CRE investors are taking a big risk when they place their trust, and their dollars, in a sponsor. Investors need to feel confident that they are choosing the right sponsor, and the sponsor needs the skill, knowledge, and experience to manage the project in an effective and trustworthy manner.
So beyond reputation and track record, what are some other things that investors expect from their CRE sponsors? Read ahead to find out!
1 – Relationships
Investors want to have relationships with the people who are doing deals and look for people who are similarly aligned with them. The really hard due diligence is done up front, and then the relationship builds over time. You eventually get to the point in your relationship where the investor trusts the sponsor enough to go after the right deals and to go look at the things they want to. That’s not to say that you don’t read any of the documents and blindly sign paperwork, but you are investing with the person first. The more engaged and connected investors and sponsors can be, the more benefit they both will receive from the relationship.
2 – Communication
Communication and engagement with investors is so important. An informed investor is obviously a good investor, and a well-communicated investor is a much better investor. This is also where transparency comes in. It’s the idea of educating the investor and letting them know, “Here is what is happening in the market, and here’s why we’re paying this”. Not just simply saying, “Here’s what you get; take it or leave it”.
3 – Investment in Technology
There are a lot of people who aren’t putting any investment into their infrastructure, and for that very reason, an investor may be less likely to invest with you. Investors are looking for sponsors who have upgraded their operation, similar to other investment industries. And it makes the sponsors’ jobs a lot easier too because they can go out and know how much they can potentially raise capital for a deal without having to scramble last minute to fill the equity checks. Many investors have already seen the progression of technology and its ability to monitor and track as the key to the success of their portfolio (e.g. the stock market). And of course, a huge benefit of having technology is efficiency…
4 – Efficiency
Most organizations do not have a lot of surplus resources. Every time an investor has a request or needs information on a project is time that the sponsor is not spending working on the maximizing the value of an investment or looking for the next great real estate opportunity. Technology helps to manage all of this information and streamline processes, and these efficiencies increase return.
5 – Data
Investors want to be able to quickly and easily see how much they have invested and how much they have made. Dashboards provide that quick snapshot with the handful of data points investors need. Technology also offers timely reporting and demonstrates the data management and integrity that investors are looking for.
Want to learn more about what investors expect from their CRE sponsors? Check out this free on-demand webinar!
Want to learn more about how investor management software can help your commercial real estate firm drive efficiency and bottom line results? See a demo!