Altus Group Ltd., a Toronto-based company that started life in 2005 as an income trust providing consulting services for the commercial real estate industry in Canada, has been busy repositioning itself.
Its new goal is to be a technology company with a far reach. It wants to make Altus Analytics the international standard for helping subscribers manage commercial real portfolios that span the globe.
"Companies are looking at investing in real estate on a global basis, and that's a phenomenon that is going on at a time when there really isn't a good solution to managing real estate on a global basis," says chief executive officer Robert Courteau, who joined the publicly traded company in 2012 after serving as global chief operating officer at international software giant SAP. "There hasn't been tools in this industry like ones commonly available in other asset classes. We are building those tools."
The tools are needed now, he adds, because big players such as banks and pension funds are moving more into global real estate and have an increasing obligation to meet complex regulatory requirements in terms of reporting and transparency. Altus wants to help them make that process seamless, more efficient and more precise.
Security analysts applaud Altus' direction. Richard Tse, an analyst at Cormark Securities Inc. in Toronto, confirms that the company is meeting an unfulfilled need in an industry that historically has had one of the lowest rates of technology investment.
"I think there's a huge opportunity for the company to take manual processes and automate them," he says, noting that many of the back-office functions and analysis in the commercial real estate business are still managed using spreadsheets. "The latest quarter shows that Altus is continuing to expand its global reach."
Altus Analytics is made up of three once-distinct units: the company's research, valuation and advisory consultancy, focusing on appraisals; its Voyanta real estate investment management software; and Argus Enterprise Software, a platform for normalizing and comparing data across the industry.
The company also has a tax service that helps clients make sure their property valuations are fair and in line with industry standards. Mr. Courteau says the company is the national leader for this service in Canada, a top 5 player in the United States, and No. 1 in Britain by profitability.
"We don't want to just be a service provider, we don't want to be just a software provider and we don't want to be just a data provider," he says. "We want to have an information platform where the CEO has the tools, data and software to be able to manage portfolios globally."
As an example, he says, clients can use Altus Analytics to track the performance of their assets on a quarterly basis and then find out how the assets performed against industry benchmarks. They can also perform attribution analysis, which allows them to understand how different asset classes are performing in different regions, which helps them adjust their weightings. The performance of individual assets can also be monitored.
"It's fairly sophisticated and we're first to market with that ability," Mr. Courteau says. "Nobody else can provide that level of detail."
Sixty of the biggest commercial real estate owners in the U.S. are now on the Argus platform, and it has more than 4,500 users worldwide. Most buy multi-year subscriptions that give Altus a healthy stream of recurring revenue, which is appealing to investors. There is also a version that casual users can rent for shorter periods to help with things like cash flow analysis.
In addition to helping Canadian and U.S. companies manage overseas holdings, Altus has been attracting new clients in new markets. It now has offices in Europe, Australia and Asia, as well as in North America, and 2,300 employees worldwide.
The global push is already paying off. From 2012 to 2015, the share of revenue coming from outside Canada grew to 47 per cent from 32 per cent. Over that period, overall revenue grew 29 per cent to $416.4-million.
Altus Analytics' first-quarter revenue was $36.7-million, up 39.2 per cent from the same quarter in 2015.
For 2015, however, overall adjusted earnings were dragged down a bit from the previous year to $63.4-million due to the company's geomatics division, a vestige of the income trust days that focuses on surveying for the oil and gas industry. The company says cost-containment efforts are under way in that part of the business.
Meanwhile, Altus plans to continue expanding internationally, both organically and by acquisition. "We've had major wins in Europe and Asia, and we continue to invest in those markets," Mr. Courteau says. "Forty-six of the 50 top [commercial real estate] asset owners in the world use one or more of our solutions."
Stephen MacLeod, vice-president of equity research at BMO Capital Markets in Toronto, says the shift to technology looks like a good move for Altus. "Generally, I think they're on the right track," he says. "People are recognizing the merits of building out this data and analytics business.
"We think that Argus is a kind of gold standard in terms of commercial real estate valuation and portfolio management," he adds. "And the industry backdrop continues to be pretty supportive for the company's technology penetration."