Smart Software

Financial analysis tools help brokers compete in today's challenging market.

By Todd G. McKissick, CCIM, CRE

As a rule, today's clients generally assume that their real estate advisers and brokers have access to the most current software available that will provide them with prompt, concise, and accurate solutions to their individual investment objectives. While that perspective is good in theory, most commercial real estate professionals probably would agree with media mogul Ted Turner's assessment: "It ain't as easy as it looks." And most probably know the frustration, time, and expense of trying to seek out and learn the programs that allow them to create financial analyses for complex developments and transactions. Finding the right fit for your business needs can be challenging.

Most commercial real estate assignments require some form of financial projection or pro forma. The CCIM templates are valuable for a wide range of projects, but some of today's investments include challenging mixes of commercial real estate product that require specialized analyses. While the following list of software applications is by no means exhaustive, this sampling of tools can help brokers meet the increasingly complex needs of today's marketplace.

CircleDeveloper
www.circlesoftware.com
CircleDeveloper creates financial models for multiphase, mixed-used developments that involve any real estate product combination. The program's timescale and phasing features allow an unlimited number of phases to combine in various groupings. These functions provide for highest-and-best-use analyses along with timed multiyear cash flows without the risk of spreadsheet errors.

CircleDeveloper was the primary analytical tool used to create a master plan for a large mixed-use development in Virginia Beach, Va. The project included condominiums, retail, office, apartments, and the sale of a hotel pad site. All of the site work and infrastructure costs needed to be allocated among the various components on a contribution margin basis.

Rather than creating several dozen individual financial models and consolidating them into a combined model, CircleDeveloper allowed me to create one financial model that calculated the common cost allocations automatically and easily determined the most favorable mix of property types, thus maximizing my client's returns.

Argus
www.realm.com
Argus is an asset valuation and cash-flow projection tool for analyzing stabilized properties in one or more portfolios, any single property type, or a portfolio of property types. Argus also offers a unit-sales module for analyzing condominium or single-family development projects. Argus 12 is the most recent program version.

The OpenArgus feature and a new Excel-based report writer lets users create custom reports and perform specialized analysis without disrupting the underlying model. OpenArgus allows users to import to and export from analyses using open database connectivity, which means different programs can access the same database. Once data is exported to an ODBC database, it can be imported by a variety of programs including Excel and Word. OpenArgus is particularly helpful for performing portfolio analysis, incorporating data into accounting or property management systems, and combining data into reports that pull data from more than one source.

Realty RiskPro
www.realtylogix.com
Realty RiskPro is a relational database application that monitors property performance. It generates a variety of informative reports, including perpetual debt service coverage and loan-to-value ratios using an integrated discounted cash flow valuation engine, impairment analysis, tenant exposure analysis, equity sensitivity analysis, new loan sizing, historical and prospective cash flow analysis, lease-by-lease analysis, and lease expiration reports.

For example, in a commercial mortgage backed securities lawsuit, the plaintiff argued that the original underwriting had been too aggressive and that the assigned rating did not adequately reflect the mortgage portfolio's credit risk. I used Realty RiskPro to import the data for approximately 600 loans, create a valuation model that reflected current market conditions, and generate a clear, concise risk profile of the CMBS portfolio.

RealData
www.realdata.com
Real Estate Investment Analysis is a useful tool for single-property investment analysis, especially when a program such as Argus might be considered too complicated. The On Schedule - Subdivision and Condominium Development module produces a month-by-month estimate of subdivision or condominium project construction and development costs, development loan utilization and repayment, project absorption, and partnership distributions.

Commercial/Industrial Development performs high-level preliminary analysis on development projects and is ideal for answering the "go/no go" question that is often the first step prior to a more-complicated analysis.

Mother's Business Analysis System
www.jaxworks.com/mother.htm
Mother's Business Analysis System version 4.0 is a nominally priced, comprehensive set of Excel workbooks, Word documents, and PowerPoint presentations.

For example, the conversion of an existing resort hotel to condominium-hotel included numerous entertainment components, such as restaurants, nightclubs, and two conference centers. The revenue generated from these operating entities represented a fairly significant portion of the net operating income. Using this program, I created financial models for each component, which eventually served as the basis for their business plans.

On a separate assignment, I created a comprehensive tenant credit analysis for a multi-property industrial portfolio, where three tenants represented approximately 70 percent of the revenue generated for the portfolio.

MyRealEstateOffice
www.myrealestateoffice.com
This Web site offers Real Estate Investment Analysis 5.0, which analyzes existing income-producing properties, and Real Estate Development Analysis 1.0, which analyzes fairly straightforward, single-phase development projects. Both programs produce Excel-based workbooks, which can be e-mailed to clients without sending the underlying analysis and risking compromising the base model's integrity.

Todd G. McKissick, CCIM, CRE, is president of McKissick & Co., an independent economic research company in Atlanta. Contact him at (678) 296-5091 or tmckissick@mckissickco.com.
Inclusion in Tech Solutions does not constitute a product review or recommendation by CCIM Institute or Commercial Investment Real Estate.

Spreadsheet Alternative
REIWise Commercial is a subscription-based investment analysis program available through STDBOnline. Not based on spreadsheets, the Windows desktop application, which does not require Internet access, offers several reports, including lease analysis, cash flow, pro forma, and rent rolls, as well as various calculations. The information can be quickly packaged into presentation-quality brochures, proposals, and marketing materials. For more information, contact www.reiwise.com or www.stdbonline.com.