Hipercept | Brexit: How Commercial Real Estate Investment Firms Can Prepare For Change and Improve Risk Management

Brexit: How Commercial Real Estate Investment Firms Can Prepare For Change and Improve Risk Management

It has now been eight weeks since the historic referendum by the United Kingdom to vote to leave the European Union. Good news, the markets and investors have settled down and most funds are reporting stabilised net flows. However, the continued political and economic uncertainty means that Commercial Real Estate Investment Management firms need to take action to ensure they remain competitive in the market and do not fall behind their peers.

Adaptability

During these moments of uncertainty, it is crucial to be able to rely on your internal systems for quick and accurate responses to any question or scenario posed by investors, clients or internal teams. Having this adaptability will demonstrate that you have your finger on the pulse, but it is not possible without great data management and great tools. The ability and robustness of your procedures to produce data accurately, efficiently and effectively will ensure you remain adaptable to both the changing market, and internal and external demands for information.

Efficiency

Old working practices and systems are increasingly exposed as unresponsive and inflexible. An effective information management platform should be doing the heavy lifting and providing quick answers to changing scenarios. Having the ability to copy a scenario, adjust the lease assumptions or sensitivities and see the impact to a fund or portfolio should take minutes, not hours, and should not have a key man risk.

Mobility

Your Asset Managers should have the best tools at their fingertips to interactively walk through scenarios and portfolios with stakeholders, wherever they are.  Modern tools provide this capability. They avoid costly duplication of information and remove the risk of hard coded analysis, mis-keying, and the carrying of constant paper files with confidential and quickly obsolete information.

Performance Analytics, Risk Management and Forecasting

Investors, now more than ever, will be looking for accurate and up-to-date information on their investments and any mitigating factors they should be aware of in the future. They will be expecting accurate answers to difficult questions and your responsiveness to these and your ability to back up your decisions will either reassure them or reduce their confidence in you. This can potentially cause them to consider transferring their funds to other more proactive organisations.

Data Management

The data necessary in your systems comes from disparate locations; property managers, valuers and fund accountants. Bringing this data together is a challenge for most organisations. Ensuring you have the latest information in one place, as opposed to it being replicated in many places, is where tools like Voyanta, Ikindi and i-level come into play. They make this task simpler, more efficient and push the management and accuracy of the data back to your partners.

Next Steps – Actions to Consider

To gauge your readiness, ask yourself the following questions:

  1. Do you have high value people completing low value tasks?
  2. Are you reliant on key individuals to model changing market indicators for specific assets and portfolios/ funds?
  3. Are your models inconsistent and difficult to audit?
  4. Are your staff duplicating data efforts and collating it individually?
  5. Is it difficult for you to analyse the impact of particular tenants across all your portfolios?
  6. Is it a challenge to perform benchmarking and compare performance by any attribute? (e.g. asset type, location, size)
  7. Do your teams spend hours of time aggregating data, rather than reviewing and auditing their assumptions?
  8. Do you find it difficult to measure the performance of partners (internal or external) in their provision of valuation, financial and asset data?

If you answered no to six or more of the questions below, this is an indicator that your firm is already well positioned to respond to the changing market.

While there is no “magic bullet”, if you are not thinking about the effect of these challenges on your operation, your investors will be, and your competitors are using this opportunity to convert such challenges into key differentiators.

Many firms partner with consulting organisations to ensure best-in-class internal operations and data management processes. For information on Hipercept’s services for commercial real estate investment management firms, click here.

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