How Banks Can Leverage CRE Loan Data to Optimize Asset Sales

As banks look to shrink their exposure to commercial real estate (CRE), they must explore strategies to maximize the value of their loan sales. Many institutions turn to third-party service providers to help position their assets more favorably, ultimately optimizing returns. The first and arguably most crucial step is to effectively gather, organize and standardize data. 

“Reliable, well-structured 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. By contrast, poorly organized data can discourage potential buyers, as they may deem the time and cost required to clean, analyze and evaluate it too prohibitive in the allotted time frame. 
 
With recent industry consolidations, banks often find their loan data scattered across various systems that do not communicate with one another. This data may reside internally or with external service providers, stored in anything from outdated tapes to Excel spreadsheets or even physical paperwork. 

“Unifying all of that is step one,” said Cleare. "If a bank is regionally focused, sometimes each region has their own way of doing things  -- onboarding a loan, managing the data, etc. Not every bank has a centralized system that retrieves all the relevant data from the other systems.” This can make data standardization a highly manual and time-consuming task.

Third-party firms can assist by pulling critical data such as servicing information, financial statements, and other essential documents from multiple sources to reduce errors and inconsistencies that might repel prospective buyers. Third-party firms gather, verify and update data to ensure it tells a compelling and accurate story about the loan portfolio.  

This process involves refreshing outdated information and stripping away unnecessary bank-specific jargon. "At SitusAMC we understand how the industry consumes this data, so we decode abbreviations and standardize bespoke language in the bank’s servicing system,” Cleare explained. “Instead of seeing a bank property code like LH1 or MO2, a potential buyer knows that the former stands for lodging and the latter refers to multifamily. We make sure the data is both accurate and easily interpreted, whether it's a translating a column header, putting together a legend or removing a distracting column that we know is not important to potential buyers.” 
 
If banks skip this critical data-preparation step, they risk being inundated with time-consuming questions from potential buyers. Buyers may ask for clarification on loan terms, risk ratings or how financial statements are handled, forcing banks to spend valuable time and resources responding to these inquiries. Poor data presentation not only puts a strain on internal teams but can also weaken competitive bidding, potentially reducing the sale price.

Bringing in a third-party provider early in the process ensures that all relevant information is consolidated into a single, easy-to-review data package for potential buyers. “Sophisticated investors demand accurate data presented in a clear and standardized format,” Cleare said. “Banks can have the most beautiful pictures, tables and charts to illustrate the loan pool’s performance, but granular data is what drives the deal.” 

Organizing data is just the first step for bank professionals navigating the complexities of CRE sales. Banks must also streamline processes and perform a comprehensive book review. SitusAMC’s new white paper “3 Ways Banks Can Mitigate Risk and Maximize Value When Selling CRE Assets,” explores the strategies to position assets to optimize returns. Download the paper here. To learn more about how SitusAMC partners with banks to help them maximize the proceeds of loan sales, visit our website.