SoftBank and Mubadala Corp. continue to make significant investments in the U.S. commercial real estate sector. Despite the challenges faced by WeWork, these investors are further committing capital, participating in a syndicate that is providing $700 million in funding to REEF Technology.

REEF Technology originated as ParkJockey, a Miami-based company specializing in parking management hardware, software, and related services. The company has since broadened its scope while maintaining its core business principles. Beyond parking solutions, REEF now incorporates infrastructure for cloud kitchens, healthcare facilities, logistics operations, last-mile delivery services, and traditional retail and experiential spaces within existing parking structures.

Similar to WeWork’s model, REEF primarily leases properties and then upgrades them before subleasing to tenants or utilizing the spaces directly. However, REEF’s business appears to have a stronger potential for success, particularly considering the accelerated trends resulting from health and safety protocols implemented during the COVID-19 pandemic.

A key differentiator for REEF is its operation of its own businesses within these locations, alongside collaborations with startups that require a physical presence for their operations and revenue generation.

The newly acquired funds will be used to expand the company’s footprint from approximately 4,800 locations to 10,000 across the country, transforming parking areas into “neighborhood hubs,” as stated by Ari Ojalvo, the company’s co-founder and chief executive.

Joining SoftBank and Mubadala in this substantial equity financing are prominent private equity and financial investment firms, including Oaktree, UBS Asset Management, and the European venture capital firm Target Global. Additionally, REEF Technology and Oaktree are jointly establishing a $300 million real estate investment vehicle, known as the Neighborhood Property Group, as reported by Bloomberg on Monday.

In total, REEF, which can be likened to a WeWork focused on neighborhood commerce, is securing $1 billion in capital to develop what it terms a “proximity-as-a-service” platform.

Since receiving a minority investment from SoftBank in 2018 – an investment that valued the company at $1 billion – and rebranding from ParkJockey to REEF Technology, the company has experienced growth in its cloud kitchen business, supporting the rise of virtual restaurant chains.

REEF has also established partnerships with a variety of service providers, including last-mile delivery startup Bond and logistics leader, DHL; national healthcare provider and technology innovator, Carbon Health; electric vehicle charging and maintenance company, Get Charged; and, in London, vertical farming developer, Crate to Plate (Ojalvo mentioned ongoing discussions with U.S.-based vertical farming companies for potential collaborations).

The company anticipates launching its first open-air entertainment venue next year at a location in Austin, according to Ojalvo.

Looking ahead, REEF envisions its spaces serving as hubs for data-processing centers and telecommunications infrastructure essential for the smart cities of the future, as Ojalvo explained.

“We are seeing significant interest from companies involved in edge computing and the rollout of 5G networks,” he said. “Data and infrastructure are crucial components of our neighborhood hubs, much like electricity and connectivity are fundamental to the modern world.” 

Currently, the majority of REEF’s revenue is generated from its parking operations, but Ojalvo projects a shift as its cloud kitchen business continues to expand. “Neighborhood kitchens will become a substantial contributor to our non-parking revenue,” Ojalvo stated.

REEF currently operates over 100 neighborhood kitchens across more than 20 North American markets, with plans for further expansion alongside its growing regional presence. The company is hosting virtual kitchens for renowned chefs like David Chang’s Fuku and providing support to established local restaurants such as Jack’s Wife Freda in New York and Michelle Bernstein’s kitchens in Miami.

In many cases, these restaurants are leveraging the workforce that REEF Technology employs to operate its network of kitchens, representing another distinction from WeWork. The company provides not only the physical space but also, in numerous instances, the labor necessary for businesses to scale.

REEF has already hired over a thousand kitchen workers to prepare food at its restaurant locations and acquired a company in May to streamline its back-end services for on-demand deliveries.

This strategy is expected to be applied to other facets of the company’s services as well.

“We are developing a platform centered around proximity,” explains Ojalvo. “This proximity is enabled by our presence in parking lots and garages, allowing various companies to leverage this location as a platform to build their marketplaces.”

As REEF secures funding for expansion, it is tapping into a contemporary urban development concept embraced by mayors from cities like Amsterdam to Tempe, Arizona – the “15-minute city” (where essential urban amenities are within a 15-minute reach).

While city leaders emphasize the accessibility of amenities, REEF’s leadership acknowledges that only a limited number of its parking lots and garages will be designed as multi-use spaces accessible to local residents. A company spokesperson indicated that only several hundred of the planned 10,000 locations will offer a mall-like environment that encourages neighborhood access, with the business primarily focused on ensuring delivery services are within a 15-minute radius.

This approach is similar to that of companies like Zuul, Kitchen United, and Travis Kalanick’s Cloud Kitchens. Kalanick, the co-founder and former CEO of Uber (which received substantial investment from SoftBank), has been acquiring properties in the U.S. and Asia through City Storage Systems, utilizing parking lots and abandoned malls as fulfillment centers.

Major retailers are also recognizing this new revenue opportunity, with Kroger, one of America’s largest supermarket chains, currently experimenting with ghost kitchens in the Midwest.

The economic downturn caused by the COVID-19 pandemic and related containment measures has created a surplus of underutilized assets, further supporting this trend.

“The success of this model will largely depend on how delivery services perform in the coming years compared to options like drive-through or curbside pickup, which are favored by large national chains like Starbucks, McDonalds, and Dominos,” noted a venture investor in an email. “However, the question remains how delivery services will utilize these spaces versus the availability of low-cost retail spaces for staging or package returns. The potential for adding modular units to existing parking spaces to provide scalability exists, but it’s unclear if significant growth is occurring. It’s simply not yet clear how converted parking spaces compare to other commercial spaces seeking new applications.”

The rapid changes brought about by the COVID-19 pandemic have accelerated the drive to transform the urban environment, though the desire for such transformation existed prior to the outbreak.

REEF emphasizes that cities represent the future.

By 2050, approximately two-thirds of the global population is projected to reside in cities, and the world’s largest cities are facing increasing pressures from economic, social, and environmental challenges.

Parking currently occupies roughly half of the average American city, while parks account for only 10% of urban space. REEF’s vision involves converting parking lots into vibrant spaces, but its current revenue model relies on providing isolated spaces for commercial transactions through delivery services, rather than fostering community interaction.

Nevertheless, the need for change is undeniable.

“Traditional developers and local policies have been slow to embrace new technologies and operating models,” said Stonly Baptiste Blue, an investor focused on urban environment transformation through the fund, Urban.Us (which is not an investor in REEF). “However, the demand for a better ‘city product’ is growing, the need to create more sustainable and livable cities has never been greater, and the aspiration to build the city of the future remains strong. Now, that aspiration is being supported by venture capital.”