By Thomas A. Rizk, chairman and CEO, TractManager
Real estate professionals are quickly learning that in this current fiscal environment, any transaction must be undertaken in an expeditious manner. Closing sales, signing leases, even just keeping financial documents in order, requires having up-to-the-minute knowledge of current market activity. And with the market moving faster than ever, it’s imperative that professionals keep the pace.
Lenders are being impacted on a daily basis by what’s going on in the marketplace. We saw Lehman Brothers file for bankruptcy overnight. We saw Washington Mutual get acquired very quickly by JP Morgan. Sometimes, when these transactions happen, there arises an opportunity — a real estate owner can purchase his own debt at a discount or a building could be sold in order to avoid a default on a maturing mortgage. Given that today’s climate makes it incredibly difficult to refinance real estate, lenders and owners need to be able to take advantage of new opportunities, and they must do so quickly.
But it’s impossible to take advantage of such a situation without the proper information in place. The process of performing due diligence can be time consuming and arduous. In the past, all due diligence was done in a “war room” with an army of lawyers and stacks of paper documents. Today, many companies rely on PDF files that create an electronic pile of documents for lawyers to sort through. Neither of these methods lends itself to speed.
What’s the Solution?
One of the primary solutions to ensuring that information is up to date and ready to go at the same pace as the market is to invest in an electronic database that can store and track all of the information a lender or real estate owner would need to complete such an advantageous transaction. Companies today need to be able to instantly review all of the information necessary to make an intelligent decision. In real estate, that information falls into one of two major categories.
First, there are leases, which are the most common type of transaction for many owners. Being able to review and project revenue is an essential step to performing due diligence. In order to accurately review existing and past leases and future projected income, a real estate professional must be able to, at a minimum, spot check the lease abstracts against the original lease documents, or simply review the original lease and skip the abstracts all together.
Within our company, we have seen that lease administration is one of the most-used parts of our software system. It allows real estate professionals to effectively and efficiently create due diligence documents. In contrast with the “war room” scenario and the typical means of compiling electronic documents to review terms and clauses, having a pre-built and updated database with lease terms can save an owner upwards of 50 percent on the time it takes to perform this aspect of due diligence. If that owner is using real estate technology correctly, they will be updating their lease administration databases on a daily basis, ensuring that their information is accurate and timely. Our PropertyTract technology, for example, makes it quicker, easier and less costly to track data from leases. Our users create an abstract or use a table of contents or searchable lease database to quickly find the information they need.
The second category of vital information that real estate professionals need to review before entering into a new agreement are vendor contracts, which are necessary to service the buildings in question — whether a single office park or an entire real estate portfolio. Knowing the terms of the HVAC contract, the landscaping arrangement and cleaning charges might seem like a small matter when considering a large sale or purchase. Yet these are the types of services that represent the true operating costs to an owner. Having a database that contains all of those agreements and outlines what services are provided and at what cost enables an accurate model of future finances. It’s not enough to review the accounting system – there also needs to be an understanding of the terms of the written agreements to budget for expenses on an ongoing basis.
It’s no secret that the current fiscal environment is difficult. Every penny counts. It is a major advantage to have technology that can help significantly reduce operating costs of a building as well as put the owner in the position to quickly complete a sale or financial transaction.
TractManager is a national Internet-based technology firm specializing in secure, real-time access to customized and centralized contract and document database systems. TractManager has offices in Saddle Brook, N.J. and Chattanooga, Tenn.