Real Capital Analytics Inc. will enter new territory in 2007, both figuratively and literally. On the service line side, the New York-based research firm is helping to launch a set of pioneering indexes to support derivatives trading, such as index return swaps. The MIT Center for Real Estate developed the 29 indexes of U.S. commercial investment property prices using data collected by Real Capital, which compiles, analyzes and publishes information on property sales and capital flows.
“Real Capital Analytics is riding the wave of real estate becoming a legitimate asset class, and at the same time we’re trying to enable and encourage that process,” says Robert M. White, Jr., president of the firm.
Real Capital is also preparing to increase its geographic coverage to track international markets. The company will determine specific countries and cities for coverage in 2007, after executives have had an opportunity to investigate candidate locales firsthand.
The decision to expand data services beyond the United States was client-driven, White says. Investors frequently ask the company to provide data on the international markets in which they search for deals.
“It’s just become apparent in the past six months how much activity and capital is going abroad, and how much of the global capital flows can be traced back to our U.S. clients,” he says. “It’s not just sophisticated opportunity funds [investing in foreign real estate]. It is developers and pension funds and the whole array of other investors out there.”
For its U.S. data collection, Real Capital monitors public records and published sources for transaction details, combined with information collected by its own teams at the market level. The company now tracks the majority of deals valued at $2.5 million or more, having increased its coverage from only tracking transactions valued at $5 million or more.
One of the challenges the company faces in tackling markets outside the U.S. will be deciding the size of deals to track. Much will depend on the resources it can tap, either through public information or with service providers in those markets.
“Initially, we’re going to try to focus on the larger deals that tend to be a little bit more public,” White says. “Over time, we’ll start backfilling it in with joint ventures and data licenses on a country-by-country basis. We’re not going to try to capture every deal, but [will focus on] the significant deals global players would be interested in.”
Researchers who have come to rely on Real Capital’s domestic data welcomed news of the company’s global aspirations.
“It’s great news for us,” says Ross Moore, senior vice president of market and economic research at Colliers International in Boston. “I would imagine that when they launch their global product, we will look to expand our contract from the U.S. to global, because we’re doing more global business.”
Real Capital has set the industry standard for transaction and capital flow data in the U.S., and having access to that caliber of information in international markets will be an asset to real estate service providers, Moore says. “If you are investing globally, one of the first things you need or want is sales comparables.”
Real Capital’s international expansion will help the commercial real estate industry function more efficiently, according to Josh Scoville, director of strategic research at Property & Portfolio Research in Boston. Good market data is available in many Western European markets, but information on Asia, Eastern and Central Europe isn’t currently available in the amount or quality to which U.S. investors have grown accustomed.
“I love [Real Capital’s] data over here and am excited to have a comprehensive data source on capital flows in places like Europe and Asia as well,” Scoville says. “That’s a data point that the marketplace really needs.”
Where will Real Capital go first? It will start by tracking established commercial real estate markets where information is easier to come by, like those in Japan and Western Europe, says Dan Fasulo, director of market analysis at Real Capital. More markets will be added as the company establishes new relationships and builds resources.
“In order to service our clients on a global basis, we’ll need to be where our clients are investing,” Fasulo says. “If The Blackstone Group ever acquires Mars, I guess we’ll be there, too.”