Long-term Macquarie Group Ltd (ASX: MQG) investors may have noted the formation of a partnership between the investment bank and analytics company CoreLogic that was announced back in May.
Thanks to the folks at Fairfax media, shareholders are getting a closer look at the partnership, which I feel is indicative of the kind of quality investing focus Macquarie has become known for.
Macquarie Group and CoreLogic have paired up with a joint venture called Property IQ which aims to provide three integrated software tools for property managers, strata-title (think apartments) managers and property agents.
The tools are designed to deliver massive productivity improvements to an area that has been described as a 'cottage industry', saving customers piles of money and theoretically attracting lots of sales for Property IQ.
What I like:
- Software business is low ongoing cost, albeit with higher initial start-up and marketing spend
- Partners have proven experience in business development, property analytics and software
- Macquarie already provides services to over 70% of strata managers, allowing for integration and hopefully easier cross-selling
- Australia transitioning into more apartment-style housing, leading to greater numbers of property + strata title managers (ie pool of software customers is growing)
What I don't like
- There are a number of incumbents in the space already and Property IQ is a total newcomer
- Targeting smaller property managers first
- Many major players have close working relationships with their software providers
It will be difficult to take major chunks of market share but targeting the smaller firms that make quicker investment decisions could be a useful way to make an entrance to the sector. Becoming a significant player will be a real struggle and there is the risk that Property IQ won't be particularly profitable if it only captures smaller players.
However, while take-up of Property IQ's offering is likely to be quite slow in the beginning, I feel that Macquarie and CoreLogic both have a strong track record of investing in underserviced sectors and I'm not betting against them.
