A new introduction

Major funds are pressing agents to sign up to a new web-based property transaction system that could fundamentally change the way they work.

By Tim Tanaher

For as long as anyone in the Property Industry can remember, the crucial tools for the investment agents have been the telephone and, more recently, the fax machine.

Now these traditional ways of introducing deals are being challenged. The Property Investment Exchange website, known as Propex, seemed another doomed attempt to cash in on the dotcom boom. However, it is now being aggressively pushed by the major funds that own it, which are seeking some order in business that has always been based on personal relationships and quiet tips.

The funds regards the system, where introductions are submitted electronically to a central database at each institution, as a good way of streamlining their operations and cutting out introductions they consider spurious. But for agents, it means a fundamental change in the way they work.

Showdown meeting
The time last year Propex was going nowhere. The property transaction website, the brainchild of property researcher Colin Barber in 1998, encapsulated everything that was wrong with the dot com boom. Its £1m of venture capital backing was fully spent but the system was still not up and running. So last August, the funds and agents who had signed up to the site held a showdown meeting and decided a new team was needed. They chose the team that runs PrimePitch, the online property sale site that is one of the few to have weathered the dotcom boom, although Barber remains very much involved.

Even so, by the time Propex went live in March this year, it was greeted with some scepticism. But now that its institutional backers have seen it in action, they have become enthusiastic about the system and how it could simplify the complex system of introductions.

In its four months of operation Propex has secured 578 individual users, about 200 from the institutions and property companies, and about 370 from agents. Of the 80-100 introductions made every day to all institutions, about 20 are done through Propex, and that figure is increasing.

Paul Marples, managing director of Propex, believes it will make little difference to agents’ day-to-day lives, but others believe it is already changing the way introductions are made.

Agents, particularly small firms, say the big funds are increasingly trying to force them to use Propex for their introductions. Their fear of upsetting the big institutional investors means they are reluctant to go on the record. But in any case, the funds make little secret of their plans to turn it into the standard introduction format.

‘It’s our strong preference for introductions to be made on Propex,’ says Peter Best, a regional director at Prudential who has been involved with the development of Propex. ‘It’s got quite a momentum now, and we’re leaning more heavily on agents to make their introductions this way’.

Prudential, is one of the biggest institutional fans of Propex, is not alone in its enthusiasm.

Tim Turnball, director at Aberdeen Property Asset Managers, says: ‘We’re not saying we won’t accept any other introductions, but it is very helpful to us and we are now using it as our system for managing instructions’.

For the institutions the advantages are obvious. It reduces the time involved in processing introductions received by phone or fax, because the information arrives on Propex in a standard format.

Perhaps even more importantly, it reduces the opportunity for agents to claim what the funds see as spurious introductions when a deal has gone ahead.

‘You wouldn’t believe the number of times you’ll do a deal and then some agent calls you up and says he offered it to you in the pub a couple of months ago,’ says one major fund manager.

More certainty for agents
The funds claim the system’s advantage for agents is that it gives them more certainty. ‘It means we can give a more rapid response so agents know if we’re going to run on it,’ says Aberdeen’s Turnbull.

But the funds’ enthusiasm for Propex means that agents, particularly small firms, feel they have had their arms twisted into joining. Membership is £750 a year with a minimum cost of £1,000. Some agents, both large and small, say they have been told by some of the big funds that it would be a good idea to use Propex if they want to continue winning sales instructions. None of the funds will admit to this.

Henderson Global Investors is one of the few big fund managers not to have signed up for Propex. Its chief investment officer for property, Guy Morrell, says he is happy with Henderson’s methods for tracking introductions. He is worried that a new online system could exclude small agents and those outside London.’

‘We support the principle of using technology to make the process of property investment transactions more efficient,’ Morrell says. ‘However we do not want to force agents into adopting one particular system, and we will therefore continue to accept valid introductions using other routes.’

But most of the other big institutions, plus a handful of the biggest property companies, including Land Securities, British Land and Hammerson, have backed Propex. This, combined with the speed advantage it gives agents in submitting their introductions, means smaller firms are beginning to feel it is essential that they use the system.

Many of the funds signed up use Propex as their standard method for logging introductions. When an introduction is faxed or phoned to Prudential, it is retyped into Propex and managed through the system. Marples says that 650 introductions have been made across the exchange, but there are 9,600 introductions logged because many funds have put all their historic introductions on the system.

Although some of the funds regard Propex as an exclusive system, other investors, such as Hermes and Land Securities, view it as an extra tool. ‘We are certainly not using it as our exclusive system for introductions,’ says Hermes’ head of property Richard Harrold.

There are concerns that the system may be open to abuse, with investment agents particularly at the big firms, firing off huge volumes of speculative introductions and punting the same properties to several potential buyers.

However, Prudential’s Best says there is no more chance of this happening with Propex than when something is put out by fax or phone.

Funds exercise discretion
The funds have discretion about whether to accept the introductions, and are more likely to accept those from agents they already have relationships with.

‘My initial reaction was that any old idiot would be able to introduce anything to anybody,’ says Mike Pope, partner at specialist City agent Morgan Pepper. ‘But the funds do have a degree of discretion over which introductions they accept.’

‘If they get introductions on the same property from more than one agent, they’ll tend to go with the people they already have established relationships with.’

So far, the big firms of agents, which need to maintain good relations with as many of the funds as possible, have almost all been persuaded to join up. Some niche operators, who want to keep in the funds’ good books, are coming on board. The gap in Propex’s coverage is the top investment specialists, such as BH2 and Franc Warwick.

The funds are unlikely to force their top dealers to ditch their phones for computer screens but their enthusiasm for Propex means few agents will be able to resist its onwards march.