Last week’s news that the Federal Reserve was turning to BlackRock, my former employer, to purchase Commercial Mortgage Backed Securities (CMBS) put all the work we are doing at GeoPhy in perspective.
BlackRock, a powerhouse in asset management, built its business around risk management which prepared it immensely well for the last global financial crisis in 2007-2009. Back then – and it looks like again now – it was the firm trusted by the Fed to help understand the risks buried in CMBS that had blown up during the housing debacle.
As the last crisis manifested itself during 2008, I remember thinking, “How can this be?” At the time, I was implementing data feeds of financial information for asset managers at a subsidiary of the Financial Times. It just made sense to me that these smart Wall Street firms with gobs of money must have had significantly more sophisticated systems and better data sources. They had to have some glimmer of what was happening deep in their investments!
The FT’s daily coverage in 2008 exposed the rotten core of the financial underbelly bit by bit. It was fascinating and sickening to learn that Wall Street had been unable to use the power of computers to analyze each of the mortgages in the securities that were collapsing. We learned then that the banks had the information, but the mortgage application data wasn’t digitized in a way that allowed for quick analysis.
That’s where GeoPhy comes in.
Earlier this year, I helped us launch a joint venture with our partner Walker & Dunlop. The result, Apprise by Walker & Dunlop, is digitizing the appraisal that is the foundation of all subsequent analyses in the commercial real estate (CRE) market.
Apprise pulls together the data feeds that appraisers need to make their judgments. Based on input from appraisers, we have defined some basic data analyses that spare them time for more in-depth analyses that require their expertise. And our roadmap for future enhancements will allow us to present the resulting appraisal to the government-sponsored enterprises Fannie Mae and Freddie Mac in a machine-readable format. No more scanning PDFs to retrieve the relevant data.
GeoPhy also provides CRE lenders and investors with other data to help in their investment and lending decisions – our Value Drivers help explain the area around a property and our Automated Valuation Model provides a quick reference for multifamily housing akin to Zillow’s Zestimate for residential housing. In light of the COVID-19 crisis and its impact on local economic health, we are investigating ways our data analytics capabilities can help further risk analysis in client CRE portfolios.
In other words, GeoPhy is now helping build the digital underbelly that the CRE industry needs to understand and manage its risks.