By Esther Ang, Managing Director, Credit & Asset Management, APAC
As commercial real estate lending accelerates, increasing numbers of Australian lenders are discovering the advantages that a credit and asset manager (CAM) can bring to their balance sheets. From monitoring compliance with financial covenants to providing non-conflicted support, these third-party credit managers are empowering lenders to conform with rigorous regulatory oversight and operate effectively within today's exacting cost margins.
The use of third-party service providers by CRE lenders started with the emergence of structured products such as CMBS and continued with the growth of the non-bank lending market. Facility agents and security agents, particularly in European markets, became a vital resource in the commercial real estate debt space following the 2008 global financial crisis.
Then as now, many lenders reached out to these intermediary agencies for help complying with tightened regulations and to rein-in operating costs. Given the common preference for large real estate transactions to draw financing from syndicates or coalitions of lenders, facility agents can provide a primary, uniform contact point between lenders and borrowers while ensuring transactions flow smoothly. Security agents fill a similarly unifying role by holding the security backing a debt on behalf of all involved lenders.
Another important function, with the rise in non-bank lending from debt funds and other sources, is for facility agents, security agents and credit managers to round out the capabilities of organisations that may lack staff or capabilities to adequately monitoring their own loans.
An experienced credit manager is often invaluable in ensuring the performance of complex loan portfolios with remote or widely dispersed borrowers and underlying properties. In managing a portfolio of Australian loans for a global investment bank, for example, our APAC team worked with our lenders associates in the United States and Asia to provide quarterly monitoring reporting, annual reviews, covenants compliance and borrower requests, local insights and expertise. A diverse range of real estate secures the portfolio, including office accommodation and industrial properties.
Our credit management clients include a loan by a global private equity fund, secured by a mixed-use development site in New Zealand. Another example is a portfolio of Australian loans secured by an array of properties including hospitality, office accommodation, retail, industrial and mixed-use development sites.
A CAM in your corner
What differentiates a credit and asset manager from facility agents is chiefly the credit manager's focus on providing loan management services tailored to their client's interests. Unlike a facility agent who administers a loan according to governing finance documents, the credit manager monitors loan and borrower performance to protect the interest of their client, adapting services, reporting and analytics to suit the organisation they serve.
CAMs typically work for a lender, although borrowers will sometimes appoint a credit manager to monitor their own performance and make sure they meet all lender requirements. In either case, the credit manager is more than an extra pair of hands. By providing an independent, non-biased layer of expertise, these third-party advisors can work alongside an in-house credit team to bolster resources, help the organisation scale its lending platform more quickly, and better-manage its balance sheet, freeing origination resources to focus on new loans.
At a minimum, the credit manager is engaged to identify and monitor trigger events and track compliance with all financial covenants, updating the client with regular internal reports. Other services can include reviewing borrower, guarantor and property financial statements and any other required documentation; analysing borrower performance through operating statements and rent rolls; screening the borrower's assumptions for threats to current or future loan performance; and monitoring post-closing items.
An effective CAM anticipates and forestalls loan performance issues. Working with the facility agent, the credit manager notifies the lender of obligations associated with upcoming milestones and conditions set out in financial covenants. CAMs also keep a weather eye on the markets for trends and developments that could jeopardise loan performance and may advise clients on appropriate preemptive measures.
CAMs are real estate lending experts with insights and trends across industries and geographies that can provide valuable perspectives. Lenders have found third-party CAMs helpful in guiding international credit management teams with local expertise and support, for example.
Could your organisation benefit from a more focused approach to managing balance sheet loan exposure? Would the presence of trusted third-party experts overseeing borrower compliance help your team to develop its in-house capabilities? Consider contacting one of our offices to discuss your lending program and explore the advantages that a credit and asset manager can bring to your firm.
About Trimont Real Estate Advisors
Trimont Real Estate Advisors (trimontrea.com) specializes in the asset management of complex performing and non-performing credit on behalf of commercial real estate lenders and investors around the world. Trimont also provides loan servicing, facility and security agency, cash management, fund and asset level accounting, underwriting, due diligence and leading technologies such as TriviewSM, that empower clients to better evaluate and manage risk and return.
Over its 30-year history Trimont has managed more than $550 Billion of debt and equity investments into commercial real estate, comprising more than 26,000 assets managed in 64 countries. Trimont is highly rated by Standard & Poor's, Fitch and Kroll and serves clients around the world from major offices in Atlanta, Dallas, Dublin, Kansas City, London, Los Angeles, New York and Sydney.