Presented By: JPMorgan Chase
Top Payment Trends in Commercial Real Estate: A talk with JPMorgan Chase’s Lisa McDonnell
By JPMorgan Chase April 23, 2024 3:36 pm
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Commercial real estate (CRE) is embracing new ways of leveraging electronic payment options as the industry continues to transform. Digitizing rent processing, boosting liquidity and automation advancements are enhancing resident experiences.
Partner Insights spoke to Lisa McDonnell who brings a deep understanding of treasury management techniques to her position with JPMorgan Chase. McDonnell is currently a Senior Treasury Management Officer on the Real Estate Banking Treasury Services team. She is focused on providing expert treasury management guidance for some of the largest real estate companies in the industry.
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Commercial Observer: How and why has the role of the treasurer expanded into daily operations of many industries, including commercial real estate?
As financial markets become increasingly complex, treasurers are playing a more critical role in managing financial risks, enhancing capital structures and ensuring compliance with regulatory standards. Treasurers are also responsible for overseeing liquidity management strategies, which have taken center stage. Optimizing cash flow includes ensuring sufficient funds are available to meet short- and long-term obligations. Blending treasury management systems into financial planning and myriad responsibilities has interconnected the treasurers throughout the entire organization.
Commercial Observer: How can treasurers leverage embedded banking to boost revenues and profits?
Treasurers can now monetize value-added services by offering premium features, enhanced functionality and personalized insights—including advanced analytics, risk management tools and advisory services—as part of their embedded banking offerings. Embedded banking also enables treasurers to identify opportunities by analyzing customer data, transaction histories and behavioral patterns. By embedding banking services directly into their platforms and workflows, treasurers can create seamless, integrated financial experiences that drive business growth and unlock new revenue streams.
Commercial Observer: How can liquidity structure in commercial real estate be enhanced to facilitate the buying and selling of properties?
A firm’s current liquidity structure can be optimized by deploying cash buffers and centralizing treasury operations for better cash forecasting, visibility and ensuring faster reaction times to a changing macro environment. Today’s technology platforms are maximizing the impact of property listings, while focusing valuation criteria and due diligence efforts. We like online marketplaces and auction platforms for attracting a wider range of buyers and sellers which expands the market.
Commercial Observer: Can automating business processes be leveraged to free up internal cash while reducing debt or interest burdens?
Automation increases efficiency by reducing processing times and payment cycles. It also helps provide more useable data in real time enabling businesses to make more informed decisions. Automation can also expedite the collection and processing of revenue-related data, allowing businesses to recognize funding opportunities.
Organizations that take advantage of automation streamline their business processes, improve operational efficiency, enhance cash flow management, and generate cost savings, all of which contribute to reducing debt levels and interest expenses.
Commercial Observer: Why has cash flow forecasting become so critical in today’s financial environment?
Cash flow forecasting is essential for managing debt obligations, making payments and maintaining compliance with debt covenants. On the other side of the balance sheet, effective resource allocation enables businesses to make informed decisions regarding investment priorities and capital expenditures to allocate capital to initiatives that generate the highest returns. Forecasting goes together with strategic planning while facilitating effective risk management. We’re always working with clients to improve at identifying potential cash flow gaps, liquidity risks and financial vulnerabilities. Enhanced financial stability is the key factor to becoming more resilient during times of economic uncertainties and market volatility.
Commercial Observer: What are some ways owners/operators can optimize their working capital operations?
The main method is implementing efficient cash management practices. This starts with maintaining a detailed cash flow forecast to effectively manage inflows and outflows.
We also recommend enhancing accounts receivable processes to accelerate the collection of rent and other receivables, which ties back to leveraging the firm’s technology platforms. Operating expenses can be controlled via regular audits and negotiating variable costs like utility rates. Lease audits also need to stay current and active.
Commercial Observer: What are some ways the rent collection process and resident experience can be improved through technology?
Empowering residents with digital options for paying rent reduces the hassle of physical checks and enables automatic payments. We’re seeing apps that not only allow residents to access their accounts, but they can also request maintenance and have a two-way communication with management. Online portals and platforms simplify leasing and help build community involvement that can reduce turnover.
Commercial Observer: How are macroeconomic events, affecting treasury management operations and strategies in the industry?
Economic instability causes interest rate fluctuations along with shifts in central banking policies. The effects can spill over into firms that may be relying on debt financing for property acquisitions, development and refinancing. To counter market uncertainty, treasury managers can deploy interest rate hedging or adjusting debt structures to mitigate risks and optimize financing arrangements. Credit market conditions, currency exchange rate volatility, inflationary pressures, regulatory changes and compliance requirements also require constant diligence and strategies.