Lease and content management and administration at most large real estate firms is an operational quagmire. In other industries, successful organizations have managed to efficiently triangulate between people, process and technology (PPT) to manage enterprise files and the important data inside of them. Yet sound processes at most CRE firms remain elusive.
Fortunately, technology offers an antidote. In this post, I share some anecdotes from the winding path that is enterprise sales, offer diagnosis for problems pervasive in the industry and leave you with a few takeaways which I hope will help you get your own house in better order.
Into the fray
We recently began discussions with one of the world’s largest office property trusts about their PPT strategy. The company owns some of the most prized, marquee office assets in the world, and employs tens of thousands of highly educated professionals, yet their document analysis and management solutions are emblematic of worst-of-breed. Pulling back the covers on their current processes quickly revealed the issues. Currently, they outsource acquisition diligence to one well-known firm that produces some of the least user-friendly work product I’ve seen. Going from 100 pages of unstructured lease to five pages of unstructured gibberish on a spreadsheet is an attempt to structure the data without actually providing any inherent capabilities of structured data.
Perhaps more detrimental, none of their data is standardized. Herein lies one of the most detrimental flaws we see. Failure to standardize your data, to enforce taxonomies and classification schema, results in tremendous losses in large organizations.
|Gartner projects that white-collar workers will spend anywhere from 30 to 40 percent of their time this year managing documents, up from 20 percent of their time in 1997. Similarly, Merrill Lynch estimates that more than 85 percent of all business information exists as unstructured data commonly appearing in e-mails, memos, notes from call centers and support operations, news, user groups, chats, reports, letters, surveys, white papers, marketing material, research, presentations and Web pages.||According to Gartner, white-collar workers will spend anywhere from 30 to 40 percent of their time this year managing documents, up from 20 percent of their time in 1997.|
Their lack of standardization is only the beginning. Once our prospect’s assets are on-board, an internal cast of characters – with overflow support from India – re-reads the so-called abstract to extract key data and enter it into MRI. Finally, when the legacy leases roll-off, new leases are papered on their forms and the internal team repeats the process. So, at the end of the day we have:
- – Two different vendors, one in the midwest and one in India
- – Silos of work, often redundant, without a single source of truth
- – Very little data integrity and control
- – Predominantly unstructured, unavailable work product
Home-grown, but not a home
Sub-par home-grown tech and siloed infrastructure frequently present themselves in the industry. We pitched – and lost – a diversified, NYC-based outfit earlier this year with a similar host of problems. The executives in that shop took great pride in their home-grown lease administration and document management technology. After two weeks of hearing about their state-of-the-art home-grown lease tech, we got a peek under the hood. What a treat! The tech was built in fits and starts over a decade and it looked every bit the part. Every feature – and I really mean every feature – got a new tab. New functionality needed? Build a new tab. The tool was so antiquated looking it bordered on cool. Think Oregon Trail.
Putting the aesthetics aside, and ignoring the fact that it was so complicated and cumbersome only one person in the firm truly understood how to use it, the system suffers from some severe flaws:
- – All data entry is done manually
- – Heavy reliance on Accenture
- – Very little control over data
- – Significant redundancy in manual work
- – No intelligence capabilities associated with document management
- – Poor data structuring and taxonomy enforcement
- – Increased total cost of ownership (TCO) with continuous custom upgrades and enhancements
The firm had the foresight to realize there must be a better way. Unfortunately, their solution for a path forward seemed to rely on some combination of doubling down on Accenture and getting a Box enterprise license. Admittedly, the Box account might offer some relief, but a smarter strategy would be to break down the silos between document management and lease admin with a content intelligence tool – like Counselytics – that could not only add superior intelligence and organization to the document management protocol, but also seamlessly communicate back and forth with the lease admin software, permitting one-click verification of data and also supplanting the costly, error-prone and manual data entry processes.
I spent 10 days in Thailand a few years ago and really enjoyed visiting their local markets. Unfortunately, many of the vendors spoke very little English and I often found it difficult to make a selection. On multiple occasions when I asked the vendors to explain to me the difference between two seemingly different products, they would quickly respond “same same”. While I am just dubious as to whether that’s a sound sales strategy in the markets of Thailand, I am absolutely certain that it is a fatally flawed strategy for data analysis and data management.
One of our clients is a large office property trust based in Pennsylvania. The firm has grown quickly to almost 20 million sf. Firms experiencing rocket ship growth typically wind up operating on paper thin technical infrastructure, harking back to their startup days. The upshot is that it’s relatively easy to effect change, as there exist no legacy systems and the hubris that typically accompanies them. So with this particular client, deploying technology was a relatively direct path to immediate ROI. With our solution we are able to seamlessly tie their Sharepoint file repository to their lease management system using our proprietary Sharepoint add-on application. The documents underlying all the important data points serve as the final source of truth, with one-click validation.
We have also have begun to address their data integrity and classification problems. At the outset of the engagement we found that the exact same language in two different documents might be abstracted in completely different ways. One human might reduce a clause to “Tenant to pay PRS”, while another may say “Included in Opex” with a different field for Opex that references 6.92% (the PRS). Certainly, not same, same: Good luck trying to search and cluster with such inapposite information. When data are unstructured, or even worse, non-standardized and unstructured, decision makers are essentially comparing apples to oranges. There’s no consistency in the taxonomies and classification, leading to bad decision-making.
A taxonomy operates like a directory on a PC by providing a convenient, intuitive way to navigate and access information. This means that rather than having to formulate a query and then review the results, the users can instead drill down through the categories and subcategories of the taxonomy until they find the relevant concept or document. The taxonomy can also be used to limit queries to specific categories and sub-categories. One must identify the categories in which each data point may exist. E.g., a field will be either Yes or No; and never maybe. As such, we can organize, query, and manage based on the Yes or the No.
We are in the process of implementing a robust digital transformation with this customer.
This data standardization is important particularly in the CRE industry where documents can have lifespans ranging from a few months to over ten years. As such, the ability to quickly identify terms such as renewal options, penalties or charges quickly can add material efficiency at such scale.
Takeaways; toward a solution
A great deal can be learned from our experiences over the last few months. No large firm will ever perfectly ace PPT, but considerable gains will be achieved with more focus and diligence.
Content intelligence is moving beyond search and document classification into full-fledged applications, like Counselytics. While early applications were largely funded by the intelligence community for its own use, commercial applications are now emerging. In fact, “killer applications” are being developed for nearly every industry in which high volumes of semi-structured documents are created. CRE is no different, and is, in fact, a perfect use case.
In order to implement an effective solution, we suggest, at minimum, the following:
- – Unify your due diligence and ordinary course deal flow processes and break down working group and data silos
- – Re-use work product. If you cannot reuse your diligence firm’s work product – and if they aren’t giving you structured data sets – fire them
- – Vigilantly enforce taxonomies and classification schema in order to combat the massive drain of unstructured data
- – Tie document management to lease administration for a true end-to-end lifecycle management solution
- – Act early – machine learning technologies are growing stronger at an incredible clip, and they are unique to each customer
- – Act now, as prolonging your digital transformation puts your firm at risk of falling behind
These killer applications, powered by cutting edge machine learning and natural language processing (NLP) technologies are maturing into an essential CRE technology, comparable to the relational database. The technology comes in several flavors, namely: search, classification and discovery. In most cases, however, firms will want to integrate this technology with one or more of their existing enterprise systems, such as MRI and Salesforce, to derive greater value from the embedded unstructured data.
Mr. Gabbard is Chief Executive Officer of Counselytics Ltd., a NYC-based document intelligence and management company. He is also Chairman of Forefront Law Group and an active angel investor.
Counselytics brings the power of big data analytics to the universe of enterprise files. We analyze, organize and manage important data inside of documents. Fortune 500 companies, top banks and hedge funds and some of the world’s most successful entrepreneurs trust us to facilitate and improve their important business processes. Counselytics is based in New York City, was founded by a former Cravath attorney and a Cambridge computer scientist, and is backed by a world-class group of investors, including Joe Lonsdale’s 8 | Partners, and Gavin Solotar, former Greenhill General Counsel and Wachtell Lipton corporate partner,and former Founders Fund partner Bruce Gibney.
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