How Banks Can Maximize CRE Loan Sales With Comprehensive Portfolio Reviews

Engaging a third-party provider offers banks a significant strategic advantage in the sale of commercial real estate (CRE) assets. Through deep-dive portfolio reviews, third-party firms can empower banks to better navigate the complexities of CRE sales and present their assets in the best possible light. This collaboration streamlines the sale process and ultimately maximizes asset values.  

Given current market conditions, banks are vulnerable to risks such as interest-rate fluctuations and potential defaults – monetary and non-monetary. A third-party firm can identify major risks and help the bank refine its strategic approach to loan pool sales.  

“The re-underwriting process allows us to take a critical look at individual loans, their performance, and current and future risk, enabling us to guide the bank to structuring a better pool and optimizing pricing,” said Jen Cleare, SitusAMC Senior Director, Strategic Advisory Solutions.

For instance, a third-party firm can analyze the maturity schedule of loans in the portfolio to determine repayment and refinancing timelines, and help identify loans at risk for default. Understanding whether loans are likely to be paid off, extended or moved to special servicing is crucial for accurate asset valuation.     

For example, in one case SitusAMC worked on a portfolio bid for an investor that conducted an analysis of multiple loans with near-term rate resets. The analysis showed that if rates reset to greater than 6%, debt coverage ratios would fall below 1.0 -- making the property’s net income less than the mortgage payment. SitusAMC conducted additional analysis focused on refinance and modification/extension options, valuations and various rate scenarios for the bidder.  

"A third-party firm may have advised the bank to change the composition of the pool to support a better outcome,” Cleare noted. 

But in some instances, eliminating loans from a pool is not an option for the bank. “In that case, third-party firms can help banks lean into the analysis of loans with rate resets, and communicate the bank's internal process to manage the risk, as well as its track record of doing so,” Cleare said. “This helps present the loans in the best possible light.”  

Through re-underwriting and risk assessment, third-party firms can help banks proactively address potentially problematic loans, and then assist in restructuring the pool composition to enhance the quality and attractiveness of the offering to potential buyers.  

For instance, if the portfolio includes a high concentration of office assets or assets located in challenged market, the third-party firm might recommend reducing the number of office loans and/or adding additional loans collateralized by other property types in diverse markets to dilute the exposure. This approach not only optimizes the sale price but also reduces the likelihood of post-sale issues, fostering long-term investor confidence and satisfaction.  

“For banks navigating the complexities of CRE sales, partnering with a skilled third-party firm can maximize precision, efficiency and success,” Cleare said. 

SitusAMC works with leading banks to help them elevate their CRE loan sales. We offer Loan Book Review; Data Aggregation to centralize, streamline and unify data so it presents a strong story for a pool; and Policy & Procedure Review, bridging the gap between a bank's internal operations and investor expectations to smooth and speed the sale process. To learn more how SitusAMC partners with banks to help them maximize the proceeds of loan sales, download our white paper “3 Ways Banks Can Mitigate Risk and Maximize Value When Selling CRE Assets,” or visit our website.