While it’s not unusual for organisations to diversify in challenging times, expansion isn’t so common. But a tight economy hasn’t deterred Graham Mirabito, chief executive officer at RP Data, who is taking the business beyond real estate and into financial services.
“Residential property is three times more valuable than the stock exchange or superannuation funds. So it’s an asset class that really hasn’t even begun to explode yet as far as the capital markets or financial markets being able to access it,” says Mirabito.
“And if you think about financial planners, they hate property, because they can’t make money out of it. It’s not liquid, but you also can’t really ask for a trail commission or anything like that.”
It’s one of the major expansion opportunities RP Data has spotted – taking property to financial planners. On the back of changes to government regulation of financial services, financial planners aren’t able to take a revenue stream from the products they sell, which Mirabito says has driven their independence.
It does, however, increase pressure on planners in terms of advice and research provision, because they have to justify their fees for service.
RP Data already has 60 financial planning businesses on its books, that Mirabito calls “the early adopters”.
Furthermore, Mirabito says self-managed superannuation funds (SMSFs) account for $400 billion of the $1.4 trillion superannuation industry.
And, according to Mirabito, property is the fastest growing asset class inside SMSFs.
“So there’s a real opportunity for financial planners to get back with the self-managed super funds and say, look, I can help you on property now.”
Meanwhile, legislative changes allow fund holders to borrow money to place into an SMSF.
“It’s typically around 40 percent loan value ratio. So we see that there is a lot of opportunity for our data and analytics and property services to be used by the wealth management industry, whereas before they really ignored it.”
RP Data has long been expanding in other ways as well. New York-listed CoreLogic is now sole owner of the business. Its ownership has been a significant aid to RP Data’s own growth trajectory, in particular with respect “to what sort of business we could be when we grew up”, says Mirabito.
“We were all about data to real estate agents, but they moved from [that] to analytics and data to the finance market, to the capital markets, as well as getting into credit risk.”
There was also a shift in emphasis, from measuring the property asset to the consumer.
CoreLogic’s investment in the business has, essentially, proved an accelerant for RP Data, helping them in “rapidly deploying intellectual property way ahead of the time we would have taken to think this stuff up”, says Mirabito.
Once a provider of data services to real estate agents, with about 6000 customers and annual income of $21 million, RP Data now has a foothold in the finance industry, boasting 11,000 customers. Mirabito says the customer base now delivers $44 million and there’s another $35 million coming from the finance industry.
“It’s grown from a subscription-only business to a subscription and a transaction business – almost 50/50.”
The big shift has been the range of customers, Mirabito adds, noting RP Data’s strength within the mortgage industry and amongst valuers and developers. The business is responsible for Australia’s first hedonic-based index, he also points out.
“The Reserve Bank said no-one can build a hedonic-based property index. Hedonic means you measure the attributes of a property as opposed to just the price change. You actually know how many bedrooms and bathrooms and the value that adds to the property. So we value every property every week in Australia for our automatic valuation model.”
Beyond industry expansion, RP Data has also been busy on the acquisition front, snapping up eight companies in the past five years, and with them, a lot of new technology.
The tendency has been to pursue smaller, more nimble players to develop solutions in specific areas. It’s how they “keep on top of things”, says Mirabito.
“We are an aggregation of Australia’s most innovative players and leaders across the asset class of property. So that’s the other strength we’ve got, we’ve brought the smart ones together, all into one company,” he says.
“We still have competitors and they’re very smart too, but we bought the leaders of the industry together to create what RP Data is today.”
Technology development is on two fronts, he notes.
“One is on the integration of all the acquired entities. The second one is on the evolution of what we call next generation. We see mobility and social media as really big parts of the development.”
Vivante, a user experience expert company, is one such entity taken into the RP Data fold. It was crucial to the development of RP Lister, an app for real estate agents. The app supplies information to 7000 agents, allowing them to investigate surrounding properties for prospective clients.
“The real secrets to the success of RP Data, from the founders’ very first development, are two things. One is innovation and the second component is touch points with the customer,” says Mirabito.
Vivante’s lounge room set-up is a place for RP Data’s customers to come in with their own customers.
”We [video-tape] them, we have behavioural scientists in the room down here who monitor every key stroke on this. It cost half a million dollars to develop this app,” says Mirabito.
“This is very disruptive technology, in that … [the] fastest speed of adoption of any technology in the world is the iPad app. But it’s two people on one machine as opposed to you with your iPhone ... So you had to really get the interaction between the two humans and the device right, and that’s what we did.”
Then there’s CBA Property iPhone app (free to users) that RP Data built for Commbank. It has more than 300,000 users and has won 25 awards. The app allows the user to point their phone at a property in order to find out how much it’s worth.
“It’s got what they call augmented reality, so it knows where you’re standing.”
Mirabito says the app has been out for two years and about 60 percent of its users are active on a weekly basis.
These developments signal RP Data’s serious investment in various industries. In terms of support, the business has training rooms in every capital city, as well as mobile trainers dashing about in ‘RPData.com’ cars. Webinars are also a staple, and around 10,000 professionals go through its training facilities each year.
With 30,000 logins from clients each day, Mirabito says its services aren’t impacted by an uncertain business environment.
“The thing about data is that even if the market is going down, people still want to know how fast, where, how much of a loss, should I get out? So data in a down cycle is still very valuable and, in fact, probably more valuable,” he argues.
“It’s just easier to make money in an up-cycle because … our business is 50 percent transaction based now, so volume in the industry makes a difference.”
Mirabito acknowledges a drop in new property sales transactions, saying it’s about 15 percent below the five-year average – refinancing is “up”.
“We’ve got transactions happening off refinance. So we’ve got a little bit of that filling in the holes of the base transaction.”