there any use case for an owner? Or is it purely for brokers right now?
Gordon Smith – You know at the moment we really don’t allow owners to come direct. Our platform really is designed for the agent. So we would probably refer that owner to one of our, we’ve got 15 to 20 broker counsel members on our platform. We’d probably refer them to one of them.
Adam Hooper – And now the data landscape has shifted a lot in the last couple years. Why don’t you kind of tell us a little compare and contrast, you know early days, getting access to data in this industry was near impossible right? So how has the data landscape changed? And what are you guys doing to leverage that availability?
Gordon Smith – We have a proprietary data partner that essentially over the course of the last ten years has basically tracked every single commercial real estate transaction in the United States over a million dollars, cataloged every single commercial real estate property. And so what we are really doing, is we are kind of the public facing vehicle for that data. And along with that comes what you and I have talked about a biproximate, which is basically our algorithmic valuation for every property in the United States. I think in general you’re seeing other emerging companies, obviously like Reonomy and Cherry. And so we’re just in theory trying to provide all that on our platform.
Adam Hooper – So algorithmic valuation for every commercial property in the US.
Gordon Smith – Correct.
Adam Hooper – That’s big. That’s a pretty big statement.
Gordon Smith – It is. And we continue to refine it. But we do have it. And you should go to the site and enter an address and check it out.
Adam Hooper – And where would people do that?
Gordon Smith – It’s www.biproxi.com
Adam Hooper – Okay, perfect.
Gordon Smith – And Biproxi is spelled with an I at the end, not a Y.
Adam Hooper – B-I-P-R-O-X-I dot com.
Gordon Smith – That’s it. Correct.
Tyler Stewart – Perfect.
Gordon Smith – That’s it.
Adam Hooper – So what’s next for you guys? Obviously fresh off a round of fundraising, growth mode. What’s next for Biproxi? What can we see from you guys?
Patrick Frank – Something we’re really excited to talk about today and really show the public for the first time, is that we have been building a marketplace. And this is the first ever open-sourced vendor marketplace where brokers can find everything that they need for a transaction from start to finish. Right so speaking to the segmentation and the fracturing of this industry. The average broker and their team have to go to ten different places to get things such as 3D floor plans, virtual stagings, virtual assistants, or valuations, comps. And imagine having something as simple as an e-commerce site, but with the sophistication to bring professionalism to every single one of your listings. So they can go on there, we’ve done the vendor research, we’ve pre-negotiated the contracts. So it’s the dependability and it’s a repeatable process. So they don’t have to worry about training their team members on where to find these people, the prices. It’s just one stop shop. Click, point, buy, and it’s done.
Adam Hooper – And that’s going live now?
Gordon Smith – And we’re finding even some of the larger firms I think New Mark was an investor in our last round. Plenty of their agents have to go through the same process of getting photos and doing a lot of the busy work. We can actually do that all for them in one place.
Adam Hooper – That sounds like a game changer. I know early days when I was starting my brokers world that would have been very nice to have.
Gordon Smith – Exactly. So you know think about uploading your listing, and then you just given a choice, right? Do you want photos? Do you want drone photography? Do you want virtual staging? And it’s click, click, click.
Adam Hooper – You just pick from the menu and it just happens.
Gordon Smith – And then it ends up in your data vault.
Patrick Frank – As we continue growing more and more vendors want more exposure. And so really at the end of the day we’re curating the best vendors at the best prices with the quickest turn around times.
Adam Hooper – Now you just mentioned, it ends up in your data vault. Who owns the data here?
Gordon Smith – The broker owns the data.
Adam Hooper – Broker owns the data?
Gordon Smith – Broker owns the data.
Adam Hooper – That’s good.
Gordon Smith – We obviously can use it in an itemized fashion, but it’s their data.
Adam Hooper – That’s also a big deal.
Patrick Frank – We are truly partners of the broker, we want to do nothing more than empower them to do more business and save time.
Adam Hooper – Sounds like a win-win.
Gordon Smith – Let’s hope so.
Adam Hooper – Perfect. All right guys, well thanks for stopping by the show today. I hope you have a great conference.
Gordon Smith – It’s great to see you, Adam.
Patrick Frank – Thank you so much.
Adam Hooper – I’m sure there’s a lot to see from Biproxi in the future. David Wind and Anthony Alvernaz joined us from CRE Simple to talk about what they’re seeing in the real estate tech space. David being a bit of a Renaissance man in the FinTech and PropTech world. Some interesting conversations about what they saw at the show and what they can expect to see from the space. David, Anthony, thanks for stopping by the booth today. We got some walkbys. Excited to have you on and talk about commercial real estate tech generally.
David Wind – Thank you so much for having us. I know I am really impressed by the turnout here.
Anthony Alvernaz – It’s pretty well attended. A lot of people here.
David Wind – It’s amazing to me is the amount of capital that’s being deployed by so many of the traditional firms that are seeing the value and providing these types of services.
Adam Hooper – Definitely. Well why don’t you give us a little bit of backgrounds first, kind of your experience in the real estate tech world. And then we can talk about some of what you guys are seeing here at the show.
David Wind – I’ve been in the commercial real estate business for almost 20 years. More recently I pivoted a bit into financial services with So-Fi. And before that, after that excuse me, with Earnest. And then I got into the PACE lending space. And then I’m now working with companies such as CREtech, which is where Anthony is trying to change the world for the better.
Adam Hooper – Perfect. Anthony how about you?
Anthony Alvernaz – My foray into commercial real estate started with CRE Simple. Proud to say the first employee, and now run our product management operation there.
Adam Hooper – Very nice. So what do you guys seeing here walking around the show?
Anthony Alvernaz – A lot of that, when we think about capital markets, vis-a-vis CRE Simple, and what we do as our lending product offerings is a quick, quick introduction. You know we offer both capital solutions to the market, as well as software solutions targeted towards mortgage brokers. On the capital side of things it’s really about recognizing where points for standardization exist. And points for making something a digital process are very relevant. You talk about, David, an example where someone is scanning a check as opposed to having integrated accounting system. It seems rather rudimentary, but the reality is a lot of the commercial still sits with some of these pieces not modernized. And so for us its about recognizing points like that, that can be standardized across transactions, and leveraging those in any capital product for different asset classes.
Adam Hooper – And I think our industry has been, if it aint broke, don’t break it. I think we need to break a lot of stuff. I think there’s a lot of opportunities to increase again, just beyond just this kind of incremental things that could have a pretty big, you know all stacked together, have a pretty big fundamental impact on operations and efficiencies.
Anthony Alvernaz – Sure and to add it’s a very understandable barrier given the size of these transactions. People like to say, “My gosh, residential has just exploded, in terms of its tech adoption.” But in essence they are simpler and smaller transactions than a lot of these commercial deals, which often have a floor at a million dollars.
David Wind – What I’ll add to that is that these incremental changes need to fit in within the framework, dare I say the existing tech stack, or lack thereof of these companies. If you had invented a much better way to slice bread, you have to find a way to integrate that within the Tower of Babel within these institutions. If Stanley is handling the finances for the company, and it’s not possible for him to smoothly integrate whatever it is into a report for these owners to review, they’re just not going to do it.
Adam Hooper – That’s actually another interesting point too, you know which we were just actually talking with the prior guests of integrations across platforms. We’re getting into the financial advisor world where there’s already an existing ecosystem of software that all talks to one another, it all integrates well with one another. So where do you guys seeing in our world of real estate where we will see platforms talking with each other behind the scenes, whether that’s through integrations, open APIs? That seems to me kind of one of the next levels of technology in our industry.
Anthony Alvernaz – Absolutely. A fundamental aspect of building any platform is integrating with what exists. You remarked that it is in fact a rather nascent environment and to that end there aren’t very many providers doing specific commercial integration that one would seek to want to leverage. The other issue that we see is often you have a lot of disparate and self reported data. And so should you find someone that you would choose to integrate with, you are then trusting their source of data into your own system. There’s a degree of sensitivity around not being wholly decided on one single integration partner, and making that be a fundamental part of where your data sources come from. But yes, absolutely. When you think about residential, and consumer FinTech, you’ve got companies like Plaid as an example that does really quick connection to one’s bank accounts for the purpose of pulling their financials. In commercial, that’s almost a foreign concept where a lot of times people are mailing in bank statements when they’re applying for a loan that are faxed, or could be fabricated, and there’s very little veracity that’s instantly provable in that sense. So pieces like that, yes absolutely, those integrations they make sense. That’s just sort of modernizing of an industry that hasn’t been too open to it in the past.
David Wind – We are seeing integration from some of the larger firms, of course. So if you’re a national title provider, for instance, it’s not unreasonable to ask them for their API kit.
Anthony Alvernaz – Yes, right.
David Wind – But if you’re thinking about the lower tier groups, the smaller firms that provide a bespoke service in particular territories, they’re unable to connect it to anything. And so we’re faced with this Tower of Babel. And so it’s going to be an iterative process, and it just sort of dovetails back to the immaturity level of the systems themselves.
Adam Hooper – Yeah, that’s something we saw in our space, right? On RealCrowd seven years ago when we started the company for a real estate owner, manager to make that information public was a huge hurdle to get over, right?
David Wind – That’s right.
Adam Hooper – Even still within the industry owners and operators are becoming more open with that information with that data, but it’s still very much very closely held data. I’m curious where do you guys see that openness for collaborating and sharing data, and being more of a not necessarily fully open, but more like this communal system where you can leverage data from other providers, maybe competitors, maybe not?
David Wind – And here’s one of the examples that I would posit and that is if you and I, Adam own like kind buildings across the street from one another, and we take Anthony’s Plaid connection, for instance, and there are many other types of providers, we’re both competing for the same commercial loan of $22 million, and we’re both providing our rent rolls to that respective banking institutions. If I’m delivering a much higher fidelity, much deeper and robust report on my tenants, telling you that my average FICO score is 783, that my folks have been employed for two or three years, that my average tenancy is over 3.3 years, and we have the same rent roll, my belief is that that financial institution is going to provide me with a more competitive opportunity than you.
Adam Hooper – Because you’re more transparent.
David Wind – It’s just not the building, and the building’s management, but basically it’s the efficacy of my tenant screening that’s going to determine whether I will have a 95% occupancy, or a 97% occupancy.
Adam Hooper – Yeah, I think it’s definitely the transparency, and again professionalism of reporting, right?
David Wind – That’s right.
Adam Hooper – That does not go unnoticed.
Anthony Alvernaz – You’re highlighting a very conceptually important topic which is really where do you draw a line around data that ought to be public knowledge versus data that is truly derived, and in some form the IP of the person providing it. David’s example there is a great example of someone that one building is offering those more detailed reports is certainly making the effort to have that be a deliverable that they think will afford them better pricing. And they are making an effort to do that, and, therefore, that is well above and beyond what just as standard rent roll would provide, and, therefore, is probably not something to your earlier comment, would expect to be free publicly shared data.
David Wind – Yeah, and against that with ROI sort of getting depressed as more cash is deployed, I can buy buildings for more money because my cost of goods sold will go down as a function in this example of reporting. So we’re really happy about what it is that we’re doing over at CRE Simple because we believe we’re starting to provide people with that type of granular visibility, enabling them to get more competitive terms and conditions from the folks they’re doing business with.
Adam Hooper – Perfect. Well, Anthony, David, thank you, guys for stopping by the booth today.
David Wind – What a real pleasure.
Adam Hooper – Have a great show, and I hope you make some good connections.
David Wind – Thanks, Adam.
Adam Hooper – Thanks, guys.
Anthony Alvernaz – Cheers, thank you.
Adam Hooper – Finally rounding out our show today, Michael Rudin, senior vice president of Rudin Management Company, talked about this phenomenal project at Dock 72 in Brooklyn Navy Yards, little bit about their company, their approach to technology and some of the innovations that they deployed at this amazing property. Michael, thank you for coming by the booth today and again for hosting us at this really awesome property.
Michael Rudin – Thanks for having me.
Adam Hooper – Why don’t you tell us a little bit about kind of Rudin Management, where you guys came from, current holdings I think, just under 5 million square feet of resi, 10 million square feet of commercial. That’s a pretty big portfolio.
Michael Rudin – Rudin Management’s a multi-generational real estate, development and management company here in New York City. My sister and I are the fourth generation to be in the family business. As you said, we own and operate a portfolio of about 15 million square feet, 10 million of office, and just about 5 million of multi-family all in New York City, predominantly in Manhattan. Our first ever project in 1925 that my great grandfather built was in the Bronx. Everything since then has been in Manhattan until this project that we’re sitting at now, Dock 72, which is our first project in Brooklyn.
Adam Hooper – Perfect, well this is a really, really awesome space. Again, we’re hosting the CREtech 2019 Conference here. Why don’t you tell us a little bit about the building, kind of what the challenges were again, how this came to be. Then we can also talk about some of the technology that you guys have integrated into the property.
Michael Rudin – We started looking at this project in about 2013. It was actually brought to us by WeWork. They had been looking at it with the Brooklyn Navy Yard Development Corporation, which is the entity that oversees the Navy Yard. It’s a 300 acre industrial complex. It’s owned by the City of New York, and so the Development Corporation is tasked with managing and operating it, and just running it. In about 2012 they put forth a really big master plan, revitalization effort that includes about 7 million square feet of new or repurposed development within the Navy Yard. And as part of that effort, about 2 million of the 7 million square feet, they’ve allocated towards what they call creative office. The other 5 million is going to be industrial and light manufacturing space. And so in their effort to find creative office users, they had identified WeWork as a good fit for that type of space and had begun discussions with WeWork to be able to develop this building on this site. And eventually, WeWork was looking for a partner to develop the building with. And we had been working on another deal with them at 110 Wall Street in Manhattan, where they have their first WeLive property that they opened in 2016. So going through that process and negotiating that deal with them, we got to know them very well. And when they were sort of shopping this deal around, we started looking at it, ultimately ended up partnering with Boston Properties to co-develop the property and have WeWork be a co-developer as well as the anchor tenant. And they’ve been a great partner.
Michael Rudin – Both Boston Properties and WeWork have been great partners over the last five or six years, as well as the Navy Yard. They are technically our landlords, so they’re a big part of the project as well. And it’s a super exciting building. It’s a pretty unique building from a whole variety of angles. We sit on a pier. We literally have water on three sides, which is I think one of the only office buildings certainly in New York City, and I’d argue, around the world that has water truly on three sides. Our site is very narrow. It’s about 600 feet long by 100 feet wide. We’re essentially in a 50 story building that’s been laid over on its side. And we had a bunch of technical challenges with the site. We sit on a land fill pier. Bedrock is about 130 feet below us, and post 2012 when super storm Sandy happened here in New York City, resiliency you know, it’s always been a topic of discussion and consideration when developing along the waterfront. But post Sandy it’s been an evermore present consideration, and it’s been actually resiliency measures have been worked into the building code to deal with the future storms. And so we had to incorporate and consider all of those things when designing this building. Given the fact that we’re on landfill, it kind of forced us to kind of elevate the building. We have no below-grade space of any kind. The building sits on about a 400 pilings that go about 130 feet deep into the bedrock. And then everything sort of rises above that at the ground level. The lobby floor is eight feet above grade. So that will hopefully allow water
Michael Rudin – to pass beneath the building in the event of another large storm or water event. All the mechanicals are either on the second floor, or on the roof of the building. All the utilities are encased in waterproof material to allow them function, even if they do happen to get submerged. So that was all sort of new world for us in terms of how we looked at developing this property.
Adam Hooper – And first entry into Brooklyn. How was that for, you said 1925 first acquisition, so almost 100 years of operating in Manhattan. First foray into Brooklyn, how did that go?
Michael Rudin – We joke that it’s a different world being across the river here. People ask us if we had to get to passport to cross the bridge. There’s a lot of similarities and differences in between the Manhattan market and the Brooklyn market. Then just like in Manhattan, there are dozens of sub-markets that exist within the Brooklyn market. It’s been a learning experience for us and our partners to understand the dynamics of not only the Navy Yard, sort of sub-market, but also the greater Brooklyn market. It’s a ever evolving and growing office market. There’s a huge demand for new space. One of the exciting aspects of this project was the fact that we were going to be developing and bringing online the first ground-up office building in Brooklyn in over a decade. And so that was one of the things that attracted us to the project, having the opportunity to do that and bring that new product. A lot of the development sort of aspects that have been prevalent in Manhattan for the last 20, 30 years, as you know the whole new office stock has come online in Manhattan, which hasn’t really been offered to the Brooklyn market. So that was exciting to bring a lot of that here, into the design and the aspects of this building. And it’s still a learning process. We’re going through the lease process for the rest of the building now. We officially opened the building yesterday. We had the ribbon cutting. WeWork started moving their members in last week. And we’re hosting this conference today with Michael Beckerman, and so it’s been a busy 10 days, but a very exciting to see
Michael Rudin – both in the lobby spaces and this floor, to see how many people are here is incredible.
Adam Hooper – It’s amazing.
Michael Rudin – It’s everything that we’ve imagined and envisioned for this project, and until you get the bodies in this space you’re kind of like, well is this actually going to work? And to see all the people, particularly in the lobby which the way it’s being used today by people to have people who are meeting each other here at this conference, to have space to break out and have conversations, grab a bite to eat, whatever it may be, to make a phone call. You know, to see them actually using that space in the way that it was envisioned is very cool and as WeWork occupies their space, and as we lease up the rest of the building and more people are coming here on a daily basis, we’re excited to see that space come to life.
Adam Hooper – Now the connectivity with the ferry, are you anticipating much coming from Manhattan here, or what is that dynamic?
Michael Rudin – The ferry stop for the Navy Yard opened in May, so it’s been about five months. It’s right at the doorstep of our building, which is very exciting, and again, one of the things that got us excited about this project. In those five months this Brooklyn Navy Yard stop has become the third most active outer borough stop within the entire ferry system.
Adam Hooper – That’s a good sign.
Michael Rudin – It just shows the need for more dynamic and new sort of modes of transportation. The ferry system within New York City has been disjointed for many years. And a couple of years ago the city finally said, let’s bring this all sort of one operator and umbrella. And put a cohesive and coherent sort of routing map together, and fair system, and all that stuff. And so like I said, it was really one of the driving factors for us getting comfortable with this project was knowing that that ferry stop would open at some point. Fortunately the timing was pretty coincidental in terms of that coming online a few months before the building opened. And we expect a lot of people with the staff that we’ve seen so far in terms of ridership from just this stop alone, we expect as the building occupies and gets leased up, that a significant number of people will use that as their main mode of transportation to get to and from the building.
Adam Hooper – Good. Let’s talk a little bit about the technology. I do have to say these are the fastest opening elevators I think I’ve ever seen in my life, which is fantastic. WeWork obviously very technology forward to be able to partner with them and kind of learn from some of their technology approach is probably very interesting build here. How did you guys approach technology with this build environment here? And maybe what are some of the more interesting points that people might not see at face value?
Michael Rudin – We’ve been integrating technology within the built environment for 20 plus years now, but it’s really the last five, seven, maybe 10 years where it’s really taken off in our industry. And like you said, there’s a lot of things that WeWork does within their own space from how you amenitize a building to how you plan for the mix of flexible versus longterm space. So from that standpoint, we think WeWork is a great partner, and that they compliment the offering within the building. We offer the “traditional” office space. They offer the flexible office space. We have a very dynamic amenity package here in the building, over 70 thousand square feet of amenities. And that’s broken down across a variety of different offerings. So we’ve got 13,000 square foot food and beverage facility on the ground floor of the building. We’ve got a 15,000 square foot gym and health and wellness facility on the second floor. We’ve got an 8,000 square foot conference and event facility that can hold up to 200 people on the rooftop of the building. And then we’ve got six office floors with their own dedicated outdoor space that’s about 18,000 square feet across those six floors. And then on the ground floor, on the water side of the building, we’ve got a 10,000 square foot lawn, half-court basketball, bleacher seating, and all this sort of outdoor programming that particularly in the warmer months of the year we expect to be really vibrant and active, and not just for building tenants, but the entire Navy Yard community
Michael Rudin – to be able to really access as well. And then from a true technology standpoint, we’re really excited. In-house at Rudin, developed a operating system for the built environment, it’s called Nantum. We have it operating across our entire office portfolio right now. And it’s also in about 12 other portfolios across the country. And there’s a couple of different offerings within the Nantum OS ecosystem. There’s the billing operator, Nantum Core product. There’s the Nantum Workplace product, which is for corporate or enterprise level users within buildings. There’s the Nantum Tenant experience app, which is for the individual employees within a building. And so Dock 72, what we’re really excited about will be the first one to debut the Nantum Tenant app. And in conjunction with Nantum Workplace and Nantum Core, will be the first building that has all three operating within it. And we think that will just really sort of create the office building of the future from those sort of three different modes that we’ll be operating.
Adam Hooper – And so that was technology that you guys developed internally for your own needs, and then you’re now able to roll that out for third party users? Yeah, we built it in-house. It’s a longer story that I think we have time for today. We can probably do it another dedicated episode just to the creation of Prescriptive Data and Nantum. But basically we were posed with a problem. We thought about what the solution to that problem would be. We went out into the marketplace to try and find a solution.
Michael Rudin – Yeah, we built it in-house. It’s a longer story that I think we have time for today. We can probably do it another dedicated episode just to the creation of Prescriptive Data and Nantum. But basically we were posed with a problem. We thought about what the solution to that problem would be. We went out into the marketplace to try and find a solution. We couldn’t find it, so we said, “Let’s build it ourselves.” Not the most sort of logical or advisable thing to do, but it worked out for us, and we created this really great operating system platform, and had the ability and luxury to test it and prove it out within our own portfolio.
Adam Hooper – That’s what’s so great about that approach is we see a lot of technology that people have a good technology background and they know how to build an interesting product, but they just don’t have that fundamental real estate knowledge to be able to package it in a way that people in the real world would use. Right, so you guys building this for yourselves, obviously you’re going to build what you need, and it’s going to be a functional product, right? So I think just how our industry has changed in its approach to technology in the last handful of years, that wouldn’t have been done a while ago. That’s just the kind of the change that we’re seeing in the industry with technology being such a core piece to operations. Congratulations, I think that’s a great sign to see that.
Michael Rudin – Thank you. It’s been exciting. And like you said, we commercialized it. We’re selling it to third parties now, owners, operators, tenants within buildings, end users within the building. And through that process is how we sort of got into the venture world, and sort of leveraging that same theory of putting our portfolio to the test and using it as a proving ground, using the centuries of institutional knowledge that exist within our organization.
Adam Hooper – You can prove product-market fit within your own portfolio.
Michael Rudin – Right and so that’s sort of our investment thesis is, is it relevant to us? Can we use it in our business, whether that be an internal-facing tool, an external tenant-facing tool? Can we see a path to using it in our portfolio, and then that technology, whatever it may be, creating a meaningful influence within and how we operate our business?
Adam Hooper – Yeah, so we were just talking with Steve Wickel from MIT of the motivations of a real estate ownership management company making venture investments. Is it purely a profit motivated? Is it more operational motivated? Is it trying to find new, interesting platforms from a operational role? So I think it’s interesting to see again how the role of the traditional building-owning management company is now getting into that venture investing for kind of all those reasons above, yeah.
Michael Rudin – Totally. Listen, at the end of the day it’s a combination of sort of all of those things. But what it boils down to fundamentally and the sort of the way we look at it, and how the team who built Nantum and the Prescriptive Data team, what they were tasked with, and sort of their marching orders were if it doesn’t help me attract or retain tenants don’t bother. Let’s scrap it because at the end of the day that’s the name of the game in our business is filling our buildings and then keeping them full and keeping our tenants within those buildings happy. And the business, whether it be residential, whether it commercial, retail, whatever the asset type is, or vertical, keeping the tenants happy, and telling their corporate level HR people, “I love this building. You should keep your office here.” Whatever the case may be, “I want to raise my family in this building. I want to grow up in this building.” It’s the name of the game is keeping our buildings full and occupied.
Adam Hooper – Full and happy.
Michael Rudin – Keeping our tenants happy and wanting to stay within the portfolio. And so as we look at technology, we really use that as sort of a core fundamental way to analyze these technologies. There’s a lot of stuff out there that doesn’t necessarily help on that side. And so we try and really focus on the technologies that are accretive to our business and to our tenants, because again, at the end of the day it’s about making them happy.
Adam Hooper – Perfect. Well, we’ll let you run. Sounds like we got a lot more to talk about, so maybe we’ll have you in for a full episode.
Michael Rudin – Yeah. Thanks for having me.
Adam Hooper – Michael Rudin thank you for joining us today.
Michael Rudin – Thanks, Adam.
Adam Hooper – Stay tuned for our next episode where we’re going to round that episode out with Dave Eisenberg, founding partner at Zigg Capital, founder also of Floored, which is one of the first exists in this new way of PropTech companies.