11 Real Estate Companies Plan Internet Alliance
Several of the U.S.’ largest real estate companies said they will form an Internet alliance based in the San Francisco Bay Area to take better advantage of the millions of people who live, work and shop in their properties.
Simon Property Group Inc., Equity Residential Properties Inc. and Equity Office Properties Inc. are leading the 11-member group that will invest up to $135 million in the venture. The goal is to create and acquire Internet-based businesses to sell goods and services to their tenants as well as other property owners. The alliance, called Project Constellation, is the most recent in a string of such ventures that have been formed by leading players in industries ranging from energy to hospitality. Just this week, Marriott International Inc. and Hyatt Corp. agreed to create an online exchange for hotel supplies.
The group backing Project Constellation owns or manages $250 billion in real estate. Two Los Angeles-based firms, real estate services firm CB Richard Ellis Inc. and home builder Kaufman & Broad Home Corp., are included in the partnership.
“Together, we have unparalleled size and scope across all property types,” said Craig Vought, co-chief executive of Menlo Park, Calif.-based Spieker Properties Inc.
The group plans a variety of ventures, from creating portals where other property owners can find loans, leasing information and assets for sale, to coming up with Web-based property management systems and “e-tailing” programs for consumers.
A recent survey reported that 176 real estate-related Internet companies were in operation as of last month, up from 121 the month before. In fact, many of the participants in the alliance announced Thursday are backers of other e-commerce ventures.
“The increased focus on technology is part of a move to the ‘real estate operating company’ model, in which ownership of real estate to collect rents is only one part of the equation,” said J.P. Morgan Securities Inc. real estate analyst Lee Schalop.
Previous industry alliances have been announced with great fanfare only to later fizzle out.
A few years ago, a group of the nation’s largest mall developers formed an alliance with Visa International that would give shoppers discounts at their properties. The alliance has since been disbanded, according to analysts.
Already, there are questions about the ability of such a diverse group of real estate companies, each with its own agenda, to operate in a concerted effort.
Specifically, on a conference call, analysts expressed concern about possible conflicts of interests between real estate companies’ own Internet programs and those planned by Project Constellation.
Company executives counter that it will be up to the individual companies to decide whether they want to contribute or start their own initiatives.
