A Student of the Real Estate Game


Valuate – Commercial Real Estate Financial Analysis, Levered

Jun 25, 2013 | Entrepreneurship, Innovation, Technology

In real estate, we often do things because that’s just the way it’s done. But that doesn’t mean it’s the best or most efficient way to do things. Evolving technology and greater acceptance of tech solutions among the real estate community has created a flurry of new products.

One space which hasn’t evolved much over the past few years is asset valuation. I often spend hours in excel just to determine if a deal is worth digging in to. There’s got to be a better way!

Bruce Kirsch, the visionary behind REFM, is currently overseeing the alpha release of a new investment analysis software called Valuate (early free access to the beta release will be available in mid-August). With Valuate, Bruce is hoping to solve many of the issues he and the REFM team encounter firsthand with their day-to-day consulting clients. Here’s Bruce to tell you more about his new program:

What’s the story behind Valuate and what series of events confirmed a need for the program?

1. All of the real estate community’s frustrations with using Microsoft Excel, and the market opportunity this presents to offer a better solution. Frustrations with Excel include: it’s fragile, cumbersome, requires massive amounts of painstaking formatting, it’s incredibly treacherous to collaborate and track and maintain versions, as a template provider I can’t push coding updates without requiring the customer to re-populate the entire new model, it’s ugly, it’s not primarily web-based, and it doesn’t manifest in a useful manner on mobile devices.

2. The antiquated, multi-platform nature of the investment sales marketing and financial analysis process…

Broker: Create rent roll and stacking plan in Excel, enter rent roll into ARGUS, draft offering memo in Word, have graphics specialist create stacking plan in Adobe Illustrator, transfer ARGUS to Excel, insert Excel and Illustrator into Word, create PDF, load files into deal room, send out Confidentiality Agreement link, give out deal room access link

Buyer Prospect: Give ARGUS assumptions a haircut, extract newly-haircut ARGUS unlevered cash flows into Excel and run with purchase/sale and debt/equity assumptions, share and track versions of Excel companion file

3. All of the customer feedback I have received about their interest in an improved, modern solution

Can you walk us through the current state of broker marketing and asset valuation? How will Valuate improve these aspects of the business?

In general, it’s gone from hardcopy and by-hand to digital and software-based. See the graphic below to see the evolution over the last several decades.

Valuate will improve productivity, reduce errors and omissions, and enable collaboration internally and between agent and principal.

How have you assembled a software team to work remotely around the clock?

There’s a concrete specialist here in DC named Miller & Long. They are the best at what they do, and they don’t miss their schedule. It’s common knowledge that you better get out of the way once you release them, because they will encase you in concrete if you’re in the way of their pour! My advice on the technology side is to find and work with an experienced technical team leader you trust, and get and stay out of their way. It was my team leader’s choice to assemble a geographically distributed team of all-star programmers and designers.

What are some of the challenges you faced and subsequent lessons learned?

Rewriting a complex Excel file into JavaScript is not for the faint of heart. You need a brilliant technology team that works incredibly well together. Working well together requires frequent and highly nuanced communication, an understanding of finance, real estate, equity joint ventures and more — in other words, super specialists. And that’s just the back end of the platform. To make it beautiful and intuitive, you need to consult and listen to the potential users early and often and design from their point of view, refining constantly (we’ve been through some 20 rounds of revisions of the interface already). It’s easy to make something busy, ugly and cryptic, and really hard for visual designers and user interface and user experience experts to keep it elegant, look like candy, and require little explanation or user guidance.

What’s been your approach to launching Valuate? Where you see it headed in the future (6 months and 6 years)?

Valuate will initially serve as a complement to existing, entrenched software solutions and workflow habits, and an eventual replacement for and improvement on some over the longer term.

What advice you’d give to a young real estate professional with a software idea?

Real estate and software are two different businesses. Make sure you are deeply passionate about solving problems with software, as much as or even more passionate as you are about the real estate business. If you’re not, don’t do it. Software design and development is very expensive (though significantly less so than in the past), complicated, painstaking and fraught with risk of all types.

Nothing beats having paying customers who know you and trust you before you have a new product for them. If you are in that fortunate situation, you’re mitigating adoption risk, and that’s a good thing.

To learn more about Valuate sign up to receive free early access to the beta release here. Stay tuned, REFM will be launching version 1.0 within the next few months.