Rate My PropTech Idea
I’ve started building out a website (well my friend who’s a software engineer is) that allows CRE companies to aggregate/archive, organize and search for the debt & equity broker OMs they receive. The interface would be identical to CoStar but the data 100% accurate – rent rolls, lease comps, sale comps, historical operating statements, etc… Would also be useful for tracking recent sale terms, debt terms and archiving market scoop.
I've worked on the buyside and we’d receive 100+ OMs / year just for office buildings in one MSA but all the info gets lost in file drives and forgotten about – especially when someone leaves the company.
Think it would be helpful to have all your old / live deals overlaid on a map and easy to find. Especially when you’ve been collecting a ton of OMs in one specific submarket and have a live deal.
If you think about it the buy side has more info than the brokers…as they’re receiving OMs from Eastdil, CBRE, JLL, Cushman, Avison, etc…
Thoughts? Think there’s demand for this?
Anyone willing to try when it's ready?
Generally like the idea, but why wouldn’t I just make a folder for a market and subfolders for each submarket?
I totally see how what you’re describing could be better than the above with added functionality, but also sounds like maybe more worth than it’s worth or not a huge value add.
Good points….couple thoughts on that:
1 Definitely not curing cancer but CRE firms are paying $30K / year for crappy data from CoStar when they’ve often times have better info sitting on their folder drives. Retail especially.
2 Organizing folder by submarket is a huge pain because there ends up being too many folders to efficiently navigate. Also you can’t search by more than one criteria to quickly find the right info….e.g. X submarket, office, closed after 2021, $50MM+, 200,000+ sq. ft. and then immediately pull the rent roll / lease comps.
I was thinking you can outsource the data entry and charge like $10 bucks an OM so it doesn’t take any additional resources.
Would this be used to only organize proprietary internal data or also pull in and interface with publicly available data?
We're working on a min. viable product to test out demand so just internal proprietary data to start . Can see how pulling in public data could add value. Maybe news feed that pulls in latest news articles for each property. Any ideas?
Couple bolt-on features I was thinking about:
1 Internal debt / equity pipeline tracking tool that takes you from deal screening to closing.
2 3rd party deal sizing service with 24hr turnaround time. We used a team in India when I was at JLL. Not perfect but they can get you 80-90% of the way there.
I like the idea
Couple issues. One, broker OMs aren't necessarily accurate, which is why any lender or investor does their own diligence. These are also asks, not actual closed deals, so thinking this will give a comp for recent sale/debt/equity terms just isn't accurate either.
I think there would be some demand, but I'm not sure that demand is coming from smart players. Every OM ever made isn't worth the paper it's printed on. It's clickbait; it's the 7 Secrets Rich People Know to Build Wealth at the bottom of the listicle.
So while it's a clever idea, and certainly has some value in showing trends in what the market expects or wants, I think that using OMs or a database of them as a source of reputable data is bound to fail prey to a garbage in, garbage out issue.
Ha definitely see your point...I've worked in debt brokerage so also skeptical of contrived broker proformas, MLAs, and market stats.
However, there is a substantial amount of "factual" information such as lease terms (rent roll), historical operating statements, expense margins and property specs. Also some of the sale / lease comps can be useful. There's also a lot of supplemental DD information that's distributed like occupancy history, leasing pipeline reports, CapEx, and internal underwriting that could be useful to have aggregated / organized in one location.
The eventual sale terms / debt terms would be entered as well.
It is exceptionally rare that I see any of that on an OM, though to be fair I get them from IS guys, not from GPs looking for debt/equity terms.
I would argue there isn't a single fact, aside from the address and maybe unit count, that can be relied on in an OM from an investment sales broker. First off, rent rolls change, which obviously isn't the fault of a broker, but if I get an offering memo today, it's got, at best, April's data on it. So right off the bat it's not reliable. Operating statements are always bullshit, pure and simple.
Basically any information that isn't already in the public record (tax bills, for example) is probably wrong, either deliberately or by the delayed nature of bringing a property to market. All of the additional diligence you mentioned is never in an investment memo. Most of it you get, maybe, if you really dig in and ask for it. Much of it will come in your DD period.
Bursting the Bubble.
...Great idea.
BUT - Most people sign confis or NDAs to receive said OM. Operating Companies do not want to disseminate proprietary data, they will sue.
Great point...few thoughts below:
1 The information a CRE firm sends / uploads would only be available to that company. We wouldn't share the info...otherwise 100% we'd get sued immediately.
2 We would be willing to sign a confi / NDA with a CRE firm that subscribes to the platform.
3 Companies on the buyside outsource their work all the time meaning they're sharing proprietary info with outside service providers. I.e. Situs, etc.. so there must be a way to get companies comfortable with a confi / NDA.
I agree with this. I really like the idea - it replaces the need to search for deals and / or to have an analyst / associate consistently update a tracking file, but on the NDA point - a lot of NDAs say you will not use this information for the evaluation of other deals. Of course people do it, but subscribing to a tool that does this purposefully is kind of admitting to it, so I'm not sure a lot of firms with legal departments will sign off on it. At the same time I'm sure there are plenty of players and small operators who don't care and will
Agreed that this is one of the biggest issues that we have to work around. Maybe marketing the software service more as a pipeline tool with unlimited data storage is the way to go (with all the same features I mentioned).
Feel free to PM me if you further want to talk things through and flesh out ideas. Always happy to work with start ups.
I have previously thought that it will be nice to actually create folders by broker, product type, market, etc or have an internal database for all the OM we receive. Candidly, I thought it will first be useful to review as I had an interest in working in debt & equity brokerage but that never panned out and I stayed in CRE banking. So I see where you are coming from but to be honest, even when I wanted to save all the OM's I was receiving, I never had the intention to use them to track or look at comps, rents, etc as Costar was giving us that info in a neat format plus using Costar gave us credibility when we made submissions to a credit committee. I have seen them shoot us down when we use comps from the OM. Secondly, I never even look at the historical operating statements and T-12, etc in the OM. It's almost worthless. Give me the source documents any day. Brokers will take the source doc and can exclude what they say is non recurring expenses or cap ex items but who really knows if they are legit. I also use appraisals from our internal closed deal database for sales and expense comps. Cant beat that.
What I will find more useful is an internal database for our very own internal credit submissions or appraisals that I can sort and filter by sponsor, market, product type, etc. If I am working on a deal for a particular sponsor, such a database will help us quickly see what is our exposure, their latest financials we have on file, if we have done a deal in that market, what was the rent comps, sales comps and expense comps we used when we last did a deal in the market, etc. This is more on us having an organized system and not so much an external business idea but your post just got me thinking how we can do much better. You will be surprised how so many firms transact in the tens of billions and do not even have salesforce or have such a clumsy organizational system, etc.
Super helpful feedback! It can handle internal credit memos and ancillary deal docs as well as broker OMs. Just PM'd you.
Being able to mine and organize data from appraisals would also be helpful. Leveraging messy data in general is value add and agree that there is a lot of inefficiency there but not convinced data in OMs is most valuable
True...that seems to be the consensus from the responses. We're going to expand the software to include investment memos, appraisals and OMs.
Costar is already filing the lawsuit. Be careful saying things like that
It's funny because it's true
Ha so true. They've got unlimited resources for lawsuits....could be doing nothing wrong and they drop a lawsuit but don't have hundreds of thousands in the budget for lawyer expenses.
I like it for, more than anything, OPEX information. Opex comps are damn near impossible to come by outside of your own portfolio and the information in OMs. Having software that could consolidate OMs and sift through the data in a more automated way to make it easier to extract that information would be huge.
My main concern would be it's ability to accurately sort by age of property, condition, quality, etc. so you can more easily pull the type of info needed.
That's definitely one of the benefits I have in mind. Those are all filters that we're including (in addition to a bunch of others) so I don't expect that to be a problem. At first we're going to have manual data entry (that you can outsource to us) but eventually we'll use more machine learning once (hopefully) we scale up and have more data. I'll reach out once it's ready...will give you a free subscription!
It would also be nice to be able to quickly search tax methodologies and tax bills in one place
Agreed but I can't think of a way to do this without building a custom web scraper for every county in the U.S. which would be a huge undertaking without significant scale.
Sound like a great idea for the internal reports and appraisals
Technology issue is extracting the info accurately and with use. Ever try to copy and paste from a PDF into Excel? Plus, how do you convey qualitative info? Reports in various formats?
So I think you have a business case (internal data, data mining). But the technology seems like the issue. The expensive and costly issue.
Agreed. At first we'll just offer 3rd party data entry (like $10 / 20 bucks) for OMs, credit memos, and appraisals. Once we get some scale we'll figure out how to apply machine learning to extract the info which probably includes a final review from a person.
Maybe someone has already mentioned this, but I feel the value in this type of project is less organization and more AI / Data Extraction paired with the historical tracking. For example, if you can successfully develop a program that (1) aggregates these OM's, (2) data mines them via AI and automatically plugs it into an ARGUS model (or other valuation software) via some type of API, and (3) track them in a searchable/filterable database (on a map as you mentioned - great concept!) with a dashboard. Maybe CoStar already does this, but nobody seems to trust CoStar. This would arguably be the value in developing your own valuation software, but maybe that's a step too far.
Anyway, Buy Side folks would receive the OM, upload it to your software, and it'd automatically parse the data from the PDF and generate a prelim value that an analyst could then adjust as needed.
Thanks for the feedback! Agreed...that level of automation is the end goal...however it requires a ton of data to be able to reach that level of automation. For now we're going to provide an option for companies to outsource the data entry for like $10 - 20 bucks and then first cut of the underwriting for like $50 - 100 w/ 24 hour turnaround time. I've got an overseas company that does really good work for the $ / hour.
Isn't this what most deal pipeline management platforms already do? Atlas X, Dealpath, Altrio, etc. all have the ability to drag and drop or forward emails to their platform which will automatically slice the high level financials that you can then compare directly with all the other OMs you've received by whatever category you want. This is obviously useful, but I think you may be late to the game.
I think you've made the best counter argument thus far, let me know your thoughts on the below:
1) We're still in the very early innings of PropTech...there's a huge untapped market that the companies you listed still haven't reached.
2) We're targeting lower to middle market companies at lower price point to help us scale up. Were providing an off the shelf product. The companies you listed are targeting huge institutions that pay $1m+ subscriptions requiring highly customized software.
3) I'd bet the software engineer I'm working with and I can execute at same level if not better than the senior leadership of companies you listed.
In regards to the price point, I think there is potential there, as a lot of proptech firms have minimum user required and for firms like mine where we only have one associate doing underwriting (me) we get priced out very quickly. One thing to consider is what price that might be, because we've gotten offers from the companies I listed around $10-$12k which is pretty doable for most midsize firms.
I think there is an untapped market, but proptech is hot, and the firms I mentioned are all pretty young. You would essentially be competing with maturing companies, unlike say a CoStar who everyone has used and is tired of. That may make it harder to get traction as onboarding takes time and firms that have joined these platforms would have done so in the short-term.
I don't mean to discourage, RE is the least innovative industry in a lot of areas, which is why proptech is taking off, but convincing old heads they need these platforms is the difficulty, and you need something that is really a necessity.
Nah. Don't need a new software for literally everything. The software stack is already getting bulky at the company I work at (and the ones previously are the same). It really is not that difficult to organize the DD in folders and come back to them later
Doesn't RedIQ do this to some extent?
Yes....but they're 100% multifamily.
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