The valuation process remains a critical aspect in understanding a portfolio’s change in market position over time. However, for large real estate portfolios, the valuation process can be a challenging undertaking typically involving internal staff, industry professionals and various business processes and performance metrics.
Spreadsheets remain the tool of choice for most real estate organizations’ valuation efforts, and yet while able to complete calculations relatively quickly, they inherently have several critical limitations:
- Spreadsheets are often focused on a single property, unrelated to other buildings within a market or within the same portfolio.
- Valuation and operational models are subject to errors and omissions when managed and/or manipulated by various staff, especially during the data collection and input stage.
- Summarizing and rolling up data for reporting at the portfolio level is usually still a manual effort and fairly time consuming.
- Comprehensive analysis of historical and future trends are typically limited, due to data being static and inflexible.
Valuations are an important process in real estate management—as a result, data and software can drive significant value, both for strategic portfolio decisions as well as with bottom line performance. Here are four ways software can help real estate executives:
Automated Valuation Modeling
4tell™’s iPlan™ Portfolio software can help drive better real estate performance by elevating analytical capabilities at the asset, building and portfolio level. Software that can perform complex analysis can help value a building with greater efficiency and speed. Software can also drive more consistent and reliable yet flexible financial models. For example, a change in the modeling approach for one building can be applied to multiple buildings with relative ease. Conversely, applying a new financial model to a portfolio using static spreadsheets would involve significant resources updating calculations and assumptions for each individual building. Valuations for large real estate portfolios accordingly are being increasingly driven by transparent and relational information.
Comparable Market and Portfolio Analysis
Portfolio-wide or market-based valuations are often used by public authorities to systematically value properties based on their individual characteristics relative to other properties in a market. Characteristics such as age, size and building condition are often used. Although computer-assisted valuation processes are not a new tool in the market, the combination of improving software and big data is driving rapid industry change, with direct parallels for large real estate organizations. Overall, market information is more accessible, and statistics and algorithms that are often used in these processes are becoming more complex and detailed. Valuations for large real estate portfolios accordingly are being increasingly driven by transparent, relational and near real-time information.
Effective Data
Having sound data collection, storage and standardization processes can drastically improve the valuation process by ensuring consistency and validity of information throughout the lifecycle of a building. As such, an “asset-centric” data strategy is core to 4tell™’s real estate platform solutions. When data is static and inactive, it can be extremely difficult to utilize the information to make strategic decisions. Additionally, without a good data platform, critical pieces of information such as lifecycle data, financial performance and operating results are often stored in static spreadsheets with no ability to provide forward views for capital investment strategies or valuation-based scenario planning.
Efficient Reporting
Reporting is an often critical but overlooked aspect of the valuation process. Part of a robust and productive data software platform is being able to automate the reporting process for valuations as much as possible. Again, final reporting and summarizing static spreadsheets can be time-consuming or worse—subject to significant error or omissions. A key aspect of 4tell™’s iPlan Real Estate Solution is ensuring that reporting processes are as efficient as possible, relating data to executive-and client-level business and operational requirements.
The ability to gain better insight into the performance of a real estate portfolio cannot be understated. Data and software are rapidly emerging as instant and quantifiable ways to provide real estate owners, operators and executives with a greater lens into the performance across their assets, buildings, infrastructure and portfolios.
Top image credit: mugley
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