3 Ways Banks Can Mitigate Risk and Maximize Value When Selling CRE Assets

U.S. banks are expected to sell more commercial real estate (CRE) loans as the sector continues to face headwinds. As banks prepare to reduce CRE exposure, they must consider ways to maximize the proceeds of loan sales. SitusAMC’s new white paper, “3 Ways Banks Can Mitigate Risk and Maximize Value When Selling CRE Assets,” looks at how third-party provider (TPP) firms can help them present assets in the most favorable light and optimize returns. 

The white paper discusses three ways TPPs can offer banks a significant strategic advantage in the sale of CRE assets by organizing data, streamlining processes and performing a comprehensive book review.

The most critical step in optimizing a portfolio sale is data aggregation and normalization.  “Good data supports a more compelling story for the assets, enhancing investor confidence and driving better outcomes,” said Jen Cleare, SitusAMC Senior Director, Strategic Advisory Solutions. “Disorganized data opens up the possibility that potential investors will walk away, because they may consider it too time-consuming and expensive to scrub the data, perform the due diligence and assemble a bid in the allotted time frame.”  

Engaging a TPR early in the process helps ensure all relevant information is unified into a single, coherent data tape for bidders to review during due diligence.  

Step two is translating policies and procedures. While all banks must adhere to federal regulations and conduct regular audits, the specific ways in which they manage properties, update appraisals and interact with borrowers can vary widely. These nuances, if not properly understood and conveyed, can complicate or disrupt the sale process, the white paper explains.  

“Examining policies and procedures in a loan sale process allows us to better understand the bank and its assets so we can help move this data along, prepare the tape and put things in the best light,” Cleare noted. “The better we understand how the bank does what it does, the more meaningful context we can give to the data, and the more the opportunity will resonate with buyers.”  

Step three is a comprehensive review of the bank’s loan portfolio. Given current market conditions, banks are vulnerable to risks such as interest rate fluctuations and potential defaults. A third-party firm can identify major risks and help the bank refine its strategic approach to the portfolio sale, the white paper notes.  

“The re-underwriting process allows us to take a critical look at individual loans, their performance, and current and future risk, enabling us to help guide the bank to structuring a better pool and optimize pricing,” Cleare said.  

For bank professionals navigating the complexities of CRE sales, partnering with a skilled third-party firm is an investment in precision, efficiency and success. Download the white paper here. To learn more about how SitusAMC partners with banks to help them maximize the proceeds of loan sales, visit our website.