If you’re a Lender in commercial real estate (CRE) today, there’s a good chance you need a commercial asset manager to help you navigate the ins and outs of burdensome reporting requirements. As we explained in our prior article, both Borrowers and Lenders have come to face increasingly stringent reporting requirements postclose.
These reporting requirements have led many Lenders and Borrowers in CRE to seek the expert guidance of asset managers. Real estate asset managers monitor property performance postclose, process transactions such as assumptions and transfers, and handle loan maintenance requirements in accordance with provisions of the loan documents.
Do I Need to Hire a Commercial Real Estate Asset Management Company?
The question of whether or not you need a professional commercial asset management company to handle the loans in your portfolio is easy enough to answer. Ask yourself the following questions:
- Do you currently have the commercial asset management personnel resources to address all the transactions and issues for your loans postclose?
- Do you have the necessary tools and technology for monitoring the status of your loans?
- Are you aware of all of the reporting requirements that exist within your portfolio?
If you answered “no,” “no,” and “I don’t know” to the above questions, then you likely need a professional real estate asset manager to guide you through all the transactions and reporting that occurs postclose. Commercial real estate asset managers play a critical role in making sure that you adhere to the riders in your loan agreement, and assist you in managing all postclose transactions.
Covenants and Reporting Requirements for Commercial Real Estate
Examining reporting requirements for Agency loans over the past decade, one observes a clear trend: Fannie Mae and Freddie Mac have developed tools to more effectively monitor and track lender reporting and post closing compliance. This has placed a clear burden on Lenders to ensure they have dedicated the resources needed to ensure compliance.
The Agencies and other governmental and institutional bodies are putting increased pressure on Lenders and Borrowers to maintain consistent reporting. Additionally, Loans are also becoming more complex. With the evolving set of riders attached to CRE transactions, Lenders and Borrowers have come to rely on commercial real estate asset management tracking mechanisms in order to make informed decisions about what needs to be done postclose.
For instance, take the Covid Debt Service Reserve—established in 2020 and amended several times since. The primary function of the Covid Debt Service Reserve (DSR) was to make sure that enough funds were available for borrowers to make loan payments if the commercial real estate market experienced stress from the pandemic. This entirely new concept resulted in a significant burden on lenders. This primarily came about due to an increase in transactions to release the Covid Debt Service Reserves upon the properties meeting certain performance thresholds.
This is far from the only rider on loan agreements for Borrowers and Lenders that would benefit from the expertise and guidance of a real estate asset manager. Commercial asset management solutions require a comprehensive knowledge of all postclose transactions and riders that Borrowers and Lenders need to address.
Armada Analytics: Your Commercial Management Solutions Company
At Armada Analytics, we are consistently refining and streamlining processes and protocols to accurately convey critical postclose requirements to our Lender clients.
By developing tools to generate thorough commercial real estate asset management reports, Armada envisions a future in which we will deploy better and more accurate solutions for the postclose CRE investments of our clients.
Senior Asset Management/Underwriting Analyst