The first three months have been very active for the commercial real estate industry, with many well-funded acquirers active across all sectors.
And, on the other side of the bid, many sellers are putting assets on the market as prices remain firm in most sectors or are at all-time highs. Yet, it is more difficult than ever to win a deal as traditional buyers are either passing or their bids are not good enough.
What’s the impact? Deal teams tackling higher frequency of deals, seeking deals in other sectors or simply taking on too much risk. Stress levels are high and the pressure is building as we enter the second quarter of the year.
Real estate investment teams, who are competitive by nature, know that they need to leverage every advantage available to them. As a quick reminder for readers who are not familiar with our data service, here is a high level overview. As a deal team receives an offering memorandum from their broker or from the seller directly, Altrio’s team will, within a tight turnaround period, extract all the pertinent deal data and property characteristics and load them in our clients’ Origin database. This essentially kick-starts the analysis process. How? The deal data is now in Origin and ready for analysis.
This Altrio Data Service uses a best-in-class approach of machine-based, human-aided data extraction to ensure maximum speed and accuracy. The service processes hundreds of offering memorandums and other deal-related documents (rent rolls, cash flow statements, models, etc.) each week for our clients.
Our data-driven approach to deal management gives our customers three significant advantages:
1. Faster underwriting
2. Greater conviction through exploitation of proprietary market data; and
3. Increased capacity to widen to top of the deal funnel
Let’s dive into these three factors in more detail.
The timeline on most deals is unpredictable. There are factors involved which are out of the acquirers control, including response times from the seller, inspectors and government agencies. One element that the buyer can control is the time it takes to underwrite the deal. If the deal team has to spend hours typing data from the offering memorandum, rent rolls, etc. it will take longer to complete the financial model.
Time spent building and populating models with basic information is time that could be better spent flexing assumptions and considering different structures, to arrive at a more comprehensive analysis.
Origin also makes it easy to find the key assumptions used in previous models for similar assets in similar markets and to keep track of changes across versions of the model for a given deal. All of this adds up to faster, more efficient underwriting.
Having a higher level of confidence in your assumptions means you can push your bids without worrying about overpaying. If every bidder had access to the same comparables for pricing, rents, operating costs, etc. all bids would fall into a small range. However, active deals teams have access to proprietary data gained through their previous pursuits, the assets they own and their own research.
Altrio’s Data Service allows our customers to capture, structure and mine this proprietary data for comparables to support a winning bid.
While each property will have its unique or nuanced features, it is helpful to understand what the market will bear in terms of capitalization rates, income and expense growth assumptions, financing terms, and so on. In Origin, our clients are building their database of comparables each and every day simply by using the platform and data service. In some cases, we’ve seen clients add 1000’s of new sales, rent and costs comps to their Origin database each month, allowing them to weaponize data that previously may have gone underutilized.
Deal teams who use Origin can look at more deals. The time our customers save by not having to type in deal data or search through dozens of PDFs and Excel files to find useful comps – together with the ability to make a bid or pass decision more quickly – results in being able to source and screen more deals. Specifically, team leads will be confident in accepting more deals to underwrite, find it easier to explain their recommendations and relish in seeing their bid win rates improving.
To learn more about how the Altrio Data Team can become your data advantage and help you win more deals, please request a free demo.