October 2007 VOL. 2

Technology:

New Tools for Real Estate Investors

As commercial real estate investment becomes an increasingly global undertaking, decisions about buying, selling and managing assets are growing more complex. Technology helps executives access and evaluate data more quickly than in years past, but there are gaps in the areas covered by existing technologies. A need for predictive modeling in business intelligence applications, for instance, has driven GE Real Estate to hammer out solutions of its own.

"The software development that we're doing on predictive modeling is all in-house because until recently the vendor community had not yet addressed it in any meaningful way," says Hank Zupnick, GE Real Estate's chief information officer.

However, as Zupnick notes, software providers are working to fill those and other gaps in commercial real estate technology. Intuit Real Estate Solutions in June released IMPACT, a portfolio modeling tool, and on Sept. 6, Resolve Technology unveiled a portfolio management and analysis software package called Portfolio Maximizer.

Global Real Estate Monitor spoke with four of the commercial real estate industry's leading high tech service providers about the challenges commercial property owners and investors face, the new systems being introduced to tackle those problems, and how these new technologies are changing the industry. Here are those experts, and what they had to say.

Terri Dowen is senior vice president of sales at Yardi Systems Inc., a Santa Barbara, Calif.-based software developer that specializes in commercial real estate technology solutions.

Mark Kingston is CEO of ARGUS Software, formerly Realm Business Solutions. The Houston-based firm's flagship product is ARGUS, a property valuation program based on discounted cash flow.

Kenneth Meyer, a principal in Deloitte Consulting LLP's New Jersey office. He specializes in commercial real estate.

Andrew Rains is vice president of sales and marketing at Cleveland, Ohio-based Intuit Real Estate Solutions, which develops and sells technology for global property managers and corporate real estate executives.

Edward Wagoner, chief information officer for global real estate firm Jones Lang LaSalle. He handles the technology requirements for the firm's Americas group.

GREM: What are some of the commercial real estate investor's current challenges and what recent innovations address those problems?

Dowen: The most advanced software packages feature fully integrated solutions that consolidate portfolio, financial, lease, and other data into one database, giving all network users instant, secure, real-time access. Strategic advantages that such technologies offer include global portfolio management through a single system that integrates operating data with portfolio financials; executive dashboards that offer ready access to key performance indicators; and portals, which permit exchanges of real-time information with stakeholders outside your company.

Kingston: Some of the pain points we're looking at are inter-company work flow, or process management between offices and companies. With globalization, that includes universal translation, both of language and of real estate data that may be expressed differently from one place to another. Universal translation within one box is the number one technological evolution for commercial real estate in the last few years.

Meyer: Technology that empowers today's real estate organizations is better than it has ever been, but consolidation for reporting and analysis continues to be a challenge. While sophisticated systems have greatly improved this kind of analysis at a core portfolio level, challenges continue to prevail when portfolios span globally and when multiple operators/managers are involved.

Rains: Commercial real estate companies want to maximize their return on investment, and there are models out there that look at individual properties. But there hasn't been a model that allows you to say what are the best buy-hold-sell decisions I can make to take this 11.2 percent return on my portfolio to a 12.5 percent return. IMPACT is a game-changing product that allows the chief investment officer to benchmark performance, model different portfolio scenarios, and figure out the optimal way to deploy capital.

Wagoner: Commercial real estate investors, whether large or small, regional or global, continue to need tools that enable efficiency and better decision making. The analytical work that used to be prepared over the course of weeks is now required to be completed in hours for investors wishing to take advantage of accelerating trends and market demands. The industry continues to make strides in better enabling data collection, efficiencies through elimination of duplication (e.g. duplicative data entry), increased cycle time and the introduction of better analytical tools. Yet the increasing speed at which the market operates often outpaces the time required to develop, integrate, implement and train to take full advantage of the innovation.

GREM: What commercial real estate problems still need to be addressed that aren't fully served by available systems?

Dowen: Adoption rates for new technologies are higher than ever before, and the importance of tying all of the pieces together, from the front office system to the C-level executive assessing complex global portfolios, is now a priority.

Kingston: The market is demanding the accuracy and scalability of an integrated solution, and that integrated solution can't just be U.S.-based anymore. The next evolution requirement is data normalization for analytics and reporting; the ability to unify data definitions across multiple solutions so you can aggregate and use it effectively is a major advance in the market.

Meyer: Calculation of distributions and waterfall calculations continue to be a highly specialized requirement. New tools have begun to offer the ability to support this kind of analysis, but the complexity and uniqueness of these calculations have resulted in a continued reliance on spreadsheets.

Rains: The next challenge is really an end-to-end solution. Real estate executives want to be able to model out the best way to deploy capital, then drive it down to the property level and get a budget, and drive that down to the transaction engine level and see how the property is performing. Then you can bring those actuals back to your model and see how you're performing against the scenarios you created.

Wagoner: The globalization of capital monetary flows, both inbound and outbound, require an increased focus on understanding regional and global economic trends while having capabilities to respond quickly and appropriately. There is an increasing demand for global data as well as better analytical capabilities to enable faster decisions. It's moved beyond ñhow do we collect and store the dataî to ñwhat does the data meanî.

GREM: What technological developments will the commercial real estate market see in the next year or so?

Dowen: Expect to see fewer paper transactions and more electronic processing for every aspect of asset and investment management. As an example, look for browser-based, intelligent workflow applications that automate paperless rent collection and receivables, invoice management and payables processing, and electronic funds transfers.

Kingston: One of the requirements emerging on our radar is the need to be mobile-centric. Whether it's to a laptop, a tablet PC or an iPhone, we have to be able to project these applications into that environment with the ability to access and consume that data. We are advancing in collaboration on a couple of fronts that will put us and our customer in a position to have that advantage.

Meyer: Enterprise software giant SAP has begun to make a visible play in the commercial real estate market. With leading technological flexibility and historic market dominance (in other verticals), combined with a new rapid deployment approach for implementing SAP in commercial real estate, SAP can be expected to deliver a compelling solution for the sector in a market that has not seen a new major entrant in decades.

Rains: We are creating that middle piece of the end-to-end solution, coming out probably in the first quarter of 2008. That will be cash-flow budgeting that ties your ability to model out your portfolio all the way down to the actual transaction engine that does all your billing, payables, job costs, all the way through the financials. That will be part of our IMPACT solution.

Wagoner: The continuing demand for faster and efficient collection and analysis of information will insure that we see technological developments for the foreseeable future. As workers become more mobile, the ability to access this information remotely and through a variety of access points will increase. While the real estate industry has historically lagged behind the general business world in this respect, it is starting to take advantage of these capabilities.