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Investment capital isn’t in short supply—plenty is available from China, Europe, the U.S. and other sources. So why are real estate investors working harder, yet finding fewer high-return opportunities?
One dampening factor is increased investor choosiness arising from due diligence activities that increased starting in 2009, when a low market virtually guaranteed returns and asset prices would rise. Plus, the regulatory climate has thickened. But the main problem today is that the marketplace, especially the U.S. with its abundance of capital, is chasing relatively few investment opportunities.
Can fund managers under pressure to place money they’ve raised find, evaluate and capitalize on good deals? Yes, says Rob Teel, Yardi’s senior vice president of global solutions—if they have the means and ability to unearth opportunities they ordinarily wouldn’t consider, or even know about. We asked Teel for insight into how technology can be an ally in the effort to identify investment opportunities and manage assets through their life cycle.
Q: What’s a key trend among the real estate property owners, managers and investors you encounter?
Teel: A lot of people are seeing the advantage of automating investment accounting, performance measurement and investor reporting with an integrated investment and asset management system. They realize that having all decision-making tools within a single system exceeds what’s possible with spreadsheets and separate databases. Managers dealing with hundreds of combined funds, entities, properties and investors are happy to be free of manually uploading data, relying on cumbersome spreadsheets and mining data from separate systems.
Q: What matters the most to investment managers as they evaluate potential acquisitions?
Teel: Getting a complete picture that helps them decide to acquire an asset and the best option and optimal time for renovating or selling it. This underscores the importance of automating the assembly of information—including loan abstracts, asset ratings, sales data, and valuation tracking and occupancy trends—from all market sources.
Q: Once they get the complete picture, how can they use that information?
Teel: They can immediately gauge an asset’s likely impact on the overall allocation of the fund and determine whether it would maintain the fund within its asset type threshold and investment strategy. They can also evaluate pipelines, register all deals under consideration and speculatively match them to the right investor. They can visualize the entire acquisition pipeline and set realistic expectations for stakeholders.
Q: Can you cite another example of technology’s role in identifying and evaluating investment opportunities?
Teel: A business development platform that compiles loan maturity dates allows investors to identify property owners who might want to sell in the face of rising interests rates. It can also shed light on a property’s potential net operating income and help investors evaluate the likely impact of renovation or other value-add work, determine whether the market can bear rent increases, and evaluate other considerations that might lead to generation of a pro forma statement.
Q: Does the information-gathering capability you’ve described hold value beyond the acquisition phase?
Teel: Absolutely. It’s crucial to note that most best-of-breed valuation tools can’t manage the lifecycle of the asset. An integrated technology platform, on the other hand, continuously collects data related to facilities maintenance, construction options, energy consumption and other operational details, along with a portfolio’s macro exposure to property types, geographic exposure and other factors that impact asset value. This constitutes a vast pool of data for evaluating an asset over a years-long investment lifecycle.
Q: What’s the bottom line?
Teel: The investment experience can be much more positive with integrated property, investment, deal management and accounting platforms capable of assimilating the full scope of property prospecting, preliminary underwriting and asset management information. Used to their full extent, such platforms can help investment managers uncover profitable deals, hit compliance targets and satisfy investors.
Learn about Yardi’s solution for driving investor value by automating the real estate investment management lifecycle.
