A few weeks ago, members of the REdirect team attended the Information Management Network’s CFO & COO Forum in Dana Point, CA. This annual event aims to connect CFOs, COOs, and others dealing with finances, regulations, and technology, providing educational sessions as well as valuable networking opportunities.
The conference was well-attended once again this year, and we enjoyed connecting with some of our current clients in person. We also made some good contacts, among both vendors and potential clients, and introduced the REdirect brand to delegates who had not previously heard of us.
In today’s post, we will share some of the key takeaways from this year’s conference.
Takeaways From Sessions
Larger Focus on Technology
There has been a noticeable shift in the marketplace across industries, with companies increasingly realizing that they can no longer get by without making appropriate technological innovations. How this investment in technology is approached, however, depends on various factors such as company type, client needs, asset class, and the company’s current technology stack.
This topic arose in virtually every panel during the conference in various guises. Given that the IMN forum attendees were predominantly focused on investment capital rather than the management and operations side of things, questions centered primarily on the issue of getting access to data.
Discussions covered how to have visibility and transparency into portfolio data and how to meet investor reporting requirements as well as internal business analytics and KPIs. An increasing number of proptech businesses are striving to address these issues and to differentiate themselves in meaningful ways to increase their market shares.
It was also noted that there has been a marked shift in the types of data these investment companies are interested in. Previously, many were simply interested in obtaining financial data to put into portfolio analytics. Now, however, there is greater interest in improving analytical models through deeper levels of data obtained from their rent rolls.
Ongoing issues in the construction industry are having a direct impact on businesses in the real estate space. The cost of lumber is continually changing, making it difficult for developers to accurately predict the budget required for construction projects. For example, one project was put on hold for six months while the team waited for lumber prices to drop again.
We also learned about the different ways that organizations are structuring debt to navigate these issues in the construction industry. Additionally, rent price uncertainty has created difficulties in pricing a potential development project. Rent prices have experienced a steady rise, but the uncertainty of how high these rents can reach has had an impact on development projects.
There was extensive discussion of inflation rates, with participants asking panelists for their thoughts on the current state of inflation and whether or not it is set to continue at the same rate.
The general consensus was that inflation will not stay up at the current 8-8.5% range indefinitely. Panelists expressed a belief that we should see the rates drop to a far more manageable 4-5% in the next two months.
Staffing Issues Within the Industry
Numerous industries have been impacted by staffing issues throughout the Covid pandemic, creating many ripple effects.
This is especially noticeable in the healthcare space. Certified nursing assistants (CNAs) do the majority of the essential work that takes place in nursing homes, but many are paid only minimum wage. At the beginning of the pandemic, many CNAs decided the level of personal risk was unacceptable and changed industries to work in a safer environment.
As a result, CNAs are scarce, and staffing agencies are charging $90-$100 per hour for their staff’s time. This is quite a shift from the previous low pay for this work, and it remains to be seen how this discrepancy will level out in the long term.
These staffing issues are causing difficulties for all fund administrators and real estate investment trusts (REITs) who have assets in the healthcare space.
Changes to IRRs
Internal rate of return, or IRR, is a way of calculating the rate of return on an investment. In general, the higher an investment’s IRR, the better, and higher IRRs across the board tends to mean more people and organizations are willing to invest.
Up until the end of 2021, an IRR of 18-20% was fairly typical. However, IRRs are starting to dip once again.
Now, deals are being written with a 15-16% IRR in mind. If this trend continues, it will be interesting to see if there is a corresponding drop in the number of people getting into the investment process.
Interest in RPA
From a business development perspective, there was significant interest in robotic process automation (RPA) at this year’s conference. However, the benefits and potential of RPA are still not as widely known or understood as we would like. Many still do not understand the numerous ways in which RPA can be leveraged in the real estate industry.
Here at REdirect, we aim to continue educating the industry on the benefits of RPA. We are also looking for the best way to bring RPA to the investment fund market, given that many of the known applications for RPA have historically been in areas in which loans and reporting responsibilities are outsourced to fund administrators. We are working to identify the best way to approach RPA as a viable product offering to the investment fund industry.
Interest in REdirect
Overall, REdirect proved to be well-known at the IMN conference.
There has been significant interest from service and technology providers in partnering with us at REdirect. Several vendors also expressed interest in ways we may work together in the future, including implementation and marketing partnerships.
We also made strides with EisnerAmper, discussing how we can leverage that partnership further. EisnerAmper has an ongoing partnership with Brayn Consulting relating to tax and fund setup, and there appears to be a natural synergy there for our three companies to work together helping clients set up their fund administration on both the technology side and the admin side.
We would like to thank IMN for this interesting and engaging event and everyone we spoke with and learned from during the forum.
If you would like to learn more about any of the topics in this post or about how we can work together to leverage your real estate technology investment for better business outcomes, get in touch today and a member of our team will be pleased to advise you.