High-tech has swept the commercial real estate (CRE) sector off its slow-moving feet, with the recent union of two highly capitalized leasing and portfolio management start-ups, New York City-based Hightower and VTS, heralding just how far the industry has come in a few short years.
To be sure, enormous sums of cash have poured into CRE to propel industry technology into the 21st century, resulting in start-ups such as Floored, an enterprise that creates interactive 3-D graphics, and Square Foot, whose platform aggregates online listings while guiding enterprises through the leasing process.
However, CRE’s tech industry is small and fragmented, making it difficult for start-ups to gain significant traction. The Hightower and VTS merger is notable for the scope and breadth of its services—in addition to size of the resulting portfolio, a collective customer base of 5 billion square feet. Accordingly, the new venture, simply known as VTS, holds the potential to make greater waves in the $15 trillion commercial property industry.
“Our vision is to become the Bloomberg Terminal for commercial real estate, a place where everyone in the industry can go to find important data and communicate more effectively,” said VTS CEO Nick Romito.
Prior to joining forces, VTS and Hightower, both three years old, recognized the time-consuming nature of executing multiple leasing deals from start to finish while managing overall portfolio performance. Each independently developed a cloud-based software platform to consolidate and update relevant information in real time. By eliminating unwieldy spreadsheets—compilations of meeting notes, phone logs, e-mail folders and calendars—the two attracted considerable sums of venture capital. VTS’s investors included Blackstone Group, Insight Venture Partners, Trinity Ventures, and Openview, and Hightower’s included Bessemer Venture Partners and Thrive Capital.
As they pursued their ventures, VTS and Hightower moved in lockstep to an extent that, in hindsight, all but portended their $300 million all-stock transaction, announced in late November. Both enterprises released retail platforms on the same day last April, both partnered with CompStak Enterprise, a deliverer of real-time records on real estate transactions, and both inked major deals with real estate giants JLL, CBRE Group, and Cushman & Wakefield.
Though similar, both platforms provide unique advantages, Jay Kestler, group head for JLL Americas Capital Markets and Investor Services, noted in a June statement, upon the firm’s decision to adopt each. “Hightower’s intuitive platform allows our teams to work smarter and faster for our clients and keep all relevant data in one place, accessing broader insights and analytics,” Kestler said. “VTS gives us a real-time view into where net effective rates are trending, along with which tenants and industries are driving demand in various locations and building types. By combining this data with the information available in our powerful existing internal system, we can make more accurate, informed, and timely decisions for our investor clients.”
“Over the next 6-12 months, we’re going to be taking the best capabilities from both platforms [and] combining them into a single platform,” Brandon Weber, co-founder of Hightower and current chief product officer of VTS, told reporters.
“For the first time in the history of commercial real estate, top institutional players and local-market power players will be able to communicate on one platform,” Romito said. “This will dramatically improve efficiency and help everyone work faster. In addition, by locating all the important information that landlords, asset managers, and brokers need in one place, they’ll be able to make more informed decisions and do so much faster than ever before. This is crucial in an industry where every second matters”
The merger is “sending a clear message to CRE tech that people want this one-screen experience and better data connectivity,” Peter Bortiz, CEO of real estate software enterprise Real Data Management, recently told reporters. “This is a seismic shift in the marketplace.”