If a corporate real estate executive (CRE) can get a due diligence professional to alleviate the countless headaches associated with environmental, architectural and engineering aspects of major transactions, then it may cost him, but he’s ahead of the pack. More importantly, expansion strategies stay on track and the CRE can stay focused on the other
demands on his time.
If the same CRE can keep tabs on the complex due diligence process in an automated or “virtual” fashion, then he’s more than ahead of the pack. He’s on the winner’s stand already in the eyes of those senior managers who challenged him to get the transaction done quickly.
That’s why third-party due diligence professionals increasingly use technology in its many forms to streamline what can be a highly cumbersome task: navigating a transaction through engineering and architectural analysis, environmental assessments, regulatory compliance, rating agency and investor scrutiny and other potential deal breakers. In fact, one such service provider, Baltimore-based EMG (www.emgbalt.com), is making its use of automated systems, particularly Web-based systems, the cornerstone of its approach to real estate due diligence. In March, EMG hired Chuck Colton as chief information officer to spearhead the firm’s push into automated delivery of various due diligence related services.
“In many cases, due diligence is the beginning of a relationship that continues with time, because owners have an ongoing need to be diligent,” says Colton. Adds John Meighan, vice president, strategic planning, “Technology helps clients transition from the due diligence phase into the operations and maintenance or operations and management phase of owning a property.”
For example, EMG gathers property-specific data throughout the due diligence process and populates a database with that information. The more involved the firm is in the pre-build stage in the case of a new building, the more information will be available later on for other purposes. “If we’re involved in the construction process, then information contained in the CAD [computer-aided design] drawings can be related back to an ongoing facilities management database, where you can relate information on space and personnel and move management back to a visual drawing and use it to manage a task,” explains Meighan.
Above right: Chuck Colton joined EMG, a Baltimore-based real estate due diligence firm, as chief information officer in March 1999.
One Size Does Not Fit All
Consultants and other corporate business partners have long relied on automated tools to supplement their own expertise. But clients traditionally were indifferent to what systems were in use as long as the business problem was solved to their satisfaction and the job got done. Today, says Colton, clients expect more. “We work with a broad range of clients in terms of size and level of sophistication as it relates to technology, and we have to be able satisfy them all,” he says.
“One of the things clients should look for in a firm like ours is the ability to deliver information in the form in which it is most useful to them,” Colton elaborates. “A one-size-fits-all approach doesn’t provide added value.” But this requires EMG and its peers in the due diligence consulting community to provide connectivity to diverse technological infrastructures — that’s the price to pay if using technology as a competitive, value-adding service element is truly important.
“Clients also are placing significant value on your ability to respond quickly, which has to do with connectivity, but it’s also about our responding to a request for assistance much faster than was possible even 10 years ago,” Colton relates. “In those days we were providing due diligence in conjunction with a property acquisition in 30 to 45 days. Some clients today want us to turn that information around in 10 days.”
Connectivity to internal and external information sources is critically important to any business endeavor and its participants. Cell phones, for instance, were a novelty 10 years ago; they are ubiquitous today. The Internet wasn’t a force in business communications until the mid- to late 1990s. Now, companies without a significant presence on the Web are being left in the dust of those willing to compete in both real space and the virtual marketplace.
Retooling the Work Force
“People expect connectivity, because they expect us to become a virtual extension of their organization,” says Colton. EMG is in the midst of implementing a virtual private network that will foster that sense of connectivity in terms of both client contact and communications with the firm’s roughly 150 employees working in the field. “More and more of the information we’re collecting is in electronic form,” says Colton. “We use digital photography, electronic links to third-party data providers, laptops with high-speed modems, scanning and fax equipment and other systems. We are headed to an environment where our people are working remotely but with a phone line can reach the company’s computing resources via this virtual private network.”
Colton says the network, when fully implemented, will use authentication and encryption technology to allow EMG staff to dial a local phone number from any location and access information housed on EMG databases. Accessing the EMG intranet will give them the ability to run certain computer applications as though they were in the EMG headquarters themselves. Response times may be slower due to the dial-up connection, but consultants working on an assignment a thousand miles away can transmit and retrieve data electronically, which significantly streamlines the delivery of information to clients.
Rather than compose a report for a client from a laptop based on a standard protocol, staff will interact dynamically with a server in Baltimore. The server will query the consultant for information – some of which will populate a database and some of which will construct the report automatically. “We do this in a manual process now, but with the connection to the Internet, we can have the power of a server doing that for them,” explains Colton. “It would be very difficult to create the templates and an interrogation session on a laptop. The virtual private network will provide that type of interaction.”
Colton says the network will eliminate the time and cost associated with sending paper documents via an overnight service. “We also anticipate an enhancement in the completeness of the information gathered the first time,” he adds. “The network will come into its own as other technologies, such as enhanced telephony and larger bandwidths approach local connectivity on a local area network, so some of the delays associated with a dial-up connection — latency — are eliminated.”
The nagging question that remains to be answered is: Will it be fast enough for the clients?
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