Provides overview of real estate industry software market

1. FrontLine Partners Viewpoint Series
Real Estate Software Market Overview
 Market Sizing and Segmentation
 Value Chain / Heat Maps
 Trends by Sector
 Competitor Positioning – Core vs. Non-Core
 Emerging Opportunity in Workflow and Collaboration
www.frontlinepartners.net
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2. Real Estate Market Sizing
The global real estate market total asset value of $14.0 trillion dollars generates
roughly $2.6 trillion per annum in real estate revenue
Global Real Estate Asset Value
(Total Asset Value), $TR The market asset value
generates roughly 18% in per annum
global real estate spend (revenues),
$37.9 which in 2006 is $2.6 TR
$34.3
$31.1
11.29% CAGR $28.2
$25.1
$23.0
$20.8
$18.8
$17.0
$15.4
$14.0
$11.8
$10.0
$8.4
$7.1
$6.0
$5.1
$4.3
$3.6
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3. Real Estate Market Sizing
North America and Europe represent 75 percent of the market expenditure with
strong spend in homebuilding, owner/operator, capital markets, and development
Global Distribution
of Real Estate Expenditure
Market Expenditure (as a percent)
by Geographic Region
North America
38%
Europe
37%
Latin America
3%
Market Expenditure (as a percent)
by Geographic Region and Market Segment
Asia/Pacific
22%
North America Europe Asia/Pacific Latin America
Homebuilding 35% 11% 10% 23%
Owner/Operator 23% 15% 15% 15%
Capital Markets 27% 40% 30% 5%
Corporate 2% 10% 5% 7%
Development/Construction 8% 20% 38% 48%
Property Services 5% 4% 2% 2%
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4. Real Estate Market Sizing
An estimated $16.7 billion was spent on software and services in the real estate
market with half of that spend occurring in the U.S.
Global Real Estate Technology Expenditure
(2006 Estimate)
Real Estate Technology Spend
as a Percentage of Revenue Real Estate US Technology Spend
as a Percentage of Revenue
North America 0.8%
Europe 0.6% Market 2006 Technology Expenditure
Asia/Pacific 0.5% Segment Expenditure ($,BN) Propensity
Latin America 0.2%
Capital Leading
$2.24
Markets Buyer
Real Estate Technology Spend Owner Leading
$1.47
By Geographic Region Operator Buyer
North America
50%
On-time
Corporate $2.59
Buyer
Property On-time
$0.12
Services Buyer
Home Lagging
$0.51
Builder Buyer
Latin America Europe
1% 35%
Asia/Pacific Development/ Lagging
14% $0.42
Construction Buyer
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5. Real Estate Market Segmentation
Six key market segments define the real estate industry
Real Estate Market Segmentation
Markets
Home Development/ Owner/ Property Capital Corporate
Building Construction Operators Services Markets Real Estate
Homebuilders Master Plan Office Property Opportunity Funds Retail Users
Communities Management
Multi-Family Retail Lenders / Banks Large Block
Housing Land Facility
Development Industrial Management I-Banks Industrial
Senior Housing
Commercial Hospitality Energy Insurance Health
Student Housing Construction Healthcare Telco Pension Funds Higher Education
Military Housing Multi-Family Mixed Use Brokerage Government
Construction
Land Owners
Specialty
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6. Real Estate Market Value Chain
Real estate market players have an aggregate set of valued functions that define
their capabilities
Aggregate Real Estate
Market Value Chain
Tenant Property
Re- Accounting/ Asset
Coordination Lease Mgmt/ Risk Mgmt/ Investor
Development/ Construction Leasing Legal Reporting Mgmt
and Admin Facility Insurance Relations
Development
Improvement Mgmt
•Identify •Detail •Property •Legal •Tenant Space •Lease •Monthly •Accts •Section 404 •Create •Manage the
potential project ROI and Review Design & Setup/Mgmt physical receivable compl. External asset
projects budgeting leasing •Lease Coordination •Tenant Rec. inspect process •Claims communica- •Position the
•Pro-Forma •Construct- projections Negotiations •Tenant Space Billings •Vendor •Accts payable mgmt tions asset for
model ion Mgmt •Prop. •Lease Review, •Recoveries contracts – process •Insurance •Manage growth
potential •Gov’t Availability Approvals Revisions and (CAM, Tax, scheduled •Asset mgmt •Coverage external
project permitting Report •Lease Approval Insurance) services •Periodic journal plan investors
•Secure •Subcontracto •Marketing/ Abstracts •Tenant •Lease •Tenant Move entries •Create
funds for r Mgmt Prospecting Construction Renewals In/Move Outs •Corp budgeting company
project •Construct- •Tenant Coordination •Collections •Site repair, •Bank marketing
•Monitor ion Progress Opportun- •Reporting •CAM Audits Maintenance/ reconciliation materials
project Reporting ities •Site Design •Reporting facilities mgmt •Fixed assets •Manage Wall
progress Identified •TI Budget •Prop & mgmt St. Analysts
•Monitor •Lease •Bid Request Portfolio •JV accounting •Create/post
project IRR Negotia- •Contract Reporting •Consolidations press
tions Award •Property •Property releases
•Reporting •Const. Budgeting accounting
•Property Schedule •Procurement •Reporting
Plan Design Mgmt • -Integrity
(CAD) •Acceptance of • -Month End
Premise • -Financial
•Contractor
Eval
•Tenant Space
Delivery
•Reporting
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7. Real Estate Market Segment Value Chains
While each market segment delivers its capabilities “a little differently”, there is a
high degree of commonality in the underlying business processes
Aggregate Real Estate
Market Value Chain
Tenant
Property
Coordination Accounting/ Risk Mgmt/ Asset
Re-Devel/ Lease Mgmt/ Investor
Construction Leasing Legal and Reporting Mgmt
Development Admin Facility Insurance Relations
Improve-
Mgmt
ment
Home
Builder
Owner/
Operator
Corporate
Real Estate
Capital
Markets
Development/
Construction
Property
Services
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8. Real Estate Market Segment Value Chains
28 percent of the valued functions represent high or medium value within the
market segments
Real Estate
Function Pools of Value
Tenant Property
Re-Devel/ Coordination Lease Mgmt/ Accounting/ Risk Mgmt/ Investor Asset
Construction Leasing Legal Reporting Mgmt
Development and Admin Facility Insurance Relations
Improvement Mgmt
Home
Builder
Owner/
Operator
Corporate
Real Estate
Capital
Markets
Development/
Construction
Property
Services
High Degree of Value Medium Degree of Value Low Degree of Value
Note: There is insignificant variation between geographic regions

9. Real Estate Market Segment Value Chains
There is a close correlation between function value and technology expenditure in
the real estate market, except in accounting/reporting
Real Estate Technology
Expenditure by Function
Tenant Property
Re-Devel/ Coordination Lease Mgmt/ Accounting/ Risk Mgmt/ Investor Asset
Construction Leasing Legal Reporting Mgmt
Development and Admin Facility Insurance Relations
Improvement Mgmt
Home
Builder
Owner/
Operator
Corporate
Real Estate
Capital
Markets
Development/
Construction
Property
Services
High Degree of Spend Medium Degree of Spend Low Degree of Spend Higher Functional Value than Technology Expenditure
Note: There is insignificant variation between geographic regions

10. Real Estate Business Market Trends by Segment
Capital markets, owner/operator, and corporate real estate show strong growth
potential in the U.S. market
Homebuilding Capital Markets
» The growth in homebuilding has slowed. Builders are now looking » There has been significant expansion in growth of funds under
to consolidate and cut-costs. management and institutional investment in real estate.
» Many domestic homebuilders are looking for international » Few systems can handle the complex layers of visibility from
opportunities. property level all the way through to fund and investor reporting
level.
» It is estimated that the top five homebuilders in the US represent
7-9% of the total homebuilding market. » There is a shortage of software solutions in the market, so there is
a high degree of customization to platforms.
» The top-tier technology solutions market place is highly
competitive, while the mid-tier market does not offer end-to-end » Real estate performance has fueled investor demand as a
solutions. separate asset class and significant queue of capital raised;
seeking deployment.
» There is an increasing consolidation & globalization in the market.
Corporate Real Estate Owner/Operator
» The top 10 corporations on last » Globalization of the
year’s Buildings magazine census owner/operator sector is a key
controlled more than 2BB square trend in this sector, as
feet of real estate. exemplified by the latest
Key Real
» Flextime and telecommuting are estimates of 244 REITs in 24
Estate Trends countries.
anticipated to reduce the typical
square footage requirements. » 28 countries are likely to have
» In the last five years corporations REITs in the next 24 months.
began focusing more on real estate » Recent trends toward mergers,
technology. acquisitions and privatizations
» Creating appealing workspaces of previously public REITs.
with ergonomic design is a top Owners are interested in
Development/Construction Property Services »
priority for leading companies. utilizing business intelligence
Tools to assist in this endeavor are » Global infrastructure » “Green” principles are not tools to be able to analyze the
on the radar of corporations. development will drive the only seen as part of real business according to internal
construction sector in the estate development, but measures of KPI.
coming years. throughout the industry as
cost-efficient operating.
» Private sector funding may
provide some of the capital » Volatility in energy markets
needed to build much needed leads companies to meter
infrastructure. monitoring and other
technology solutions.
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11. Real Estate Software Market Trends by Segment
The real estate technology market is growing to support the expanding capital base
Homebuilding Capital Markets
» The top-tier technology solutions market place is highly » Integration of fund accounting software with core accounting
competitive, while the mid-tier market does not offer end-to end systems has become a priority. Integration allows for more
solutions. robust and integrated reporting capabilities.
» Homebuilders favor technology that demonstrates a clear ROI and » The capital markets desire a more effective solution for fund
is designed specifically for the homebuilding industry. accounting and reporting.
» Virtual design centers are being attempted by some builders; an
effective sales and marketing tool is needed in homebuilding
» An effective warranty tool is needed for the homebuilding
industry.
Owner/Operator
Corporate Real Estate
» Companies have a strong desire to
» Today, corporations use Integrated purchase software to meet their
Workplace Management Systems needs but have limited solutions.
(IWMS) to effectively manage key
metrics such as total square » Smaller to mid-tier providers can not
footage and vacancy status.
Key Real scale up and big providers want big
Estate Trends deals.
» Corporations are late adopters of
technology to manage their real » Companies that have implemented
estate assets and typically do not these solutions are now moving their
implement technology until it is focus from back to front office
absolutely necessary; that is functions.
beginning to change.
» Standardization of traditionally
» Corporations that require systems complex business processes in the
find that the solutions are still Development/Construction Property Services areas of leasing and CAM is being
developing and do not fully meet implemented by some in the
the industry needs. » Supply chain management. » Business technology is owner/operator segment.
providing increased security.
» The corporate real estate market is » On-line catalogues are » Electronic funds transfers, common in
highly fragmented and providers common for today’s » Meter monitoring with real Europe today, are beginning to
have a real challenge in selling construction purchasing. time data is important for become more common in the US as
their solutions. energy management. well.
» 5D CAD software is
anticipated to be the CAD » Property managers have » Utilities cost containment and
technology of the future. many of the same technical utilization management that feed data
trends as the owner/operator into the ERP solution are on the radar.
segment.
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12. Real Estate Software Providers
The market leaders differentiate themselves by their ability to maintain and deliver
quality technology
Real Estate Market Providers Positioning
Emerging Players Market Leaders
“Building Industry Technology” “Setting the Industry Software Trends”
Yardi
Resolve Intuit MRI
Cougar Accruent Tririga
CTI Limited
Ascendix
Realm/Argus
Primavera
Peracon Sitera
Manhattan
JD Edwards Kardin
Famis Fraser Williams
Corrigo
Skyline
Real Data
RealPage
Bricsnet
Virtual Premise
AMTdirect
Workspeed
Net Facilities
Niche Players Visionary Players
“Serving Specific Industry Needs” “Emerging Technology Players”
Corporate Owner/Operator Capital Markets
Note: Major ERP companies have been excluded
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13. Non-Core Real Estate Software Providers
Many non-core estate software providers have little penetration into the real estate
market, but provide services to real estate companies
Non-Core Real Estate Market Providers Positioning
Emerging Players Market Leaders
“Building Industry Technology” “Setting the Industry Software Trends”
Proforma ♠
Mega International ♠
iGrafx ♠ IDS Scheer ♠
♥ SAP ♥ Business Objects
♠ ♥ Cognos
Casewise
Telelogic ♠
♥ Information Builders
EMC ♠ ● Open Text
♥ hyperion ♥ Oracle ● Stellent ♥ SAS
● Hyland
Sybase ♠ ♥ Actuate ● Interwoven ♥ MicroStrategy ● Vignette
Savvion ♠ ● Tower Software
● Xerox
Tibco ♠
● Objective
Ultimus ♠ ♥ Applix ♥ QlikTech
● Xythos
♥ Spotfire ● Day Software
♥ Panorama
● SunGard ● Cimage
Niche Players Visionary Players
“Serving Specific Industry Needs” “Emerging Technology Players”
Business Intelligence Collaboration Workflow
Note: Major ERP companies have been excluded
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14. Real Estate Software Providers Profile
Transaction processing and reporting have a robust offering across multiple market
segments, the same is not true for collaboration and work flow – an emerging
market
Capital Markets Homebuilder
Owner Operator Corporate RE
Realm Yardi MRI Skyline JD Tririga Accruent
Edwards
Business
Analysis
Business
Intelligence
Transaction
Processing
Reporting
Collaboration
No real estate market solution currently exists
Workflow
Core Value Player Participant
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15. FrontLine Partners Overview
FrontLine Partners (www.frontlinepartners.net) is a real estate consulting firm that
works with banks, institutional investors, lenders, owners, intermediaries, and service
providers in the commercial real estate and financial services industry to help them
accelerate growth of their business or reposition their business models and assets.
FrontLine Partners offers a number of services ranging from strategy formation,
corporate and business development, mergers and acquisitions, capital sourcing, work-
outs and corporate restructuring.
For additional discussions, please contact our Managing Partner:
Jim Vincent (214) 369-2085 jim.vincent@frontlinepartners.net
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