It’s not uncommon to hear the word “risk” across any number of industries – but what does it mean for commercial real estate, specifically? And what’s your current risk level?
Two Types of Risk
Broadly speaking, there are two types of risk common to commercial real estate firms – reputational and operational. Reputational risks are those typically associated with numbers – bad data, incomplete analysis, or inaccurate reporting. Operational risks (also commonly known as “key-person risks”) are typically associated with people – being understaffed on a project, or having a key team member resign or leave unexpectedly.
I was recently speaking to the Chief Operating Officer of a Dallas-based investment firm with $3 billion in assets under management. We were discussing life before and after adopting Pereview as their asset management software platform. She emphasized how confident the firm is in their data now – from aggregating data from operating partners, through their internal analysis and decision-making, and ultimately to accuracy of their investor reporting.
She told me that one very astute, very demanding institutional investor who had regularly pointed out her firm’s errors and miscalculations in the past was now giving them unstinting praise. That investor was moving from the fifth-most invested LP to the No. 1 invested LP in their newly-created multifamily value-add fund.
That’s an instance of Pereview solving issues related to reputational risk.
I then called the Chief Compliance Officer of a New York City-based investment manager (this one with $16 billion in AUM) and asked him the same question. What was life like before, and now after, adopting Pereview as your Life of the Asset software platform? His story underscores how Pereview solves operational risks.
Before implementing Pereview, this company was reliant upon a single Excel valuation model that was stored on the laptop of one senior team member. This was a venerable company with five core funds hugely reliant upon one spreadsheet and one key individual. And that spreadsheet wasn’t even parked on the company intranet, but rather a desktop.
The CCO told me: “Daryl, we’re all aware of that saying ‘what happens if you get hit by a bus?’ Well, this individual walked some 10 city blocks to and from work on a daily basis in arguably the most congested public transit traffic in all of the U.S.!”
To make matters worse, this employee was known as one of the best in all of real estate for performing valuations (having created his own advanced model), and yet this individual never trained anyone else at the firm on how to use it.
Now, with all data from across the Life of the Asset flowing into Pereview, multiple people within the firm have access to data that was once siloed on a single person’s desktop. Reports can be generated at the push of a button with accurate, actionable data. But the CCO and I both cringed knowing that hundreds of other real estate investment management firms in the U.S. have similar stories to tell related to operational risk. This real-life example plays out more times than the industry realizes – it can happen when an employee goes on vacation or extended leave, or following a retirement or some other form of attrition.
How Pereview Reduces Risks
Through automated reporting, connected Excel modeling, and multiple data capture options with data validations, a Pereview client now has all of their data in one place. This allows an organization to mitigate key-person risks and drive organizational efficiencies with clean and governed historical and point-in-time data. This includes accurate, forward-looking projections, and educated assumptions via data visualizations, ad-hoc analysis, document management, and shared dashboards.
There’s simply nothing better than hearing a Pereview client tell me that our platform is making their firm better by ensuring their data is consistently at their fingertips. Pereview’s turning our client partners into commercial real estate superheroes – faster than a speeding bullet, more powerful than a locomotive, able to leap tall buildings in a single bound … or leap out of the way of a speeding bus!