It seems like SoftBank and the Mubadala Corp. haven't finished with big swings in US commercial real estate. Even after the WeWork collapse, investors are doubling up on a similar business model as part of a syndicate that is investing $ 700 million in REEF technology.
REEF began life as a park jockey in Miami providing hardware, software and parking management services. Since then, the company has expanded its vision while remaining true to its basic business model. While the company is still managing parking spaces, it is now adding infrastructure for cloud kitchens, health clinics, logistics and last-mile delivery, as well as for stationary retail and experience spaces of the old school in addition to the now empty parking structures and spaces.
Like WeWork, REEF rents most of the properties it operates and upgrades them before renting them to other residents (or using the spaces themselves). Unlike WeWork, the company actually has a fair chance to develop – especially given the business trends that have accelerated in response to the health and safety measures that have been put in place to stop the spread of the COVID-19 pandemic.
This is partly because REEF operates its own stores on the premises and works with startups to provide actual goods and services that are location-dependent for their success and revenue generation.
The money will be used to scale from its 4,800 locations to 10,000 new locations across the country and to convert the parking lots into “neighborhood centers,” according to Ari Ojalvo, co-founder and CEO of the company.
SoftBank and Mubadala, together with the private equity and financial investment giants Oaktree, UBS Asset Management and the European venture capital company Target Global, are providing the money for the massive equity financing. Meanwhile REEF technology and Oaktree are collaborating on a $ 300 million real estate investment vehicle called Neighborhood Property Group, Bloomberg reported Monday.
Overall, REEF, which can reasonably be called WeWork for the neighborhood store, has $ 1 billion in capital to build what is known as a Proximity-as-a-Service platform.
Since acquiring a minority stake in SoftBank in 2018 (an investment the company reportedly valued at $ 1 billion) and converting ParkJockey to REEF technology, the company has added a booming cloud kitchen business to the growth to support virtual restaurant chains.
In addition, a number of service providers have been added as partners. including Start of last mile delivery binding (and logistics giant DHL); the national operator of the primary care clinic and technology developer, Carbon health;; the charging and maintenance provider for electric vehicles, To be charged;; and – while working in London – the new vertical farm developer, Box to plate (Ojalvo said it was in talks with the established vertical farming companies in the US about possible partnerships).
The company plans to open the first of its experimental open-air entertainment venues in a space it operates in Austin next year, according to Ojalvo.
And below, the company sees the opportunity to serve as the hub for data processing centers and telecommunications gateways that will power the smart city of the 21st century, Ojalvo said.
"We have an in-depth interest from edge computing companies and companies preparing for 5G," he said. “Data and infrastructure are a big part of our neighborhood center. It's like electricity. Without electricity and connectivity, we don't have the world we want to see. "
The majority of the company's revenue comes from the parking business, but Ojalvo believes that will change as the cloud kitchen business continues to grow. "Neighborhood kitchens will be a significant part of the non-parking revenue," Ojalvo said.
REEF already operates more than 100 neighborhood kitchens in more than 20 markets in North America. That number will only increase as the company expands its regional presence. It houses virtual kitchens from celebrity chefs like David Chang & # 39; s Fuku and, according to the company, offers lifelines to beloved local restaurateurs like the chain Jack & # 39; s Wife Freda in New York or Michelle Bernstein's kitchens in Miami.
In some cases, these restaurants use the employees with whom REEF Technology operates its kitchen network. This is another difference between WeWork and REEF. The company not only provides the space, but in many cases also provides the workforce that companies can use to scale.
The company already employs over a thousand kitchen workers who prepare food in its restaurants. And REEF acquired a company in early May to consolidate its back-end service for on-demand deliveries.
The same strategy is likely to apply to other aspects of the company's services.
"We're building a platform close by," says Ojalvo. “This proximity is driven by an installation base in parking lots or in multi-storey car parks … (and) which enables all types of companies to use proximity as a platform. To basically build their marketplaces. "
As REEF raises money for expansion, it draws on a new urban development theory advocated by mayors from Amsterdam to Tempe, Arizona that calls for a 15-minute city (one that has the amenities necessary for comfortable urban living no more than 15 minutes walk).
It's a worthwhile goal, but while mayors seem to be focusing on the availability of accessible facilities, REEF leadership admits that only some of its parking lots and garages will be multi-purpose and accessible to residents. According to a spokesperson, only a few hundred of the company's planned 10,000 businesses will have a multi-purpose mall environment that encourages neighborhood access. Instead, the business seems to be based on the idea that most delivery services should be no more than 15 minutes away.
It's a different project, but it also has a number of supporters. One could argue that cloud kitchen providers like Zuul, Kitchen United, and Travis Kalanick's cloud kitchens are all attributed to the same belief. Kalanick, the Uber co-founder and former CEO, whose company has received billions from SoftBank, has purchased real estate in the US and Asia under an investment vehicle called City Storage Systems, which also uses parking lots and abandoned malls as fulfillment centers.
Large retailers have also taken note of the new revenue stream, and one of America's largest corporations, Kroger, is even running a ghost kitchen experiment in the Midwest.
If that's not enough, there will already be plenty of underutilized assets in the market due to the economic downturn caused by the COVID-19 pandemic and government efforts to contain it.
"I think a lot depends on how the delivery players develop in the years to come, as opposed to 'drive-through' or 'curbside pickup', where big national players seem to be concentrated (Starbucks, McDonalds, Dominos, etc.) "wrote the venture investor in an email. “But how do delivery companies use this space compared to a lot of inexpensive retail space that can be used for the delivery or packaging of returns? Maybe there is a game of adding modular or pre-built units to the existing parking lots to give flexibility to scale, but it's not clear someone is growing at a breakneck pace … I'm just not sure how to get converted parking lots in the Can compare to other … commercial see retail or office spaces all looking for new uses. "
The COVID-19 outbreak, which changed modern life in America so quickly within a single year, did not instigate the urge to change the urban environment but did much to accelerate it.
As REEF recognizes, cities are the future.
About two-thirds of the world's population will be living in cities by 2050, and the world's largest cities are cracking under the pressure of economic, civil, and environmental changes that they have not been able to effectively manage.
Mobility and thus places to store and maintain these mobile technologies are part of the problem. About half of the average modern American city, REEF notes, is devoted to parking, while parks occupy only 10% of urban space. REEF's language focuses on turning a world of parking lots into a paradise, but that language contradicts a reality that makes its money (at least for now) isolating individuals into personal spaces where their commercial needs are met through delivery – not through community interaction.
Still, the fact remains that something has to change.
"Traditional developers and local guidelines have been slow to adopt new technologies and operating models," said Stonly Baptiste, an investor in urban transformation through the Urban.Us fund (which is not a supporter of REEF). “But the demand for a better 'city product' is growing, the need to make cities better for the environment and our lives has never been greater, and the dream of building the city of the future never dies. Not this dream is subsidized by VC. "