January 15, 2015

The Mark Zuckerbergs of Real Estate

In a special corner of co-working mecca 1871, where you might hear mutterings about cap rates and cash flow, is elmspring, a three-month accelerator for real estate startups with potential to disrupt the market in a big way.

The real estate industry is on fire in terms of venture capital, elmspring executive director Colleen O'Toole tells us, along with angel investment and out-of-the-box corporate collaborations like the accelerator's recent partnership with multifamily giant Waterton Associates. Just look at some of the participants in its first class. College Annex, a college rental site, is already profitable and used at 19 universities, while ReaLync snagged $300k in seed funding and gained 2,000 users (from NYC to California) of its live virtual property touring system. It's all about looking beyond traditional investment dollars for larger sales opportunities that provide a stable revenue model, Colleen says.

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Pictured: the Merchandise Mart, where elmspring resides within 1871. Now on its second class of entrepreneurs, its startup teams include veterans of commercial real estate, residential and technology: CondoGrade evaluates the financial health of condo associations; HerbFront connects the growing cannabis industry to amenable real estate owners; PeerRealty is a crowdfunding platform for middle-market real estate investments; Megalytics helps lenders evaluate financial risk; and CampNative will find you the perfect campsite. The biggest challenge for them, learned from the first class, will be finding ways to pivot and address feedback from prospective clients, customers and investors early on, Colleen tells us. (Pivot is tech talk for quickly changing your strategy or business model.) You heard it here first, expect mega-IPOs (and Aaron Sorkin-penned biopics) from these companies in a few years.

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Richard Branson Says “Hello, Ladies!”

D@LY3D, Flickr

Virgin's first-ever hotel opens this week in Chicago, and Sir Richard Branson tells the WSJ its No. 1 priority is wooing female business travelers by appealing to their needs--safety and convenience. (Think more closet space, bright vanities and a door between you and deliveries.) Given the status of women as one-half of business travelers and their preference for multiple-night stays with added leisure time, this could be the key to standing out in a competitive hotel landscape.

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Others are taking the soft branding approach to differentiate their hotel product, like Hilton's Curio Collection or Marriott's Autograph Collection. Especially for converted hotels looking to maintain the history and unique charm of their historic property, soft brands allow a hotel to preserve its own identity while tapping into a global brand family, says Paramount Lodging Advisors' Dan Beider (pictured).

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VOTE FOR CHICAGO'S COOLEST OFFICE SPACE

Bisnow, Chicago Creative Space and Leopardo Construction have teamed up to bring you the top five creative offices in Chicago as voted by you, the readers. Over the course of the next two months, we will be publishing four videos a week for you to vote on. Click on the links or images below to vote.

Click above to check out Braintree's Chicago Office and Vote if you think it's one of Chicago's Coolest Office Spaces

Click above to check out Tribeca Flashpoint's Chicago Office and Vote if you think it's one of Chicago's Coolest Office Spaces

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Detroit's 3.5M SF of Potential

Abbey Jennnings

Here's what remains of Detroit's Packard Plant, which opened in 1903 to manufacture luxury cars and is today a stark symbol of the car capital of America's decline. (Photos courtesy of Bisnow friend Abbey Jennings, who made the eight-hour drive through snow and accidents last weekend.) With Chicago-area developers wringing their hands about the high prices and scarcity of good land sites, these photos show our Midwest neighbor at bottom and ripe for groundbreakings. (To the dismay of graffiti artists and scrappers. Someone even pushed a dump truck off Packard's fourth floor in '09.)

Abbey Jennings

Lima, Peru-based developer Fernando Palazuelo, CEO of Arte Express, saw the potential in Packard, paying $405k for the 40-acre site in 2013. Demolition kicked off last fall and Arte plans a 10- to 15-year historic renovation, estimated to cost $350M, that would include residential, retail, offices, light industry, recreation and art. (Palazuelo also has said he plans to build himself an apartment within the plant, a type of commitment not shown by many developers.) His incentive for auto industry suppliers: free rent for several years. (And access to the go-kart track he's thinking about building.)

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How Sam Zell Makes Millions

The answer: Having a nose for the right turnaround play. One of billionaire Sam Zell's (snapped with VNO CEO Steven Roth) funds just sold the 366-space garage at 33 W Ontario for $16.9M to JLL Income Property Trust, after picking it out of foreclosure and debt for $7.2M in 2013, Crain's Chicago Business reports. If you've parked in any River North garage and suffered from the sticker shock, you have a sense of how such a cash-flowing business could appeal to institutional investors. With Zell's $110k in upgrades, projected 2015 net income is $1.2M.

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Don't Miss Our Creative Office Summit Jan. 28!

Companies (led by tech firms) are pining for open space and a “Google culture,” but they're realizing you can't just knock down all the walls and hope that will happen. That's why we're exploring the process, step by step, at Bisnow's Chicago Creative Office Summit, Jan. 28 at Willis Tower, beginning at 7am. Our all-star lineup includes 1871 CEO Howard Tullman, South Street Capital co-founder Matt Garrison and CBRE EVP Brad Serot. Pictured: The special photo wall at CBRE's new digs, 321 N Clark, where employees can showcase their personality. Don't wait, get your event tickets today so you can prepare for your office makeover tomorrow!

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Bisnow's Capital Stack Report: And 5 Reasons Why You Should Be Allowed to Expense It...

  1. You'll learn which metros are attracting the most capital...
  2. As well as what fees developers are charging...
  3. You'll be a pro on real estate vs. the stock market...
  4. And an expert on how leverage is being used by asset class...
  5. Last but not least, who the most active foreign investors are...

This incredible report includes easy-to-understand charts, graphs and bullet points that sum up complex information neatly and accurately. Fortify yourself with useful knowledge as you move forward in 2015. To get your discounted copy, please use the code: jan50.

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Tell Us

We asked for cold weather survival strategies and Bear Construction's Bill Ziemek Jr gave us this great recipe. In a large coffee mug: Mix three parts Jameson Irish Whiskey or equal like Bushmills, three parts piping hot caffeinated coffee, a generous dollop of real whipped cream or two tablespoons of heavy cream, then stir with a cinnamon stick. Enjoy! marissa.oberlander@bisnow.com