“Our younger colleagues started ‘halfway there,’
Fried says. “They are totally comfortable with tech-
supported communication, and a remarkable num-
ber are already in jobs with some telecommuting
element. The duration of the pandemic is unknown,
and potential smaller ‘blooms’ can be anticipated.”
Fried thinks the pandemic will change the way
business is done. “It’s unlikely that we’ll all revert to
the way we conducted business before this,” he says.
“This [technology] has become an essential spend
that cannot be cut if it’s the key to a business operating.”
Another consideration for innovation investment in commercial
real estate is that these upstarts have not proved their case, at least
in the eyes of some.
Matt Ruark, head of commercial and healthcare mortgage production for KeyBank Real Estate Capital, thinks many of thesestructures with diverse groups of investors at different levels cangive lenders pause.
“I know there’s this desire to open up the marketplace to a
wider cut of investors, whether it’s via crowdfunding or other struc-
tures that are out there,” Ruark told us in late February. “There’s
real hesitancy [from banks]. We’ve seen some crowdfunding try to
come and assume loans or recap certain sponsors and lenders are
uncomfortable in approving that.”
Why is it so tough to get through that approval process? Ruark
says their access to capital is holding them back.
“If you can’t raise a fair amount of capital, and then borrow with
the most competitive sources, it will be tough to compete with pri-
vate equity firms that have a lot of capital,” Ruark says. “In that
instance, you’re forced to compete on assets that have higher cap
rates and are not mainstream because they don’t have the same
access to capital a big institutional fund or private equity firm
Besides these issues, it should also be noted that investment in
innovation, even at the best of times, can be an iffy proposition. “The
fact is, a lot of the stuff that is out there is two steps forward and one
step back,” Brian Stoffers, global president of debt structured finance
for capital markets at CBRE, said in late February. “You make great
progress, but then there’re issues, and you’ve got to work through
those issues. All that kind of slows up when there’s a pullback.”
Perhaps the biggest concern, at least in this current uncertain
environment is this: Even with the massive amounts of money
invested into improving transactions, there are still some things
in the transaction process that can’t be automated, says Jason
Shapiro, managing director of Aztec Group.
“I don’t know that executing a transaction can ever be donewithout ever getting into the car and looking at the real estate,meeting the people on the other side of the table with whomyou’re negotiating,” Shapiro says.
REAL-TIME BORROWER DEMAND
But can the coronavirus permanently turn back the clock on real
estate finance tech? After all, technology not only opens a new
world of investors, but it also makes the transaction process much
more seamless for borrowers of all stripes. That process has been
occurring for a while and, as social distancing is expected to be part
of the landscape for the foreseeable future, it will surely continue.
Despite his earlier observation that human contact is still necessary to close a deal, Shapiro also acknowledges that much of thecommercial finance transaction process is done online. “No onesits around at a conference room table with their lender to signpaper documents anymore.”
Al Brooks, head of commercial real estate for JPMorgan Chase,agrees that technology has had a “massive” impact on finance. Andhe adds that pre-coronavirus borrowers made it clear that theywanted more.
“Borrowers want more seamless and digital ways to conduct theirbusinesses, streamlining processes and providing their tenants witheasier payment solutions,” Brooks says.
A newer generation of borrowers is partially driving this change.Stoffers, who also serves as the chairman of the Mortgage BankersAssociation, says millennials enjoy doing things online and throughtheir mobile devices. “But they want to have somebody to talk to ifthey run into a roadblock,” he says.
Indeed, innovation must first be in a firm’s DNA, Fried says. “You
have to have a culture that says, ‘We’re prepared to try things that
aren’t always going to work.’”
Stoffers thinks the Quicken Home Loans model can meet those
“The model that Quicken uses is a combination of real people atthe end of the phone with a lot of data-enabled technology,” hesays. “To be honest with you, we don’t see as much of that on thecommercial multifamily side because the asset size is typically a lotbigger and less uniform than a home loan. But we see more peoplegravitating toward the technology piece.”
TAKING BOLD STEPS
Some of these developments that were underway before the coronavirus seem, in retrospect, to be the perfect investment for thisnew age.
For example, KeyBank wants to minimize touchpoints, suchas the number of times people pick up and put down a file.Ruark says tech is driving the process of how the company getsthings done and interacts with its capital partners, vendors andcustomers. “We are very much thinking about how to streamline the process, how do we make it a better experience for ourcustomers and our employees,” he says.
Is the CRE Finance Revolution Over Already?
. . . continued on page 60
THE FACT IS, A LOT OF THE STUFF THAT
IS OUT THERE IS TWO STEPS FORWARD
AND ONE STEP BACK.
GLOBAL PRESIDENT OF DEBT STRUCTURED FINANCE FOR
CAPITAL MARKETS AT CBRE