Tackling Real Estate’s Data ‘Problem’

Alan James of RealPage discusses the competitive advantages of good data, and outlines what GPs and LPs should look for in a data platform

Privcap: Large GPs have greater ability to acquire and process data. Why does that matter to smaller investors?

Alan James, RealPage: Not unlike the larger GPs, midmarket and smaller GPs have the same need for the data and the analysis to continually measure and monitor their KPIs
and KSIs (key performance indicators and key success indicators) of their business to better serve their investor community.

Is that also an issue on the investor side? If so, what are the consequences for smaller LPs?

James: In the limited partner space, whether it’s an institutional player like a pension fund or a family office trust, their requirements are exactly the same, but perhaps they may be even further challenged in that real estate, in many cases, is a relatively small allocation to the overall investment platform. You could have a limited partner managing $2B or $3B in real estate with just…four or five professionals managing that real estate. So, their access to technology resources and software to help them run the business is perhaps even a greater challenge than the general partner.

What sort of features should a GP look for in a data platform?

James: As you might imagine, it varies from GP to GP. Number one is scale—the resources they have available to run the platform. Second is the diversity of their portfolio in terms of the number of managers they use. Then, are they a diverse portfolio across multiple asset classes like lodging, commercial, multifamily, student, senior, etc.? Or are they focused on one asset class with just a few partners?

If they’re dealing with multiple managing partners and joint venture partners and they have a rather diverse asset class, then they’ve got quite a challenge. at is, how do we standardize the collection of that data so that they can use that data for the now, since they need it at a portfolio level? Really, their options are two: they can either mandate some kind of a platform down at the operating partner level or they need to find a mechanism in place to collect data and provide that data holistically at the GP level.

What about LPs? Are their needs much different?

James: I would call it the real estate ecosystem: the LP, the GP, and the operator, and how do [they] play nicely together and pass the data from one level to another? At the end of the day, based on each of the individual asset classes that both the GP manages or the LP invests in, there are a series of standard KPIs and KSIs…that both the GP and LP look at on a regular basis. The more they’re able to standardize the collection of the data that supports the KPIs at that platform level, the better it’s going to be for both the LP in communicating and evaluating the GP and the GP evaluating their operating partner.

What, ultimately, are LPs looking for from their GPs when it comes to data and fund-level information?

James: The LPs are looking for timely and accurate information. In many cases, even today with all the great technologies available to both the LP and GP community, the time lag between quarter-end reporting is 60 or 90 days. What LPs are looking for from their GP partners is timely and accurate data, four to six days after the quarter end, not 90 days after the quarter end. at is really difficult to do if you don’t have some kind of automation in place to collect the data, aggregate the data, and disseminate the data up to your key stakeholders.