Faced with a mountain of disparate operating data, many real estate owners want a "single source of truth" that compiles all of their vital information in one place and outlines how their portfolio is performing. Mark Kingston, CEO of Houston-based technology firm Realm Business Solutions, is determined to satisfy this demand. In June, he unveiled INSIGHT XI, a business intelligence program specifically tailored for commercial real estate executives. The tool has been adopted by organizations such as the James Campbell Co. of Hawaii, a national real estate operating company that owns more than 12.5 million sq. ft. in 16 states, and Houston-based retail REIT Weingarten Realty Trust.
Herb Yamasaki, vice president of information technology for the James Campbell Co., notes that INSIGHT XI offers "significant time savings" in preparing for audit schedules and third-party reports. The software can also help real estate executives gauge how small changes such as a lower rental rate can impact the overall performance of a portfolio.
NREI: What is business intelligence software?
Kingston: It is technology that allows companies to create "dashboards" to manage and monitor a company’s performance. The dashboard shows up on the computer screen and is similar to the dashboard in a car. But, instead of dials that indicate speed and oil and gas levels, the dials on this dashboard illustrate a company's performance. Each dial represents different key performance indicators, also known as KPI.
NREI: Why did you design business intelligence software specifically for commercial real estate?
Kingston: Most companies are focused on key performance indicators such as earnings, sales revenues and expenses. Commercial real estate needed a specific business intelligence application because the industry uses different indicators to determine performance. For example, companies outside of commercial real estate don't generally track vacancies or average rents. Other main performance indicators are net operating income (NOI), regional rents, occupancy trends, outstanding receivables and retail sales per square foot. There are various key performance indicators derived from over 50 metrics that owners can put on their dashboard.
INSIGHT XI evolved from conversations with many of our larger institutional clients including REITs who were using CTI, our property management software. They wanted a smart way to consolidate reporting, analyze “what if” scenarios and measure performance. For instance, an owner can adjust the metrics to indicate a $2 decrease in rental rate. INSIGHT XI will show how the other key performance indicators will change because of the decreased rental rate.
NREI: Explain how business intelligence software helps commercial real estate owners.
Kingston: Managing large real estate portfolios is complicated. Owners and managers not only have to worry about taking care of the actual buildings, they have to keep up with hundreds, if not thousands of tenants. They end up using different software packages for property management, lease administration and financial reporting. For example, they might use financial analysis software to run all the financials on properties, and a separate software product that manages the property itself.
Each of these programs has its own collection of data. Without a strong business intelligence tool, owners must run different reports through the programs. It takes a lot of effort to report on a property-by-property basis without the benefit of benchmark reporting across the portfolio. This type of analysis doesn’t provide a comprehensive view of all the key performance indicators, making it difficult to use data from many different sources to make daily and strategic decisions.
NREI: So how does business intelligence software connect those dots?
Kingston: Think about the whole process as a human body: It's easy to see how business intelligence software helps. If the different software programs that owners use are the organs, then the business intelligence software is the brain. The brain gathers information from the organs and all that information is stored in the brain, which then measures performance and reports on the different organs.
Business intelligence software also allows owners to drill down into their performance indicators. For example, many owners have more than 10,000 tenants in their portfolio, and they need to correlate various data points to help them make decisions. For example, let's say that a retail real estate owner has a children's clothing store in several centers but all of the stores are not performing well. The owner can compare that store and center to others with the same tenant.
NREI: How much does the software cost?
Kingston: INSIGHT XI's pricing and configuration depends on the user's technology infrastructure and business, but licenses generally start at $25,000.
NREI: What are the challenges to implementing a business intelligence suite?
Kingston: The greatest challenge is gathering the data from the various programs and putting it all together. The integrity, or accuracy, of the data is also really important. For example, most databases contain inaccuracies ranging from incorrect numbers to wrong dates. Most of the data errors are related to data entry, and the data must be "scrubbed" — a word to describe the process of cleaning up the data. If the data is bad, the dashboard and reports won’t be able to give an accurate picture of the company’s performance. Another challenge in implementing this type of technology is the industry's dependence and familiarity with Microsoft Excel. People are so used to working in Excel that they sometimes hesitate to use anything else, even if it means that they won't have to create thousands of spreadsheets. One big benefit to INSIGHT XI is that it's compatible with Excel.