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Debt & Equity

Asset manager using artificial intelligence to get ahead in New York’s investment sector

Compound Asset Management, a New York City-based real estate asset management company, is partnering with Vanderbilt Appraisal to use artificial intelligence to get ahead in the investment market.

“The future of real estate investment belongs to the investors who have better access to data and the ability to interpolate and correlate millions of data points,” said Vanderbilt founder Michael Vargas.

“For Vanderbilt, this is an ideal strategic alliance. Compound’s platform is single-handedly aggregating the most robust training data for an artificial intelligence-driven investment platform in the country’s largest real estate market.”

Compound uses data and valuation analytics from Vanderbilt Appraisal’s data to power its investment process.

The proprietary algorithm will be applied to the available property dataset in order to winnow the available inventory into a shortlist of 25 to 50 of the best investment opportunities based upon Compound’s analytics. This subset of properties can then be analyzed and negotiated by human investment professionals, reducing the amount of human capital required and the potential for human bias. The AVM, automated valuation model, will provide an objective valuation metric using hundreds of data points. AVMs also power so-called “i-Buyers” like OpenDoor and also Zillow’s home valuation tool, the Zestimate. “Today, there are more than 3,800 apartments publicly listed for sale in Manhattan – and there are hundreds (if not thousands) of ‘shadow inventory’ units, which are uninhabited or soon to be uninhabited residences,” said Janine Yorio, CEO of Compound.

“As units come on and off the market and price changes are announced, the ability to parse through this complex data will allow us to pin-point properties that fit Compound’s investment strategy.”

Jesse Stein, Chief Investment Officer at Compound, added, “The AVM plays an essential role in automating our investment process because it allows us to establish an accurate baseline value for each asset quickly, without human intervention and before spending valuable due diligence time.”

According to Bill Staniford, Chief Product Officer at Compound and former CEO of PropertyShark, one of the first companies to commercialize real estate data, creating an accurate AVM for New York City has proven difficult, primarily because evaluating vertical real estate is much more complicated and involves more variables than valuing suburban, single-family homes.

“We have what we believe is the most accurate AVM for New York City in existence which gives us a competitive advantage when it comes to identifying investment opportunities and acting quickly on them,” said Staniford.

Compound’s strategy is to hold residential assets for the long-term in a fund, rather than rehabbing and flipping them. The firm believes this model is more sustainable and less vulnerable to market downturns.

Last month, the company made its first investment with its Manhattan Residential Fund, acquiring a 49 percent interest in properties located in Chelsea, Flatiron and East Village at a valuation of $47 Million.

Two Kings Real Estate will contribute the other 51 percent of the purchase to the fund.

Compound’s Cityfund allows accredited investors the opportunity to invest a minimum of $2,500 in city-specific residential real estate assets.
Manhattan Residential Fund will acquire condominium units, apartment buildings and townhomes.

The firm plans to continue to expand its Cityfund offerings to key United States markets as well as abroad.

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