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The Problem with Third-Party Management with Managing Capital

The problem with third-party management is that you're working with a mediator (or multiple mediators), which means you're not getting everything you need to get your business off the ground. And in some cases, you're putting yourself at risk of fraud.


Canopy Analytics is a venture-backed real estate software company focused on the operations of large apartment portfolios. It uses data to help multifamily teams collaborate better to perform better. They help clients when their data is spread out and not actionable. They built an AI for asset management that uses predictions, alerts, and workflows to help property teams take real action. 


Canopy helps you put your team's time where the money is. With operations visibility at your fingertips, we create top-to-bottom value for ownership groups and residents through better-run properties and more profitable portfolios.


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The Problem with Third-Party Management with Managing Capital

We are joined by Sunny Juneja, the Founder and CEO of Canopy Analytics. Canopy is an interesting company because I am on the board of Canopy. We invested in their last round. It helps operators benchmark their portfolios. For owners, you can pick any KPI and track how the property executes against them in real-time, helping prompt managers to automate their work and helping them prioritize




Sunny, thanks for coming on the show.


Thanks for having me, Zain. I appreciate it.


I would love to start with an introduction. How did you end up running this startup and focusing on this particular problem set?


I got my start in real estate in 2008, like a lot of people. The mortgage crisis was going on strong. There were a lot of opportunities to help people. A lot of people’s mortgages were underwater. We did loan modifications. We used to keep people in their house and make it, so their mortgage was not underwater. I got into real estate. I saw that it was a very tech-forward industry. There were a lot of opportunities. Ever since then, I have been like, “I want to do something in real estate and technology.”



"One of the biggest problems that keep asset managers and property managers up at night is making decisions on their gut and assumptions."



As the years went on, I got more interested in multifamily, the purpose that it plays in cities, and how it is important for housing. I saw the same problems in property management. They were not utilizing technology. It is creating a poor resident experience, and in turn, it was putting the financial performance of these different owners for purpose.


I was introduced to Sunny and Canopy by a former investor of mine because I was a tech founder once. Dabbling into real estate, I was very frustrated with the reporting coming back to me from the various properties I bought. It seemed like it was not just a problem I was facing. I work for a private equity fund, Blue Field Capital, and we have the same problem. We use a lot of third-party managers. The information coming to us is not sufficient. It is a constant source of friction.


We talk to hundreds of operators before starting our company. We are talking about teeny-weeny syndicators. In the first deal, they are doing 100 units and then PGIM, which is one of the world’s largest local real estate investment brands. What surprised me was that problem was pervasive so much everywhere. People were staying up and could not sleep at night because they were worried about what was happening to their properties. They never felt like they knew what was going on. I had always had this question and there was a real opportunity to help solve that.


Communication is very important. There is one thing about communication, which is the aura of transparency. That is the outcome of being frequent and consistent in your communication. That is something a lot of people get wrong. The information is not transparent. You only hear about problems after the fact. Another element of this is losing credibility because information sometimes has issues.

Data can be wrong. A number of times, I personally caught things on the metrics that do not add up. This is information coming from Excel or someone is emailing me. A lot of our inboxes are flooded if we are in real estate with these weekly or monthly emails. Sometimes, there are errors in those. It is nonsense to me that real estate is this way still.


To sit beside the property manager for a moment is the most common problem. It is like garbage in, garbage out. You are supposed to meet these hundreds of million-dollar decisions based on completely faulty data. I have to sympathize with the property manager because they are on the ground. They are the ones trying to close work orders and fix toilets. Everyone is yelling at them.


The best tools they have is they go to the property management system, download a bunch of reports, copy and paste stuff from there to Excel, and then they are supposed to write up this email explaining exactly what is happening and why. They are struggling with the most basic things like, “How do I keep my units occupied? How do I prevent people from leaving? How do I get them from not yelling at me because they are getting a rent increase?”


It is a fabulous job being a property manager when things are working well. Success is when no one talks to you and replies with a one-liner, “Great job. Thanks.” It is when things are not going well, you come under scrutiny and there is tension.


"People want to record data more often to see the results and get a good snapshot of what's actually happening."


What you said earlier is one of the problems is that people do not know when things are going well at work. You have these reports that are coming. You are not sure what is right and wrong. The property manager is thinking of this as an afterthought on the job. If you both could see there was a clear problem and it was super obvious to both of you, you would naturally collaborate to solve that problem.


What we have seen is that is what has been missing in real estate for so long. It is like, “Here is the one thing we both need to improve on. We know exactly how to do it. This is the money we want to allocate to fixing it.” That conversation never happens because you can never get a sense of what is happening with the property.


Being a PropTech investor, it feels to me like we are not coming along and making progress in most areas of real estate. In PropTech, we are using AI in many interesting ways. We are using IoT devices. We have tenant engagement apps and smart access control systems but the fundamental buying, managing of real estate, and communication are still done in Excel. There are two areas where there are big opportunities. This underpins why we invested in Canopy.


One area is the underwriting process. It is still mostly done by spreadsheet and you are relying on what the seller told you. Relating to this is all the reports you get from the property. The management and how decisions are made in real estate are very poor. It is the quality of data you are getting out and how property managers report to their owners or investors. It feels like the one area in the property still has not been fully digitized and is waiting to happen.


Let’s talk about some of the success stories in real estate. What has worked in PropTech are these very clear applications that have one purpose and then they do the hell out of it. They struggle a little bit with becoming larger and doing it but the thing that works for them is they typically do not have to integrate with the property management systems, which is this ginormous headache. The other piece is that the ROI is super clear. One of the most interesting trends is digital leasing or automated leasing. The best part about that is it is completely divorced from existing data, ideally, and then you have this prospect who is able to book a tour and sign a lease.


All of that is talking to property managers, which is very disconnected. It also has one singular purpose. You want to get someone either to a core or a lease. That one goal is simple. Whereas recording is you are looking through your entire portfolio and trying to find, “Did we spend too much on marketing? Did we spend off on work orders? Are people leaving because we are not closing work orders? Is it because there is a new supply in the market that is offering a more competitive product?” These holistic questions are often too big for an individual property manager to figure out, which is why it has been such a lagging problem.


I ran an ad platform. That is how I made my money. There was a very decent-sized acquisition that came out of that. Every decision we made in the company was underpinned by data. Should we change the size of the X button? What color should the characters be in the ad? What should be in the ad itself? What should the call to action be? We had a culture where opinions do not matter. Run experiments and get data. When it comes to real estate, I was shocked and horrified that major decisions are being made sometimes based on individual experience, random intuition, or whatever you feel like on that day.


“What color should we paint the walls? Which vendors should we use for this? How much should we increase our rents by? What should we do with these assumptions?” It is nonsense. For a tech person, it has been hard to get familiar with how little data is used or incomplete because a little bit of data can be quite dangerous. Sometimes it can be misleading because it is regionally specific and asset-specific. What worked at one company might not work at another, even the class of property you are dealing with. Class A and Class C have different ways of running.


What is interesting about that is, to your point, bad data is worse than no data. One of the biggest problems that keep these asset managers, regional managers, and property managers up at night is they are making decisions all on their gut and assumptions. These are huge decisions like a CapEx project can cost hundreds of thousands of dollars per unit or a common area project can be very expensive.


One of the nice things is you worked at an ad tech company. You can run a quick experiment. Looking for that equivalent in real estate has been hard. That is one thing that has been interesting about the trend to get more data. People want to record data more often so they can see what the result of it is. If they can get a good snapshot of what is happening, they can say like, “We painted this blue and people stopped showing up. Maybe it is making everyone depressed. We should stop keeping it painted blue.”


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About Zain Jaffer:
Zain Jaffer is an accomplished executive, investor, and entrepreneur. He started his first company at the age of 14 and later moved to the US as an immigrant to found Vungle, after securing $25M from tech giants including Google & AOL in 2011. Vungle recently sold for $780M. 


His achievements have garnered international recognition and acclaim; he is the recipient of prestigious awards such as "Forbes 30 Under 30," "Inc. Magazine's 35 Under 35," and the" SF Business Times Tech & Innovation Award." He is regularly featured in major business & tech publications such as The Wall Street Journal, VentureBeat, and TechCrunch.


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