Incans - kn

"In simple terms, the real estate industry needed to recognise the power of data in driving accurate and transparent decision making. The Credit Crunch of 2008 was initially driven by a sharp rise in defaults on subprime mortgages in the US. Here the fundamental problem arose because interest rates were too low, lenders didn’t have a robust underwriting process in place, the quality of the borrowers was far lower than declared, and the underlying assets held as collateral were far less valuable than predicted. This perfect storm of factors emerged because there was very little data available to quantify these risks, and it was labour-intensive and cumbersome to estimate the overall risk of rental default within a portfolio. More alarmingly, nobody could be bothered to look in the box and see what was in there. Nobody checked the quality of the underlying cashflows that ultimately supported asset values and serviced the debt."

Read the full article HERE.

Michiel Foekens has joined Income Analytics as Director of Sales to help drive our exciting and ambitious growth plans. Michiel has a proven track record in designing data solutions for real estate professionals having spent the last 7 years working for transaction data specialist Real Capital Analytics (more recently MSCI following their acquisition of RCA). Prior to that Michiel spent 10 years working with real estate news publications.  

Chris Elliott, Head of Sales & Partnerships said “I’m excited to have Michiel join Income Analytics, bringing his wealth of experience and global network. Along with Spike, we now have a formidable team to deliver our credit risk solution at a time the market needs it”. 

Michiel is joined in the sales team by Spike Bott. Spike joins with experience selling expert network services and understands the importance of data and insights for successful decision making. He will work alongside Chris and Michiel to drive our sales programme. 

Expanding our data and research capabilities, we have recruited Zahra Bharuchi and Jack Baker. They will be working with Hayley Blackwell to deliver our industry leading client service and reporting. 

Matt Richardson, CEO and Co-Founder of Income Analytics commented “our expanded team reflects real estate professionals’ increasing focus on monitoring and managing their tenant credit risk. We are well set to deliver the solutions they need”. 

Our latest Q4 scores for UK retail operators remain significantly below the UK average and have remained unchanged for the last 12 months. This is no surprise given the UK high street includes the failures of Wilko and the struggles of Body Shop among other concerns. UK office and logistics occupiers are at lower risk of failure in comparison to retailers, although logistics does sit below the UK average.

In contract, European based logistics operators are trending above their regional average and showed improvement in Q4 versus Q3. Hotel tenants recorded the best improvement in scores during the last 12 months and scored just below logistics at 83 out of 100.

In North America office and retailers maintained above average scores despite market commentators observing that the office sector remaining cautious in Q4. While office occupiers may be considering their occupational needs, it is not due to financial struggles but down to the impact of hybrid-working and economic uncertainty weighing on expansion plans.

Across all regions healthcare offers the most income security, albeit it remains a small sector with fewer investment opportunities.

Our latest T200 Q4 reports are available highlighting tenant risks in the UK, Western Europe and North America.

We are pleased to announce the publication of our ELAM technical paper in collaboration with Andrew Baum, Emeritus Professor at the Saïd Business School, University of Oxford.

This paper was prepared in response to the Pereira Gray report for the RICS published in December 2021 which recommended that “the valuation profession should incorporate the use of discounted cash flow as the principal model applied in preparing property investment valuations”. Other recommendations related to (i) greater use of sophisticated modelling and analytics, and (ii) a standardised approach to risk pricing.

At Income Analytics we have developed INCANS® Scores that provide users with a long-term projection of % probability of tenant failure/default that can be matched to the lease length. In this paper we explain how these probabilities of default or “PD rates” can be used in valuation DCF models so that valuers can finally isolate and quantify the “quality” of one tenant vs another in their modelling work.

We hope you find this report a useful step forward in helping valuation professionals in their transition to DCF modelling and helps them meet the reports’ recommendations relating to (i) greater use of sophisticated modelling and analytics and (ii) a standardised approach to risk pricing.

Looking a little further ahead, we are pleased to announce that we will be releasing this work as a new analytical service on the INCANS platform in Q1 2024. Called the Expected Loss Adjustment Model or “ELAM”, this new tool will provide Valuers with the ability to combine the INCANS® Tenant Scores (and their associated PD rates), with lease/unit/market-specific reletting assumptions (such as expected void length, vacant and reletting costs, under/overrenting, etc), to calculate an Expected Loss of discounted cashflow for this lease given the tenant quality. This expectation can then be used to calculate the corresponding additional risk premium in isolation to directly adjust their valuation cap rate.

More recent comments from RICS have suggested that they want clients to be able to understand the journey the Valuer has taken to come to their conclusions – with the Valuer able to show transparency and objectivity, and the ability to document and articulate all assumptions made.

To download the Technical Paper please click here

Anne Conlan has joined Income Analytics as an Account Director to help existing clients get the most out of its tenant risk management platform. Anne has a great track record in working with real estate professionals having spent 6 years with transaction data specialist Real Capital Analytics (and then MSCI following their acquisition of RCA). Prior to that Anne spent over 8 years with BCA Research. She has recently had experience in delivering an ESG solution to real estate investors.

Simon Mallinson, Chief Operating Officer said "I'm looking forward to working with Anne again after many years working together at RCA. She's ideally placed to understand how Income Analytics can help our clients manage their tenant credit risks at a time when income is the driver of returns."

Anne will work with Chris Elliott, Head of Sales & Partnerships, and co-ordinate with Michiel Foekens and Spike Bott on ensuring existing and new clients get the most value from their service.

Matt Richardson, Chief Executive Officer added "It’s great to have Anne join us. With over 50 clients now directly signed with Income Analytics, it’s important that Income Analytics ensures it continues to deliver industry leading service while working closely with our clients to develop the next generation of products they need."

Watch our video on the Portfolio Manager Service

Income Analytics had the opportunity to kick off PEI PERE's new feature in their global magazine, Trend Watch. Our inaugural article focused on rising bankruptcy rates in Europe and its impact on tenant default risk. We highlighted the important of keeping track of all tenants given each sector has a spread of risk across tenants. Tenants are not created equal, its partly what gives buildings their non-homogeneous nature.

To read the full article, authored by Income Analytics COO Simon Mallinson, click below.

https://www.perenews.com/income-analytics-rising-bankruptcy-levels-put-income-at-risk/