Stuck in a Holding Pattern
Commercial real estate (CRE) is a massive market in the United States, accounting for some $15T in value, but has not received anywhere near the level of investment that the consumer and residential lending segments have enjoyed. Indeed, the workflows that power CRE have seen practically no innovation since the advent of the spreadsheet.
Today, before CRE deals are considered, potential investments go through “pre-flight checks.” During the pre-flight check, analysts pore through offering memoranda and other deal-related documents, manually input key financial data and search for sales and lease comps from multiple market data providers.
Deals that pass the pre-flight check are considered in deeper detail, with analysts building complex valuation models based on projected rental income, comparable property valuations, neighborhood considerations and numerous other inputs all pulled from different sources. Highly knowledgeable CRE underwriters are effectively reduced to human data aggregators, combining files, documents and market data in a process that is painful, tedious and error-prone.
Once an investment is made, investors receive updated rent rolls, financials and tax information on a quarterly – or monthly! – basis, all of which has to be manually entered into spreadsheets and fed through the model. Because CRE valuations are highly sensitive to changes in comps and other factors, investors re-underwrite their properties regularly, going through the process described above several times a year for every asset in the portfolio.
Between time-consuming pre-flight checks and recurring data entry for portfolio monitoring, many potentially lucrative investments never get off the ground. Underwriters and investors are stuck in a holding pattern, constrained not by deal flow but by their inability to efficiently evaluate deals and reach investment decisions. CRE lending has become an expensive and time-intensive process ripe for automation.
Rethinking CRE Loan Underwriting and Portfolio Management
As a serial entrepreneur with a background building enterprise software, CEO Shayne Skaff was shocked when he first learned of this inefficient process. With the help of a team of AI/ML experts and CRE industry veterans, he conceived of Blooma. Blooma offers a centralized, fully digital underwriting platform powered by artificial intelligence that helps users spend less time spreading financials and more time closing transactions.
Blooma offers two core products – a CRE origination intelligence suite that optimizes the deal evaluation process and a CRE portfolio intelligence platform that drives ongoing monitoring efficiencies and reduced credit risk. The platform leverages AI/ML to expedite manual tasks and automate analysis of deals through a number of high-impact competencies:
Evaluate CRE loans against any combination of 1,000+ configurable parameters Quickly parse offering memoranda for key deal information Analyze and automatically classify borrower/guarantor financials Select and rank sales/rent comps for calculating sales and income valuation Accurately estimate additional income and capital/operating expenses for a given asset Normalize multiple market data sources through proprietary intelligent data scoring model Centrally store and update deal information via API connections to 3 rd party data providers
Blooma eliminates countless hours of manual work through automated deal sizing, asset/ borrower analysis, and pipeline management. The platform manages the process of inputting and evaluating deal collateral, then streams this data into existing loan origination systems. Blooma generates fast and accurate valuations based on intelligent market data, leveraging AI to help make scientifically informed, rapid decisions for originating new deals or refinancing existing properties.
On the portfolio management side, Blooma gives investors significant operating leverage through automated loan monitoring, auditing, stress testing, and borrower analysis, enabling entire portfolios to be tracked in real time. Loans are continuously screened against configurable parameters and real-time market data sources, providing an essential early indication of risk.
These innovative features combine to dramatically improve the CRE underwriting and investing experience and obviate significant human labor spent on data collection and input. With Blooma’s robust and growing product suite, CRE investors and underwriters finally have access to the tools they need to conduct their business at the speed of the 21
st century. Partnering with Blooma to Build the Future of Commercial Real Estate
We are incredibly excited to lead Blooma’s Series A financing round. After just a few quarters in-market, Blooma is already demonstrating an impressive ability to generate value for customers. On average, users of the platform see a 75% reduction in loan origination time, complete 50% more transactions and achieve 4x reductions in origination and servicing costs. To date, Blooma has analyzed over $12 billion in deals and is helping multiple commercial banks, private banks and brokers optimize their CRE business, including C3 Bank, Bank of Southern California and CBRE.
During diligence, we spoke to Blooma customers and learned that underwriters using Blooma were 2-3x faster when evaluating deals without needing to hire any additional personnel. Customers were especially appreciative of Blooma’s lightweight cloud-based architecture which made implementation fast and simplified the adoption process.
Importantly, Blooma doesn’t compete with existing CRE data vendors or loan operating system (LOS) providers. Instead, Blooma partners with top vendors to offer comprehensive CRE data sets and plugs in seamlessly to customers’ existing systems. Blooma’s approach is purpose-built to ensure the best possible customer experience without introducing any transformational risk.
Blooma’s solution is highly strategic to our network of limited partner banks. On a combined basis, Canapi limited partners hold more than $250B in CRE loans and most of our LPs struggle with the pain points discussed above on a daily basis. We continue to be extremely encouraged by the positive reactions our banks have had to Blooma’s platform, with many citing both the potential for increases in underwriting efficiency and meaningfully improved portfolio monitoring effectiveness.
We believe these early achievements are just the beginning. Blooma has a clear path to continued growth as it maintains its focus on innovation across the ~$15 trillion U.S. CRE space. Over time, we are confident Blooma will be able to leverage its position in the center of the CRE market to materially expand its offerings and market share on the way to building an integrated, modern technology platform powering CRE deals nationwide.
Here at Canapi, we’re always on the lookout for extraordinary teams building thoughtful solutions to mission-critical pain points across the financial services landscape. In Blooma we’ve found a team and company that checks all those boxes. We’re thrilled to join Shayne, Tal, Shy and the rest of the Blooma team as they continue to build the future of commercial real estate!