In the last decade, non-performing loans have become a significant part of the real estate landscape. The legacy of the global financial crisis and the requirement to restructure balance sheets led banks to make major moves to deleverage by selling large loans related to real estate.
Private equity funds have been the largest buyers of NPLs globally. While some funds are still buying NPLs, others are responding to market changes and are now looking to liquidate their legacy assets. Across Europe this has been achieved through the traditional sales process, which is fractured in nature and time consuming. Private funds have been frustrated with the current routes to market, which lack agility and flexibility within the transactions process, and are often opaque.
However, alongside changes in the market driven by the property cycle, and political and economic events, the use of property technology – proptech – is also having a profound impact, challenging traditional processes across the entire landscape of the real estate industry. The process for trading real estate is an area that has been ripe for disruption, and we are now seeing significant game-changing innovation.
The digital model for sales has been revolutionary, allowing funds to sell assets quickly, with full transparency of the process and clear visibility on pricing. Historically, private funds would take a fractured approach to disposing assets, which given the granular nature of most of the portfolios is very inefficient. But the use of technology allows for multiple sales to be achieved at the same time, within a dedicated timeframe, making the digital model an extremely viable alternative.
What we know at BidX1, having launched our global digital marketplace for real estate, is that many private equity firms are multi-jurisdictional. Historically, when selling real estate assets across multiple geographies, funds would have to work with separate agents in each individual country, with limited collaboration and lacking in cross business visibility. The digital model is creating global connections, aligning sales across the business in every country, with full visibility. It also provides an improved process through the use of data. The ability to aggregate and interpret data is offering a better insight to facilitate business decisions and allows for more intelligent marketing.
By understanding the buying patterns within each market, asset marketing can be tailored depending on specific demographics and trends, meaning higher visibility, a wider potential pool of buyers and ultimately a faster sale at a potentially higher price. Data allows us to understand buyer behaviours – a valuable asset to funds. When an asset is listed to sell, by using a digital model there are multiple channels available to reach audiences, which is far more advanced than the traditional methods previously on offer.
The ease of selling across multiple jurisdictions, with increased insight, targeted marketing, visibility on pricing and timing of sales and a coordinated approach to business, means that funds can shift assets in larger volumes. And with clear timelines from listing to sale, funds can create clearer strategies. All of this leads to greater agility, efficiency and transparency, which ultimately equates to less risk and increased success. Technology is game changing.
Johnny Horgan is managing director of BidX1, a digital property trading platform.