The Importance of Treasury Departments in Commercial Real Estate: A Talk With JP Morgan Chase’s Grace MacLeod

J.P. Morgan Chase is focused on supporting the growth of companies along the Front Range of the Rockies by advising on commercial real estate (CRE) treasury operations to make organizations more efficient. 

While treasury departments can be overlooked by companies both large and small, Partner Insights spoke to Grace MacLeod, vice president and treasury management officer at J.P. Morgan Chase, who’s working to change that dynamic. MacLeod, originally from New York City, now calls Denver home, bringing her big city hustle to this burgeoning Western town.

Commercial Observer: What’s an area of opportunity that fast-growing commercial real estate companies can improve to stay ahead? 

Grace MacLeod: Many newer commercial real estate companies are in the process of sophisticating their treasury operations. Real estate companies have aggressive growth goals, are focusing on raising funds and deploying capital, but may not be looking at their operations. It’s easy to overlook the treasury department until it’s clear there’s a need for more investment. 

As companies scale up, we advise reviewing the processes they have in place including how they are leveraging their enterprise resource planning (ERP) systems, if they are using a treasury management workstation, and how they are evaluating their overall cash management structure. We can assist them in developing a blueprint for integrating technology into their business, with a focus on automating certain elements of their operations. 

What are the primary challenges commercial real estate companies face in their treasury operations?

These businesses work with extreme volumes and they need corporate, property operating, and security deposit accounts opened in a quick and efficient manner. Oftentimes a treasury team is the last to know of a deal closing, and there’s the need to execute quickly, which can be challenging for a company that operates with complexity.    

Joint-venture partnerships are prevalent in the commercial real estate space, so effective communication between the partners is vital. That means working together to ensure that everything is being set up correctly, appropriate entitlements and systems are in place so that their funds are being managed correctly. 

Operating risk can permeate every internal process within an organization, especially when handling money that’s not yours, which is common in real estate. Technology risk shows up via an ever-growing rise in payment fraud. Cyberattacks now represent real costs to a business, especially in companies with fragmented infrastructure. Liquidity risk comes with higher interest rates that impact how companies are managing and optimizing their cash levels and investment options. 

At what point do you typically see management recognizing the need to sophisticate their treasury operations?

When the complexity of their existing processes or infrastructure becomes inefficient and starts to invite more risk in the three categories listed above. Some firms are working with hundreds of accounts across multiple banks and ERPs due to acquisitions of different business lines. 

Using different systems that don’t talk to each other is a common issue. ERPs that aren’t connected to banks, or are not as automated as they could be, is another pain point. All these problems create more manual processes, which makes it difficult to keep up with rigorous reporting standards.

How do inadequate treasury reporting standards impact a commercial real estate company’s ability to operate?

Commercial real estate companies showing strong growth are typically bringing in institutional capital that requires a higher standard of reporting. Creating monthly or daily cash positions manually in an Excel worksheet is extremely cumbersome. Dealing with individual bank portals and constantly pulling reports hinders how effective a company can be in managing their cash.  

Headcount is a critical consideration: Managing an ecosystem of 30 different banks with 500 different accounts requires significant resources. By investing in technology to centralize and aggregate data, a company can streamline operations and improve efficiency.

How do sophisticated treasury systems and automated processes help build efficiencies?

Companies want to make sure that transactions can be reconciled on an automated basis so that their reporting is current and accurate. This can be achieved by files sent directly from the bank into a company’s ERP or treasury management workstation, significantly saving time reconciling payments. 

Leveraging those respective systems to improve true cash visibility across different banks allows companies to harness that data for intelligent forecasting so they can put idle cash to work. Having true visibility means adding more transparency into their operations. Ultimately, it helps a company deploy cash more effectively and simplifies reporting.

What trends are you seeing in the ways commercial real estate companies are handling payment processing?

When considering payment processing, companies are focusing on two distinct areas: the collection, storage and approval workflow, and the payment origination process itself.

The collection and storage component in the vendor database is extremely important for a company if their ERP serves as their system of record. I usually ask them if they want to house and maintain that information. Some prefer a different arrangement. 

A lot of companies are focused on streamlining and automating the vendor onboarding process along with maintaining their ongoing vendor enrollment. Most companies want to have more influence on how vendors are paid. 

To optimize the process, companies are focused on converting payments from paper checks to automated clearing house (ACH) platforms or virtual cards so they can monetize their payments. They’re reducing risk and complexity by lowering check volume while earning rebates on their annual spend.

What are the long-term benefits for companies that invest in treasury operations, and how can they justify this investment to stakeholders?

When speaking with clients, I often ask them about what they think is foundational to their success. Has their company invested in the technology that allows them to outperform their competitors? Have they invested in tools that help their company be more productive? The questions typically go to the top of the house, and the answers usually provide the justification for making the move. 

Automation can increase satisfaction levels within staff roles. If they’re not focused on mundane tasks, they can concentrate on ensuring quality and improving their process. It’s important to make the case that these investments yield real results, not only improving the bottom line, but also affording team members more time back for those value-added tasks that help improve overall productivity and profitability.