In the case of the borrower, says Patrick Rafferty, vice president
of Product at Reonomy, many are now better informed about
which lenders could be the best to work with. “They might have an
acquisition opportunity they are pursuing and are looking for a
partner for financing.” New tech and data sources make it easy to
see who has made loans recently on similar assets.
Lenders, too, have a wealth of new options that deliver benefits—benefits that eventually filter down to the borrower.
Reonomy, for instance, works with a number of lending institutions and debt brokerages to identify leads at the top of the funnel,
Rafferty says. One product offers a view into properties that not
only include such facts as square footage and prior sales price, but
also offers insights tied to those properties. “It understands the
sales and mortgage history, for example,” he says. “It knows who the
key decision makers are that sit behind that LLC. Ownership in
commercial real estate can often be obscure.” He adds that the
company is starting to score properties using that information to
new data sources that
can deliver an
Chief economist at the
Backed by investors led by the technology investment arm of Brookfield
Asset Management, with GLP, Tishman Speyer and venture capital firm Fifth
Wall, VTS is aggressively investing in and expanding its software that helps
landlords track and manage tenant leasing. It raised $90 million in a recent
funding round in a record CRE tech venture financing. The company stated
the funding will continue to deepen its current software capabilities, and
accelerate the launch of its end-to-end commercial real estate leasing product Truva, which will go live later this year.
One real estate industry expert in the proptech space characterized the
crux of the VTS software as providing owners the ability to do deals directly
with the end users. “It’s about eliminating brokerage commissions. So, this is
really bad news for JLL, CBRE, Cushman or other brokerage firms,” he said.
He explained with a hypothetical that if an owner can increase their net
income by not paying commissions to brokers, the impact on the value of
their portfolio would be much larger than just the dollar amount of commissions that were saved, because real estate is typically valued at a multiple of
net income, called a cap rate. If a cap rate is 5%, each dollar of saved commissions increases the value of the portfolio by $20 dollars.
“If the real estate firm’s portfolio is worth $350 billion, and the firm
increases net income by 6% by not paying commissions to brokers, the
impact on the value of the portfolio would be $35 billion,” he said. “That’s
why the big property companies are willing to invest big dollars up front. The
software will dramatically reduce commissions. If I can invest $90 million in
VTS and potentially make $35 billion in portfolio value from it, I would do
that deal all day long.”
VTS allows pricing management where owners share information on
rents. Through benchmarking, they can see what other owners are pricing.
“There is no broker involved because it’s owners sharing that data,” he
Companies like Brookfield have multiple people in buildings, including
security guards and property managers. Once tenants get information
online, they can directly visit the buildings. The company employees could
show the property.
Jonathan Kaufman Iger, the CEO of Sage Realty, the leasing and management division of The William Kaufman Organization, says that his company
was one of V TS’s first customers. He opined while not eliminating the role of
brokers the technology will be enough of a disruptor to change brokers’ jobs.
He said technology is the disruptor of the real estate industry. But he
pointed out even with the flourishing of online resources like Trulia and
Zillow, residential brokers continue to thrive.
Iger described the VTS software as “starting to provide tools to truly
unlock data to make it unbelievably actionable for landlords and operators.”
V TS landlord clients pay additional fees for modules that provide information outside traditional brokerage services, according to Iger. For example,
V TS can indicate whether the landlord is going to get a return on investment.
The system tracks rents and TI costs, replacing more cumbersome record-keeping of deals on Excel spreadsheets.
But as to how it will directly affect brokers, Iger said, “Technology is mak-
ing it more transparent and easier to find space. But that’s not the only thing
that brokers do.”
On one end, he described a hypothetical with a broker taking a tenant to
10 spaces, trading paper on three or four, helping the negotiations and
handing it off to an attorney—maybe staying involved in the negotiations
for a couple more months. The broker finally receives a $500,000 check (gross
payment), not from the client but from the landlord. “I think 99% of the time
if the broker is truly being honest with you, they cannot say, ’ Yeah, I provided
$500,000 of value.’ That’s just the bottom line,” said Iger.
On the other end, he added that if you’re JLL’s Frank Doyle with an
18-month assignment to relocate Deutsche Bank into over a million square
feet of space, accounting for significant dynamics with their relocation, their
future growth or contraction, and how they tie into base building systems,
that clearly points to the advisor’s providing value.Iger says VTS and similar
technology will make brokers more service-oriented.
“They are going to need to provide financial analytics for tenants to make
informed decisions on the terms of the lease that they sign,” he said. As an
example of added value, Iger stated, “The broker can make sure that you’re
asking the right questions to understand with how you operate your busi-
ness if it’s the best building for you. It doesn’t and it shouldn’t come down to
simple dollars and cents and whether I like the look of that lobby.”
The source who opined the software is more of a direct threat to brokers,
stated JLL and CBRE are clients who also use the system—because the land-
lords who hire such firms require the brokers’ participation. However, Iger
also noted brokers can use the VTS system as a tool to build tour books to
show listings to tenant clients.—Betsy Kim