Fresh out of Harvard Business School in the early 1980s, Pat O’Connor came back to Houston to work with his father as a commercial real estate broker. But the self-described technology geek quickly realized a sales job wasn’t for him.
Having noticed many of the names atop the Fortune 500 list were in publishing, O’Connor shifted his focus from selling apartments to investors – to tracking down data for them instead.
Today, Houston-based O’Connor & Associates provides real estate research and data, appraisals, property tax appeals and cost segregation services to real estate professionals and consumers. Revenue in 2016 is expected to be upward of $20 million, mostly from the property tax appeals business.
O’Connor lately has been spending much of his time building up the data side of the business, a company called Enriched Data, which he hopes one day could help save the country from another financial collapse. For example, it would give more data about residential mortgage-backed securities, one of the causes of the 2008 recession.
He recently spoke with the Houston Chronicle about ways to put massive amounts of data to use. Here are edited excerpts.
Q: How did your penchant for data begin?
A: I started off as an apartment broker selling apartment projects. After about two years, I started doing the Houston Apartment Trends newsletter really as self-promotion. It was a one-page, two-sided newsletter we’d send out monthly. We put out information on apartments that had sold and some economic trends. Then we decided to make it Houston Real Estate Trends, and have it for apartments, office, retail, warehouse, land and the economy. We made it a paid publication.
Up until about 2008, the data was used mostly to support our real estate appraisal business and the real estate property tax appeal business.
Q: And then?
A: In 2008, we expanded to cover Dallas, Austin and San Antonio for apartment, retail, industrial and office. About two years after that, I decided to do deeds and deeds of trust for the same major metro areas.
Now we have a national database for deeds and deeds of trust and tax rolls that covers about 97 percent of the country. We have this large team in Coimbatore, India, to help us write programs to process the data and who also can enhance the data. We have about 40 software engineers doing coding, and then 360 people are involved in either data entry or data processing or research. We do a lot of web research.
Q: Enriched Data is the company you spun off last year to provide real estate information to big commercial property brokerages. How does that business work?
A: Our biggest niches right now, one is giving mortgage bankers information on mortgages that are about to mature. The fees are often for them three-quarters of a point or a point, so on a $5 million mortgage they’re looking at $35,000 to $50,000. So having good information on mortgages close to maturing is valuable information. The highest and best use of their time is not doing web research.
The other is real estate investment brokers and other people who want to contact people who are buying real estate. We’re processing all the sales of real estate and highly developing the contact data for sales of commercial real estate valued at $2 million and more.
Q: In your wildest dreams, where do you see the company going?
A: We’d like to get to where we’re working cooperatively with real estate professionals, especially appraisers, and giving the data to appraisers and getting back in turn enhancements they make. We’d like to get to the point where we’re better able to value properties than any other data provider.
Take RMBS, residential mortgage-backed securities, which might consist of a pool of 10,000 mortgages and underlying that is 10,000 houses. The concept with the RMBS is you’d value each house in the pool and then take in information on the mortgage and see if it’s under water or there’s equity. Then you could look at data on the pay history. Then you could look at Nielsen Psychographics for the people living in the home to understand their level of affluence or not.
So in my craziest dreams, it’s providing valuation services to Wall Street for real estate securities or things like bonds or things that are secured by real estate.
Q: How many tax protests does your firm do, and what’s the success rate?
A: About 180,000 appeals each year, and hopefully it’s about a 65 percent success rate.