How Software Is Changing the Real Estate Underwriting Process

Last month we reported on funding news for an underwriting software called Assess+RE. There are announcements for investment rounds all the time but what turned our heads was who was providing the capital. One of the main investors is Ranieri Strategies, which was founded by Lewis S. Ranieri has been famous in the investment world for some time for his role in creating the securitized mortgage market. He has since become known by the general population for his role in the Michael Lewis book and subsequent movie The Big Short. A seasoned, high-volume investment house like Ranieri seeing something in a technology was a hint that we needed to dig little deeper.

Underwriting is a commonly overlooked part of the real estate workflow, but it shouldn’t be. Property decisions are made from information from a huge variety of sources. Underwriting properties is key to understanding risk and so it is one of the most important things an investor does. It requires a lot of manual labor by high-skilled (and highly paid) people and can be the thing that holds up the purchase of real estate.

Using software to speed up underwriting has obvious benefits. But doing so isn’t an easy endeavor. We had some follow up questions for Assess+RE CEO Min Suh to help us better understand exactly how his software is able to qualify property information better than what is being used today.

What does Assess+RE do to help the underwriting process? Which types of property companies is it most useful for?

Assess+RE provides a comprehensive, yet intuitive, solution for underwriting and valuing almost any commercial real estate asset or portfolio of assets. By applying heuristic analytics to property-level operating assumptions, Assess+RE enables transaction stakeholders to develop in-depth, asset-level financial analyses. Intuitive reporting metrics and visual dashboards summarize these analyses. Based upon usage statistics with over 1,500 users, Assess+RE significantly streamlined the underwriting and valuation process, to less than two hours on average for modeling a single asset.

The Assess+RE platform is designed to work for anyone within the commercial real estate transaction chain. Our customers are brokers, appraisers, investors (individual, family office, fund, and pensions), developers, lenders (banks, life insurance companies, or private lenders), hedge funds, private equity funds, and asset managers.

What part of the information gathering process do Assess+RE clients struggle with the most? How has the platform changed to further help those processes?

Assess+RE’s platform has addressed several inefficiencies associated with underwriting, valuation, and investment decision areas, including: (a) repetitive workflows to create customized formulas within Excel, (b) auditing and correcting complex models in Argus and Excel, (c) the ability to integrate third party data from internal or external resources via the cloud into a single data repository, and (d) the ability to securely manage and exchange financial reporting information in a SOC-compliant manner.

Where does Assess+RE pull in data for the underwriting? Does it allow clients to keep their current data providers?

Assess+RE’s platform enables users to import data from Argus DCF and Argus Enterprise via those tools’ Excel exports. Assess+RE Enterprise clients are able to manage underwriting and valuation data sources within a single data repository. The Assess+RE platform leverages API integrations through the cloud to exchange data sets (such as with accounting systems, property management systems, asset management systems, bank operating systems, and investor reporting systems), making the process seamless.

Assess+RE’s platform enriches this data with “Smart Tips”, which are visual cues within its user interfaces. “Smart Tips” are part of the heuristic analysis feature, enabling users to better understand which data inputs (e.g., inflation rates, tenant vacancy rates, lease renewal rates, price PSF) and outcomes (e.g., IRR, NAV, NOI) are realistic/similar to other types of assets which have been modeled within their company historically.

What do you see as the future of property underwriting? How will this change the way real estate data is bought and sold?

Although the commercial real estate market is responsible for a significant part of the U.S. and world economy, it has been slower than other industries to adopt technology to improve its human capital operations and net income margins.

At Assess+RE, we believe the future of property underwriting, valuation, transaction management, and asset management will see increased data transparency. Companies will increasingly view data as an asset, and value it accordingly. As elsewhere, operational efficiencies will be realized through software incorporating highly sophisticated scenario analysis and data visualization within “real time” environments.

Smarter software will determine an organization’s valuation trends, analyzes trends and indices, and automate these processes. Smarter processes will subsequently increase a company’s ability to review more transactions, with improved operating outcomes. Information will be readily available, highly correlated, extremely accurate, and shareable between entities that typically do not interact.

Since every property company has different techniques, does Assess+RE allow their product to be customizable? Does it help inform its clients on ways that they could change their processes to create more efficiencies?

The Assess+RE platform is highly flexible. The platform and its individual feature sets are built as a “service”, which leverage APIs. Therefore, our platform can be customized to fit any organization’s needs. A specific example of customization: Assess+RE can deliver custom key performance indicators based upon a specific customer’s reporting and information dissemination needs. Another example is the ability to integrate disparate and siloed sets of information from internal and external data sets. Our professional services and customer success team is comprised of product engineers and product designers who work side-by-side customers to determine software requirements, and implement those requirements into “their” instance of the Assess+RE software platform. Our goal at Assess+RE is to build a platform that is capable of supporting any customer’s unique needs, while at the same time satisfying the majority of customer needs without customization.

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