How to Avoid Common Mistakes CRE Firms Make When Managing Investors
If you have been active in the commercial real estate market long enough, chances are you have a general idea of what your investors are expecting from their CRE sponsor. With the advancement of technology and the speed at which communication and decision-making now take place, though, you may feel like you are losing touch with your investor base, particularly as Millennials begin to flood a market that was once dominated by Baby-Boomers. What’s more, 50% of investors will switch firms if their needs can’t be anticipated. Understanding investor expectations is pivotal to both effective investor relations and your bottom line.
Read ahead to identify areas of possible improvement to keep investors engaged and committed to contributing capital.
Avoid Overselling Assets
Hall of Fame speaker and best-selling author Bob Burg said, “All things being equal, people will do business with, and refer business to, those people they know, like, and trust.” You will never sway an investor who feels he cannot trust you. The key to building this trust with your investors is transparency. Don’t embellish or exaggerate about an opportunity. The first thing potential investors are likely to do once you’ve pitched them is fact check your every word. Credibility is key, and you cannot build trust by pushing a one-size-fits-all opportunity. Clear, confident, and honest presentation of information will make investors feel comfortable committing capital. Consider using an investor management software to streamline your asset presentation and give investors the information they’re looking for in a straightforward, transparent way.
According to the State Street Investor Confidence Index, investors’ risk appetite is growing increasingly more cautious. Your assets will sell themselves if you can communicate to your investors that you are all in. It’s always reassuring to investors to see that you are sharing in their risk and that you are confident in the potential return on investment. Most investors know how to compare risk profiles, measure potential ROI, and select a deal that best suits their investment portfolio, so don’t push ROI and neglect to address risk. An honest, plain-language explanation of risk accompanied by your own invested capital shows investors that you are knowledgeable, level-headed, and truly believe that an asset will be profitable.
Once you have committed investors, it is important to keep them informed about the status of their investments. Retaining the investors you have is just as important as attracting new ones. Plus, securing capital from your existing contacts is often easier because you’ve established a relationship. If your investors don’t have access to the information they want, when they want it, they may be reluctant to invest with you again. Always offer more information than is requested and reach out to your investors. Solutions like RealPage IMS make this simple and convenient with features like investor reporting offer 24/7 access to asset data in real time. Being proactive can make the difference between making a lifelong contact and losing capital down the line, so make sure you are anticipating your investors’ needs and offering the information they’re looking for.
Adapt to the Market
It’s estimated that 20 to 30 trillion dollars of capital are expected to transfer from Baby Boomers to Millennials over the next several decades. As the investor base continues to shift, it is necessary to reach capital holders in ways that are relevant to them. Your investors expect an instant and digital investing experience that offers transparency and a wealth of information. Firms that take swift and decisive action and implement a digital strategy will secure the trust and capital of a new generation of investors.
Listen to Investors
If you’re not sure where you stand with your current investors, ask them how you could better meet their needs and expectations. Chances are they will appreciate you fostering a relationship built on trust and transparency. Implementing CRE technology allows you to provide a custom investor experience built on accurate information without overburdening your staff. If you have engaged investors who are willing to offer you feedback, actively seek out ways to improve the investor experience based on what your investors are saying.
If you’re still unsure if your firm is best serving your investor base, check out our free checklist: 7 Ways to Exceed CRE Investor Expectations