By Jack Stubbs
“There’s an arms race going on in this industry. Some bigger companies have more funding behind them and are more well-known. I have a niche, and I need to make sure that the value proposition is [effectively] communicated. Better market data will allow you to do a better job,” said Ford Fisher, founder of Rudolph Property Explorer.
Founded in February 2017, Rudolph Property Explorer helps clients to sort through complex commercial mortgage backed securities (CMBS) disclosures through a web app that simplifies the process and allows them to see into the underlying real estate data: commercial real estate (CRE) properties, loans and leases. The platform also allows users to see how their properties’ financing and financial performance compares to similar properties locally, regionally and nationally.
CMBS gives a thorough and accurate picture of the financial situation behind CRE properties. Rudolph allows users to access various points of information, including the exact terms of the debt on properties, multiple years of property revenues and expenses, and the names of the borrowing entities and guarantors on the loan, among other data.
We recently spoke to Ford Fisher about his vision for Rudolph Property Explorer, and how the platform fits into larger trends driving an increasingly tech-oriented CRE market.
How does CMBS data fit into what Rudolph does as a product?
Historically, especially over the past three decades, CMBS has represented about 20 percent of commercial real estate financing…20 percent of all loans extended for retail, industrial and office properties have a loan that gets put into a CMBS deal.
Most CMBS are packaged together with other loans, and those are regulated by the securities and exchange administrations. They are public filings…there’s a prospectus on when the deal is getting sold, and there are monthly distribution reports. Essentially, [Rudolph] takes these public filings and parcels them into their underlying security information. If a property is not on the market, this is the most robust financial information you’re going to find on properties.
There’s a lot of information here that can help the average CRE professional, but it’s not the entire market. There’s probably only five percent of buildings that have CMBS data on them in the recent past.
For the day-to-day real estate professional, why is this streamlined CMBS data useful? What would this platform allow potential users to accomplish, and how does Rudolph strive to differentiate itself from other platforms?
If you’re doing a market study, this [information] is very valuable. Or if you’re representing a tenant and you know a loan [on a building] is maturing near when you’re negotiating a lease, that can be valuable. For the tenant rep community, it’s about the leases: for tenants, if they’re pitching a new client, they can see five new potential office leases that weren’t public otherwise. My main set of customers are banks and debt brokers; they’re interested in refinancing opportunities; they’re looking for loan maturities in their markets.
In public companies’ annual reports, there is always a section labeled ‘properties,’ which is sometimes not as [informative] as it needs to be. A good tenant broker should be looking at that information, but it’s [difficult]. The ability to more effectively synthesize public companies’ annual property reports is not currently in the product. It is software I’ve built a prototype of and plan to incorporate in the future.
What is the most compelling element of Rudolph? What makes your product unique?
The most innovative part of the product is probably its account structure. It’s $50 a month; you can sign up and cancel without talking to anyone. I’m about to introduce exports right now, that’s a key feature for a lot of people. People will have to pay more to export X number of records and get all the data in a spreadsheet. Right now I’ve built a web application that I think is more powerful than a spreadsheet, because it lets you [see things more comprehensively].
Within the commercial real estate industry, who does the platform predominantly serve? Geographically, where does the platform operate?
There are two sets of potential customers for this product. [One] is the people who are already using CMBS data, usually brokers. Existing solutions are worth it to them, no matter how expensive they are. These clients already know [what the product does]. The potential customer is your average tenant rep broker, who won’t necessarily know [about CMBS data].
I’m based in Dallas, but the CMBS deals occur nationwide. The average bond will have properties in every major market, so there will be about 100 loans in the bond. Underlying those could be 100 to 300 properties across the nation. I have some established customer and brokerage firm relationships in Dallas and New York, but I’m talking with some people on the West Coast, too.
Can you speak to some of the primary differences between how this product might operate within the commercial versus the residential real estate markets?
This [trend] has already happened in residential real estate, to a degree. You have the monster platforms like Zillow and Redfin. But residential brokers and their fees survived, so I think it is happening in commercial real estate, but the fees might not collapse like it happened in Wall Street.
I’ve talked with some private equity firms that do huge developments. Some of them, especially if they have the Wall Street background, go to their broker for [this] information. This has [shown] me that I need to be selling to brokers more than to developers or to the property investors. The brokers are the arbiters of the information.
What’s next? Looking forward, where do you see Rudolph headed in the short-term and long-term?
Because I’m still focusing on product development, the marketing has been a little slower, [but] I think this product is something a lot of people would be interested in. I’m hoping that by the end of this year, the core product is mature so that I can enter 2018 with a greater focus on selling.
I’m in conversations with some of the existing players…and there are several routes I could take. If building an API wasn’t a good deal, a company like CoStar could sell the data through their products. I worked at a hedge fund before I got into software development. On Wall Street, people are throwing data products at you [constantly], because better data means better decisions.
Is there anything else you’d like to tell us?
On Wall Street, brokers have kind of been displaced, the average stockbroker doesn’t have the same level of importance, because software has somewhat taken that role. I don’t want to displace commercial real estate brokers in [this] market; I don’t know if anyone ever can or will.