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Why Billion-Dollar Portfolios Shouldn’t Be Managed on Spreadsheets

Commercial real estate lending in the U.S. is a high-stakes world. High stakes with big rewards. But it’s also filled with uncertainty. U.S. and global economies, political uncertainties, severe weather and ever-changing regulations create endless challenges for commercial real estate firms. And the downstream effects, like data loss, missed opportunities and operational inefficiencies, stifle growth. To control the chaos and promote growth, today’s CRE professionals need a way to see the full picture. 

CRE companies have access to vast amounts of data, but all this valuable information is fragmented. It exists in structured, semi-structured or unstructured formats and lives in isolated applications, departments and personnel. Unfortunately for real estate professionals, all of this “zombie” data is lying dormant, making it challenging to take advantage of their data to draw clear and actionable insights for better and faster decision making. 

The traditional tools of the trade—homegrown databases, legacy IT systems, out-of-the-box CRMs, proprietary Excel models and various other point solutions—only capture bits and pieces, and not the entire life cycle of an investment. 

Conventional analytical methods and data sources make it challenging to draw clear hypotheses and build robust business cases. Analysts must sift through tens of millions of records or data points to discern clear patterns and place their bets with few supporting tools to help glean insights from that material. By the time an investor can collect, compile, and process the data needed to distill action, the best opportunities are gone.

McKinsey & Company 

This means if asset and property managers want to see the entire history of a deal, start to finish, they must assemble all the data from various sources, such as the multitude of data providers (e.g., CoStar, Reis, RCA), their CRM (e.g., Salesforce), documents storage (e.g., Dropbox, SharePoint) and accounting systems (e.g., Quickbooks, Enterprise!, McCracken Strategy). This process generally happens by exporting data from the sources and then cutting and pasting into a new Excel sheet by hand. Without the use of technology, this can be extremely tiresome for asset managers and risky for a firm since its manual nature lends itself to human error. It’s also the reason real estate asset management technology is so critical to staying competitive and accretive and driving business strategies.

Asset management software can centralize and integrate various internal and external data, making it easier for CRE professionals to manage, analyze and report on their investments. Instead of keeping data sources isolated from one another, software can help collect, organize and standardize it for an apples-to-apples analysis. This allows for a single source of truth for all investment data, robust analytics, powerful queries, rules-based notifications, customizable workflows and more.

Excel is an indispensable modeling tool widely used across every financial industry. But spreadsheets have limitations, especially when dealing with very large data sets. As investment portfolios grow to billions of dollars in value and tens of thousands of data fields to keep track of, spreadsheets become more painful to manage. In such an environment, it is inevitable for key data points to slip through the cracks (a.k.a. data leakage) or Excel to start breaking. Plus, Excel slows to an almost intolerable level when processing large quantities of data, which is often critical time needed for making important decisions.

This can lead to scrambling instead of being proactive. This is problematic because reactive management is stressful and creates rushed decision-making that can have serious consequences for your investors, management and clients. Even the slightest wrinkle, a missed deadline or an overlooked covenant that can trigger all sorts of technical defaults, can have extensive implications. 

There are some one-size-fits-all systems out there, but the reality is that in today’s ever-changing and hyper-competitive market, what makes you different also sets you apart. Those plain-vanilla systems and tools just don’t cut it and in fact may do more harm than good. Commercial real estate lenders and investors have nimble and dynamic products, and so they also require that same flexibility in a technology solution. One that can integrate and build off existing workflows, models and reports, rather than force the use of a system-generated template that cannot be customized or changed without throwing tons of money at it. Then there’s the brain drain necessary to make an inflexible system usable, if that’s even achievable. 

So how do you find a CRE asset management software that meets these needs and works the way CRE professionals want to work? After all, not all CRE software is created equal. Fortunately, there are ways to sort the good from the bad. Here are a few key features to look for.

So how do you find an asset management software that actually meets these needs and works the way CRE professionals want to work? Not all software is created equal. But there are ways to sort the good from the bad. Here are a few key features to look for.

Well crafted asset management software supports each phase of your investments from start to finish. It is the center of your work-stream. This means it helps you track an investment opportunity through each stage of the loan lifecycle, including underwriting, origination, securitization, surveillance, management and disposition.

Good news Excel lovers: you don’t have to ditch your formulas and customized models when you migrate to a CRE asset management software. Instead of replacing the Excel models and reports you worked so hard to build, good software integrates them. Choose a solution that integrates well with Excel.   

Any asset management system can deal with simple, middle-of-the-fairway loan structures. But when it comes to unique vehicles like collateralized loan obligations (CLOs) or highly bespoke transitional products like bridge and construction loans, those inflexible systems fall short. If your software can’t handle the complex deals, is it really helping you? Asset management software should be able to support the following products and more: balance sheet, bridge & construction (loans/lending), CMBSs, warehouse, and mezzanine financing.

The asset management process can look different depending on what type of lending platform you run. If your focus evolves and your products change, you want a system that can adapt with the different needs, requests and demands of your investors, clients and managers. Good software will support your business model and lending program, no matter what you are focusing on or where the market opportunities are at a given time. This includes banks, private equity and funds, insurance, REITS and asset managers, owners, operators, and sponsors.

Many organizations shy away from CRE asset management software purely because of technology investment hurdles. That’s why you should look for a software that is not only cloud-based but also checks all your security and regulatory boxes while at the same time complementing your greater IT goals. 

CRE asset management software helps CRE professionals centralize data, add power and depth to Excel models and bring structure and transparency to the asset management workflow. If you or your firm are still relying on some combination of CRMs and Excel exclusively, or spending too much time searching for data and playing catch-up, ask yourself if you want to continue the status quo or make the switch and invest in CRE asset management technology. 

As more commercial real estate players are adopting disruptive technologies and the numerous FinTech and PropTech firms continue refining their innovative solutions, companies that embrace technology today will have a distinct advantage. Real estate is the biggest asset class in the world. Right now it is primarily managed on spreadsheets alone. The stakes are too high to have something so important be managed exclusively with Excel without the automation or fail-safes. If we want to make our built world more efficient, first we are going to have to complement our spreadsheets by integrating them into much more sophisticated systems where they belong. 

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