System for the automated, continuous valuation of real estate

Fact Sheet RiskLine-RE

The “Alternative Investment Fund Manager Directive” (AIFMD) requires of fund managers that they exercise risk control and risk management. In relation to this, the question arises as to how much you can trust in risk management which:

  • is based solely on annual or semi-annual survey reports
  • allows the daily interest rate and currency exchange rate changes to be disregarded
  • cannot handle fuzzy statements, such as “high geopolitical risk” or “very good property location,” which are essential for a proper valuation

With the RiskLine-RE system from the RiskLine suite, it is possible to carry out real estate valuation in short time intervals, which underpins risk assessment deserving of the name. The degree of automation is in this case so high that, at negligible cost, a daily valuation can be carried out. With this, real estate can be valuated in a comparable way to how investment funds are handled under UCITS.

When calculating the valuation price, methods from financial mathematics, as well as methods from artificial intelligence, are used. abraxas has been successfully using fuzzy logic in the context of RiskLine-P to evaluate OTC-traded bonds for many years. The fuzzy systems are configured together with the customer, so that customer-specific expertise will be integrated into the valuation.

The valuation price takes into account:

  • Survey report prices
  • Rental agreements (if known) and cost estimates
  • Calculated prices, which were determined using approved methods like the capitalization rate, annuities or discounted cash flows using current yield curves and foreign exchange rates
  • Expert annual appraisals of the property
  • Macroeconomic data, e.g. the inflation rate
  • Changes in fuzzy, but valuation-relevant factors (e.g., geopolitical risk, location of property) which occurred only after the creation of the valuation and cannot therefore be taken into account in the survey report

A largely automated data transfer guarantees negligible manual effort. The results of the calculations are stored in reports which make all the valuation details fully transparent to regulators.
The system is audit-proof, i.e. any change in data is logged (who changed what, when) and archived (modified files are not deleted, but merely no longer used) i.e., the change history is reconstructible. Since the four-eyes principle is applied, modified critical data needs to be confirmed by a second user.

The data delivery of the yield curves and foreign exchange rates is carried out by RiskLine-P or via interfaces from the customer's systems. Other interfaces, such as for rental agreements, can be implemented upon request.

The system can also be operated in interactive mode. The user then has, for example, the opportunity to see all calculation results in detail at the computer, to modify data or to initiate new calculations.