CHICAGO-One fallacy of the current dotcom implosion, AvidXchange co-founder and CEO David Miller says, is that “some people wonder if the Internet matters anymore.” However, just as clicks failed to take the bricks out of real estate, computers are likely to continue to grow in practical usage by those in the business, be they brokers, leasing agents, property managers, or financiers.
Miller's Charlotte, NC-based company develops software with commercial and multifamily real estate applications, making the procurement and bidding processes more efficient. Joining Miller at a recent Real Estate Investment Association forum was Dale Vanderlaan, co-founder and president of Realogic, whose firm's core business is software that makes the lease abstract process more efficient, as well as reducing the time clients spend on due diligence.
“In applications like this, we stop the madness,” Vanderlaan says.
The accounting firm of Deloitte & Touche told AvidXchange the typical property management transaction cost $76 the old way, but can be driven down to $23 by putting the process on line. That savings goes directly to the property owner's net operating income, Miller says, theoretically raising property value and increasing the ability to borrow more against it. Overall, the firm saves its clients about 15% on average, Miller says, paying for the software with those savings in about eight weeks.
For Levine Properties, the light went on, literally and figuratively, when the firm that manages 1.5 million sf in the Charlotte area realized how much it was spending on light bulbs with seven different vendors. Specifications were drawn up, and vendors bid in an on-line auction format. Levine saved $30,000 as a result of the e-procurement process, quickly earning back its $5,000 fee to AvidXchange.
However, the human element is worth considering. That includes relationships property managers and other professionals have built up with vendors. “We think business is about relationships, and a lot of relationships are long-standing,” Miller says.
Indications are more firms are jumping on the much-ballyhooed information superhighway. A Building Owners and Managers Association survey in October found 7% of procurement officers buying on line, but 70% of those same buyers expected to be doing to by this October, Miller says.
Different facets of the industry are using technology in different ways. While property managers may do their procurement on line with AvidXchange, they also put lease information on line with Realogic, which also can later serve investors looking at the property as a potential acquisition. Meanwhile, the commercial lending business has gone electronic, says Glaser Financial vice president Pete Evans, at least as far as lenders and originators dealing with Freddie Mac and Fannie Mae, who have automated their processes and created helpful databases.
“Everything used to be paper,” Evans says. “Now everything is automated. When they go to buy our loans, everything is inputted electronically…It's a great tool when you're underwriting a deal.”
The computer is less helpful, however, in the borrowers' search process with lenders. The problem is, borrowers may shop on line with a number of mortgage brokers, all of whom may then pitch the same deal to their institutional sources. After a while, Evans explains, those capital sources get leery of an over-shopped deal.
“It's a little counter-productive because you have so many people looking at the same deal,” Evans says. “They think no one has control over the deal.”
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