Trimont sees increasing shift toward data-based decision-making

Atlanta loan servicer and advisory dials up data efforts as market remains hindered by wide bid-ask spreads.

Trimont, an Atlanta-based commercial real estate loan servicer and advisory company, anticipates data will be the key to the decision-making process in the coming commercial real estate cycle, according to Bill Sexton, chief executive.

The firm, which advises on more than $230 billion of debt globally, believes the data points it collects from borrowers and other data sources will be a critical key of working out loans as delinquencies and defaults start to rise. Trimont aims to provide real-time or near real-time data to clients in a usable format to help with investment or workout decisions, Sexton says.

“Data can give you a much clearer picture by allowing you to compare the situation you’re looking at with other situations. When things get difficult, when you’re trying to make an investment or divestment decision with an imperfect data set, it becomes harder to make an astute decision,” Sexton says. “Technology helps us not just to digest information, it helps us to reproduce that data in a usable format that helps people to be better informed and make better credit decisions.”

The commercial real estate market continues to be hampered by a wide bid-ask spread between buyers and sellers and lenders and borrowers, against a backdrop of more than $1.6 trillion of loans expected to mature over the next three years.

“As we near the end of this phase of monetary policy tightening, we are left with assets which were underwritten in a different rate environment,” Sexton says. “The impact will be felt across the entire asset class, which is inevitable when the cost of funding rises exponentially. Returns on risk-free money are much higher today and the question we have to ask is, ‘What sort of risk premium does an asset class like commercial real estate demand?’”

Simpler approach

The firm last month completed a rebranding, shortening its name to Trimont and rebranding its website to reflect the international nature of its client base, its focus on technology and the loans it services.

“The real estate lending business and the environment in which we operate has changed substantially over recent years. We operate in a space where real estate, financial services and technology interact. This is our 35th anniversary and we felt that this was a perfect time to update our brand to reflect the confluence of those things,” Sexton says.

In its rebranding, Trimont aimed for a clear approach to the market, one which Sexton said mirrors the guiding principles of real estate lending and investing. This is particularly important today, when lenders and borrowers are grappling with a more than 500 basis point increase in the US Treasury rate since March of 2022 and similar rate increases from other central banks around the world.

“Many of the challenges the real estate capital markets are facing are just simple math. You can’t double or triple the cost of something and not have it affect the underlying value,” Sexton says. “As we navigate the price discovery phase, uncertainty paralyzes the market until things stabilize and we find a new basis of value.”

While the current levels of distress will rise, one mitigant is that there is substantial dry capital on the sidelines. “If the market finds a basis, there will be no shortage of capital. It is just at what basis is it prepared to play and at what return requirements,” Sexton said.

While lenders are often offering extensions to accommodate borrowers, the reality is that this situation cannot go on forever. Additionally, there are real differences in the way troubled balance sheet and commercial mortgage-backed securities loans can be worked out. “A private debt fund can take a view where a special service has to adhere to the servicing standard,” Sexton says.

As a result, Trimont has separate teams for workouts around securitized and non-securitized loans. “Within the securitized structure, the special servicer really drives the resolution and outcome on behalf of bondholders. On the balance sheet side, it is very different and the discretion rests with the client.  Our role is to advise on options and financial outcomes and support execution,” Sexton said.

Certain asset classes are encountering trouble ahead of others, but nothing is immune to an entire capital markets shift, Sexton says. “Lenders will be proactive on the resolution if there is an engaged borrower and a realistic solution. No one sets out to realize a loss on the debt or equity side.”