In April, Jim Hannon was promoted to CEO Altus group after nearly two years as President of Altus Analytics, a subsidiary. He wants to continue the company’s long-standing policy of aggressively acquiring proptech startups that feed it Valuation, Tax Complaint, Project Management and Due Diligence Platform for real estate investors and owners.
Founded in 2005, the publicly traded Toronto-based Altus Group was an early proponent of delivering real estate technology data as “intelligence as a service”.
Commercial Observer spoke to Hannon in late July from his home in Naples, Fla., about Altus’ role in the world of real estate investing and ownership, and his near- and long-term views on proptech.
The interview has been edited for length and clarity.
Commercial Observer: With a market cap of $2 billion Altus Group is a huge company in the proptech sector and one with many services. What is your elevator pitch as CEO for Altus?
Jim Hannon: In short, we are the #1 provider of commercial real estate technology consulting service reviews. We’re #1 or 2 in the core markets we serve to ease tax filings and deliver successful results in lowering your taxes and getting better returns on your wealth.
We help developers determine when and where or if they should invest. And when they decide to invest, we help them with project management of large investments and developments. So these are the things we do: Valuation, Tax Complaint, Project Management and Due Diligence. Our customers are investors, asset managers, developers, lenders and, for the tax business, property owners.
Is Altus too big or not big enough for what you want to achieve as a technology source for your customers?
That’s an interesting observation. I started my career at IBM, so it doesn’t seem very big at all. Actually it’s a very close community within Altus. It was formed through acquisitions over the years. But from my chair, it feels like a highly focused company compared to the size of the companies I’ve worked at.
How big is Altus in terms of employees and revenue?
We have 2,600 employees. We’re in a blackout period right now, so I can’t be too specific, but I can tell you that we made CA$625 million in sales last year ($485 million today).
As you mentioned, Altus has grown quite a bit through acquisitions. What’s it like these days? Are there more opportunities to acquire proptech startups that fit your platform, or have innovative startup opportunities slowed down?
There is always an opportunity to acquire proptech startups. We keep a close eye on the market and our capital structure, making sure we are investing in the right areas.
In the past year we made three significant acquisitions. We bought a company in Paris called finance active. We are heavily involved in the valuation business for investments in commercial real estate. Finance Active brought us into the debt management side of these investments and significantly increased our international footprint.
In March last year we bought a company called stratodema, which has given us an analysis engine and thousands of macroeconomic data points to incorporate into our advanced analyses. And in November we bought a company in New York City called reonomywhich provided us with a substantial amount of data on approximately 53 million commercial real estate investments in the United States. It also gave us the underlying technology to link attributes of assets to the performance drivers.
This year we bought a tax technology company called Rethink solutionswhich also gave us an automated workflow and some predictive analytics for taxes.
What drew these proptech companies to Altus?
On the tax side, we want technologies that improve workflow or improve the predictability of a successful tax appeal outcome. We are the #1 commercial real estate tax advisor in Canada. Basically, we help to facilitate the process of filing tax assessments. In the UK we are No. 1.
In the US it is difficult to determine the exact size of the market but we estimate that we are number 2 but still have a single digit market share. It’s a very fragmented market in the US, so acquisitions that can help us automate the processes or predict which assets will have the highest likelihood of a successful outcome are an interesting technology for us. It allows us to expand our market to clients who wish to serve themselves or have a lighter advisory approach if they wish, or who wish to leverage the expertise of our teams.
On the analytics side, our core business was the valuation of commercial real estate – mark-to-market. We lead by far, be it from a technology perspective with our Argus company, our flagship product, or through our consulting services. When we produce valuations, we dump a tremendous amount of exhaustive data that allows us to look at the commercial real estate market and say, “OK, what’s been driving the performance of different types of assets?”
How do you see the industry in the midst of so many technological changes?
The industry is at a turning point. It feels to me a lot like financial services did over a decade ago, where there’s amazing technology and expert services that go along with that technology to say, ‘What just happened in the market? How do I get a better understanding of what’s going on around me?” The next step is, “Why did this happen?” Our analytics technology allows us to make correlations, particularly with our recent acquisitions. Then, most importantly, it’s, “What’s going to happen next? Where should I invest? Why should I invest? And how do I feel about the performance of assets in huge investment portfolios?” That’s what we’ve been aiming for with our acquisitions over the past year.
What was the most exciting thing for you when you became CEO?
It’s an opportunity to be in front of the entire industry. We’re still very early on the advanced analytics adoption curve and thinking about the investment side of commercial real estate. There are great companies out there, they have their own data strategies, and some of them are significantly bigger than us.
But that’s what we do: investment firms should have data strategies, and we’re here to enable those data strategies for them. When we assemble assets like Stratodem with Reonomy to create advanced offerings and combine them with Argus and our consulting business, and even the data we fork in our tax franchise, there is no other company in the world that has our dataset and has the potential to change this industry like we are. And it was just too much fun to pass on this opportunity.
On the demand side, how do your customers view the adoption of proptech?
You are hungry for it. If we put it in the context of today’s economy, facing rising interest rates and headwinds will change investment theses and the way owners think about how to maximize their returns. They focus on the tenant experience as it should be. I think that side of the business has as much potential as our side, the investment and performance management side. There are so many ways to improve in-building services and bring all sorts of technologies to fruition in this current economic cycle.
It’s even more important to think about productivity, efficiency and differentiation. The various proptech companies that are out there all bring this up from a different perspective. I think owners understand that investing in technology will enable their future growth and the best outcomes with their tenants. We see strong demand. We have a total presence in approximately 100 markets across six core countries – Canada, US, UK, Germany, France and Australia – and we see an addressable market of approximately $5 billion opportunity in these six countries alone. If you add the rest of the world, our model says it’s a $10 billion global market.
What types of data questions do customers ask Argus?
Surprisingly, the first conversations I had with people at the CXO level in the industry only concerned the core management of data. “How do I harmonize data from investments in three different countries to get a portfolio view?” I understood the problem. At this point, even the most advanced are still trying to figure out how to aggregate their data and look at it on a country or global level.
Then think about all the different attributes of performance. It’s a core problem across the industry, and the technology that we’re building organically with the acquisitions we made last year addresses this problem head-on.
Is there a specific real estate sector that you focus on for your clients, be it construction, office or residential?
There is a blurring of the lines. We are sticking to our core strategy of commercial real estate. However, as investors move into single family rentals as a commercial asset class, it is changing our perspective on what is commercial. The legacy definitions don’t necessarily apply when viewed from an investor’s perspective. So that’s not our core strength, but we’re building those analytics skills.
In our Stratodem acquisition, we actually collected a tremendous amount of macroeconomic housing information data that we built into our models. It provides information about the performance of commercial real estate investments. We build data and analyzes on this across all classes of commercial real estate. We have our tax practices. We aim to target and segment growth areas such as data centers or green energy.
How do you see the adoption and use of technology in real estate for the rest of this year or in the near future and how will this impact Altus’ strategy?
I have to be careful not to answer a specific question about the rest of the year that might come off as a guide in any way. I’m going to talk about the industry in general and our positioning. We’re in a great place. In markets that are going up or down, you will have investors looking to either buy or sell. We’ve been through various economic cycles over the past 15 years and are very resilient because buyers and sellers are looking for that next piece of information to determine what to do next.
We were there with expert services, information and analysis capabilities and the adoption of this technology is accelerating. This puts us in an excellent position as a trusted partner for many of the world’s largest investors.
Philip Russo can be reached at firstname.lastname@example.org.