The Innovators: Apprise
In this series, Bisnow highlights people and companies pushing the commercial real estate industry forward in myriad ways. Click here to read Q&As with all the innovators Bisnow has interviewed so far.
For decades, the appraisal industry — an important cog in the commercial real estate ecosystem — has operated with a largely manual workflow, with appraisers using Excel spreadsheets and Word documents to aggregate property information.
The need for speed became even more pronounced two months after the company launched, as the coronavirus pandemic disrupted the commercial real estate industry and injected uncertainty into assets that had long been stable. Apprise Chief Operating Officer Nicole Urquhart-Bradley, who leads the company alongside Managing Director Meghan Czechowski, said this disruption gave the company the ability to stand out in the market.
"Any time there's an event, whether it's an economic event or this unprecedented pandemic, it creates a lot of uncertainty in the market," Urquhart-Bradley said. "We've been able to take real-time data and technology and create a product for answers for clients that some of our competitors cannot do, most of our competitors cannot do."
Apprise focuses on multifamily appraisals by leveraging the market data from Bethesda-based Walker & Dunlop, which became the nation's largest multifamily lender earlier this month, with the machine learning technology from GeoPhy. The company also utilizes technology from Enodo, a multifamily underwriting proptech company that Walker & Dunlop acquired in 2019.
The company has grown quickly in the 16 months since its launch. The company has expanded to about 60 people, including a new managing director announced Friday who will lead Apprise's West Coast office, making it a nationwide enterprise. Urquhart-Bradley said the company's growth shows how it is successfully transforming the appraisal business.
"We’ve grown faster than we ever thought we would," she said. "It still blows us away. People are starting to call us and say, ‘Hey I’m interested in joining you. Tell me more about Apprise.’ Whereas when I first started we were still having to convince people. And I think word is out there that we are doing something special, we are doing something different, and we are going to change the way the industry works. We’re that catalyst for change."
In addition to the pandemic, last year brought a renewed movement for racial justice in the United States, and the appraisal industry has had to reckon with its own past. Studies have long found that houses in predominantly Black neighborhoods have been appraised at lower values than their counterparts in majority White neighborhoods, and this disparity has only worsened.
Urquhart-Bradley said Apprise's data-driven approach can help eliminate the biases that lead to this racial disparity.
"It may be easy for some to go into a neighborhood and say, ‘Ouch, I wouldn’t live here,’ or just think negatively about an area," she said. "And when you have the data and when you’re drilling it down to an apartment building and where people are working, and where they’re employed and what is their credit rating, it takes away that focus on the color aspect, the minority aspect, and you’re really looking at what is pertinent. "
Apprise has made an outdated process more efficient and more equitable, and it helped clients navigate the economic disruption caused by the pandemic, and for those efforts, it is a Bisnow Innovator.
This interview has been edited and condensed for clarity.
Bisnow: I want to start with a general question: How is Apprise going about improving the appraisal process? What are you doing to make it easier, more efficient, more accurate, since you launched last year?
Czechowski: As a producer myself for the better part of the last 16 years, it has been a largely unchanged industry for going on a couple of decades. We’re leveraging various industry-standard resources that are scattered across different log-ins. Appraisers themselves are required to know all the available market insights and comparables that are out there, and that’s a really large task when there's CoStar, RCA, REIS, all of this disparate data, and we have to confirm that and get into a database. And then once you got it in there, the legacy process, the most efficient process we’ve had over the last decade is a database in Excel and Word. The problem is you get maybe 50% of the comp information into the database, and then you allow the appraiser into the Excel and Word, and that’s highly manipulable. You come up with inconsistent analysis or ways to lay out the analysis for the client.
They want a standardized product, they want to know that for multifamily you’re going to address all the risk assessments, the demand drivers, why a resident wants to live in that particular apartment building, why an investor would then want to invest and create that return on that particular apartment building. But the way an appraiser can get there if you’re sticking with Excel and Word is highly manipulable, and all those data points are in these files that ultimately get into a flat PDF and sit amongst folders in a national network.
So there was a real opportunity for a GeoPhy and a Walker & Dunlop to come together, create an Apprise concept [and] work through a web-based interface, which every single data point an appraiser puts into our property records database and appraisal workflow is recorded and trended upon into the future, so you can see where this flywheel can start to work. Data aggregation is really key. And the way to do that is to ensure that every data point an appraiser needs is recorded to be used the next time.
Urquhart-Bradley: If I could add to that, I’ve been in this business more than 30 years, and as Meghan said, very little has changed. The data resources have changed, but the way we put together an appraisal report hasn’t changed. The exciting thing, the reason why I came to Apprise, is they were taking data, data that hadn’t been harnessed before, a wealth of data from the Walker & Dunlop side of the house, taking that data and aggregating it, and using technology, cutting-edge technology to allow the appraiser to spend more time on the analysis and less time on the busywork.
Bisnow: That’s interesting. What types of technology are you using, and what ways are you using technology to improve this process?
Czechowski: If you have 500 units, you don’t want to list all 500 units, you want to aggregate all the one-bedrooms and two-bedrooms together so that you can understand the story that the one-bedroom rents is telling you. Right now, that’s done manually. We have a proptech group called Enodo that’s owned by Walker & Dunlop that parses rent rolls, and same with operating statements, which are very important in our process. There’s a couple technical areas where we need to analyze pages and pages of operating data, wherein the legacy model we would have to create a summary-type table to show how that is going. But by using Enodo, it leverages machine learning and artificial intelligence through their rent roll and P&L operating system parser, we can just drag and drop and inside of seconds create these summary tables that are very accurate. And it automatically categorizes it in a meaningful way that our clients are looking for. It creates a level of consistency. It removes the propensity to errors that occur when you’re manually assembling this information, hard typing using analysts.
A lot of the errors that are commonly made through the process of analyzing these large sums of data are eradicated by the AI and machine learning. The other way that we’re really leveraging our process and creating more efficiency is all those different industry data resources that we use, we have a lot of direct integration into our property records database. So instead of having to log into three different resources to find out what the number of units are or amenities are, it automatically flows through into our property records database so the appraiser can go in and say ‘OK, Comp A has this level of amenities, Comp B has this level of amenities.' That compares to my subject property this way, and I can create that narrative and tell that story without first having to do all the research because it’s already there.
Urquhart-Bradley: The one thing that is unique about Apprise is we have this 50-50 joint venture between Walker & Dunlop and GeoPhy. Walker & Dunlop is the leader in multifamily lending and has been for years. GeoPhy is a data science and technology company. So whereas other firms are trying to make great leaps from a technology standpoint, they don’t necessarily have a real technology arm doing that. We have the best of both worlds. We have all of the data and knowledge from Walker & Dunlop that we have access to, and then we have GeoPhy, the technology and data science arm that is helping us to harness all of that data in conjunction with machine learnings and the APIs that Meghan was talking about, so we are getting valuable insights to our clients faster.
One of the things Meghan and I talk about all the time is the fact that in our old life — we’ve worked together 15-plus years — but in our old life a client would call and say, ‘Tell me what comps in the market, tell me what’s happening in the market in terms of expenses,’ and we’d have to dig through old appraisal reports to get that for them. And now we have that at our fingertips. So we're not spending the time digging for the data, we’re actually spending the time analyzing the data for clients. It has gone over so well. The response has been unbelievable in terms of their appreciation for what we’re able to give them in real time, because they’re making decisions often in hours, and that data is just crucial for what they’re trying to do.
Czechowski: We’re able to provide real market insights to our clients inside of hours as opposed to, in the old model, it would take days.
Bisnow: It sounds like in addition to making it more efficient, you’re also making it more accurate. Have you found that with all of this data and technology that you’ve seen the past process led to more mistakes, and you’re now more accurate?
Czechowski: Accuracy is an interesting term. I think credibility is a better term. Appraisers form an opinion and then we support it with a lot of contextual information, whether it’s comps or local information, and all of that has to go into our end product. But that is information that our clients need at the very beginning. Whether they’re looking to refinance, the lender might need that, or our client could be a buyer, and they need to understand how to underwrite a potential acquisition. They’re moving fast. We had a really interesting stat that from 2014 to 2018, the number of multifamily transactions increased by 74%, but the number of appraisers decreased by 10%. So appraisers are where all of that valuable information starts, and you’re automatically working in an upside-down model in terms of getting the information you need quicker, so the process had to change in terms of how we’re able to deliver those insights to our clients.
Bisnow: You launched this platform right at the beginning of the pandemic. So I’m interested what Covid has meant for the appraisal space. Has it created more volatility in not knowing the level of income or where things are going in the future? How has Apprise responded to the pandemic?
Urquhart-Bradley: You said it right, we clearly launched at the beginning of the pandemic. And for most companies, they slowed down significantly. Some even came to a screeching halt saying, 'Let's see what this does to our business before we grow.' And any time there’s an event, whether it’s an economic event or this unprecedented pandemic, it creates a lot of uncertainty in the market. What we’ve been able to do, we’ve been able to take real-time data and technology and create a product for answers for clients that some of our competitors cannot do, most of our competitors cannot do.
Czechowski: We have things like the GeoPhy market ratings that we can offer, really pinpoint to get on a more granular basis the census information that goes into that, the amenities information for a particular area. Also, we have Covid ratings we’re working with, that is a unique product to Apprise, and we can really understand how Covid has impacted a particular market, in terms of how the employment sector is made up. Is it tied a lot to retail services? Is it hospitality? Is it the travel industry? Areas that had real impact from the pandemic.
So these are the types of tools in our toolbox that we have given our partnership with GeoPhy. And on top of that, in times of market uncertainties, the best thing that you can have is to understand what the market is doing in that particular moment, and the only way to do that is to have most the comprehensive dataset available. Our focus on data aggregation and getting it into our appraisers' hands quicker allows our clients to have that information quicker as well.
The clients that we’ve brought on board over the last year have been a good indicator that we’re on the right track. And the response to the market insights in hours instead of days has also been a good indicator. But also our recruiting efforts over the past year. As Nicole mentioned, some of the other platforms had to just stop. They didn’t hire during that time. Apprise increased our employee base by 7x over the past year. And I think that plays well into the story of the direction we're taking the industry, the process enhancement we can show the users, which are the appraisers themselves and local market experts, and also our clients. Their clients agree that there is a need for change and we’ve listened, and we will continue to listen and enact those changes and move with the market. Digital innovation has taken us so far in commercial real estate, but we’re set up to go even further and continue to lead the market.
Bisnow: So you focus on multifamily, which has been one of the more stable asset classes. How has the appraisal process been going during the pandemic for multifamily compared to more volatile sectors like hotel or retail or office? Do you think it’s been easier to get more credible and reliable appraisals for multifamily than some of those other property types?
Czechowski: Yes, without a doubt. I mean, housing is a basic need. Everyone needs it, and on a national level the trend has been toward rental as opposed to legacy homeownership. So we’re very pleased to be focusing on multifamily valuations as opposed to hospitality over the last year, because there’s a lot of question marks and pause and if it doesn’t come back you have to make a forecast. But for multifamily, there was a pause maybe for six weeks where folks pulled their assets off the market and chose to hold, to wait and see how the lockdown played out, what did rent collections look like.
So one thing we did here at Apprise ... we took a look and tried to figure out what could the potential impacts be, here’s what to look out for. But we really took it market by market, asset by asset. Because some markets performed swimmingly, there were no collection issues, occupancy increased in some areas, and collections were fine. But there were others where there was a short-term blip, where folks lost their jobs, and they had a hard time backfilling those units. But because we have the most comprehensive dataset, we were able to see on that asset that was in trouble, here’s what it looks like in the coming few months to get back to normal and how that impacted value. So we could really consult with our clients in terms of what impact has been and what the prediction would be to get through the next few months.
Bisnow: On that point, we’ve seen data on occupancy and rent collections that shows that downtown urban apartments have been struggling more than the lower-density suburban properties. Have you seen that trend play out in valuations? Have there been dips in valuations for urban properties relative to suburban?
Czechowski: Yes, and that’s the most evident in the transaction volume. So you see a lot of sales in the suburban garden with the larger unit types, more amenities that are open, in markets where it didn’t shut down. And in the urban core, there are a lot of investors that are just holding right now. But I will say one of the other things that occurred during the pandemic is not a lot of construction starts. So what decrease we’ve had in occupancy and a trend of concessions in an attempt to increase occupancy, so effective rents have come down, I'm not making a prediction, but logically you’d say that if there’s not going to be new inventory because there has been no new construction starts over the last 12 months, that in another year as some of the reasons why people aren’t choosing the urban core right now — their cafés aren’t open, their restaurants aren’t at full capacity — so as we start to fall out from that and all that urban walkability, all that good stuff, the reasons why people choose to live in the urban core, you’re going to see huge rent pops. So I think we’re looking at a short-term blip on the urban properties, but they’ve absolutely been impacted, and their values have been impacted.
Bisnow: I have a bigger picture question I want to touch on. There’s been a lot of talk over the last year about racial inequalities in every industry including real estate, and there have been studies in the past that have found racial biases in the appraisal space, in terms of houses in majority Black neighborhoods being appraised at lower values than White neighborhoods. Do you see fundamental issues with the appraisal system that need to be corrected?
Urquhart-Bradley: It’s interesting, and you’re right there’s been a lot of press around racial inequalities, particularly on the single-family side, and it’s opened up a lot of our eyes to potential biases that can occur. I think you see less of that, far less of that, on the commercial side, because we’re not looking at an individual home in a neighborhood that may be all minority where somebody’s coming in and doesn’t understand the dynamics of the neighborhood. We’re looking at larger assets in larger metropolitan areas or suburban areas that are more diverse. So I think that phenomenon is definitely a factor on the residential side, less so on the multifamily side, but it’s something that is real and I think as an industry and as a nation, our eyes are opening to that reality. So I have hope for the first time in a long time that we as a nation are heading in the right direction.
Bisnow: That’s interesting, I hadn’t thought about the difference with single-family versus multifamily. But I’m curious, with your technology and data-driven approach, are there ways that Apprise can help remove biases from this process?
Urquhart-Bradley: Absolutely. I will say absolutely, because it may be easy for some to go into a neighborhood and say, ‘Ouch, I wouldn’t live here,’ or just think negatively about an area. And when you have the data and when you’re drilling it down to an apartment building and where people are working, and where they’re employed and what is their credit rating, it takes away that focus on the color aspect, the minority aspect, and you’re really looking at what is pertinent. Their employment status, their credit rating, we can look at a building and see whether their credit ratings have gone down or gone up. We can look on a building basis as to what do collections losses mean. So that’s really helpful to take away the inherent biases that some may have. Data will cure all.
Czechowski: We can see the trending as well on what GeoPhy has, the neighborhood ratings I referred to earlier, and you can start to see where some of the opportunities lie in terms of how a particular neighborhood is changing quarter-over-quarter and really see that’s ripe for private investment. An area you would have never thought of in the past is on the verge of seeing an uptick, so we can see and start to predict that as we continue to analyze the statistics that are out there for us.
Bisnow: I want to follow up on one point from earlier. You said you’ve grown the employee base by seven times. What was the initial number that you multiplied by seven, and what has enabled you to expand that quickly?
Urquhart-Bradley: Meghan was our eighth employee in January 2020, and I was our 16th employee in July of 2020. And if you look now, the number of people who are going to start by the end of May, we’re at about 60 employees.
It’s twofold. Our appeal is that we have the data. That’s what is king for appraisers. If you have to go scrounging around and looking for data in different places and don’t have a platform where you can harness that data, and easily pull out the data to help you make the right valuation decisions, it’s going to be a little bit harder.
The other thing is that the industry realizes that there hasn’t been a lot of change, and that in order for us to continue to be competitive as an industry as a whole, something has to give. We have to create those greater efficiencies within our platforms. Other firms are trying to do it. We have the benefit of both, experience and excellence in the multifamily side and the data science and technology side. So they’re far behind what we are.
As we're talking to people, they want to see something different, they’re frustrated with the way things have been done and the antiquated practices. And they’re also frustrated because there are far more appraisals being ordered, not just multifamily, across all asset classes, and there are far fewer appraisers. So they’re working longer, they’re working nights and weekends, they’re not seeing families.
The goal of our platform — and we’re not 100% there yet, we’re a startup — is to create efficiencies for you, so can have that balance in life and you can spend time with your family and you’re not constantly on that production treadmill. And that’s an appeal. We’ve grown faster than we ever thought we would. It still blows us away. People are starting to call us and say, ‘Hey, I’m interested in joining you. Tell me more about Apprise.’ Whereas when I first started we were still having to convince people. And I think word is out there that we are doing something special, we are doing something different, and we are going to change the way the industry works. We’re that catalyst for change.
Czechowski: We’re really leaning into that change and embracing and harnessing the technology, the digital innovation that is out there for us. And you can see we’ve already had success in doing that. Our intentions are there, we’ve built something that already harnesses some of the technology that’s out there. We’ve seen it through client growth as well as our recruiting efforts. That need for change is there, and folks are embracing it and are acknowledging that we are the market leader in harnessing that digital innovation in the appraisal space.