The commercial real estate industry is currently experiencing greater demand from investors for increased transparency on investment and asset performance. In fact, 63% of investors cite ‘degree of transparency’ as being an important consideration for their investment. Firms willing to provide those additional
insights may see heightened interest from investors, which can lead to higher engagement and increased probability of repeat investments.
The commercial real estate industry has been known to adapt slower than other industries to shifts in the market, but forward-thinking firms will want to keep their eye on several key trends that have emerged surrounding increased transparency.
Read ahead to learn how to leverage technology to address these new investor demands and expectations.
Distribution Details – Firms are increasingly providing investors with additional details on their distributions, allowing investors to better track info such as their breakdown on returns, returns over a specific time period, and whether the distribution includes Preferred Return, Return of Capital, or something else. Investors are also expecting to see these details in real-time and on-demand.
Investor Statements – One way that firms are providing increased investor transparency is with some format of monthly or quarterly statements. The most common analytics provided to investors are Cash on Cash and IRR, which help investors evaluate risk versus reward and builds trust. Some companies are moving towards providing asset-level performance as well, but that trend is being adopted at a slower rate.
Data Security – 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.
Deal Transparency – When deals are marketed electronically, investors will have the most recent version of details and information. They can also easily refer back to the deal and access that same information in the future.
Market Expansion Plans – It’s becoming more common to share market expansion plans with prospects and current investors in order to pique interest. Even providing simple details such as the location and asset type can be enough to keep investors engaged, and they may more likely to invest once the deal begins taking commitments.
To build trust and transparency, firms must also focus on their investor relationship management strategy. A big component of this is communicating frequently and effectively and providing meaningful information. Even when not actively raising capital or managing a deal, it’s important to stay top-of-mind – and that is a great opportunity to provide industry insights and thought leadership to prospects. A CRM automates these communications and enables the process to be scalable.
There are also now several emerging industry trends on what types of data and information to communicate with investors.
Quarterly Portfolio Performance
If you are not sure how often to connect with your investors, we recommend checking in at least once a quarter to provide updates on their portfolios and to keep their investments top of mind. Providing an investor statement allows the investor to keep track historically of how their investment is performing over time.
Annual reports can give analytic minds the transparency they desire. An effective annual report should strike a balance between being comprehensive and concise. Key sections of an annual report typically include
- Key financial highlights and strategic initiatives
- Letter to shareholders
- Financial statements
Key Performance Indicator Progress
It is common to share portfolio KPI progress with investors, but remember that metrics alone don’t tell the entire story; data without context can be hard to interpret. Adding context to these numbers and highlighting key milestones not only gives you more control over how people understand and interpret numbers but also helps to highlight the less tangible parts of your business and to engage investors.
Leveraging technology makes it easy to communicate effectively at scale and to provide investors with this level of transparency. In fact, this form of electronic communication has become increasingly popular and is preferred amongst both sponsors and investors, accommodating the 24/7 global schedule of investors.
As sponsors use these tools and resources to increase transparency, investor trust grows, leading to higher engagement. Sponsors implementing these best practices via the IMS Platform have seen an increased number of investors logging into their portals monthly and greater click-thru-rates on emails.