A Technology Checklist for the 21st Century LIHTC Asset Manager

With the increased demands placed on LIHTC asset managers, it is more important than ever for all of us to take control of our data and analysis with a single, workflow-oriented and comprehensive database. It is easy for asset managers to get stuck in antiquated processes and it can feel daunting to start over. But with the stakes so high and the opportunities for efficiencies and improvement so vast, the LIHTC industry needs to take the leap into the 21st Century with technology for the 21st Century asset manager.

When it comes to asset management, especially for those of us involved in Low Income Housing Tax Credits (LIHTCs), our technology choices have always been limited. From Excel spreadsheets and in-house solutions to databases that feel retrofitted or clunky for our industry, it’s nearly impossible to find a workflow-oriented database with the right tools to help us analyze, report and manage our data. All of us would agree that our goal should be to spend more time managing assets and less time managing data.

Similar to so many firms, we initially relied on Excel spreadsheets to manage our LIHTC assets. This was fine at first, when our portfolio was small and essentially handled by one or two asset managers. But our portfolio has since grown by 900 percent, to nearly 400 properties and 19 asset management employees. This Excel-based system was inefficient and data integrity was a potential issue. Our asset managers could not effectively manipulate or analyze data with multiple users; we needed a standardized database and analysis tool that would enable our LIHTC asset managers to become more productive and effective at their everyday tasks.

What to avoid:

In 2008, we searched for a better alternative, largely using price as our guide. It became abundantly clear that most of these solutions were simply modified to fit the LIHTC market. We selected a vendor, and our issues started almost immediately after the installation. The interface was not seamless and required extensive customizations to perform basic tasks. This was expensive, significantly slowed adoption and curbed productivity.  We had no efficiencies, as more than two simultaneous users would cause the system to crash. As a safeguard, asset management maintained redundant data using spreadsheets, creating even more inefficiencies. We were handcuffed to our vendor for every custom report, as there was no standard reporting tool that we could deploy in-house. The vendor’s availability was spotty; turnaround time was slow. Needless to say, we cut them loose upon finding a real solution.

What to look for:

As we set out to search again for a suitable LIHTC asset management system, we developed a “must have” checklist of five criteria and questions to select our new system. We think most of our fellow asset managers could use these to set the bar for choosing the right provider.

Efficiency: Can asset managers look at the vital signs of each portfolio and property, including audited financials, tax returns, occupancy trends, current and 12-month trailing debt service coverage trends, per-unit operating expense analyses, reserve balances and site visit scores? With automated analysis tools and the ability to set proprietary standards and alerts, we can now dig into property challenges faster, track progress over time and proactively report back rather than spend time aggregating data and doing manual calculations.

Cost-Effectiveness: Can you create custom reports in-house for investors, state agencies and internal use? We’re now able to create custom Crystal reports on our platform at no additional cost and no down time while waiting for our software vendor. Even though we had plenty of sunk costs in our old system, the cost of staying with it would have been exponentially greater in lost productivity, reporting and inaccurate data.

Scalability: Can your system scale up or down with changes in workload or data requirements?

When we learned that the biggest asset management firms were managing more than 2,500 properties on their system, this gave us the peace of mind that such a system could handle our own rapid growth without compromising on performance.

Integrity: Does the system offer automatic alerts and built-in data validators when critical variances occur during data entry? Most of us need a checks-and-balance system that informs the user of variant, inaccurate or corrupted data. We now have a greater sense of confidence in the data to make critical decisions and take action, which is the real work of asset management.

LIHTC-Specific: Is the system comprehensive? Ask whether it was designed by asset managers for asset managers. In addition to operational analyses, make sure it tracks partnership tax credit delivery, K-1 input and capital accounts for potential investment exposure.  You’ll know you’ve found the right fit when the software flows seamlessly with the way you think about and evaluate a LIHTC property.

Given the initial experience, we knew what we wanted, what we absolutely needed and what to avoid. We talked to our credit investors and other top firms to find out what they were using to determine what was effective. We selected Lexington Solutions’ Fusion, which has given us a single system to manage all aspects of our LIHTC properties while retaining the same level of flexibility, speed and performance.

With the increased demands placed on LIHTC asset managers, it is more important than ever for all of us to take control of our data and analysis with a single, workflow-oriented and comprehensive database. It is easy for asset managers to get stuck in antiquated processes and it can feel daunting to start over. But with the stakes so high and the opportunities for efficiencies and improvement so vast, the LIHTC industry needs to take the leap into the 21st Century with technology for the 21st Century asset manager.

Kent Mehring is senior vice president, Head of Asset Management for Wentwood Capital Advisors LP, a provider of direct-investment, funds management, asset management, recapitalization and work-out services for Low Income Housing Tax Credit (LIHTC) investments.