Lenders haven’t been able to make the most of their portfolio data in the commercial real estate (CRE) space. Siloed information, manual processes, and inefficiencies have gotten in the way. A recent survey shows nearly 80% of respondents in the industry still need to fully modernize their data management systems.
Inaccurate and out-of-date data sets can lead to erroneous loan valuations, increased portfolio risk, and a poor customer experience. CRE lenders solely relying on Excel spreadsheets and legacy systems developed in the 90s to analyze risk, assets, and loan portfolios need to consider how a cloud-based deal management system can help optimize their portfolios in today’s challenging markets.
A new way to look at CRE data
CRE lending has yet to be a digital-first field. Data management is primarily a manual process siloed among various stakeholders, costing time and money. McKinsey found that Fortune 500 financial institutions can capture significant financial benefits by capitalizing on the cloud’s optimization levels. Not leaning into digitization and cloud technology also presents an operational risk, missing out on opportunities to innovate and decrease inefficiencies.
“Failing to invest enough in technology could be short-sighted,” noted Deloitte’s 2023 Commercial Real Estate Outlook. The firm predicts organizations that embrace flexibility and leverage technology innovation will unlock potential, enhance core services, and gain competitive advantages. Lenders will need easy access to deal management data to review each property, accurately calculate loan-to-value and interest income, and quickly view how investments perform.
When data is digitized, the process—from loan origination to administration, pipeline tracking, and portfolio visibility—becomes more efficient for stakeholders and third parties.
The benefits of better data for CRE lenders
Few can deny the benefits of digitization and cloud storage. However, for CRE lenders, using a cloud-based deal management solution goes beyond data storage. Instead, it’s a way to derive more value from data without complicating current processes, frustrating developers or owners, and missing investment opportunities.
Historically, the root-level data for asset managers, debt funds, and lenders have been living in silos within disparate Excel workbooks and Word files. Working with a deal management solution that integrates with your current workflow is key. That doesn’t mean tossing spreadsheets out the window, but integrating on top of the Microsoft Office suite, both Excel and Word.
Lenders can still utilize spreadsheets for ad hoc modeling while layering them directly into a data management tool, which stores and digitizes data for advanced analysis, dashboard creation, and collaboration.
For example, a lender can use a spreadsheet to build an underwriting data model for a potential investment. Rather than having that spreadsheet need to act as the model and database—with siloed information that stalls collaboration—lenders can integrate it with a deal management platform. Now, the data is easily accessible to all stakeholders, and customized dashboards and reports can be created with a few clicks.
Let’s dive deeper into the key advantages that easily accessible and manageable data can offer:
Access detailed reporting and analytics
By digitizing information, lenders can start automating functions related to data reporting analytics. For example, the ability to generate customized reports on everything from originations to underwriting makes it easier to uncover insights and take action. When lenders can pull in comprehensive data from Excel and access it in the cloud, it’s easier to generate reports and share them with investment committees and investors.
Digitized data management also helps improve every stage of the deal pipeline. Beyond managing investment and property collateral, lenders can harvest data and use predictive analytics that pulls in historical information, improving forecasting, tracking, and project completion rates. Now, it becomes easier to model CRE data and report on analytics. And, with information stored in the cloud, it’s possible to collaborate on deals from anywhere—accessing data, reviewing documents, and communicating with colleagues within the platform.
Enhance current workflows
Rather than entirely replacing the need for Excel and spreadsheets, cloud-based data management solutions can enhance workflows with integrations. Two-way Microsoft Excel and Word integrations can help lenders maintain current workflows, minimizing changes to daily operations and offering complete configurability and customization. Lenders can still use Excel for what it does best while gaining more efficiency. Layering digital data storage, reporting, and analytics solutions on top of native workflows will offer transparency and real-time information while reducing risk and errors.
Data silos can trigger delays in workflows as well. With data and documents on a cloud-based platform, it’s easier for stakeholders to access internal records, reconcile loan information, and quickly review and approve documents related to deals and draws.
Make better investment decisions
With better data practices, lenders can make better investment decisions and price deals more accurately. For example, pricing becomes much more efficient with access to comparable data that’s been verified. In addition, higher-quality data allows for more transparency and visibility into the numbers, making it easier for decision-makers to reduce risk and find even more investment opportunities.
After all, inefficiencies can financially impact lenders when new real estate deals and loan administration are on the line. Digitizing this information helps lenders understand the overall investment, including potential risks, compliance issues, delays, and draws. Buying and selling, generating interest income, and monitoring critical cash flow will become that much easier.
Differentiate from the competition
As deals become more complex and portfolio managers seek higher returns, it’s increasingly essential for lenders to automate operations, streamline workflows, and make better decisions faster.
While current setups can get lenders part of the way there, a deal management solution can seamlessly integrate with existing processes and digitize them, offering better insights into your portfolio’s underwriting, closing, and asset management.Topics: CONSTRUCTION FINANCE