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Imagining a network of rental properties that build community and equity for tenants, former WeWork CEO Adam Neumann landed a major investment last month from a Silicon Valley firm known for betting big on bold ideas.
Neumann quietly scooped up thousands of apartment units before then grabbing a $350 million check from Andreessen Horowitz (a16z), reportedly the biggest single investment by the firm known for its early bets on Facebook and Airbnb.
Although little information has emerged about the new company called Flow, an analysis by Inman provides a potential playbook for what we might expect it to look like.
It’s too soon to say whether Flow will simply repeat Neumann’s past attempts at offering shared housing and apply his powerful branding skills to make it seem new.
But statements from investors add intrigue. Notably, Marc Andreessen indicated the venture might somehow provide a way for renters to gain equity through renting.
Renting an apartment is “a soulless experience; do you even meet your neighbors, much less have any friends in your complex? Does it feel like home, or just a place to sleep? Are you proud to bring friends and family to visit, or hesitant?”
He then added the final hint: “You can pay rent for decades and still own zero equity — nothing.”
If the new venture provides a path for renters to earn equity, it would crack one of the biggest issues in the modern real estate market. Prospective buyers, priced out by the double-whammy of record-high home prices and quickly rising interest rates, bowed out and remained renters.
Neumann is well known for his meteoric rise as co-founder of the shared working space company WeWork. That company experienced a rapid boom and led to a shared housing venture called WeLive before both struggled and an attempt to take WeWork public blew up and led to Neumann’s ouster in 2019.
Meanwhile, rent has risen to new highs. That leaves a bigger pool of people blocked out of the buyer’s market and the ability to generate wealth through real estate ownership.
So how exactly does Flow plan to attract renters to its buildings, what does it plan to offer that’s different from modern luxury apartments that are already stacked with amenities and how would it offer renters any equity?
Here’s what we know and what we don’t.
What we know so far
In recent months, Neumann has picked up apartment buildings and towers in Miami, Nashville, Atlanta, Fort Lauderdale and Norwalk, Connecticut, according to reports.
What’s shared among these properties is a series of luxury amenities like rooftop decks and pools, yards, fitness rooms and yoga studios. Some include multiple levels of coworking space.
Flow comes in a post-remote work environment and after a period of migration across the country brought on by the angst of the pandemic. It seems clear the buildings will be designed to accommodate people looking to live in amenity-rich spaces where they also work.
Andreessen suggested these types of amenities can help to deal with the negative consequences, like more screen time, isolation and loneliness from the shift to working from home.
“For many of these people, increased screentime and reduced in-person interaction will cause challenges that are not just limited to work, such as alienation and loneliness,” he wrote. “This is not a good path for anyone and it needs to be addressed directly, right now.”
Several properties include tech-first services like Updater that helps people handle the logistics of a move, such as hiring movers, changing utilities, forwarding mail and finding renters’ insurance.
“Flow will operate the properties Neumann has bought and also offer its services to new developments and other third parties,” according to the New York Times.
The company is hiring in Miami, New York, Los Angeles and Austin, so it’s not clear if Flow also plans to acquire buildings in those markets.
That’s just one of the big unknowns.
What we don’t know
A $350 million check is certainly significant, but it would amount to the purchase of a few thousand apartment units. That’s not the type of bet a16z is known for making.
So it leaves one question: What is the big innovation in rental housing for which Flow hopes to become known?
There was one intriguing paragraph in Andreessen’s letter that hinted at why he wanted to get involved, and it gets to the issue of renters not generating equity.
Andreessen said the experience-driven system and other changes would “create a system where renters receive the benefits of owners. This means rethinking the entire value chain, from the way buildings are purchased and owned to the way residents interact with their buildings to the way value is distributed among stakeholders.”
But how can a company generate profit for investors and equity for renters?
How to build equity?
One theory is that the building could operate like a REIT — or a real estate investment trust. That’s a common way for people to invest in rental properties without owning them outright. They then earn dividends over time.
“It could work like a private REIT, similar to a crowdfunded REIT that a portion of tenants’ rent goes toward each month so each tenant gains shares over time,” said G. Brian Davis, a real estate investor and owner of Spark Rental.
“I suspect it would own a portion of the building where the tenants live, so they effectively earn an ownership interest in it over time,” Davis said. “That would be a way for Neumann to pull his capital back out of the buildings he already owns, and he could then use the money to go out and buy more buildings.”
Safi Aziz, director of innovation services at the venture capital firm MetaProp, suggested this is one of the key focuses for a16z and Neumann.
“Flow aims to be a real estate investor, landlord, and property manager of a highly amenitized, tech-enabled residential building network in which residents will be renting a Flow unit with the option to purchase that unit over time,” he wrote in a thread.
Aziz noted that in early 2021, Neumann and a16z both invested in a mortgage company called Valon Mortgage.
So, are these investments by a16z and Neumann simply proven ways to make money, or could they be preparing to string them all together into a single brand of apartment buildings that lets renters build equity?
Move often, move quickly
Andreessen lamented that once renters find a place to live, they can’t move along too easily.
“You’re now stuck — you can’t move, even if your economic opportunity or life path wants to take you somewhere else,” he wrote.
This suggests that Neumann’s venture will focus on providing freedom of movement for the renters (or buyers) who live in the units controlled by Flow.
“I think that’s what this is, it’s communal living,” said Jason Calacanis, a venture capitalist, on a podcast making predictions about the new venture. “And I think it’s gonna be that you can leave one and go to another one.”
It’s possible Flow renters could hop between buildings when space is available, with their status as Flow clients reserving them space in the company’s buildings.
Its name alone implies renters may be able to move relatively seamlessly between buildings and cities. Get a hankering for Miami? Just find a spot you like and move from your Atlanta apartment when space is available. Tired of the East Coast? Find an opening in a Flow building in Los Angeles.
Mixing rewards with crypto
Forbes confirmed that Flow was planning to offer a type of wallet that would store cryptocurrencies and manage rewards for tenants.
A spokesman told Forbes “that Flow would not be receiving crypto payments for rental of its apartments, nor would the company be ‘one of the largest implementations of blockchain in the economy.’ However, he added that a tokenized rewards program from Flow could involve cryptocurrency.”
Aziz hypothesized that could provide an incentive to earn the tokens, which could then be used within the Flow network.
That’s the type of tech-forward investment that would attract a16z.