Commercial real estate is a complex business – deals are large and usually involve complicated financial structures that challenge even the most creative minds in banking.

Despite advances in technology, many firms are still struggling to find effective ways to harness the web of fragmented, disjointed data that surrounds their business and turn it into useful information that can drive meaningful decisions. An emerging database technology promises to change that. Those who are already familiar with something called “unstructured databases” say it will offer new possibilities for commercial real estate firms, and has the potential to bring a new level of order and insight to their businesses.

Consider the challenge a large lender or investor faces in understanding a portfolio of commercial real estate deals. Each contract has its own players with varying ownership percentages and roles in the deals. Players use different legal vehicles through which they participate. None of the information is standard, making it nearly impossible to capture in a traditional information management system without scouring through mountains of paperwork and entering it manually.

As a result, firms essentially throw away enormous amounts of valuable information that could be used to help manage complex deals, identify relationships, mitigate risks, and spot new opportunities.

Newer, unstructured databases offer fundamentally different capabilities that are more suited to the needs of business users handling commercial real estate portfolios. Here are some key features that make unstructured databases a great fit for commercial real estate firms:

Full contract capture in searchable form. Unstructured databases convert information within contracts into a searchable format, enabling the discovery of key information such as aggregate ownership across multiple deals or important covenants.

Insight into all parties and roles in a deal. Portfolio managers will be able to determine exposure across multiple deals for specific borrowers, even if exposure and roles are different deal-by-deal. Unstructured databases can also be designed to analyze the relationship of multi-entity borrowers so that when investors are involved in many deals at once, the lender or investor can query by role across each deal to see the partners, the covenants and other terms of each property, and the relationship with lenders.

Ability to aggregate relationships across large numbers of complex deals. An unstructured database can capture not only primary parties, but also secondary players across all contracts, allowing analysis of exposure and risks at an aggregate level across thousands of contracts. For each loan, the business user can also analyze the roles of each player involved in the contract and can zero in very quickly on trends that might signify financial risks.

Ability to evolve the database structure with the needs of the business. Unstructured databases, as part of their inherent design characteristics, offer the flexibility and ease of use to manipulate data and automate common searches, enabling better alignment with the changing needs of the business.

Getting Started

For a firm that wants to explore this technology, here are a few tips for getting started:

• Look at both software providers and IT services firms that have experience in deploying this emerging technology. Since this is new technology, relevant experience will come from similar but not identical applications, such as unstructured databases and business intelligence for managing swap portfolios or large-scale research and publishing operations.
• Expect to spend time reviewing contracts and other unstructured data sources to help your technology team develop a data dictionary and identify structural patterns and matching logic for entities, roles, covenants and other terms that will be “tagged” for data mining .
• Insist that your technology team design for fast retrieval, typically by searching the tagged data while allowing easy drill downs into full documents.
• Build for change with an editorial solution that highlights new terms and other gaps so users can “teach” the system to keep up with the business.

Ray Strecker is a senior vice president and Surajit Bhattacharjee is a director at Virtusa in Boston.