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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

šŸ¤”

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

šŸ¤”šŸ¤”

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

šŸ¤”šŸ¤”šŸ¤”

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

šŸ¤”šŸ¤”šŸ¤”šŸ¤”

A: Customers entering a store.

B: People visiting a website.

C: I thought of both.

Development

šŸ¤”šŸ¤”šŸ¤”šŸ¤”šŸ¤”

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 ā€“ we need you! šŸŒŸ

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

šŸ˜ Plan a media partnership

šŸŖ„Book a one-on-one CRE tech coaching session

ā˜•Buy me a coffeeĀ 

šŸ“§ Subscribe at jentindle.substack.com Ā 

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.

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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 techĀ  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 kitchenā€¦ very few will care. Those who do will care passionately, for sure. But it wonā€™t drive the success of your CRE business.

The more Iā€™ve seen of CRE ownersā€™ cultures, the more Iā€™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 ā€œback officeā€. For CRE tech to influence your firm strategy, your decision-maker must be on the revenue-generating side of the firm.

If youā€™re large enough, then you should 1000% hire someone specific to this role. My current favorite title for this role belongs toĀ 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?

Ā Check out my Substack on this very topic here.Ā 

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

šŸ˜ Plan a media partnership

šŸŖ„Book a one-on-one CRE tech coaching session

ā˜•Buy me a coffeeĀ 

šŸ“§ Subscribe at jentindle.substack.com Ā 

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.

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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 ā€œCRE tech market mapsā€, I couldnā€™t help but think to myself, ā€œAre you kidding me? What real estate firms truly have the time and budget for all of these tools?!ā€ Okay, fine, the big guys do. But weā€™re talking about an industry comprised largely of Davids with a small number of Goliaths.Ā 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.Ā 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.Ā 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 youā€™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.Ā Not all pain points require technology to solve. Youā€™ll be surprised how often a change in procedure will suffice.

As a counterargument to myself, Henry Ford once said, ā€œIf I had asked people what they wanted, they would have said faster horses.ā€ 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 teamĀ willĀ want before they figure it out.

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

I canā€™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, heā€™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. Itā€™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 Redditā€™s r/CommercialRealEstate or r/RealEstateTechnology and the companyā€™s LinkedIn posts to see if they have comments or likes. DM folks that commented or liked to get their feedback. And if youā€™re in multifamily, you can try Revyse.

Of course, check out the CRE techā€™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, itā€™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 theĀ commitment and consistency principle.

If youā€™ve really gone through all the steps above and every single review, referral, etc. are exactly the sameā€¦ then flip a coin. If theyā€™re exactly the same, then it clearly doesnā€™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:

šŸ˜ Plan a media partnership

šŸŖ„Book a one-on-one CRE tech coaching session

ā˜•Buy me a coffeeĀ 

šŸ“§ Subscribe at jentindle.substack.com Ā 

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.

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Accounting Asset Management Finance Investor Reporting

Do You Know The Most Common Commercial Real Estate Valuation Methods?

Firms often choose one of three common real estate valuation methods for fair valuing their properties. Do you know what they are? If not, you should.

The most common real estate fair valuation methods include the income approach, sales comps, or the bid on value (BOV) method. Most opt for the income approach, which gives you a clear estimate of the specific investmentā€™s value based on actual net operating income and recent sales.

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The Income Approach

The income approach involves three crucial steps:

  1. Projecting Future Net Operating Income: Start by creating a discounted cash flow model to predict the net operating income (NOI) for the next 12 months. NOI, not to be confused with net income, is the linchpin of real estate valuations. It encapsulates the property’s cash flow by considering operating revenues and expenses.
  2. Determining Market Cap Rates: You must gauge the specific investmentā€™s market cap rates. Cap rates, or ā€œcapitalization ratesā€, are typically calculated as the sum of forward 12 monthsā€™ NOI divided by the propertyā€™s purchase price or valuation. Cap rates differ greatly by market, property type, vintage, and more. You must research each propertyā€™s cap rate and consult third-party data sources for accurate, recent, and property-relevant cap rates.
  3. Calculating Property Value: Armed with NOI projections and cap rates, you can unravel the property’s true value. Divide the investmentā€™s projected 12 months’ NOI by the market cap rate, and you’ve got the value of the property if it were to sell today.

Sales Comps

If properties sold recently near yours, then you could argue that your property would sell for around the same price. That said, you need to ensure comparability of properties via:

  • vintage,
  • construction,
  • size,
  • composition, and
  • other reasonable forms of comparison.

Typically, firms will gather as many recent comps (comparable sales) as possible. Then, they will divide each purchase or sale price by the propertyā€™s square feet, units, beds, etc.

Next, they will average the purchase price per square foot, units, beds, etc. and then multiply it by your propertyā€™s square foot, units, beds, etc. This allows you to calculate your propertyā€™s relative value.

Finally, this valuation method is tricky not because of the math, but because many states are whatā€™s called ā€œnon-disclosureā€ states. In these states, parties to a real estate sale are not required to disclose price information. That makes accessing recent sale comps challenging.

BOVs

Another common real estate valuation method is BOVs, or broker opinion of value. I rarely see this method used in isolation to value a property. Normally, you request BOVs to support the sales comp method of valuation or your income approach valuation. Thatā€™s because a BOV is exactly what it sounds like: a brokerā€™s opinion of your propertyā€™s value. Most brokers will provide you with a higher-than-actual BOV to entice you to sell. As such, itā€™s not considered as reliable as the other two valuation methods.

Great! Weā€™re done now, right?

Not so fast.

Get the Full Details on Real Estate Valuation Methods

Want to learn more about real estate valuation methods? Amazing! You’re not alone.

I wrote this free white paper for you. Take it, expand on it, and let me know your feedback.Ā 

(Put the price as $0 and then select “I want this!” after clicking the button below. Of course, if you want to buy me a $5 coffee, I won’t say no…)

Get Your Free White Paper

I hope you use your real estate valuation methods knowledge to make improve your valuations. Let me know if you have any questions or edits. I always love hearing from you.

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Accounting Asset Management Investor Reporting KPIs

How to Prepare Real Estate Investor Reporting

It’s that time of year. You need to prepare your real estate investor reporting. Where to begin?

Investment structures and investor composition drive private equity real estate firm’s reporting. For example, the SEC requires certain filings based on your investment structure. Large, institutional investors require quarterly and annual reporting. This is typical regardless of whether they invest in a fund or syndication.

Recently, that reporting has expanded beyond financial projections and operations. Now, it often includes environmental, social, and governance (ESG) data. Many also include diversity, equity, and inclusion (DE&I) data.

Required investor reporting will likely continue to expand over time.

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Beyond Financial Statements: Real Estate Investor Reporting

Most of you could guess that you need to prepare financial statements for your investors. And loads of you probably know that you also prepare capital account balance statements by investor.

What you may not realize is that most successful real estate firms provide far more than the minimum required reporting.

Investors LOVE transparency. The more information you can provide on their investments – while still making your firm look excellent – the better.

Get the Full Details on Investor Reporting

Want to learn more about real estate investor reporting? Amazing! You’re not alone.

I wrote this free white paper for you. Take it, expand on it, and let me know your feedback.Ā 

(Put the price as $0 and then select “I want this!” after clicking the button below. Of course, if you want to buy me a $5 coffee, I won’t say no…)

Get Your Free White Paper

I hope you use your investor reporting knowledge to make improve relationships with your investors. Let me know if you have any questions or edits. I always love hearing from you.

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Acquisitions Asset Management Finance

12 Questions To Understand NOI

12 Questions to Understand NOI

NOI is one of the most common requests by institutional and family office investors. What does NOI mean? It means ā€œnet operating incomeā€.

Most real estate firms use NOI to value properties. NOI gives a true sense of the cash flow at the property by using operating revenues and operating expenses. Anything below the line, meaning below NOI, is not in the normal course of operating the property and therefore, not used in the propertyā€™s valuation.

Let’s take a hypothetical situation to better understand what NOI means.

New Investor Requests NOI Details from Real Estate Firm

Perhaps you landed a job at CALPERs. You go, Glen Coco! Thatā€™s a huge win.

As part of your job, you need to assess GPs, aka real estate firms, to understand potential investment opportunities in their funds or other vehicles. You will want to understand the investment vehicleā€™s overall returns as well as individual real estate investmentsā€™ performance. Thatā€™s because different funds or vehicles will have unique waterfall structures that impact how much you, the investor, get paid.Ā 

These waterfall structures are up for renegotiation anytime you invest in a new vehicle. As such, itā€™s important to understand how well the actual real estate performs, as that could potentially result in higher returns for you. Itā€™s also easier to compare across other real estate firmsā€™ vehicles, as the waterfall structures will vary.Ā 

Most new institutional investors (such as yourself in this scenario) make a HUGE mistake here. They know that NOI is important, but they fail to specify what kind of NOI they want. Instead, they send an Excel table with column headers for ā€œProperty Nameā€ and ā€œNOIā€.

As a GP, Iā€™m freaking out! Here’s what runs through my head:Ā 

12 Questions to Understand NOI

  1. Did you mean NOI at acquisition?Ā 
  2. Or NOI at exit?Ā 
  3. Maybe you meant current NOI?Ā 
  4. Or maybe base case underwritten?Ā 
  5. Current projected?Ā 
  6. What about the time frame? Did you mean trailing 12-months?Ā 
  7. Current month (T1) annualized?Ā 
  8. T6 annualized?Ā 
  9. Or projected 12-months?Ā 
  10. If trailing or projected, do I include the current month or start with the month prior or after?
  11. What GL accounts should be included per their definition of NOI?Ā 
  12. Is that consistent across all of my property types?

Trust me, these questions could go on and on. Most new institutional investors donā€™t know what theyā€™re looking for, and many a real estate firm throws darts at a dive-bar decades-old dartboard blindfolded and milk-drunk from the fact that they finally landed an institutional investor. 

How Real Estate Firms *Should* Present NOI

As a GP, I recommend presenting the version of each metric that shines your firm in the best light, as long as you’re consistent across all investments or properties. Then, leave your investor with a list of footnotes explaining what you did. Youā€™ll want this anyway to document and train someone else to help you someday.

How Investors *Should* Request NOI

As an investor, youā€™ll want to clarify at least some of the 12 questions above. Otherwise, the data that you receive back wonā€™t be comparable across GPs. And if thatā€™s the case, whatā€™s the point of requesting that data anyway?

What Actually Happens...

Now, let me let you in on a dirty little secretā€¦ most institutional investors rarely scrutinize these reports in detail. They will check to make sure that GPs filled them out at least partially. And thatā€™s about it. That said, an investor will – perhaps a new one who read this article – review these reports line by line. They will ask detailed questions and send the report back to the GP, redlined and asking for explanations.Ā 

As a GP, you should complete these reports in the same way you do for your regular performance updates; provide just enough information that doesnā€™t beg additional questions. That may mean filling out all required information, or that may mean filling out what you feel most confident in. Iā€™ll leave that up to you.

Now you know the 12 questions to ask about NOI as a GP and as an institutional investor. I hope you use this knowledge to make improved investment decisions and sharpen your portfolioā€™s performance. 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.

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