Five years ago, George Alva, a former private equity investor in the corporate world, opened the doors of his student housing company, Unica Properties, now Mosaic Student Communities. Expanding from a few properties near Berkley and Cal Poly, Mosaic is now a growing competitor in USC-area market, against other more established companies such as StuHo and North University Park Properties (NUPP). Although starting fresh in a neighborhood with a plethora of student housing companies, Alva hopes to attract students through a slightly different type of business plan.

“I enjoy serving the student community, and I’ve really enjoyed the results from renovating these old, beat-up homes and bringing them back to life for people to enjoy once again. We think most of USC student housing providers have terrible to mediocre customer service and property management. We intend to set a new standard in the neighborhood.” Mosaic markets itself by appealing to specific groups of students, like sports teams, film students, or clubs. They hope by doing so, they can draw more community-oriented groups of students away from other, less personal housing companies (the aforementioned StuHo).

“Student real estate is more restrictive than other kinds of real estate because you can only buy property around university campuses, which narrows your target market,” Alva admits. “It’s very management-intensive, because every year you need to lease out all of your units again, while dealing with inspections, repairs, and prepping for new tenants.” However, there are benefits to a student market. “Real estate is cyclical in general, but student housing is insulated from that cycle because there are always going to be an influx of students.”

One only has to look around the USC/West Adams area to guess that the financial crisis would affect local homeowners and neighborhoods. However, for Alva, “[t]he housing crisis was the best thing that happened to my business, as I started buying properties in this area at very low prices.” For a housing company it’s acquire or be acquired. “NUPP had to sell six properties during the crisis, and have been left in a worse off position than companies that were able to purchase properties instead.” Those who can’t acquire are left behind. Not wanting to sound cold, Alva states it was just the “right place at the right time”, as his business arrived a year after the housing bubble burst, not to mention most of the properties bought were “almost abandoned and in really bad shape…a lot of people wanted to sell.” And unlike StuHo, who usually tear the original properties down to build new, larger units on top, Mosaic keeps more than the foundations of these sometimes historic houses in an effort to truly revitalize the past.

Perhaps surprisingly, the USC student housing market has only grown in the last five years. With the arrival of huge, luxury complexes such as Icon Plaza, Gateway, Tuscany, and the Lorenzo, “the USC area has become a much more desirable place to be.” Instead of fearing these monstrously big developments, Alva welcomes them. “Despite the increased supply, when, theoretically, prices should go down, these new developments are bringing more and more students back to the USC area.” Alva’s desired customer base also differs from students who would move into such complexes. “We cater to larger groups of students, groups of friends usually, who want to live in a house together.” In other words, Mosaic is a different type of honey, attracting a different flock of bees.

That’s not to say Alva disregards the growing USC real estate market. Alva brings up the future University Village/USC Village development. “The 1.1 billion dollar UV project starting in May will add 4000 units over 15 years.” Alva theorizes it will make the North University Park a more college-town-like environment. “Everyone will want to live around USC, students and young alumni alike. It’s becoming less of a commuter school than it was ten years ago…the more you have improvements from big developments, the more the tide rises. And rising tides lift all boats.” At least, it lifts the smart boats. Mosaic been forecasting the UV development, and is in the process of purchasing more houses in the North University Park area. The following map displays Mosaic’s current properties (marked with yellow houses), and the area where they hope to purchase and develop new properties (marked with the red circle) in response to the coming UV development (the blue mark in the lower right portion of the circle):

            “The smart move is to grow into the North University area in order to meet the incoming business.” Alva hopes such planning will put the young Mosaic ahead of the “more aggressive, and deep-pocketed” StuHo. “The biggest challenge is finding new, well-priced properties. That’s what I worry about at night. The important question to never stop asking is: How are we going to keep growing?”

           It began in 2009, near the mountains of Northern California, the Cradle of Digital Civilization…Google headquarters. Hal Varian, the company’s economic analyst, was struck with an idea: What if Google search queries could be accurately used as an economic indicator? Now, the national banks of Britain, Italy, Spain, Israel and others, along with the US Federal Reserve, have followed up with studies of their own. The results? An intriguing “probably”.

Known as the Google Domestic Trends Index, it can be accessed by anyone simply through, you got it, searching Google. Unlike a lot of indexes which merely act as trailing indicators, the Google Index can act as a current, if not leading, indicator. While it takes most index reports a few weeks or more to gather data and report, Google “makes its updated data available one to three days after searches”.

            Take, for example, the above graph of Google searches related to buying automobiles. The US governments Cash for Clunkers program launched in July ’09, and, accordingly, the searches for buying and selling cars increased dramatically. Not limited only to cars…

            This graph catalogs Google searches relating to unemployment and unemployment benefits. From the time of the ’08 recession on, the increase is visibly clear. With many other examples, there appears to be a clear relation between Google searches and real fluctuations in the US economy.

With research on the dependability and accuracy of the Google Index currently ongoing by many inside and outside the US, its move toward acceptance marks an exciting and modern evolution of economic indicators and the way we can watch the interaction between the “digital” and real world in almost real-time these days; a real-time Census in some ways.

However, there are some who warn that utilizing Google as a true indicator right now might be a risky thing to depend on. Lucrezia Reichlin, of the London Business School, thinks that, while “Google is sexy” and may prove useful as the Internet Age progresses, more time is needed. Its search figures only go back to 2004, and it doesn’t take into account those who don’t use the Internet as often (namely, the “elderly and the poor”).

Progress, though, might be the key word. The Internet is an ever-expanding tool and the number who don’t interact with it shrinks every day. Circling back around to Google, Project Loon aims to bring easy internet access to those who are in more out-of-the-way, remote, or impoverished locations via high altitude Wi-Fi balloons. Greater connectivity will make this small world even smaller, and the reliability and correlation of Internet searches to market trends will only increase. There are already some studies that claim models using the Google data more accurately reflect real market movement than models excluding the data. The future is now. Probably.

Links: Businessweek “Google: Central Banks’ New Economic Indicator” by Aki Ito & Alisa Odenheimer, August 9^th 2012. http://www.businessweek.com/articles/2012-08-09/google-central-banks-new-economic-indicator

Google Domestic Trends; http://www.google.com/finance?q=GOOGLEINDEX_US%3AUNEMPL&ei=eUrcUsjKCYqWiQLmCQ

This past weekend, my cousin Roys Gureli was visiting from Istanbul, Turkey.  She is the founder and CEO of annelutfen.com, a baby/mother online retail store operating in Turkey.  She is a young entrepreneur, a Northwestern undergrad, and a recent graduate of Stanford MBA program. I took this is as an opportunity to learn more about her entrepreneurship journey, and so we started our interview.

“Before attending Stanford, I had a prestigious job working with the Borusan Group – specialized in logistics and energy – in  Turkey.  After graduating, I knew I had to build something of my own and I started to look into markets, see what was missing in Turkey. Soon I realized there wasn’t even one online retail market on baby and mother products,” says Roys. AnneLutfen is now one of the fastest growing online retailers in Turkey. The company has 25 investors, including Agah Ugur and Jaclyn Shnau.

AnneLutfen differentiates itself from its competitors through fast delivery, good customer service (live chat, 10 min. response frame on social media), and advanced technology.  Roys proudly says they have the biggest mother/baby selection in Turkey, and they give great importance in online product descriptions, videos, and comments. They’re also very active on social media, something other Turkish companies haven’t yet picked up on. She says they regularly give away free gifts through twitter and Facebook, and have Instagram competitions to create hype for the website.

Established in 2011 AnneLutfen entered the fastest growing market in Europe: Turkish economy expanded by 9.2% in 2010, and 8.5 percent in 2011. The company also entered a market where baby/mother retail was worth $6 billion and only %1 was online at the time. “Compared to the United States average of 10%, I realized this was the market to grow in. Even after 3 years, I believe the market has still not reached its maximum. Slowly, with offline customers switching their habits to online, there will be huge growth in e-commerce in the next five years in Turkey,” says Roys.

When I asked Roys about how she would describe their change in market percentage and sales since they first launched AnneLutfen, she said that in their first year they developed the product base for their website and perfected their service levels. She says considering the importance Turkish people give on people relations and communication, they knew they had to achieve excellence in customer service if they wanted to be the best in the market. She believes this is one of the biggest reasons they were able to grow 11 times more in only 12 months. Roys says their business is not as highly affected from political crises or the economy as much as other businesses, and gives the example that they grew 40% during Gezi protests, a major uprising in Turkey against the current government that negatively affected most businesses.

Although AnneLutfen was not affected majorly by the recent crisis, Roys thinks customer confidence index is the economic data that affects their business the most. “Baby and mother retail does not get affected by crisis, but political instability and currency fluctuations affects customers spending habits. People spend more carefully in unstable environments.”Roys tells me that in order to survive the crisis in the past years, they focused on growing their sales team and support teams, and promoted their marketing head to be the merchandising head in order to cut on costs and have a better marketing plan with the suppliers.

When I asked about their biggest challenges, she responds firmly: getting new investments. “ E-commerce requires a lot of capital before the company scales and becomes cash flow positive, therefore the investing environment in Turkey is very important. AnneLutfen has been growing with crowd-funding. We have 47 different angel investors in the company, 80% of which are foreigners, and it has been challenging to get those,” she continues by saying that foreign angel investors want to invest in Turkey since it’s a fast growing market, but they want to limit their exposure with a minimum investment amount, and that since Turks are new to angel investing, their appetite to invest are less than foreigners.

Finally, Roys says that there are always new entries to the market, but it takes time to build relationships with suppliers and develop a large product base. “The market is very big; we are the only large player so there’s always room for more players.” However, she says that for now, since they don’t have competition, they’re able to maintain their prices: “ We are a full price website, but every day we have special offers on different products. Although offers definitely induce sales, most parents are price-agnostic, so discounts are not a must in our business.”

 

 

 

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