Across four key areas, commercial real estate owners and investors are accelerating their digital roadmap and transforming operations to meet the challenge of covid-19, and a post-pandemic world.
Covid-19’s impact on commercial real estate in 2020 saw companies expedite the digitization of their operations, close and reopen physical facilities, put in place measures to protect the health and safety of employees and tenants, and provide financing options to end users who have been financially impacted by the pandemic.
Economic recovery is now riding on the vaccine rollout and the continued fall in covid-19 cases. Private equity real estate leaders need to weather the medium-term storm, as well as put in place measures to adjust plans, remain competitive and thrive in the long term. A key aspect of this is ensuring they have the right data management, technology and skills in place to operate a digital business, for financial and operational resilience.
Throughout the pandemic, there have been four key areas relating to data that essential real estate clients have turned to technology for support, to maintain a strong financial position and successfully enable teams to work digitally:
- Portfolio data aggregation
Typically, investors or portfolio managers collect standard financial and operating data from underlying assets on a monthly (or quarterly) basis. A predefined set of data points is collected and aggregated (often manually) from external managers, JV partners, and other sources. Since the outbreak of covid-19 and the dramatic impact on tenants, supply chains, and assets, there has been a demand for far greater granularity in reporting, in many cases, now on a daily basis. Investors want to understand the impact on lease deals in the pipeline, tenants requesting rent abatements or reductions, tenants going out of business, the reduction in foot traffic at assets, the costs for assets with essential services (supermarkets, pharmacies, medical offices, and the like) that remain open while the vast majority of an asset is in shutdown, and a myriad of other data requests. Historic systems and templates are not set up to handle these changes in data requests and it is often not a simple process of adding fields.
- Asset analytics
Once the data is collected, it needs to be normalized and modeled to determine how much strain an asset can take before it is at risk of breaching covenants and hitting a negative performance threshold. Many investors are doing this in spreadsheets with complex formulas that are being constantly tweaked and optimized – manually.
- Portfolio/sector/fund sensitivity
The real challenge comes with trying to aggregate the data from individual assets into a portfolio, sector and/or fund model. With so many new data points that are often unique to a specific asset type (e.g., a regional retail mall versus an industrial asset), aggregating this data in a meaningful way is complex and often error prone. Investors are not only aggregating the data in a bottom-up fashion, but also then applying top-down sensitivity drivers to model out where the breaking point is for a portfolio or fund. As we have seen in the media, many daily priced open-ended funds have suspended trading yet continue to charge fees to investors. This is, in part, because these managers are still actively managing their portfolios, arguably more so now than ever, trying to contain the down-side risks while also modeling the impacts of different scenarios on their portfolios or funds over a medium and longer-term.
- Returns and performance modeling
Finally, managers and investors are creating multiple sensitivity models to try to ascertain the impacts of covid-19 on their fund’s performance, their various fees (management, development, transaction, etc.) and, of course, their own carry. At the same time, many private equity real estate firms are sitting on dry powder and are looking for the right buying opportunities as asset values are being impacted, some more dramatically than others.
Lionpoint has helped many real estate owners and investors fill these gaps by leveraging the Anaplan platform.
Lionpoint partners with Anaplan to enable private markets and financial services firms to automate processes, integrate data and drive dynamic real-time updates to their calculations, modeling and forecasting.
Anaplan is the platform for orchestrating business performance, connecting critical operational drivers and financial outcomes across the business to drive growth, optimization, efficiency and continuity. This allows you to move from offline, isolated, manually maintained data—and a high dependence on Excel—to a cloud-based, fully automated, scalable and collaborative solution.
We have developed a suite of Anaplan models to address the key challenges faced by essential real estate, across asset budgeting and forecasting, investment, fund and waterfall modeling, underwriting and development, and other key areas of the real estate investment life cycle.
Summary
Real estate leaders are balancing the medium-term business adjustments required to sustain the drawn out pandemic, as well as ensure the business is set up to execute against business plans and thrive in the long-term.
A key solution that Lionpoint works with clients to implement and enhance the use of, for asset, portfolio, and fund modeling, is Anaplan.
View our Anaplan guide for real estate here.
