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An upstart REIT asset management firm has entered the machine-learning sphere.
Armada ETF Advisors, a Connecticut-based REIT asset manager that launched in March 2022 with a large focus on the multifamily sector, announced a merger on Tuesday with Arialgo Ltd, an early-stage machine-learning data analytics firm founded in 2021 that specializes in valuations for real estate investment trusts (REITs).
The joint entity will split leadership capabilities: Armada’s Phil Bak will serve as CEO, while
Arialgo’s Roni Appel will serve as chief operating officer. Bak told Commercial Observer that no purchase was involved and that both companies are being put together at an equal valuation.
Scott Robinson, an adviser at Arialgo, said the new company will be a family of actively managed exchange-traded funds (ETFs) that leverage machine-learning technology to make investment decisions. He said the merger is the first of its kind in the REIT asset management space.
“We don’t have any peers,” Robinson said. “Nobody is doing what we’re doing.”
Arialgo emerged out of a Columbia University partnership between Appel and professor Assaf Zeevi, Kravis chair at the Columbia Graduate School of Business, who together developed machine-learning valuation models that take 25 different data points to value REIT stocks.
Bak said that his team was drawn to the expertise Arialgo has shown in both artificial intelligence and REIT-factor technologies.
“They developed proprietary machine-learning models from some of the leading experts of machine learning and data science in the world,” Bak said. “Ultimately, they are the most advanced thing that we’ve seen in the REIT industry by a wide measure.”
Appel told CO that the merger puts the combined organizations at the forefront of the $1.5 trillion global REIT market. “You put the strength of the two organizations, and you instantly create an industry leader,” he said.
Armada currently carries roughly $5 million in assets under management, according to Bak, while Arialgo, which is headquartered in Tel Aviv, Israel, holds $2 million in assets under management, Appel told CO.
David Auerbach, managing director at Armada, said that the impetus for the merger was his firm’s recognition of the sudden prevalence of artificial intelligence across different sectors of the economy and the need for innovation in the REIT space.
“One sector that hadn’t started to see [AI] yet was the REIT industry,” he said. “We felt that it was truly underserved.”
Armada launched its Residential REIT Income ETF ETF exactly one year ago on March 1, 2022.
The merger will close in approximately 90 days, according to Appel.
Auerbach said his firm didn’t look at any other options beyond Arialgo when seeking a partner from the nascent world of machine-learning technology. He emphasized that the real estate industry experience held by Arialgo’s management team is comparable to the leadership at Armada.
“What led us both to each other is the mutual respect between the advisory board and the board of directors that our respective teams have assembled,” Auerbach said.
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