Participating at industry conferences is critical to help us to stay abreast of market developments and meet professional goals. In January, we participated in two conferences and share our experiences and takeaways from each. Continue reading for the highlights!
Abbey Holm’s takeaways from the Insight into Commercial Real Estate market from the IMN Winter Forum
This January, I joined lenders, operators, fund managers, investors and other service providers at IMN’s 16th Annual Winter Forum on Real Estate Opportunity and Private Fund Investing. At the event, held in Laguna Beach, CA, all aspects of commercial real estate (CRE) investment were covered, as lively sessions with knowledgeable industry professionals took place.
Of particular interest among attendees were sessions regarding the economic outlook and its impact on CRE markets. Panelists shared their predictions on the US economy, and discussed their efforts to successfully position themselves within the industry. While the consensus across panelists and sessions leaned toward an economic slow-down, rather than a recession, there were differing opinions of which sectors would see the most focus. Panelists thought multi-family and industrial would remain strong investments, whereas hotel and office were less clear-cut. Retail also, was a debated sector, providing opportunity for some, and untouched by others. Strategies varied as well, with some panelists focused on less risky core and core plus, while another panelist lightheartedly described core plus as “over-priced value add”.
Another recurring topic throughout the event was deal structuring. Sessions discussed different ways for deal professionals to access capital sources. Deal-by-deal investing, joint ventures, REIT investing and fund launches garnered a lot of attention. Pros and cons of the various structures included:
Deal-by-deal investing:
- Pros - streamlined and simple to operate, no burdensome administration requirements.
- Cons - cash requirements may not synch with cash flows. Increased lead time to source funding, with limited deal flow and purchase opportunities.
Joint Ventures:
- Pros - increased access to capital, shared risk between partners and flexibility of partnership scope and term.
- Cons - increased legal and administrative costs and shared control across partners.
REIT investing:
- Pros - increased access to capital while management maintains control of investments.
- Cons - higher administrative costs associated with operating REITs. Usually high barrier to entry for shareholders.
Funds:
- Pros - often have access to institutional capital, allowing for greater deal flow and size.
- Cons - requires established track record and robust infrastructure to meet investors’ compliance and reporting requirements.
Panelists agreed deal structuring is dynamic and can evolve over time. It’s driven by best fit for deal professionals and their partners/investors.
As a technology solutions provider and back office administrator, SS&C is able to help clients navigate the CRE space. We offer a range of flexible options, recognizing there is no “one-size-fits-all” solution. Whether you are a deal-by-deal investor looking to aggregate your portfolio or an emerging fund manager looking for end-to-end outsourcing, SS&C can provide highly specialized software and deep industry expertise. Clients are provided with tailored service to meet their operational needs, in a focused, efficient and cost effective manner.
Amy Pearce’s experience at KPMG’s Los Angeles Real Estate Event focused on Real Estate Fund Administration 2.0
In January, I had the opportunity to sit on KPMG’s real estate outsourcing panel at their Los Angeles Real Estate Fund Administration 2.0 Share Forum. They always say it is sunny and 70º in LA, however, on this day it was pouring. The weather didn’t stop area real estate professionals from attending and miss out on networking opportunities in the tight-knit real estate industry.
KPMG conducted a survey of 107 real estate investment professionals, which found significant maturity in the real estate fund administration industry due to meaningful investment in real estate-specific capabilities – people, processes and technology by various fund administrators. After presenting the survey results, KPMG moderated two panels. One discussion with real estate managers focused on their experience with fund administration outsourcing. Their top reasons for outsourcing included:
- Reduce operating costs such as IT, HR and facilities; and looking for a shift from variable to fixed costs
- Search for a scalable solution with which they can grow
- Improve focus on core activities – investments and fund raising
- Satisfy LP’s push for outsourcing for independent and transparent reporting.
The managers also discussed what they have chosen to outsource and some of the successes and pitfalls experienced in the transition. One manager is currently with its third fund administrator due to his firm’s success outpacing their administrator’s capabilities. It is important when selecting a fund administrator that you are not just thinking of your needs today but where your operations will be three, five, ten years from now and select and administrator that has the capabilities to grow with you. At SS&C, we are able to effectively support managers at both ends of the spectrum and anywhere in the middle.
The administrator panel discussed the scope of services typically outsourced, which was very much in line with the results of the KMPG Real Estate Fund Administration 2.0 survey results. New managers or those offering a new strategy, like open-ended funds and Qualified Opportunity Funds, chose to outsource fully from the start to avoid the cost and time required to support the new strategy with new or upgraded technology and staff. Conversely, we discussed how we frequently see an existing manager’s quest for a reporting or portal solution to address their limited partners’ demand for transparency, – however, end up outsourcing a broader range of services as there is a core scope of services for which it is not effective to separate.
The panel discussion ended with a focus on technology and how critical it is to our ability to deliver; and how managers see it as a differentiating factor when choosing an administrative partner. Managers want an automated solution for the complex calculations such as management and incentive fees, and look for a large scale data solution including both financial and non-financial data related to the underlying investments. As SS&C is a technology company at its heart, we are our constantly evaluating our toolbox of solutions and the needs of the industry to fill the gaps. As the real estate fund administration market continues to mature, the focus on technology will continue to be on the forefront. In 2019, KPMG’s Real Estate Fund Administration Survey will focus on technology.
The survey results and panel discussions were valuable to me, conference attendees and panelists. The managers’ perspective and insights from KPMG are invaluable as SS&C continues to expand our Real Assets fund administration business. As a prospective administrative partner, this knowledge helps streamline the selection process for our prospects by offering the right outsourcing solution.
