Ankur has over 22 years of experience defining, designing and implementing large and complex enterprise IT systems in various industry domains including private equity, insurance, travel, media and telecommunications. Prior to co-founding PE Front Office, he worked with a large PE firm as Enterprise Architect and with Sapient Corporation, India as Chief Technology Officer. In 2013, Ankur wrote a book titled “Enterprise Technology in Private Equity”, published by PEI Media, London.

The alternative assets industry has seen exceptional growth over the past decade, with private equity, hedge funds, real estate and private debt contributing a significant share of alternative investments. Sources estimate that the sector will reach $18 trillion by 2024 and as a result, real estate assets, which account for around 9% of total alternative investments globally, present alternative investment managers with many opportunities to grow. ‘investment.

Although transactions in real estate and other asset classes are broadly similar, there are some differences in the investment process. One of the major differences is the nature of the beneficiary entity, for example, in the case of other asset classes, the investment is made in “Companies”, on the other hand, in the case of a fund real estate, investment is made in ‘Projects/Properties’ of ‘Companies’. While the normal due diligence process includes activities such as evaluating the books and reviewing the “earnings quality” of the business, for a real estate fund it includes activities such as inspecting the property, verifying leases and securing government permits and approvals. When it comes to investment management, while real estate funds use the loan-to-value (LTV) ratio, other asset classes use the debt-to-equity ratio to measure financial leverage. Another difference may be the valuation methodology, while typically companies are valued on revenue or multiple of EBITDA, real estate projects/properties are valued using either the revenue approach, the cost approach or the sales comparison approach. Additionally, to assess the financial health of the project/property, real estate funds focus on a different set of portfolio financial data such as capitalization rate, net operating income, gross operating income and the cash return.

New and innovative investment approaches, complex valuation processes, compliances/regulations and hectic schedules of real estate fund managers have led to the need for technology solutions that can help manage and streamline the investment process of end to end. However, generic technology solutions do not work well in this sector, as each asset class follows different investment processes.

New era technology solution providers are aware of these needs of real estate funds and understand that each asset class requires a specific technology solution designed with a different purpose. Real estate-specific technology solutions can streamline investments by providing extensive monitoring capabilities as well as the flexibility to manage assets at the property and project level. Below are some major features that an ideal real estate investment management solution should offer:

Transaction Management

A robust real estate investment management solution should standardize the process of evaluating deals and allow investment teams to efficiently manage multiple deals to arrive at winners. Some transaction management features offered by an ideal real estate investment management solution are:

  • Simple and intuitive mechanism for easy and automatic transaction creation
  • Configurable transaction stages and real estate-specific data fields
  • Track transactions through multiple stages via customizable workflows
  • Comprehensive reports and analyzes

Portfolio Management

Portfolio management is an essential task for a real estate fund. This requires accurate and timely data collection from the respective properties and projects and their real-time analysis. Some portfolio management capabilities offered by an ideal real estate investment management solution are:

    • Support for multiple asset classes including stocks and debt
    • Automated amortization/repayment schedule
    • Cash flow and valuation tracking at property level as well as project level
    • Asset warehousing i.e. easy transfer of asset ownership
    • Automatically calculated performance parameters such as IRR and MoC
    • Provision for management of non-performing assets
    • Cap Table to monitor the shareholding model, based on shareholder entry and exit
  • Flexibility to set real estate specific financial/KPI/ESG metrics such as Cap Rate, Net Operating Income, Gross Operating Income and Cash Yield
  • Monitoring of financial parameters / KPI / ESG on different periodicities
  • Investee portal for easy data download
  • Comprehensive reports and analyzes

Investor management

A real estate investment management solution should give the investor relations team extensive capabilities to manage investor relations and maximize opportunities for tracking potential investors, fundraising activities and communicating with investors. investors. Some investor management capabilities offered by an ideal real estate investment management solution are:

  • Track detailed investor information and investment preferences
  • Track fundraising progress through a customizable fundraising workflow
  • Monitoring of withdrawals and distribution at investor level
  • Monitoring the performance of investors’ investments
  • Support for personalized communication via the built-in email communication function
  • Comprehensive reports and analyzes

Fund management

The increased complexity of new-age specialty funds has made fund administration a complex activity that requires a great deal of time and effort. A growing number of fund managers are seeking refuge in technology to simplify this complex business and to their delight, new-age technology solutions offer innovative solutions. Some fund administration features offered by an ideal real estate investment management solution are:

  • Assistance in setting up complex investment structures
  • Automatically calculated fund performance parameters such as gross and net IRR/MoC, NAV, DPI, RVPI and TVPI
  • Monitoring of fund costs as well as cash flows and underlying investment valuations
  • Track investment details of existing investors including Commitment, Contribution, Distribution, NAV, Gross and Net IRR.
  • Automated withdrawals/distributions as well as capital call operations
  • Comprehensive reports and analyzes

Utility vs Productivity

An ideal real estate investment management solution should not only focus on utility, but also help improve the productivity of the investment team. Some new era technology solutions have attempted to fill this gap by offering the following additional features:

  • Seamless integration with third-party data sources for easy transfer of data between multiple systems
  • Integrated document management powered by digital signature features for easy storage and sharing of important documents
  • Email plugins to access information directly from the mailbox without having to log into the software
  • Mobile apps for easy access to information on the go

Conclusion

Maximizing the overall return on investments is the primary goal of real estate investment management. However, it takes a lot to maximize returns, from the careful evaluation of investment opportunities, to effective monitoring of portfolio investments, to timely reporting to investors and to the competent administration of funds. Technology is helping greatly to streamline these complex and important activities and is poised to show us the right path to take in the future.

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