With all the news coming out in the PropTech space it is easy to miss a new product announcement. But when that product is a completely new software offering from one of if not the biggest global property technology firm, it piques the interest of PropHeads (working title) like us. I am speaking about the recent announcement from Altus Group about the new addition to their software line called Argus Acquire (stylized as ARGUS).
For those of you new to the industry, Altus Group is an international property consulting company turned software provider. Their suite of enterprise software has been one of the go-tos for the industry when it comes to modeling and valuations. Now they are expanding this set of tools to include a cloud-based platform for acquisition teams to use for deal management and modeling purposes. We know how much work goes into such a large undertaking so we reached out to Altus Group to find out more.
First, we were curious to find out about the motivations behind this. With so many users in so many countries there must be plenty of directions for Argus to innovate, so why did Altus Group choose this one?
“As we transitioned the market from the legacy Argus DCF product to Argus Enterprise over the last few years, we’ve heard from a lot of acquisitions professionals how we could make Argus Enterprise a more natural part of their deal flow process,” said Stephen Lowrance, Vice President at Altus Group.
Interestingly, it wasn’t only those working on property models that needed a better solution. Portfolio managers also needed a better way to understand their pipeline.
“We learned that acquisitions VPs need better visibility into the health of their pipeline, for example, [questions such as] ‘do we have enough deals in the pipe to meet our capital deployment targets,’” Stephen told me.
This is a subject I have written about before. In my mind, it isn’t only managers that can benefit from this info but the investors themselves. Much like how stock investments are made as much on growth potential as current value, property portfolios also need to reflect the purchasing that are in process as a way to understand their future worth.
I knew that this level of software doesn’t get built overnight. It usually involves a long process where user feedback is used to create the final product. This was the case with Argus Acquire. They spoke to around 40 top acquisition professionals before building the platform, and another 70 were consulted as it was designed and tested over the past year. Understanding what this conversation looked like can give all of us in the industry a better handle on how acquisition teams think so we, being our curious and hopefully not too annoying selves, asked about it.
Stephen told me about a few changes that were made thanks to the feedback of their Innovation Panel.
“An example of [a change] is a Kanban pipeline view that we created that didn’t test well, so we opted to go with a more grid-like, table view for evaluating the pipeline, inverting it so that deals closest to closing appear at the top of the pipe, along with some simple metrics forecasting the expected value of closed deals based on stage weighted value,” he said.
Let’s unpack that statement a bit. The kanban – “signboard” in Japanese – process was invented by Taiichi Ohno, an industrial engineer at Toyota, to improve manufacturing efficiency. This process is often now seen as an integral part of the famous “just-in-time” process that is taught in practically every business management class. The problem is that this method separates a process into different stages of completion and places each project in a different stage. As Stephen’s team found, it turns out that acquisition teams are less interested in looking at the projects in each stage and more worried about seeing each deal laid out in order of proximity to completion.
Stephen also told me that giving users a way to easily test hypotheses was seen as a huge bonus. To that end, his team implemented a built-in stress testing capability in Acquire’s models.
“Senior managers who would otherwise rely on analysts to go off and make manual changes in Argus Enterprise to test different assumptions and come back with results in an hour or two, whereas now these leaders can do that work on a self-service basis, in a matter of seconds on an iPad,” Stephen said.
This product represents another innovation that will likely help the entire industry. While a lot of these portfolio-level technologies don’t get the same coverage that more flashy products like tenant’s apps and 3D space modeling do, they are arguably more important. As one of the biggest asset classes, commercial real estate is constantly being evaluated by an army of professionals to better understand its future value. The decisions that portfolio managers make are felt by the managers, brokers and users of commercial space alike. Understanding how they make these decisions could be one of the most important steps toward predicting the future of the industry. Now, thanks to these insights by Altus Group, we all have a slightly better vision of the very uncertain future of the property world.