September 30, 2016
Interviewed by: Privcap
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How to Tackle Real Estate’s Data ‘Problem’

Alan James of RealPage discusses the competitive advantages of good data, and what GPs and LPs should look for in a data platform.

Alan James of RealPage discusses the competitive advantages of good data, and what GPs and LPs should look for in a data platform.

Tackling Real Estate’s Data “Problem”
With Alan James of RealPage

Q1: Large GPs have greater ability to acquire and process data. Why does that matter to smaller investors?

Alan James, RealPage:
Not unlike the larger GPs, mid-market and smaller GPs have the same need for the data and the analysis to continually to measure and monitor their KPIs and KSIs (key performance indicators and key success indicators) on their business to better serve their investor community.

Q2: Is that also an issue on the investor side? If so, what are the consequences for smaller LPs?

James: In the limited partner’s space, whether it’s an institutional player like a pension fund or a family office trust, their requirements are exactly the same, but perhaps they may be even further challenged in that real estate, in many cases, is a relatively small allocation to the overall investment platform. Therefore, in many cases, you could have a limited partner managing $2 or $3 billion in real estate with just…four or five professionals managing that real estate. So, their access to technology resources and software to help them run the business is perhaps even a greater challenge than the general partner.

Q3: What sort of features should a GP look for in a data platform?

James: As you might imagine, it varies from GP to GP for a couple of reasons. Number one, as we mentioned earlier, is scale—the resources they have available to run the platform. Second is the diversity of their portfolio in terms of the number of managers they use—their operating managers, joint venture partners. Then, the asset classes themselves—are they a diverse portfolio across multiple asset classes like lodging, commercial, multifamily, student, senior, etc.? Or are they focused on one asset class with just a few partners?

If they’re dealing with multiple managing partners and joint venture partners and they have a rather diverse asset class, then they’ve got quite a challenge. That is, how do we standardize the collection of that data so that they can use that data for the now, since they need it at a portfolio level? Really, their options are two: they can either mandate some kind of a platform down at the operating partner level or they need to find a mechanism in place to collect data and provide that data holistically at the GP level. As we mentioned, in many cases, the GP may not be in a position to dictate, if you will, to their operating partner the system. Either they have a joint venture partnership that does not provide for them to do so or financially they are not in a position to mandate a platform down at the operating level.

Q4: What about LPs? Are their needs much different?

James: Both on the GP side, the standardization of data, and the LP side—they both play hand in hand. In fact, I would call it the real estate ecosystem: the LP, the GP and the operator and how do those three ecosystems play nicely together and pass the data from one level to another, (i.e., the lowest level operating level up through the GP to the LP)? At the end of the day, based on each of the individual asset classes that both the GP manages or the LP invests in, there are a series of standard KPIs and KSIs…that both the GP and LP look at on a regular basis.

So, the more they’re able to standardize the collection of the data that supports the KPIs at that platform level, the better it’s going to be for both the LP in communicating and evaluating the GP and the GP evaluating their operating partner. When you think about it, it really is a trickle-down. It starts at the top and works all the way through the GP down to the operator level.

Q5: What are the core capabilities of RealPage’s own asset management product?

James: Our approach on this whole providing data at both the GP/LP level is founded on a couple of key concepts. First of all, the aggregation of the data, in an agnostic way, meaning that the property management companies and the joint venture partners are hired to do one thing: to manage the operations of that asset and to maximize value wherever they can.

Our view or approach to that is to not require any partner behavior at the lowest level. Let them use the technology tools they’re most comfortable with, but rather providing data aggregation layer—data aggregation service—that allows the GP to collect data on a monthly basis in a standard, prescribed format that then can be used and aggregated at an asset level and to evaluate it through those KPIs and KSIs. Two, the KPIs and KSIs that each of them are being evaluated by and three, then, the strategies—whether it’s buy/sell—can be adjusted accordingly based on the data they’re looking at. So, our approach to this is to provide an asset management system that collects the data from different operating partners across different asset classes in an agnostic way, with results being a portfolio-level asset management system at both the GP and LP level.

Q6: What, ultimately, are LPs looking for from their GPs when it comes to data and fund-level information?

James: The LPs are looking for timely and accurate information. In many cases, even today with all the great technologies available to both the LP and GP community, the time lag between quarter-end reporting is 60 or 90 days after quarter end. With respect to the LPs, what they’re looking for from their GP partners is timely and accurate data, four or five to six days after the quarter end, not 90 days after the quarter end. That is really difficult to do if you don’t have some kind of automation in place to collect the data, aggregate the data and disseminate the data up to your key stakeholders.

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