Conject Finance-Paper En

8/22/2019 Conject Finance-Paper En

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Reducing the Real Estate

investment risks


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Challenge for Investors

conject supports all relevant real estate processes in nancial institutions through an integrated and modular system ofsoftware services that focuses on process improvement. The software services have been internationally proven to signi-

cantly improve processes, automate routine administrative activities and minimise the risk of earnings erosion across the

real estate lifecycle.

conject supports core real estate processes such as:

cost control during construction, maintenance and refurbishments

structured property documentation

regular surveys & appraisals

asset/portfolio disposals


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After providing loans or other investments to real estate developers there is a need to gain visibility over progress. Signi-cant changes in cash ow can occur during development and/or construction. Funding may be delayed or postponed due

to lack of construction progress. Alternatively, tendering may progress quicker than planned or unplanned nancial con-

straints may require earlier or higher loan payments than anticipated.

Budget planning for operating existing assets needs timely and intensive interaction with Property Managers (internal and

external) to agree on reliable cost forecasts for the short and medium term. This ensures that an assets value can be

sustained or raised and that necessary nancial resources are provided for the SPV, observing all applicable review and

approval processes.

Most of the time Developers and external Property Managers supply budget and cost data in spreadsheets. Since these

spreadsheets usually comprise data accumulated from different systems (or from other spreadsheets) analysis across

projects or assets/portfolios is virtually impossible, as is any standardisation of reporting. Moreover, calculations are rarely

consistent which makes them hard to reproduce. Formulae can also be changed or corrupted, either intentionally or unin-

tentionally. Since the format of data received is often incompatible for upward import to corporate nance systems, some

or all of the data often needs to be manually input into these nance systems for onward incorporation into appraisals,

budgeting, further analysis or balance sheets.

Cost control during construction, maintenance and

refurbishment


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conject offers clients a consistent approach & system for control of their investments across the construction period. Aworkow-driven change management platform ensures all review and approval processes can be complied with by all

parties, and to rapidly identify and arrange additional funding if needed. Reporting tailored to respective audiences allows

everyone involved in a process to gain an instant picture on cost progress. Invoices, contracts and any associated docu-

mentation often contained in emails as well as change orders or specic tenant t-out information, is associated with

nancial transactions and can be reconciled with approved budgets and invoices at any time.

For any maintenance or refurbishment activities of existing assets, this same process can be applied. Any reporting needed

to ensure comprehensive cost management can be obtained on the touch of a button, even when looking across phases.

Budget planning will always be compliant with dened approval processes and allows the integration of external service

providers. Cash ows can be planned per contract and are aggregated on project and/or asset level, taking any risk or

reserve positions into account. In addition, responsible project managers can be informed of expiring warranties.

Cost control during construction,

maintenance and refurbishment


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When acquiring new assets or developments for funds, operational responsibility usually transfers to new or existingexternal service providers. Their objective is to sustain or increase the assets value through day-to-day management.

The property owner maintains responsibility for short and mid-term cost planning, and for management of warranty and

security expiries, as well as any other budget, cost, and revenue planning during the assets li fe.

At some point assets may well be sold in order to realise value. A complete & structured set of documentation is essential

for a nancially successful disposal.

Any gaps in documentation can lead to signicant reductions in sales price and can increase transaction risks, even after

the completion of the disposal. It may even stop the disposition process. Since properties need to be appraised more regu-

larly, a well-kept and comprehensive documentation record reduces time and cost for surveyors.

External property managers need to focus on invoicing rent and service charges, as well as ensuring that each property

is maintained to a high quality. Experience shows that for teams to comply fully with dened processes there is often a

considerable demand for manual effort. Coordination between Property Manager and Asset Owner regularly happens via

email that for a variety of reasons may not be maintained and accessible for the entire holding period. It may also be

incomplete or inconclusive if different external parties are communicating directly. Tendering existing service contracts

every 3-5 years also means that assets and portfolios are being managed by different service providers, with different

people. A change in responsible parties makes the loss of information a very likely risk. Additionally, coordination of tenant

t-outs and refurbishments need to be coordinated by the service provider but should be structured and system-based to

ensure information can be exchanged with the Owner and made visible.

conject offers a unique system for maintaining comprehensive documentation related to assets, able to be contributed &

accessed by Asset Owners and Service Providers. Any relevant documentation, e.g. registrar entries, permissions, lease

contracts, insurance policies, tax records or technical maintenance documentation, are centrally stored in a highly struc-

tured environment and accessible for all internal and external process participants through the internet. This documenta-

tion provides all information needed at any point in time to minimise effort nding new tenants or buyers for assets and

providing them with all documentation necessary for the due diligence. Moreover, conject offers a consistent data structure

across all assets and service providers.

Property documentation


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Property documentation

Integrating external Property Managers or other Service Providers, e.g. to coordinate refurbishments or tenant t-outs,is easy with conject. It allows better control and management of an assets operation but also automatically documents

any information exchange. We give our external Property Managers access to conject so that we can have access to any

documentation at any time, without having to ask them to supply it. This way we save a lot of time and even more im-

portant ensure we have a full set of property documentation even if we re-assign the propertys management to some-

one else. Markus Rink, Head of Technical Competence Centre, Commerz Real.

To ensure the property documentation is seamlessly kept up-to-date, conject may also be used to manage documents and

design plans during new developments and refurbishments. After the scheme has been nalised, all relevant documenta-

tion can be selected and approved, and user rights are transferred to the operations team allowing for a complete docu-

ment record to be implemented from acquisition to disposal.

conject also supports all project-related cost-control activities during design and construction as well as throughout the

assets operation. It covers budget planning and helps achieve strategic management goals by supplying a variety of

standardised reports and forecasting tools for investment cost calculation, KPI analysis, change management and bench-

marking.


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Where large portfolios are kept for long investment periods, property documentation tends to be incomplete and inac-curate. For periodic appraisals, gathering all necessary documentation to achieve pre-set KPIs and valuations can become

time consuming and may substantially increase costs.

Often a propertys documentation is incomplete - important documents detailing a propertys value are missing or certi-

cates and permits have expired. When the asset was purchased the vendor may have provided paper documentation, or

worse, a DVD with thousands of unstructured documents. For a long time, the impact of this loss or lack of information

could be ignored, since procuring the relevant documents would be in the future when the asset was planned for disposal.

Since value appraisals have become more frequent, Asset Managers undertake the cumbersome and often manual process

of information gathering more than once or twice a year, across a variety of assets. This not only includes the procurement

of relevant documents but also validates the information already in place, gaining updates and collating everything togeth-

er to provide to surveyors. Some of the documents need to be digitalised rst, or they may need to be moved to external

storage devices to allow the surveyors to gain access. In addition, the use of email to chase information, manage respons-

es and agree commitment dates from external parties (lawyers, auditors, etc), can be a mineeld.

As surveyors need to review all documentation that is submitted, a well structured information platform can reduce time,

improve project management and thus save money on each appraisal. As users can interact with conject through tradi-

tional email systems and/or through very simple user processes, information can be captured at source and submitted to

surveyors for review in one simple process.

Colleagues and external parties can be asked to procure or update documents which can have been pre-set as place hold-

ers, with the co-ordinating Asset Manager keeping full control of the process. For any future appraisal only new or updatedinformation needs to be supplied, completing any remaining gaps. Further queries can be submitted (and answered)

through the systems communication module allowing them to be forwarded to third parties for answering and fully docu-

menting any exchange. A complete audit trail supports the appraisal.

Appraisals


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Asset-/Portfolio Disposal

For any property owner, it is crucial to avoid gaps in their asset or portfolio documentation since this can inevitably leadto signicant sale proceed reductions. It may also increase the transaction risk (resulting in later damage claims) or may

delay or even stop a disposal.

At the beginning of each sale, property documentation is being assembled for potential investors and needs to be revie-

wed and agreed with all parties participating in the transaction. A full set of documentation needs to be distributed to se-

lected potential investors as quickly as possible. At the same time, each investor needs a simple way to access all relevant

information at any time, and instigate queries ensuring they are dealt with in a timely and auditable manner. This way, the

due diligence process will be swift and the disposal will go forward at the best possible price.

If changes in documentation need to be provided by email or paper it is challenging for Transaction Managers to make

sure all potential buyers have received the same information. Access to le servers may pose problems with regards to

availability, access rights or data security. Again, this increases transaction and contract risks since the future owner may

claim lack of crucial information during the due diligence, stalling the transaction or payments.

There are challenges once a sales transaction commences:

Updating a dataroom index is cumbersome, and often incomplete, since it relies on a manual process.

Identifying the actual information needed takes considerable planning and then needs owners to deliver against

the placeholders.

Q&A, communication and document management across different systems make it hard for potential investors to

rapidly retrieve a relevant piece of information.

Collating all questions and answers and identifying where outstanding points require completion requires a highlydiligent process.

conject offers an internet-based transaction platform containing all relevant data and documents central to the due dili-

gence process. It is available to all parties taking part in the disposal, with access regulated via individual security rights.

The great news is that access to the system and subsequent interactions can be undertaken direct from a users email

system.


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The system updates potential investors on any new updates to data or responses to issued questions, in a secure, private,

environment. All potential investors are informed of any changes in a timely manner ensuring up-to-date and high-quality

information to support due diligence.

Even in the run-up to a planned disposal, conject can support the Asset Manager. At that point in time, if documentation is

incomplete and unstructured, the data and documents essential to complete the process can be highlighted and procured

online from a variety of parties (Property Manager, Lawyer, Surveyor, Auditors, internal departments). Since not all docu -

ments and data are even digital and may be spread across various companies, this reduces the time consuming, and often

labour intensive exercise of data retrieval, or even creation.

conject supports data dissemination and approval and ensures document quality and security. At the same time processes

are signicantly faster and documentation will be available at the earliest possible time. conject supports nancial institu-tions in reducing their Real Estate investment risks, reduces the amount of internal routine tasks and maintains full control

over all phases of the real estate life cycle, whether the investment is direct or indirect. At the same time, conject offers a

future-proof solution to improve nancial institutions ever more complex risk management processes.

Asset-/Portfolio Disposal


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conject

21-25 Church Street West

Woking, Surrey, GU21 6DJ UK

Phone: +44 (0)1483 712620

Fax: +44 (0)1483 756325

Email: [email protected]

Internet: www.conject.co.uk

Documents

Conject Finance-Paper En