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Guide

How do leading CRE investors manage their debt portfolios?

Summary

Leading commercial real estate investors realize that minimizing risk and maximizing returns requires accurate, proactive management of their debt. They combine CRE-specific debt technology and industry-leading support for implementation/maintenance with advice on best practices.

Debt management is a critical area for compliance and performance, though typically it requires a partner that offers the necessary technology infrastructure along with deep domain expertise and complete operational support. Institutional real estate investment managers need to accurately capture terms critical to reporting and forecasting, as well as key date or event performance, and covenant compliance — areas that asset management or accounting groups likely emphasize. Other teams, such as capital markets and valuations, will focus on different areas of debt, including prepayment or refinance scenario analysis, lender relationship management, debt origination pipeline management, and fair valuing debt either to strike an NAV or for specific investor reporting requirements.

Leveraging the administrative and operational support of real estate debt specialists who extract, populate, maintain, and quality control data in a purpose-built system creates operational efficiency while mitigating risks. Even within the realm of CRE debt experts, institutional real estate investors lean on sub-specialists with deep expertise in specific areas to apply the industry’s best practices in the context of their organization’s structure and culture, crafting the most efficient and effective workflows around debt.

CRE investors manage debt, from origination to maturity or prepayment, such that all stakeholders have easy access to bespoke reports, analysis, documentation, payment calculations, key dates, and other important loan terms. Smoothly integrated technology and advisory support facilitate and streamline workflows such as debt origination, covenant compliance, and debt valuation. The trend among the largest real estate investment managers is to integrate their debt management solution, typically via an API, with portfolio systems or data lakes so they can capitalize on debt data (terms, metrics, and analysis) at the enterprise level. Tailored implementation allows debt data to be further mined in the debt management user interface as well as user-defined reports and analytics.

Outside of particular loan compliance, top CRE investors place a premium on having robust lender relationship tracking, with the best practice being to track current and historical total commitments and outstanding principal, as well as win/loss record of debt bid.

As is often the case with data and technology, debt management needs and use cases are constantly evolving. For a business to run lean, and for teams to focus on their core competencies, CRE investors need a time-tested partner whose technology and consultant support continually evolve and anticipate new challenges and needs in the market.

  • 8 of the top 10 largest real estate investment managers use Chatham's debt management solution
  • 250+ clients across the globe trust Chatham's team and technology
  • $1.3T+ loan principal housed in our system across 47K+ loans

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Disclaimers

Chatham Hedging Advisors, LLC (CHA) is a subsidiary of Chatham Financial Corp. and provides hedge advisory, accounting and execution services related to swap transactions in the United States. CHA is registered with the Commodity Futures Trading Commission (CFTC) as a commodity trading advisor and is a member of the National Futures Association (NFA); however, neither the CFTC nor the NFA have passed upon the merits of participating in any advisory services offered by CHA. For further information, please visit chathamfinancial.com/legal-notices.

Transactions in over-the-counter derivatives (or “swaps”) have significant risks, including, but not limited to, substantial risk of loss. You should consult your own business, legal, tax and accounting advisers with respect to proposed swap transaction and you should refrain from entering into any swap transaction unless you have fully understood the terms and risks of the transaction, including the extent of your potential risk of loss. This material has been prepared by a sales or trading employee or agent of Chatham Hedging Advisors and could be deemed a solicitation for entering into a derivatives transaction. This material is not a research report prepared by Chatham Hedging Advisors. If you are not an experienced user of the derivatives markets, capable of making independent trading decisions, then you should not rely solely on this communication in making trading decisions. All rights reserved.

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