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A Rose By Any Other Name...

They say that a rose by any other name, is still a rose. The name doesn't matter because everyone knows what a rose is. But what do you do when you create something new, that is not quite like anything that came before it? A name matters, because it's your first attempt to explain the new creation, communicate the idea of what it is. At SkyMeta we've spent a lot of time considering names. The name of the company, SkyMeta, is based on the idea that with mastery of metadata, markets that have heretofore remained offline can finally be brought online, and when you do that the sky is the limit, so to speak.

For our first trick, we focused on the wholesale commercial real estate loan origination market; that is the market that exists between loan brokers and lenders for the origination of commercial real estate loans. This market has long functioned by communications over the phone and by email. It is not unusual for a broker to spend a week reaching out to lenders, such as banks, credit unions, insurance companies, private lenders, CMBS (commercial mortgage backed securities) companies, to find the ideal loan structure and pricing for a particular borrower in a particular scenario. The whole process is tremendously time consuming and usually requires a lot of question and answer exchanges and often provision of financial statements and more. There has to be a better way.

By contrast, in wholesale residential mortgage loan origination market, mortgage brokers have access to real time pricing engines that enable them to see pricing for specific scenarios across perhaps a hundred lenders all at once. Nothing like this has existed in the commercial real estate mortgage space, until now. The SkyMeta™ app (https://app.skymeta.com) is, for starters, a real-time commercial mortgage pricing engine.

How is this achieved in the much more complex market for commercial real estate loans, you might ask. Well, for starters, we spent a tremendous amount of time deciding what to include. If there are too many options, the app becomes too hard to use, too few options and it is not useful enough. We boiled down the massive complexity of the commercial real estate market into a key set of metadata. Then we created a form for lenders to enter loan structures, terms, and spreads. We call this form a rate sheet because that is a familiar concept, and it looks like a rate sheet that a banker might build in a spreadsheet, with columns of popular loan structures, an index, spreads over the index, and key features. But it also has a section to implement modifiers to the basic spreads based on a host of other criteria, like loan size and building type, to name a couple.

The rate sheet the lender builds is never actually shown to anyone. Rather, the data from it is extracted and used to present options to loan brokers, also known as commercial loan brokers, commercial mortgage brokers, or capital markets advisors. For their part, the SkyMeta app gives commercial mortgage brokers have a web form they can use to define their desired loan structure, type of real estate, information about the borrower, key underwriting criteria, and more.

When the commercial mortgage broker completes this Deal form, SkyMeta's algorithm calculates the best loan options using data extracted from lender rate sheets, and presents those anonymized commercial loan options to the commercial mortgage broker. In this sense, SkyMeta is a commercial mortgage pricing engine for the commercial mortgage broker, because they can see real-time pricing for various options. Indexes are updated daily, automatically. Lender names are not shown at this point to protect the confidentiality of the lender's pricing information. The broker has to select a loan option, request a Letter of Interest (LOI), and pay a small fee to get introduced to lender and have their LOI request delivered. The fee is important because it creates an incentive for the broker to just send the request to the few best options, rather than to 100. A good community should not encourage time wasting behavior.

On the other hand, the lender also pays a small fee when they receive the LOI request, so they have an incentive to keep the spreads on their rate sheets accurate. It is not in their interest to pay for LOI requests for deals they cannot ultimately approve.

So, the SkyMeta web app is a pricing engine for the commercial mortgage broker, but for the commercial lender, it is more of a deal engine, in that it generates a deal (loan) opportunity for them to pursue. It is more than that though, because SkyMeta enables commercial real estate lenders to specify thinner spreads when the borrower brings over large deposit accounts to the lending institution. The practice of discounting commercial mortgage loan interest rates when the borrower brings over deposit accounts is common among commercial banks, which originate the majority of commercial real estate loans. When commercial mortgage brokers enter their deal profile, they are able to specify the bank deposit account balances that will accompany the loan, and get better pricing for the borrower. In this sense, SkyMeta is a commercial banking relationship engine for commercial bankers.

SkyMeta also enables commercial mortgage brokers to send application packages to the commercial lender via a secure and simple-to-use web interface, and commercial lenders can in the same way send forms to the commercial loan broker that they need completed. LOI's can also be exchanged. So, based on this functionality, SkyMeta can be said to be a commercial real estate loan origination platform for the automation of commercial mortgage loan origination processes.

Lastly, both the commercial real estate lenders and the commercial mortgage brokers have the ability to write a review about each other after the deal is done or declined. In this sense, SkyMeta can be said to be a commercial loan community where participants are building reputations that can convey to them long-term competitive advantages.

It should also be noted that borrowers that arrive at the SkyMeta website are presented with a form (https://skymeta.com/#borrower) via which they are referred to commercial mortgage brokers that are SkyMeta members. In this way, SkyMeta can be said to be a deal engine for the commercial mortgage brokers as well.

Thanks for reading. If you made it this far, you have a great attention span. Maybe you'd like to weigh in on what you think we should call SkyMeta. We'd love to hear your opinion. Drop us a note at [email protected]. In the app you can also use the Tell Us ™ feature, anywhere you see a lightbulb in the app, to tell us what you think. We invite you to experience the "rose" for yourself by selecting the Register button below.