This spring and summer, we’ve been super busy, hopping from event to event including YASC Dubai, the IMN CFO and COO Conference in San Diego, and Realcomm Las Vegas. But, the one event we’d like to talk about presently is YASC DC.
We were overwhelmed with learning about new features, functionality, industry trends, and company news, so we want to dive right in to the East Coast YASC and look at some of the top conference takeaways.
Financial Consolidations: Intercompany-Level Reporting Now Required
Most companies within commercial real estate investing have large, complex corporate structures. For many years, the party with a majority ownership interest in a joint venture was primarily responsible for consolidating the financial results of that joint venture or letting it stand as an off-balance sheet entity. While the consolidation rules have become more complex over time, that calculus significantly changed when FASB updated (ASU) 2015-02, Consolidation (Topic 810) – Amendments to the Consolidation Analysis.
This amendment requires all parties accountable for evaluating, not just majority ownership, but what entities are driving economic and financial performance at every level within the corporate structure created for each deal. This latest guidance is vital for real estate investors to understand, and some systems like Yardi Investment Management are designed to sufficiently accommodate.
However, from a client perspective, we’re seeing a gap in consolidations and a lack of reporting at the intercompany level. With the convergence of IASB (IFRS) and FASB (GAAP), these clients—who may have been able to slip under the radar and avoid this level of reporting—will be more formally required to create these reports.
The consolidation process for many finance/accounting teams can be a tedious and relentless process that also takes months to complete if using a basic general ledger or Excel. Yardi’s solution to this problem is its ability to automate journal entries through various rules and sets required for consolidating entities, almost instantaneously. It’s a beautiful thing.
InvestorPlus: Good News for Investor Relations & Customer Support
Look out! We learned at YASC that Yardi is likely to complete and introduce an enhancement that combines Yardi InvestorPlus with its investor portal. Talk about a one-stop-shop solution. It’s a great opportunity for Yardi to improve your day-to-day operations for your investor relations or customer support team who don’t need to dive into the general ledger, lengthy reports, or the accounting system to get what they need.
CRM & RENTCafé
New Features Galore
We’ll give it to ya straight. Here are some of the CRM updates that were highlighted at YASC: 360º tours are now available, where you can upload a floor plan and do a 360º tour online; Yardi is now offering email management with cool analytic reporting, allowing you to pull reports to see if residents are opening emails, how long they are reading them and if they are opening attachments; availability alerts have also been introduced, where prospects can select a “Notify Me” option alerting them when an unavailable floor plan becomes available—they get a daily email for 60 days or until the floorplan is no longer available or the prospect opts out; and finally, Yardi Voyager 10.9 is expected to add Home Buzz, a popular ILS in Canada. Yardi also gave us a bit of advice, recommending consolidating unit types—even if they have subtle differences, lump them together and list the price range so you don’t overwhelm a prospect.
The New York Module
Updates in a New York Minute
Two quick bits of news for our New York module users: First, a word on ClickPay. Most companies are choosing to use ClickPay for their New York rental properties because it only allows people on the lease to pay the rent—as opposed to Yardi PayScan, CheckScan, or other online payment methods which have looser parameters. Secondly, the next version of Yardi Leasing Pad will allow you to—with luck—do a New York vacancy lease on it!
A Window to Yardi Voyager
Yardi Elevate is a new suite of software products is geared toward upper management: CEOs, COOs, asset managers, other operational managers as well as other “front office” personnel, brokers, and leasing agents. Dubbed “a window to Voyager,” it provides the appropriate glimpse into Voyager without getting into the weeds or providing as much depth as Voyager, which is unnecessary for this audience.
Yardi Elevate Multifamily consists of four solutions: Asset Intelligence, which provides insight into the client’s entire portfolio across multiple Voyager databases for benchmarking expenses and operating income against the competition; Forecast Manager, which brings together actual historical unit-level performance data with market outlooks and, while looking at B&F data, its deep business intelligence measures for an accurate revenue forecast; MATRIX, which takes a deeper dive into marketing and benchmarking, offering a platform for deep market data and complete intelligence for acquisitions, benchmarking, and market valuations; and Revenue Management, a tool that empowers leasing staff to lose high-value leases and raise in-place rents while reducing vacancy loss and turn costs.
Yardi Elevate Commercial is made up of four solutions, too: Deal Manager is a solution for asset managers and their internal and external brokers. Plus, this bonus: While it’s for deal management, you can also view commercial lease and deal data with this tool. Yardi Elevate Commercial is additionally made up of Forecast Manager, which connects leasing, asset management and finance teams to the budgeting process to assist with budgeting and forecasting; Construction Manager is the job cost or construction management module of Voyager, providing real-time insight into budget performance, revenue impacts of capital projects and tenant improvements as well as job and contract data. Finally, Facility Manager was carefully designed for higher-level maintenance managers in Voyager—the chief engineers and facility managers—to help streamline management and equipment maintenance, property inspections, and service requests.
Lease Accounting: New Accounting Standards You Need to Know
In early 2016, the Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB) issued new guidelines for financial reporting of leasing transactions. In response, Yardi has added new functionality to automate the necessary calculations in the Yardi Voyager property management and investment management platforms.
Under the new standards, both FASB and IASB now recognize all lessee transactions on the balance sheet, where previously only purchase agreements appeared as liabilities. Companies were not required to disclose long-term liabilities—greater than one year—associated with their operating leases. Under the new guidance, to account for these liabilities, lessees are required to determine the net present value of all their leasing obligations given a discount rate, and set up a lease liability and offsetting Right of Use Asset.
Under both models, reporting organizations are required to determine the lease term and the cost of borrowing for calculating present value and loan interest subjectively. In Voyager, the interest rate can be specified on a global level, and fine-tuned on a property-by-property or even a lease-by-lease basis. On the Lessee Accounting Parameters screen, Voyager provides a link to all options that affect rent changes and a flag to indicate whether the option is likely to be exercised. If this flag is checked, the option’s term and scheduled rent payments, if applicable, are included in the present value calculation and resulting amortization.
Under US Generally Accepted Accounting Principles, all companies will be required to apply the new standards for periods starting after Dec. 15, 2019. Organizations reporting under IFRS will be required to apply the new standards for periods beginning Jan. 1, 2019.
Lessee Accounting: What to Expect
Yardi’s Lessee Accounting has a similar look and feel as Straight Line Rents in Yardi. Beyond interacting with the tool, note that leases must be set up as a “Corporate Tenancy” lease type in order to create a payable rather than a charge from the lease records. Also note that discount rates must be entered. General ledger accounts that are affected by this solution are: Right of Use Asset, Lease Liability, Rent Expense, Interest Expense, Depreciation Expense, and Amortization Expense.
If You Don’t YASC, You’ll Never Know
As your trusted real estate technology consultants, we will always encourage you to go to YASC. It’s a wonderful educational experience and professional development opportunity. But we’re realistic, and we know not everyone has the time or budget, so equally as important, remember that you can always rely on us to give you an insightful recap to learn what’s new and what’s important to your organization. Happy learning!