Alternative Lenders Outsource Valuations to Gain Competitive Edge

To succeed in alternative lending, commercial real estate (CRE) market participants must raise capital at scale to manage costs effectively. As the sector quickly expands, many funds are adopting independent third-party valuations to differentiate themselves to investors and gain a competitive edge. SitusAMC’s new white paper, “Transparency, Consistency, Best Practices: 3 Ways Independent Valuations Position” explores the key advantages of outsourcing, based on the firm’s extensive experience supporting alternative lenders. 

SitusAMC’s works with leading lenders to value their CRE loans, commercial mortgage-backed securities (CMBS) and CRE collateralized loan obligations (CLOs) to help them determine the value of existing or new originations. Those assets may be senior loans, mezzanine loans or preferred equity -- or CMBS securities rated from triple A down to triple B and unrated bonds. The valuation includes analysis of market trends and credit metrics to accurately reflect current asset values. 

Consistent valuations provide current and prospective investors with transparency in an illiquid and opaque market, the white paper explains. Though prices depend almost entirely on comparable transactions, it can be challenging to find true “apples to apples” comparisons in a hyper-localized and asset-specific market such as real estate. As part of their diligence process, investors are more frequently requiring managers to employ an independent third-party valuation firm, rather than conduct internal valuations so they can understand the market value of their investments. 

Secondly, outsourcing helps lean, entrepreneurial firms avoid the repercussions of stale data, according to the white paper. Agile players often have small teams that manage multiple roles. This multi-functional approach can strain resources, leading to a risk of outdated or inaccurate data. Regular, periodic valuations provide a consistent flow of data, ensuring investors have accurate insights into the performance of their investments. 

Finally, third-party valuations are a core component of a suite of best practices and controls, the white paper explains. Especially in the recent volatile environment for CRE, investors are placing a premium on best practices to maintain their competitive edge and drive differentiation. Alternative lenders can gain a competitive advantage by leveraging best practices across asset management, accounting, compliance, valuations and reporting. This demonstrates operational maturity, which builds credibility and confidence among investors. For those seeking capital inflows, the commitment to regular third-party valuations is increasingly viewed as essential, instilling trust, and establishing a firm foundation for growth.   

Download the white paper here.  

SitusAMC is an industry-leading provider of CRE debt valuations and advisory services to clients across the CRE Finance markets, with $130 billion in debt valued quarterly for 100+ clients across the U.S. and EMEA. Learn more here. To view the full suite of services SitusAMC can offer alternative lenders, visit our website.