11 months ago
11 months ago
Commercial real estate is rarely the first industry that comes to mind when thinking of technological innovation. But that is quickly change.
Over the past 10 years, the Internet has revolutionized how individuals and corporations find, lease and occupy space. Developers and owners can now leverage cloud data and connected devices to create smart, automated buildings with energy efficiencies thought impossible just decades ago. Yet the way we finance commercial property has remained largely unchanged.
It’s paramount for the commercial real estate industry to respond to the demands of up-and-coming investors — and the transparent, real-time nature of online investment and reporting platforms is doing just that. Consider that Millennials are 10 times more likely to use online investing platforms than Baby Boomers. Will the next generation of real estate investors and financiers be content with today’s processes? Unlikely.
Let’s take a step back 15 short years to 2001. Online retail was in its infancy, and a two-year-old company known as Zappos had just quadrupled their annual sales to $8.4 million thanks to a fast, easy-to-navigate website and a strong emphasis on customer service. By 2008, the retailer was doing $1 billion in annual sales. In 2009, Zappos was acquired by Amazon — a company that today offers same day delivery and is experimenting with 30-minute delivery using small unmanned aerial vehicles (UAVs).
Could the commercial real estate finance industry experience such a sea change in the near future? A strong case can be made for ‘yes’. Consider what is already underway in the residential mortgage space. Quicken Loans has originated more than 2 million loans online from a centralized hub of underwriters and mortgage professionals. Their market share is poised to grow further thanks to a new app called Rocket Mortgage that verifies deposit and investment accounts, allowing for loan approval within minutes.
Of course, commercial and multifamily loans are much more complex and time-consuming — making them the ideal candidates for improvement through technology.
Our focus on technology at Arbor is driven by the fact that we are a leader in the small multifamily loan space, and are the top provider for both Freddie Mac and Fannie Mae small loan products (think $1MM to $5MM). While these products are tailored for small investors and streamlined compared to larger agency loans, they still present a detailed process for both the borrower and lender.
To enhance what was already a relationship-driven process, Arbor developed ALEX (Arbor LoanExpress), a technology platform that provides an online window into the loan transaction that is accessible 24/7 from any computer, tablet or smartphone. Launched in 2016, the portal transitions the machine-like process we have built over the years into an online, paperless platform that has reduced processing times by 23 hours per loan for our borrowers and brokers.
In addition to reducing time and costs, the platform has enhanced relationships between borrowers, brokers and our originations staff. Instead of spending time printing, signing and emailing documents back and forth, all parties can log in and instantly see the status of the loan. The transparency frees up time and allows originations staff to focus on delivering the best terms possible, while our borrowers can focus on managing their portfolios and identifying potential future investment opportunities.
But this is just the beginning. Any technology with lasting power must be viewed as an open book. In 2017, we look to launch a more mobile ALEX. As a relationship-driven industry, commercial real estate professionals are constantly on the move. Being able to move the loan — or investment sale, lease contract, appraisal, etc. — process along while on the road will become a key facet of conducting business. In fact, the smartphone has become the primary business tool of choice, especially among the next generation of leaders. Giving borrowers and brokers the proper tools to engage and communicate on their device is paramount to bringing the commercial side of the business up to speed with what the residential space has already achieved.
In addition to communication, our industry is now using technology to integrate systems between the various parties involved in a loan. Complete synchronization between two separate environments — such as the CRM platforms used by lenders, brokers and issuers — will allow companies to significantly reduce the amount of communication needed to get business done.
Ultimately, our industry must focus on making the process of obtaining high-quality financing easier for multifamily properties of all sizes. In addition to better customer service, a tech-forward approach towards efficient processes is an important component to supporting workforce housing affordability goals, as 80% of our nation’s renters live in buildings with 5 to 50 units. Servicing and understanding the needs of all customers — regardless of size or sophistication — is an important component to securing long-term growth, as the small investors often grow into the larger borrowers.
About the Author
Ivan Kaufman is Chairman, President & CEO of Arbor Realty Trust, Inc. (NYSE:ABR), a leading multifamily and commercial real estate lender and real estate investment trust that became publicly traded in April 2004.
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