Commercial Real Estate Tenant Health

Enabling Commercial Real Estate building managers to identify risk in their tenant base and predict rent delays and losses.

THE CHALLENGE

Rebecca manages five buildings in downtown Indianapolis with 60 tenants each, including a mix of office and retail. Given the medium-to-long tenures of many tenants, Rebecca was familiar with which rents usually came in on time and which tenants tended to pay late. Just like her peers, Rebecca did not use any external data to understand risk profile of tenants; she did not know what data was available on small businesses.

In March 2020, coronavirus-driven social isolation and curfews dramatically impacted businesses. Rebecca wondered which tenants were of sound financial footing before the crisis hit—that insight would help her predict if they can weather the storm. Rebecca also wanted to know which tenants were falling back on other payments (e.g., invoices, utilities) due to COVID-19. This information would give her a heads-up that their rents would likely be late or missed.

THE SOLUTION

Given the COVID-19 crisis, many Commercial Real Estate leaders like Rebecca are looking for prescribed methods and data to proactively manage risk. PayNet is solving this challenge with Commercial Real Estate Tenant Health, a solution that provides detailed credit health data for a building’s tenant base, allowing for easy identification of high-risk tenants that warrant further risk review. Plus, monthly monitoring will identify performance score changes and delinquency on individual accounts. As part of the process, building managers will need to report rent payments to credit bureaus. Those payments will then be incorporated into tenants’ credit scores, creating increased incentive for tenants to pay on time.

For risky tenants, we are partnering with ReMeter to offer additional, deep-dive reporting, including industr-specific payment benchmarks and real estate-specific recommendations. This powerful tool further quantifies tenant financial health and ability to continue on lease.

THE RESULTS

Rebecca sent a list of her 300 tenants to Equifax and received a health profile of each one along with a building view to identify her portfolio risk as R/G/Y. She is curious to see how these values will shift as the COVID-19 situation continues into the summer. For 35 “risky” tenants, Rebecca also received a financial health assessment. What’s more, as she started reporting rent payments to credit bureaus, she saw an uptick in on-time payments from her tenants who were intent on keeping their credit scores from lowering. Armed with this information, Rebecca was able to communicate the financial plan and second quarter expectations to her management. Knowing that there is a wealth of external data she can tap into, Rebecca decided to continue leveraging these sources of information long after the current crisis ebbs.

Through transparent and objective risk data, Commercial Real Estate leaders can measure tenants’ creditworthiness and strategically manage their business.

For more information, reach out to marketing@paynet.com