12.10.20

The Propcast: PropTech Law and Launching

In this episode The Propcast talks to Jonathan Mills and Conrad Davies from Osborne Clarke about PropTech law and launching.

Click here to listen to Episode 10

 

The Propcast by Louisa Dickins, co-founder of LMRE the leading Global PropTech recruiter brought to you in partnership with UK PropTech Association, The UK PropTech Association is a membership organisation to drive the digital transformation of the property industry. This show will focus on connecting the Proptechs, real estate funds and VC’s globally…and get everyone talking about innovation of the build to rent environment.

12.10.20

About Our Host

Louisa Dickins

https://www.linkedin.com/in/louisa-dickins-ab065392/?originalSubdomain=uk

Louisa started her career in property working at a well-known estate agency in London. Realising her people skills, she moved over to Lloyd May to pursue a career in recruitment. She now is a Director at LMRE, who are a specialist recruitment firm driven by PropTech and recruitment professionals, and Louisa oversees their 5 core areas. Louisa co-founded LMRE and provides a constructive recruitment platform to the new disruptors in real estate. Louisa is also on the board of Directors at UK PropTech Association (UKPA).

About LMRE

LMRE believe there is a better way to recruit. LMRE focus on a more comprehensive, client led focus delivering exceptional talent to the right place at the right time. They are passionate about the industry and passionate about people's careers. LMRE spend time with each client to become and an extension of the business, and their transparency and core values help them grow with the sector. LMRE simplify recruitment and innovate with our clients and evolve the people driven, PropTech community.

 

About Our Guests

Jonathan Mills

https://www.linkedin.com/in/jonathan-mills-b0692933/

Jonathan is an Associate Director in the real estate department at Osborne Clarke LLP and advises on a variety of property related matters, including investment, development, tech, and energy and utilities. He has a specific focus on the alternative residential market including co-living, student accommodation, Build to Rent/multifamily and assisted living/care. Jonathan is currently on secondment to Osborne Clarke’s office in New York where he is advising US companies on English legal matters and supporting their global legal projects. Jonathan is working closely with Osborne Clarke’s international offices and network of law firms around the world with their cross-border real estate, infrastructure and PropTech projects.

 

Conrad Davies

https://www.osborneclarke.com/lawyers/conrad-davies/

Conrad is a Partner in Osborne Clarke’s corporate practice and head of their Urban Dynamics group - which focusses on the transformation taking place in global cities and the impact this has on clients and their businesses. His work includes acting on private equity fundraisings, private acquisitions and disposals, restructurings and complex joint ventures and partnership arrangements. He has a particular focus on advising on transactions involving real estate and infrastructure assets and portfolios. He also has significant experience of work in the technology sector.

 

 

Resources

 

LMRE website www.lmre.co.uk

UKPA www.ukpa.com

Osborne Clarke www.osborneclarke.com

 

Insights from this Episode

  •  I really think that COVID has put data and the use of data for everybody's benefit, really into the public eye Jonathan Mills
  • The reality is that data is the lifeblood of digital transformation in real estateConrad Davies
  • Similar cultures obviously really helps when either working out and calculating whether a product is going to fit or solve a problem in a different marketJonathan Mills
  • I think there's going to be lots of opportunities for businesses to use technology to improve the energy efficiency of their homes and their buildings, and I think that decarbonisation agenda is going to also fuel adoption Conrad Davies
  • The appreciation that talent can work from anywhere is going to be keyJonathan Mills
  • We always explain to clients to think globally but act locally, because there are so many differences between individual marketsJonathan Mills
  • I think the technology sector is now better understanding the real estate market and the people that are involved, and what investors and developers really want from technology. I think what that's also meant that the tech has got betterConrad Davies

 

Episode Transcript

 

Louisa 

Hi, everyone, and welcome to the podcast. My name is Louisa Dickins, co-founder of LMRE and board director of the UKPA and I shall be a weekday host. Each week for 30 minutes we'll be connecting the VCs, PropTech start-ups and real estate professionals globally, and assist in bridging that famous communication gap we all love talking about. So sit back, relax and enjoy the show. Hi, everyone, and welcome to the Propcast. Today's topic is on law, and we are fortunate enough to be joined by Conrad and Jonathan aka Millsy from Osborne Clarke. So welcome, Conrad and welcome Millsy.

 

Jonathan 

Hey, thanks so much for having us.

 

Conrad 

Hello, good to be on, good to talk to you.

 

Louisa 

For those who don't know about Osborne Clarke, Osborne Clarke is an international law firm with offices in 25 cities. They are full service but have a heavy focus on real estate and tech. Osborne Clarke has a European wide PropTech practice and also assist US companies with their expansion and growth into Europe and Asia. To introduce you to our guests on today's podcast, we'll start off with Conrad who is a corporate and M&A partner and is based out of the London office of Osborne Clarke. He worked in business for five years before entering law and trained and qualified with US law firm Jones Day, and has been with Osborne Clarke for 15 years now. He is international head of the firm's real estate infrastructure team and his work crosses both real estate and technology.

 

Now for Millsy, who I met at CREtech in New York many months ago. He is currently an Associate Director at Osborne Clarke in London, Jonathan's practice focused on real estate and PropTech, and he's currently on secondment at Osborne Clarke’s New York office. He works with US companies on the international expansion strategies. So thank you both for joining. Since personal experience of setting up LMRE’s US business and also having assisted clients launching in different cities across countries, I know the pains of it and I also know what it feels like not really knowing where to start, the do's and don'ts, the whole process behind it. Then after learning and doing it, I thought who better to get on the podcast than both of you. So without further ado, let's kick start and why don’t you both tell us about how you both got into PropTech? Millsy do you want to kick start?

 

Jonathan 

Yes, absolutely. So real estate used to be the bread and butter of my practice. And more and more my clients are becoming increasingly involved in technology and how they can drive efficiencies and profitability in their business. And it really piqued my interest, and for me it's just super exciting to be working with what tends to be a really entrepreneurial group of people and really exciting part of the real estate industry, and working with clients that really care about the business and the change and the positive change that they're making to the sector.

 

Louisa 

And Conrad, how did you move into the PropTech space? You balance a bit of infrastructure as well, was it an interest, did it just didn't happen?

 

Conrad 

Yes, a combination of both. I mean, as you say, we're kind of a full service law firm but we tend to focus on a few very specific sectors. And as you mentioned, technology and real estate are two of those, I mean they make up about 50% of our income in the UK market. So when PropTech started to kick off, and started to come to prominence, it just made perfect sense for us to look at it because we could bring together our expertise from both of those areas to effectively help tech companies understand real estate and vice versa. And personally, I've always had a practice that's kind of across both. I've got clients that sit within technology, but you know also really should expect a strong real estate practice, so I find the whole thing interesting. And let's be honest Lu, the other reason is it's a great market opportunity. So as we go through this period of kind of digitalisation of real estate, there's going to be lots of run out. So it makes economic sense for us as well.

 

Louisa 

Yes, it's definitely a good space to be in. And every webinar and other podcasts I'm listening to, everything is fairly optimistic, saying this market is only going to grow and be resilient to everything we've all gone through in the last few months. So here's to hoping. Okay, why don't we just start with Millsy, tell us a little bit more about a success story you've had with assisting a business to expand into new jurisdictions?

 

Jonathan 

Absolutely. So our US practice for the past 20 years now has been assisting US companies to expand into the UK, Europe and Asia. And that started on the West Coast with fast growing venture backed tech companies looking to expand quickly into Europe, and has really matured over 20 years, and now we've got an office in New York. We still have a heavy tech focus but real estate and PropTech plays such a big part in the New York market that there are so many exciting companies now looking at European Asian horizons as the next step for their business. If we're going to talk about a couple of success stories, one that is particularly relevant to this podcast would be Airbnb. We helped their leisure and hospitality platform, we helped their expansion into the UK. And what's interesting is that they expanded in different ways in different jurisdictions. And so it really gives you a good cross sector of different ways that your listeners can do this. Airbnb expanded into the UK in an organic fashion. So setting up a company, small number of boots on the ground to start with, and then grew as their market share did in the UK. However, in Germany, they acquired a competitor in the market and then scaled on the back of that. And as I said, it just shows a different approach to expansions and appreciate this is more the marketplace, software platform, part of the PropTech spectrum, but it was just an interesting cross sector.

Another again very interesting expansion for us, and a great client is Allbirds, so they are a footwear brand from the US but with a really big tech and e-commerce platform to their business. Obviously, they have bricks and mortar real estate within their wider business portfolio as well. We assisted their acquisition into multiple jurisdictions and they're doing very well and have performed very well, and had some great press during the unfortunate COVID pandemic as well. And they're really going to go from strength to strength. In terms of expanding the other way, and although our business and our business model is an expansion of UK business into the US, we've been here for 20 years now and have got a fantastic and strong and helpful network we can share with clients. A couple of clients that expanded successfully in the UK in the US census is a platform for co working businesses, and another great one is Pirate Studios. So Pirate Studios, they hate me explaining like this, are a Wework for recording space, and they've got a really exciting model that works fantastically in the US with the independent artists scene here and the real love of music and talents, they've been really successful coming over here into the US as well.

 

Louisa 

Is there a certain criteria or stage of business, size or whatever stage it might be, evolution for businesses that move? You mentioned that you can acquire business over in a different country, but what trends have you seen?

 

Jonathan 

It's really interesting question, I think the trend is that it's happening earlier and earlier in the growth cycle. So 10/15 years ago, we used to see businesses would strategically raise from their investors probably to a C round, before they were under either investor pressure or had significant market presence in their home jurisdiction. So consider moving elsewhere and selling their product into a new market. But if I'm honest, now we've seen some big clients move as early as that large A round funding. Depending on the product and the size of the round, a B round tends to be the sweet spot, coming under pressure, a nice pressure, obviously from VC investors, and that tends to be the sweet spot. Obviously, you can have customers in a market before you move abroad. And the question is, when you commit boots on the ground and begin to chase more of a market share, you tend to want to be successful in your home market as well before you expand. What you don't want is for an expansion either to have a financial or a strategic hit on the home business if it's not a successful expansion. So timing is really important.

 

Louisa 

Yes, it makes sense. And is it very intense launching, if you compare say US to Europe, I always find that the US PropTech start-ups generally raise more capital. And so the way I think about it, do they have a large chance or ability to launch in Europe? Or am I wrong in thinking that?

 

Jonathan 

No, not at all. Europe is always a really appealing market for the US obviously, particularly UK commonality of language. Similar cultures obviously really helps when either working out and calculating whether a product is going to fit or solve a problem in a different market. But as I said, the key, in particular in relation to investor or internal expectation setting is to make sure that you understand the potential market and how your product fits in it. We always explain clients to think globally, but act locally, obviously, because there are so many differences between individual markets. So if you're thinking about something like sales cycles, if you were to go going to go from the US to say, Germany, the sales cycle is a lot longer. But following that customer base tends to be much more loyal.

So the opposite of the US where your sales cycle tends to be shorter. Other things like the way the comp is structured will be completely different between the US and the UK, you get your high salaries in the US as well, comparative to many European cities, and just things like employment laws can be completely different. US you have employment at will, somewhere like France, for example, if a PropTech was moving into Paris as a key market, they've got a very protectionist regime in terms of employees and employee rights. And obviously, just generally, talent is incredibly hard to find, but incredibly important for businesses. Obviously, that's where you guys at LMRE come in as well.

 

Louisa 

Yes, thank you for that little sell! What would you say the main obstacle businesses come across, if you're launching to expand across borders? You mentioned a couple then to do with different sales cycles, different markets, maybe languages, what's the biggest one which keeps coming up?

 

Jonathan

I don't think we can stress it enough, but it really is market and understanding that everything is going to be different. Market and culture differences can be huge. Even when OC moved from the west coast and expanded to the east coast of the UK, it was a completely different place, and it took a while to get our head around the different way the market works. In the States, you even get micro issues between states. So we hadn't appreciated the differences between the Boston and New York market when we first moved, and we're now an East Coast practice as opposed to a New York practice for that reason. But for that reason, and understanding the market and knowing the market, market knowledge is going to be key. Our advice is always not to move too fast, and to do everything in a proportionate way. So obviously, there's different shades of grey to that, but we always advise to as part of your understanding of market, whether that's to get a small number of boots on the ground first before going into it hard, or dipping your toe to understand the market and how your product fits and the problem that you're solving. Because as I said before, you don't want to be causing capital or cash flow problems to the parent or home business with given unsuccessful or particularly problematic expansion.

 

Louisa 

That's one of the selling points on Clarke from the various introductions, you help businesses soft launch and giving them that access for certain businesses in the market that might be useful. So for us as a business, you already mentioned Boston, so in in the US there’s definitely some PropTech hotspots, New York, San Fran, Boston, Arizona. Then over in Europe, we have London is now separate but you have London, Amsterdam, Berlin, Paris, these are some hotspots, where do you see the strongest growth?

 

Jonathan 

That's really interesting. I'll take this one again, Conrad. So as I said, for US PropTechs the UK always tends to be the number one destination, as I said already, language cultural similarities. It's important to realise how different the rest of Europe can be. We've had some conversations and with clients or potential clients here in New York, where they band together the whole of Europe as one destination of choice, you really have to strip back and realise how different each market is how different expansion into each market needs to be, because I'm understanding how the product fits and the cultural difference and the market interplay with your product is going to be really important. One that you've not mentioned is Israel, it’s obviously becoming usually important in the PropTech market.

And at Osborne Clarke we always talk about the PropTech triangle. So US, mainly New York for PropTech, UK, again mainly London and Israel as well being a real key demographic work for the PropTech ecosystem. The trend tends to be in terms of popularity, I'd actually say it goes, Israel to US is where we're seeing most movement, and then USA to UK, and then UK into US. People still see the US and particularly New York as a big, scary, very costly market as you well know. But interestingly, and from speaking to Israeli Proptechs and their founders, they're always most keen to crack the US first. Various reasons for that, but one of them is simply if they can consider it, if they make it in the US, they can make it anywhere. And then they'll head back out to Europe after that. And as I said, the US PropTech it tends to be London as is destination number one.

 

Louisa 

Yes, actually as part of this series I interviewed Sivan Blasenheim who's founder of Rentigo, they're basically a PropTech payment company within the property management space, but he's actually launched his business over there from Israel. But he's also launching something which is called an innovation hub. And he's having it in Tel Aviv, London and New York. And it's got hundreds of PropTech start-ups involved. So that is introduction which I will make, because there's definitely some synergy there. And exactly what you said, most of Israeli Proptechs are looking to get to the US and all the processes behind that. So yes, definitely tune in to listen to that one.

 

Jonathan 

Good to know that we’re not off piste then, and that we’re right in our thinking!

 

Louisa 

Yes well, hopefully we both are. Conrad, let's get you involved with the podcast! Prior to COVID, there’s been an accelerated expansion in the past 5/10 years in the PropTech landscape, why do you really think that is?

 

Conrad

Yes, I mean it's good to be talking! I was very much listening to Jonathan, taking us through that podcast and that was great! There's been from my perspective, a real expansion in PropTech. And I think, if you take real estate, it's a very old sector, it's been around a long time, it's a slow asset class, it's a liquid. It's very slow to trade. And because of that there is a historical issue with real estate being slow to adapt, and it’s had that label of being laggards and being an industry that's kind of failed to embrace technology. But I just think that's not the case anymore. Things have definitely changed. I'd say in particular, probably in the last five years, certainly from what I've seen, that the markets really woken up to the opportunities that technology can bring. And now I think we see it from our perspective in every aspect of the property lifecycle.

 

And why? Well there's in my mind, there's a few reasons. One, I think the technology sector is now better understanding the real estate market, and the people that are involved, and what investors and developers really want from technology. I think what that's also meant that the tech has got better, there are now boxed up applications that are much more affordable for property companies to plug and play, rather than having to need to develop everything from scratch on a starting basis. And that drives down cost and makes it easier to implement the product. And I think also, it's the demand for the technology particular software, it's just really increased.

 

Jonathan mentioned earlier the competitive nature of our market. And the reality is margins are compressed, and people need to find efficiencies and technology can deliver that. I think we're further along the adoption curve, you know, there were there were a number of popco’s who were interested, but just didn't want to be the first people to put their toe in the water. And now you've got some really big, listed property companies who have put digitalisation right at the centre of their strategy. And the reality is there’s safety in numbers. So a number of others have been followed suit. And lastly, just the markets go through a massive period of change. I mean, take for instance, co working and flexible office space. A few years back, it didn't exist. Now partly thanks to Wework, the reality is that that's become almost an established asset class. And that's creating new opportunities for Proptechs. Ten years ago, there simply wouldn't have been a market for that business. It wouldn't have had clients to go after, but now it's a thriving SaaS business, it’s on the stock exchange it just raised 7 million on an 80 million valuation and that's what's happening. I think, you know, the market is changing, and there's now there's kind of a real marketplace for that technology to be sold into.

 

Louisa 

Yes, I recently read Osborne Clarke’s future proof real state report, which those who are listening is a must read. You surveyed 550 technology and real estate thought leaders from all over Europe, and found that 82% of respondents see the tech industry as having an increasingly important influence on the built environment. You mentioned, obviously flex working just then, what other growth areas do you predict?

 

Conrad 

Yes thanks for mentioning the report, do read it, the only thing really I would say is some of the data is slightly out of date, because we launched that in 2018. But the reality is, there's some insights in there that I think is still worth looking at, we've got an update to that report coming out soon. So watch out for that. But the big area, I think was identified those that those texts, tech experts, thought would definitely be most commonplace by 2020, which is the kind of timeframe we looked at the time was big data. So 73% thought that, you know, big data would be commonplace in the market.

And you know, I'd say that's come true. The reality is that data is the lifeblood of digital transformation in real estate, you can see it through kind of every aspect of the industry, whether it's even thought of research and due diligence, or some of the modern methods of construction, building information, twins, well-being apps and amenity provision in housing, it doesn't matter which aspect you look at, that data is there and it continues in my mind to give huge opportunities. And examples, property management, the reality is now buildings absolutely packed full of tech and sensors that's enabling people to really monitor total building performance. And those platforms are collecting real time data, looking at energy consumption and moisture, heat, air quality, just lots of data points that will enable occupiers to have a better experience and to drive efficiency. And that's not just good for the users of the buildings, that's amazing for the landlords, because they can then use all of that data to improve the financial performance of the building. one set of data, great, start aggregating that with data across other buildings across, other portfolios, then you can really start to identify trends and characteristics that will have a big, big impact on that portfolio. So data is the big area for me, I think we're only just beginning to tap into it.

 

Jonathan 

Yes I think obviously worth on the legal side just mentioning data protection there as well, and how important that's going to be for expanding and growing businesses, particularly in the PropTech sector, not only GDPR obviously, with personal data, but as Conrad said with the amount of data that is now available and can be collected, it's just it's just making sure that's being done in the right way to avoid risk to not only the growth business, but the home business in terms of brand as well. Obviously, with CCPA being launched in California, very similar to GDPR, thinking about data transfers, where you can freely transfer data between the US and the UK for example, there's a lot of a lot of considerations, in particular that will come around and become more prevalent, the more important big data becomes the real estate businesses.

 

Louisa 

So what are the ways of getting around that then if you can't transfer the data?

 

Jonathan 

And so you can't freely transfer data, data can be transferred, but there's very strict guidelines and rules around it. And so Conrad and I, the lowly real estate and corporate lawyers would obviously introduce our clients to our wonderful IP, IT and data teams who do a lot of this for a lot of our real estate clients.

 

Conrad 

Yes, I mean, I think that the key thing there is it is difficult, you’ve got to be really careful. But if you take the right advice, then there are means of being able to take advantage of using that data. So, my view on this stuff is don't be frightened of it. Look at the market opportunity and what you want to do, look how you want to commercialise it, just make sure you take the advice, and if you can't, well, then you got to look at creative ways of you know, trying to use that data. But as long as you get the right advice, I don't think you should be too frightened.

 

Jonathan 

You’re exactly right.

 

Louisa 

And the right advice is going to come from Osborne Clarke.

 

Conrad 

Well done Lu, well done!

 

Louisa 

If we're looking at opportunities post COVID, I've interviewed people from all different verticals of PropTech and we just spoke about the uptake in data digitisation happening in real estate, which is good news. Where do you see the biggest opportunities for your business?

 

Conrad 

So COVID, ignoring for one moment the kind of health and human impact of it, which is obviously terrible, the reality is, it's having a massive impact on the real estate market. So you know, there's lots of data to make it very clear that real estate as a sector has been one of the heaviest hit. Retail and other markets have been impacted similarly, but real estate has felt it. And so I think PropTech has got a lot to give. I think in the short term, there may be a small hiatus while people get to grips with how to deal with the business as usual and mediate issues that they've got, but frankly in the long run, I think it's going to accelerate investment into technology and an adoption of PropTech and even in the short run, you know, there's lots being written about how technology is going to be used to get people back into buildings sooner rather than later. Anything that's going to help people maintain social distancing and keep people safe at this time is going to be key.

 

And I mentioned to you earlier, when we were chatting before coming on, I went into an office on Tuesday, and the landlords that everything they need to in terms of fulfilling their regulation and they put Perspex up in the lifts, and they're doing what they can, but the only way to get the lift to move between the floors is to press the buttons. And if you're on the other side of the divide, how'd you press the button? You know, the reality is looking at the adoption of let's say, smart technology and smart lifts, those businesses that have done that, they're the ones that are going to benefit, because then they try to move massive quantities of people up and down through 50 floors of a building, if they don't have the right tech in there, they're not going to do it. So definitely, it's going to have an impact but I think in the long run, I think it's I think it's going to accelerate adoption.

 

Louisa 

Yes, agreed. Millsy, anything you'd like to add to that?

 

Jonathan 

Yeah, absolutely. I was going to say there's the popular meme but I think there's only popular to PropTech nerds like us. But there's the meme that everybody’s seen which says, “what drove digitalisation in your business, CEO, CTO or COVID?” and for a lot of people, the number three is unfortunately the right one. So in terms of the crossover that we've got, its overseas talent and the appreciation that talent can work from anywhere is going to be key. So reducing cost base across businesses, and the growth acceleration about all our global talents is people now realise that is at their fingertips, and they're a lot more accepting of the fact that the work from home and the flexible working culture and the benefits that can bring to the business. The big one for me is going to be functional tech, as Conrad touched on their lifts within buildings. So you swipe your card, and then the lift opens because it knows where you want to go. But functional tech, so in real estate, even on the residential side things like paperless leasing, virtual tours, anything that removes the friction and I guess for a short term, human contact in real estate and in tech is going to be huge.

Actually, an interesting one for the listeners, a live conversation that Conrad and I are having with a client at the moment, actually in the retail space there's a lot of talk about how the traditional lease is dead. So long terms with upward only rent reviews, and how retailers can't possibly take on that liability anymore. And Conrad was speaking to one of our landlord clients recently, who is looking to find solutions, as is the whole of the landlord market to bring more accuracy to turn over leases. And turnover rent calculations, which is going to help the retail industry move forward and repair itself. At the moment is seen as a fairly untrustworthy data set, because there's so much to it and so many moving parts, but it's functional tech like that, and problem solving within certain markets that are either in distress, in trouble, on a downward curve, that COVID is going to really bring to the fore and have a big impact on, I think.

 

Conrad 

I was going to say that the other thing, just building on that, I think not in the immediate term but slightly further out basically, smart buildings and energy efficiency is going to be a big area. I mean, there's clearly a massive increasing desire to have kind of best in class efficiency, and all types of tenants and occupiers working under their own kind of desires to prove their kind of environmental governance credentials. With the government, and there's lots of pressure at the moment for governments to kind of to drive forward the economic stimulus off the back of COVID with funding packages around the green agenda. And I think there's going to be lots of opportunities for businesses to use technology to improve the energy efficiency of their homes and their buildings and I think that decarbonisation agenda is going to also fuel adoption.

 

Jonathan 

Yes, it's top up and top down, isn't it Conrad. So not only is the pressure coming from a governance of individual businesses, lenders, the government itself, but also customers and taking the real estate example tenants, they want the building to be representative of how they want their business to be perceived, their brand. And so the pressure on real estate is coming from both ends at the moment, as Conrad said smart buildings and smarter cities are very much a part of our future.

 

Louisa 

It's nice to see that the real estate world is finally seeing all these opportunities, and what service it can provide to the industry. I think it's seen a surge in interest in the last two to three years. I know there's been MRI and Yardi around for ages, but finally it's been taken seriously and I genuinely think that this just only the beginning. And I'm thankful that we're all in this space but I'm also equally excited to what's going to come, what businesses are going to grow, what business will go global. But also, it'll be interesting to see which ones don't make it through COVID because there's a lot of people who will be hit by it, but the best products will come out, and they're going to be in the US, there’ll be everywhere. So that being said, so for businesses, Proptechs, start-ups, people who are looking for advice, before we get to the end of the show, is there anything which both of you like to share with us? How to connect, any parting bit of advice? Millsy you want to kick it off?

 

Jonathan 

Yes, absolutely. So first of all, thank you very much for having us on, really appreciate you having us on and your support for Osborne Clarke as well. In terms of contact, go to our website www.osbornclarke.com, or Lu has our details. Feel free to link in with Conrad and I as well, happy to chat about supporting real estate and PropTech businesses in Europe, and also US businesses looking to expand into new jurisdictions. In terms of parting points, coming back to Conrad’s big data point. It's the horse that's been flogged over a number of years, and everybody loves to talk about it but I really think that COVID has put in data, and the use of data for everybody's benefit really into the public eye as well. So if anybody needed advice on the management or utilisation of their data, please do reach out to us.

Louisa 

And Conrad?

 

Conrad 

Yes, not a lot to add to that, you know how to get a hold of us. But just going back to your point around what the future opportunities are, we're committed to this, we see a huge amount of growth over the coming years and as a business, we’re not going away from it, we're going to double down and focus even more on that, and crossover between technology in real estate. And I think we like to think of ourselves as being a bit different yet, we need to make money and at some point in time, we would like to have work that we can charge for. But the reality is, we like this space, we like talking about it and we like having creative conversations with other players within it. So if people want to talk to us reach out, we're not just going to put the clock on, you know, we want to have a dialogue. So don't stay back.

 

Louisa 

Awesome. Well Millsy and Conrad, thank you so much for coming on the podcast, pleasure having you both. And hopefully, we will catch up soon, whether it's in New York or in London.

 

Conrad 

Sounds good. Thanks, Lu.

 

Jonathan 

Absolutely. Thanks for having us again. Lu. Go LMRE.

 

Louisa

Thank you for joining us this week on the podcast and a big thanks to our special guests. Make sure you visit our website www.lmre.co.uk where you can subscribe to our show, or you'll find us on <a href="https://lmre.enginecms.co.uk/formgen/createform/blog_uk/About%20Our Host Louisa Dickins https:/www.linkedin.com/in/louisa-dickins-ab065392/?originalSubdomain=uk Louisa started her career in property working at a well-known estate agency in London. Realising her people skills, she moved over to Lloyd May to pursue a career in recruitment. She now is a Director at LMRE, who are a specialist recruitment firm driven by PropTech and recruitment professionals, and Louisa oversees their 5 core areas. Louisa co-founded LMRE and provides a constructive recruitment platform to the new disruptors in real estate. Louisa is also on the board of Directors at UK PropTech Association (UKPA). About LMRE LMRE believe there is a better way to recruit. LMRE focus on a more comprehensive, client led focus delivering exceptional talent to the right place at the right time. They are passionate about the industry and passionate about people's careers. LMRE spend time with each client to become and an extension of the business, and their transparency and core values help them grow with the sector. LMRE simplify recruitment and innovate with our clients and evolve the people driven, PropTech community. About Our Guests Jonathan Mills https://www.linkedin.com/in/jonathan-mills-b0692933/ Jonathan is an Associate Director in the real estate department at Osborne Clarke LLP and advises on a variety of property related matters, including investment, development, tech, and energy and utilities. He has a specific focus on the alternative residential market including co-living, student accommodation, Build to Rent/multifamily and assisted living/care. Jonathan is currently on secondment to Osborne Clarke’s office in New York where he is advising US companies on English legal matters and supporting their global legal projects. Jonathan is working closely with Osborne Clarke’s international offices and network of law firms around the world with their cross-border real estate, infrastructure and PropTech projects. Conrad Davies https://www.osborneclarke.com/lawyers/conrad-davies/ Conrad is a Partner in Osborne Clarke’s corporate practice and head of their Urban Dynamics group - which focusses on the transformation taking place in global cities and the impact this has on clients and their businesses. His work includes acting on private equity fundraisings, private acquisitions and disposals, restructurings and complex joint ventures and partnership arrangements. He has a particular focus on advising on transactions involving real estate and infrastructure assets and portfolios. He also has significant experience of work in the technology sector. Resources LMRE website www.lmre.co.uk UKPA www.ukpa.com Osborne Clarke www.osborneclarke.com Insights from this episode - I really think that COVID has put in data, and the use of data for everybody's benefit really into the public eye as well – Jonathan Mills - The reality is that data is the lifeblood of digital transformation in real estate – Conrad Davies - Similar cultures obviously really helps when either working out and calculating whether a product is going to fit or solve a problem in a different market – Jonathan Mills - I think there's going to be lots of opportunities for businesses to use technology to improve the energy efficiency of their homes and their buildings, and I think that decarbonisation agenda is going to also fuel adoption – Conrad Davies - The appreciation that talent can work from anywhere is going to be key – Jonathan Mills - We always explain clients to think globally, but act locally, obviously, because there are so many differences between individual markets – Jonathan Mills - I think the technology sector is now better understanding the real estate market, and the people that are involved, and what investors and developers really want from technology. I think what that's also meant that the tech has got better – Conrad Davies Keywords Business real estate tech market prop uk clients people podcast technology data Europe expand launching Transcript Louisa Hi, everyone, and welcome to the podcast. My name is Louisa Dickins, co-founder of LMRE and board director of the UKPA and I shall be a weekday host. Each week for 30 minutes we'll be connecting the VCs, PropTech start-ups and real estate professionals globally, and assist in bridging that famous communication gap we all love talking about. So sit back, relax and enjoy the show. Hi, everyone, and welcome to the Propcast. Today's topic is on law, and we are fortunate enough to be joined by Conrad and Jonathan aka Millsy from Osborne Clarke. So welcome, Conrad and welcome Millsy. Jonathan Hey, thanks so much for having us. Conrad Hello, good to be on, good to talk to you. Louisa For those who don't know about Osborne Clarke, Osborne Clarke is an international law firm with offices in 25 cities. They are full service but have a heavy focus on real estate and tech. Osborne Clarke has a European wide PropTech practice and also assist US companies with their expansion and growth into Europe and Asia. To introduce you to our guests on today's podcast, we'll start off with Conrad who is a corporate and M&A partner and is based out of the London office of Osborne Clarke. He worked in business for five years before entering law and trained and qualified with US law firm Jones Day, and has been with Osborne Clarke for 15 years now. He is international head of the firm's real estate infrastructure team and his work crosses both real estate and technology. Now for Millsy, who I met at CREtech in New York many months ago. He is currently an Associate Director at Osborne Clarke in London, Jonathan's practice focused on real estate and PropTech, and he's currently on secondment at Osborne Clarke’s New York office. He works with US companies on the international expansion strategies. SO thank you both for joining. Since personal experience of setting up LMRE’s US business and also having assisted clients launching in different cities across countries, I know the pains of it and I also know what it feels like not really knowing where to start, the do's and don'ts, the whole process behind it. Then after obviously learning and doing it, I thought who better to get on the podcast than both of you. So without further ado, let's kick start and why don’t you both tell us about how you both got into PropTech? Millsy do you want to kick start? Jonathan Yeah, absolutely. So real estate used to be the bread and butter of my practice. And more and more my clients are becoming increasingly involved in technology and how they can drive efficiencies and profitability in their business. And it really piqued my interest, and for me it's just super exciting to be working with what tends to be a really entrepreneurial group of people and really exciting part of the real estate industry, and working with clients that really care about the business and the change and the positive change that they're making to the sector. Louisa And Conrad, how did you move into the PropTech space as well? You balance a bit of infrastructure as well, was it an interest, did it just didn't happen? Conrad Yeah, a combination of both. I mean, as you say, we're kind of a full service law firm but we tend to focus on a few very specific sectors. And as you mentioned, technology and real estate are two of those, I mean they make up about 50% of our income in the UK market. So when PropTech started to kick off, and started to come to prominence, it just made perfect sense for us to look at it because we could bring together our expertise from both of those areas to effectively help tech companies understand real estate and vice versa. And personally, I've always had a practice that's kind of across both. I've got clients that sit within technology, but you know also really should expect a strong real estate practice, so I find the whole thing interesting. And let's be honest Lu, the other reason is it's a great market opportunity. So as we go through this period of kind of digitalisation of real estate, there's going to be lots of run out. So it makes economic sense for us as well. Louisa Yeah, it's definitely a good space to be in. And if every webinar and other podcasts I'm listening, everything fairly optimistic, saying this market is only going to grow and be resilient to everything we've all gone through in the last few months. So here's to hoping. Okay, why don't we just start with Millsy tell us a little bit more about a success story you've had with assisting a business to expand into new jurisdictions? Jonathan Absolutely. So our US practice for the past 20 years now has been assisting US companies to expand into the UK, Europe and Asia. And that started on the West Coast with fast growing venture backed tech companies looking to expand quickly into Europe, and has really matured over 20 years, and now we've got an office in New York and we still have a heavy tech focus but real estate and PropTech plays such a big part in the New York market that there are so many exciting companies now looking at European Asian horizons as the next step for their business. If we're going to talk about a couple of success stories, two of our better ones that are particularly relevant to this podcast, first would be Airbnb. We helped their leisure and hospitality platform, we helped their expansion into the UK. And what's interesting is that they expanded in different ways in different jurisdictions. And so it really gives you a good cross sector of different ways that your listeners can do this. Airbnb expanded into the UK in an organic fashion. So setting up a company, small number of boots on the ground to start with, and then grew as their market share did in the UK. However, in Germany, they acquired a competitor in the market and then scaled on the back of that. And as I said, it just shows a different approach to expansions and appreciate this is more the marketplace, software platform, part of the PropTech spectrum, but it was just an interesting cross sector. Another again very interesting expansion for us, and a great client is Allbirds, so they are a footwear brand from the US but with a really big tech and e-commerce platform to their business. Obviously, they have bricks and mortar real estate within their wider business portfolio as well. We assisted their acquisition into multiple jurisdictions and they're doing very well and have performed very well, and had some great press during the unfortunate COVID pandemic as well. And they're really going to go from strength to strength. In terms of expanding the other way, and although our business and our business model is an expansion of UK business into the US, we've been here for 20 years now and have got a fantastic and strong and helpful network we can share with clients. A couple of clients that expanded successfully in the UK in the US census is a platform for co working businesses, and another great one is Pirate Studios. So Pirate Studios, they hate me explaining like this, are a Wework for recording space, and they've got a really exciting model that works fantastically in the US with the independent artists scene here and the real love of music and talents, they've been really successful coming over here into the US as well. Louisa Is there a certain criteria or stage of business - size or whatever stage it might be, evolution for businesses that move? You mentioned that you can acquire business over in a different country, but what trends have you seen? Jonathan It's really interesting question, I think the trend is that it's happening earlier and earlier in the growth cycle. So 10/15 years ago, we used to see businesses would strategically raise from their investors probably to a C round, before they were under either investor pressure or had significant market presence in their home jurisdiction. So consider moving elsewhere and selling their product into a new market. But if I'm honest, now we've seen some big clients move as early as that large A round funding. Depending on the product and the size of the round, a B round tends to be the sweet spot, coming under pressure, a nice pressure, obviously from VC investors, and that tends to be the sweet spot. Obviously, you can have customers in a market before you move abroad. And the question is, when you commit boots on the ground and begin to chase more of a market share, you tend to want to be successful in your home market as well before you expand. What you don't want is for an expansion either to have a financial or a strategic hit on the home business if it's not a successful expansion. So timing is really important. Louisa Yeah, it makes sense. And is it very intense launching, if you compare say US to Europe, I always find that the US PropTech start-ups generally raise more capital. And so the way I think about it, do they have a large chance or ability to launch in Europe? Or am I wrong in thinking that? Jonathan No, not at all. Europe is always a really appealing market for the US obviously, particularly UK commonality of language. Similar cultures obviously really helps when either working out and calculating whether a product is going to fit or solve a problem in a different market. But as I said, the key, in particular in relation to investor or internal expectation setting is to make sure that you understand the potential market and how your product fits in it. We always explain clients to think globally, but act locally, obviously, because there are so many differences between individual markets. So if you're thinking about something like sales cycles, if you were to go going to go from the US to say, Germany, the sales cycle is a lot longer. But following that customer base tends to be much more loyal. So the opposite of the US where your sales cycle tends to be shorter. Other things like the way the comp is structured will be completely different between the US and the UK, you get your high salaries in the US as well, comparative to many European cities, and just things like employment laws can be completely different. US you have employment at will, somewhere like France, for example, if a PropTech was moving into Paris as a key market, they've got a very protectionist regime in terms of employees and employee rights. And obviously, just generally, talent is incredibly hard to find, but incredibly important for businesses. Obviously, that's where you guys at LMRE come in as well. Louisa Yeah, thank you for that little sell. What would you say the main obstacle businesses come across, if you're launching to expand across borders? You mentioned a couple then to do with different sales cycles, different markets, maybe languages, what's the biggest one which keeps coming up? Jonathan I don't think we can stress it enough, but it really is market and understanding that everything is going to be different. Market and culture differences can be huge. Even when OC moved from the west coast and expanded to the east coast of the UK, it was a completely different place, and it took a while to get our head around the different way the market works. In the States, you even get micro issues between states. So we hadn't appreciated the differences between the Boston and New York market when we first moved, and we're now an East Coast practice as opposed to a New York practice for that reason. But for that reason, and understanding the market and knowing the market, market knowledge is going to be key. Our advice is always not to move too fast, and to do everything in a proportionate way. So obviously, there's different shades of grey to that, but we always advise to as part of your understanding of market, whether that's to get a small number of boots on the ground first before going into it hard, or dipping your toe to understand the market and how your product fits and the problem that you're solving. Because as I said before, you don't want to be causing capital or cash flow problems to the parent or home business with given unsuccessful or particularly problematic expansion. Louisa That's one of the selling points on Clarke from the various introductions, you help businesses soft launch and giving them that access for certain businesses in the market that might be useful. So for us as a business, you already mentioned Boston, so in in the US there’s definitely some PropTech hotspots, New York, San Fran, Boston, Arizona. Then over in Europe, we have London is now separate but you have London, Amsterdam, Berlin, Paris, these are some hotspots, where do you see the strongest growth? Jonathan That's really interesting. I'll take this one again, Conrad. So as I said, for US Proptechs the UK always tends to be the number one destination, as I said already, language cultural similarities. It's important to realise how different the rest of Europe can be. We've had some conversations and with clients or potential clients here in New York, where they band together the whole of Europe as one destination of choice, you really have to strip back and realise how different each market is how different expansion into each market needs to be, because I'm understanding how the product fits and the cultural difference and the market interplay with your product is going to be really important. One that you've not mentioned is Israel, it’s obviously becoming usually important in the PropTech market. And at Osborne Clarke we always talk about the PropTech triangle. So US, mainly New York for PropTech, UK, again mainly London and Israel as well being a real key demographic work for the PropTech ecosystem. The trend tends to be in terms of popularity, I'd actually say it goes, Israel to US is where we're seeing most movement, and then USA to UK, and then UK into US. People still see the US and particularly New York as a big, scary, very costly market as you well know. But interestingly, and from speaking to Israeli Proptechs and their founders, they're always most keen to crack the US first. Various reasons for that, but one of them is simply if they can consider it, if they make it in the US, they can make it anywhere. And then they'll head back out to Europe after that. And as I said, the US PropTech it tends to be London as is destination number one. Louisa Yes, actually part of this series, I interviewed Sivan Blasenheim who's founder of Rentigo, they're basically a PropTech payment company within the property management space, but he's actually launched his business over there from Israel. But he's also launching something which is called an innovation hub. And he's having it in Tel Aviv, London and New York. And it's got hundreds of PropTech start-ups involved. So that is introduction which I will make, because there's definitely some synergy there. And exactly what you said, most of Israeli Proptechs are looking to get to the US and all the processes behind that. So yeah, definitely tune in to listen to that one. Jonathan Good to know that we’re not off piste then, and that we’re right in our thinking! Louisa Yes well, hopefully we both are. Conrad, let's get your involved with the podcast! Prior to COVID, there’s been an accelerated expansion in the past 5/10 years in the PropTech landscape, why do you really think that is? Conrad Yeah, I mean it's good to be talking. I was very much listening to Jonathan, taking us through that podcast and that was great! There's been from my perspective, a real expansion in PropTech. And I think, if you take real estate, it's a very old sector, it's been around a long time, it's a slow asset class, it's a liquid. It's very slow to trade. And because of that there is a historical issue with real estate being slow to adapt, and it’s had that label of being laggards and being an industry that's kind of failed to embrace technology. But I just think that's not the case anymore. Things have definitely changed. I'd say in particular, probably in the last five years, certainly from what I've seen, that the markets really woken up to the opportunities that technology can bring. And now I think we see it from our perspective in every aspect of the property lifecycle. And why? Well there's in my mind, there's a few reasons. One, I think the technology sector is now better understanding the real estate market, and the people that are involved, and what investors and developers really want from technology. I think what that's also meant that the tech has got better, there are now boxed up applications that are much more affordable for property companies to plug and play, rather than having to need to develop everything from scratch on a starting basis. And that drives down cost and makes it easier to implement the product. And I think also, it's the demand for the technology particular software, it's just really increased. Jonathan mentioned earlier, kind of, you know, the competitive nature of our market. And the reality is margins are compressed, and people need to find efficiencies and technology can deliver that. I think we're further along the adoption curve, you know, there were there were a number of popco’s who were interested, but just didn't want to be the first people to put their toe in the water. And now you've got some really big, listed property companies who have put digitalisation right at the centre of their strategy. And the reality is there’s safety in numbers. So a number of others have been followed suit. And lastly, just the markets go through a massive period of change. I mean, take for instance, co working and flexible office space. A few years back, it didn't exist. Now partly thanks to Wework, the reality is that that's become almost an established asset class. And that's creating new opportunities for Proptechs. Ten years ago, there simply wouldn't have been a market for that business. It wouldn't have had clients to go after, but now it's a thriving SaaS business, it’s on the stock exchange it just raised 7 million on an 80 million valuation and that's what's happening. I think, you know, the market is changing, and there's now there's kind of a real marketplace for that technology to be sold into. Louisa Yeah, I recently read Osborne Clarke’s future proof real state report, which those who are listening is a must read. You surveyed 550 technology and real estate thought leaders from all over Europe, and found that 82% of respondents see the tech industry as having an increasingly important influence on the built environment. You mentioned, obviously flex working just then, what other growth areas do you predict? Conrad Yeah, I mean, thanks for mentioning the report, do read it, the only thing really I would say is some of the data is slightly out of date, because we launched that in 2018. But the reality is, there's some insights in there that I think is still worth looking at, we've got an update to that report coming out soon. So watch out for that. But the big area, I think was identified those that those texts, tech experts, thought would definitely be most commonplace by 2020, which is the kind of timeframe we looked at the time was big data. So 73% thought that, you know, big data would be commonplace in the market. And you know, I'd say that's come true. The reality is that data is the lifeblood of digital transformation in real estate, you can see it through kind of every aspect of the industry, whether it's even thought of research and due diligence, or some of the modern methods of construction, building information, twins, well-being apps and amenity provision in housing, it doesn't matter which aspect you look at, that data is there and it continues in my mind to give huge opportunities. And examples, property management, the reality is now buildings absolutely packed full of tech and sensors that's enabling people to really monitor total building performance. And those platforms are collecting real time data, looking at energy consumption and moisture, heat, air quality, just lots of data points that will enable occupiers to have a better experience and to drive efficiency. And that's not just good for the users of the buildings, that's amazing for the landlords, because they can then use all of that data to improve the financial performance of the building. one set of data, great, start aggregating that with data across other buildings across, other portfolios, then you can really start to identify trends and characteristics that will have a big, big impact on that portfolio. So data is the big area for me, I think we're only just beginning to tap into it. Jonathan Yes I think Lu ,Conrad, obviously worth on the legal side just mentioned data protection there as well, and how important that's going to be for expanding and growing businesses, particularly in the PropTech sector, not only GDPR obviously, with personal data, but as Conrad said, with the amount of data that is now available and can be collected, it's just it's just making sure that's being done in the right way to avoid risk to not only the growth business, but the home business in terms of brand as well. Obviously, with CCPA being launched in California, very similar to GDPR, thinking about data transfers, where you can freely transfer data between the US and the UK for example, there's a lot of a lot of considerations, in particular that will come around and become more prevalent, the more important big data becomes the real estate businesses. Louisa So what are the ways of getting around that then if you can't transfer the data? Jonathan And so you can't freely transfer data, data can be transferred, but there's very strict guidelines and rules around it. And so Conrad and I, the lowly real estate and corporate lawyers

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