Research results: Better investment administration needed to support growing LP expectations

To learn more about the challenges commercial real estate investment managers are facing when it comes to investment operations and administration, we recently partnered with IMN to conduct a survey of executives at sponsor firms.

The Commercial Real Estate Investment Operations and Administration Survey, which launched on October 4 and ran through October 20, 2021, covered a range of questions about investor expectations, operational workflow and processes, as well as experiences working with external administration partners. More than 100 GPs from a range of U.S.-based CRE firm types participated in the study, 73% of whom were either a Principal, CEO, CFO, or COO at their firm.

Here’s a few of the things we learned:

Investors already have high expectations—and, as the market quickly evolves, those expectations will likely grow.

We asked GPs which investor-driven demands they thought were likely to increase over the year. Better reporting (57%) and transparency (52%) topped the list, followed closely by standardization (50%) and timeliness (42%).

Related: Find out how to bridge the GP-LP reporting gap on page 24 of NAREIM's Dialogues magazine

More GPs are realizing that the investor experience is what sets them apart from their competitors, reporting that a great investor experience prompts more repeat business (86%), more referrals (83%), more—and larger—investment commitments (62%), more time to spend on high-value activities (55%), and more productive customer relationships (44%).

In spite of all the benefits of improving the investor experience, many GPs say their administrators aren’t focused on providing the support needed to make that happen. Only 24% of GPs report that the investor experience is a focal point of their administrators’ offer—and 43% say their administrators are not focused on it at all.

Where some GPs get bogged down by bureaucracy and administrative tasks, the most successful are looking to administrators for support.

But not all administrators are created equal, and many are missing the mark. When it comes to providing insights and expertise backed by robust technological infrastructure and a high-touch approach that can alleviate GPs’ operational burdens, our survey found that just 21% offer meaningful process improvement support.

Whether they manage funds or invest deal by deal, our GPs tell us they are looking for an administrator that offers the right mix of people, partnership, and technology—one that blends the right digital and organizational expertise, carefully guides you on investment operations and processes, and adjusts to your needs as investors, regulatory requirements, and the real estate market evolve.

It’s a similar story with the subscription process, which 71% of GPs found either highly or somewhat demanding. Given that figure, you might expect administrators to be focused on making the subscription process as easy as possible. But that doesn’t seem to be the case, as 42% of GPs reported that their administrators were still using manual processes instead of managing subscriptions through an online workflow in a secure investment portal.

Working with an administrative partner who offers a technology-driven subscription solution can be a game changer. Juniper Square client Jeff Goldtein of ACRE Investments sums up the benefits, “Instead of managing subscriptions and chasing signatures and reviewing documents, the ACRE team can focus on what they do best: raising and deploying capital, breaking ground on and managing workforce housing and other purpose-built multifamily developments, and delivering stellar service and outstanding investment results to their investors.”

Related: Raising money is hard. Subscriptions don't have to be.

Our research found that while many GPs still don’t work with an external firm on investment administration, that’s changing. Many respondents reported that they are considering outsourcing investment operations going forward, especially for time intensive-tasks like preparing partner capital account statements and K-1s or dealing with compliance issues.

That’s not a surprise, since our recent Operational Excellence Survey found that top-performing CRE firms reported being less likely to be slowed down by manual processes.

Related: Learn How The Fastest-Growing CRE Investment Firms Run Their Businesses in this survey.

If you’re thinking about working with an administrator, we’ve put together a list of things to ask potential providers to make sure you get the right technology, expertise, and level of partnership needed to redefine the way you work and build exceptional client relationships.

Related: Looking for an administrator? Top questions to ask here.

Download the survey results summary to learn more.