Welcome to the second episode of the Goodwin Proptech Series, where Blake Liggio discusses the rise of tech-experience in the C-suites and boardrooms of real estate firms.

Blake Liggio is a partner in Goodwin’s Real Estate Industry group. Mr. Liggio focuses on mergers and acquisitions, including the representation of acquirors, targets, boards of directors, transaction committees and investment banks. He also advises clients on a range of corporate matters, including fiduciary duties, corporate governance, federal securities law disclosure and compliance, and defensive measures.

Mr. Liggio is also involved in Goodwin’s PropTech Initiative focused on the intersection of Real Estate and Technology through thoughtful collaboration across the two practice areas and advises on relevant market trends impacting the PropTech sector.

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Transcript

RealCrowd – All opinions expressed by Adam, Tyler, and podcast guests, are solely their own opinions and do not reflect the opinion of RealCrowd. This podcast is for informational purposes only and should not be relied upon as a basis for investment decisions. Comments and observations made during the podcast do not constitute legal advice and should not be taken as such. To gain a better understanding of the risks associated with commercial real estate investing, please consult your advisors.

Blake Liggio – A lot of this is internal education. Generally people don’t like change and things that they don’t know and so where you have a strong leadership team that can kind of facilitate the internal education.

Adam Hooper – Welcome back to the second episode of the Goodwin PropTech podcast series. Today, we discuss the rising presence of technology experience in the C-suite and the board rooms of real estate companies with Blake Liggio, partner at Goodwin and the PropTech practice group. C-suite roles are ever evolving, and the nature of technology professionals is becoming more integrated. The generation gap between real estate leadership of today and tech-savvy millennials is closing. The new wave of real estate practitioners rising to leadership roles brings with them a more ingrained view of technology and how to leverage it across their organizations. For more information and to stay up to date on future episodes, go to realcrowd.com/proptech where you’ll find a link to an upcoming webinar with Menta, Blake, and Soleil. Be sure to leave a question for us to answer live on the webinar. As always, if you have any feedback, comments, or questions, send us a note to proptech@realcrowd.com. Hope you enjoy the episode. Well Blake, thanks for jumping on another episode of the Goodwin PropTech pulse summary here. Excited to have you on today and kind of continue the conversation from our prior episode, this time talking about the presence of technology in the C-suite and in board roles. Thank you for joining us today and excited for the conversation.

Blake Liggio – Likewise, excited to talk.

Adam Hooper – Why don’t we take a little bit on kind of your background, how you got involved in the PropTech initiative at Goodwin and kind of your view in technology and real estate now.

Blake Liggio – Sure. Goodwin is global law firm that is organized in business units. We gravitated towards this space given our strong presence in both the technology and real estate industry silos. We have very strong teams in both areas so we identified our potential capabilities in this cross industry space. For me in particular, I’m a merge in acquisitions where I sit in the real estate unit here at the firm, but I practice M&A across industries, so I worked with public private M&A with tech companies and real estate companies and kind of just really saw the capability of where real estate could kind of innovate by adopting technology based on my experience working with real estate companies and I also know tech companies, I understand how the culture and kind of dynamics are very different with tech companies. I was able to kind of understand the challenges facing getting PropTech up and running, which is really where we’re at right now in the space, and that’s kind of what drew me into the area.

Adam Hooper – Yhat’s interesting because as we’ve talk about before on the show and other conversations, almost every company today is at some sense a technology company, right? Technology is pervasive across all these industries. Real estate, historically, has been a very slow industry to adopt technology, but it feels like we’re seeing a bit of a pendulum shift of realizing that and now trying to get out in front of it. That will be an interesting conversation today to see how companies are maybe kind of organizing at the top to take advantage of some of these trends and make sure that as an industry, we don’t miss what’s going on, what’s been a huge impact on their industries as well.

Blake Liggio – That’s absolutely right. I completely agree with the concept that tech is almost less of an industry and more of a type of company. We’ve seen basically every industry that you can think of, other than real estate, kind of over the last decade since the dot com boom, really, really adopt technology. Most recently Fintech as you’re probably both aware was kind of what a lot of people who study PropTech see as kind of the predecessor to this movement. But you’re absolutely right that real estate has just been a bit of a slow adopter and there’s a lot of capability.

Adam Hooper – Let’s kind of set the stage here in being in the real estate brokerage game back in the early 2000’s, my notion of technology was our IT guy that managed our email servers.

Blake Liggio – Right.

Adam Hooper – How has that shifted? What is a current leadership role in the technology space look like for a real estate company?

Blake Liggio – That was really the topic of our article. That’s spot on. Most real estate companies view a Chief Information Officer, a Chief Technology Officer, any sort of leadership role in a real estate company as kind of the IT person. The person who comes and fixes the computer. That role has really evolved and that’s what we’re studying kind of as this symbol of the fact that the movement to integrate technology has really taken hold within real estate companies. That position within these companies has really evolved to more of a strategic role. We’re seeing real estate companies take technologies, utilize how those technologies are impacting key financial metrics and asking who was historically the person who fixed the computers to kind of synthesize this information, deliver it immediately to key executives, and really start to strategize around that information and think about how with the other C-suite executives and think about how that tech information is being delivered through technologies is impacting the bottom line and ROI specifically.

Adam Hooper – Now is the adoption of technology in these firms, is that coming from those internal technical guys that were again fixing the printers and servers and the computers, are they coming to positions of influence in the company and then bringing this technology in? Or are you seeing companies actually go and search out these leaders or these experts to figure out how can they better implement this technology across their company?

Blake Liggio – It’s a little bit of both. When we did our study, we found that kind of the key leader in the tech unit in these tech units that have taken hold in public companies, is usually somebody who’s been promoted from within. Like I said, it’s somebody who knows the company which makes sense. It might not have necessarily have been the one scoping out some of the new technologies that are being adopted historically, although at this point the role has evolved to kind of lead that charge. What most companies have done is to bring in kind of younger people to work alongside with that executive level role. Frankly a lot of this is a, there is some generational kind of underpinnings to this movement in terms of how it has kind of moved into real estate. There in most instances we’re seeing, like I said, some younger kind of junior people to the Chief Information Technology Officer coming in, scoping out technologies, having some sort of basis and bringing in the information. Then having these chiefs kind of get caught up and be a part of that as well.

Adam Hooper – What are some of the main drivers when a real estate company is looking to adopt new technology? I know you mentioned maybe impacts the bottom line or maybe it’s efficiencies. Maybe we can talk a little bit about when people are seeking out new technology. Are there specific problems you’re trying to solve, or is it just kind of surveying the landscape and seeing what’s out there?

Blake Liggio – For real estate companies, and I think this kind of goes to why real estate has been a somewhat slow adopter of this, it’s really operational. To the extent that there is, it’s not, “Oh, let’s just go out and kind of survey the tech market and see what we find.” These companies are not looking to implement technology I think to the extent they have an operational problem like around energy, say, or they might be able to find more efficiency. We’re seeing it and leasing where companies are seeing what the we works of the world are doing and some of these intermediaries that are coming in and how they’re kind of capitalizing on revenue streams from short term leasing and so real estate companies are seeing there that they’re losing money. Are they able to kind of bring in a technology that can help them eliminate the intermediary and then kind of goes back to increasing the bottom line again. It’s really an identified operational efficiency that’s driving the kind of movement to go out and seek technologies that might remedy those issues.

Adam Hooper – What are some of the challenges when they’re out there trying to find those, or maybe even identify what those use cases are internally. What are some of the challenges that real estate companies might face when they’re trying to identify new technology or who that right role is to bring in that can help them with that?

Blake Liggio – The challenge right now, as you know, there’s a ton of money pouring into this space because of the fact that the tech developers see so much possibility. There’s so many technologies and some of them are not really developed with an eye toward being easily integrated into a real estate platform. That’s one piece. It’s both a volume of the technologies available. The challenges with implementing some of these technologies into a real estate platform. Which we’re seeing that come up. Many of these technologies that have been most successful have been developed by people who have a real estate background and kind of understand what will be useful. Also this issue of identification, which we’re seeing, like I said, through kind of the onboarding of leadership that has some tech background. So I would say those are the three biggest challenges.

Adam Hooper – What you mentioned before that, one of the things that we’ve seen and have talked about is the kind of integrations that we’re seeing across platforms in our space. I think it a long time of these software companies were operating in silos and their technology wouldn’t necessarily play well with others. We’re starting to see more kind of cross platform integration, so as a real estate manager, being able to identify how these different pieces of technology can all kind of work together while in an ecosystem rather than having these disparate technology providers. Have you seen any trends there? Do you think we’ll see more of that? Do you think we’ll see kind of a unified platforms out there? What’s your thoughts there?

Blake Liggio – That’s a topic that I’m very interested in because it goes to where we’re seeing potential M&A in the pipeline. I completely agree. I think what real estate companies really want is capabilities that kind of cross the tech stack versus these, like you said, kind of siloed assets. What we’re anticipating is that in order to deliver that kind of one stop model that can provide the tech capabilities that real estate companies are seeking in one platform, we’re expecting that there will be some consolidation among these variety of assets that do one thing or another and that that then will be much more attractive for the end user real estate company to adopt.

Adam Hooper – Good. We talked a little bit about the kind of evolution of that role to the CT or CIO, but how does the role of a Chief Technology Officer, Chief Information Officer, in a real estate company differ from maybe what that role, we would think of in the technology world or what is that, or the daily duties of a CTO in the real estate space look like right now?

Blake Liggio – It’s a much more expansive… Well I think it’s a role in a real estate company that has more headwind. There’s still, in the companies that are really on the cutting edge of this space, there’s more buy in internally from your CEO and your kind of top tier executives and it’s more of a model where it’s collaborative. There are other real estate companies now where there is a CIO, but it’s still a role that I think is somewhat maybe an outsider to the core C-suite. I would say that in a technology company, a CIO is much more aligned at this point with probably the other executives. Whereas generally in real estate companies, it’s a role that I think still faces a little bit of adversity and probably a lot of internal convincing in terms of why technology should be embraced within the company.

Adam Hooper – Do you have any examples of a company that maybe went through that transition or maybe some success stories of an early adopter that maybe identified some areas that they needed some efficiencies or wanted to identify new technology and then were you able to implement that and then see what that success looked like?

Blake Liggio – We work with a number of big public companies. I would say that one of my favorite stories is the Boston Property story where Jim Whalen is the CIO and they’ve done a really good job at kind of integrating his role with the other executives and they’ve launched, they’re not an investor in the technologies and they’ll say that. They’ll say that right away. There’s sort of different ways that real estate companies are looking at this. There’s some companies that are forming investment or are participating or forming investment arms and kind of investing directly in the technology. There’s others who are just kind of continuing to license and identify one technology or the other and kind of position pilot programs to test what they like and what they don’t like. Boston Properties is kind of the latter model. But they have assembled a team internally and they’ve recently launched a co-working kind of platform, it’s called PxP Flex, which is kind of like I said earlier, targeted at having them kind of be the direct provider of some of these short term leasing models rather than bringing out a we work. They also do have some leases with we work, so they’re doing a little bit of both. But that’s a good example of where the role has really evolved into one that I think is integrated with the rest of the C-suite executives internally.

Adam Hooper – Good. Boston Properties has obviously a very large pool of resources to draw from when it looks at exploring technology. Do you see this kind of innovation, or this adoption of technology across the manager stack down to people that are maybe managing a handful of smaller properties, maybe a regional manager, all the way up through the public companies? Are you seeing more adoption in one area or the other as it relates to I guess available resources to explore this?

Blake Liggio – Ee’re seeing some of it at the property manager, at the actual asset level in some instances. You’re right that obviously the resources has always helped. That overall, it’s probably going to be more of a trickle down. If you have kind of operations at the portfolio level that are really committed to this space, I think maybe you get situations where there’s more kind of more adoption and integration at the asset level. But for the most part, I think those would be sort of the exceptions rather than the rule right now. We’re seeing more traction at the corporate level.

Adam Hooper – Great. Now if I’m a real estate manager and maybe I’ve been pushing off the decision to start exploring new technologies, how do they begin? Is it recruiting from outside, is it trying to find someone that can be kind of technology lead internally? Are there certain areas of operations that they would typically focus on first? Like how do you get into this if it’s something you’ve avoided to date?

Blake Liggio – It’s a combination of both. Like I said with the chief study that we did, a lot of the lead roles are kind of promoted from within so I think understanding culture of the company which is always kind of a consideration that you think about when you think about any leadership turnover is important. I do think that taking somebody internally who maybe has some background in technology and getting that person involved combined with kind of looking externally to find people who have just a sole background in the technology space is what I would say is the best combination to lead to sort of immediate success. Because the internal people are going to understand the dynamics that exist and as we’ve discussed, there is some resistance to these exchanges in many real estate firms. Having that basis of knowledge combined with sort of a fresh look of somebody coming in from the outside with a strong tech background I think is what we’re seeing as the most successful formula for quick success.

Adam Hooper – I would imagine it’s a fairly collaborative process once the decision is made to explore new technologies. I would imagine again, obviously you’re CEO, your operations team is going to be involved in really identifying, again, maybe doing a technology audit or an operational audit and seeing where new technologies can maybe improve some of those operations. Is that how it typically goes?

Blake Liggio – Where you’re taking a completely kind of bottom up approach in audit is depending on the internal knowledge of people you know who understand what’s in place. An audit is we are seeing that as a strategy to kind of get going quickly. That is a good way to go.

Adam Hooper – With the onslaught of new technologies that are out there being marketed to real estate folks right now, how do you make sure that you identify the ones that are useful for your particular business rather than, I think we’ve all spent a lot of money on things that I maybe use 10% of the power of my phone, probably. But how do you make sure that as a practitioner, when you engage and you embark on this new technology journey, you’re not being wasteful with resources, you’re actually choosing things that will be implemented and then getting the rest of your operations to kind of buy into that, right? There can be a shift in culture of how you view technology.

Blake Liggio – On the first piece, we’re seeing a lot of companies, a lot of these technologies are implemented through licenses so you might have, most of them are delivered through short term license and what companies are doing is taking a license and maybe piloting that technology at one asset and seeing if it’s a good fit before they might take it and unroll it across the portfolio. The license model kind of plays well with this idea of testing the technology before you really need to make a long term commitment to it and then kind of putting it into one, implementing it on one asset rather than the entire portfolio is probably the best way to go. In your second question was how do you get in buy in to the implementation? That’s where we feel and are seeing that these leadership teams are helpful. A lot of this is internal education. Generally people don’t like change and things that they don’t know and so. Where you have a strong leadership team, they can kind of facilitate the internal education of people who are utilizing spreadsheets have kind of stuck with real estate companies, right? Just like you’re saying. We’ve never done a deal with a real estate company where we aren’t guided by a spreadsheet throughout the entire process. But yeah so there are some hurdles there, but I think having the internal infrastructure to support the changes is key.

Adam Hooper – Perfect. Well Blake, I think that’s a good summary of this piece of content that you guys put out. Why don’t you tell us a little bit about what we’ve got coming up on the PropTech series and how listeners can maybe learn a little bit more about Goodwin, what you guys are up to, and get involved as you’re releasing this new content.

Blake Liggio – Sure. We’ve launched what we’re calling our PropTech Pulse series. It’s coincided with the launch of this practice area which we launched several months ago. We’ll just be continuing to follow the hot topics in the space coming up in the pipeline next will be doing an article this month about M&A and consolidation, which we’ll kind of study how the tech assets are competing for capital and how we might, we’re predicting some consolidation trends in this space both to deliver an app that they can kind of cross the tech stack to real estate companies which is attractive for them, and also render the tech assets kind of more viable for funding that’s pouring in so there will be an M&A piece coming up. We’ll also be looking at trends that have sort of resulted in the real estate industry being a little bit of a slow adopter of technology versus other industries as we discussed earlier. Yhen as this gets going, we’ll just kind of highlight what our clients are doing for the benefit of other clients, showing some of the models and what assets are being used and highlighting success stories and also just following hot trends generally in the space.

Adam Hooper – Great, and then if listeners want to sign up for the distribution list for the PropTech Pulse, how would they go about doing that?

Blake Liggio – We’re active on social media, so you can sign up through our website for all of our publications and we’re also posting everything that we’re doing through LinkedIn and on Twitter. Those are the best ways to follow what we’re publishing here.

Adam Hooper – Very good Blake. Well we appreciate your time today, and we look forward to getting you back for the next episode of the PropTech Pulse.