Thank you for sharing!

Your article was successfully shared with the contacts you provided.

Commercial real estate investment managers are struggling to reconcile demand for more information with their ability to measure key risk parameters as quickly as possible. That’s the consensus of more than 50 representatives of investment management firms, REIT’s and private equity firms who responded to a survey from Needham, MA-based Resolve Technology.

“With the real estate sector bracing for further fallout from the economic downturn, investment managers are shifting their focus from managing growth to managing investment risk,” says Resolve CEO Eric Forman.

The survey found demand for information is growing in response to the economic slowdown, with investors and internal decision makers exercising tighter controls. More than 80% of respondents rate the frequency of demands for reports and information as higher than a year ago. But many companies are struggling to measure some of the most requested risk parameters. Many perform key calculations on risks such as tenant exposure every three months or more.

More companies said they are required to include debt mark-to-market calculations in their financial reporting. But many acknowledge difficulties projecting future compliance with Loan-to-Value and Debt Coverage Service Ratios as property values and projected income continue to decline. More than 70% of respondents consider such ratios important to financial and operational decision making. But more than a third concede it can take days or weeks to calculate a portfolio’s future DSCR–and nearly half take just as long to calculate future DSCR for an entire fund.

“With property values going down and some tenants defaulting on lease payments, debt ratios can quickly be out of compliance with loan terms,” Forman says. About a third of the companies responding report they use what-if scenarios to evaluate debt strategies on a weekly or monthly basis. Another 41% perform the analysis quarterly and 22% perform it annually, at best.

Forman says the survey “demonstrates the struggles of the industry to keep up with the growing demand for timely information and the need for proactive, forward- looking risk management capabilities. Most companies still rely on custom-built Excel spreadsheets as the primary tool for measuring risk and running what-if scenarios. There is an urgent need for better information infrastructure and analysis tools across the industry.”

Forman’s comments are not exactly surprising, since Resolve markets a complex suite of investment management software. But a random survey of industry professionals concedes the assessment is accurate.

Sophisticated software can provide global, up-to-the-minute access to data “much faster because the data is integrated into a centralized system that allows you to search or research specific tenants or industries,” says Eric Schultz, a portfolio management associate at LaSalle, a wholly owned but operationally independent division of Jones Lang LaSalle Inc.

Want to continue reading?
Become a Free ALM Digital Reader.

Once you are an ALM digital member, you’ll receive:

  • Unlimited access to GlobeSt and other free ALM publications
  • Access to 15 years of GlobeSt archives
  • Your choice of GlobeSt digital newsletters and over 70 others from popular sister publications
  • 1 free article* every 30 days across the ALM subscription network
  • Exclusive discounts on ALM events and publications

*May exclude premium content
Already have an account?


Join GlobeSt

Don't miss crucial news and insights you need to make informed commercial real estate decisions. Join GlobeSt.com now!

  • Free unlimited access to GlobeSt.com's trusted and independent team of experts who provide commercial real estate owners, investors, developers, brokers and finance professionals with comprehensive coverage, analysis and best practices necessary to innovate and build business.
  • Exclusive discounts on ALM and GlobeSt events.
  • Access to other award-winning ALM websites including ThinkAdvisor.com and Law.com.

Already have an account? Sign In Now
Join GlobeSt

Copyright © 2021 ALM Media Properties, LLC. All Rights Reserved.