Real Estate, Tech Collaboration and Launching in the US with Oli Farago and Richard Croft

We talk to Richard Croft, M7 Real Estate and Oli Farago, Coyote Software about Real Estate Tech Collaboration, and US Launching.

Today’s episode will be on real estate investment and technology collaboration. Today we’re fortunate to be joined by Richard Croft, exec chairman of M7 Real Estate and Oli Farago, CEO of Coyote software.

Let’s hear more about how you two came together and the learnings you both have from your businesses. So Crofty do you want to kick start with how Coyote has affected your business, what problem is it really solved at M7? Tell me more how it’s helped you help your business.

Richard 

Let me start at the beginning of the Coyote story. We’ve been business partners since the very beginning Oli’s career. So Oli came to work with me at Halverton 2006, which is 15 years very nearly, when we left GPT Hampton – when I was fired from GPT Halverton – it was decided all of us that we’d set up M7. Oli and I sat down with the rest of the team to try and work out what we could get technology to do for us, so that we could differentiate our new business from the market and Coyote was the result of that. But you need to understand that after I got fired from GPT and the team decided to reform as M7, we thought that we probably ought to take the lessons that were meted out by the global financial crisis and pay attention to and learn from them. And Coyote was, in fact, the probably key takeaway was that managing your data is as important as managing your assets and when we started M7 we were looking for a software package that allowed us to run acquisition successfully, allowed us to manage data, better to have a stronger information management structure, and it didn’t exist. So we sat down, so primarily John Croft, my brother, and lead by Oli, we sat down to look at what we could create and look at data and look at ways we could use software and we could use technology to improve our real estate offer. And Coyote was born out of that.

Oli

I was just going to say it’s fair to say isn’t it though, when we were looking at not only that we couldn’t find a software platform to do what we needed, actually a lot of the software providers out there, they didn’t really understand the business like ours. And that also really added to added to the challenge.

Richard 

That’s totally true and actually, if you consider Coyotes claim, which is property software written by property people is true. Oli being in the property business since his formation as a business person, Oli has been around property, understands properties, even though he has the ability to code. it’s important to understand that he understands we’re real estate, and the team that advised him on the creation of Coyote were real estate people. So we told him what we needed software to do, and a lot of PropTech is designed by people who are quite tech orientated and trying to solve problems they think that will estate industry has, rather than this was done from the other way around. A bunch of I would think reliable real estate asset managers telling Oli what the problems were we had, Oli and his team then coding around the problems we had and how we were going to solve them. So this was built from the bottom up, and I think makes it a very different proposition to almost any other PropTech, particularly PropTech solution – I hate the expression – that is out there at the moment trying to do similar things to Coyote

Oli

Basically it’s given us a real unique selling point in the market. And to be honest, that leads us into why we decided to ultimately build it out, which is that we wanted to just keep that going. And we had over the course of the eight years that we’ve developed it as an internal tool, we had just constantly added new features and new functionality, like every single time we experienced pain points and frustrations within the M7 business. But then we realised, actually, we created what we created with the input of just ourselves, but what could we do with it if we went out to the entire industry, and we went out to the best in class in every single country in every single sector, and we can keep Creating this tool created by property people. I think it’s fair to say thank you that was a big rationale for us wanting to do that.

Louisa 

I was going to say so for you Crofty, is a particular feature of say the Coyote product which has benefited M7 most?

Richard 

No, because it’s the package. Two things that I will tell you about Coyote, three things actually, that somebody might position benefits from and obviously the platform benefits. I’ve been able to sit at my desk on Saturday and Sunday afternoons and I can see every deal that has been worked on across the group, the group’s big now. So there is nothing, there’s no piece of information that isn’t available to me almost instantaneously. So that’s been a big thing. I don’t think there’s a single piece of software where public property company, in this case alternative income group where we recently won the mandate to become a manager for the board references Coyote as a key reason for them transferring the mandate to us. I mean that’s just something that happened, we’re very successful asset manager, but one of the things that they highlight as being one of the reasons for appointing us, is that our asset management, our data management is just so everybody else’s and that is because of Coyote.

Louisa 

And Oli for you having M7 as a client, you now have 40 clients globally. Has winning a few big clients, do you start to see more of an uptake, do you have to more prove more case studies, how’s that been for you?

Oli

Yeah, I think there’s no doubt about it that the clients, having M7 was a phenomenal, we were so lucky to have M7 to start with because so many people knew M7 and so went “well actually, if this is good for M7 and this has powered their growth then it’s definitely something that we should look at”. But definitely like the more clients that we’ve then got be it in different sectors or in different countries, it then just gets easier and easier to win different clients. And so we’ve definitely seen like an acceleration in the adoption of the Coyote platform since we officially launched it to the market in April 2018.

Richard 

Along with that, we decided in 2017 to provide it to the marketplace. For a long time, I was not in favour of creating Coyote as a sellable business because it gave me such an unfair advantage, it was like going into battle with a tank. And if you look at a company that didn’t exist in 2009, there was no doubt I would say this, but I think there is a lot of evidence that M7 has been the most successful of the 2009 class, and a lot of that was down to Coyote which lead our adoption of technology. So in 2017, it was only when I thought that other people were beginning to understand how important data management data integrity is. that I thought, well, if we don’t actually allow people to have the software, somebody would probably go and design it anyway like we’re seeing with companies like VTS, PropTech is being more widely established. So there’s only 2017 that I agreed that Oli’s plan of making this a publicly available thing was a good idea. Because for a long time, I wanted to keep it to myself!

Oli

Yeah, it’s fair to say I think we’ve never really talked about it before, but the very first iteration we used to call it 7M software, I think and the very deck which was asked considering selling Coyote to an Australian company. I think the deck dates back to 2011, that’s how early we started thinking about it. And then we over the years we were just like, shall we – no, shall we – no, and then yeah 2017 it finally happened.

Richard 

But it is from M M7s perspective, spinning it out was a big decision, it wasn’t so much about money it was about, the product, our are USP, our special sauce, I mean, it’s a bit like Colonel Sanders making his 11 herbs and spices available to the general public. That’s what I thought about it. I don’t think he would. But we did.

Louisa 

Well, it’s given you a massive set of technical advantage and that you’ve got to share that with others

Richard 

We got a head start with our data, and so that was important, that was the other reason. I reckon we’ve got eight years ahead of the of the market with our knowledge that we’ve built through Coyote. So making the weapon available was fine, because we’d already taken so much benefit from it.

Oli

And I think that actually leads quite nicely to what I was just saying around having more clients helps win new clients. But actually, the market was also rapidly changing so much as it says, eight years ago in 2009, really nobody was doing anything like it. And even when we span out and started having the kind of early stage conversations in late 2017, the appetite was fundamentally different. People were starting to, the whole PropTech thing was really was starting to have a lot more conversations. But it wasn’t widespread. they were the types of conversations that if you had a chat to someone about, “So what do you do? Oh prop tech? Oh, okay” and it certainly wouldn’t be like, “Oh, brilliant, let’s have a conversation” and then gradually over 18/19 we just saw this huge shift from people dipping their toe into the water and originally starting to want to talk about how they’re doing prop tech and then people trying stuff out. We’re just now entering into the period where I think people were really starting to commit to major projects of digital transformation and adopting platforms like Coyote, obviously COVID maybe a little bit slightly changed the pattern of that. But that’s where we were.

Louisa 

And the more the uptake you’ve seen over here in the UK and Europe, you’ve obviously recently launched in the US, which is awesome and congratulations again for that. Would you say the US real estate industry is more open to technology or slightly advanced? Or is it still the same challenges for this technology business trying to win over landlords and real estate funds on that side of the pond?

Oli 

Yeah, it’s definitely similar challenges. I think, where it’s slightly easier in the US is that there are a lot more software as a service platforms out there selling services to the real estate industry. Bizarrely you might say, well surely it’s easier without competition. But actually, that just isn’t the case. Us having competition, even tangential competition in the US means that the market is being educated. and if people know that there is a category of product out there, then all of us working together are, kind of educating that market. And then people can then come and look at us. And then they can say, Well, how do you compare to platform X or Y, and then we’re just competing on future set or budget, on team fit or whatever it might be. Whereas when we started this in the UK, we were competing against, like, literally, day books and people filing stuff in Outlook, at which point, , we were create, we were trying to persuade people, they needed to spend money. So in the US, people have already got the mindset that the systems are out there. And there is, obviously VTS have made a massive difference in terms of the way that the industry thinks about SAS based technology. And so it sounds like it’s utterly cliched, but in the US, we’re finding that people are much more open, they’re much more willing to have the conversation. And then they’ll tell you if they’re not interested. And they’ll tell you why they’re not interested. And then we can move on, which is actually a lot easier than in the UK, where we are so polite, and no one likes to say no, like, “Oh, yeah, the timings not quite right – can we just get back to you in a couple, we just need to do one more deal?” And, no one wants to say no to you. So it just is really interesting that the nuances of selling into the into the different markets.

Louisa 

you mention COVID which a lot a lot of people are talking about, for both of you do you see many opportunities come out of COVID and where do you see them from a real estate investment standpoint, and a PropTech standpoint? Crofty do you want to go ahead?

Richard 

I spend almost every day on 3/4 calls, trying to work out what the opportunity is. So I mean, if you imagine real estate, as a long line, a linear asset class, at one end you’ve got shopping centres and hospitality, which has been brutalised by COVID. I mean, just horrible right now, just no business, no income. And on the other end, you’ve got things like data centres and logistics, which has performed phenomenally. So there’s no distress over there, if anything its grown. across the line, you’ve got different sectors, from retail, warehousing, to student housing, to regional offices, to city centre offices, and they’re all performing slightly differently. So we’re trying to work out where there’s opportunity, and at one point we were thinking launching a massive recovery fund. The truth is, I’m not sure there’s a lot to recover. You’ve seen what’s happened in the stock markets and you’ve seen what’s happened to valuations, which is pretty limited outside of the disaster cases or shopping centres, good hospitality. So I think that our view is we kind of keep doing what we’re doing, which is investing in the sectors that we think of long term. We’ve been nervous about mega cities., so include London in that, for quite a long time because of affordability, and I think that the COVID event, the Coronavirus event has speeded up a change that I think was coming. They used to say that there were three rules to investing in real estate, which was location, location, location, I think that’s changing, and is becoming space, space and connectivity. Very important that you’ve got good connectivity or fibre basically, because none of this is available if you don’t have good internet. So I think people realise about the value of space. And what I mean by that is people want to be able to spread out more, people want to be able to feel that they’re not hemmed in and I think people don’t want to commute anymore. 19.00? So where we are at the moment is that we think the opportunity is going to be in the regions in the UK. And across Europe. We think people don’t want to not use offices – terrible use of English, triple negative – for people to want offices. They just want a different offer to what they had before. I think what people don’t want to do is commute anymore. And it’s interesting to see if that comes back. But we remain nervous London, we remain positive in the regions and we think things like retail warehouse, which is warehousing that has a retail consent rather than shopping centre. We think that is probably well positioned to benefit over the next 6/12/18/24 months. So our primary focus is on regional office, industrial obviously retail warehousing.

Louisa 

Okay, well that’s quite that’s quite a few of opportunities to look forward to whenever you listen or read a blog or something it’s usually quite negative so it’s good to hear.

Richard 

I mean, I agree. The economy’s going to spend two years dealing with the aftershocks. I mean, so the earthquakes happen but the aftershocks are still to come however, the amount of fiscal stimulus that has been bazooka-ed at the global economy by every central bank, and by governments, and it’s going to be followed up with massive infrastructure spend and quantitative easing, it seems pretty difficult, or seems very unlikely to me that asset earnings are going to fall. I wrote an article about it,  it’s called “The end of Smith” and it is about the strange result or strange outcome we’re going to have from mass fiscal stimulus, we’re going to have fairly substantial asset inflation, once the real economy is going to struggle. You’ve seen that over the course of the last 3 months with the recovery in the stock. market. So it’s not that I’m positive pre se, it’s just that the amount of money that is floating around the need for income, is going to drive quite a lot of capital towards certain types of real estate.

Louisa

Oli from a technology standpoint, where do you see the opportunities for Coyote, you mentioned there’s definitely some obstacles already but there’s been more of a take up. How do you think this is going to affect uptake in the real estate world of new technologies?

Oli

I think long term, it’s going to cause a massive acceleration in adoption across the board, certainly of technologies that are helping people understand, helping people report to their investors, helping people analyse and understand risk , a huge amount of people have been just caught with their trousers down whereby,  suddenly this scenario is come about and then banks and investors are expecting an awful lot from them in terms of reporting that they just cannot provide. And so we saw pretty early on the whole wave of people coming to us sometimes that we’ve spoken to before that said, the timings the timings not right, coming and saying, okay, we now need to go ahead. And that’s not to say that this has been an easy period for us as a software provider, or for any others because inevitably along with the increased demand has come pressure on people’s budgets, and things like that, but we’re definitely seeing more interest, more inbound leads, and we’re building more pipeline into Q3 than we’ve ever seen before. Then in the kind of building technologies around all the things that are going to be required to continue to make space work well and helping people feel comfortable around, be it fresh and clean air, be it touch touchless entry and the way that you operating lifts, there’s obviously all kinds of things there that are going to just go through the roof, as buildings need to entirely reinvented the way they work.

Louisa 

Have you seen clients asking for a slightly different product? Or is there anything which you’ve done to develop your product over the past like few months, or what you maybe had planned for the future?

Oli

Yeah, we definitely ended up shifting our roadmap a little bit over the last couple of months, purely based on the market shifting, and instead of what we might have been optimizing for was for clients that were going and buying lots of lots and then suddenly they are not buying so much, and the pressure shifts on to really understanding and effectively managing what they have. So we spent a lot of time chatting to our clients and understanding really what they needed. And then the nice thing about being of a small size is that we can still be very agile. So we have a tech team that release new versions of Coyote every two weeks, and so when our clients are saying to us look, we really need to be able to ask questions of our portfolio around analysing what our exposure is to certain tenants, and what our exposure is to sectors and countries and looking at how that relates to, , people’s arrears. And so we were able to build whole new swathes of functionality and kind of get that in people’s hands within three or four weeks, which has been massively well received. And the other thing we’ve had to do is just, frankly, is just listen and be supportive to our clients and what they need. And like in every industry, some of our clients are, , are hurting and they’ve come to us and  been saying, okay, we might need , a bit of a concession or whether that be going to monthly paying for a little bit or whatever it is, and we’ve just been happy to just go along and do that.

Louisa 

Four weeks its quite a quick turnaround. Your team must be working exceptionally hard. It’s been

Oli

Do you know what, the other amazing thing is this massive shift to being a fully remote business. And actually the team on the whole have just been loving it or haven’t been loving the environment, But what they’ve been what they’ve really adapted well to is having the freedom to work kind of where they want, when they want, to spend more time with their family to not have to just commute at eight and six, and,we’ve put out surveys and I know Crofty’s done the same, and our employees attitude to how they want to work going forwards is just totally different than we could ever have imagined.

Richard 

You’ve been surprised by how many who have come back to the office as you’ve begun to open it?

Oli

Yes, absolutely. I think what we’ll see is, it’s just a change in the office, isn’t it? We have almost no one wants to come and work from the office, to use it as a desk in a screen with very small exceptions of people that maybe don’t have the space to be able to do it at work or things like that, what people do want to do is they want to come back to the office to collaborate with their colleagues to kind of have a meeting two meters away from someone against the table, or whatever it is. And so, whereas we thought we might see a small percentage of people coming back on a day to day basis, actually, what our team wants to do is they want to come back as whole teams, and then find a way to use the office to be able to come in team by team in a safe way.

Louisa 

I’m looking forward to getting my team back, it’s difficult to predict what’s going to happen in the future. I’m quietly optimistic about it. If we’re looking at the future Crofty, you’re clearly committed to PropTech, are there any future trends you’re seeing or anything you’re specifically looking at currently?

Richard 

We’ve invested in a Proda,  we’ve invested in a funding platform in Australasia called Jasper, in fact we’ve invested in probably eight or nine PropTech businesses over the last couple of years. Our view is that we think technology is going to change real estate investing. I’m not clever enough to know exactly how, Oli probably is, but I’m not. But what I do know is that the industry is changing. The industry is becoming more accepting of technology, and the technology can improve the way that we do things. People will now understand that real estate is a fundamental part of everybody’s lives from the house we live in, pretty much every place that you visit, the built environment has a role to play. And so technology can change the way that buildings operate. It can change the way you can asset manage, it can change the efficiency of the pool. And so, , we are looking or accepting that over the next 20 years technology is going to be a major, major part of the universe, whether it’s old fashioned estate investors like me, I’m 50, whether we like it or not I’m afraid that is the upgrade and it’s a very exciting one. And we would be remiss as an investor not to recognize that, and I think we recognised it early 10 years ago, but technology is improving every day, and not to embrace it or not to try and understand it and master it to help your own investment making decisions. to improve the efficiency of your buildings, your asset management is crazy. So what we’ve decided to do is double down on that, and go “Okay, not only are we going to adopt it ourselves as a user, we are also going to help get it off the ground by being an investor”

Louisa 

Well lucky for everyone he invested with, we work with some other VCs, and I’ve spoken some their cohort and it’s just nice. I think it’s almost like soft launch, when you have the backing of someone who understands real estate, understands of the investment and the landscape and always helps in pitching their business as well.  Whether it’s traditional investment or VC investment, or Oli you  bringing on different clients in the US and across to Europe, COVID obviously slowed down some deals, but do you think overall, in the long term, it’s going to have a positive effect?  what timeframe’s do you think we’re looking at? Crofty do you want a kickstart?

Richard 

I will try and kick start. I mean, we’ve seen corporate activity pick up a lot in the last three or four weeks, and whether that’s just people just need it to get going again, whether it’s because lock down is ending, a mixture of the two, because I still pick up a concern about where long lockdown ending will lead. So the reality is, we’re all operating slightly blind at the moment as the speed picks up, but I would have thought that everything that has happened will underline the need for technology more , there’s a reason why the NASDAQ 100 is trading profits for the year and is up even on its pre-COVID environment, it’s because people believe that it is speeding up the adoption of technology. The way that we did things in the old days, well the pre-Covid days probably needs to be updated. So I would have thought that what’s happened is going to speed up at least in real estate. It’s going to speed up the adoption of technology and speed up the adoption of platforms like Coyote.

Louisa 

Sounds like we’re all in the right space and long may this adoption continue. Oli is there anything you’d like to add to that?

Oli

No I mean, listen, trying to predict the future at the moment is virtually impossible. Frankly, I don’t know when this is coming out, probably not for not for a good few weeks, and who knows how the world will have changed by then? I definitely think that we are definitely seeing cautious optimism across everyone that we’re speaking to, but there is this just backing as Richard said, of fear, where people are just like, let’s just see what happens over the next few weeks, see what the quarter looks like. And I hope if we can just get through this without seeing a kind of big second wave, then people’s confidence will begin to return, and I think that’s when the adoption will truly start to accelerate.

Louisa 

Yes, I agree with you. I’m conscious of time and this is  bringing us to the end of the show, before we go is there any anything that either of you would like to share with the audience and the listeners who would love to be able to hear, more learn more about M7 and also Coyote. What would be the best way for them to connect with you or the business>

Richard 

Visit our website, all of our contact details are on there, or email me [email protected]  We’re always delighted to hear from anybody who wants to talk to us about anything, you never know from those conversations extraordinary things can happen.

Oli

Richard is my mentor obviously and Richard has always says “take any meeting” just in case!

Richard 

You never know who you’re going to talk to, or you’re going to meet, and from that great relationships start. We would turn up to the opening of an envelope! It’s through networking and that’s still an old-fashioned thing, but it’s going to take a while for technology to travel through the dark ages, but that it is from networking that you make relationships and through work relationships that you build businesses in my opinion.

Louisa 

Oli how would you like the audience to connect with you?

Oli

So we would obviously to show anybody Coyote and we’re about to release Coyote X, which is our latest version, now, what did we just say 11 years in the making. So if you want to see that, go to our website, www.coyotesoftware.co.uk Or if you’re in the US, www.coyotesoftware.io If you want to connect with me and just chat generally about PropTech and tech in general, then you can find me on LinkedIn and on Twitter @coyoteoli