The Future of Due Diligence: From Paper Management to Data Management

Posted on August 28, 2012 in Viewpoints by admin

By Michael Cipriano, President and Co-Founder of Millennia Group, LLC.

Even the best investment strategies are entirely dependent on the quality of the execution…of the due diligence…of the process.  The challenge has been and always will be how to track all the information of a transaction; Did we receive it? Where is it? Who has it? Did anybody look at it? and Is this the latest version?  The devil is truly in the details.

In some ways, the details have become somewhat more challenging to track, as the critical information such as the top 5 or 10 leases, the most recent appraisal, the Phase I report, the rent roll, the Argus file, etc have moved from paper to electronic format while our processes for managing that information are still somewhat mired in paper-oriented thinking   For example,  the standard approach to collecting information is to create a folder structure on the shared drive (analogous to an old-world file cabinet) and to start copying the files into the folders.  While this method is relatively simple at first, issues develop quickly.

For example:

Individually, each of these problems seem small, perhaps inconsequential, but in aggregate and over the due diligence period for any investment, the potential for error only grows, and each error or delay can be expensive.  Even the most brilliant investment strategy can be brought down by the seemingly small challenges of document management.

The solution to this is not simply to work the existing process harder, put more people on the problem, or even yell at your staff for inconsistent filing of documents – but rather to embrace a digital process – based not on the limitations and capabilities of paper filing, but on the unique qualities of a digital system for information storage and retrieval.

Real estate investment managers need to take a good look at digital management systems designed specifically for the real estate acquisition and due diligence process.  Key to such systems should be a secure, online document collection tool that allows you to request, store and track critical due diligence documents and data files.  The system should be designed to track what documents are in the system and which are missing, it should tell you which is the latest version of a document, who last reviewed or commented on the file, and it should automatically remind the responsible party that the document is still missing.

Your on-line “war room” needs to be more than a digital replica of your filing cabinet – it has to help you and your extended team manage the details of your acquisition process.  Those investors who understand the power of document management are far more likely to be able to execute their strategy successfully.

About Michael Cipriano and the Millennia Group, LLC:

Millennia Group has been providing document imaging services and document hosting applications to the commercial real estate industry since 1996.  They have participated in the collection, digitization and normalization of documentation for single asset acquisitions to the acquisition of entire commercial real estate companies with hundreds of properties.  Michael is a frequent speaker at real estate and technology events and is a member of the Association of Records Management (ARMA) and the Association of Information and Image Management (AIIM).,, 630-279-0577 x122