Strategies, Best Practices and Thought Leadership

Four Keys to Managing Your CRE Portfolio Through Economic Changes

Change is probably the only constant we know in the banking industry. We get a new program, a new process, employee turnover, even winning or losing a customer can change the dynamic of the routine. We get to the point that we try to be proactive and anticipate these changes so we can keep our day to day steady. While there are many times that still feel reactive, the key is for it to be on a smaller scale and therefore more manageable. Let’s face it, with the world swirling around us right now, this is what we are all doing.

Whether your Commercial Real Estate makes up the largest part of your portfolio or the smallest, I’m sure you’ve thought about how to manage any possible issues that may start arising from this crisis. So, what can you do to prepare yourself, your customers, and your financial institution overall?

Utilize the front line.

Now that businesses are opening back up, get your relationship managers on the phone or out in front of those business and building owners. Find out how your customers are really doing. Are they recovering or barely holding on? Did they take advantage of the PPP program? Have they hired back employees? Who found clever ways to keep business running during the lockdown?

Look at location.

Is it a standalone building? Is the area around it is also opening back up? How are the collective businesses in shopping center, city, town, or state doing? Many large retailers are filing bankruptcy, closing locations, and still limiting business hours. I think we all remember how those larger retailers affected the businesses around them during the economic crisis of 2008.

Gather/evaluate what financial documentation you can.

This is probably going to remain a challenge for a few months at least but keep it on top of the radar. This will be critical over the next few years really to seeing where your clients stand.

Evaluate the property’s condition.

Was the property in good condition from most recent appraisal? Watching more closely for depreciation will be critical in the next few years. With businesses struggling to recover, they may neglect basic maintenance needs to keep other aspects afloat.

The more you know about your clients’ status now and in the coming months/years, the more proactive you can be in protecting these assets as the world recovers. Being proactive now in taking care of your CRE portfolio may prevent many issues in the long term. There is only one question left: do you have the tools you need to manage all of these? If not, Baker Hill can help. From our CRM and lending tools, to tracking and risk management solutions, we can help make sure you can manage proactively and reactively in the months and years to come.

 

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Written by

Lorraine Montuori is a Business Process Architect with Baker Hill, responsible for evaluating the company’s financial institutions processes and making best practice recommendations towards improvement. She has 11 years banking experience, managing lending needs for business clients primarily up to $20 million in revenue before moving to loan operations, managing a loan portfolio that ranged anywhere from $200-400 million.

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