It is often said that “data is the new oil” and nowhere is this truer than in the real estate industry. CPROP, a leader in creating blockchain-enabled applications for the real estate industry, is introducing a new data platform, PropAbility, that creates durable, accurate, continuous and immediately accessible property-related data records. PropAbility organizes raw data that is either not captured systematically or resides in disparate systems into a unified data architecture supported by blockchain-level security and wrapped in a user interface that organizes and delivers essential information quickly and succinctly.
PropAbility, addresses several needs, including:
PropAbility has several potential applications, including:
CPROP is initially launching two products on the PropAbility platform – HomeFAQs for the residential market and cFAQs for commercial buildings. Data categories targeted by each product include the following:
HomeFAQs (residential property) Physical
2.1 Asset Management
Capital flows in commercial and multifamily real estate move largely based on data and information and asset managers are challenged with absorbing, analyzing and making decisions on potentially vast oceans of data. Traditionally, investment managers assess their properties through the lens of conventional reports such as financial statements, leasing performance reports and market reports. Beyond this level of reporting, the property is a kind of “black box” inside and around which many things are happening that can impact valuation, risk and capital planning. The essential question is whether these traditional reports tell the whole story of what is happening with any individual property, much less the inter-property dynamics of the portfolio.
In reality, valuation and risk can be impacted by events involving multiple, interconnected disciplines, with the data associated which each typically housed in disparate systems or silos that do not communicate with one another. If an investment manager has data from less than all of the silos, there can be information gaps that conceal risks (and opportunities) which can result in mis- allocation of capital and sub-optimal decision making.
PropAbility helps investment managers to see all the data they need to get a holistic view of their properties, knowing their data is maintained in a way so that it is continuous, reliable and always available so they can obtain deeper insights into the risks and opportunities associated with the properties they manage. In an acquisition, PropAbility can de-risk and expedite the stressful and time-bound due diligence process by helping investors quickly zero in on the information they crave.
Figure 1. Valuation can be impacted by multiple, interconnected disciplines
While there are many commercially available automation solutions within these various information categories, none traverse all the categories noted above. This is problematic inasmuch as the quality of the insights and conclusions reached by asset managers about any specific property and its position within a portfolio can be a function of the degree to which the asset manager’s view is holistic, rather than singular category-focused. A goal of PropAbility is to leverage asset managers’ time to facilitate more astute commercial and financial decisions than the current paradigm by providing this holistic view succinctly, accurately and securely.
By providing a continuous and more detailed record of what goes on inside a property, PropAbility helps ownership keep track of the data they require for better control over their portfolio.
Figure 2. PropAbility High-Level System Architecture
2.2 Construction Management
When a building is constructed, whether it be a single-family home or a large multi-tenant property, detailed records concerning what goes into the property as it is being constructed can be scarce or hard to locate. What building materials and components were used, from where they were purchased, at what cost and under what terms and conditions are questions that linger long after a structure has been completed.
Especially where accounting controls are weak, there is also the persistent question as to whether what was paid for is what was actually delivered and installed.
The data architecture of PropAbility is designed to address this problem by providing a purpose-built repository into which selected data from the bill of materials, purchase orders, bills of lading and field inspection reports come together to spot irregularities and create an additional layer of control. Further, the resulting database establishes a foundation for monitoring the performance of those materials and components over time.
2.3 Warranty Management, Life Cycle Costing and Supply Chain Management
Buildings are comprised of a plethora of building materials, components, finishes, equipment, appliances and other hardware, many of which are sold with warranties which can last many years. However, information concerning what was purchased when, from whom and for how much is often buried inside accounting systems that are designed to track financial accounts, not assets. This paradigm makes it difficult to understand when assets are replaced, why, by what, by whom and for how much.
The data architecture of PropAbility is designed to address this problem by serving as the repository for all asset-related information so that owners, regardless of whether they are the original owner or the tenth owner, have a continuous record of the assets within a building so they can:
2.4 Insurance and Risk Management
When disaster strikes – a fire, flood, earthquake – that results in property destruction, insurance claims can be greatly facilitated by the asset inventory housed within PropAbility. Without such a data repository, reconstructing an asset inventory would likely be tedious, if even possible.
From an insurer’s perspective, PropAbility can help to de-risk property-related insurance underwriting by providing a more accurate and complete inventory of the components and contents of homes and commercial buildings.
For example, home insurance underwriting relies on MLS data and building codes, but fact-based, property-specific underwriting decisions are not feasible due to a dearth of reliable, field-validated information. Homeowner’s insurance is given without a site visit that can reveal the presence and functionality of smoke detectors, fire extinguishers and deficiencies in the construction or design of a home that can lead to claims. In Florida, hurricane insurance is provided without the need for a site visit. In a commercial setting, records of building contents seldom reside in single, accessible and secure location to facilitate insurance claims.
PropAbility can serve as that logical place to house all asset-related information and blockchain gives that data permanence and durability over time as properties age and change ownership.
Applications built on the PropAbility platform are envisioned to incorporate several key design features:
PropAbility aggregates data that is not presently systematically collected and/or resides in separate systems into a unified data architecture so everything can be found in one place. The precise content will be specific to the application, but aggregation is a common feature across all applications. In each case, however, selected data elements, not entire databases would be extracted to produce succinct reports built to support specific outcomes.
Figure 3. PropAbility aggregates bot unstructured data and data residing in different silos
Because buildings last for many decades, the associated data also must survive for decades and be continuous as properties can be held by many different owners over their lifetime. Continuity is important for creating context, seeing trends and generating other commercial insights possible only with a long-term view.
The security of the data architecture and whether data is truly resistant to modification over the life of the building is an obviously critical feature. Centralized databases are vulnerable to manipulation, intentional or accidental, despite secure log-ins and other common security protocols.
This is where the power of blockchain comes into play. Blockchain is a data architecture comprised of a decentralized network of computers (or nodes) that hold timestamped packets of data than can contain many things, from metadata about a transaction or contract to document hashes.¹
Blockchains, because of their decentralized architecture, are virtually hackproof – in order to change a blockchain record, one would need to simultaneously find and access a majority of the nodes on the blockchain network all at the same instant – a feat not possible with today’s computing power.
A blockchain timestamp can be compared to the way people previously used postmarked envelopes to verify that something had happened prior to a certain date. For example, by signing a will, placing it in an envelope, and mailing it to yourself, you can use the post office’s postmark on the envelope to prove the will was created and signed prior to the date of the postmark. Blockchain timestamps work in the same way. So, in a sense, a blockchain is a database of timestamps which allows you to confirm a certain thing happened on or prior to a specific point in time.
Blockchains can be public, like the Bitcoin blockchain (on which trades Bitcoin, the cryptocurrency) or permissioned. For example, Hyperledger Fabric, an IBM-branded blockchain platform, is used by corporate clients (e.g. Wal-Mart, Maersk, Northern Trust) to create customized blockchain implementations.
Figure 4. Timestamping and hashing on the blockchain
A blockchain “backbone” is a logical complement to any centralized database where key data elements deserve extra protection. Because blockchained data is immutable, such a backbone can instill a higher level of confidence that the data residing within the Propability platform is accurate because it is subject to an additional layer of protection and validation.
Automation speaks to the efficiency with which data is gathered, synthesized and presented. Suffice to say, many current processes involved in managing important data incorporate manual elements which may be needlessly time-consuming and people-intensive. Ideally, PropAbility would incorporate APIs or other software “connectors” that can automatically push or pull data from existing information systems in to the PropAbility platform. As a practical matter, this can present a challenge, especially where accounting systems are involved. At the outset of an implementation, there will likely be some systems where automation is possible immediately but, in other cases, a degree of manual effort will be required to transcribe data from existing systems or reports with the goal of increasing automation over time.
Beyond standard log-in protocols typical of centralized databases, smart contracts can add an additional layer of security by governing which permissioned users get to see which data and for what period of time. This feature can be important for pinpointing whether information is getting to the right person and, where desirable, whether that information has, or is, being acted upon.
The PropAbility platform fills a void in the spectrum of commercially available data products and aims to deliver a specific value proposition – to preserve property-related information over the life of a building typically lost or difficult to access to mitigate risk and generate insights not otherwise possible. This is accomplished by aggregating unstructured data or data presently residing in disparate systems into a unified data architecture with a user-friendly interface. PropAbility incorporates blockchain to ensure the data has continuity and durability over the life of a building and will survive intact when properties change hands, are modified or encounter disasters. Specific implementations can be tailored for specific applications, which span both the residential (HomeFAQs) and commercial (cFAQs) real estate sectors.
¹ A document hash is a 64-character string of numbers and letters generated by a publicly available algorithm that is unique to a specific document. If anything in the underlying document changes, even just one letter, its entire hash changes. A document’s hash is often referred to as the document’s digital fingerprint and is used to verify that nothing in the document has changed since the hash’s blockchain timestamp.
² Smart contracts are self-executing contracts with the contract terms being directly written into lines of computer code. The code resides in a distributed, decentralized blockchain network. Smart contracts permit automated, trusted transactions and agreements to be carried out among disparate, anonymous parties without the need for a central authority, legal system, or external enforcement mechanism. They render transactions traceable, transparent, and irreversible.
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