Identifying opportunities and risks in real estate markets has always been a challenge for portfolio managers, analysts, traders and other financial professionals. Each firm has its own methods which usually involve monitoring a variety of data sources using multiple spreadsheets and platforms. It’s not uncommon for investors to follow other investors, making reactive decisions based on old data, incomplete data or data that the user simply doesn’t understand.
The problem facing investors is not a lack of information. Oftentimes there is plenty of high-quality data available but it can be difficult and overwhelming to aggregate and monitor it in such a way that market trends and events become apparent and actionable. This is where Discern, a big data software platform, shines. As Discern’s Founder and CEO, Harry Blount, pointed out, “The real issue is not data, it’s noise. So our service is focused on finding the single piece of information that is relevant to you as an investor. We call it Signals as a Service.”
Blount, a former Wall Street executive who founded Discern in 2009, recently raised $20 million in a Series A financing round valuing the company at almost $60 million. Initially they were focused on data tools for the oil and gas industry but last week at REITWorld 2015, the National Association of REIT’s Annual Convention, Discern formally announced the launch of its real estate platform. The company already has good traction, counting several of the largest active equity managers in the U.S. as customers.
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“For decades the real estate market has benefited from declining interest rates,” said Blount. “As a result, competition has dramatically increased, which is expected to drive future returns down markedly. This dynamic has put real estate professionals under intense pressure to optimize their decision-making processes, but they need more than antiquated spreadsheets to keep up-to-date with today’s complex, rapidly changing market dynamics and make well-informed decisions.”
Discern Real Estate’s cloud-based subscription program persistently monitors a variety of data sets for “signals” that can inform investors of potential opportunities. Via an online dashboard, users can view data by sector, by company, and/or by the user’s own parameters. They can also view data from multiple perspectives including national and local views, views at a point-in-time and over time, and comparative views.
One of the data providers that Discern utilizes is SNL Real Estate. Keven Lindemann, SNL Director, Real Estate, commented: “Our relationship with Discern breaks fresh ground and opens up new opportunities – as this is the first time we have partnered with a cloud-based solution provider to offer our real estate data. SNL has been following the REIT sector for over 20 years and our analysts have considerable knowledge about these companies, which provides Discern clients with the ability to access leading industry information at their fingertips.”
According to Blount, Discern has developed absolute and relative valuation signals for more than 120 US REITs, scanning thousands of different valuation relationships daily. Attractive entry and exit points corroborated by supply and demand data can help investors make better informed decisions. In addition to SNL’s data, Discern also synthesizes housing information from Altos Research, construction permitting data from BuildFax, and public information like U.S. Census records, and U.S. Bureau of Labor Statistics.
While the Discern platform is constantly updated through machine-learning, investors are also paying for the guidance of a human curator who understands the market and needs of investment professionals. The curator provides a touch of personal service to ensure the service parameters and signal definitions are specifically aligned with each user’s investment objectives.
Over the past several years, the cloud and the internet have leveled the playing field for investors. Everyone has timely access to fundamental market trends, so in order to remain competitive analysts must find new ways to make obscure data connections.
“Today it’s much more challenging to generate excess returns,” added Blount. “People are being overwhelmed with all sorts of data in various formats and on top of that, their view into the data is limited. They are missing a lot of important information that’s off to the side that could change their investment decisions.”