The commercial real estate investment market remains hot, so much so that zero-coupon DST commercial real estate private placement offerings have made their way into the market and are actively promoted and sold to the investing-public. Zero-coupon investment transactions create huge term default risk and maturity default risk issues for the investor in a 1031 exchange transaction because the zero-coupon structure dictates there will be no dividends paid over the term. The zero-coupon structure focuses on the investor realizing their gains when the property is sold at the end of the investment term. In the case of DST and other 1031 exchange vehicles that term is 10 long years. In the typical zero-coupon transaction structure, the investor is buying the security at a significant discount to its market value and when the security matures the difference between that market value and the discount price is the profit the investor realizes. This is great on near-term obligations where the holding period is short, but on longer term transactions where there is no mandatory call (meaning the securities are equity securities and not something like bonds) the potential for investment loss severity risk can be quite high. This requires special considerations be applied to the underwriting and due diligence assessment process to provide investment loss severity risk management on an ongoing basis and an investment loss mitigation structure to manage the inevitable loss potential that would likely be realized in these long-term holding periods. INVIZEN supports the project and the participants the entire way with our exclusive suite of business planning services specifically designed to proactively manage execution risk because the budgets, goals and owner requirements are automatically updated and transmitted down to the line employee level through every level of management that includes tasking, productivity measurement and automated reporting. What does your due diligence program have?
FINRA Regulatory Notice 10-22 makes it really clear the government wants the CRE finance industry to clean up the property due diligence processes attending CRE securities private placement offerings pursuant to the Direct Participation Program. NNN property due diligence requires more of us now than just verifying the lease and making a guess about subjective measures such as “tenant quality”. Sears, ToysRUs, Caldor – the list goes way back in time and yet the losses have continued.
INVIZEN offers the only end-to-end solution specifically-designed to help end loan and investment losses in CRE securities private placement offerings by addressing the totality of the underwriting and due diligence issues in a real-time, proactive environment that only gets started with pre-closing due diligence. The INVIZEN Stop Loss program is designed to help prevent the key risks from becoming future asset impairment problems while also proactively managing and/or deterring investment fraud, management performance and foreclosure default event exposure.
INVIZEN was purposely built to provide underwriting and due diligence reviews with one singular goal in mind: preventing future loss on capital investment made today.
To understand the INVIZEN value proposition is to understand the basic processes that attend the underwriting goal of using independent information to determine the value of an income-producing business asset. INVIZEN automates these processes so the cost of underwriting drops dramatically and the speed of processing increases dramatically as well. The underwriting happens in real-time and that means we can give CRE NNN property investors the luxury of future investment performance assurance by re-underwriting the transaction each and every month of the investment holding period to give you up to 24 months of advance notice of changes in the market, the asset or operations that may have an impact on the future income-generating capacity of the market, property and site. These notices can be both good and bad. INVIZEN has artificial intelligence at its core and computers don’t care if you have trash, it will still be another man’s treasure.