Dealpath, a San Francisco-based deal management platform for commercial real estate debt and equity investors, is seeing something necessary emerge as more US managers launch debt strategies: the need to scale a platform and move quickly on deals.
Mike Sroka, CEO and co-founder, says this is apparent as the number of debt funds Dealpath works with has grown. “I think what we see and clearly understand is that the winning formula is scale, speed and production. Our clients need those things to be able to operate,” Sroka tells Real Estate Capital USA.
The firm first began tracking the rise in debt funds prior to the start of the pandemic, as real estate private equity companies and other investment managers believed the market was either at or past its peak, Sroka notes.
“Something we have observed over the past couple of years is a significant amount of capital formation on the debt side as many large real estate private equity companies are raising debt funds,” Sroka says.
“We speculated that, pre-pandemic, we were at the peak or past the peak of the market cycle and investors were starting to see the best risk-adjusted returns in different parts of the capital stack. As we entered the pandemic, there was more participation in other parts of the capital structure, which fueled the formation of debt funds.”
At the same time, the commercial real estate market has become more institutionalized, and more market participants are looking at ways to scale their platforms and better understand and analyze their existing data sets.
“There are clear economies of scale on the investment management and debt side,” Sroka says. “There are operational efficiencies as you work at a larger scale and it’s more efficient for loans to be owned by larger pools of capital and these managers must have the tools and systems to do
Making data useful
Today there is an ever-increasing amount of data and information that is fragmented in both sources and structures.
“Lenders need to be able to work internally across different departments, with different partners on each deal,” Sroka says. “This was workable in decades past when the industry was slower, smaller and less efficient, but with the new world we see today, that is really breaking down. To be clear, there is no shortage of data. The challenge is making the data useful.”
“To be clear, there is no shortage of data. The challenge is making the data useful”
Mike Sroka, Dealpath
Dealpath works with investment management companies to track the data, files, documents and task ownership to make it easier for market participants to execute deals. Part of this is helping clients to understand this data, which Sroka notes is critical for investment managers that are underwriting loans or making investments.
“When an investor can see the performance of their portfolio, the comps or every deal and asset, that will allow them to make the best investment decisions,” he says. “To collaborate across teams internally, this simply can’t be done on an ad-hoc basis. You need to have systems and processes to do that and it’s really critical for people to be able to work from anywhere.”
Dealpath is also working to build out its deal management and portfolio management capabilities for institutional investors.
“We are continuing to remove the partition between the buy side and the sell side,” Sroka says. “We want to unlock the value of structured data to make it easier for our users to unlock the value of data for better portfolio management, underwriting and execution.”