Why We Need To Talk About Your Risky Tenants

1.07.21

The founders of a new proptech venture that has just won backing from MSCI and Savills said UK commercial real estate needs to rethink its approach to cashflow.

Income Analytics founders Matthew Hopkinson and Matthew Richardson said cashflow is too often placed second to cash value, something the coronavirus pandemic shows to be a dangerous mistake.  

“Everyone is wedded to the idea of the value of the building but very few have any idea about the risk of failure attached to the cashflow in their portfolio,” founder and Chief Executive Matthew Richardson said.

“The key point is that if income is generating 70% of your total return, and is the least volatile part of your return on investment, then why on earth aren’t people quantifying and measuring the risk?

“If you think about what property is, the value of bricks and mortar is only a function of its use. Yet weirdly we focus on the cash value, not the quality of the cashflow. Today property needs to analyse that cashflow risk.”

Richardson said that the coronavirus exposed the lack of tools available to the property business.

“The property industry had a set of tools which involved a bit of underwriting and checking, but they never had a standard way of looking at the income risks,” Richardson said.

The failure to analyse income is part of a wider obsession with capital values, the founders claimed.

Richardson argued that the big mistake is focusing on capital values, and then on loan-to-value ratios, rather than on cash-cover, and how able a property is to generate revenue sufficient to make debt payments when they are due. “Cash cover is far more important,” he told Bisnow.

“The property industry doesn’t know what it doesn’t know, and it takes a crisis like this to bring it to the fore. The question property has to ask is, do I just hope it will be OK on the night and continue doing what I’ve always done?” Hopkinson said.

“This is about simplicity versus complexity. Capital value is a simple number, but income is based on a complex set of leases. Data in the property industry has not been structured to enable them to look at this.”

Income Analytics is already in use with a number of leading UK, Irish and EU-based property professionals, institutional investors and lenders.

Grosvenor Hill Ventures, the proptech investment subsidiary of UK listed real estate advisory firm Savills, and MSCI have led a funding round into Income Analytics. 

Income Analytics provides investors with proprietary global rental default risk measures on commercial real estate income (the INCANS Scores) at tenant, asset, fund and portfolio levels.

It also provides real-time analytics and ratings on income risk in commercial real estate that aim to increase transparency, improve operational efficiency and reduce costs for real estate professionals, investors and lenders.

Read the full article HERE

David Thame at david.thame@bisnow.com

bisnow+thumbnail-1

Related Stories
Income Analytics Webinar: European Office Real Estate 2025: Buying the U?

Income Analytics Webinar: European Office Real Estate 2025: Buying the U?

Join Income Analytics CEO Matt Richardson for an in-depth discussion on why Office Real Estate is back on the menu with…

Read more... 7.07.2025
Q1 2025 Income Analytics T200 Reports

Q1 2025 Income Analytics T200 Reports

Income Analytics is pleased to release its latest T200 reports. Our T200 series quantifies the default risk across the…

Read more... 10.06.2025
From Global Expansion to Distress: The Story of Groupe Casino

From Global Expansion to Distress: The Story of Groupe Casino

It has been interesting to follow the fortunes of French supermarket giant Groupe Casino in recent years. We have…

Read more... 28.05.2025
Revisiting Retail - Webinar Summary

Revisiting Retail - Webinar Summary

The webinar "Revisiting Retail," hosted by Income Analytics, explored the state of the retail property market in the UK…

Read more... 12.05.2025
Q4 2024 Income Analytics T200 Reports

Q4 2024 Income Analytics T200 Reports

Income Analytics is pleased to release its latest T200 reports. Our T200 series quantifies the default risk across the…

Read more... 12.03.2025
Review - Why Logistics Real Estate Leads the Way

Review - Why Logistics Real Estate Leads the Way

The Income Analytics webinar on 10th February 2025, "Why Logistics Real Estate Leads the Way: Stability, Demand, and…

Read more... 10.02.2025
Q3 2024 Income Analytics T200 Reports

Q3 2024 Income Analytics T200 Reports

Income Analytics is pleased to release its latest T200 reports. Our T200 series quantifies the default risk across the…

Read more... 14.01.2025
The Problem with UK REITS

The Problem with UK REITS

REITS are an important vehicle for many investors to access the durable, long-term income that commercial real estate…

Read more... 13.01.2025
Q2 2024 Income Analytics T200 Reports

Q2 2024 Income Analytics T200 Reports

Income Analytics is pleased to release its latest T200 reports. Our T200 series quantifies the default risk across the…

Read more... 23.09.2024
Divergence within UK Retail Parks

Divergence within UK Retail Parks

With UK Retail Park mainstay Carpetright falling into administration, we thought it worthwhile to examine the credit…

Read more... 29.07.2024
Office Inflection

Office Inflection

Office landlords and investors find themselves at a tricky inflection point. Income Analytics’ T200 time-series show…

Read more... 19.07.2024
Income to Drive Total Returns

Income to Drive Total Returns

The European real estate fund association, INREV, released its June Market Insights paper and stated that 79% of…

Read more... 4.07.2024
Q1 2024 Income Analytics T200 Reports

Q1 2024 Income Analytics T200 Reports

Despite a general aversion to office investment, the tenants that typically lease office space are holding up well…

Read more... 22.05.2024
Q4 2023 Income Analytics T200 Reports

Q4 2023 Income Analytics T200 Reports

Our latest Q4 scores for UK retail operators remain significantly below the UK average and have remained unchanged for…

Read more... 6.03.2024
Income Risk is Specific. Avoid Averages.

Income Risk is Specific. Avoid Averages.

A lot of focus is put on the heterogeneous nature of real estate with a recognition that every building is unique with…

Read more... 9.01.2024
Q3 2023 Income Analytics T200 reports

Q3 2023 Income Analytics T200 reports

November 28th 2023, London. A common theme across all our regional T200 reports is a recovery of the leisure sector…

Read more... 28.11.2023
Q3 2023 Income Analytics T200 reports

Q3 2023 Income Analytics T200 reports

November 28th 2023, London. A common theme across all our regional T200 reports is a recovery of the leisure sector…

Read more... 28.11.2023
Matthew Richardson Interview: Further Corrections and Opportunities to Emerge

Matthew Richardson Interview: Further Corrections and Opportunities to Emerge

Matt Richardson had the chance to speak with Real Asset Media at Expo Real 2023. This 2-minute interview offers Matt's…

Read more... 10.11.2023
ELAM Technical Paper Published by Income Analytics

ELAM Technical Paper Published by Income Analytics

We are pleased to announce the publication of our ELAM technical paper in collaboration with Andrew Baum, Emeritus…

Read more... 8.11.2023