By Jack Stubbs
In the current age of commercial real estate tech, many platforms are striving to streamline the commercial real estate industry by bringing new products to the market.
Juniper Square, founded in 2014 and based in San Francisco, is a software company that serves investment managers in the real estate private equity industry. The platform helps to automate investment operations for its customers, with a goal of giving them time back to focus on real estate and investing.
We recently spoke with Alex Robinson, CEO and co-founder of Juniper Square, about the goals of the platform, how it seeks to impact the commercial real estate industry, and what trends might define the evolving market over the next 12 to 18 months.
Where does the platform operate, geographically and demographically? Who are some of the platform’s primary clients within the real estate industry, and how does Juniper Square seek to enhance the operations of its clients (real estate investors and developers alike)?
In terms of product type and strategy, our customers span the full spectrum of product type (office, multifamily, retail, industrial, hospitality, mobile homes, etc.) and strategy (core, value add, opportunistic). We also serve many of the leading developers on the West Coast and across the country as well. Some of our customers are huge ($10 billion-plus of outside investor commitments managed) and some are just getting started with their first deals. The unifying theme for our customers is that they are investment managers, meaning [that] they raise money from outside parties to pursue investment strategies in real estate.
What are some of the practical, day-to-day services that Juniper Square provides its clients in the industry? How does the platform seek to increase transparency and collaboration between different parties?
Our software is used by our customers as the primary interface between their firm and their investors. This means that any of the operations that relate to maintaining relationships with outside investors—from organizing your fundraising activities and outreach, to performing the complex investment accounting required by investment partnerships, to automating the paperwork involved with subscribing to a new investment —take place primarily in our software.
Our product helps the manager by automating many of these routine tasks, saving them time and reducing errors, but it also helps the investor in that they go from a paper-based experience toward something that’s akin to Charles Schwab. There is a lot of complexity in the interaction between investment sponsor and investor in private illiquid assets like real estate—partly due to regulatory requirements, and partly due to the fact that the parties are entering into complex legal agreements when investing together—and we work very hard to make that process as simple and transparent as possible for both sponsors and investors.
To what degree does the platform seek to address a “broken workflow” in the industry, and does it build upon older more outdated methods of communication and data synthesis?
The biggest thing that’s “broken” in the industry is that firms are still using the same tools to run their investments business—namely, email and spreadsheets—that first became available nearly 30 years ago. The public markets and many other industries have moved on to adopt new technologies, but the private funds industry—and especially real estate private equity—has been slow to do so.
This slow pace of adoption isn’t because real estate private equity players are lazy, it’s because the tools that have been available to them have been pretty terrible. Up until recently, they had to choose between the inefficiencies of email and spreadsheets, or extremely expensive, hard-to-use software that often took years to deploy and a dedicated team to operate. Given the choice, it’s no surprise that most stuck with spreadsheets.
How does the company’s location in San Francisco influence its operations? What is the current state of the Bay Area market, and how do some of these trends reflect broader national trends?
There are obviously pluses and minuses to operating out of San Francisco. On the plus side, it’s hard to think of a geographic region that has the same depth and quality of technical talent and company-building advice and expertise as the Bay Area. We also find that San Francisco acts as a magnet for high quality talent in other markets, so we recruit in other markets and relocate folks to the Bay Area.
On the negative side, the cost of living in the Bay Area is a huge problem. It’s hard to overstate how expensive San Francisco has become, and how competitive the job market is. For every one talented software engineer in the Bay Area, there are surely at least 10 highly attractive job offers for them to choose from. The supply and demand for technical talent is just completely out of balance in the Bay Area, and of course this is true nationally as well. The Austin market is also increasingly competitive, though not to the same degree as San Francisco.
In your view, what is the current state of the private funds industry? Have have fundraising and investment methods changed over the last 2 to 3 years? What do you predict for the trajectory of these sectors?
I think there are some things happening at the micro level and others at the macro that will take longer to fully show up as trends in the market. On the micro, we’re seeing a big shift into open-ended, yield-focused vehicles from investment sponsors who previously have operated only closed-end funds (usually with a value-added strategy). I think this reflects where we are in the market cycle.
There are fewer value-add and opportunistic opportunities out there, but there is a lot of capital chasing yield that’s happy to own US real estate over a longer-term time horizon. Open-ended vehicles, which previously were the domain of only the very biggest managers, offer a way for sponsors to align their activities to what capital is seeking from real estate.
In the current age of commercial real estate (CRE) tech, there are many platforms that seek to do what Juniper Square does (simplifying communications between team members, synthesizing data, and automating the distribution of documents online). Why should investors choose Juniper over other CRE tech platforms? What makes this platform unique?
Part of what’s going on here is that the cost of developing software has plummeted over the last decade. So for the first time, firms like ours—and others in the CRE tech space—can profitably build software for industry niches that just a decade ago would have been too small to focus on. By connecting the parties in the market around a transaction, the software vendor can help create outsized business value by reimagining how the parties find each other, exchange information, and ultimately transact.
So companies like VTS are trying to do that on the leasing front between owners and brokers, and we’re trying to do it on the investment front between sponsors and investors. But in both cases the playbook is more or less the same.
How, specifically, will Juniper Square ensure that it maintains a competitive advantage over other investment management software platforms moving forward? Looking ahead, is there anything in particular that concerns you about the rapidly-changing industry?
The competitive advantage we are concerned about is relative to Excel, not other investment management software platforms. Excel is the substitute of choice, and it’s where the real work gets done inside of 90 percent of private investment firms (even if the firm has licensed investment management software!). The key to sustaining a competitive advantage is to focus on being excellent in all of the areas where Excel is weak—collaboration, accessibility across devices, and cases where multiple users (say investors and managers) are trying to interact with the same underlying set of data.