Management software companies prepare to battle

When it comes to property management software, the "usual suspects" have led the industry for some time. JD Edwards and CTI are the property management software companies of choice for a predominant share of top multi-management real estate companies in the United States, according to Chris Shaida, a partner with Ernst and Young Kenneth Leventhal of New York. But Shaida, who has specialized in the real estate industry for 10 years, warns that property management software is not an easy equation, and there are many opportunities for other strong players to challenge the old guard.

"For owners and managers, the usual suspects play a vibrant role - JD Edwards and CTI," Shaida says. "But new players are entering [the top positions]. SAP and Oracle have announced their real estate lease management packages. Both are moving to get into market."

Scott Morey, a partner with Ernst and Young Kenneth Leventhal of Chicago, agreed. Morey, who specializes in real estate software, is in charge of compiling a biennial comparison survey of property management software that is published in the Journal of Property Management by the Institute of Real Estate Management (IREM). Morey said he expects this year's survey results by April.

In the 12 years Morey has worked in the real estate software industry, he said three companies stand out: SAP, JD Edwards and CTI, respectively. "The LaSalles, Lincolns, Rouse, Equity Office, Lend Lease and Simon Property, the mammoth retail REIT, they all turn to one of those three, JD Edwards, SAP and CTI," Morey says.

But Morey also concedes that he typically works with only the larger real estate multi-management companies that demand the strength in technology and functionality that SAP, JD Edwards and CTI deliver. He says many other companies hold a large share in their respective markets.

According to Shaida, the rise of SAP and Oracle may open a window of opportunity for other companies to compete. He says SAP and Oracle will be able to penetrate the market with ease due to their strength - a good thing for the industry.

"It is not going to hurt across the board," Shaida explains. "It [having SAP and Oracle compete with CTI and JD Edwards] is a good thing for property owners and managers because there will be a greater variety of solutions available to them."

But the greater variety of solutions available for property management software buyers, may not come from SAP and Oracle.

"The new players, SAP and Oracle, will take time to penetrate the market but without huge functional advances," Shaida says. "And they will not be more affordable, supporting size and growth. They will have the paradoxical effect of raising cost in the industry."

Heightened competition and higher prices will leave room for other companies - ones that now experience a good level of market share - to introduce products that will capitalize on technology at a lower price and allow them the ability to break into the top league. With the consolidation trend in the industry, anything is possible, Shaida stresses.

"As consolidation continues, the amount of necessity in business systems is increasing," he adds. "There is not a pie of expenditures that is X today and X tomorrow. The pie is getting bigger. SAP and Oracle can apply pressure on all vendors."

One company plans to apply pressure back - Yardi Systems, Inc. (www. The Santa Barbara, Calif.-based real estate software company is already a vibrant player according to Karen Y. Edgar, director of marketing for Yardi. She says she is confident Yardi will become even more popular with its newest line of products. One such new product is one for the subsidized housing industry called, "Yardi Affordable Housing." According to Edgar, no other software company has property management software for the subsidized market that completely integrates with all other real estate software. And, perhaps more importantly, all other software in this field is in DOS format.

"It [Yardi Affordable Housing] is fully integrated," Edgar says. "There is no duplication of effort, which is big in the market. We introduced this in October [1998] and it is available in Btrieve, SQL and Oracle platforms."

In the past, most who work with subsidized housing software programs have had to re-key information into their Windows-based programs since they did not integrate. Now, this is not a problem, Edgar explains.

"It [Yardi Affordable Housing] also allows Section 42 tax compliance calculations," Edgar adds, stressing the assistance this offers with the complicated HUD-related issues and taxes.

Another perk with Yardi Affordable Housing is that, unlike competing software, not all information must be shared with all employees. Yardi has a feature that allows companies to keep certain aspects of information private. An employee's position determines which screens will be available.

Edgar says an SQL-server product line is the most important aspect of real estate property management software.

"Oracle is fine and is a good [client-server platform], but with Microsoft's introduction of the SQL server, it provides similar performance at a lower price," Edgar says. "And there's a demand there. SQL [server] is definitely the better solution these days and it is the most requested."

The second most important aspect of choosing a property management software program is the company behind it, Edgar says, stressing the importance of customer service and using the latest technologies. According to an executive of the Philadelphia office of Cushman & Wakefield, Yardi scores high points in both those areas.

"I have lent my face to their advertising over the years, that's how much faith Cushman & Wakefield has in Yardi," says Gary Merron, managing director of financial management and reporting for C&W. One of the reasons for his faith in Yardi is a week-long session C&W executives had with Yardi in 1996 before C&W switched from Timberline as its system of choice.

"We beat the living daylights out of their products," Merron says. "We worked very closely with them [Yardi executives]. We had a week-long teardown session that became legendary here at Cushman & Wakefield and probably at Yardi too. We met with a dozen of our systems and accounting experts and some of theirs for five, 12-hour-days."

During that time, the experts came up with four pages of bullet points on how Yardi's property management product Advantage could perform better for C&W - one of the largest companies in the world that manages 200 million sq. ft.

Merron says Yardi impressed him before the meeting because it is a Windows-based product that had been in the field longer and had been "tested and debugged." He also liked the graphical user interface of Yardi. But in order to really support C&W's needs, it required a more open database to allow Cushman to use many external tools. After the week-long session, Yardi created "Enterprise" for Cushman. If C&W have any more concerns or needs, Merron says he is confident Yardi would work with them - a perk that keeps Cushman & Wakefield satisfied.

Both experts, Morey and Shaida, agreed Yardi is a vibrant player in the industry. In fact, Morey said Yardi's property management software is used often by many of the bigger companies in conjunction with other products.

"Yardi was the first to come out with a Windows product four years ago," he says. "For a long time, they served the lower end of the market. Their asset management application is outstanding and a lot of companies are using them in conjunction with other packages,"

Shaida agreed, and adds that Yardi's strengths are in the traditional property management and asset management arena.

"They are a real player - not with the largest real estate owners and operators - but they are a definite, viable choice for small and mid-sized owners and operators, which holds out hope for the long-term," Shaida says.

There are many real estate property management software packages out there.

According to Shaida, the pie may keep getting bigger, allowing other companies to position themselves in the big leagues. But not all of the vendors will be able to and Morey says he will watch to see which companies will merge or be acquired and which will fall. The positive side to the consolidation trend, however, is that the companies that now strive to compete with SAP, JD Edwards and CTI, may finally be able to do so.

While Geac/AMSI ( has a "long presence" in the residential, multi-family and for-rent arena, it hopes to expand its market share with large commercial clients. According to Paul Burgan, central region manager for Geac/AMSI based in Houston, he certainly plans to be a contender.

"We aren't going anywhere in the next 10 years," Burgan says. "We are very excited about being the dominant player in the multi-family area and we fully intend to be the dominant player in the commercial area with our Windows products."

At press time, Geac/AMSI was Beta-testing their commercial property management system - a SQL server-based, 32-bit Windows product called "StarSuite." Burgan says top multi-property managers and REITs will like using this system because it employs the best technology Geac/AMSI uses, while adapting popular technology and features now found in other fields.

For example, one feature Burgan believes will prove popular is the "MICR reader," which can be found in Wal-mart stores across the nation. This device allows property mangers to scan the check by dropping it into the reader. The reader then inputs the appropriate check information - such as who the check is from, the date of payment and the amount - into the system. Burgan says he is also excited about the option of automatic debits from checking accounts.

"70% of health clubs use automatic debits from checking accounts," he says. "The apartment world can do it also. If a tenant travels a lot, they no longer have to worry about the rent being paid on time."

But the 14-year AMSI veteran stresses that while these features will be new perks, clients can depend upon the tried and true Geac/AMSI options that are extremely important to them. For instance, StarSuite has multiple report abilities, lease profiles to track and assist portfolio managers, sales histories, spreadsheet interfaces, automatic invoices for tenants for all recurring charges and automatic late charge calculations.

While Shaida could not discuss Geac/AMSI's newest product, he says Geac/AMSI has more opportunities playing their best hand.

"Geac/AMSI has had a long presence in residential property management and they still have a substantial market share," Shaida says. "They still have an opportunity in that market space. They ought to be able to capitalize on that, as with many other vendors."

Shaida says there is so much opportunity in the field because so many companies are not as quick to market with new products as the market would like.

"The multi-family market is big and there are two major players, AMSI being one of them," he explains. "But the market needs next generation solutions - on-site lease and property reports vis a vis communications."

For instance, while AMSI and RentRoll - the other major contender in the multi-family arena - allow clients to periodically dial up a home office and process data, if systems were created over the Internet costs would go down with added convenience and speed.

"The Internet is the way to provide a meaningful central depository of data using a browser and at a cost that would be lower than five years ago," Shaida says. And the real estate expert predicted that the vendors who are the first to embrace the Internet will be the ones who will have a strong hold on their future.

"The attitude about the Internet is really changing - just in the past six months," Shaida says. "Many are beginning to invest in technology using the Internet as a base. It is happening right now."

If a vendor isn't as quick to market with what a company is looking for, often times, that company may create an in-house product.

Barbara Holland, president and CEO of H&L Management of Los Vegas, is a perfect example of this. She began creating her own property management software back in 1977 when she couldn't find what she needed within the industry. She still uses an internal system today.

After the PC was introduced, Holland says that she interviewed many companies, including Timberline, but no one had everything she was looking for.

"Most of the companies, 99% out there, basically cater to residential property management," Holland says. "You can look at the chart at IREM and you can see that very few [property management software packages] provide everything that you're looking for. Hardly any software companies facilitate products for industrial, retail, office, commercial, association, single family homes, commercial sales and leases.

"It's not efficient for me [to purchase property management software] because I'd have to purchase four or five products," she explains. "It's a disadvantage for a company to then have to have people who are familiar with different software. I can't tell you who I think is the best company [property management software company] out there, but I can tell you that more companies will be looking for full servicing. And companies out there are smart enough to start doing this peripheral."

Shaida and Morey agree that opportunities abound for aggressive, technology-savvy and visionary software vendors to position their property management products for a strong future.

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