Real estate investment trusts (REITs) aren’t just challenged by the need to comply with various requirements; they also deal with a higher level of risk than some of their private equity counterparts. The ultimate goal of REIT technology is to minimize vulnerability and help REITs adapt to various market changes. While striving to achieve this, they also struggle to balance that with maintaining strong investment performance to attract new shareholders.
The biggest challenges that face REITs revolve mostly around reporting, as they are always looking to provide returns back to shareholders from things like adjusted funds from operations. In the midst of all of this, REITs seek to mitigate any issues around debt requirements, and the technology systems these REITs use has a direct impact on their ability to complete their objectives. However, REIT technology improvements, such as an integrated systems, can help REITs face their frequent challenges with reporting, data accuracy, and visibility.
How can integrated systems benefit your REIT?
The challenges that REITs face revolve around the fact that they are often concentrated on a specific asset class as opposed to having a large variety of asset classes by which they can reduce their exposures to certain market conditions. There’s a real focus on how to best leverage debt, both secured and unsecured, to achieve their desired means.
Automation and reporting
Technology like integrated systems can help REITs because these systems allow them to easily ensure compliance with specific business and investment models. A lot of the processes associated with these business models can be automated, tracked, and audited. A system like this provides a lot of what would otherwise be a significant manual burden.
These integrated systems also support investment in a specialized asset class because they allow a user to easily understand and analyze market trends. REITs can easily consume information from multiple sources and present it in a way that is visually appealing. The systems are also efficient to adopt and analyze that information.
Data visibility and accessibility
REITs can use this technology to understand and mitigate risk by providing visibility into blended asset income and debt service. In this particular scenario, blending refers to a blending of both historical, actual information with forecasted information based on assumptive data. That specific benefit opens up an easier way to understand both what REITs are likely to encounter from a risk perspective and the kind of opportunities they can leverage to mitigate risk in the future.
Integrated systems assist in enabling quick and competitive responses to opportunistic acquisition/disposition transactions. In the past when things were done manually, this process was, in many ways, cumbersome to the point that people were missing out on strategic opportunities because they couldn’t finish the due diligence quickly enough. Systems that help automate that collaboration of information can enable REITs to act quickly when an opportunity arises.
The systems also support the timely decision making and audit requirements by reducing human error within the process. A lot of this error is mitigated simply because of the automation through systems. This means that when someone is looking at a report, they can be more confident in the data integrity.
Finally, these systems can help businesses deliver real-time reporting at every level of the REIT instantaneously. Modeling and reporting no longer needs to be done in Excel, which is usually a cumbersome process. REITs can use this technology to overcome their challenges.
Finalizing the new process
A REIT’s ability to overcome obstacles doesn’t have to be hampered by lacking technology. The software solutions discussed here are readily available to REITs so they can start streamlining processes and mitigating risk. MRI Software offers an Investment Suite of products that help REITs maximize efficiency and bring their organization up a level and prepare them to compete with private equity counterparts.
Watch the on-demand webinar here to learn more about MRI’s investment solutions and how they can help overcome the challenges facing your REIT.