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The Future of Appraisals with John Meadows and Noah Isaacs

26.1.21

In this episode The Propcast talks to John Meadows and Noah Isaacs from Bowery about how tech is revolutionising appraisal.

Click here to listen to this episode and check out this preview of our chat with John and Noah below!

The Propcast by Louisa Dickins, Co-Founder of LMREthe leading Global PropTech recruiter brought to you in partnership with UK PropTech Association. The UK PropTech Association is a membership organisation to drive the digital transformation of the property industry. This show will focus on connecting the Proptechs, real estate funds and VC’s globally…and get everyone talking about innovation of the build to rent environment.

About Our Guests

John Meadows

https://www.linkedin.com/in/john-meadows-7434a615

John Meadows in the co-founder and co- CEO of Bowery Valuation. Bowery is redefining the commercial appraisal space through big data, advanced technology, and extensive expertise. Bowery improves the efficiency of the commercial appraisal process by automating tasks using their software product Prior to co-founding Bowery, John worked at Leitner Group, now BBG, the largest independent appraisal firm in New York City. In his 4+ years there he valued over $3 billion of commercial property across all asset types. Frustrated with the antiquated process of appraising, but excited by the need for a better solution, he left to start Bowery with Noah and Cesar in June of 2015. John graduated Magna Cum Laude from the University of Pennsylvania with a degree in US History.

Noah Isaacs

https://www.linkedin.com/in/noah-isaacs-3a430278/

Noah Isaacs is the co-founder and co-CEO of Bowery Valuation. Bowery is redefining the commercial appraisal space through big data, advanced technology, and extensive expertise. Bowery improves the efficiency of the commercial appraisal process by automating tasks using their software product. Before co-founding Bowery, Noah worked for BBG, valuing over $2.5 Billion worth of commercial real estate in New York. In 2010 he started his career in Baseball Operations, “Money-Balling” for the Toronto Blue Jays. Noah graduated from McGill University with a major in Statistics and a double minor in Operations Management and Labor-Management Relations. He has on multiple occasions lectured at Columbia University, with a primary focus on PropTech and the future of the real estate.

Resources mentioned

LMRE website www.lmre.co.uk

UKPA website www.ukpa.com

Bowery Valuation website www.boweryvaluation.com

Key Insights In this Episode 

  • We realised there’s so many other aspects of an appraisal firm that we can change and make different, and hopefully make better not just from a tech standpoint, but from an operational standpointJohn Meadows
  • Really, all of our success is due to the people that we’ve attractedNoah Isaacs
  • A huge part of how we think about building a different culture is setting up a compensation structure that has a really sizable equity component to it, that really connects people with the large division – John Meadows
  • I think if you are able to attract a lot of smart, ambitious people and put a problem in front of them, it’s pretty incredible what they’re able to achieveNoah Isaacs
  • We have one pretty significant advantage on the product side, which is that we’re building a tool for ourselves internally today… It was originally Noah and I designing our dream software for ourselves as appraisers John Meadows
  • John and I were very intentional about having gratitude be a core value that we built our corporate culture aroundNoah Isaacs

Episode Transcript

Louisa

Hi, everyone, and welcome to the podcast. My name is Louisa Dickins, co-founder of LMRE and board director of the UKPA and I shall be your weekly host. Each week for 30 minutes we will be connecting with VCs, PropTech startups and real estate professionals globally and assist in bridging that famous communication gap we all love talking about. So sit back, relax and enjoy the show. Hi, everyone, and welcome back to the podcast. Today we will be speaking with Bowery founders, John and Noah on how tech is revolutionising appraisals. So welcome to the show, guys.

John

Thank you so much really excited to be on.

Noah

Yes, thanks so much for having us.

Louisa

For those who are listening, Bowery Valuation is one of the leading startups in the emerging world of real estate tech, and the only company of its kind in the commercial real estate appraisal space. Their appraisals work hand in hand with the engineering design and product team to continuously add new features and functionality to the platform. Also a fun fact for the listeners, they are also the first ever VC backed commercial appraisal firm, having raised over I think it’s $30 million in the past three plus years. Now powered by big data, advanced technology and extensive expertise, Bowery is redefining the entire commercial appraisal space. And so you all have a brief introduction to two of the three founders that we’re speaking to today, prior to co-founding Bowery, John worked at Leitner Group, now BBG, the largest independent appraisal firm in New York City. In his four plus years there he valued over $3 billion worth of commercial property across all asset types, and frustrated with the antiquated process of appraising but excited by the need for a better solution, he left to start Bowery with Noah and Cesar in June of 2015. John graduated from the University of Pennsylvania with a degree in US history, and he still aspires to become a chef, a filmmaker, and the first left-handed shortstop for the San Francisco Giants. So welcome to the show John. I’m looking forward to hearing about your chef ambitions later.

John

Sounds good!

Louisa

Now for Noah’s background. Before co-founding Bowery Noah also worked for BBG, valuing over $2.5 billions worth of commercial real estate in New York so not short of what John did, three billion, I’m sure a bit of competition there! In 2010, he started his career in baseball operations, money balling for the Toronto Blue Jays graduated from McGill University and majored in statistics and a double minor in Operations Management and Labor Management Relations. He has a multi locations lecture at Columbia University with a primary focus on PropTech, and the future of real estate. Noah loves numbers, all things data related and scones. Both of you welcome to the show. Let’s start with John, how about you talk us through the Bowery journey. How did you get to where you are today?

John

I would say it’s a story about getting lucky a lot of different times and foremost, mostly for the people we’ve met and who’ve decided to come on and do this with us. But I would not say the appraisal aspect of this story is a super intentional one. I fell into this space, a little bit randomly out of college, I was always a generalist in school and wasn’t exactly sure what I wanted to do with my life. And I had thoughts of going to law school as an undergrad and I to debate in high school in US history, but my parents were both lawyers and talked me out of going straight to law school out of college, I don’t think it was my lifelong passion. And the same way medicine, for example was for my sister who wanted to be doctor since she was nine years old. So I’m from California originally, Noah and I grew up together in Berkeley, and I fell in love with New York City visiting on weekends when I was at Penn. And so really was looking for a job in New York and really wasn’t sure exactly what I wanted to be doing, and was avoiding the traditional investment banking route a lot of my friends were going down. And so I started applying to some startups and some consulting firms, and very early on in that process, beginning in my senior in college, a friend of mine from school called me up to try to recruit me for this commercial appraisal firm that he was working at, which at the time was the largest independent from New York City but it was still a 20 or 25 person company. It was a very fragmented space.

And so I didn’t really know much about appraisals or commercial real estate at all. I was taking an architecture class at the time that was focused on modern architecture and a lot of New York City properties, and so that piqued my interest and came up to interview. And the owners pitch to us was that the appraisal space was maybe not one that we were super familiar with, but it’s an amazing foundational education to get in commercial real estate, what we’re doing is we’re valuing every commercial asset you can think of, in the largest real estate market in the country, and every day as appraisers, 22 years old right out of college, talking to lenders, developers, brokers, so building a lot of connections in this space. And really understanding ultimately, the underlying value of all these assets, which is a super valuable thing if you want to get into development later on, or lending wherever it is within real estate. So I ended up taking that job out of school, and then six months in I ended up recruiting Noah, in the similar way that my friend from school recruited me.

And so we were there together, I was there for four years, Noah was there for three and a half years. And pretty quickly, we were frustrated with the tools that we had to do our jobs for technological standpoint, there has not been a lot of innovation in this space in the past, 20/30 years. And so pretty much industry standard was Word and Excel and that was the extent of the tech that we had. And so you’re taking this Excel sheet, which is a template basically from previous reports, that’s 50 different tabs filled with data from God knows how many other buildings have been built on top of the same template. That Excel is linked to a Word document, which is 120 page plus appraisal report written about a totally different building. And there’s just a huge amount of manual data entry, basically working through this Excel and Word doc to create your new appraisal, but also huge amount of risk for errors and inconsistencies, because one hidden row in your Excel or hard coded cell and your value of the property could be off by millions of dollars. And then you’re going through a 120-page Word document that’s written about a completely different building and trying to update that and turn it into a new appraisal, but it just leads to a huge amount of errors, inefficiencies and consistencies. So these reports take three, four weeks to be delivered, a huge amount of back and forth clients. We are the risk layer for lenders, millions of dollars for the loans and so if there’s inaccuracies in the appraisal that can have huge implications, and that’s happening all the time.

And so Noah and I had this idea in our heads of starting something on our own for a long time. Our first entrepreneurial pursuit after our sophomore year in college, we started a baseball scouting website, and Noah put 10,000 miles on his parents old Volvo driving down the different cities in California. And he leveraged that to get the job of the Blue Jays which he can talk about, but I guess that was when we first got the idea of wanting to do something on our own. And we were really interested in the food space. So there’s a lot of ideas that revolved around food and restaurants, and we wrote a screenplay at one point on the side after work! But this idea was always staring us in the face, we were living together and working together at a time and on our walks home, talking about our dream technology and what we could do if we built something in a modern tech stack for this industry that hasn’t really seen that before. And so after three and a half years working there together, we’d saved up enough money and built up enough expertise within the appraisal space to pursue this idea.

And for us it started with technology, but when we thought about actually staying in the appraisal industry and doing something on our own, we realised there’s so many other aspects of an appraisal firm that we can change and make different and hopefully make better not just from a tech standpoint, but from an operational standpoint. Culture is a huge one, our company when we were there sold for $20 million, and one person got $20 million, and all the people that had been putting many late nights in for many years got nothing from that. 8.32 And so it’s really important for us to build a company that everyone has equity in and build something in a shared vision with our team. And so there’s been so many exciting parts of this journey beyond just the tech idea and building a truly new modern appraisal firm. So we quit our jobs in 2015. The first really, really lucky thing that happened was meeting our third co-founder, Cesar, who we truly could not have done this without, through a friend of mine from school. And he had a small development firm, and he was an engineer, he was already at Princeton. And him and three other guys had this development firm where they did contract work and took on some side projects ours.

And so we started working together for about a year and then and then he came on full time and left that firm to join us as a third co-founder, and our CTO. And so that was in summer 2016, and we then got into the Metaprop accelerator, we were in their second class in New York City. I went through that six-month process, and then came out of that and looked to raise a seed round. And so we raised our seed round in May of 2017, and that was when the next really, really fortunate thing happened, which was meeting our CFO and chief appraiser James Dunne. Somehow convinced him to leave CBRE which is the largest appraisal firm in the world, where he was the VP had a team and was an emerging star there. And then he came to join a company of three people, zero revenue and zero clients. And that was the really crucial step for us because we are a tech enabled appraisal firm. And so in order to be that we needed that experienced appraiser, James had been in commercial real estate in New York for 16 years at that point. And so in summer 2017 launched the business and so in the past three and a half years since then we’ve grown I think pretty significantly, we have now a second office in DC, we’ve raised a little over $30 million. And now focused on national expansion over the next two or three years.

 

Louisa

Well, that’s, that’s some journey, John. There’s obviously three founders, you mentioned Cesar, in any startup businesses as senior management, everyone has their different skills set. Me and my co-founder Brad, I’m more facing, business development, he’s very much operations and significantly more technical than I am and way better at the financial side. Noah this question is for you, what are your different roles that you play?

Noah

Yes, that’s a great question. I think that part of what makes the partnership work so well for myself and John is that we are very similar. And we have very similar skill sets, but also to your point, that poses a challenge as you become leaders in a business. It’s more efficient to divide and conquer, in a lot of ways. So John has really taken on the responsibility of sales and recruiting, and oftentimes more external facing. I think he’s done a pretty unbelievable job recruiting, the people that we’ve been able to attract are not only just so smart and dynamic, and the associates that we’re hiring out of college, I would never get a job at Bowery full stop. And also, just amazing people, we were in the car the other day just talking about a lot of the nicest people we’ve met work at Bowery. And I think that’s a lot of a lot of our success. Really, all of our success is due to the people that we’ve attracted. So just always in awe of John’s ability to bring incredible people in. My side is more on the finance, accounting, operations and product side. So I oversee our finance department, I have weekly meetings with our head of product, I have daily meetings with Cesar our co-founder, and really just trying to understand how we can alleviate all the pain points that people John is bringing in. And eventually those two things come together and build something that we believe can be really powerful.

Louisa

And so you both quit your jobs in 2015, starting off your own business after being part of a bigger firm is always a risk. It’s extremely exciting but it’s always a risk. Now, a lot of our listeners are founders or potential founders, also people who come from the real estate industry or outside with these fantastic ideas of disruption. How did you approach that? Can you explain how you got the business from just an idea to actually building something? Because your business has changed so much since 2015, maybe this one is for you, John?

John

Yes, I mean, I would say the quitting and living in New York City, making no money for a year and a half is probably not as thought out and planned out as it should have been! We had saved up a little bit of money from our time appraising there for four years at that point, also we needed a change. We were we were pretty burnt out, the way our old firm worked, it was very siloed and just coming in every day and just grinding out these appraisal reports without a connection really to the organisation. Or you were on Facebook, getting what percentage of our fees for each of these jobs. And you can only do that for so long. And so that’s a huge part of how we think about building a different culture and setting up a compensation structure that has a really sizable equity component to it, that really connects people with the large division, what we’re trying to do here. And so we were at a point in 2015, where if it wasn’t this, it was it had to be something else. But this idea was one that was really exciting for us, and meeting Caesar, who made it possible.

And so we really focused the first two years, and a notably long product development cycle for new startup, because of the complexity of the tech that we were building. There was a very high bar for what it meant to be ready to launch, because we’re creating reports that go to banks and large financial institutions that are relying on these reports to make out to put out millions of dollars or these for these loans. And so spent two years really building out the tech until we were felt we were ready to launch the actual business. And so we’re bouncing around coffee shops in the East Village, me, Noah and Cesar building out our dream software for ourselves. And Noah and I as appraisers were conceiving of what was required and Caesar was what executing on that from a tech standpoint. And then raising that seed round of capital in May 2015, I think that Metaprop was really helpful with making a lot of introductions in the VC world, taking us from outsiders in the space that really knew appraisals and had this idea to insiders within this new emerging PropTech world. And for us, it was really exciting to see the reception we got from venture capitalists, that I think I’d seen a lot of other industries have similar transformations to the one we’re trying to take in the appraisal world, but no one was doing it within appraisals.

And so thankfully, a few investors believed in us as the ones that could drive this change in the industry, and then meeting James and having James come over from CBRE was the last really crucial leap there for us to actually launch that business. And then for us the initial sales were challenging, because we play in a world of pretty risk averse institutions, rightfully so. And so being a new appraisal firm a lot of clients don’t want to be the guinea pig on that. But thankfully, we had built up enough connections and trust in the industry of certain individuals, lenders we’d work with a lot like James, when he was at CBRE, Noah and I when we were at Leitner Group, and a few clients gave us a shot and then just started building from there.

Louisa

It always helps when you have both of you who truly understand your value proposition. So when getting your product into said business, whatever it could be, that must help.  Is there a particular client, which could be one of your biggest clients you’ve won over, what’s one of your biggest successes to date, Noah?

Noah

Yes, so there’s one client, we work with a lot of national lenders from Wells Fargo, Capital One, First Republic, all the way down to smaller players. I think the biggest success is the talent that we’ve been able to attract, I think if you are able to attract a lot of smart, ambitious people and put a problem in front of them, it’s pretty incredible what they’re able to achieve. But that was always the question, are we going to be able to get people to follow this vision, and we’ve been able to do it to date. And it’s still a challenge. The people are everything and being able to convince people to follow you is everything. And I think that’s been by far our most achievement, our biggest achievement. And I think when you talk to people at Bowery, they’ll tell you the same thing. The magic is the people that work here.

John

We cry a lot at our parties, when we look and see the people that are doing this with us.

Louisa

People I know in the industry, they talk about your culture, how do you create the right culture? It’s not easy, lots of audience listening it’s a question that gets emailed in quite a lot. How do you create a healthy, happy culture? No doubt any startup is a chaotic, stressful yet fun environment.

Noah

Yes, I would say that there’s no saturation on good culture, right. I think that we have a great culture but there’s so much more that we can do. I think early on John and I were very intentional about having gratitude be a core value that we built our corporate culture around. At our last job, we didn’t really feel valued in a lot of ways, that was something that was really missing. And we want to make sure that when someone decides to take a risk and join your company, or when they wake up every morning and decide to come work at Bowery, we’re hiring really capable people. They don’t have to work at Bowery and to not see that and appreciate that as to take them for granted. And I think that it’s just such an amazing gift. And it’s something that is contagious. So I would say that truthfully, a lot of our culture is just accidental and we’ve spent a lot of time as you’ve grown being more and more intentional. But from day one, we want to make sure that this is a place for people we’re going to work hard, but we’re going to be deeply appreciated for all that hard work.

Louisa

Now stepping aside from the culture, it sounds a pretty epic place to work, especially if you have two good friends starting a business, it’s always going to be a fun environment. Let’s talk a little bit more about your product and how your product has probably changed significantly since you first started the business. We’d love to hear a little bit more about what you have planned for 2021. Noah the product man, do you want to go?

Noah

Oh, thank you, I get the easy ones here. The product, it’s changed so much. John’s talking about this earlier, for a couple years it was just John and myself as essentially product people and Cesar as the loan engineer. And we spent a couple of years designing something that we thought made a lot of sense, but really in the lean startup model, you want to get the minimum viable prototype of product out as quickly as possible. So we spent two years developing this MVP and when we got it out into the real world, there’s so many different edge cases, especially within commercial real estate and especially in New York, which is arguably the most challenging geographic to actually value properties within.

And so we spend a lot of time just solving pain points for different edge cases that we would encounter. So getting all that live ammunition, being able to actually work with lenders get their feedback, being able to bring on appraisers was hugely helpful. And we built something that was incredibly powerful within New York and New Jersey for multifamily and mixed use assets. And over the last year, we’ve been looking to really expand the product to something that’s more geographically agnostic, and more asset agnostic as well. So now we’re at a place where we’re appraising every single asset type, we’ve worked in over 30 states in the US, and we’re just making sure that our product has the infrastructure to support all those geographies and all of those asset types. Meanwhile, our engineering team is massive, we’ve got over 35 people working in product design and engineering. So the rate of delivery has also accelerated quite a bit.

John

And we have one I think pretty significant advantage on the product side, which is that we’re building a tool for ourselves internally today. There will be a tool ultimately down the road that interfaces directly with the clients. And so that is certainly on our roadmap, but today our technology is used by our appraisers who are on our staff. And so there’s that really powerful feedback loop between our actual colleagues, it was originally Noah and I designing our dream software for ourselves as appraisers, now it’s our entire 40 plus person appraisal team working directly with their colleagues who I guess now they virtually sit next to each other, but in the pre COVID role are literally sitting next to our product design engineering team, and designing this the software together. And so I think that internal feedback loop has been really powerful for us in terms of being able to deliver things quickly.

Louisa

Nice. Clients often biggest frustrations is not having a product that considers changing and fit what their needs are. You mentioned the COVID word, how has it impacted your business? Surely your product has had change for the market, or is it fairly resilient?

Noah

The fact that we have a cloud based system has been hugely valuable, everything is cloud based. So database, all of our data and Dropbox, we use Salesforce for our operating system, as a company our appraisal writing platform is all in the cloud. And so that makes it very easy for us to be remote. And so in a lot of ways, nothing changed and a lot of the work that we had done enabled that when we hit COVID.

Louisa

So if we’re looking at 2021, you are in 30 states and perfecting your product. Can your product be replicated in other countries? Over here in the UK, I know a couple of firms who are doing it, but none which has particularly grown ,and there’s definitely a gap in the market for it.

Noah

Yes absolutely. So we’ve only focused in New York and DC and we’ve only gone after clients in those markets. But because of the level of service that we’re able to provide, we have clients that have asked us to work in over 30 different states. So our focus really to date has been in just those two geographies. As we look to next year, we want to expand geographically, but valuation and appraisal is a global industry. And it is a pain that is felt all over the world. So we met with Cushman Wakefield’s Head of Europe, and their pain points are the same pain points we face here. And it’s the same exact methodology. We’re actually talking to an appraiser now who works in Canada, and the governing body in the US is called USPAP, and the governing body in Canada is called CUSPAP, and they have been harmonised, and it’s very much the same problem set. So we see Bowery as potentially a global company, and that’s what we’re working towards. John you gave a talk to a bunch of Japanese bankers.

John

Yes, they were like, when can you be in Tokyo? I’m like trust me, I want to be in Tokyo as soon as we possibly can!

Louisa

So going truly global, well let’s hope we can all start traveling again. Outside of revolutionising appraisals and going global, talk to us a little bit more how you both spend your spare time if you do have any spare time. John, you mentioned you’d like to be a chef among many other things, since lockdown how have your culinary skills come on? Is there a particular dish you started cooking? Talk us through that?

John

I think the increased cooking has been one of the few positives COVID for me, definitely been cooking a lot more which is really nice. I really I love seafood and shellfish. I make a lot of spaghetti with clams and other dishes and the shellfish world, but food and film are my real passions in life outside of work. And so COVID has only enhanced that time in terms. I think there’s a lot of other things I really do miss I can’t do any more from COVID such as traveling and seeing friends, things like that, but the cooking parts are really nice.

Louisa

You say you love scones, very British of you. What do you have with them, do you have the cream and jam or what do you have?

Noah

There’s actually this bakery in Berkeley, California where John and I grew up called the Cheese Board. And it’s this really important institution in Berkeley, and they make a number of scones and I just have them straight, but it is one of my great joys to sit outside of Cheese Board and have one of their cold brews and eat one of their scones. It’s a pretty amazing thing.

John

Absolutely love Paris and France, but I stand by the best baguette I’ve ever had in my life is from Cheeseboard

Noah

when you’re out here when it’s safe to travel, we’ll take you on a tour.

Louisa

Oh I can’t wait, whenever that will be. Unfortunately coming to the end of the podcast, please tell the audience the best way for them to connect with you and Bowery. John if you want to go first.

John

So the best way to connect with me I guess would be to send me an email. My email is John@boweryvaluation.com if I’m slow to reply I apologise.

Noah

Email as well, but even as I’m saying, this, this is such an obvious indication of how antiquated our industry is. I don’t know if people have Twitter or Instagram or anything that, so I feel I’m part of the problem as well. But the best way to reach me is Noah@boweryvaluation.com

Louisa

Awesome. Thank you guys, and also audience can probably catch them at the bakery, they’ll probably be lurking about there as well! Look thank you guys for joining us on the podcast, and I’m looking forward to catching up with you after the show. Thank you for joining us this week on the podcast and a big thanks to our special guests. Make sure you visit our website www.lmre.co.uk where you can subscribe to our show, or you’ll find us on iTunes and Spotify where all good content is found. While you’re at it, if you found value in the show, we’d appreciate it if you could rate and review us on iTunes or if you simply spread the word. Be sure to tune in next Tuesday, and I’ll catch you later.

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