SYNCOPATED REAL ESTATE LLC
MIAMI, FLORIDA

Sarkis said SoftBank remains hands-on with company matters such as business strategy and recruiting even after it makes its investment. “Having a board seat is already a pretty big commitment,” Sarkis said. In addition to Reonomy, Guttman, who now runs his own company, Morris & Company, spearheaded SoftBank’s investment in the construction tech startup FieldLens in 2014 as part of an $8 million Series A round. WeWork — in which SoftBank now technically has a 20 percent stake — bought FieldLens last year for an undisclosed price. Regardless of who makes the final call, “vetting takes time,” Guttman said. “You spend months getting to know the company — how they operate — to determine if they’re a good match.” While SoftBank’s seemingly boundless capital has put the company in a class of its own, its push into real estate is unprecedented — and its recent investments have led some to question the firm’s judgment. Industry sources pointed to a few of those huge funding rounds as unwarranted. in December, for instance, pushed the six-year-old firm to new heights, sealing its reputation as the most valuable residential brokerage in the U.S., with a $2.2 “[The funding] came from somebody who doesn’t understand the residential brokerage business,” said Patrick Carlisle, chief market analyst with the San Francisco-based residential brokerage Paragon Real Estate Group. “They look at the volume of commissions, but they don’t realize most commission money goes straight to agents. Meanwhile, operating costs go up. Compass is throwing around money in large quantities despite being in a very low-margin business.” Another brokerage operating in a similar space as Compass is Redfin. The Seattle-based firm, which has made recent efforts to represent both buyers and sellers, A key difference between the two is that Redfin charges a below-average listing fee (1.5 percent, and now the company is testing out a 1 percent fee in California). Sources say Compass’s strategy — paying agents sizable bonuses and providing 100 percent commission splits — is a cause for concern when it comes to investment profitability. Carlisle said the only scenario in which that works is if SoftBank sells its stake “before the market looks at companies’ profit and loss numbers again.” Other tech-heavy real estate firms such as Zillow (which has a market cap of over $7 billion),Redfin and even CoStar may seem like obvious investment choices for the Japanese conglomerate. But sources pointed out that the Vision Fund has yet to target public companies. If that’s an intentional strategy, those three firms may have already been ruled out. “The Compass investment was predicated on upgrading an old-style business model with more efficient technology,” said Zach Aarons, an executive at the real estate investment firm Millennium Partners and co-founder of the New York-based tech accelerator and advisory firm MetaProp NYC. “But SoftBank likes the super-disruptive stuff, and Compass is not that.” To attract SoftBank’s attention, a real estate company needs to have a “huge idea,” Aarons said. “SoftBank is not interested in incremental improvements,” he noted. The single biggest amount Son’s firm has provided to a real estate-related company yet came in August, when it invested $4.4 billion in WeWork. The funding is already making some of WeWork’s loftier plans a reality. The co-working giant has lined up a fancy new headquarters, with the of the Lord & Taylor building at 424 Fifth Avenue in partnership with private equity firm Rhone Group. And SoftBank’s injection will only further WeWork’s rapid growth. The seven-year-old company has locations in 50 countries and is expected to exceed $2.3 billion in revenues this year, the Times reported. Son, who had been pitched on the fast-growing startup in previous years, was said to have developed a rapport with Neumann and the company’s other co-founder, Miguel McKelvey. Neumann recalled to Forbes that when the two firms closed their deal in March 2017, Son turned to him and asked: “In a fight, who wins — the smart guy or the crazy guy?” The three-year-old company just reached a valuation of more than $3 billion thanks to an $865 million investment led by SoftBank’s Vision Fund in January. “Katerra has a very capital-intensive agenda,” he said. “As the company grows, it can have a real impact on housing affordability.” Daniel Schreiber, CEO of Lemonade, said that Son and his team share “our conviction that big data and machine learning are set to profoundly remake our entire industry.” After SoftBank’s investment, Lemonade had the means to take the company global, Schreiber said. The talks suggest a move toward crossover benefits among some of SoftBank’s investments. Sources told the Journal in February, for example, that Son’s firm could offer Swiss Re’s insurance plan to WeWork members. Likewise, SoftBank has partnered with a construction firm it invests in to serve a common goal. Lendlease, the Australian giant that has become a go-to manager for Billionaires’ Row projects, struck a partnership with SoftBank in October to work on roughly 8,000 U.S. cellular sites. The move allows Lendlease to become a major owner of cell towers alongside SoftBank, which owns about 80 percent of Sprint’s outstanding shares. The companies have each put in $200 million toward the $5 billion venture, with SoftBank’s portion coming directly from the company rather than its Vision Fund. It’s also SoftBank and Lendlease’s first joint investment. Negotiations primarily went down in person with both firms’ executives in Kansas City, where Sprint is based, according to Murray Woolcock, a Lendlease executive who serves as CEO of the Lendlease Towers venture. SoftBank execs also flew to New York for meetings with Woolcock and his team, he said, but declined to comment further on the meetings. Firms such as VTS and the rental listings service Apartment List appear to have funding momentum and operate in a space that SoftBank has not made a true leap into yet — potentially making them ripe for an investment.