In an exclusive interview with Juniper Square, Matt Kaplan, Managing Director at Almanac Neuberger Berman, shared his insights on technology, why people matter as much as the investment, and what good governance really means. Here are some of the highlights.
Identifying what technology provides a strategic advantage
Kaplan has long been a tech skeptic. “I’ve been hearing about AI since the mid-eighties,” he joked. Far from an early adapter, Almanac held back, waiting for others to try, perhaps fail, and only then, capitalize on what was proven to work. That changed about five years ago when Kaplan watched portfolio companies leverage new technology to give them a strategic advantage when acquiring and operating properties.
“There's been a sea change out there, especially in areas that deal with the consumer,” he added. Take self-storage. The owner or operating company may not need round-the-clock on-site staff if a renter can access the storage property and unit via an app. “You don't need a person standing there 12 hours a day with keys to the locker. You can interact with them on the phone. You can price them on the phone. You can do a contract on the phone. You can let them into the building on the phone. They can go to their unit—all on the phone.”
But rather than investing directly in the technology company—Kaplan trusts the great venture capitalists he knows to do that—Almanac researches and sorts through the many options on the market and provides informed recommendations to its portfolio companies. “There are 10,000 PropTech companies, and it’s easy to get whiplash with people approaching them saying, you should do this, you should do that. Our job is to be an informed consumer and help them assess what technology will give them a strategic advantage.”
Underwrite the people, not just the asset
Everyone is selling something, especially at the first meeting, but it’s rare that Kaplan and his team take that initial meeting and decide to make an investment the next day. “You build a relationship. You get to understand the team, and they get to understand you. We underwrite the organization from top to bottom.”
For Kaplan, due diligence means getting out of the documents and into the field. He’ll take the Almanac investment committee and “spend two days in a van traveling around. We'll see them in action with each other. We'll see them in action with their property management team and get behind the scenes. By spending time with them, we'll have a good sense of what this organization is all about, how it operates, and who the people are.”
They also leverage their deep network to get insights into how prospects have treated their partners, bankers, or associates over the years.
What good governance really looks like
For Kaplan, good governance requires a properly functioning board of directors that is well-aligned with the business. Boards must be experienced, mature, and can be trusted with the authority to make decisions quickly.
The real impact of a strong board built on alignment and trust was especially evident during the pandemic. “Buy and sell decisions are part of the predictable pattern. But when June of 2020 comes along, and you're in the middle of COVID, that’s when good governance kicks in. You must make decisions very quickly—and in unison—regarding your employees, empty hotels, debt, etc.”
Kaplan believes that more and more real estate companies will adopt Almanac’s governance and board approach. “Almost every company has a board of directors but not the full fiduciary boards we have with our companies. You could write a great investment paper, but that will not replace a well-functioning, appropriately populated, appropriately aligned board of directors,” he argued.