The world is in the midst of an information revolution, and one real estate organization is trying to stir up the industry.
Recognizing that information is power and a powerful driver of all markets, the Multifamily Housing Institute, a recently formed Washington, D.C.-based organization, has unveiled a prototype for a database that will provide investment and market data to owners, investors, underwriters and managers of market-rate and affordable multifamily property. The unique and ambitious program, called the Multifamily Housing Performance Database, is a response to the pressing need for real estate information as the industry relies more on the document-hungry public markets for liquidity.
Information on companies and properties that was considered a bonus a decade ago is now required, particularly by investment bankers that securitize commercial mortgages and analysts that underwrite IPOs.
"We didn't need to track cashflow fro our properties (before becoming a public company), we just had to know it was coming," says Tom Sargeant, chief financial officer of Avalon Properties Inc., a $651 million real estate investment trust based in Alexandria, Va. "Now we need information to manage Wall Street's expectation. You can't disappoint Wall Street and expect to raise capital soon thereafter."
Investors, lenders, owners and managers are spending big to meet their information needs. Fannie Mae is spending $100 million on management information systems (MIS). Avalon will spend $100,000 on an information program it's developing internally, and New York-based Bear Sterns & Co. Inc. spends about $10,000 a month on CMBS data.
The Multifamily Housing Institute hopes to have the first phase of the database running in a year. The plan calls for the institute to receive data from owners and lenders and present the information in a form that the industry can use to value and benchmark properties, and analyze debt portfolios and the CMBS market.
While there are major issues to be ironed out before the database is a reality, there's virtual unanimity that a reliable, comprehensive database is not only desirable, but necessary to the industry's ability to attract liquidity.
"We can't afford not to tie together the information that firms generate internally," says Matthew Slepin, the institute's executive director.
The institute's 55 members, which include industry leaders like The Balcor Co., Boston Financial, Camden Property Trust, GE Mortgage Capital, Related Capital Co., The Patrician Financial Co. and Washington Mortgage Financial Group, will provide some of the seed capital for the database's expected $1 million price tag. And the institute will likely partner with other firms to start up the database. Once it's running, it will be accessible to the industry-at-large for a fee. It is a non-profit project that its originators hope will be self-sufficient.
"Information makes markets. It's necessary to manage and price risk, and find it when you're interested in it," says Shelley Klein, a manager with Price Waterhouse, which was hired to help develop the prototype.
In the eyes of owners and investors, the next major hurdle -- and one that will take years to change -- is cooperation and confidentiality of sharing data. But as one owner says, "Organizations like Multifamily Housing Institute help to change these cultural-type issues."
Klein says industry members will share information as long as they know that no one will look solely at their portfolio.
There's no reliable source of information on conventional and affordable housing, Slepin says. Companies today are paying big money -- often for little information.
"This database is sorely needed," Stepin concludes. "We're farther along than anyone else in the industry (in creating one) and we have the large players that will allow us to standardize more."