The fact of the matter is, technology continues its unstoppable move forward and it impacts every aspect of our modern life. Its relentless push forward is and will undoubtedly continue to change the way we live, plan our lives and certainly, in the way we do our business. In my humble view, we have two choices: we can ignore this reality and slowly but surely drift into obsolescence and eventual extinction, or we can embrace this new paradigm and thrive, personally and professionally.
I for one, welcome it, embrace it and continue to integrate it into every area of my life and business, at least, where it makes sense and although, I am convinced that there is no substitution for the human touch in investment management, especially when my product is real estate, I clearly understand that by fully harnessing and leveraging technology, we benefit on many fronts, ultimately allowing us to positively enhance our tenants’ experience while continuing to augment by an attractive multiple, our investor’s return on equity...
Just think for a moment of the possibilities and potential benefits in terms of optimizing the tenant experience, asset and property management processes. How about, the possibilities in terms of streamlining and fine tuning the investment process; property sourcing, selection and value extraction, etc.
Let’s review a few trends that may seem unrelated, but in my opinion, are not only interconnected and synergistic, but key in the value add process.
IOT (Internet of things) –
For those of us who operate and invest in the multifamily and student housing sectors, our ability to keep high occupancy rates continues to be a key success factor as is, our ability to justifiably raise rents. Therefore, in this day and age, this is only achievable if the tenant’s“experience” is unique and satisfactory and that means going above and beyond what everyone else is offering. So, we find ourselves in need of adopting and successfully executing tactics
similar to what one may find within the hospitality industry into our properties. Yes, we all throw parties for the tenants, improve the club house (did someone say hot tub and fire pit?) introduce various amenities and so on, but is this sufficient? What else can we do?
Much, I think. For example, if we take the time to understand our tenants, who now live or have grown up, in the era of Facebook, Tweeter (TWITTER) and social media; where just about everyone is connected to each other and to the web 24/7 via smart mobile devices, and for whom texting has become a clear preference over traditional conversation.
We as owners, operators and investors would be wise to fine-tune our product offering and communications methods to leverage these clear preferences in our favor, by adapting our units to feel and respond to the tenants needs (e.g. a clogged toilet sends a maintenance request, the A/C adjusts temperature based on a voice command, lighting sensors, access control, physical security, cyber security, etc. Just imagine…).
Not only that, consider for example, the wealth of information that we can collect and analyze daily to continuously improve our service offering to our tenants, to efficiently provide them on an individual basis with a tailored solution to their needs. Some of these solutions would be geared to complement the overall offering, but some would be revenue generating new services, that would allow us to increase the bottom line with its obvious implications (more about that in a separate piece).
Artificial Intelligence [AI] and big data –
Artificial intelligence and bot applications can be used to replace service call centers, log maintenance requests, handle most of the paperwork associated with the leasing process and so on. Big data in turn, as previously indicated would leverage the information gathered from the tenants to improve service offering and add-on sales allowing us to cater to their specific needs.
That’s two birds with one stone – Improved service [tenant experience] and increased bottom line;
resulting from our ability to increase and generate new revenue sources, while allowing us to manage more efficiently our cost structure by helping us realize savings on payroll expenses, utility consumption and so forth. The list goes on and on…
How about the investment process? well, for instance, take the sourcing and analysis process. We all know that these processes depend on timely and accurate information, but the information gathering process as currently conducted by our analysts is rather inefficient and time consuming. Therefore, these are processes, at least at the initial, raw material stage can clearly and effectively be taken over by artificial intelligence [AI] applications, which in shorter periods of time can access, gather and sort large pools of information gathered through big data tools. Granted, the buck still and will continue to stop with the investment committee, but now we can be more efficient and precise with the ability to review more deals, faster and with information that may be more relevant to the success of our strategy.
What about reporting and asset management? Well, artificial intelligence [AI] and big data can be very useful tools in monitoring the execution of a business plan. Producing key and timely data [on a need basis] to different levels [operating or executive] of the organization and alerting much sooner about potential faults and deviations from the plan. In short, it can save our asset managers a lot of time going over raw data and crunching it, freeing them up to focus on meeting and exceeding the business plan goals.
Virtual Reality [VR], Imaging and drones –
Separate or together these technologies and resulting tools can help us in many ways; Think in terms of marketing and tenant acquisition implications; Think in terms of their potential impact much deeper detail by the key decision makers, before any of them has to invest the time and resources to travel out to see the property (remember the human touch?). But the potential benefits go well beyond time savings and enhanced marketing capabilities. These technologies would be critical in the value extraction process by allowing us to simulate or create “before” and “after” imaging of a value add program and thus give us an invaluable feedback on the impact a certain renovation scheme would have on the property, all before spending a dime on renovations, effectively replacing the method of upgrading a batch of units to take the tenants’ temperature as most often than not, is the case today. It could also be used to locate hidden faults and together with AI and IOT create a REALLY accurate maintenance log, a more efficient Due Diligence
inspection and so forth.
The fact of the matter is that the list of potential benefits derived from the efficient use of technology goes on indefinitely as new technologies evolve every day. We are only limited by our imagination and our ability to adapt them to our business model to create a unique experience for our tenants while we strive to surpass our investors return expectation
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Mr. Vilenko is an experienced Real Estate professional with over 15 years of experience in real estate investments, including acquisitions, due diligence and asset management. He has held various executive leadership positions focused on private equity, real estate, structured finance and investment banking. Mr. Vilenko leads VTS Capital Partners’ investments process; being responsible for all aspects of the company's investment activities, from deal origination through analysis, contract negotiations, due diligence, project financing, asset management and asset disposition. In prior roles Mr. Vilenko served as Chief Investments Officer for CityR Group and Gaia Real Estate.
VTS Capital Partners “VTS”, is a full service real estate investment and asset management firm, specializing in
value-added real estate transactions in the US with a strong focus on income producing properties; mainly in
the multifamily and student housing space. Our mission is to provide sophisticated HNW investors and
investment groups [family offices] with a platform through which they can diversify their asset allocation and complement their current investment portfolios, by providing them direct access to institutional quality real estate which, to date, has been predominantly reserved to financial institutions