Real Estate Investment Trusts (REITs)
The global REIT market continues to expand, with the UK and several European countries adopting REIT legislation over the past two years. Most of these entities have invested in solutions to manage and report on their historic financial performance as well as to hold legal and financial details of their assets and liabilities. Where many REITs have failed to invest is in forward-looking financial analytics. At Cougar™ we equate this to driving your car while looking backwards!
The recent global credit crises have highlighted the need for real estate investors to have their finger on the pulse of all operations, both historic and most importantly, future. The impact of mistiming debt refinancing, key tenant lease expiries or cashflow waves can be devastating, particularly to public REITs.
Cougar™ offers peace of mind and visibility across the real estate lifecycle by integrating data from property management and accounting, valuation and market sources to give analysts, asset managers, property managers and accountants the accurate data to support the entire investment Real Estate business process.
Specific areas where Cougar’s REIT Edition adds value include:
- Budget Preparation – streamlined process saving considerable time, duplication and risk of error
- Forecasting and Reforecasting – immediate results allow continual reforecasting and monitoring
- Valuation (internal and external) – either using Cougar™ for the full valuation or integrating with local market tools to manage the valuation process
- Quarterly and Investor Reporting – readily provide quarterly and supplemental data
- Investment Analysis – assess returns over an investments lifetime rather than typical point-in-time analysis
- Performance Management – review and manage actual performance against budget and reforecast
- Support of GAAP and IFRS accounting standards as well as PISCES/OSCRE standards
The lead up to 2007 saw extraordinary growth and performance in the real estate fund and private equity markets with abundant capital from numerous sources, and this continued through the first half of 2007. Cap rates were at historically low rates, fuelled in part by the liquidity in the markets.
The latter part of 2007 saw the market hit with the global credit crisis, with subordinate debt as a catalyst, and the implications have been felt throughout the industry. The new environment will give rise to a slowing down in transaction volumes and growing cap rates, as well as far more stringent reporting demands from investors and regulatory groups. On the opportunistic side, investment opportunities will now arise at greater yields than in the recent past and private equity funds are accumulating capital to take advantage of these dynamics.
These and other related market trends mean that real estate investment managers need to have a very clear picture of the performance of their investments over the entire lifecycle, not just at a point in time.
It is essential that they have robust tools to analyze, assess and respond to historical and forecast fund performance, undertaking sensitivity and “what-if” scenarios, and pulling in disparate data from a multitude of sources. Once the data is at hand, these managers must be able to model complex scenarios and structures, project returns, and optimize the use of available investment capital. Of critical importance, the calculations are carried out within Cougar’s calculation engine so you do not need to rely on a third party tool to provide such critical data! For added comfort, all calculations in Cougar™ are transparent, rather than being undertaken in a ‘black box’, so analysts can see exactly what was done with the data elements to arrive at a given result. This is unique yet essential in the current environment.
Benefits of Cougar’s Fund Edition include:
- Cougar™ acts as the central repository for all real estate investment data and has tight integration with accounting solutions, valuation models, market data and Microsoft Excel – in fact Cougar™ brings in ANY cashflows with ANY chart of accounts structure
- Ability to easily model below the NOI line and capture all elements of debt and equity structures, including different tiers, subordination, waterfalls and timing
- Consolidate historical, actual and reforecast financial and property data, generating real-time Fund, Portfolio and Investment performance and risk metrics and sensitivities such as IRR, NCREIF and AIMR returns, and LTV
- Produce performance reports such as dynamic IRRs, time-weighted and horizon returns, and multiples for quarterly, annual, and ad hoc reports
- User-definable performance management dashboard
- An investor reporting environment that gives secure access to each investor’s lifecycle from initial investment through calls and distributions to eventual liquidation of the fund
- Tight integration with Microsoft Excel - we know this tool will always be used to some extent
Corporate Real Estate
Corporations today are very concerned about effective and efficient use of real estate. It is a significant cost (one of the top three with HR and IT) and has historically been treated as an unavoidable cost of operations. Additionally, space comes at a premium and environmental concerns are driving corporate executives to take a hard look at the way they house their employees and operations.
Landlords have had the upper hand with tools to model deal terms on the fly and calculate the total IRR and DCF on a deal when negotiating with tenants. Corporate real estate transaction managers typically rely on spreadsheets to model the total cost of occupancy.
With Cougar’s Corporate Edition, CRE managers can take a lifecycle view of their assets and liabilities and are enabled to carry out sensitivity analysis at the lease, building, cluster, region or portfolio level. Most importantly, they can undertake the required analysis for informed financial decision making within a robust, integrated environment, drawing upon the lease and accounting data from their underlying CRE/FM system through an automated ETLR mechanism.
Benefits of Cougar’s Corporate Edition include:
- Get control of the financial side of your real estate obligations
- Model lease versus buy in a robust framework
- Real time analysis of lease T’s and C’s to assess impact on total cost of occupancy
- Integrate market data to determine whether an early renewal makes financial sense
- Side-by-side analysis of lease deals with all underlying assumptions and metrics
- Integration with underlying CRE/FM systems allows for monthly refreshing of models, giving a true lifecycle view of owned and leased real estate