Top 4 limitations in managing CRE debt in Excel

While Excel serves many purposes, it was not designed to assist CRE professionals in managing their loan portfolios and therefore has many inherent limitations when used for this purpose.

1. Data integrity risk. Without a series of robust processes and controls, the use of Excel to track loan-related information can increase the risk of relying on inaccurate or outdated data. This can lead to failures in compliance and ill-informed strategic decisions, yet many CRE investors track loan- and debt-related information in Excel. Given how tedious loan review and term extraction can be, coupled with the need to manually transfer this information into Excel, the use of spreadsheets is highly susceptible to human error. In addition, when loans are modified (e.g., refinance, principal draw or paydown), the “right” person needs to know that this has happened, update the spreadsheet(s), and ensure that the “right” others within the organization know where to access the most current and complete information. Excel provides limited audit trail functionality for purposes of understanding how loan terms have changed over time and who has made what edits to any places that data is stored.
2. Time- and labor-intensive. Managing a portfolio of CRE loans in Excel is both time- and labor-intensive, which can limit the productivity of real estate acquisitions, capital markets, and asset management teams, particularly those that run lean. Members of these teams add the most value by focusing on achieving organizational targets through optimizing asset performance and identifying opportunities to acquire, sell, or refinance properties. Yet many of them spend too much time locating and poring over loan documents, loading and updating data, and ensuring that nothing “breaks” in the “master spreadsheet” and anything that’s linked to it.
3. Limited insights and actionability. Beyond simply capturing terms, how do you use them to derive insights and drive action? Most debt tracking spreadsheets, or abstracts prepared by counsel, contain static data relevant at the time it was entered (and likely no longer). However, markets are constantly in flux, and it is critical to understand your loan in the context of current market conditions, avoiding the pitfalls of making important decisions based on outdated information. An effective debt management program calls for consumption of various historical and live projected interest rates for purposes of budgeting and forecasting, double-checking payment notices from lenders, and calculating prepayment costs in connection with evaluating a potential sale or refinance.
4. Incomplete solution. Because Excel was not designed to assist CRE professionals in managing their loan portfolios, it fails to address common needs to execute on an effective debt management strategy. For example:
   • Key terms. Which terms and attributes are most important to track at the level of a specific asset, fund, or portfolio? Spreadsheets serve as a blank canvas that provides flexibility to capture and analyze an infinite amount of data, but you must know what to track.
   • Key date reminders. Effective debt management requires prompts as various relevant deadlines/timetables approach (e.g., extension notifications, amortization, maturity, covenant compliance)
   • Easy access to the right documents. CRE teams often store their loan documents in some combination of shared drives, active or archived email, or even in hard copy. Not all team members have easy access to the same documents, leading to version control issues, where somebody relies on a document that is not the latest/final. Teams also can lose documents when somebody leaves the firm abruptly.
   • Managing enterprise/key person risk. A single team member often manages data extraction and capture, increasing enterprise risk if this team member abruptly leaves the firm or switches roles, potentially creating a single point of failure.

These are four of the many limitations of using Excel to manage a loan portfolio. If you're ready to explore alternatives, please reach out to us via the form below.