Acquisitions

Sean Fitzpatrick: Faster, Smarter, Easier - A New Era in CRE Valuation & Underwriting

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CRE is evolving and technology needs to evolve with it. Coupling years of experience consulting for commercial real estate decision makers with technological know-how, rSquaredCRE launches to tackle advancement in CRE valuation and underwriting.

Filmed in Partnership with Realcomm | IBcon


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Sean Fitzpatrick, CTO, rSquaredCRE

WEBSITE | TWITTER | LINKEDIN

 

VIDEO TRANSCRIPT:

So CRE is evolving and what we've found is while our industry is rapidly evolving the technology hasn't quite kept up pace. In particular we're expected to close acquisitions now and half the time that we previously did but our software isn't keeping up with the task. 


So valuation software in particular hasn't met our expectations. We're still using desktop software, we're using software that was built over a decade ago. And while that's okay it's not going to get us to the efficiency that we need to be as an industry. So things like multi day training sessions to get you up on your valuation software. We think this is really a symptom not a solution. It should take you an hour, two hours tops to get you up on your your CRE software. 

So we're going to show you a solution here in a moment that hopefully will solve some of those problems. 

Our company our squared CRE is a brand new company but we're based out of an original consulting company. We've had hundreds of years of experience producing software. We have two existing software applications right now, our abstract and our budget that our SAS software applications in use for over a decade. So we're not new to this game where we're very much in a technology leader. We've got wonderful very popular clients, clients like Hines, EOP, Griffin Capital, First Capital to name just a few. 

These clients have reaped the benefit of our experience are hundreds of thousands of hours of modeling commercial real estate software. So we used our experience our frustrations that we found in modeling software to come up with a new solution a solution we think that the industry will greatly benefit with.

Here's our mission statement. So we're of course all about empowering CRE. We feel that our solutions will allow the industry to grow more quickly to have less friction and to get what we all need to get done which is valuations more efficiently processed.  So what do you need? What is absolutely necessary to solve this problem? Your solutions have to be SAS based. There's zero cost of ownership as it relates to owning hardware. So your TCO is going to be lower. You don't have to make those commitments, there's no sequel server upgrades. This is what is required for 2019. We cannot be using desktop software. We can't use software that you have to be at your office to actually be able to use it. You've got a SAS solution. All you need is a browser, ubiquity anywhere you have a browser. You're going to be able to use our application.

So again if you've got to spend time training people, if people have to guess what it means in a particular field you're going to introduce errors, you're going to have problems. So our application is intuitive. We have something we call an input carousel so you don't see hundreds of columns, you have to studiously scroll through the input carousel shows you just the field you need to see and just the areas you need to see them. So you're going to realize a much more efficient more intuitive interface. The UI feels kind of like a rich desktop application but you're in a browser so you get all that benefit of the rich desktop but you're in a browser environment and fast.

So we've got all sorts of hooks in the application. We've got hotkeys, so hotkeys to navigate to different places quickly hotkeys to add things to delete things. In addition to our hotkeys we have things called walkthroughs. So we can walk you through common things so you'll find in the application that we can get the data calculated the data in and the data out in the most efficient fashion.

So one knock on a lot of the incumbent software is that they're just pretty close environments and we built this with an open environment we want you to get your data into and out of our application with no friction. We have what we call round tripping of Excel so you can export your data manipulated in excel and return it. And while that's helpful for a single asset if you have hundreds of assets this can be a huge time saver. Take inflation for two dozen buildings change it in one place upload it simultaneously. 

There's a lot of benefits of being open. And we also open in the ability to consume data from other applications out there. So we've got a very robust VTS integration. We can import deal data from VTS we can import portfolio information from VTS we have links to legacy software. So we wanted to be as inclusive as possible to gain as much traction as possible our application is available for third gate trial for free. We don't want anybody to not have the opportunity to try to use the software. While you're using it, you have the ability to create snapshots. These are little things you can email anybody else or you can share the snapshots via our own email links. So you can send out to as many people as you want and get them up and running on the application.

So obviously everybody wants to use a DCF application that's accurate and it's something you'd expect. We try to bring it home further by giving you the ability to see all of your reports in excel. So these are not just CSV exports of data. This is formulas, these are presentation quality reports and that ability to vet them in excel guarantees the accuracy. 

Finally we need things to be transparent, so you can look at that formula, we have wonderful audit reports. A lot of times things like recoveries become black boxes you don't understand how the numbers came to be. When you see the formulas you can confirm to yourself that the application is doing precisely what you want. 


Collaborative. So we've got this in the cloud SAS application. We can have multiple users simultaneously editing the same property, they can be editing the same property, they can be running reports, they can view doing portfolio analysis, they can be working on multiple properties simultaneously so there's no ability to have to check out a property check in a property all of it can be done simultaneously allowing for a more collaborative environment. And again you can send out those snapshots so it doesn't have to just collaborate within your organization. If we collaborate with organizations around the world. 

Our underwriting work this may be our single biggest differentiating factor. So you get this rich 15 to 20 page workbook that has all of the analytics that are typically very difficult to find within these reports. So we've got excel where everyone kind of does their last mile analysis. They're going to layer on debt they're going to put in partnerships going to tiered participations. All this stuff is typically done by taking canned reports cutting and pasting into Excel. 

You know cutting and pasting into Excel you're going to introduce errors.  You know it's going to take you a long time. So we get rid of all that by having this underwriting workbook. We think this will save hundreds of hours for each client each month.  So this is the kind of stuff that we think has to be in an application to be fast and efficient in 2019.

So what we're talking about is a new era. were going to have a new era where people can openly collaborate fast efficient intuitive. No need for weeklong training sessions multi day training sessions. No need to engage another consultancy to get your users up on the application. Our DCF will be that solution that allow you to cleanly efficiently model from start to finish your last mile analysis and excel and we think we will change the industry with it. 


Thanks for your time.


Guy Zipori: Artificial Intelligence & Real Estate Investment

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Guy Zipori, CEO of Skyline AI walks us through the history of artificial intelligence and how it’s evening the playing field of real estate investment for development firms of all sizes.


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Guy Zipori, CEO, Skyline AI

WEBSITE | TWITTER | LINKEDIN

 

VIDEO TRANSCRIPT:

Over the past 10 years the main ingredient for success in real estate investing is investing in real estate. Some have done better than others. But the market was on a steady incline and we all know that the next 10 years will probably look different. I'm Guy Zipori, I'm the co-founder and CEO of Skyline AI and I'm going to speak to you today about the meeting point between artificial intelligence and real estate. Personally I'm coming from a technology background, not from real estate background in fact, it took a team of four to get me into this suit.

In artificial intelligence we hear this all the time, it's changing the way we work, the way we do business, the way we discover and vet new information. But it also comes with fears. Many people are speaking about how AI’s coming for jobs. Hearing about driverless cars and other things makes people fear and no wonder. Hollywood has done a wonderful job terrifying us about new technology. It turns out that a story about how technology and AI will take over the world sells a little bit more tickets than how AI helps us improve our company's revenue. By the way Skynet from from the Terminator has nothing to do with Skyline AI, just clarifying this, and the fears that people experience today are pretty similar to the fears that people felt back then in the industrial revolution. Hearing that machines will come and take over their jobs. But eventually the industrial revolution created new jobs, new opportunities and transformed economies for the best. Of course it's much easier to look at innovation when looking retrospectively and now it's time for a change.

Real estate is at all time high with dry powder of about 280 billion dollars that is sitting there un-deployed just this June, and AI technology is very advanced. Computers today can find anomalies much better than humans. Looking at the history of AI, there's always the one theme, men versus the machine. Whether it's Deep Junior or defeating Gary Kasparov in chess, or Watson beating trivia at Jeopardy. By the way Shay Bushinsky, the creator of Deep Junior who was responsible for defeating Gary Kasparov is our Chief Data Scientist. But this is not how real life implementation of AI looks like. Men together with the machines work in many ways in a very powerful force. For example, using A.I. and the CIA to capture bin Laden or predicting flooding in India to save lives. The combination of human and machine is powerful. If you take the best out of both of them keeping the machines doing the repetitive tasks, such as data crunching, and leaving the humans for creativity and strategy and other things that we still do much better than machines. AI is not replacing lawyers in court but is helping them review contracts finding mistakes and helping doctors with X-ray scanning allowing them, helping them to identify cancer.

Do you know how much time out of a 16 hour flight from New York to Tokyo is manually flown by a pilot? Only 8 minutes. So we trust AI today with our lives. But what about our investments. This is Tom. He's 14, my nephew and shockingly he's even geekier than I was at his age. Today he sells Superhero Toys on Amazon. And this is Jennifer. I admit I don't know her personally but I do know for sure that even though she's managing billions of dollars of our pension funds, she has less technology than my nephew. And this shouldn't be the case. Computing power today is much more powerful than it was in the past. Computers that were once a luxury for only companies with supercomputers or seven digit budgets, is now in our hands in every handheld device and more data is available. Take Planet Data for instance. This company has 21 satellites and they are taking one point five million photos every day covering about two hundred twenty million square miles.

Advanced technology computing power and data enable us to sequence the DNA of Real Estate Investing. For example, instead of looking at comparable assets by looking at vintage or location or other static characteristics, we can today use data such as internet browsing data, where people are, what people are looking for online to better understand and analyze what assets really are comparable. Skyline AI is a commercial real estate asset management technology company. We partner with top commercial real estate players to establish investment vehicles augmented by AI. Today were connected to more than 130 different data sources. We try to put our hands on every piece of information that may affect real estate value. We then use our artificial intelligence technology to extract insights and generate predictions based on this data. And together with our partners it helps us making better real estate investment decisions and achieving better results than the industry benchmarks.

Our technology is impacting the lifecycle, the entire lifecycle of real estate investing. Whether it’s deal sourcing, allowing us to find the best opportunities available no matter where they are hidden, or analyzing those opportunities much faster in seconds instead of weeks and with hyper accuracy. Or during the ownership period, understanding the situation in our asset and compare it constantly to competing assets surrounding us. So we put our technology to a test. We took a portfolio of one of the top real estate investors here in New York and we allowed our technology to determine which asset we would participate if we would support this this firm. So we have two portfolios. One is their portfolio that is managed only by the human and the second is a subset of this portfolio only with the asset that the technology would recommend to acquire. And the result were groundbreaking. The technology together coupled with the human perform 21.87% IRR compared to just 15.6% IRR for the real estate investment firm alone. That’s 40% higher returns. The AI revolution has started. So what part of this history are you going to be on?

Thank you.