Finding Your Competitive Edge in a Digital Transformation

Josh Malinoff:

Thanks, Sarah. Great to be here. Appreciate it. Josh Malinoff, one of the principles at Redirect Consulting. My day-to-Day role is I'm our CEO, but I've had a great opportunity over the past 30 years to work with real estate technology and here at Redirect work with many of those solutions. Redirect focuses on helping companies adopt technology to become more efficient and reduce risk. We partner with the leading software applications in the areas of investment management, asset management, property management and accounting. And we help advise companies on evaluating and optimizing the right technology. We implement most of these major platforms, systems like Yardi, MRI and RealPage as well as the number of point solutions. And then we provide ongoing support and administration of these systems for our clients. We're a long-term partner of Eisner Amper as well. We're a strategic partner where we are able to collaborate on various engagements and that's been really exciting for us as well.

Sarah Brand:

So let's talk a little bit about companies, the ones that already invested in their technology platform, they've spent the money, they've gotten into their technology. How do you come in and help them navigate the systems?

Josh Malinoff:

What we're finding, I would say particularly since the pandemic is a lot of real estate companies have not even realized how much they're under utilizing the technology they've already invested in. So over time, many real estate companies have made technology investments. They may have implemented a major platform and what we have found is when we come in and take a look at how they're utilizing the software, they're only using a small percentage. We found about 20 to 30% is a typical utilization and that opens up a tremendous opportunity to take advantage of more. So we do what's called a business process review gap analysis where we can come into any real estate company and help them identify these gaps, what they're doing outside of the system, what they're doing inefficiently, and we make specific recommendations on how to remedy those gaps. And it usually results in a long-term that a real estate company can use to think about maybe the next three to five years what their priorities are and then we ultimately help prioritize as well.

There's just this tremendous opportunity we're seeing because having this technology already in place, investment has been made in the software in the platform, but the ability to get it from that 20 30% to fully optimized is where that opportunity lies. And that's a big area we've been focusing on along with our normal implementation services. So if a company has not yet adopted a modern platform, that's an area where we see opportunity to help those companies navigate that. Because there are so many PropTech solutions out there currently, it could become quite overwhelming and we are able to really be agnostic and independent and help figure out what is most important based on the company's requirements and goals.

Sarah Brand:

So if someone is optimizing 20 to 30%, are you finding that those companies are the ones that went in, thought that they get to the a hundred percent optimized but didn't have maybe the resource or the tools to really hit the ground running? What is causing some companies to only utilize 20 to 30% lack of manpower to understand the system? What's causing that delta?

Josh Malinoff:

It's really a combination of things. So first and foremost, when a company goes through implementing a new software platform, a real estate management system, it's quite an undertaking. While the goals might be to get fully optimized relatively quickly, a lot of companies are doing this with a limited number of resources. So the prioritization becomes the critical areas, making sure the tenants get rent bills, making sure the collections on those bills happen, making sure the vendors are paid and the very basics. And what happens is in that first phase of the implementation is we're kind of back to where we were. If we were in a prior legacy system, they're not really gaining a lot of efficiencies at that point. So the real opportunity is to go to the next stage. And a lot of companies, particularly ones that we didn't get a chance to implement and we come in later stop because they get back to business.

So that's one area. The other area is they may actually go quite far and do a multi-phase implementation and take full advantage of all those bells and whistles and areas where they gain a tremendous amount of value. But then two things happen. The software is constantly changing because the software is improving and new features and functionality and new versions, and then the real estate company is evolving. Maybe they entered a new asset class, they used to just focus on commercial and they went into multifamily or maybe some key staff members are no longer on board and the replacement of those staff members aren't fully up to speed on how to utilize the software and start going onto paper or into Excel. So those are just a few examples of what causes the under utilization of the technology.

Sarah Brand:

That's wonderful. It's good to have a resource to come in and say, look, here's everything that the software has to offer and we're going to help you get to that, taking it to the next level and then the next level and then a new level when the new version comes out and things like that. So it's great to have that partner there. If we talk a little bit about right now everything is automation and AI and how can we optimize and become more efficient with maybe less manpower or utilizing our manpower differently, how are you as a company helping use that data or use some sort of artificial intelligence to get your companies and your clients to the next level?

Josh Malinoff:

So I mentioned we do what's called a business process review. And while that doesn't sound technology focused, the reason that we start to focus on the business processes as opposed to just jumping right into the software is we find that the individuals, the people working in their job functions, even if they're fully utilizing the capabilities of the software, they may be stuck doing monotonous repetitive tasks. So the most classic example I like to talk about is a bank reconciliation. So every real estate company has a lot of different bank accounts, they typically have multiple banking institutions they work with, and it's important every month to reconcile those bank accounts by entity. And when you add up the volume of those and the number of different bank portals that may need to be logged into, even if you're using the bank reconciliation functions of the matrix software products, you still need people to do that function to log into the bank, download those transactions, match those transactions.

So we, several years ago, about four or five years ago, we launched an automation practice and this very much supplements our implementation and support services because what we find is once the software is optimized, we want to see how we can free up people to get away from those monotonous repetitive tasks and automate those functions. And we do that by utilizing RPA robotic process automation, which maps out a particular process and builds rules around it to fully automate it and even uses a little bit of AI to learn over time. So using that bank reconciliation example, we would find that many transactions do not match when we download those from the bank. And that's because, for example, a tenant, multiple tenants may pay rent in a given day and when you deposit it in the bank, that's just one lump sum transaction. But in the accounting system, in the property management system that is many different deposit transactions. So the system is smart enough over time to learn how to address those many to one and do those matchings and it gets ultimately trained over time to become smarter and smarter. That's just one example of a process that a lot of companies can relate to that needs to be automated, but there are so many others that we have found and we work with our clients to identify those and automate 'em.

Sarah Brand:

So as we talk about how different softwares can help our clients and real estate companies out there, what would you recommend for some new companies who might be using QuickBooks or maybe you're using Excel, you mentioned Excel, what type of platforms would you suggest? What process would they go through? How can you help an up and coming real estate company who's looking to

Josh Malinoff:

Grow? Yeah, so for companies that have not already invested in a platform, they have a big decision to make because we want to make sure that whatever system they go through an implementation on select and do an implementation, that process could probably take a year or so. So whatever they settle on, it's important that that lasts them only not only meets their current requirements, but as the company grows, we want to make sure that this software that they select will grow with 'em. And buying or purchasing enterprise softwares somewhat could get quite emotional, a lot of money involved. There's a lot of time involved, there's a lot of choices out there. So what we do is we try to take a very methodical approach towards helping evaluate and select software. As mentioned, we're independent and objective, so we're not in any case really getting financial incentives by recommending one software over another.

Our goal is really to help once that software is selected with the implementation and support of it. So that allows us to objectively evaluate and we work very closely with a number of our software partners, companies like Yardi, MRI and RealPage that have wonderful platforms and solutions, but they have some differences between them and one may be a better fit for one company versus another. So we go through a process of evaluation that includes first and foremost identifying the business requirements. So it's critical even if we're not involved, we always tell people who are going through this process to stop for a moment, take some time and put on paper what's most important for their business. What are some of the pain points they've experienced with their current software, what are they looking for as far as gaining efficiencies? Now most companies know a certain amount about software, but it's not their core business.

They're real estate companies. So in a lot of cases there's this not knowing what you don't know situation. So once the real estate company goes through and creates that preliminary list, we can come in and get much deeper. We can interview the key stakeholders across all areas of the business, property management, asset management and accounting, construction, you name it, and begin to really flush out the key requirements. Once those are documented, we can then go to each of the software vendors that are identified and we can help narrow down which are the key ones to evaluate, and we can put in writing these requirements and requests that the software vendors respond in writing. And the reason that's important is we have something to go back to. If there's ever an issue in the future where you heard something that sounded great, but when it came to after you purchase it, you now have something to go back to and say no, you responded and said the software can accommodate this. We also aid with that because we understand how these software products work. We've worked with most of them for anywhere from 20 to 30 years. So redirects been in business now for 25 years, which is crazy to think about.

We really are able to get those requirements flushed out nicely, get the responses back from the software vendors, and then challenge some of those responses because if we know that the software does something or doesn't do something and we get a response that conflicts with that, we can go back and let's show us prove it. So you're getting a lot, a real estate company is getting an advisor, somebody really coach them and help them on their side. So the other thing we see is, because I mentioned this process can get emotional depending on who's presenting the software in a demo, can Jade sort of which one you prefer? There's a human connection to it. The person might be a really good presenter, maybe not a really good presenter, but that doesn't necessarily mean the person who's a good presenter is better softer, it might be worse, softer.

We're able to really cut through that and make sure that it is objective and methodical. Once we get the requirements responded to and we add our input, we then go through a scoring process because certain requirements are going to be much more important than others and we weight those appropriately so that we get a weighted score. And then ultimately by getting everybody's feedback and input along with ours, we're able to come up with a score that ultimately helps drive the who is selected and then we go from there. So this investment that you're making, if you're real estate company and enterprise software is going to last you at least 10 years, we try to get to close to 15 to 20. And so spending that time upfront is really important and you don't want to rush into it and two years later realize after you've gone through the implementation that it wasn't the right fit.

Sarah Brand:

So you mentioned humans, the human aspect of things as well as data. And one thing that we're all hearing of how important data is gathering data, analyzing data, data analytics is everywhere out there when people are putting together and real estate companies are putting together their list of here's everything that we want. Are KPIs and data one of the top items that they're looking to get? Is that something that you as a consultant are looking to help gather all of the right data to allow them to drive their business in the direction in which they're looking to drive their business?

Josh Malinoff:

Absolutely, and I would say Sarah, over the past five to 10 years, the need for timely accurate data to make business decisions has drastically increased. There's a number of reasons for that. So 10 years ago when things were doing great, investors in real estate really didn't care too much about getting a lot of information. They cared mostly about consistent distributions and that the overall portfolio was performing well enough to support those distributions. Then we've gone through our economic cycle as we're going through it, there's been an increased need for transparency. So the investors are saying, well, wait a second, I didn't get my distribution or my distribution isn't as robust as I thought it would be. What is happening? I need to know more about these real estate investments. I need to understand how you're operating them. I need to understand what tenants are in those buildings, what risks do I have within that property?

And that information right now is spread out quite a bit because in the traditional real estate ownership and management model is a lot of the management is outsourced to third parties. And the third parties in a lot of cases are given the opportunity to utilize their system of choice. And even if they use the same system that the owner uses, they will be utilizing it differently. They might have a different chart of accounts, they may name, number the properties differently and such. So it's very difficult in a lot of cases to obtain all of the information across the different managers, operators of the real estate and bring it in to the asset managers system or the investment managers system. And that's because of this disparate system scenario where the different property managers are using different systems. And it's also if you're an owner or operator of real estate, you ideally would ask those property managers to come into your system.

But a lot of those investment and asset managers don't have the expertise that the property managers do of how to run the properties day to day and therefore when it comes to supporting them on the system, it becomes very difficult. So that's an area where we've developed over time our support services to help these investment and asset managers and facilitate the communication with the property managers and support the property managers, even if they're on their platform, which is ideal. But when they're not on the investment and asset managers platform and they're utilizing the system of choice, it's critical to find a way to aggregate all of that data and bring it in and bring it in a cleaned up basis. So what we call normalize that information so that if I have five different property managers on three different systems, when it comes to the investment asset manager, it's consistent, it's using the same codings and naming and data governance that the investment asset manager is using.

So there is various technology to help with that aggregation and management of the data. And then there's also managed services. So Redirect works on both sides of it. We help with the technology and then we also have managed services. So for a company that doesn't want to have to coordinate and some of them have 20 or 30 different property managers overseeing their portfolio, we can help with that as well. So the technology is catching up to help with that, but it does still remain a challenge. And there's a few reasons why it's a challenge. Probably the biggest is there's no data standards in real estate like there are in other industries. So what convention a lease is using will vary from system to system, company to company. So without data standards, there's not a lot of consistency. The technology is pretty limited to do this because it's complicated. And so there's not as many technology solutions as you would think. A lot of the desire of the key software platforms is to have the investment manager just have the property managers work in their system, but that may not always be feasible.

Sarah Brand:

So Josh, do all of your clients have the proper asset management system in place to gather the right data to provide them with the guide to move forward and have a real estate company?

Josh Malinoff:

Surprisingly, many don't. And it's interesting because what happens is the property management accounting becomes the priority. So if I'm an asset or investment manager, I need to make sure somebody is operating my properties and I need to make sure that the accounting is being done properly and the leasing and such. And then what happens is in a lot of cases, the asset or investment manager will reach out to the property managers and ask them to send reports, ask them questions on the phone or over email, and they're not capturing this data in a centralized location. So one of the things we identify very quickly and really insist upon is that the asset investment manager has their own platform in place to capture that data I just mentioned is being spread out across the property managers. And the reason you need that asset management system is you want to be able to make decisions timely.

We talked about getting the data over timely and some of the capabilities around that area, but having it in place is amazing because then you can look holistically across your portfolio and see some trends. You can have dashboards and reports that aid your decision making, and that's very different than having a hundred Excel spreadsheets or a bunch of PDF files sitting in your email with reports from each of your property managers. So the asset and investment managers that are gaining a competitive advantage, making better decisions on which assets they acquire and dispose of and looking for opportunities to improve pricing on their rents, reduce their expenses, are ones that have an asset management system in place.

Sarah Brand:

So 25 years, you've been doing this for 25 years, the company's been in business. What really drives you to stay in this real estate world? What's your passion? What do you love about helping out real estate companies?

Josh Malinoff:

What's really cool about being involved in it so long is you get to watch the technology evolve and at Redirect, I've been in Redirect for about 17 of those years just in that timeframe. It's a long time. The amount of technology has grown exponentially used to just have a few choices now there's hundreds. And so what excites me most is finding the best solutions and then seeing how it helps our clients because there's really a big difference when technology is properly implemented and supported on an ongoing basis. These real estate companies are gaining tremendous efficiencies. They're reducing their risk, and we hear after the fact and sometimes during the implementation, it's not always that exciting and painful sometimes, but a year or two after when we keep in touch with these clients and continue to work with them, in many cases we see the before and after. And that's just so exciting because it's a constant learning. We get to see all of this technology, assess it and see what's best for our clients and then see how our clients benefit from it. So that's really exciting.

Sarah Brand:

You always get to see the return on investment, which we all love being a bunch of accountants and finance and real estate. So it's excellent. Thank you so much for joining us here today. Josh, it was great. Thank you to our listeners for joining EisnerAmper's podcast. Subscribe to stay notified in future podcasts as well as links to our previous podcast. Thanks so much for joining us and Josh, thanks again.