Friday, 12 February 2016
Last updated 9 hours ago
Sep 19 2013 | 9:10am ET
Joy Hou thinks the real estate industry has been slow to adopt modern technology, and that's something she aims to change.
Hou is the co-founder and CEO of Metis Financial Network which, this week, unveiled a web-based platform designed, she said, to “inject all the benefits of technology” into the real estate space.
It's a space Hou knows well, having been involved, over the past 20 years, in almost all its aspects: acquisition, disposition, financing, CMBS, structuring, asset management, underwriting and valuation. Prior to founding Metis, she was a managing partner of The Renaissance Companies, helping hedge fund and private equity clients originate and structure off-market transactions. Before that, she was a director in the U.S. real estate capital markets group at Barclays Capital, and before that, a vice president at Lehman Brother’s global real estate group. Hou has also held positions at Donaldson Lufkin & Jenrette, HVS International and Champion International Investment Corporation.
Hou was on Wall Street in 2007 when the financial crisis hit and says much of what happened came down to a lack of good intelligence.
“In real estate especially, that's what happened. It's a very human capital-intensive industry; every project is done with multiple professionals both internally and externally. Everybody's job is to provide intelligence so decisions can be made but it was a very fragmented process,” Hou told FINalternatives during a recent phone interview.
Hou left Barclay's in 2008 having decided to tackle this “fragmented process.” After talking to “literally hundreds” of financial institutions, she came to believe that the problems they faced undertaking real estate investments—lack of transparency, lack of good intelligence, lack of communication—were all ripe for technological solutions.
“[T]echnology...provides the ability for people to access and share information,” said Hou. “It connects people, it connects people to opportunities, it minimizes manual work, it helps with transparency and collaboration...That's what technology does all across the board for everything."
The typical real estate deal, said Hou, involves multiple professionals: lenders, lawyers, underwriters, risk managers, etc. Traditionally, each new person is brought in on an “as needed” basis and brought up to speed on the fly:
“And the deal progresses through due diligence, things are getting emailed around with a large email chain, excel spreadsheets are floating around, documents are floating around and somehow at closing everything comes together.
“What happens after that is, everything then gets handed to an asset manager who was not fully involved in this whole process of origination, doesn't have a relationship with, in the lender's case, the borrowers or all the players involved, but is expected to monitor this asset with a limited amount of intelligence. And then...when it's time to dispose or recapitalize or securitize, it then gets pushed to another set of players who then have to learn about what happened...”
Metis offers a place where the various participants can store information, share it (in “a very controlled manner”), access it, monitor deals and “communicate and collaborate” in real time. Metis' platform, said Hou, will “sit on top” of the various players' existing systems, so they don't have to change the way they gather intelligence.
“We'll extract all the data from various sources and give each individual user the ability to control how much info they gather from what sources, consolidate it and share it down to the document level...It has the ability to log all the activities, and gives even functionality like a collaboration tool where you and I for example...can be looking at a document and be making changes simultaneously online.”
Hou said their platform will evolve to keep pace with changing technology—in fact, it already has: they are now using about 15 different computer languages, six of which didn't exist 12 months ago.
Hou believes the platform will be particularly useful to fund managers, who can use it to communicate and connect with investors and employees as well as third parties like lawyers and accountants.
“[T]he reality is nothing is perfect and there are a lot of unpredictable things that could happen," “said Hou. "But when you work as a team better decisions get made...Especially in the case of hedge funds and private equity firms, everything is so time-sensitive, so the ability to have access to that intelligence is going to give them an advantage over their competitors.”