Commercial real estate (CRE) investments are risky and liquidity assurance protection is now a reality via the INVIZEN RTS system. The INVIZEN RTS program operates in a unique way to create a true end-to-end solution that focuses on liquidity assurance in a way that makes common sense.
Please indulge us for a moment while we re-cap the key facts:
- We live in a market economy where all participants act in deference to the dictates of Rational Choice.
- Rational Choice plays out in the market economy in the form of changes to the purchasing preferences of consumers/end-users of products and/or services.
- This means investors, lenders, sponsors, issuers and business managers will all seek their own best outcomes at all times.
Accordingly, we know that, all other things being equal (and the absence of fraud), as long as liquidity is available the business is likely to pay its bills in a timely fashion and make distributions of profit as promised. That liquidity (and therefore; liquidity assurance) is only likely to be manifested where a market opportunity can be demonstrated to continue to exist for the products and services of the business to penetrate the sales opportunity.
INVIZEN developers took this basic market lesson to heart in designing the end-to-end solution that provides a powerful measure of investment performance assurance. The INVIZEN design concept focuses on utilizing historical market performance indicators to provide a workable solution for loss severity risk:
- By definition, market failures occur due to advancements in technology occur in many forms and require time to manifest in almost every case – the CRE vertical is a case in point. The INVIZEN program concept limits market forecasting to the near-term forecast horizon that most closely matches the period of time over which a market disruption would be reasonably-expected to manifest. Market forecasts beyond this window are rendered superfluous.
- The market window and underwriting liquidity requirements are closely matched such that it is highly unlikely that a liquidity crisis (resulting in a bankruptcy petition) is very unlikely to occur over the designated near-term forecast horizon.
- The RTS system continually re-forecasts the market and re-underwrites the transaction (including potential reserve requirements) each month of the enrollment period to continually extend the forecast period and coverage over the entire term of the holding period.
- As the end of the investment term nears, the RTS system automatically reduces reserves (boosting the IRR of the investment) allocations until the liquidity reserves are finally completely repatriated with the equity stakeholders at disposition (sale or recapitalization).
The potential outcomes speak for themselves:
- Advance warning of potential market failures is now achievable – this means that orderly exits from potential troubled assets can be realized before the asset value suffers serious impairment.
- Advance warning of potential market changes resulting in potential increases in asset values is now achievable – this means an orderly sale or recapitalization can be timed to market conditions to provide the opportunity for unforeseen profit-taking that could boost the IRR of the investment.
- Advance warning of potential default conditions that could result in an administrative foreclosure is now achievable – this means most management decisions that could have unforeseen adverse impacts would now be subject to oversight and corrective action.
The INVIZEN RTS system offers an end-to-end approach that allows these benefits to have the opportunity to be realized:
- Every month of the enrollment period, the RTS system runs multiple intended-use scenarios for the site and market to provide the all-important capital investment opportunity analysis to determine what potential income-producing property business development programs may in fact provide the highest return on capital. Conversely, for those properties experiencing a market failure, this tool (called the “Real-Time Analytics” or “RTA” Report) provides the basis for creating a new business opportunity for an otherwise failed endeavor (remember the old saying: one man’s trash is another man’s treasure). All of this happens in real-time so the proprietary technology of INVIZEN represents a quantum leap forward for the CRE vertical.
- Every month of the enrollment period, the RTS system takes the findings of the RTA into account for the production of a complete market and financial feasibility analysis of the subject site and business operations to determine if the market demonstrates reasonably-conservative evidence of a sufficient revenue capture opportunity for the business to meet all of the economic goals its sponsors originally set for it at funding. The INVIZEN Real-Time Analytics Feasibility (or “RTAF”) program does this task in real-time – not months. The INVIZEN model takes the additional step of testing all of the key empirical assumptions and findings of the market feasibility analysis to determine if a reasonable basis may in fact exist for their inclusion in the analysis. The underwriting of CRE investments requires the production of a project feasibility study and INVIZEN also undertakes this task with the RTAF, and does so in real-time – not months. The INVIZEN proprietary technology represents an additional quantum leap forward for the CRE vertical in this regard as well.
- Every month of the enrollment period the INVIZEN Real-Time Underwriting (or “RTU”) system completes a comprehensive capacity, credit and collateral underwriting review of the business and investment – and this is also done in real time (and not weeks or months). This is the keystone accomplishment that powers the entire RTS system as investors and lenders have long desired the benefits that would come from having their holdings completely re-underwritten each and every month they hold an investment, but due to the production time and cost of underwriting, have been frustrated in achieving these benefits.
- Each and every month of the enrollment period, the RTS system also collects property-level operations data to help thwart default risk by monitoring revenues realized and expense allocations made, then matching them to the covenants of securities issues and known regulatory compliance requirements.
INVIZEN offers a new way forward and demonstrates the next level of technological achievement in Internet technology the CRE industry has been seeking to bring it firmly into the 21st century. Find out more by calling INVIZEN today at 832.663.9634.