Streamlining Asset Management with RE Analytics | S3SP13
In this newest special episode of the A.CRE Audio Series, Sam, Michael, and Spencer talk asset management with George Burchlaw and Carol Ann Flint from Re Analytics Business Development. RE Analytics is a service that partners with real estate investment companies to provide efficient, cost-effective back-office asset management and analyst services.
Listen to this episode to learn about RE Analytics and how they solve the common challenges associated with handling high volumes of information and documents through the entire lifecycle of commercial real estate.
Streamlining Asset Management with RE Analytics
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Resources from this Episode
- A.CRE Real Estate Financial Modeling Career Accelerator
- A.CRE Development Models
- Education in Real Estate
Welcome to the Adventures in CRE Audio Series. Join Michael Belasco and Spencer Burton as they pull back the curtain on everything commercial real estate and introduce you to some of the top minds in the industry. If you want to take your skills to the next level and be part of a growing community of CRE professionals across the world, this is for you.
Sam Carlson (00:25):
Hello, and welcome back to another episode of the Adventures in CRE podcast. We’ve got a cool one for you today. We talk a lot about tech. How data, how all the communications, everything that’s moving so fast is really affecting the world of commercial real estate. So, we are here with George Burchlaw and Carol Ann Flint, and I’ve got a lot of excitement about what we’re talking about today. Michael, go ahead and frame this out for us.
Michael Belasco (00:55):
So, this is a really exciting episode for me. I had actually met George and Carol Ann probably two or three months back. We’re actually introduced by Tucker Wells, who is a part of our team here at Adventures and CRE. And George’s background is fairly extensive, and he had this great idea to launch this platform to solve a tremendous problem in our industry that I’ve had a ton of experience. Everyone that’s in the industry has a ton of experience with dealing with the complications of handling all the information and documents through the entire lifecycle of commercial real estate. So, George and Carol Ann have set out to solve that problem and their platform, Re-Analytics I think is one of few really great solutions out there. So, let me give a background on George and Carol Ann, and then we’ll just get into this episode.
Michael Belasco (01:53):
So, as I said, George has extensive experience on the principal side of the business. He started his real estate career at a private equity investment firm in Dallas, Texas as an acquisition and asset management associate. Then, he went on to work for 10 years with Forest City Enterprises who was acquired by Brookfield. There, he led three large-scale mixed-use development projects in Dallas, Texas. Thereafter, he moved on to become an executive vice president for family office where he was the lead developer on a 66-acre super-regional mall redevelopment project.
Michael Belasco (02:26):
And then, with him is Carol Ann. And Carol Ann has spent 18 years as a broker in New York City, and then, worked for a couple years for a multi-family developer who is also an architect and general contractor. So, guys, anything I missed there on your backgrounds before we get into the meat of this episode here?
George Burchlaw (02:43):
No, Mike. I just want to say thanks to your team. We really appreciate you guys having us on, and looking forward to a great discussion.
Michael Belasco (02:49):
Excellent. Yeah. So, I thought we kicked this off, George and Carol Ann. Getting into, what really is this management of information. It’s a lot of what we call back office stuff. Stuff that’s not in the foreground but takes significant amounts of time out of your day. So, maybe we could get into a little about what it is in a commercial real estate shop. What are all these back office issues and challenges that we come up? Some that come to mind for both of you guys.
George Burchlaw (03:18):
Typically, when you guys do an underwrite a project, basically, there’s all this work done on the front end, gathering all the documents, the appraisals, the tax statements, the insurance policies, negotiating all the loan documents, all the entity documents. Of course, running that Excel cash flow model to understand pricing and assumptions. And we see a lot of work done on the acquisition side. But once that asset gets acquired and is put into the portfolio, we see it’s a challenge to keep up with all of that data, especially, as a portfolio gets maybe over three or four properties. So, I mean, you have between 15 and 20 documents per property and an Excel cash flow model. So, we see real estate companies who have three or four properties, they can manage that once they get over about five properties. It gets to be a lot of documents, a lot of data to manage to really understand the financial performance of the asset.
Michael Belasco (04:09):
Great, excellent. And so, you live where you were basically in your background seeing all that, when was the moment that prompted you to say, “You know what? There’s an opportunity beyond just working in the front day-to-day commercial real estate stuff. There’s this supplemental and very strong need.” When was that moment that you realized?
George Burchlaw (04:33):
It was a long time ago. I came right out of business school in 2000, graduated from UT, and took my first job at a real estate company. And of course, in graduate school you think all the companies are super high-tech, have all these tech platforms and run streamline and used technology. And I went to a very sophisticated private equity shop who was operating not as efficiently as they could. So, we would underwrite distressed portfolios of loans and real estate. So, we’re underwriting probably 20 to 30 real estate loans at a time, and to try to understand all the documentation, all the data and price all of those loans, it was extremely challenging. So, we had a lot of say high-priced acquisitions people just managing data, and it was unbelievable to see, and I think that’s for about a year and a half. And then, it was like, “Boy, there’s got to be a better way.” So, it originally started out as an acquisitions platform to underwrite groups of assets and then, morphed into the asset management side.
Carol Ann Flint (05:34):
And let’s say that you have to get a data point maybe three times a year when you’re doing various tasks. You hunt through nested file folders on your computer and you grab that data point and you put it in whatever you’re doing and then, the next time you need it you have to repeat that process and that is absolutely a waste of time.
Michael Belasco (05:57):
Yes, we can relate. All of us can relate. I spent a year and a half launching a shop with Spencer, and I would say we… because we all had deep experience, recognized this problem upfront and I probably spent 60 to 70 maybe more percent of my time focusing on this issue off the gate. Now, what we had as a benefit is that we were a brand-new company, so we had no legacy issues and years’ worth, some decades worth. I was at an institutional shop that’s been around from the ’50s and going through decades of documents, it’s just this whole mess. So, we’re able to recognize that upfront. So, I’m curious for you guys, are you finding access or success with new companies? Are you able to get into these legacy shops and help them tweak their process, or where are you guys finding most of your activity?
George Burchlaw (06:56):
Well, we’re trying to market to any real estate company because we think it’s a universal problem. The newer shops, as you said, don’t have that legacy issue and maybe people are used to one system or another, but mainly how they track is typically Excel models. It’s in an Excel cash flow model. And like I said, if you have three or four properties, is that three or four cash flow models? That’s 10 properties, is that 10 cash flow models? So, it gets to be a lot of data.
George Burchlaw (07:22):
We are targeting companies with say three assets, and Carol Ann and I had a call last week with a company that had 101 assets, and it’s just want to… And they brought on an asset manager probably two or three months ago. And that job description was to maximize the value of the portfolio. So, I don’t know. With 101 assets, that’s a hundred as you guys know, 101 operating statements each month, information coming in, is it good news, is it bad news, how do you really track all that. So, we are trying to market to any company that needs our help but [inaudible 00:08:00]-
Carol Ann Flint (08:00):
But I think a lot of people in the formation stage at this point want to do their formation strategically and implement whatever new technology or platforms there are. They definitely don’t want to just go into their new venture with the old model of doing things the traditional way. I think there’s a lot of openness to implementing what there is out there to make things more efficient and probably to reduce overhead and be more comprehensive from day one.
Spencer Burton (08:41):
Yeah, I think that’s ideal, is you have a clean slate of a whiteboard, and you craft a tech stack that includes this component for sure. But most of our listeners aren’t that. But most of us are a… First off, most of the listeners are a cog in a wheel and a wheel that’s been turning for a lot of years. And that’s the legacy issue that Michael describes.
Spencer Burton (09:12):
I think there’s another fundamental challenge here and we can all speak to this and that is the stakeholder in the process that actually understands this problem best. Generally, is an individual that has no decision-making power. And the decision-makers, the one who really have the ability to implement this strategy doesn’t actually understand the problem. And it might be communicated them, might be communicated to them a bit, but let me… If there are any more senior people who actually have that level of decision-making power, let me describe the real issue here. And the real issue is you have individuals, many with graduate degrees or fancy undergraduate degrees, you are paying a well above average salary and that individual is doing, at certain levels, 80%, 90% of their work data entry, and the data entry they’re making are repetitive over and over again.
Spencer Burton (10:26):
And to Carol Ann’s point, they might do it three times a year. Peck can find some data point hidden in some Excel spreadsheet or in some PDF on some shared drive, and then 10 king meaning using their fingers to punch in numbers into an Excel sheet or maybe some antiquated software program that’s being used. And they’re doing that thousands of times a month. And you scale that to large organizations and you’re talking dozens or even hundreds of people essentially doing data entry 80, 90% of their work. What solutions like this do?
Spencer Burton (11:05):
And I don’t mean to Michael and Sam and I get nothing out of this other than we recognize the problem. The idea is you want to unlock those people to do their full potential, and their full potential is not data entry, it’s thinking critically about investment challenges and helping make those investment decisions.
Spencer Burton (11:25):
So, let’s get into the weeds though, Carol Ann and George on how this works. So, let’s imagine that I’m a whiteboard firm, I come in and I implement the system. How does this connect with say, my underwriting software, or does this include an underwriting component? How does this save me time or my people time as it relates to the acquisition asset management and disposition functions of a typical real estate shop?
George Burchlaw (11:54):
You bet. Every company has its unique underwriting models. So, we don’t want to change that or disrupt that. Some CFO likes this model. They have a special model that they’re used to using. So, basically, once we analyze the portfolio, we would take their underwriting model and put it in our format. So, whatever the [inaudible 00:12:12]-
Carol Ann Flint (12:11):
That is eyelid so that it matches up and that paved way to put it into our system.
George Burchlaw (12:20):
Purchase price, projected NOI, CapEx, timing, at leasings TI, financing. So, basically, if they’re IRR is 25%, in our model it’s 25%. So, we do go through this whole reconciliation to make sure we have the base case. So, that is one tab of our Excel file, and the next tab is where we put all the actuals and all of the projections, we’re able to do all these variances. But I guess, the trick is, and maybe the unique part about our services, we’re able to do the analytics and Excel which is super transparent. Everybody sees how the calculations are done, but we’re able to aggregate all that information into a platform that can slice and dice all of the data and look at it multiple ways. And I mean, by asset manager, by entity, by lender, I mean, just numerous ways to manipulate the data to really give them a different perspective on their portfolio and how it’s performing.
Spencer Burton (13:12):
So, do you think of yourself Carol Ann as a service provider? So, is this something where Re-Analytics plugs into my organization and provides that back-office support, or is this a tech solution that you license to firms that then use to become more efficient? Describe the RE-Analytics model to this problem.
Carol Ann Flint (13:36):
It’s definitely a service, but what makes it more efficient, so that we can deliver more analytics and more efficiently, more cost-effectively and faster is the tech component of our platform. Our platform is what aggregates. Our platform is what pulls all of the data points from the abstracted documents in and rolls them up to a subset or a full portfolio level and gives us reporting. So, that’s why it’s better, faster, more comprehensive data than you could ever do in-house.
Spencer Burton (14:24):
So, does this plug into the accounting side as well, or just the business decision-making side?
George Burchlaw (14:31):
Well, we use accounting data. So, basically, we use the accounting data, we use property management reports, and whatever 20 key numbers you want from the accounting data and whatever numbers you want from the property management, we put in our platform each month updated to keep current Excel cash flow models. So, real estate guys as you know and your companies with all the Excel cash flow modeling, everybody wants to see the numbers in Excel. I mean, that’s just, if you tell a real estate principle, this deal is going to be a 25% IRR. The next question is perfect, show me an Excel so I can understand it. So, there’s no getting around that. So, the only way we think to analyze each asset transparently is to use Excel but have the technology to slice and dice the data from Excel.
Spencer Burton (15:17):
And is this thing updated daily where your clients can see a dashboard, or is this something that they see quarterly through a report that gets issued, or how does that work?
George Burchlaw (15:27):
They have access to our platform. So, basically, they have access and can push the buttons and see all the data, see all the reports, push the buttons, and understand debt balances, understand yields, understand projected IRRs. And so, we’re feeding the platform information, letting them know [inaudible 00:15:44]-
Carol Ann Flint (15:44):
As they give us the updated cash flow information. So, if that’s monthly, it’s updated monthly, but you can always pull up the dashboard and see as of the last update.
Spencer Burton (15:56):
And when you say, they, are you referring to the accounting group provides that information?
George Burchlaw (15:59):
Property management or whatever the [inaudible 00:16:01]-
Spencer Burton (16:00):
George Burchlaw (16:02):
… are. If they upload a rent roll, but update the occupancy, update current rents, that sort of thing.
Spencer Burton (16:09):
Michael Belasco (16:10):
Great. So, there’s this data entry component that’s massive. It’s the summation of all these desperate points and you need to get that into somewhere where it’s easily digestible by decision-makers. That’s one piece. The other piece that I find so important in this process is day-to-day business plan risk management. Whether that’s even as simple as making sure tax bills are paid on time, all these little nooks and crannies of just operating the business that you depend on so many third parties and so many people that somebody at a senior level doesn’t have that much transparency into and should have more without having a hundred people come together and just aggregate it, and then, this report’s delivered, do you guys address risk at all? And that was a big, and still is always a big issue, but when I was at a bigger shop, that was always a key thing is that there’s so many… You were looking at a group with a hundred-plus properties, there’s all these little operating risks that could impact your bottom line. So, how do you guys either recommend to groups as some tips and insights, or just how you guys might address it within RE-Analytics.
George Burchlaw (17:30):
Michael, as a follow-up to your recommendations from probably about a month and a half ago about that email tickler and all that, since you sent that email, we’ve implemented email notifications on probably 10 topics, action items, tax, real estate tax due dates, insurance due dates, maturity dates, and basically, we would agree that you want to see this weekly, quarterly, monthly, and we have a platform, we’d push a button, and it would kick out emails to the asset manager, the CFO to say, “Hey, in the next 90 days, real estate taxes are due on this property, this property, this property. Your current escrow amount is this amount, this amount. The total amount of the bill is this amount. Do you have enough escrow to pay the bill?” We get so much feedback from real estate companies, and they just give us ideas, and we can implement them relatively quickly.
Michael Belasco (18:24):
Yeah, that’s awesome. It’s almost… And Spencer hit it on the head, it’s getting people to free up their time. I’ve spent tons of time doing this mundane data entry and it’s true. I mean, I lived it, Spencer’s lived it, we’ve all lived that paint. So, you pull people out and all of a sudden you have this platform where you’re pushing buttons and getting all that information. It’s just, it’s critical. And we have the capabilities just where we are in the world today, and real estate is notoriously slow to adapt and so, it’s great. There’s just all these opportunities to optimize all of that. So, it’s really good to hear. So, are you seeing… What types of results are you seeing from this implementation? When you work with companies for a while, does it free them up? How does it translate? Is there any feedback you’re getting, or just proof in the pudding of implementing what you’re doing?
George Burchlaw (19:23):
Right. Right now, we’re getting feedback on information that we can track. And so, basically, I don’t know if they’ve used the platform long enough to realize that, but I think in time that will come, and then, of course we get feedback from different clients and then we learn and maybe use that as a different marketing angle or something else we could… Another additional service if it can save our clients’ time would be happy to do it.
Michael Belasco (19:47):
Great. So, actually, I want to ask… I want to kick this over to Spencer because Spencer’s in a… Question for you, Spencer, because you are in such, when your company started it was all about tech and optimization. Sure, it still is. How is your life, your professional life in dealing with the mundane, and have you seen some improvements utilizing this information management? There’s so many systems out there, but just this focus on optimization. I’m curious to get some of your thoughts.
Spencer Burton (20:22):
Well, again, I think the objective of efficiency and optimization isn’t to replace people. Although you might see leaner organizations, but the primary purpose is to elevate people to do their best work. And if high quality people are spending too much of their time doing mundane, rote, repetitive exercises, A, they’re not happy. So, if you’re an owner of an organization, you want to keep your people happy, don’t have them doing excessive dead entry. It’s just not fulfilling. But also, you’re going to get better out outcomes because your people are going to be focused on the things that matter. Now, these things matter, but they can be automated and that’s to me the key. And so, as you push the items that are repetitive to an automated fashion or you create tools to speed the completion of certain tasks that are lower value, you allow people to really focus on the things that matter. Therefore, they’re happy and you get better outcomes.
Michael Belasco (21:36):
Spencer Burton (21:36):[inaudible 00:21:37].
Michael Belasco (21:37):
I saw my own thoughts on this, but then, who does the analyst and associate if all of these back office task get taken over? Somebody has to manage that still, right? And maybe there’s more coding or maybe these people-
Spencer Burton (21:52):
Yeah. Those people don’t go away. So, I think that’s the key, right? It’s the assumption you hear all this is like, “Oh, analysts are going away.” No, analysts are never going away. Analysts are simply a stepping stone to a decision maker. And in order to get to the point where you can make investment decisions, you have to have some seasoning, you have to have seen things, experience things. But when you as an analyst are so in PDFs or in spreadsheets all day long, you can’t see the forest for the trees. And so, what this does is… Actually, it reminds me of this latest trend we’re all seeing with ChatGPT, the AI-generated content. And your first blush is, “Oh, it’s going to get rid of writers. It’s going to get rid of artists.” No. No, not at all.
In fact, I did a blog post a few weeks back on, I created an Excel macro using essentially ChatGPT, okay? But in order to produce that macro, I needed to understand the features that Excel offers. I needed to understand what the macro… I was doing a residual land value. So, I needed to understand residual land value and I needed to understand which inputs were important to that analysis. And so, I therefore was doing higher level work rather than for someone like me who’s not a superior VBA developer, I would have spent a lot of time searching the internet trying to find lines of code that would accomplish what I wanted, but instead, those mundane things, those lower value things, I pushed to an automated fashion, and I focused on the higher value. And I didn’t really think Carol Ann and George, that’s what you’re getting at. It’s like, let’s not spend our time on the mundane things. Let’s spend our time on the higher value things and the result is going to be better outcomes for our firm, for our investors, for our people.
Carol Ann Flint (23:45):
What I like to think about is this allows people… Instead of being reactive, it allows people to be strategic because their time is freed up from the mundane and that elevates everybody in the organization to focus on looking at things from 100 feet, 500 feet, 1000 feet, 10,000 feet. So, everybody’s role in the company is elevated. And it’s good to know the anatomy of how the cash flow model works, but once you’ve cellularly got that in your DNA, then, why spend time doing it when we can automate it for you, so that it gets done faster, so that you can move on to going, how can we make strategic decisions that make our operations more efficient, more profitable. So, that’s the goal, and it really elevates everyone’s role in the organization.
Spencer Burton (24:51):
That’s not true [inaudible 00:24:52] never ending code. Let me give an anecdote if I can, Michael.
Carol Ann Flint (24:55):
Spencer Burton (24:55):
So, a firm I won’t name that I worked at in the past, incredible people, incredible firm, great investors, but they had essentially an investment committee memo that they had to be produced, and there was an individual’s job who was to produce it, and it would go to an investment committee. And I kid you not, in an hour investment committee, probably 15 minutes was spent on talking about the formatting of this document. Now, the part of that, was because this document then ends up going to other groups, higher up and they want to make sure that it’s right. But talk about low value… And you have an investment committee, so very high level, 10, 15 people sitting around a table talking about what needs to be underlying, what needs to be bolded, let’s not indent this quite the same way. Low value, that’s the thing that’s automated in this new world.
Michael Belasco (25:46):
Think about this. I like to think of these microtransactions in your brain on the day-to-day. When you’re talking about higher-level thinking, if you spend two hours on data, It’s a different part of your brain. And to have to turn that off, regear, to then go into strategic thinking and it’s on the margin on a day, but you add that up over a year, over a decade, it’s massive. And I know when I get in and I’m just that kind of person. I actually like just sitting in a room and doing some of that and some of it’s like solving puzzles in another world. I know very few people would say this, but I’d probably wouldn’t mind being an accountant part-time [inaudible 00:26:29] full-time. There’s some puzzle about it all. But when you leave that and then you go and you’re looking at an investment opportunity and your mind just gets like, there’s this moment of just pure exhaustion, like, “Man, I got to take a break.” Because your mind has to switch over into that creative. It’s artistic. That piece is, there’s art and then there’s organization. So, there is such a value. If there is an implementation of this so-called optimization and offloading of the work from these types of people, then, it just changes. It’s such an opportunity.
Spencer Burton (27:05):
Yeah. Let me ask. We’re running low on time, but I want to give George the last word here if that’s okay. Fast forward 10 years and this information management, data management, how does the industry look 10 years from now as it relates to these things?
George Burchlaw (27:26):
Well, I’ll say, I don’t see Excel going away. I see finance people having to use Excel. Finance people will never understand the accounting statements, and that’s information is not applicable to real estate people because they underwrote an Excel, they want to see cash flows in Excel. So, I think they want to see all the future analytics in Excel. So, I don’t see Excel going away. And the opportunity we see is there’s probably 15 to 20 different data sources for real estate property, loan documents, any documents, appraisals, all of them come from a different source. So, I mean, the appraisal comes from the appraiser, loan documents come from an attorney, entity documents come from a different attorney. And so, it’s just so document intensive. How could that ever be streamlined into a package to slice and dice, to generate a report that someone would trust and say, “We’re going to do this based on that.” I’m not sure if that is in the future, potentially in the future, but for I’d say for the next five to 10 years, it’s going to be someone rolling up the sleeves and doing all of the work to give transparent reports to real estate companies and investors.
Sam Carlson (28:36):
Yeah. It’s interesting. As we’ve been talking, I’ve just been thinking, there’s a couple words that as we use them in our own native tongue, they just become meaningless with time. And one of them is efficiency. Oh, we’re becoming more efficient. And as we’re talking about all these things I’m just thinking, imagine the 40-hour work week, 15 years ago. The amount of information and work that happens now compared to then just based on this technology boom, is mind-boggling. You can accomplish, I don’t know obviously what the math is, but probably in a five-hour work week, what you could do 15, 20 years ago, which would take you 40 hours. So, these types of conversations that we’ve been having with these different tech firms doing different parts of the supply chain here in commercial real estate have been fascinating. This is no exception. So, Carol Ann, I will give you the very last word before we finish up here. If people want to learn more about RE-Analytics, where should they go? What should they do?
Carol Ann Flint (29:35):
They should go to our website and which is www.re-analytics.net. If you go to com, you’ll end up in an Italian company. Do not do that. Re-analytics.net.
Sam Carlson (29:52):
Awesome. Well, if you’ve been participating in the show, listening, watching, whatever, thank you for giving us your time, and we will see you on the next episode.
Thanks for tuning into this episode of the Adventures in CRE Audio Series. For show notes and additional resources, head over to www.adventuresandcre.com/audioseries.