Fifth Wall, one of the largest venture capital firms investing in and developing real estate technologies, has backed major real estate tech companies like Opendoor, Notarize, Sundae, and countless others. The company, which has billions of dollars behind it, is venturing into climate technology, addressing the role real estate plays in climate change and carbon emissions.
Fifth Wall's Climate Technology Fund -- which has already received backing from and formed partnerships with big names, including Robert Downey Jr. and Ivanhoe Cambridge, a billion-dollar real estate firm in Montreal -- now has a new partner: Invitation Homes (NYSE: INVH).
Invitation Homes, the largest single-family rental real estate investment trust (REIT) in the business, with over 80,000 homes under management or ownership, recently announced its investment in Fifth Wall's Climate Technology Fund.
Decarbonization and improving development systems
Fifth Wall's Climate Technology Fund focuses on decarbonization, which is the removal of carbon emissions produced from the management, development, or use of real estate. Considering 13% of global emissions in 2019 were from commercial and residential real estate, there is a massive opportunity in this sector.
Construction, materials, operations, management, and maintenance can be improved to be more sustainable and reduce environmental impacts. The plan is to utilize Fifth Wall's expertise to disrupt this sector by developing innovative ways to enhance and improve Invitation Homes' carbon footprint.
Invitation Homes -- which already utilizes smart-home technology in their rental properties, resulting in tenants saving as much as 15% on their energy bill -- has stated it plans to increase its focus on energy savings for the company and tenants moving forward.
While the company hasn't disclosed the exact investment amount, it has stated it plans to use this partnership to improve some of the development, management, and maintenance systems within its portfolio and operations.
The first start-up to branch from Fifth Wall's technology fund is Sealed: a company that uses technology to identify potential heating and cooling improvements that can increase a home's energy efficiency. Using partnering contractors and working with local municipalities to finance the repairs, the cost for repairs is repaid to the homeowners through savings in energy over time.
A green step forward
This partnership was announced shortly before the company's second earnings release, which unsurprisingly showed positive momentum. Invitation Homes has achieved stellar performance over the past year and a half.
The coronavirus pandemic created a new demand for single-family rentals, particularly in the Sun Belt -- a major region in which the company operates -- which pushed revenues up 9.3%, lease-rate growth up 13.8%, and funds from operations (FFO) up 14.4% year over year.
Continued investments and strategic partnerships, such as this one with Fifth Wall and those with other big companies like PulteGroup, should continue to propel the company forward over the coming years.