5 Ways Sponsors Can Improve Investor Transparency
Transparency is a hot topic in commercial real estate, and for good reason. Over 60% of investors cite degree of transparency as being an important consideration for their investment, and the accelerating rate of CRE tech adoption brings with it a greater demand for more transparency around investing.
While the concept of transparency is not unique to commercial real estate, its meaning is pretty consistent across industries. Put simply, transparency means that information, data, and insights are shared openly. For sponsors, providing a high degree of transparency to investors enhances the client-sponsor relationship because of the sense of comfort and security that having access to valuable information and insights creates. For investors, a sponsor’s transparency allows them to feel confident that they are making an informed decision and helps them to feel good about their choices.
To be most effective, transparency must be linked with consistency and eventually become a habit. Read ahead to discover five ways that you can improve investor transparency at your firm.
Provide 24/7 On-Demand Access
CRE is an increasingly global business. Investors across the country or across the world need instant access to key information, investment documents, and legal details, regardless of time zones and business hours. Investors need accurate, reliable data at their fingertips to help support better decision-making. Having real-time, on-the-go access can help accelerate deals by removing some of the roadblocks associated with time and efficiency.
Provide Quarterly Portfolio Performance Updates
Sponsors are often unsure of how frequently to connect with their investors. While checking in too little or too much can both be traumatizing to the sponsor-investor relationships, no communications at all can be even more detrimental. Therefore, we recommend checking in at least once a quarter to provide updates on their portfolios and to keep their investments top of mind. By providing a quarterly investor statement, investors can easily keep track of how their investments are performing over time.
Enable Investors to View Distribution History
Having access to the distribution history shows investors how they are getting a return on their investment. And it provides them with the information that they need to share with personal financial advisors who manage their overall investment portfolio.
Ensure Data Security and Accuracy
While there’s no shortage of technology solutions available today, there is a rising demand to find platforms that will keep data secure. Traditional ways of supplying data and reporting through mail or email carry the risk of being hacked or reaching a party they weren’t intended for. With a secure technology platform, sponsors can store and share confidential investors details through a password-protected dashboard or portal.
Provide Investors with Access to Investment Documents
Years ago, sponsors would need to send their investors documents in the mail, which could take 3-4 days. More recently via email, that could still take anywhere from hours to over a day to receive. That same information is now instantaneously available at the click of a button. With a document management tool, sponsors can securely share project- and investor-specific documents and information such as statements and K-1s. And investors can quickly access and download those key documents at any time and from anywhere.
Today, technology makes it easier to be transparent with investors. And it’s making it more efficient for sponsors and investors to contact each other and share information. As such, technology leads to deeper connections and enables effective engagement between sponsors and their investors. A drive for transparency means an enhanced client experience.
You may also be interested in reading The Need for Transparency in Commercial Real Estate.