BGO, a $17-billion real estate investment manager, is pioneering new ways to find and invest in undervalued, mission-aligned assets. The firm has a remarkable $89 billion in assets under management. To do this, it has become more and more reliant on the principles of data science to inform its investment strategies. Co-CEO John Carrafiell has always placed tremendous value on advanced analytics. This integration allows BGO not to operate on gut instinct, but rather to base decisions on data analysis.
BGO’s creative approach was successful in large part because BGO has an all-star data science/data visualization team. Made up of six experienced professionals, they work hand in hand with the firm’s asset management and acquisitions teams. With this collaboration, they hope to make the decision-making process more efficient by leveraging historical data and predictive modeling. Carrafiell notes that by sitting next to the teams responsible for managing and acquiring assets, the data scientists can quickly respond to market changes and optimize investment opportunities.
This is similar to a recent $20 million BGO investment in an industrial development project in Las Vegas. They completed the anchor through a smart joint venture partnership with Northpoint Development. The company matched 20 years’ worth of historic transactions with a new algorithmic computer model that takes advantage of machine learning. This allowed them to remove the human factor from their analysis. Carrafiell said what they ended up with was the culmination of thousands of data inputs. Many of these can be accessed freely from the government, while others must be bought from telecom providers, yielding tremendous insight. We have found the key.
In their analyses, BGO capped the underwriting rents at $5.88/sq. They did manage to hit really high rates—around $9 per square foot—with success. This huge gap is a testament to the power of their data-focused strategy. Carrafiell further emphasizes the reliability of their model: “We know it’s accurate because we backtest it.”
The data science team’s work doesn’t stop at the Las Vegas border. BGO has used the same analytical methods for investments around Florida and the Rust Belt, leading to millions in returns. Carrafiell mentions that Las Vegas offered some distinct competitive benefits compared to other areas, especially California’s Inland Empire. He states, “We found that Las Vegas offered cheaper rents, taxes, and labor compared to the Inland Empire of California.”
The firm is committed to using technology farther upstream than just analytics. They are looking deeply into artificial intelligence (AI) as a new, powerful supplemental tool. Carrafiell describes AI as “an enhancer and an accelerator that allows us to do so much more,” while emphasizing that the core strength lies in their data science practices.
BGO’s unique practice inspires strong investment returns. Beyond that, it fundamentally changes the playing field for real estate investment firms, forcing them to compete on an entirely new level. Through isolating key variables and understanding market dynamics through historical data, BGO is confident that they have materially upgraded their performance. “We think our performance has materially increased as a result of this model,” says Carrafiell.
BGO expertly manages the ebbs and flows of the real estate development cycle. Its strong commitment to transparent, data-driven decision-making raises the bar high for the entire industry. The firm’s creative ways of doing business positioned it for considerable long-term growth. This is crucial to its success, particularly as a leader in global real estate investment competitiveness.