Home Companies This Chess Master’s Arbitrage Platform Intends To Be The Bloomberg Terminal of Real Estate

This Chess Master’s Arbitrage Platform Intends To Be The Bloomberg Terminal of Real Estate

by Mike Jordan

Any fan of chess will tell you the game has a variety of real-world applications. But one particular fan, chess master A.J. Steigman, would say there are other ways to use it that one might not expect.

“Chess is a fantastic game,” Steigman says, “which can give you a lot of pattern recognition skills that help identify trends and opportunities.”

Steigman at WhartonThe opportunity Steigman sees with Steignet — an cheeky amalgamation of his name and the fictional artificial superintelligence system from the “Terminator” films — is in real estate trading, but at speeds that give a superior advantage to those buying and selling at high frequency.

Steigman believes there’s too much noise for investors to analyze on their own, even in areas as basic as multiple listing services. “People think there’s a master MLS in the U.S., and that’s not true,” he says. “There are over 1,000 MLS in the U.S. — Florida has around 40, Georgia has 20. There’s different ownership and variables. The data is highly fragmented.”

Steignet’s objective is to automate processes, analyses and transactional components, then filter the numbers down to give clearer information faster and help buyers make better decisions. As opposed to having real estate investors calling brokers to place trades, Steignet automates purchasing sequences.

Steignet, according to Steigman, is for investors looking to buy and flip new buildings, rental properties and more. He compares the platform, which works by automating processes, to the Bloomberg financial data terminals, and says the benefit is in the speed of identifying and locking up real estate deals.

And no, he does not think such transactional business is bad for cities. He actually believes the opposite, especially for the city where Steignet will soon have an office.

“Atlanta’s really different this year than last year and five years ago,” Steigman says. “If you’re able to find the deals, and billions of dollars are coming to the market, it’s modernizing the entire city. That’s very good for Atlanta.”

Institutional clients, such as family offices, hedge funds, and multi billion dollar companies deploying large amounts of capital need systems like Steignet, according to Steigman, who calls the platform a sort of digital “bounty hunter,” that helps them find profitable deals.

“It’s like World War III going on right now,” he says. “Commercial cap rates are compressed, and old school mentalities are being squeezed. Each of these large companies pulling hundreds of millions of dollars, they’re going into lower asset classes, like single family rentals, and there’s a race to arms in trying to lock up these deals that fit their parameters.”

Supporting his argument is the seed round of $1.3 million that Steignet raised in Q4 of last year. Oversubscribed by 30 percent, the round raised more than $825,000 in a single day.

Describing himself as an “opportunistic entrepreneur,” Steigman, much like a chess piece, as been all over the board.

AJ Steigman Playing As a Kid

The Florida native learned chess at the age of four, and entered his first tournament a year later. By 13, he’d gained the ranking of chess master, and was a member of the U.S. Chess Federation’s All-American Chess Team for eight years.

After high school he attended Emory University, where he helped the school set up its chess program, and would play exhibition games against multiple people at once — sometimes as many as 40 players.

He then went to work in investment banking at Merrill Lynch. Unfortunately, he arrived just in time for the 2008 financial crisis, just as Merrill Lynch was about to be acquired by Bank of America. He says the experience taught him a big lesson in entrepreneurship.

“My group got annihilated with the acquisition, and it left a permanent impression on my mind. The old way of thinking is that corporations are safer than a startup, and I vehemently disagree. And I’m not going to let upstream corporate bureaucracy, which I have no control over, decide my destiny.”

From there, Steigman went first into streetwear. In 2009, he became a vendor for Nike and began selling sneakers under the name “AJ’s Rare Footage.” Later, he and a partner started an ecommerce and social networking platform called Soletron, which had a model similar to Etsy, but intended specifically for sneakerheads.

Soletron was acquired by online retailer Karmaloop, and while “decompressing” after the successful exit, Steigman started looking at commercial and residential real estate. That’s when the benefits of pattern recognition from playing chess, and from his experience working in investment banking in the 2008 recession, began kicking in again.

He saw individual credit being diminished and people being unable to buy houses. He noticed the transience of millennials, who wanted to be “tactically light” and move around much more than previous generations. Renting provided that key, so he started buying units, on a smaller scale than larger companies, but basically shadowing their operation.

His hypothesis: invest in one-off units (houses, condos) in tertiary markets like Atlanta, before the market had the prominence it enjoys today. At the time, these assets were being unloaded for pennies on the dollar by investment banks who wanted them off their balance sheets.

“A lot of people — very successful real estate investors — thought I was from Mars to be doing this,” Steigman says. “It was the complete opposite of what major firms did; they bought commercial buildings in large cities. Nobody bought $200K assets or less. That was beneath them.

“Coming from IB and being a quantitative data guy, I saw that it was very inefficient. So I started a multi-state brokerage and got closer to the transaction, to have a better way to analyze deals.”

Steigman says he tripled investors’ money in a short time, far surpassing the commercial returns of his doubters.

He then went to Wharton for an MBA, and started Steignet in mid-2017 while still a student, but says he didn’t start really working on it until after graduating in summer 2018, in order to focus on academics.

Steignet is currently expanding to Atlanta’s Buckhead neighborhood from Florida, and Steigman says he wants to raise $5 to $10 million in the next six months. He says he’s seeing new patterns again, and wants to secure more regional and large clients that need a real estate deal-hunter.

Atlanta is also Steignet’s top market, followed by South Florida, Orlando, Tampa, and Philadelphia. Steigman says he’s seeing demand grow rapidly, with interested clients in Alabama, Ohio, and other parts of Florida and Georgia.

Steignet’s upcoming Series A will fuel the company’s “geographic expansion,” he says, and the company is looking for more AI programmers, as well as acquisition analysts on the business and corporate development side.

It’s something you don’t have to be a chess master to understand: Patterns emerge, and being first to see them provides a tactical advantage. And when that advantage equals revenue for clients, those who can read the patterns are most likely to make money.

“Every cycle, there’s always the “in” industry — social media, mobile apps, asset sharing,” Steigman notes. “Real estate tech is on fire right now. Today is the “Goldilocks” period and it’s starting to be disruptive.”

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