To be competitive in today's commercial real estate marketplace, financial institutions must keep up with new computer software and available technology.
The Information Age continues to open new doors for the financial institutions industry, as it has a tangible effect on how every aspect of the business is being done.
Software is at the very heart of the matter. But while the right software can make all the difference in a company's productivity and stature, it still represents a huge chunk of its expenditures. For many of today's financial institutions, the amount spent on such technology may be the largest capital expenditure they've seen in recent history. And when information technology has such a major financial impact, it is the focus of much attention.
No matter the degree to which a company chooses to invest, it will, of course, want to be certain it is using its spending dollars wisely. "The software a company uses affects it tremendously," says Tim Mazzetti, director of business development and marketing for Midland Loan Services LP, Kansas City. "The software we use is a huge integral part of our business." As a loan servicer and end-user, Midland Loan Services is a technology-based company, according to Mazzetti. For that reason, it builds much of the software it uses in-house. "We use a combination of off-the-shelf software and those we've developed from the ground up," says Mazzetti. "Hybrids of the two also are utilized by the company. By putting together our own programs, and using parts of commercial programs, we're able to create what works best for us."
Al von der Linden, vice president of information technology for Midland, says that even the software that is purchased by his company often is modified heavily for its use. For example, Midland purchased loan servicing software from McCracken, and has been modifying it since then. The company also has built other applications in-house. Among them: an investor reporting system, credit administration system and asset management system. "For those needs, we just found it sensible to create our own software," von der Linden says.
A majority of the new software development by Midland was done that way using a tool known as SQL Windows, a product of Centura of Menlo Park, Calif. "We used this tool for the three applications I mentioned and to build a loan portfolio analysis system," von der Linden says. That system was built by Midland a few years ago and has proven itself very strategic for the company. "We built it for our clients to use remotely, and with its remote application server, our outside clients are able to run Windows applications on their PCs," he says. "That's a trend that's becoming increasingly popular in the industry."
Trends fuel much of Midland's need to develop, modify and update the company's software. "Any trend that we believe will be powerful in the future must be considered when we're choosing or developing software," von der Linden says. "It's a situation where we must carefully choose our technology; the computer technology we possess will grow our business in the right direction."
Beaverton, Ore.-based Timberline Software Corp. knows its software is designed for the property management industry. "In the property management industry, every part of the property investment revolves around the lease: legal, financial, operational, administrative and physical," says Perry Levine, product marketing specialist for Timberline's property management products. "Yet despite the lease's pre-eminent status, property management software has traditionally given the lease a subordinate position in the data structure, storing the lease information on the unit or tenant records. The commonly used unit-based and tenant-based models do not adequately accommodate certain complex leases and don't support the integration of accounting with lease management."
That was Timberline's design rationale, when it set out to redevelop its property management software for the Microsoft Windows environment, Levine says. Timberline now offers its Gold Collection for property management, which breaks with tradition by offering a graphical, lease-based system that significantly advances the scope of property management software, according to Levine. "The majority of our customers' leases were straightforward agreements: one tenant, one lease, one unit," says Levine. "But the exceptional cases are often applied to the largest tenants and most lucrative leases." Based on that type of client feedback, Timberline created a more flexible solution for its third-generation property management software.
In addition to adapting to complex leases, lease-based design allows the integration of lease administration with accounting. "Typical tenant- and unit-based systems capture only accounting-related lease information, such as rent schedules, additional rents and late fees," Levine says. With the lease as a separate, independent record, lease-based software offers a convenient opportunity for tracking the entire lease agreement -- fiscal as well as operational."
Hines Interests Ltd. Partnership began using Timberline software just over two years ago. "With more than 80 properties under our management in the country, we use it domestically to meet accounting and property management needs," says Jesse Carrillo, senior consultant of the Information Systems Group at Hines Interests. "We run all our daily workload accounting on this software and using this type of product cuts our costs."
Carl Van Quathem, owner of Consolidated Equities Inc. in Los Angeles, says that his field of property management often is accompanied by a tight budget. "Accounting and other financial activities need to be learned in a very short time," says Van Quathem. "The software can be automated substantially and the people using it don't have to know much at all. Consolidated Equities also uses the software for accounts payable and payroll. In the end, it positively affects our bottom line. We try to automate the process as much as possible, and no matter what program we use, the easier it is to use the better."
Real estate investment companies have long known the importance of versatile software to their business and, now, are using software to manage their portfolios. Milwaukee-based Northwestern Mutual Life Insurance is one such company. Northwestern Mutual recently tapped DYNA Software of Clearwater, Fla., to provide forecasting, budgeting and valuation software for use by its headquarters and 10 regional offices to help it better understand the risks and opportunities in its real estate portfolio.
DYNA Software develops and markets DYNA for Windows, a fully integrated real estate asset/portfolio management and lease-by-lease analysis software used by commercial and residential real estate developers, lenders, investors, REITs, owners and managers. According to Lewis Foshee, vice president of marketing for DYNA Software, the company's products are used for conducting lease-by-lease forecasting and analysis, preparing cash flow, taxable income, GAAP and FFO projections, as well as structuring debt, equity and partnership/JV structures and modeling/development projects.
"DYNA's DYNABase utility allows users to perform powerful query operations on the DYNA for Windows open database to quickly create custom reports and graphical analysis for a portfolio, property or an individual tenant," says Foshee. "Since it is so easy to use, many real estate executives are using DYNABase to strategically analyze their portfolios and properties; before DYNABase, these executives depended on a technician to do the analysis. DYNA's products are capable of analyzing any property type, at any stage of the life cycle, with any capital structure."
Northwestern Mutual attributes the continued refinement of DYNA Software's real estate analysis products to meet the increasingly complex demands of the real estate industry as a prime reason for its selection of DYNA. "One of those complex demands is a need for a forecasting, budgeting and valuation tool that provides a truly open technology solution," says Nick DeFino, assistant director of portfolio management at Northwestern Mutual. "DYNA's management is comprised of individuals with real estate experience combined with technological know-how, and that orientation is thoroughly reflected in their products," says DeFino. "DYNA's data goes directly into an ODBC compliant Microsoft database the moment data is input, and it can be sourced immediately for use in Northwestern Mutual's Sybase data warehouse. DYNA's new SQL server version will facilitate an even smoother data warehousing process."
Another major reason cited by Northwestern Mutual for its selection of DYNA is DYNA's extensive portfolio analysis capabilities, including automated portfolio sensitivity analysis and the ability to aggregate partially- or wholly owned assets into portfolios. "With this software, we're able to aggregate individual properties into a portfolio, conduct automated sensitivity analysis at the portfolio level and do slicing of the portfolio to view it from different perspectives," says DeFino. "DYNA's ability to concurrently project cash flow, taxable income and GAAP (book) income is critical in enabling an institutional real estate player like Northwestern Mutual to effectively plan its financial future."
The Quantra Corp. of Smyrna, Ga., is another player in the effort to provide financial institutions with the software they need to do business. Quantra offers a wide range of real estate based investment management software products including the Mortgage Loan Management System, Portfolio Strategy System, Real Estate Management System, SKY-LINE for property management and PRO-JECT for property valuation.
"The Mortgage Loan Management System (MLMS), for instance, is a Windows-based client/server full-featured loan servicing system. This software application was created using the latest technology to provide users quantum gains in loan servicing profitability, efficiency and ease of use," says Cy Brinn, senior vice president of Quantra. "MLMS is a loan servicing, accounting and management system that supports commercial, multifamily, residential and agricultural mortgages. This product was designed for use by any type of financial services organization. Investment bankers, mortgage bankers, pension funds, non-bank financial firms and government entities involved in finance and others will benefit from it."
According to Brinn, MLMS provides data for reporting to regulatory entities including the NAIC, OCC and IRS. It also interfaces to tax services, coupon vendors, general ledger, check disbursement, imaging, lockbox, CIF, predictive dialing, ACH and other systems to eliminate data re-entry and preserve data integrity. "And direct output of reports are made to Web pages," says Brinn. "Thus, we're reaching investors, borrowers and trading partners via Intranets and the Internet."
Yardi Systems Inc. of Santa Barbara, Calif., designs software dedicated to making real estate automation more accessible and more cost-effective. For accounting, asset management, residential office management and industrial, retail and shopping center management, Yardi's software is developed to help clients manage their assets efficiently and profitably.
Accounting software is the backbone of the Yardi Systems product line. A powerful accounting and financial management system, all fundamentals are addressed, including general ledger, accounts payable, accounts receivable, audit controls and comprehensive reporting. According to Karen Edgar, director of marketing for Yardi, advanced features adding power and flexibility to the software include MICR check encoding, bar code scanning and ad-hoc report writing with graphics. "Additionally, what truly sets this system apart is the seamless integration between the accounting system and all other aspects of the management database," says Edgar. "Financial information flows through the system with a minimum of keystrokes, giving managers and accounting personnel the information they need at all times."
Cushman & Wakefield, whose businesses include office and industrial, financial services, corporate services, asset services, valuation advisory and research services, utilizes Yardi software products for its American and international operations. "As real estate managers and advisors for the nation's largest corporations, we have a responsibility to ensure that our clients' investments are not only managed profitably, but also managed intelligently," says Gary Merron, managing director of asset services at Cushman & Wakefield. "Yardi's software adds value to our services and to our clients' interests."
Yardi Systems also offers its Asset Management System, a suite of integrated software products for asset managers that is compatible with Windows and Windows 95. The product features holdings reports which consolidate financial and occupancy data in one report, according to Edgar. "The reports are completely customized," says Edgar. "It can be used to compare market value to book value, original debt to outstanding debt or to compare and analyze any general ledger account balance. The reports provide a summary view of the portfolio sorted by property type, region or fund. Occupancy information also is shown, allowing the asset manager to focus on any problems to obtain further details."
Lisa Pritchard Mayfield is a freelance writer based in Macon, Ga.