Fifth Wall CEO Brendan Wallace: the data center land grab and the most stable asset on earth you still can't buy

Brendan Wallace is the Founder, CEO & CIO of Fifth Wall, the largest investment firm focused on technology for the built environment, with ~$3B in capital, the firm is driving the growth of nearly 170 companies, backing category-defining PropTech leaders such as Opendoor, Procore, Blend, Hippo, and Bilt Rewards. It's supported by ~115 of the world's largest real estate owner-operators including CBRE, Hilton, Hines, Marriott, Public Storage, Related, and Starwood. Before Fifth Wall, Brenda...

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00Auren Hoffman?

  Hello fellow data nerds. My guest today is Brendan Wallace. Brendan is the CEO of Fifth Wall, which is probably the largest, what used to be called prop tech investor in the world. They have over $3 billion in capital. Their portfolio of over 170 companies, including Open Door, Procore, Blend, Hippo, and Built. Before Fifth Wall, he was at Goldman, he was at Blackstone. He co-founded two companies, Identified, which is one of the largest recruitment platforms on Facebook and sold to Workday, Cabify, which is kind of Latin American Uber equivalent. And he spent his career basically doing things in the physical world and now physical world meet technology. So Brendan, welcome to Sumation.

• 0:39Speaker 01

  Yeah, thank you for having me.

• 0:41Auren Hoffman?

  I'm really excited. Now, you kind of like said, prop tech went through kind of like an extinction event in, let's say, 2021. Like, what turned out to, what happened and what turned out to be wrong, what turned out to be right?

• 0:55Speaker 01

  Yeah, so I'd say, you know, prop tech, obviously, as a category, just exploded from 20, call it 2015, and I would say certainly after we launched Fifth Wall in 2017, all the way through like 2021, 2022. And, you know, the thesis was that real estate as an industry, very slow, very late adopting, and you can render efficiency on it with all this new enterprise consumer fintech solutions. And that worked very well. And I think what not everyone realized is how much of that growth was fueled by low interest rates. Now, some part of that is obvious across all of tech, meaning like all of tech benefited from, you know, the free interest rate environment, thanks to the Fed. I think no one truly understood

• 1:38Speaker 01

  the extent to which it was benefiting from it. But real estate and prop tech in particular had almost like a triple convexity in how exposed it was to rates. So, one, it had the dynamic every other, you know, venture back business had, which is, as soon as rates went up, everything massively rerated. That, of course, impact prop tech, but it impacted everyone. The second thing is that low rates fuel real estate capital markets, especially residential.

• 2:04Auren Hoffman?

  Sorry, why would residential be more than commercial with low rates?

• 2:08Speaker 01

  Just because it's higher velocity. I mean, they're both. Obviously highly sensitized to it like meaning both residential capital markets and you know, commercial capital markets are probably two of the most sensitized industries to rate moves. Right. You just you see that everywhere in the economy. So, once people stopped buying homes and buying and financing assets, the the bottom really fell out on the demand side of a lot of prop tech businesses that fueled that, that that kind of you know, supported that they had built enterprise software to accelerate, you know, the financing of assets or they had built solutions that depended on, you know, homeowners buying new homes. So whether buying home and home warranty products or title insurance or home insurance.

• 2:46Auren Hoffman?

  And we saw even like all these like new advent, like I remember like Zillow created like an open door competitor and then like six months later, oh, whoa, this is not, you know, working for all these kinds of things.

• 2:56Speaker 01

  That's the third part of the, I would say, first part is rerating. Second part is the demand side fell out of real estate capital markets. So people stopped buying, you know, homes and buildings and refinancing them, which drove a lot of the business. And the third part was the actual cost of capital themselves for companies that had a capital intensive business. So like, take Open Door, right? Open Door is actually buying homes. They're they're buying these assets. So as their cost of capital and buying these homes gaps out, that massively explodes their cost structure.

• 3:24Auren Hoffman?

  Before, maybe it made they could hold the inventory for three months and now they can only hold the inventory for one month or something. And that that changes the incomplete game.

• 3:32Speaker 01

  And your margins get very, very thin. So I would say prop tech kind of sat at the intersection of those three storms and it just crushed a lot of businesses.

• 3:43Auren Hoffman?

  And also the the interest rates, it didn't just go up like gradually, like went up all of a sudden. So you didn't really have a lot of time to react and like think it all through.

• 3:52Speaker 01

  Totally. I mean, it's it's kind of exactly what you expect to happen when you're like the government produces like literally tens of trillions of of capital, you know, very, very quickly alongside a low interest rate environment and then massively rotates back the other way. A lot of dislocation is going to happen. And I just think the the prop tech ecosystem was very, very exposed to that. And so that forced this reckoning for a lot of businesses. And I'd say it changed sentiment in the category dramatically. And I'd say PropSec went through kind of like a pretty bleak 30, you know, 24 to 36 months and

• 4:32Speaker 01

  It now feels, or it has felt for probably the last 18 months, that we're on the other side of that and that this new generation, this new cohort of prop tech businesses are emerging and they're very much informed by those experiences. And you're just seeing it in all different kinds of ways. Actually, the interview I was just in was with a founder that started a company that was in Fifthwell's first fund in the mortgage space. And now they've started an entirely new company also in the mortgage space. And what I was asking him is, what were the lessons he learned, the lessons he imported from that first experience, which encountered all the dynamics I just described to you of high interest rates, rerating, costs of capital growing? And he was like scarcity. You know, you build a business

• 5:16Speaker 01

  with abundance in its capital structure, but scarcity in its resourcing. And I learned that the hard way. And I never want to put myself in that position again. But like that one insight is very powerful. And I would say it's very expensive, but it's exactly what you want to see in the maturation of any ecosystem. It's a entrepreneur that's now battle hardened, had experience, is doing it again, and is doing it informed with the mistakes made in the past. That is what really excites me about our category. It's reaching that stage of maturity.

• 5:49Auren Hoffman?

  10 years ago, if you said the word prop tech to me, the first thing in my head would have been like WeWork would have come out. They were kind of like the dominant kind of company. And what I really like about WeWork is it really built a brand. Like in real estate, there doesn't really seem to be much of a brand, at least a kind of consumery commercial brand for office real estate that's out there. How important is brand?

• 6:16Speaker 01

  Brand is much more important than I think any real estate owner recognized. And there's been an arc of the industry learning that. So maybe I'll start with where the industry already knew this is in hospitality. So in hospitality, there are brands, those brands are dominant, they are incredibly powerful.

• 6:33Auren Hoffman?

  You know, if you go to a Four Seasons or you go to a DoubleTree, like you kind of know what you're getting.

• 6:39Speaker 01

  Exactly. And the misconception many consumers have is that those brands also own their real estate, which is actually the exception, not the rule. Most of the times, those brands are totally decoupled from the ownership of the actual real estate, which is partially what makes them great brands. Now, on the actual hard asset side, so owning, operating, developing hard assets.

• 6:59Speaker 01

  Brand is not something that you've seen a lot of. What WeWork did, I would say better than anyone, is they built a brand in an otherwise undifferentiated space. So like, you know, most people don't even know who their office landlord is. And there's a lot to be learned from that, which is it's not real branded category. WeWork did something that wasn't entirely novel or new. There are many companies that were building flex office and miniaturized office spaces.

• 7:22Auren Hoffman?

  Yeah, Regis and all these things, yeah.

• 7:23Speaker 01

  Exactly. But they built a brand and that brand was very cool. And I think a lot of, you know, established incumbents in the real estate industry looked at that and they were like, well, I should go build a brand. I don't think we've seen anyone do it nearly as well as they have on the consumer side. We invested in one company called Industrious that I think also built a brand. That was kind of the follower, I would say, of WeWork. But it was a different kind of brand because they were less of a kind of B to C brand and more of a B to B brand in terms of like providing flex office to enterprises more so than just like walk-in consumers. But WeWork is an iconic example of how powerful brand can be. Like that, the brand equity in WeWork is still amazing.

• 8:06Speaker 01

  Like you still know exactly what the product you're getting is. And the same way you know exactly what the product of a Marriott is or a Four Seasons.

• 8:13Auren Hoffman?

  To me, like if I go to Starbucks or McDonald's, like of course they all kind of like slightly differ depending on where you are and what geography you're in. But like you're going to have a very common experience. You kind of know what you're going to get. You know, okay, it's going to be like this and they're going to have these things on the menu and it's going to be clean tables. And you know, you have a sense of like the band that any McDonald's is going to operate in. Even though McDonald's doesn't, they franchise, it doesn't own, you know, their particular things, like you have a sense of what you're going to get. Where like in Airbnb, it's like, I don't know what Airbnb brand is. It's just like, it's almost like eBay. I get to like try things out.

• 8:57Auren Hoffman?

  I get to, it's like little collectibles. It could be good, it could be bad, it could be, there's no common thing when I go there. So it's harder, it's harder to just like judge each thing on like a snowflake when you're trying to have an experience.

• 9:12Speaker 01

  That's exactly right. Like the, you know, one of the, you know, the core features of real estate as an asset class is its heterogeneity. Meaning like the, you know, if you're looking on Airbnb and you're looking at homes in a given zip code and you want to visit, you know, that area, you can reliably assume some of those homes are beautiful and stunning and some of them are terrible. And some of them are going to want to stay in and some you won't. But it's very hard to know a priori, just based on location or a couple of pictures, what's actually there.

• 9:38Auren Hoffman?

  And it takes a lot of time to figure it out. And I've been in enough Airbnb's in my life where I don't know if I want to figure it out anymore. Like I'll just like, I'll just go, I'm just going for the hotel now because it's just, I know what I'm going to get.

• 9:50Speaker 01

  That I think is what hospitality brands have done a very good job of. I would say there are a number of players that are trying to do this in kind of the the sharing economy and in the Airbnb marketplace and ecosystem.

• 10:02Auren Hoffman?

  Like a high end homes type of thing. And okay, this is what you're going to get when you go to these like super high end homes or something.

• 10:09Speaker 01

  Throughout, you know, the, the real estate ecosystem, kind of different variants of the same model, call it the WeWork model, or even the Airbnb model, have cropped up. Whether you're talking about multifamily or industrial or retail, like there is a variant of each one of those themes in those categories. And I think it's just all part of the broader maturation of the real estate industry that, you know, you're starting to see the industry actually pay attention to brand and standardization.

• 10:38Auren Hoffman?

  In, I had a company that was selling data and one of the categories we wanted to sell into was real estate. Of course, if you're buying like large amounts of data, you have to be a fairly sophisticated, have a pretty large data science team. And initially, like the only customer that we could get to buy our data was Blackstone, like which was essentially the biggest real estate owner that was out there. It was very, very hard, even like the next player down didn't seem like they had any sophistication at all. Like they're out there like touching dirt or, you know, maybe they're using Excel, but they didn't have, like they didn't even, obviously that's progressed. Like, how has that changed over time?

• 11:16Speaker 01

  The actual people making the, you know, buy sell decisions, call it the consequential capital markets decisions in the real estate industry. They're not really using data. I mean, there's some that will say they are.

• 11:28Auren Hoffman?

  Duran Excel and et cetera.

• 11:30Speaker 01

  In terms of what is possible, they're scratching the surface of it. And I would say that the paradox is that despite that, the number of data providers that are selling into the real estate industry and offering really powerful, really unique, really predictive information about assets and particular geographies and anything you want to consider. I mean, there's been an explosion of these tools, data tools, automatic valuation tools that are available today. And generative and agentic AI has, I'd say, made that almost go exponential at this point. So in some ways, what you're just highlighting is one of the biggest opportunities.

• 12:10Auren Hoffman?

  Right. The opportunity is to be the buyer, right? Rather than be the data provider, because it seems like there's tons of competition for data providers. But the buyers, it seems a lot of them are stuck like from the 1980s, it seems like.

• 12:24Speaker 01

  Exactly. That's exactly it. Like, it's a, it's a conclusion that lends itself to a different kind of business that ought to be built. Because everyone in tech and Silicon Valley will say, oh, never get into the capital intensive side of the business. Never actually buy real estate because you can't really do that with venture capital dollars. There's this desire to kind of stay asset light. But in so doing, you lose what I would say is the most attractive part of the value you're providing to real estate owners that are just going to, they're just, they're adopt, the pace of adoption and the rate of adoption versus what's available is shockingly slow.

• 13:08Speaker 01

  And so it's almost like, do you want to wait for that to catch up while more and more people commoditize the data? Or do you want to take advantage of it right now? Because there are these clear arbitrages in the market where you can leverage data to make better decisions as to what assets to buy or sell before the traditional real estate industry figures that out.

• 13:25Auren Hoffman?

  What do you think about just where we are in the office landscape? I've heard just so many different opinions about where we're in that arc. Are we where like kind of malls were in 2005 where they just had a lot of room to go down? Or are we where malls were in 2000? Eighteen, where they're kind of like getting close to bottom.

• 13:50Speaker 01

  Yeah, it's closer to 2005 in that analogy because I don't know the extent to which, you know, generative agentic AI is going to radically change the knowledge work economy, which is the industry, that is the supply side, or that's the demand side of office. And I think it's going to radically change it. I just don't think I know or anyone knows the extent to which. There's, of course, the, you know, the historical examples of, well, if you destroy certain jobs, more jobs will be created on the other side of it.

• 14:29Speaker 01

  It's less obvious to me that we have a lot of examples of that in purely knowledge work. So it's a little bit more mysterious to me what those new job categories would be. But I don't feel confident enough to say they won't reemerge. But I would say it is a time of very high risk and negative sentiment in the office industry because we just lived through this first reckoning for it with COVID, where remote work was really the kind of open question. And I think remote work, there was this false positive around it for like three years. And now we've actually very dramatically swung back the other way, which I think is

• 15:12Speaker 01

  a good thing. But right as that happened, now the potential of massive job destruction on account of generative agentic AI is here. And so I think the industry just like wants stability and it's hard to say where that stability will come from, given how much AI is changing the economy right now so quickly.

• 15:32Auren Hoffman?

  When I go to like just a random office, they're usually just.

• 15:39Auren Hoffman?

  They don't seem like exciting places to be. The buzz is very low in most offices. It doesn't seem fun. It's very sterile. It's like these weird white kind of things that are out. It's not inspiring when you go to most. Every once in a while, you show up at an office and you're like, whoa, this is cool. Or you hear the, you feel the energy or it just looks super cool or it's a little artsy or nichey. You're like, oh, this is like fun and interesting. But you generally, when you walk in, I guess you walk in a 95% of offices. It is really uninspiring place to go to.

• 16:16Speaker 01

  I would say no argument for me that like a sterile, septic office is a miserable place to do work. And I started my career working in offices like that. So I totally know that. What's less obvious to me is that working from home every day, all day is dramatically better either. Meaning there's a lot of drawback.

• 16:37Auren Hoffman?

  Yeah, it's like, let's, but maybe we need a better place. Like just the office itself needs, every once in a while, you go to someone's office. Like this is awesome. Like it's just, and you could even hit it right when you get in, you feel it's awesome. I often can even tell just like when you go to the lobby, usually the lobbies are so terrible. And the waiting room where you're waiting, let's say you're waiting to meet someone at some fund or something. You're like, this is like, it's like crickets everywhere and you don't hear anything. There's no buzz. You're like, ah, you know, maybe they have a nice view. They have a view of Midtown Manhattan or something, but I don't, it just doesn't seem like it's a exciting place to go. It's not drawing people in.

• 17:18Speaker 01

  Yeah, I think that's right. And I think the other thing that a great office does is it, it promotes and it instigates the kinds of activities that only an office can provide, which is collaboration, the development of culture, team building, mentorship and spontaneity. Those are the things that like are uniquely and only achievable, I think, in a physically instantiated office. A great office, you know. In some ways encourages that and creates that. Whereas, you know, a really bad office just provides working in proximity next to one another, which you could just do from your home.

• 17:58Auren Hoffman?

  Yeah, maybe every once in a while it's nice to be able to get into a conference room with somebody, but it's like, it just like, it seems like that it could have so much of a better experience if people actually thought it through. But for whatever reason, like, maybe they'll like, when you sometimes you go to these private equity offices, you think they're so nice because they hang like a $10 million painting on the wall or something, but they, they, they're terrible and they're just way too big. So there's just, there's no collisions that go there. Like there's people and they go, whenever it's big, they're like, they go to all the weird sides of the, it just, I don't know, it just doesn't seem like an inspiring place to go.

• 18:33Speaker 01

  I think everyone now that lived through remote work very much appreciates the merits of having an in-person office and what it can do, which is, I mean, there's the obvious things. It allows you to cultivate and develop a unique culture in a way that Zoom is just not the right substrate to do so. You need a physical office that actually carries and supports your culture. I think it's, it's also like the spontaneity of, you know, how ideas and perspectives collide in an office and create a lot of like, for example, in a venture fund, the alpha or, you know, really the IP and another kind of business. It's like, that's, that's very important.

• 19:15Speaker 01

  But there's also the, the more, in some ways, the more negative sides that people also don't like to talk about, which is, I think when you're in an office next to someone, you tolerate people that are bad cultural fits or, you know, mediocre talent far less. Whereas when you're on Zoom and you just, you know, you see them on a Zoom, you can tolerate, like mediocrity, I think lingers a lot longer.

• 19:41Auren Hoffman?

  Yeah, I think 2021 was almost like peak mediocrity, just because it was a very, people were tolerating a lot of random stuff that like, I don't think they would do in an office.

• 19:51Speaker 01

  Yeah, and I think a lot of the churn that we've seen in the workforce is a function of that, which is, remote work. Allowed for the hiring of people that I'm sure were hired with the best of intentions, but probably were the wrong fits for their companies, or mediocre, or whatever it is. And the preservation of remote work perpetuated their presence at those companies far longer than would have, they would have stayed there if they were operating in an office. And I think what's happened is like, as people have rotated back to the office, your tolerance for mediocrity collapses because you don't want to have that, you know, working right next to you. You want to build a dynamic culture in a physical place. And like, that,

• 20:35Speaker 01

  not only does that involve celebrating the exceptional talents that are culture carriers, it involves removing the mediocre talent who are culture destroyers. Those two things were hand in hand, and an office does that.

• 20:48Auren Hoffman?

  In a culture, it's really important to have people are like adding positivity to things, and the negativity is, can be really corrosive. In, in remote, maybe negativity is less corrosive than in person. And so it doesn't like infect the culture as fast, whereas like in person, you're just sitting next to someone who's negative. It's just like, it's a super bummer, and you're just not going to want to go to work if that, if that happens.

• 21:14Speaker 01

  It's intolerable to work next to people that you don't want to work with, for whatever reason. And that is a very powerful instinct in building a culture and building, you know, an exceptional organization, is to not just celebrate and promote and, you know, equitize and, you know, kind of pull forward the people that are great. It's also to exclude the people that are bad. That is a, that is a core part of it as well. And I think an in-office culture is the best environment to do that.

• 21:40Auren Hoffman?

  Speaking of like data, you know, one of the, maybe the biggest data company in real estate is CoStar. Probably most people who listen to this, maybe have never even heard of them, but this, you know, massive company. Why have they been so successful?

• 21:56Speaker 01

  Well, there's a lot of reasons, I think, why they've been so successful. Or if people don't know, they aggregate data about leasing data predominantly. And they do it with people, cold calling call centers. And they have built this trove of proprietary data that the real estate industry is very dependent on. And there's a kind of complex relationship between the real estate industry and CoStar. But CoStar has built an amazing business. I think your question is like, why hasn't a solution emerged that doesn't require cold calling? Where all this could just be available on demand.

• 22:34Auren Hoffman?

  Yeah, good point.

• 22:34Speaker 01

  And I think it's because a lot of the activity. I mean, the simple answer is that a lot of the leasing activity, marketing, perspective spaces, actually signing contracts, all of that is mediated by brokers. And brokers have a disincentive to share all that information. Because a huge part of their job is helping prospective landlords and tenants navigate that otherwise opaque information. And actually, CoStar becomes an instrument as part of that. So I don't have a perfect explanation as to the political economy of like, why a solution like CoStar persists in a world like 2026.

• 23:15Speaker 01

  But I think a lot of it has to do with the fact that so many leases are mediated by brokers, that are in some ways trying to add complexity to the process. Or maybe, not trying to, they're almost inadvertently adding complexity to the process. They're helping both the landlord and the tenant enter into this complex transaction by providing them information. But it just adds this layer that allows a solution like CoStar to exist and persist for a while.

• 23:43Auren Hoffman?

  If you think of like, you're buying a company or something, private equity, buying a company. There are, sometimes there's SPVs, but usually it's in some sort of fund structure where you're buying X number of companies in a fund. Obviously, that does exist in real estate. But so many of the transactions in real estate are SPVs for a very particular, we're buying This apartment building, we're buying this office building and it's like these like one-off things that are there. Why, why is real estate, is there like a tax reason why that is? Or is there, why is it so much like that?

• 24:20Speaker 01

  I think a handful of reasons. One is just the size of real estate capital markets. So like real estate capital markets, both commercial and residential like dwarf private equity markets. And the, the second thing is that the long tail, like the, the, the, the size of the assets in real estate can get a lot smaller than the size of the assets typically in, in private equity. Like there are for sure buildings like right now, we could go buy that are like 50, $75,000. It's hard to buy 50, $75,000 businesses. So you have that extreme long tail in the business. The third thing is that there's a certain level of sophistication that is required to operate a, a business

• 25:03Speaker 01

  and therefore own it. Like you get a, there's, there's a lot more moving parts. Whereas the beautiful thing about real estate is that the building does most of the work for you just by existing. Of course, there, there are operations. I'm not trying to downplay that. But like a lot of buildings, like net lease assets, you actually don't have to do anything for. So there's a operational simplicity to real estate that I'd say it does get more complex as you get bigger, but you know, the complexity of owning or operating a building versus owning or operating a businesses are, are not really comparable. And then the last thing is it's everywhere. And so everyone knows it. Meaning like not everyone's a buyer of, you know, of, of businesses, but like everyone drives by, walks by buildings, homes, et cetera.

• 25:46Auren Hoffman?

  Yeah. And they either own or rent a home, right? So yeah, so they're, they understand how that works, right?

• 25:52Speaker 01

  Yeah. So it's like, it's like everyone is, you know, enfranchised in this, in this capital market, right? Like a huge portion of the, you know, the American population are homeowners, right? They, they own a single piece of, of real estate. It's at far more homeowners than our business owners. That's just because there's just so, so many of them. So I think those are some of the reasons. But I would say that there has been a trend, which is the opposite of what you're saying, which is greater levels of institutionalization in the, the real estate asset class, which is More real estate is being owned by larger and larger companies, both funds and the large public companies like REITs.

• 26:34Speaker 01

  So you're seeing more assets flow into super institutional structures than ever before, even though the industry by and large is characterized by this long tail and a very granular structure that, yeah, involves a lot of SPVs and people passing the hat on one-off deals.

• 26:50Auren Hoffman?

  What do you think of these like new ways of raising capital, like a fundraise or something where they're kind of democratizing? You could put a hundred bucks into a thing or own a piece of a building or something like that. Like, how do you think those are changing the market?

• 27:08Speaker 01

  The reason public markets exist is to provide the average American consumer the opportunity to invest in something they couldn't buy outright. And there's many REITs, right, across every asset class? So there already is a lot of-

• 27:23Auren Hoffman?

  Well, it's a good point. Fundraisers, in some ways, it's kind of like a REIT.

• 27:25Speaker 01

  Yeah, it's a REIT, but it's more an idiosyncratic asset. But oftentimes, we get pitched by people that say, "Well, the American consumer has no way of investing in real estate." And it's like, well, that's not true.

• 27:37Speaker 01

  They can't buy any particular asset in a very granular structure, but there's tons of ways to invest in real estate. So that's kind of a, I'd say, I do think structures like that make sense in terms of like people that want to have larger stakes in individual assets. I think the tools like a fundraise or any of these crowdfunding platforms make a lot of sense. The other kind of side to that equation, which I think is an opportunity, is that

• 28:10Speaker 01

  there's tons of tools that allow consumers to get exposure in small increments to income-producing real estate. But one of the things we haven't seen, that we're very curious to see, is like, we haven't seen a tool that allows the American consumer to get exposure to land, which is typically not an income-producing asset, but is probably the most stable-

• 28:35Speaker 01

  Inflation resistant asset on earth. The only real way to get exposure to land is to buy it indirectly. So you buy a REIT that's income producing that happens to own some land. So just by virtue of that exposure, you're kind of getting exposure to land or say in a fundraise, or you buy the whole parcel. You buy a parcel of land off, which gets pretty expensive and has all the idiosyncratic risk of where that parcel is. But there's no tool like for for you or me to say, I want to go buy a index on land in San Francisco right now, which by the way, would probably be a very good business in light of what's happening in Francisco right now. The absence of that tool is is surprising to me and seems like a obvious opportunity

• 29:20Speaker 01

  in the market. So maybe an indirect answer to your question, but more like a company I would love to see exist is something like that, but kind of provides a more granular, more democratized way of everyone being able to participate in land value appreciation, which is unlike income producing real estate, doesn't provide near term yield, but provides an inflation resistant asset that is very, very unique amongst all securities.

• 29:52Auren Hoffman?

  It seems like every year there, and I invested in a company like this called Point, where every year there was, there's like a company that's trying to allow you to sell a piece of your house or something, or maybe a piece of your building. And you could sell 20% of your house or something, but like for whatever reason, they've never taken off. I would love to sell 20% of my house, but I don't, I don't have any way of doing that today, at least I don't think I do. Why has that not taken off? It's like, is it incentives problem? Is there some other kind of like thing there? Cause in some ways like I'm going to take, I'm going to take care of my house. Like it's pretty obvious. Like I live there, I've got my family there. I'm probably going to take care of it.

• 30:34Auren Hoffman?

  I'm going to probably like improve it and then I'm going to pay my taxes on it. And maybe if there's like a maximum, like maybe I can only sell 25% of it. So I don't know, like weird disincentives, like the someone will just like be along for the ride for the appreciation of that over time.

• 30:49Speaker 01

  Selling off a piece of your, your house? You have lots of options to do today, right? You can get a large, you can get a larger mortgage, you can get a reverse mortgage, you can get a HELOC. The difference is those are being sold to not individuals. Those are being sold to, you know, basically like lenders and financial institutions. But you're still doing the same thing. You're getting liquidity on, on your home. So meaning-

• 31:09Auren Hoffman?

  But I want to get, I want to get equity liquidity and not debt liquidity.

• 31:13Speaker 01

  Your point is why can't you buy equity in your neighbor's house?

• 31:16Auren Hoffman?

  Cause you know, you talk about like the San Francisco thing. Okay. Well, maybe on any given house, you don't, you're too worried about it. But if you just want to get, I don't know, you want to own a piece of a hundred houses in Pacific Heights in San Francisco, right? You, you realize Anthropic's coming, you want to own a bit, you're like, I don't know. That seems like something people might want to bet on and make a, they could decide if that's valuable or not to them.

• 31:37Speaker 01

  Yeah. So I think it should exist for sure because it's something that it's a financial instrument that seems very absent, you know, in the, in the, you know, the arsenal of instruments the consumer has. Like, why can't you bet directionally on residential real estate in a more like thematic, generalized way? Based on geography or whatever the criteria are. Yeah, like that, that should exist. I think it's probably the complexity of, of getting the assets themselves, right? Actually getting distribution into those assets themselves. Like there's, there's a, a new solution for providing liquidity to the American consumer through the equity in their house every other day.

• 32:19Speaker 01

  It's like a credit card or some new convoluted HELOC or, you know, selling off, you know, shares in your asset or a ground lease model. I think none of them have taken the view of how they exit to a financial security like what you're proposing. Meaning like they're much more focused on being origination businesses than becoming a financial security themselves. That's my best explanation as to why it doesn't exist because I share your view that it should exist, it just doesn't.

• 32:47Auren Hoffman?

  And for a lot of people, it, it, you know, and they may have a point where their, their home is their biggest asset. They want to diversify. They don't want to diversify into debt for whatever reason. They may be more averse to debt or for- Whatever reason they don't want to go more into debt, or they may not be able to take a mortgage deduction beyond X dollars anyway. And so there could be a lot of different reasons why they don't want to go more into debt. And having some equity could be really valuable to them. And it's like, you know, maybe they don't have to pay it off until they sell the home. So that's kind of like pretty exciting. And maybe there's a point where you have to do it after X 20 years or something. You have to pay it out. You have to give people the opportunity to have liquidity, but maybe not.

• 33:32Auren Hoffman?

  Because maybe there's always a secondary market for these things. And as long as you're diversified, it works out.

• 33:38Speaker 01

  Yeah, and I'm sure there's, there's like, there clearly would be demand if someone could actually package that security in a structured way. I think it's probably because most of these financial products have really robust capital markets ecosystems behind them, including HELOCs, meaning like the originator.

• 33:58Auren Hoffman?

  What's a HELOC? I never heard of a HELOC.

• 34:00Speaker 01

  It's a home equity line of credit. So it's just.

• 34:03Auren Hoffman?

  A home equity line of credit.

• 34:04Speaker 01

  A second mortgage, right? Like it's just saying you have a mortgage that, you know, let's say you have a home that's worth a hundred dollars and you have a mortgage on it for $60. You can get a home equity line of credit for another $20, right? Or a second mortgage for another $20. So you get $20 in your pocket, right? And you obviously have cost of capital associated with that. The, the, the position, right? And if you think about the home as having a capital structure is it's a second lien, right? Behind the mortgage. So there is some complexity there, but your point stands, which is there should be a product like this that allows you to speculate slash invest in a pool of residential assets. Seems glaringly missing from the capital markets ecosystem.

• 34:47Auren Hoffman?

  And this may have not been true a few years ago, but today, whenever I talk to real, whenever I say the word real estate to someone, the first thing in their head is data centers. Like, I don't even think there isn't like a close second. Thoughts there. How do you think about the data center boom? And how are you thinking about that like from a macro sense?

• 35:07Speaker 01

  The AI boom has opened everyone's eyes to the potential of what generative and agentic AI can do. But now we're realizing that, you know, if we assume, you know, the development of these frontier models continues and they kind of become commoditized, we actually have a more challenging and intractable problem, which is a supply side problem of compute. And you need real estate for compute, meaning like the, it's not that, you know, if you, the question you asked earlier, like what happens to offices? And you're like, well, let's take the position that, you know, lots of knowledge workers get replaced with generative agentic AI. It's not like real estate is not being consumed in that. It's just a different kind of real estate. So as opposed to an office, you know, a data, there's more data centers being built. So demand for data centers from the hyperscalers,

• 35:52Speaker 01

  from, you know, dedicated data center developers is massive. And that's creating a huge market upstream and powered land, which is getting access to land where you can bring power to it. So what's happened in the data center market is like, you can't even get a grid connection. So like, you go tie up a bunch of land right now, and you ask your utilities, I'm gonna put a data center on this land. They're like, great, we'll give you a grid connection in 2037.

• 36:18Auren Hoffman?

  Yeah, we have a company called Gridstone, which is trying to like, all do all the compliance to do, to accelerate that as fast as possible. But it's just a huge, it's a huge problem.

• 36:27Speaker 01

  And the backlog is going to be very real. And so one of the, you know, the kind of unintended benefits of that is that it forces developers to power their own land. And so, you know, it's going to be bring your own power.

• 36:40Auren Hoffman?

  Bring your own power, bring your own solar farm, bring your own whatever it is that they're bringing.

• 36:45Speaker 01

  Exactly. I mean, you know, the best way is it's done in a, you know, sustainable green way with a solar farm. You could also just use diesel power generators, depending on, you know, the, the, the asset. So land on which you can build data centers, I think is going to become voracious. Already is voracious and it's only going to grow because roughly the growth in compute that's needed by most estimates is around 20% per year. So there's very few real estate markets that are growing like that.

• 37:20Auren Hoffman?

  How do you think about like the locality? So I live in Fairfax County, Virginia, which is right next to Washington DC. There's basically no data centers there. If I go to the next county over, it's Loudoun County, Virginia. It probably has more data centers per capita than any other place in maybe the world. I just imagine like the tax base of Loudoun County is going to be just like unbelievable. The schools are going to be incredible. They're gonna, the police officers are gonna have all the best kit and you know, where you're just like the neighboring counties because they have made some decisions or the land's expensive or they're anti-data center for whatever reason. So it's not just like even the states, but like county by county, even city by city, like next to

• 38:02Auren Hoffman?

  one another. I think you're gonna start to see like these weird changes in tax bases and stuff.

• 38:08Speaker 01

  And my guess is also, you know, the sentiment of residents around data centers. Like right now, there's a lot of negative sentiment around data center. Nobody wants a data center in their backyard.

• 38:19Auren Hoffman?

  Unless all of a sudden your schools improve dramatically and you could have, it's like, well, we couldn't have had a fencing program before, a Model UN program, and now we get to have like all these cool things because we can fund it.

• 38:31Speaker 01

  I agree with that. That's going to be a real debate because data centers are going to become extremely valuable assets.

• 38:36Auren Hoffman?

  It's like the easiest thing to tax of almost anything. So it's like, it's great for, like a city can produce a revenue or a county can produce revenues from it.

• 38:44Speaker 01

  And here's where I think it gets even more complicated is the, the movement of compute and even energy storage to the edge of consumer networks. So like, we're looking at a lot of companies that are building edge data centers. So like, these are, you know, as big as like the size of a shipping container, you know, in some cases, the size of a closet, right? So these are, these are like, like real miniaturized, modularized computational assets that you can put hypothetically anywhere. You could put it in your basement, you could put it You know, on an abandoned factory, you can put wherever.

• 39:16Auren Hoffman?

  Yeah, back in the day, you go to even like people's homes, they would have like this. If you look, the AV systems would have these racks in the, in the, like a random closet. And you don't see that in a home today because you don't need that. But maybe we're going to start seeing those now in homes again.

• 39:30Speaker 01

  It's unclear that the demand is there yet for that, but I expect it will get there. And I think that's also going to create enormous real estate businesses around it. The question of like, how do we get this much compute line is both going to be a kind of mega project, powered land opportunity, but I think it's also going to be a distribution, urban infill problem as well, which is actually, how do we get data centers into cities at enormous distributed scale? Because obviously you can't, you can't go build a data center in Santa Monica right now. But if we need a lot of inference compute very close to where consumers are using it, it's very likely we're going to have to put a lot of infrastructure in.

• 40:15Speaker 01

  Whether that's in people's backyards or in, you know, subterranean spaces, that's TBD, but that's going to be a massive real estate business.

• 40:22Auren Hoffman?

  Depending on with inference, it might be a little bit harder, but for some things for data centers, you might be able to turn it on only when the power is cheap. And where you live in Southern California, there are many days where the power is negatively priced. So the data center is like earning money by taking on the power. And then, you know, that may only be from 11 a.m. to 4 p.m. or something where it's negatively priced. But they could, they could, they could add a lot to the grid. They could, and they can all of a sudden like add a lot of value to the entire ecosystem by taking on that excess power.

• 40:58Speaker 01

  Yeah, I think that's, that's going to be something you're absolutely going to see. And it's, you know, energy and compute are going to go hand in hand in that. So alongside, you know, edge data centers, yeah, you'll probably have, you know, stationary batteries also running, you know, micro grids and depending on the jurisdiction, selling energy back into the grid. There's like, there's all, there's like whole ecosystems of real estate like businesses that are going to be built as miniaturized versions of what we think of as like large format businesses, whether that's a power plant or a data center.

• 41:28Auren Hoffman?

  I heard, and this might not be true, but I heard like Fifth Wall is run more like a PE fund, like a Blackstone than like a typical venture fund. A, is that correct? And B, like, what's your philosophy of running the fund?

• 41:42Speaker 01

  Um, so it's a, it's not sure how to, because I actually admire Blackstone a lot. I'm not, I'm not sure I.

• 41:49Auren Hoffman?

  Yeah, I admire them too.

• 41:50Speaker 01

  I used to work at Blackstone, so I started my career at Blackstone.

• 41:53Auren Hoffman?

  Yeah, incredible, incredible company.

• 41:55Speaker 01

  I view that as a, as a compliment.

• 41:57Auren Hoffman?

  I agree, so, I agree. It is a compliment.

• 42:00Speaker 01

  I'm not sure I quite live up to, to running it like, like Blackstone, but.

• 42:04Auren Hoffman?

  There's a CEO, like a venture's case, like, you know, there's, there's a collection of partners, like you may have like five CEOs or three CEOs or something, and, you know, there's decision makers. It's run more like a company and then, and then if the partner's like on some, like in a, at Blackstone, if like the top three partners get hit by a bus, like it's bad, but like the company still goes on where it's a venture firm, like the venture firm is over.

• 42:27Speaker 01

  Yeah, I'm the CEO, I'm the CIO, it's, it's not really a partnership as much as it is kind of run like a, you know, almost just like a regular C corp organization from a decision making, from an execution process. And why I think that's extremely valuable is that we've been, we're consistently very nimble in identifying how our underlying market is changing. Meaning what prop tech means, like what the intersection of real estate and tech means is something very different today in 2026 than it was in 2017 when we started. And so it's very hard to evolve partnerships. There's a lot of evidence to suggest that that's the case. Like partnerships generally do not evolve with the market. I think Fifth Wall has evolved very rapidly with the market.

• 43:11Speaker 01

  We've had lots of huge successes, lots of huge failures, but we've innovated constantly in the model, in the approach, in the types of funds we built, in building out capital markets businesses. We've done SPACs, we've launched merchant banks, we've gone funds with very specific strategies. And the reason I think that's very important is leading to where we are today, which is we are at a moment in time where what it means to be a venture capitalist is going to fundamentally change. The business of waiting for Series A, Series B, Series C companies to come along and buying minority stakes and non-controlling interests, that is still going to be a thing. But because the costs of development are collapsing to zero, meaning if you can think it,

• 43:56Speaker 01

  you can build it very, very quickly, the opportunity to build de novo full-stack businesses in huge categories that would have seemed uninvestable and totally outside of the venture capital domain as recently as five years ago, those are going to fall into the aperture of venture. You're already seeing it in what Thrive and General Catalyst are doing.

• 44:15Auren Hoffman?

  Yeah, like General Catalyst bought like a hospital, right? I mean, it's just like, which is so cool. Like, it's so cool that they're experimenting in different ways.

• 44:23Speaker 01

  So we're going to start to do stuff like that. And I think that one of the reasons why we've been able to kind of move with those trends is partially because of that structure, meaning...

• 44:34Auren Hoffman?

  Yeah, you don't need to have like five people all to make the decision together and you have different egos that you have to kind of figure out.

• 44:41Speaker 01

  And I think where that goes, like where I think the end state of that is, is I think like we are at a moment in time where entirely new real estate businesses, real estate, like capital R, capital E real estate businesses are going to be built in the next five years in a way that was never before possible. And I don't think they will be built by traditional real estate players, actually. I think what they will be, who they will be built by are people that see the ways that tech is changing the meaning of space and how you commercialize it. People that can have sophisticated conversations about and execute on exactly what we were just talking about.

• 45:23Speaker 01

  The fact that you have to move compute and energy storage to the edge of consumer networks. There is a massive real estate business to be built around purely that thesis. And I think that it's far more likely to be started by a venture capital firm. You know, its lineage is a venture capital firm than it is in a company whose lineage is a real estate firm.

• 45:43Auren Hoffman?

  It's funny, you mentioned the word lineage. One of the companies that I really admire is Lineage Logistics, which essentially was building all these like cold storage things. And they, they just thought about it in an extremely different way. It's been incredibly successful company. I wouldn't have thought there was, there would have been like an opportunity there if somebody asked me about that 20 years ago, but somehow they were able to like figure it out.

• 46:06Speaker 01

  Lineage is an LP in Fifth Wall, and there's a lot of businesses like that that people never thought of as being real estate businesses until they realized they were. Data centers, prime example of that. Like data centers were actually not thought of as a real estate business up until like 15 years ago. Yeah, they were thought of as like more like kind of tech, kind of hardware, infrastructure. They weren't thought of as like, like you're just leasing space. It's just a different use case. No one conceptualized it like that. Gigantic outdoor refrigerators, same thing. It was, it was not really conceptualized as that kind of a business. And there's AmeriCold and there's Lineage, but like the, the enfranchisement of the cold storage logistics supply chain is something that definitely technology enabled, but

• 46:49Speaker 01

  it is a novel phenomenon that we're now seeing that purely as a real estate business. And what really excites me is what are the future real estate businesses and asset classes that are going to exist five years from today? That today seem like tech businesses, seem like the domain of venture capital, but in five, 10 years are going to be very obviously real estate businesses. Those are what I'm very interested in, in figuring out and finding. And that's why, you know, I'm so excited for like this next.

• 47:24Speaker 01

  Iteration of PropTech and obviously Fifth Wall's future.

• 47:30Auren Hoffman?

  Now, you are known, at least the rumor is that you're a great fundraiser. Walk me through how you work with LPs.

• 47:37Speaker 01

  We fundraise from them, as we say, we have a thesis that the real estate industry, the technology industry is colliding and we kind of give you a front row seat if you're like a large real estate corporate to how that's happening. And on the institutional side, more institutional investors, it's purely based, obviously, on our performance and our track record. And do you think that there's money to be made in that? So it's a slightly different message depending on who you're positioning it to. And I would say in terms of how we work with them, so a large real estate corporate will engage very strategically, will try to understand their pain points, what they care about, very intimately understand their business and then try to connect them and link them to technologies that we think could accelerate their business.

• 48:22Auren Hoffman?

  They almost have like a double bottom line, you know, they're trying to get a good return, but also they're trying to do some things that may help their business or get insight into new technologies that could help their business.

• 48:31Speaker 01

  Like a good example would be like the Open Door deal. So like we invested in Open Door, we made a very significant $82 million investment in Open Door alongside that we structured this huge partnership with Lennar. And Lennar basically, Lennar basically used Open Door to provide this new kind of insurance product to home buyers so they could basically sell their home as long as they bought another Lennar home. And it was a home run deal for us. It was like three and a half times on the deal, like huge financial win, huge distributions to our investors. But I think if you asked our institutional investors what they liked about the deal, they would have been like the financial returns. If you asked Lennar what they liked about the deal, I think it would have been the strategic value. So like that's the end state. By the way, it doesn't always end up like that, but that is the end state that we're

• 49:16Speaker 01

  shooting for. So it kind of depends on who we're talking to as to what that model is.

• 49:22Auren Hoffman?

  Two personal questions before you go. The first one is how are you personally using AI?

• 49:27Speaker 01

  I use AI in two ways that are probably novel that people could copy me on that I think are interesting. One is Well, obviously, I use dictation software everywhere, so I'm constantly dictating as opposed to writing. But what I've built in Notion, which is where I dictate into a lot, is an agent that constantly is reading what I'm writing and comparing it to my goals. So comparing it to what my stated goals are at the beginning of a day, a week, a year, and saying, here's what you're not seeing, here's what you should be doing. So it's offering you perspective on what you're actually producing in real time.

• 49:58Auren Hoffman?

  You have like a goals list somehow that it knows? Okay, and you're updating those goals occasionally?

• 50:04Speaker 01

  Getting I've made those a priori, and the agent is trained on those, and it's querying those and comparing what I'm writing and what I'm entering into my notes against those goals to see, are there things that seem totally out of sync with that? Or are there ideas or approaches I might not be thinking through that could align me to that?

• 50:19Auren Hoffman?

  And is the goal like a measurable thing? Or is it like, I want to get better at this thing, or I want the company to get better at this thing? Or is it like, I want to, I want to write something that is here? Like, I want to write something that's the top 10 posts on Substack or something?

• 50:33Speaker 01

  It's usually a bit more amorphous. Like, meaning, one of the goals is, I want to be, I want to identify the next great real estate companies that are being built at the intersection of real estate and technology. That is one of my goals. And so as I'm writing down notes over the course of a day, the agent is constantly looking at what I'm writing and deciding, is that consistent with that goal? Or is that inconsistent with that goal? And what are the ways in which Brendan might not be thinking of opportunities that could connect it to that goal? Because it's exhausting to try and think of that all yourself, right? So like, you know, at the end of this podcast, I might write down a few notes, and it will immediately link it to those things. So that's like one example. I have a whole bunch of those that I've actually built internal in Notion that I use.

• 51:12Auren Hoffman?

  All right, last question we ask all of our guests. What conventional wisdom or advice do you think is generally bad advice?

• 51:17Speaker 01

  There's a prevailing piece of wisdom in Silicon Valley that capital-intensive businesses are bad for venture capital. And there's a lot of reasons why that's the case. And there's a lot of evidence that that was the case historically. I'm pretty sure that's about to not be the case.

• 51:34Auren Hoffman?

  It seems like that conventional wisdom has flipped in the last few years because if you just think of the CapEx of all the Mag7 and stuff, you know, it's changed dramatically. And, you know, and some of these, even some of these companies like Google are like raising money for the first time.

• 51:48Speaker 01

  That is conventional wisdom that I think has overstayed its truth in terms of the modern economy.

• 51:56Auren Hoffman?

  Before, everything about Google in some ways was like, oh, it's capital light. It's great, gazillion margins, you know, whatever. That's why we love the business. And, you know, maybe everything is, yeah, probably everything has flipped since the AI boom has happened.

• 52:13Speaker 01

  That's exactly right. So that's, I would say, a piece of conventional wisdom that I think is no longer true. Meaning like, stay, stay away from capital intensive businesses is, I think, really bad, really bad advice in 2026.

• 52:25Auren Hoffman?

  Okay, this has been amazing. Thank you, Brendan Wallace from Fritfall, for joining us on Summation. This has been incredible. Really appreciate it. Thank you again for coming on.

• 52:35Speaker 01

  Thanks for having me.

• 52:36Auren Hoffman?

  One more thing before we go. I read a blog called Summation. It's the same as this podcast. The blog is about non-obvious idea sharing on business, talent, data, longevity, and random contrarian takes. If you like the conversations on this show, you'll probably like the blog. It's free. New content comes out twice a month. You could subscribe at orin.substack.com. That's orin.substack.com.