Pan-European manager Patrizia is taking digital disruption in private real estate seriously. In January, the Augsburg, Germany-headquartered firm responsible for more than €42 billion of assets, created two additional management board positions, both focused entirely on technology and digitalization.
Alexander Betz, founder and chairman of the supervisory board of eFonds, who had been leading Patrizia’s digitalization effort for the past two years, was made chief digitalization officer. And Manuel Kasbauer, a long-term Patrizia employee who joined the organization in 2012 and currently leads its technology and innovation team, assumed the chief technology and innovation title.
Betz’s role includes providing IT infrastructure for the company, while Kasbauer will focus on ensuring the business remains “futureproof and innovative,” says Simon Woolf, the firm’s chief human resources officer. Woolf, himself a new addition to Patrizia’s management board, says the CDO role will involve collaborating with start-ups in the proptech sector, among other duties.
Across the broader financial services industry, managers are introducing new leadership positions in response to a widening range of disruptions. These include sustainability and demographic-oriented disruptions. But among private real estate managers, it is the technology-related appointments that are proliferating.
In addition to harnessing behavioral and other forms of big data for underwriting and deal sourcing, firms are now gradually recognizing the need to create data management roles. And where previously hires happened at the lower and middle ranks, they are now happening at C-suite-level. Another example occurred last month at private real estate heavyweight Blackstone. The New York-based manager appointed John Stecher, formerly group chief technology officer and group chief innovation officer at bank Barclays, as chief technology officer, succeeding Bill Murphy.
Patrizia’s Woolf tells PERE these elevated “competencies” allow the firm to strengthen its innovative work environment, have the right talents onboard and to accelerate the adoption of new technologies in order to foster operational excellence and further increase efficiency, transparency and quality for its clients.
For its 2020 commercial real estate outlook, Deloitte surveyed 750 commercial real estate executives, including owners and operators, developers, brokers and investors, across 10 countries. From the findings, 55 percent said their data is being managed by a chief data officer or an equivalent C-suite executive, or by collaboration across business verticals, versus 45 percent who outsource data management to third-parties.
But while there is an uptick in senior technology-based hires, titles are currently far from standardized. There are chief digital officers, chief technology officers and broader roles like at the Chicago-headquartered manager LaSalle Investment Management.
Nine months ago, LaSalle hired Sarin Thampy as global head of data strategy and engineering, to organize and lead its digital strategy. Thampy reports to Tim Kessler, global head of corporate strategy and development, who himself joined the firm in September 2017 in what chief executive officer Jeff Jacobson describes as a “strategic COO-type” of a role.
Under these two senior executives, the firm has now embarked on a plan to hire 55 people with data and technology expertise who will operate out of parent company JLL’s Bangalore office, before year-end. PERE understands approximately 20 hires have already been made, including data scientists and application architects. If these hiring plans are successful, the Bangalore team will be LaSalle’s largest tech-focused team across its 24-strong office network.
“This latest phase, by far, is our biggest ramp-up,” acknowledges Jacobson. “It is a big bet. But it has been based on a series of smaller things we have done. We now have a better understanding of what works and what doesn’t. We are ready to take it to the next level.” LaSalle executives working from its Singapore, Chicago and London offices and are helping design the technology business and training the Bangalore team that handles the engineering and data mining work.
“We have historical data in a variety of ecosystems such as Argus, Yardi and numerous spreadsheets,” explains Jacobson. “To get everything into a common data platform base, and cleansed, is a monumental task. But you have got to do that first before you can do anything with the data.”
As the industry creates room for tech talent, the scope of these roles is also evolving. Emily Von Kohorn, managing director and co-head of the global real estate practice at executive search firm Sheffield Haworth, says the role is increasingly changing from purely technology-oriented to more about data and digital strategies – how to handle information and knowledge management.
As such, many of these hires are coming from outside financial services. Bill Lee is a senior director at Hong Kong-based private equity real estate firm Gaw Capital Partners, hired in February 2019 to advise the firm on proptech investments and real estate development. He came from global technology giant Microsoft, where he was a director of real estate strategies and development. LaSalle’s Thampy had worked in senior technology and digital roles for Vodafone and Olam Group before being recruited.
Although such hires help solve the tech needs of an industry formerly reliant on old-fashioned methods of driving investment performance and efficiency, they come at a cost. Sometimes a premium is paid for recruiting from limited talent pools where there is both tech and real estate expertise.
Often, from a compensation perspective, people coming from the technology world and people coming from the real estate investment world speak different languages” Emily Von Kohorn
“Often, from a compensation perspective, people coming from the technology world and people coming from the real estate investment world speak different languages,” agrees Von Kohorn. “We are talking about carry and long-term incentive plans and they are talking about options and equity. There is a little translation required. The person coming over has to buy into what can be accomplished and what they stand to gain.”
Jacobson says this is why LaSalle is not building large tech teams in the US or UK. “It would be tough to get that type of talent at scale from Silicon Valley,” he says. “We are hiring small groups of subject matter experts, then building a center of excellence in India where there is really good and affordable data and technology talent, relative to hiring a bunch of Silicon Valley engineers.”
There is also little visibility into the return on investment from these hires. But despite the challenges of measuring the efficacy of a tech hire over the short term, firms are willing to bet on the unknown. “We asked ourselves what the cost to us would be if we did not include the CDO and CTIO roles in our management board,” says Woolf. “We are convinced that these C-suite roles are key investments to future-proofing our business in a real estate world that is constantly changing in terms of technology.”