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Author: Jen Tindle

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Accounting Finance Investor Reporting

Private Equity Real Estate Fund Financial Statements

Fund financial statements
Fund financial statements

Real estate private equity firms use a variety of software applications for bookkeeping at the fund level. Some of the most common include Sage, Quickbooks, and Yardi. At small firms, the CFO may also be the bookkeeper. At large firms, many bookkeepers may report to a senior accountant, who reports to a manager, and so on. The day-to-day bookkeeping is best understood by reviewing a firm’s fund financial statements.

Balance Sheet

Fund financial statements seem simple on the surface. A typical balance sheet, aka statement of financial condition, consists of the following:

  • Cash
    • Called capital not yet committed
    • Money drawn from the line of credit not yet deployed
    • Cash distributed by properties to the fund and not yet distributed to investors (rare that you see a balance here)
  • Restricted Cash
    • Cash reserved for a specific use, such as tenant security deposits
  • Prepaids
    • Fair value of interest rate caps or swaps purchased by the fund
  • Deferred Costs
    • Financing costs for a fund-level line of credit
    • Any other financing costs for loans payable by the fund
  • Investments
    • Fair value of the investments, as described above (specifically, the equity or debt invested in real estate, not the full value of the real estate)
  • Credit Facilities
    • Outstanding debt amount on the line of credit (most real estate funds use a line of credit to reduce the number of capital calls required when managing several investments with varying capital needs)
  • Accrued Expenses
    • Accounting fees, placement agent fees, or other fees and expenses payable by the fund
  • Investment Management and Incentive Fees
    • Acquisition fees, a percentage of the total equity invested at acquisition, if applicable
    • Asset management fees, typically a percentage of committed capital until a certain threshold, and then a percentage of outstanding invested capital thereafter
    • Incentive management fees, income earned by the General Partner based on the waterfall structure
    • Debt placement fees, typically fees paid for debt placement services by the Fund, if applicable
  • Dividends Payable
    • Dividends approved by the Board or governing body of the fund but not yet distributed (you rarely see a balance here)
  • Partners’ Capital
    • Limited Partners (aka investors in the fund) capital outstanding
    • General Partner (aka manager of the fund) capital outstanding

Schedule of Real Estate

A typical schedule of real estate consists of:

  • Real estate investment name
  • Real estate investment location (city, state if in the U.S.)
  • Property type(s) of each investment
  • Cost as of the stated date
  • Fair value as of the stated date
  • Ownership percentage, if applicable

Note that this is for the real estate investment and is not necessarily the value of the property or properties within each investment. For example, if your fund had leverage on an investment or owned less than 100%, then the value and cost shown in this schedule will relate only to the portion of the investment owned by your fund.

Income Statement

A typical statement of operations (aka income statement) consists of:

  • Investment income
    • Dividends distributed to the fund
    • Acquisition and/or disposition fee income
    • Other income earned by the fund
  • Investment expenses
    • Interest expense, if applicable
    • Organization costs
    • Placement agent fees
    • Technology fees
    • Other expenses (dead deal costs, travel, etc.)
  • Investment management and incentive fees
  • Net realized and unrealized gains on investment

Your fund’s income statement will vary based on what your accounting and legal team deem allowable in accordance with your investor agreements.

Statement of Changes in Partners’ Capital

Finally, a statement of changes in partners’ capital may be provided at the fund and LP levels and consists of:

  • Beginning capital amount
  • Increases to capital, such as additional contributions
  • Decreases to capital, such as via distributions
  • Allocation of net income
    • Net realized gain or loss from investments
    • Net change in unrealized gain or loss from investments
    • Carried interest to GP
    • Ending capital amount

Once again, the structure of your statement of changes in partners’ capital will vary based on your fund structure.

After your fund financial statements lay the most important part: the footnotes. Your CFO, CAO, or Controller will ideally have loads of experience preparing footnotes. If not, then I recommend hiring a prominent Big 4 public accounting firm or a large regional firm with a strong reputation to advise you. Once you have a template, you can reuse it in the following years. Your auditors will provide any comments on missing or potentially inaccurate information.

You now know the basics of private equity real estate fund financial statements. Go get ’em!

SHAMELESS PLUG ALERT: If you need more help, send me a note or book a consultation with me. If this blog post helped you, feel free to buy me coffee.

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Property Management

Outsource Property Management in Multifamily or Commercial Real Estate

Outsourcing Property Management
Outsourcing Property Management

When you’re evaluating whether to outsource property management in multifamily or commercial real estate, you will want to first consider the incentive structure of both methods. Most third-party property management firms charge real estate owners a percentage of revenue generated by the property. For institutional property managers of commercial or multifamily real estate, you will rarely see this percentage reach above single digits. Most charge 3-5% of gross receipts.

Why do property managers get compensated on revenues? Why not on net income? Or even net operating income?

One word: incentives.

Outsourced Property Management Incentive Structure

As a real estate owner, the most important metric to you is net operating income. You want to ensure that your property management team maximizes NOI. However, property management has little control over many of the large operating expenses, such as taxes and insurance. Utilities costs often have more to do with the physical equipment than management of the property’s systems.

The only line item that a property manager has full control over is rental income. Therefore, the best way to incentivize them to maximize NOI is by paying them a percentage of rental income. Many owners also add bonuses for achieving a targeted occupancy rate. To ensure that the property management team focuses on renewals in addition to new leases, owners typically offer those bonuses to the full team, including maintenance staff. Many owners require their written approval of expenses above a certain dollar threshold. That ensures the management team minimizes property costs as well.

Real estate owners may choose to hire property managers in-house (aka vertically integrate) as opposed to hiring a third-party property manager.

Benefits of Hiring Property Managers Internally

Benefits of hiring property managers internally include:

  • Greater control of operations, including oversight of all expenses
  • Cost savings on personnel, as a percentage of revenue charge may be expensive for a particular property

Benefits of Outsourcing Property Management

Benefits of hiring external property managers include:

  • No need to worry about turnover of property management staff, as the third-party management firm runs hiring and retention
  • Brand-name management, which matters to many commercial real estate buyers when you decide to sell
  • Cost savings on technology, as management firms can often negotiate more favorable software prices

For your property, you may encounter many other pros and cons of hiring internal or external property management. Each situation is unique. You should consider the importance of local market knowledge, superb people skills, strong accounting (and accountability), and operational expertise. If you can find the right team that encompasses those skills in-house, then you may experience efficiencies from vertically integrating. That said, many of the largest real estate owners in the world outsource property management.

The choice is yours.

SHAMELESS PLUG ALERT: If you need more help, send me a note or book a consultation with me. If this blog post helped you, feel free to buy me coffee.

If you like All About CRE and want to support my work:

😍 Plan a media partnership

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☕Buy me a coffee 

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Categories
CRE Tech

Marketing Strategies for Early Stage Real Estate Tech Startups

Marketing for Early Stage Real Estate Tech Startups

In startupland, getting noticed is key to success. And with limited time, you need to figure out what marketing strategies work ASAP. I’ve been in your shoes and am sharing my experience. Here’s how to market early stage real estate tech startups. 

What Works

  1. Gated Content That Ranks Highly in SEO. Content marketing is a great way for startups to get attention. By creating helpful content, you can show prospects your real estate knowledge. If you require prospects to submit an email before accessing the content (aka “gated”), then you have a lead! By ranking high in Google searches, more prospects will find it and become leads.

  2. Building Community:. Focus on the problem you solve and connecting people to solve it together.. You can create or contribute to groups on platforms like Slack, Reddit, and LinkedIn. By sharing your expertise, you can make connections and learn about potential customers.

  3. Speaking at Conferences. Going to conferences can be expensive, but speaking at them can be a great way to get attention for your startup without blowing your budget. By sharing what you know on panels or as a speaker, you can demonstrate your expertise. Plus, you can meet potential customers, partners, and investors.

What Doesn't Work

  1. Paying for Ads:. Buying ads might seem like a good idea to reach lots of people fast, but it rarely works for early stage startups. It’s expensive, to say the least. The competition for ads is tough, and if you don’t have a big budget, you won’t get much out of it.

  2. Using Traditional Ads (Like at Conferences or Self-Promoting Social Media). Traditional ads at conferences or on social media might not get you the attention you want. At conferences, competition is fierce. You probably don’t have the budget to stand out. Plus, most major conferences are probably too generic for your target customer. Self-promotion often appears unattractive. We tend to write-off overly boastful people.

  3. Hosting Webinars (Unless You’re Already An Influencer). Webinars can be a good way to teach people about your startup and get them interested. But if you’re just starting out and don’t have an audience, it can be hard to get people to come.

Marketing Early Stage Real Estate Tech Startups Affordably

Marketing early stage real estate tech startups is about balancing smart ideas with affordability. By learning from my experience, I hope you will save yourself some headaches and $$$. And of course, grow fast!

SHAMELESS PLUG ALERT: If you need more help, send me a note or book a consultation with me. If this blog post helped you, feel free to buy me coffee.

If you like All About CRE and want to support my work:

😍 Plan a media partnership

🪄Book a one-on-one CRE tech coaching session

☕Buy me a coffee 

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Categories
Accounting KPIs Property Management

The Top 8 Real Estate Reports for Property Manager to Client Reporting

Top 8 PMC To Client Reports

Do you ever hear that voice in your head saying, “Did I send the right information to my client? Was it enough? Or was it too much?” Multifamily and commercial real estate managers have way too much on their plate to be worrying about client reporting. That’s why I’m writing this post. AND it’s why I created a free whitepaper with in-depth instructions. By knowing what to report, you can press the mute button on all those voices in your head. Today, I’ll show you the top 8 real estate reports for property manager to client reporting.

Learn More For Free

The Top 8 Reports for Property Manager to Client Reporting

First, review the contract that you signed with your client. Make sure that you include all reports identified in the contract in your reporting package.  I will review the top 8 reports in detail, but if you don’t abide by the contract, then you may find yourself in a heap of trouble.

You should send your reporting package no less than monthly. In each month’s report, you will include up-to-date information based on the most recent month. You may include some year-to-date and period-over-period metrics, which I will describe in the whitepaper. Regardless of the details, you must keep your clients updated on your work at least once a month. And that’s the minimum! If you want to go above and beyond, you may want to provide updates on a weekly or bi-weekly basis.

In every reporting package, you absolutely must include your commentary on the property’s performance. Did you sign an incredible new tenant? Or if managing a multifamily property, did you crush your revenue targets while maintaining high occupancy? Every interaction with a client is an opportunity to sell yourself and your firm. Now is not the time to be bashful! Share how amazing you are and how your incredible efforts paid off for your client.

If you haven’t already, download my free whitepaper on the top 8 real estate reports for property manager to client reporting.

Get Your Free White Paper

SHAMELESS PLUG ALERT: If you need more help, send me a note or book a consultation with me. If this blog post and white paper helped you, feel free to buy me coffee.

If you like All About CRE and want to support my work:

😍 Plan a media partnership

🪄Book a one-on-one CRE tech coaching session

☕Buy me a coffee 

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Categories
Capital Formation Investor Relations

What Should You Include in a Real Estate Fund DDQ?

Real estate DDQ

When I worked in private equity real estate, I completed no shortage of DDQs for prospective investors in our fund or syndication. Each investor due diligence questionnaire (DDQ) had its own flair for questioning our track record, fund strategy, team strengths and composition, among other criteria. We knew that we needed a simpler way to complete these forms. To make it easier on ourselves, we pre-built our own DDQ, acting as if we were the investors. We provided this document in our due diligence files, and we used it to shortcut completing DDQs for investors. If you want to save yourself time (and carpal tunnel) from retyping the same thing over and over again, read on. Here’s what you should include in a real estate fund DDQ.

Sections to Include in Real Estate Fund or Syndication DDQ

Firm Overview – Provide a brief history of your firm, highlighting what makes you unique. Talk about how you’re best suited to guide your investors to high returns.

Team – Who leads your firm? How do you organize by team? What characteristics make them uniquely capable of making the best investment decisions?

Investment Strategy – Describe where you see the best opportunity for investment and why. Be specific; identify property type(s), location, vintage, supply/demand, among other relevant characteristics.

Market Overview – What makes the markets you want to invest in so attractive? Again, be specific here. Provide visualizations if appropriate. For time series information, line or bar charts typically provide the best explanations.

Investment Process – How does your firm make investment decisions? Do you have an Investment Committee? A Pre-Investment Committee? Who’s on those committees? And who has decision-making authority? What documents do you retain around your decision-making process?

Track Record – Demonstrate successes and failures by listing each investment that your firm has made. And do not hide your failures; no investor will expect perfection. They do expect, however, that you explain what went wrong, what you learned, and how you will avoid that mistake in the future. Some firms may also break down what portion of their successes were due to the market compared to what pieces of the returns were generated by their strategy and management. You may choose to provide detailed track record information in an addendum.

Investor Reporting – Describe how frequently and how much you will report to your investors. Read more about investor reporting here.

Fund or Syndication Overview and Terms – List the partnership name, a brief description of the investment strategy, fund or investment size, target returns (typically only IRR here), commitment and investment periods, term and any extensions, waterfall distribution details, and management fee calculations.

Administrative Activities – Describe the contributions and distributions process. List the fund or syndication administrator, insurer, auditor, compliance service, and any other relevant parties in the administration of your investment. Provide specifics as needed. Also, you may describe any relevant software packages used to manage investments.

ESG, DE&I and Innovation Strategy – If applicable, detail your policy on ESG, DE&I, and technology/innovation.

Cybersecurity Policy – Provide information on how you safeguard investor assets and information.

Disclaimer – Be sure to include the appropriate disclaimers throughout your DDQ. Your legal team will help you.

That’s it! With these sections, you will be off to the races with your pre-filled real estate fund DDQ.

If you like All About CRE and want to support my work:

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I hope you use this information to become more efficient in your real estate due diligence process.

Let me know if you have any questions or edits. I always love hearing from you.

Categories
Accounting Acquisitions Asset Management Capital Formation CRE Tech Finance Investor Relations Investor Reporting Property Management

Are You The CRE or Tech in CRE Tech?

Are You a CRE Pro or Techie?

Wondering if you lean towards commercial real estate, aka CRE, or tech in the “CRE tech” catchphrase? Take the quiz below to find out!

CRE Pro vs. Techie Quiz for CRE Tech Leaders

With each word presented below, pause for a moment to think about its meaning. Then, select the option that best aligns with your interpretation.

Engineer

🤔

A: A pro guiding real estate site development and securing necessary permits.

B: A coder crafting website or program code for computer use.

C: I thought of both.

Waterfall

🤔🤔

A: A project management style emphasizing a linear progression in a project.

B: A profit-sharing method among partners with uneven distribution.

C: I thought of both.

Database

🤔🤔🤔

A: An organized collection of structured information stored electronically.

B: A folder structure with mostly unstructured data like Word docs and PDFs.

C: I thought of both.

Traffic

🤔🤔🤔🤔

A: Customers entering a store.

B: People visiting a website.

C: I thought of both.

Development

🤔🤔🤔🤔🤔

A: Activities from renovating existing buildings to selling developed land.

B: Process for conceiving, designing, and maintaining software.

C: I thought of both.

Get Your Results!

Tally your score based on the points below.

Engineer – A: 0 points; B: 5 points; C: 10 points

Waterfall – A: 5 points; B: 0 points; C: 10 points

Database – A: 5 points; B: 0 points; C: 10 points (Consider various software databases here!)

Traffic – A: 0 points; B: 5 points; C: 10 points

Development – A: 0 points; B: 5 points; C: 10 points

Your Score:

0-10 points: You’re a true commercial real estate pro! Brush up on tech talk for seamless communication with your techie pals.

15-30 points: You’re a techie extraordinaire! Spend more time with your real estate buddies to soak in their industry insights.

35-50 points: You’re BILINGUAL in CRE and tech! Cheers to your versatile expertise. Share your knowledge with the world – we need you! 🌟

If you like All About CRE and want to support my work:

😍 Plan a media partnership

🪄Book a one-on-one CRE tech coaching session

☕Buy me a coffee 

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I hope you use your score to better understand how you can learn from your CRE or tech peers. Let me know if you have any questions or edits. I always love hearing from you.

Categories
Accounting Acquisitions Asset Management Capital Formation CRE Tech Finance Investor Relations Investor Reporting Property Management

Who Should Be In Charge of Proptech Strategy?

You decided that you want to focus on proptech (aka CRE tech), but you don’t know who should be in charge of your proptech strategy. As someone who’s run CRE tech for a real estate firm and sold software as a CRE tech vendor, I can help you decide. Here’s my two cents. Hint: it’s not IT.

Ideally, your CRE tech  decision-maker should be in a role that drives revenue for your organization. In a property management firm, this means the Head of Marketing (or Revenue Management). With owners, this means either your Chief Investment Officer or Head of IR/Capital Formation. In a tenant rep organization, this means your Head of Client Solutions.

Otherwise, your proptech strategy may as well have the same priority as deciding what dishwasher to put in your common area kitchen… very few will care. Those who do will care passionately, for sure. But it won’t drive the success of your CRE business.

The more I’ve seen of CRE owners’ cultures, the more I’m convinced that investments (which includes asset management) or IR would be the safer space for a head of CRE tech to flourish. The unfortunate reality is that many CRE owners consider non-deal roles to be “back office”. For CRE tech to influence your firm strategy, your decision-maker must be on the revenue-generating side of the firm.

If you’re large enough, then you should 1000% hire someone specific to this role. My current favorite title for this role belongs to Ilene Goldfine, Chief Digital Strategy Officer at Hines. You will also see this title framed as a Head of Innovation or similar.

Want to learn more about who should be in charge of your proptech strategy?

 Check out my Substack on this very topic here. 

If you like All About CRE and want to support my work:

😍 Plan a media partnership

🪄Book a one-on-one CRE tech coaching session

☕Buy me a coffee 

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I hope you use your newfound knowledge on how to choose commercial real estate tech to improve your processes. Let me know if you have any questions or edits. I always love hearing from you.

Categories
Accounting Acquisitions Asset Management Capital Formation CRE Tech Finance Investor Relations Investor Reporting Property Management

How to Choose Commercial Real Estate Tech

What VCs think the CRE tech market looks like vs. what CRE firms think the tech market looks like
What VCs think the CRE tech market looks like vs. what CRE firms think the tech market looks like

After seeing so many VCs post versions of these “CRE tech market maps”, I couldn’t help but think to myself, “Are you kidding me? What real estate firms truly have the time and budget for all of these tools?!” Okay, fine, the big guys do. But we’re talking about an industry comprised largely of Davids with a small number of Goliaths. Most real estate firms struggle with tech overload. Here’s how to choose commercial real estate tech among the plethora of options.

For more, read my Substack posts on the psychology of why these decisions are difficult and a detailed version of my CRE tech decision-making framework.

How to choose commercial real estate tech in 6 steps

Below, I give you a 6-step framework for decision-making. I used this framework as a buyer of commercial real estate tech (aka CRE tech) and as a tool when I was selling software to real estate firms. Without further ado, here’s the framework:

1. Create a healthy culture around decision-making.

Ensure your culture AND compensation structure does not penalize individuals for making mistakes in tech choices. You must also review the success of your CRE tech and structure strict rules around your review process.

  • No finger pointing.

  • Maintain a zero-regrets mentality. You made the best decision you could with the information available at the time.

  • If you chose a CRE tech tool that failed, identify what part of your process needs to be tweaked to prevent a similar situation. A bad system will beat a good person every time.

Lastly, and perhaps most importantly, avoid death-by-committee. Give the decision-making reins to a competent resource (or three, if you’re a larger organization).

2. Identify pain points where your firm needs to improve.

To define pain points, create small functional groups of 8 or fewer people to discuss 5-10 areas for improvement. Not all pain points require technology to solve. You’ll be surprised how often a change in procedure will suffice.

As a counterargument to myself, Henry Ford once said, “If I had asked people what they wanted, they would have said faster horses.” He implied that relying on consumer input here is quite risky. So let me caution you. I am not suggesting that you ask your team for input on solutions, only pain points. You must determine what your team will want before they figure it out.

3. Rank pain points. Then, select one pain point to solve at a time.

I can’t prescribe exact actions to weigh one pain point versus another. Our industry is too broad, and each company bespoke. Trust your judgment.

Focus on solving one pain point at a time. Dr. Andrew Huberman, a famous Stanford neurobiologist (at least, he’s famous to us podcast-listeners) warns against the mythological siren of multitasking.

4. Ask for help.

Connect with your peers to find out what tools solve their similar pain point. Ask for details about their experience.

Sure, you run the risk of a competitor-peer being untrue, but most people are good people who are just as lost as you and looking for answers. It’s less risky than relying solely on VCs or advisors, who are incentivized to get you to use their products. Always keep in mind the incentives of whom you speak.

5. Read reviews and case studies.

Try Reddit’s r/CommercialRealEstate or r/RealEstateTechnology and the company’s LinkedIn posts to see if they have comments or likes. DM folks that commented or liked to get their feedback. And if you’re in multifamily, you can try Revyse.

Of course, check out the CRE tech’s company website. They should have free resources and case studies where you can learn about their product or problem they solve in more detail.

6. Make a decision, and sign as short of a contract as you can.

Shorter terms require you to re-evaluate more frequently. Yes, it’s more expensive. Think of it as buying an insurance plan. You can extend it for a longer timeframe after the first period if you want to continue.

But beware of the commitment and consistency principle.

If you’ve really gone through all the steps above and every single review, referral, etc. are exactly the same… then flip a coin. If they’re exactly the same, then it clearly doesn’t matter what you choose. All that matters is that YOU CHOOSE SOMETHING. You must set deadlines to force your hand.

If you subscribe to this framework on how to choose commercial real estate tech, making a decision is better than no decision. The regret of commission will sting, but trust me, the feeling of success is worth it. Start now.

If you like All About CRE and want to support my work:

😍 Plan a media partnership

🪄Book a one-on-one CRE tech coaching session

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I hope you use your newfound knowledge on how to choose commercial real estate tech to improve your processes. Let me know if you have any questions or edits. I always love hearing from you.

Categories
Capital Formation Investor Relations Investor Reporting

What Is a REO Schedule?

What is a REO schedule?

Perhaps a lender, bank, or investor requested a schedule of REO to preliminarily validate your firm’s track record. Well, what is a REO schedule?

What is a REO schedule and how do you build it?

REO stands for “real estate owned” and a REO schedule simply means a list of all of the real estate owned by your firm. So how do you complete a basic REO schedule?

Start by listing each real estate investment that your firm has ever had an equity or credit ownership stake in. Most requestors of REO schedules will also want you to include a column for the fund name, if applicable, as well as the address, property type, total square feet, number of units (if multifamily) or number of beds (if hospitality), and current projected 12 months’ NOI. 

For equity investments, they will also want you to input the acquisition date and price, disposition date and price (if applicable), and ownership percentage of each investment. Now, ownership percentage may seem like a simple request at first, and it usually is. However, you might think that they mean the ownership percentage after current projected sale’s waterfall distribution. That is a complicated request and likely not what they want. Instead, most requestors of an REO schedule want the percentage of equity invested by your firm divided by the total equity invested by all owners.

For credit investments, they will typically ask for the total commitment amount, interest rate, origination date, and maturity date. In this scenario, the interest rate is too simple of a request. Do they actually want the accrual rate? Use your best judgment here. Explain the rate you listed in a footnote.

Keep in mind that some REO schedules may require additional detail. Having the basics outlined here will most certainly help you complete a schedule of REO faster and more accurately. 

If you like All About CRE and want to support my work:

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I hope you use your newfound REO schedule knowledge to improve your processes. Let me know if you have any questions or edits. I always love hearing from you.

Categories
Capital Formation Investor Relations Investor Reporting

Tell Me I’m Wrong About: The “Data-Driven” Pitch

Tell Me I'm Wrong About: The Data-Driven Pitch

When I first started in private equity real estate, having a “data-driven” pitch in CRE was a unique approach to investing. Now, you will struggle to find a firm that doesn’t tout itself as being “data-driven”. I call bullshit. 

Tell me I’m wrong…

If investing was truly data-driven and NOT based on human (read: emotional) decision-making, we’d see more massive swings than we do now. Real estate firms may be using data, but their ultimate decision is still based on emotion.

The public markets comparison

The more data-driven your decision-making, the more automated it becomes. And the more automated your decision making, the more likely you are to follow the crowd instead of making smart, forest-for-the-trees decisions. Take automated trading in the public markets.

In 2016, the SEC launched an experiment to evaluate the impact of algorithmic trading. They focused on small companies with market capitalizations between $1 billion and $3 billion. To reduce algorithmic trading, the SEC increased the tick size for these companies. The SEC successfully saw a decrease of 11% in trading for these smaller stocks. As a side effect, they noted that “searches for those companies’ filings on the SEC’s website surged, especially in the weeks before their earnings announcements.”

As a result of the SEC’s experiment, the smaller stocks accurately reflected earnings’ reports. Algorithmic (read: automated) trading actually made pricing less effective. The algorithms were programmed to follow the lead of large hedge funds rather than base their trades on sound judgment of a company’s performance.

Consider this…

When you’re investing in real estate using your data-driven approach, are you using the same data as everyone else?

If everyone uses the same data, how does being data-driven give you an edge?

Software failures, bad algorithms, etc.

If real estate firms truly are data-driven, why don’t we hear more about massive software failures impacting real estate businesses? Or algorithms that have mistakes or biases?

We don’t.

Over-optimization

If real estate firms were relying on data to make their investment decisions, then we would see much more over-optimization on successful strategies. Instead, as real estate firms grow, we typically see a diversification across all strategies. The classic “CYA” approach emerges instead of 1000% believing and acting on data to drive decisions.

As humans, we often expect the unexpected and will intentionally NOT rely on data if our fear of the unknown trumps whatever strong signals we may encounter.

The new “data-driven” pitch in CRE

Rather than saying your firm is data-driven like literally everyone else, talk about:

  1. your institutional decision-making process,
  2. the data that you have that no one else uses (i.e. YOUR data), and
  3. all of the other ways that you’re NOT following the crowd.

Being data-driven, while unlikely an accurate claim by the oodles of real estate firms using it, is now commonplace. If you want to stand out, you need to find an alternative niche. Tell me I’m wrong about the “data-driven” pitch. Or actually be innovative.

If you like All About CRE and want to support my work:

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Get In Touch

I hope you use your newfound marketing knowledge to improve your communications. Let me know if you have any questions or edits. I always love hearing from you.

Become the best commercial real estate and tech professional you can be.

You know what to do…