Clients, Investors And Hackers, Oh My! Creaky Spreadsheets Leave Users Vulnerable

The coronavirus pandemic and its resulting disruptions accelerated the adoption of new technologies in many industries. Notably, the technology adoption trend widened the productivity gap between top-performing organizations and the rest.

But the pandemic isn’t the only factor nudging businesses to embrace digitization. In the commercial real estate world, investors are losing patience with legacy software systems that are slow to process the many complex details that go into a real estate transaction.

“I've seen companies that have spreadsheets that literally take 10 minutes to open because they are so big and they're reaching the maximum capacity of what Excel can do,” said Michael Sebastian, industry principal at AppFolio Investment Management. “It’s used like a poor man's database.”

To an investor in the midst of fundraising, 10 minutes wasted to manually access a single piece of data can seem like an eternity, not to mention all the time normally spent in repetitive data entry and back-and-forth communications.

AppFolio Investment Management designed its software to provide error-free distribution calculations as well as transparent and on-demand knowledge-sharing between general and limited partners. This can help maintain client confidence throughout the investment life cycle.

“Limited partners and institutions know that there's problems with spreadsheets, and they'll say, ‘If you want our money, you need to use a modern system,’” Sebastian said.

Dated, cumbersome technology is a turnoff for another important audience too: the next generation of CRE leaders. Bright, young professionals, Sebastian noted, may be hesitant to sign on with firms whose tools seem to be stuck in the early 2000s.

A firm also doesn’t want to face a bottleneck if its resident Excel expert exits the company, leaving a less-savvy employee to pore through confusing rows, columns and cells to find an answer to a client’s question. 

“Imagine a scenario where you have 10 or 15 properties out there and you might have 100 investors,” Sebastian said. “If you get a question from an investor — like ‘What's my capitalization table across all my investments?’ — that can take a lot of analysis and a lot of time with spreadsheets. I've talked to clients where it's taken a week to turn it around just for one investor.”

However, if there is one group that does appreciate dated spreadsheet software, it is cybercriminals. Sebastian cited the SolarWinds hack as an example of how bad actors were able to exploit vulnerabilities in Microsoft software.

“With those systems, you're eventually going to get hacked or get ransomware or get something where your business and data now are at risk,” Sebastian said. “You need to outsource that risk, and one of the best ways to do it is with a professional, encrypted database that is significantly less prone to hacking.”

To keep important stakeholders happy — and keep hackers out — AppFolio Investment Management offers a mobile platform that puts all information at the right people's fingertips. 

With a cloud-based system, said Tony Bettis, president and CEO of All Pro Capital in Colorado Springs, Colorado, investors don’t even have to pick up a phone to check their portfolios. Instead, they log on to the interactive AppFolio Investment Management portal for answers. He said this is much more efficient for his firm and its clients than the system All Pro Capital used previously.

“The waterfall feature in particular is super helpful because every project is different,” he said. “AppFolio Investment Management does that calculation automatically so we don’t have to sit there every quarter and figure out what we may owe somebody.”

Not long ago, the ability to access accurate information instantly was limited to very large firms. Tools like AppFolio Investment Management, Sebastian said, bring these advantages to small- and mid-market companies.

“We're democratizing that market, so to speak,” he said. “Smaller managers can now get a solution that is as sophisticated as something that a multibillion-dollar company would use.”

Sebastian added that a system like AppFolio Investment Management can also reduce errors. With a spreadsheet, a simple incorrect input can have a cascading effect, particularly in complex waterfall formulations used to split profits among investors.

In addition to helping companies narrow the productivity gap with their larger competitors, cloud-based AppFolio Investment Management can help firms cope with another big trend of the coronavirus era, Sebastian said.

“The pandemic has driven companies to look for solutions to allow their employees to work remotely,” he said. “And I think that's what this software does very well for real estate investment firms.”

This article was produced in collaboration between Studio B and AppFolio Investment Management. Bisnow news staff was not involved in the production of this content.

Studio B is Bisnow’s in-house content and design studio. To learn more about how Studio B can help your team, reach out to studio@bisnow.com.