Dallas-based Lincoln Property Co. prides itself on meeting its clients' needs. That's especially true when it comes to supplying timely portfolio information on the properties it manages for third-party investor clients. In fact, Lincoln will often give institutional owners access to its property management software systems, so those investors can slice and dice real-time data on their own properties any time they'd like.
But sometimes, giving clients the answers they want, when they want them, can result in even more questions. That's what happened recently when a client called to ask about higher-than-normal delinquencies at a particular property. "They called on the third of the month and asked why the delinquency was so high," says Brian Galla, Lincoln's director of information technology. "Of course, rent isn't really late until after the fifth."
Photo Credit: Jason Abbott
That small example highlights a new wrinkle in the industry's rush toward real-time data and access to that information. As owners and institutional clients clamor louder and louder for up-to-the-minute stats, management firms and technology vendors must be prepared to deal with the real-life challenges of providing real-time statistics to their business partners, from availability to context.
"Was that a big deal?" Galla asks, referring to his client's delinquency question. "No, but you're going to get those people who look at real-time information and not necessarily understand what it means. In that case, it was just the natural trend of cash-flow balances in a typical month."
So much for saving time and money by providing instant access to information.
Real-Time Tension
Given such scenarios, third-party managers and software vendors are questioning the value of providing data in real time, especially given the increased workload and high cost of doing so.
"From a third-party perspective, we see clients that want data all the time. We go through a very laborious process to feed it to them, but then you never know what they actually do with it," says John Gallagher, senior vice president of property management at Chevy Chase, Md.-based Polinger Shannon & Luchs Co., an owner and third-party manager of approximately 6,000 units.
Hard-dollar costs for such efforts are difficult to ascertain, but experts estimate providing true, up-to-the- minute data can cost anywhere from five to 10 times as much–or more–as feeding it on a daily or weekly basis. That's particularly true in a Web-based setting. "The cost can become fairly significant, especially when you've got 50 or 100 properties and everybody's banging on the system to get information at the same time," says Nevel DeHart, executive vice president at First Advantage SafeRent, a Rockville, Md.-based provider of multifamily screening and risk management software. "The horsepower you need to drive that engine gets magnified geometrically."
More fundamentally, software vendors and third-party managers question how useful up-to-the-minute (and ever-changing) information is for investors when making longer-term, strategic investment decisions. The benefits of real-time data for managing a property are undisputed; accurate delinquency data and vacancy rates, after all, can help a manager collect rent more effectively or launch a timely marketing campaign. But there is such a thing as too much information. "You can get so mired in the details, you don't do anything. It can lead to paralysis," Gallagher says.
At Richmond, Va.-based REIT United Dominion Realty Trust, which owns and operates more than 74,000 units nationally, chief information officer Patrick S. Gregory says the application of real-time data in the apartment industry is fundamentally different than in other businesses.
"This isn't Wal-Mart," Gregory says. "Our inventory doesn't turn over daily. In fact, it might only turn over one or two times per year. The clear trend toward Internet sales and leasing makes it desirable to have apartment inventory and pricing information available on a real-time basis, or on a daily basis at worst. For other information, I think you've got to figure out what the cost, and value, of the real-time data is."
Investor Interest
On the other hand, institutional clients say up-to-date information is crucial to making informed decisions. "Is there a risk of information overload? Absolutely. But for me, as an investment manager in the real estate world to say I'm not going to look at something that's available to me is ridiculous," says one large institutional asset manager who owns more than 30,000 units nationally, but requested anonymity to speak to the issue for this article. "I would criticize software vendors for not being more open to transferring data in and out of their systems without major root canal work."
Smaller investors agree. "For me personally, there's a lot of appeal in having a stock-ticker-type view of my real estate portfolio," says Allison Atsiknoudas, CEO of Belmont, Mass.-based Investment Instruments Corp., a start-up property management software firm aimed at helping individual owners manage portfolios of 50 properties or less.
Founded by Atsiknoudas and two other partners who met while attending the Massachusetts Institute of Technology, Investment Instruments' goal is to provide real-time portfolio information to those investors who want it. "I want that information not because I'm going to change my investment on a daily basis, but because I enjoy seeing my progress, even though that progress may be long-term."
Real-Time Relief
Of course, multifamily technology managers are the ones caught in the middle of this data tug-of-war. D. Thomas Figert, director of information technology at Dallas-based BH Management Services, a third-party manager of more than 32,000 units, strives to find a balance in the information he provides against the resources it takes to do so.
For instance, the firm has been focused on deploying Santa Barbara, Calif.-based Yardi Systems Voyager property management software, a process that Figert says is now about 80 percent complete. "One of my challenges has been to slow down on the reporting capabilities until we get the product fully deployed," Figert says. "At some level, it comes down to costs, but largely, it's just resource-related. I've only got a finite number of staff." One way Figert and BH have addressed that challenge is by updating reports they've generated in the past for new requests.
"We will often get a request for a report that puts particular emphasis on a specific value," Figert says. "If we can direct them to a similar [existing] report that basically has the same thing, it saves a lot of time."
But providing real-time data also has upsides. At Lane Co., an Atlanta-based third-party manager of more than 30,000 units, chief information officer Dan Haefner says the firm makes information available to its clients through a password-protected extranet, a process that has saved the firm time and energy it would spend generating reports.
"After years of doing owners' reports that were stacked 8 feet high, we decided to use the technology to give our clients access to their data, in real time, at their convenience," Haefner says. "Now, the process is way skinnied down. The value-add is the technology and process improvement coupled together. How do you assign an ROI to that?"
The answer is, you can't. And for fee-based managers and technology providers who serve institutional clients with tens of thousands of units nationally, whether they should be providing real-time data to their clients may become less and less of a question over time. The reason why? Those investors are simply demanding that they do so. And ultimately, they're the ones who write the checks to get it.
"From a third-party perspective, I don't believe you can be competitive without offering some kind of real-time reporting," says Scott Wilder, vice president of national residential property management at Lincoln. "When you go in there to pitch your business, what you're really doing is selling your technology. That's what they're interested in. They want to know what you can do, how you can report their data, and how often you can do it."
–Joe Bousquin is a freelance writer in Newcastle, Calif.
How to Avoid Drowning in Data
1 Strive to provide real-time data, but balance it against the larger needs of the organization. You might not be able to respond to every unique request until your technology is fully deployed.
2 If numerous report requests do bog you down, try to provide existing data that addresses the same, or a similar, area. Remember, reports are content. The more mileage you get out of any one report, the more time and money you will save down the road.
3 Give clients access to data through an extranet. While this can generate even more requests for data, it pares down the time it takes to create non-automated reports.