New York tech firm Bonside nabbed equity investments from Kimco and Nuveen as it looks to place a new underwriting tool in the hands of more retail landlords, The Real Deal has learned.
Bonside founder and CEO Neha Govindraj is set to reveal the news Sunday during a panel at the International Council of Shopping Centers’ annual ICSC Las Vegas trade show and conference.
The company declined to provide details on the equity investments, which aren’t part of a formal funding round. Lead investor Floating Point also participated in the capital raise.
Kimco and Nuveen Real Estate, part of TIAA, are among the first to use the new Bonside Scorecard. The tool, which costs $1,500 per scorecard, helps retail landlords determine the risk of non-credit tenants by analyzing store profitability, cost of goods sold, labor and more than 20 other metrics aimed at fortifying the due diligence process.
Its release comes as smaller mom-and-pop businesses look to grow their physical footprints, while landlords diversify their centers’ tenant mixes.
“One of the things that became really apparent to me was that no one really understood how to evaluate brick-and-mortar,” Govindraj said. “Maybe they thought about it but were applying a blanket approach.”
Not all tenants are created equal, and Govindraj would know. The serial entrepreneur cut her teeth at Bain & Company’s private equity retail practice before moving on to start express facials and beauty services concept Glowbar. The experiences gave her first-hand experience in retail financing and brick-and-mortar growth from a tenant’s perspective.
That’s why Bonside, launched in 2023, not only provides underwriting intelligence but also capital to retailers, such as Black Seed Bagels, Go Get ’Em Tiger, Broad Street Oyster Co. and several others as they expand their store counts.
That’s a page out of the playbooks of developers such as Runyon Group, which has invested in Buck Mason, John Elliot and Go Get ’Em Tiger. The investments give Runyon skin in the game by backing some of the tenants at their projects. That’s a move played out on a much larger scale with mall owners such as Simon Property Group and Brookfield Property Partners going in with brand owner Authentic Brands Group on the 2020 purchase of Forever 21 out of its first bankruptcy.
The Bonside Scorecard is another means of allowing smaller businesses to, as Govindraj put it, “have a chance to win” at physical retail.
The CEO declined to say how many landlords are using the Bonside Scorecard currently, adding that the number is ramping each week. It’s currently only in use within the U.S.
For Nuveen, the decision to invest in Bonside “clicked” immediately for Katie Grissom, the company’s U.S. head of retail and mixed-use. With a background in retail private equity, she’s seen the challenges that come with non-credit tenants at properties, but also views them as a “rising class” of tenants that do not have the same access to capital and data as larger chains.
As more landlords tap into smaller businesses to fill space and merchandise their centers to fit local communities, understanding how to work with this emerging tenant base is seen as key.
“The more diversity you have in your tenant mix, the better off you’re going to be,” Grissom said.
The pandemic underscored that and may have helped lenders see smaller businesses in a different light.
“I think what really started to change that was COVID. We saw in our portfolio that most of our mom-and-pops and non-credit tenants were paying their rent. This was their livelihood,” Grissom recalled of that period.
That contrasted with larger chains that in some cases leveraged their multi-lease status to hold off or defer on paying rent.
“I think lenders started picking up on that,” Grissom said. “A lot of institutional investors are saying, ‘Hold on. One size doesn’t fit all.’”
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