At a recent client meeting, a senior partner of a real estate investment firm made a comment that really resonated with the Altrio team. The partner indicated that during the process of evaluating a new acquisition that their “wizards” did the specialized work to build out the deal model. These wizards are the true hero’s of their organizations. The team at Altrio agrees as there is magic within all the models and analysis conducted by these experts.
Now, the concept of a very competent analyst who can spin up elaborate pivot tables, write complex formulas and tie together multiple tabs on a spreadsheet being a wizard sounds appropriate. It is no secret that these skills do take time to refine but wizardry?
There is no shortage of wizard analogies in popular culture, think Harry Potter, Dr. Strange from the Marvel Universe of characters or Merlin from King Arthur’s Knights of the Round Table times. While it may be a stretch to compare the humble deal analyst to these popular characters, it is still a nice compliment from a senior executive to be considered a wizard. Of course, for Harry Potter fans out there, let’s hope that the reference was not to the infamous and poorly treated Dobby the House elf (technically a wizard too)!
There are three things that Altrio wants to explore as part of this blog.
Firstly, the typical wizard needs to be able to get creative when building out their data models. This means that they need to be able to see their deals on a map, in a chart or even a baseball card type view as a bare minimum to ensure that models and output charts can be displayed in the best possible format to convey their conclusions. And the data taxonomy needs to be flexible; there needs to be the possibility of creating new data types on the fly (especially as we see more alternative sectors becoming mainstream like medical office, storage and student housing). In fact, in the Origin platform, it is possible for new data types to be built with formulas and other calculation techniques. The other area where deal wizards get constrained is when their organization has an ad hoc process for deal approvals. Typically, updating the status of a deal involves phone calls with team leads, scrambling to find a spreadsheet on a shared drive or a late night email thread being created to support a decision the next day. This is rushed and inevitably gets repeated on the next deal. Origin allows for deal specific workflows which includes approvals and task management capabilities. Thus, fewer surprises and uncertainty when slaying dragons aka closing a large deal. So, just like the wizards in Harry Potter, it is imperative to create a “Diagon Alley” type approach to keeping the wizards in your organization equipped with the proper tools needed to excel in their roles.
Secondly, wizards really do not want to be burdened with repetitive tasks that take away precious time that could be spent on more productive activities. One such task is the translation of data contained within an offering memorandum into a usable data format. In a typical week, a busy real estate team might see 10-15 new deals come across their desks. If the data is furnished in a .pdf document or not easily extracted, then the wizard needs to spend a great deal of time translating and re-entering deal data into their spreadsheet. This could lead to hours being spent on data cleaning instead of building the actual model and running multiple deal scenarios. Now, we all know what happens when you have an angry wizard (think Voldemort in Harry Potter or Saurman in the Lord of the Rings trilogy as spells get cast, things get zapped or put into a trance). Altrio’s clients avoid the “AWS” (angry wizard syndrome) with our Client Data Service. Our clients’ wizards simply forward any deal data in acceptable file format to the Altrio research team. This team of talented Altrio Wizards apply a combination of programmatic and manual logic to extract, transform and load the data from the offering memorandum into the clients Altrio Origin tenancy. The clients appreciate this so that they can free up time to play their favorite wizard game “Quidditch”.
Thirdly, the excitement of successfully closing on a new asset transaction is the result of a lot of work by the acquisition team. The typical team will have a success rate of deals that they review of 5-10%. Therefore, it is common for the deal analysts to get overwhelmed with the repetitive tasks of tuning their model, updating status of the deal and preparing for various evaluations of the deal by the investment committee. With a platform approach to transactions, Altrio has taken many of the repetitive tasks of a deal process and provided a structured deal framework. This has resulted in many benefits for the deal analysts as they are spending less time answering queries on the deal, verifying data sources or chasing down comparable data.
By having a single source of deal truth that an entire organization can refer to, it allows the wizards to get more creative with their deal analysis and feel more invigorated about the contributions that they are making to the success of the deal.
For instance, when the Altrio platform instantly shows a deal being offered at a price per square foot that is significantly higher than comparable transactions, it is easy for the analyst to recommend that they pass on the deal since at the current price, asking rents and required capital expenditure result in an investment return that is not acceptable.
Finally, the Altrio team recommends that our clients and prospective clients keep their wizards challenged with interesting work, provide modern tools to reduce deal friction and ensure that they have the best possible spell book. This will ensure that when the flood of acquisition targets gets overwhelming, the team can thrive. Altrio Origin can help and prevent wizards from going rogue to join the side of the evil wizard aka He-Who-Must-Not-Be-Named.