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DigitalDisruption@BREI

6 January 2020

A joint venture between the Bartlett Real Estate Institute and Resilience Partners Limited.

Digital disruption with BREI logo

Data Driven Real Estate

DigitalDisruption@BREI, is a unique consortium of Academics, Real Estate Asset Managers, Developers, Managers, Funding Institutions, Lawyers and other Professionals and Representative Trade bodies, which will drive adoption of both inventive and innovative ‘deep tech’ in the Global Real Estate market.

The focus of the consortium is the development and deployment of research that relates to the current and future world of Real Estate. Prop Tech, Real Estate FinTech and PropRegTech. These are fast moving sectors which are having a radical impact on what has been a slow moving, traditional and conservative industry.

The consortium will design protocols for ‘structured data’, ‘tokenisation’ and ‘DataNet; as an infrastructure level using blockchain and DLT technologies which will support data analytics by AI Machine Learning and due diligence through ‘KYA’  [Know Your Asset].

The main thrust of the initial work that the consortium is investigating is the use of data to improve the design, build and operation of High Rise Residential Buildings [HRRB] following the Hackitt Report on building safety, which we are calling SafetyTech’.

Participation in the consortium will assist members to:

  • Increase the value and performance of Real Estate assets by the use of data analytics in conjunction with ‘deep tech’.
  • Create a global ecosystem to support digitisation in the Real Estate Sector to increase the speed and profitability of transactions.
  • Encourage collaboration in the design, construction and operation of Real Estate Assets which will drive enhanced safety, encourage dispute avoidance and dispute resolution and enable regulatory compliance.
  • Support the development of Smart Buildings and Cities to improve Sustainability and drive the adoption of Corporate Social Responsibility.
  • Build an automated eServices marketplace providing clients with secure data exchange, executable legal contracts, automated payments and other professional services.[1]

People:

Joint Chairs: Jeremy Barnett, Visiting Professor of algorithmic regulation at BREI

                     Professor Andrew Edkins, Director of BREI

Professor Yolande Barnes, Chair of BREI

Joseph Mayhew, UCL

Mike Millar, RPL

Bandana Rehncy, UCL


Themes:

Data in the Real Estate Construction Phase

This will involve all key stakeholders in a Real Estate construction project. Key documents, including those recording decisions and their reasoning will be identified, thereby creating a digital timeline and searchable document repository. This can, in addition to supporting and enabling projects, also be used to create a ‘due diligence’ evidence-based defence for future regulatory requirements. Information will need to be identified and tagged at the outset to enable automated disclosure and discovery to be undertaken should a dispute arise.

Benefits:

Data in Operations and Smart Cities

According to a report by the consultancy firm Savills, Real Estate is the world’s most valuable asset class, one third larger than all listed equity and debt securities combined[1]. The new forms of digital technologies that relate to property, collectively known as PropTech is growing at a faster rate than FinTech (see CB Insights Deal Search ("Real Estate Tech"), **CB Insights Global Fintech Report Q2'18) with investment increasing from $0.5bn in 2013 to $3.4 bn in 2017.

The disruption caused by the key technological advances: Big Data, Building Information Modelling, the Internet of Things, Artificial Intelligence, behavioural/predictive analytics, and Blockchain and other Distributed Ledger Technologies – arguably offer the greatest potential in the real estate sector to transform the way the built environment is financed, designed and managed.

Technology can help solve increasingly pressing problems, including the reduction of energy costs and carbon emissions of buildings as well as mitigating large social problems such as the changing demographics that have caused that has led in part to the crisis in the provision of affordable housing.

Data can be collected in the following areas of interest:

The market for property i.e. both commercial and residential information relating to marketing and sale

  • Real Estate financing structure
  • Management through use of IoT, BIM and Blockchain
  • The provision and alignment of real estate related professional services
  • Energy monitoring and use at the individual property and area (city) scale
  • Those aspects of the functioning of the aspects that comprise Smart Cities
  • Environmental modelling
Data for Transactions

Data driven Real Estate is about the use of 'structured data' in combination with sophisticated data analytic infrastructures utilising the developments in trusted record keeping concepts such as Blockchain (distributed ledger technology), 'smart' contract and 'tokenisation'. The potential for a significant disruptive effect has the prospect to transform the volume of transactions and the way in which transactions are conducted as follows:

  • Due Diligence
  • Land Registry and Environmental information
  • Market evaluation
  • Financing (by tokenisation and other financial platforms)
  • Automated compliance and regulation
Entrepreneurship

The modern university environment is ideal to foster entrepreneurship amongst bright minds and leading-edge thinking. University PhD students undertaking relevant types of research can be encouraged and assisted to allow them to consider designing, launching and running new businesses based upon their research. By creating a supportive environment comprising mentors, advisors, professional experts and investors, talented students have turned their ideas into successful start-ups, with the possibility that some may become ‘unicorns’ such as Deep Mind which began life at UCL.

Entrepreneurship at DigitalDisruption is following the lead set in UCL’s Computer Science Department with its ground breaking creation of Conception X (see below) and is developing a set of areas of activity, including:

  • An elevator approach which can encourage Real Estate PhD students from UK universities to develop skills that are required by Investors, Managers and Owners of Assets in a digital world
  • Venture Capital Club where students can learn about how funding works for startups incorporating a Venture Capital Panel of experienced Prop Tech and other relevant investors
  • Conception X – PropTech will be a venture builder that creates investable deep tech start-ups in Real Estate by de-risking exciting new technologies with potential to improve and enhance the real estate sector’s performance and seek to change the world for the better. The original Conception X was launched by UCL’s Faculty of Engineering Computer Science Department, supported by Barclays Bank Eagle Labs.

This will all act to allow a culture of Intrapreneurship, the act of behaving like an entrepreneur whilst working in a large organisation, to grow.  It is the practice of a corporate management style that integrates risk-taking and innovation approaches as well as the use of reward and motivational techniques.

Members of the consortium will benefit from both programmes by gaining insight into the latest prop tech advances and formulating strategies to introduce intrapenureship within their own organisations.

    DataNet

    DataNet is a concept of a new form of infrastructure for securely sharing data globally or within an organisation. Consider the DataNet akin “to do for data what the Internet does for communication” in a secure, permissioned and trustworthy way. With the rapid growth on data generation, transmission and storage, it is likely we will see the era of the ‘data tsunami’. At such times such a DataNet (built on a blockchain) will be required to manage data.

    Data management is an increasingly significant and substantial problem facing many private or public sector organisations and institutions. At the same time, the future of commerce is global digital marketplaces for the Service sectors; trade (e.g. Maersk); retail (e.g. Alphabet (Google), Amazon, Alibaba), account/audit (e.g. EngineB), legal services, government, education and more. Just as the use of debit and credit cards and now instant transfers, so a ‘Swift’ or ‘Visa’ for data – the DataNet infrastructure – can be seen as being required by corporations to facilitate commerce; for sharing data/documents facilitated by a global ID structure (cf. InterNet IP/URL address). This ‘Data ID’ is the basis for secure and permissioned sharing of data and documents. Conceptually as with a telephone number or IP address, every person, project, consortium, company etc. can have a unique ID to facilitate data sharing.

    With the ‘Uberisation’ and globalisation of the Services sectors, a number of consortia (e.g. EngineB.com) are seeking to create global marketplaces for digital commerce and trade. This is a proposal that the DigitalDisruption@BREI consortium is considering, i.e. to understand what is required to build fully automated e commerce platform for the global Real Estate sector.

    For further information on DataNet please contact Professor Philip Treleaven at UCL Competer Science

    Email:  p.treleaven@ucl.ac.uk

    Tokenization of Real Estate

    One of the early developments of the new ‘crypto economy’ as applied to real estate has been the movement to raise development finance by the use of tokens. This has gained the interest of investors, lawyers and regulators, as investors are starting to understand the attraction of increased liquidity in a major established, and highly illiquid, asset class.

    Prop Tech and Real Estate FinTech are fast moving sectors which are having a radical impact on what has been a largely analogue, traditional and conservative industry. Real Estate is the largest asset type and, in part due to its established position and long lifespan, one of last to adopt technological change and the innovation that tech can bring.

    The Global Real Estate market is worth $217 Trillion according to Savills 2016 and the World Bank, of which 75% is residential property. Annual Real estate trading has averaged $636 billion annually since 2007 and reached £900 billion in 2015. This is a large illiquid asset class which has the potential for substantial disruption.

    Consortium members New Alchemy and Resilience Partners Limited have combined to form New Alchemy RPL Labs, which is a full tokenization service for Real Estate Assets including a tech stack and a legal regulatory framework to produce an investment grade service.

    For further information see CMS tokenisation of real estates where consortium members Jeremy Barnett and Nils Veenstra (shown in photograph) conducted workshops at the Amsterdam seminar on 7th June 2019.

    https://cms.law/en/nld/news-information/tokenized-assets-amsterdam-tokenization-great-opportunity-for-real-estate-asset-financing

    Further article on Fire Safety

    Jeremy Barnett. BREI 2019 and RPL.

    The Hackitt Review into Grenfell Tower [Hackitt] concluded that the current system of building regulations and fire safety is not fit for purpose. Hackitt recommended a new regulatory framework to encourage genuine system transformation which will create a more simple and effective mechanism for driving building safety, provide stronger oversight of duty-holders with incentives for the right behaviours and effective sanctions for poor performance.

    The proposed framework will assign responsibilities to all those who procure, design, create and maintain buildings, with a new set of rigorous and demanding duty-holder roles and responsibilities mandatory recording of decision using a series of robust gateway points, stronger control processes and rigorous enforcement powers.

    The most relevant buildings to target are new and existing high-rise residential properties which are at least 10 storeys high (currently estimated at 2,000 – 3,000 such buildings in the UK alone). A systems approach to risk management is recommended which treats the building as a single entity rather than a series and set of discrete elements and parts. An outcomes based approach will be taken, with encouragement of robust mandatory incident reporting, whistleblowing and the use of data. 

    The report promises ‘serious penalties for those who choose to game the system and place residents at risk’. There has been a move by regulators to impose turnover based sanctions to encourage behaviours with massive financial penalties, see for example: GDPR failures (British Airways £183.39m for a data breach), FRC (KPMG £4.5m Quindell, £18m Lloyds Syndicate) FCA (Santander £32m for a basket of compliance issues, Tesco Finance £16m for failure to prevent a cyber attack) and the SEC ( Facebook July 2019 $100m , JP Morgan $126m).

    It is too early to quantify the potential financial penalties that might be imposed against a duty-holder with a multi-billion dollar turnover where 72 fatalities occur as in Grenfell Tower.

    Blockchain presents an essential tool for those who wish to demonstrate compliance with the new regulatory regime as follows:

    As a form of ‘state transition machine’, it is ideally suited to record the gateway points that each duty-holder must sign off Automate regulatory oversight Support remote building control Incentivise behaviours through tokenisation.

    Provide a trusted, transparent and independent record for use by residents to enforce their new rights.

    [1] The DataNet Global ‘ID+Data’ Technology Stack: P Treleaven UCL 2019.