Welltower has licensed a customized version of its data science platform to Frisco, TX-based Public Storage to help the public self-storage facility-focused real estate investment trust “deploy capital with greater velocity and precision on granular acquisitions to ultimately achieve stronger risk-adjusted returns,” the Toledo, OH-based REIT said Sunday.
The agreement with Public Storage represents the first time Welltower has licensed a bespoke model of its platform.
“While real estate is the world’s largest asset class, it has historically been characterized as a local, ‘gut-feel’ industry that has proven to be one of the most unscalable businesses. While some have attempted to scale the business through service models, we believe that the only way to truly scale this business is through the data generated by the assets,” Welltower CEO Shankh Mitra said.
“Harnessing the power of Welltower’s data science platform, Public Storage will be deploying quantitative models for the real world — a world of science and math, not language and images — trained on decades of actual, proprietary performance data. This will significantly accelerate capital allocation decisions, demonstrating a tangible, real-world application of AI,” Mitra added.
As part of an arrangement, the companies said, Public Storage also will share its operational data science capabilities with Welltower to help improve Welltower’s operating performance and analytics-driven decision-making across its business.
“Both Welltower and Public Storage have built differentiated data science capabilities that create a durable competitive advantage,” Public Storage’s incoming CEO, Tom Boyle, said in a statement Sunday.
Public Storage, according to Welltower, “has developed best-in-class operational data science capabilities as part of its transformation, including revenue management, customer behavior modeling, demand forecasting, and operating efficiency analytics, which are core drivers of net operating income growth and margin expansion.”
Welltower said that its data science platform, including machine learning, deep learning and artificial intelligence, “is designed to dynamically direct capital to the highest risk-adjusted return opportunities across acquisitions, developments, dispositions and lending.” The platform has led to more than $80 billion of capital allocation activity by Welltower since it was created in 2016, according to the REIT.
Through the platform, Welltower said, it has compressed the transaction process from five to nine months down to a few weeks using advanced mathematical models. The customized version that Public Storage will license from Welltower uses various supervised and unsupervised learning to focus on micro-markets with the greatest return and growth potential.