Looking for ways to scale or improve your operations? Outsourcing can reduce risks, provide staffing and operational efficiencies, and even improve investor satisfaction. But how do you know if you’re ready to outsource? And how do you do it in a way that will unlock the benefits while avoiding potential pitfalls?
To help answer those questions and more, we recently hosted a webinar called, “Doing More with Less: How Trusted Third Parties Can Be Critical to Operating Efficiently and Scaling Your Business.” In it, Juniper Square’s own Jacqueline Johnson, Head of Fund Administration Sales, and Vittoria Reimers, VP of Investor Services, spoke with Tom Stults, Managing Partner at Watchung Capital. Together, they discussed the results of a recent Juniper Square survey of GPs on their expectations for 2021, the hurdles facing real estate investment managers today, and some of the steps that successful managers are taking to operate as efficiently and effectively as possible, particularly in light of more volatile market conditions. Here’s a recap of what they had to say.
Tom, who got his start in real estate private equity at Goldman Sachs and spent a number of years on the executive teams of other firms before starting Watchung Capital, echoed many of the conclusions of our survey. He thinks COVID’s impact will be driven in large part by which area of the real estate market you’re invested in, but its overall influence on the economy and capital markets will be more muted. “Depending on who you are as a real estate manager and what type of property you focus on, the impact may feel negligible, slightly positive, or almost apocalyptic,” Tom said. “But my strong suspicion is that certain pockets will be resilient, although there’s not nearly as much obvious opportunity as there was after the last financial crisis.”
His views on fundraising and acquisitions mirror his views on opportunity, “For most managers, 2020 set a pretty low bar so it’s not surprising that the majority expect to be doing more in 2021. The markets have opened up from a transaction and capital-raising standpoint and, while we’ll have to wait and see what the opportunity set is for next year, we expect things to improve.”
If you scale it, growth will come
Most managers have plenty to deal with beyond figuring out how COVID will affect the real estate market and their investments, including how to best grow AUM and efficiently scale their businesses to support expected growth in 2021. The challenges they’re facing are both external and internal in nature. Externally, as always, there’s the question of how to source new investment opportunities and get access to more capital. Internally, time is always an issue. Figuring out where to prioritize is a constant challenge.
Tom is focused first and foremost on scaling his business because, in his opinion, growing AUM is just one part of their overall efforts. According to Tom, there are organizational and strategic reasons for focusing on scale versus gathering more dollars. “Launching a new fund, embarking on a new strategy, doing something new and different tends to be much lower down the list these days. It’s always chicken and egg as to which is more acute, but I’d say, at least from our standpoint, scale is clearly the focus right now.”
Why outsourcing (and why now)?
Tom’s not alone. Survey respondents also reported challenges around scaling internally. The good news is that, in most instances, internal and external factors are interrelated—if you can solve internal operational challenges, you can free up time to focus on external priorities. One way to do that is to outsource your internal activities like fund administration or accounting.
Tom and the team at Watchung Capital, who specialize in yield-oriented investments in residential commercial and hospitality assets, already draw on technology to identify innovative operating strategies to drive higher returns at the property level. But they were intrigued by what outsourcing could do to improve their operational efficiency and, as a result, decided to move their fund administration activities to Juniper Square.
As to what motivated them to do it now, Tom says the decision was obvious. To begin with, it’s helped them better focus on their number one priority of scaling their business. Tom observed, “The ability to operate lean and agile and save costs and time were all salient points for us.”
But one of the biggest wins was a continuation of the strides already made in terms of reporting.
A particularly beneficial connection for us is that we were already using Juniper Square’s information-rich portal to provide full transparency to our investors.
Saving time and resources
According to our survey, managers who outsource their fund administration tend to spend less time on internal activities and more time on external activities that are going to help them grow.
Our survey backs this up. Almost all of the respondents reported that they plan to spend either the same amount or more in outsourcing and technology investments in the future.
“We think that’s a decision that will pay off over the long term,” Vittoria said. “Survey respondents who increased their investments in technology and outsourcing reported that they are more than twice as likely to be on track to meet their fundraising needs and far more likely to be doing more acquisitions.”
Fund Admin 2.0
In the end, Tom’s decision came down to technology. “A lot of the existing fund administrators are an extension of your personnel, which is great. They do a good job, they’re highly qualified, and I’ve generally had a positive experience with them over the course of my career. But, for us, we wanted to take it to the next level through some connectivity with a technology solution that could help us be more flexible, achieve scale, and provide a great user experience.”
The crux of their decision to go with Juniper Square was that the fund administration piece was completely plugged into its technology solutions and, according to Tom, “I didn’t see anything like that in the existing fund administration landscape.”
Leveraging the value add for your firm and your investors
Tom shared what adopting Juniper Square as their fund administrator has meant for their investors. “The experience has been great. The software piece was a known quantity to us and it was the foundation for why we were excited to make this move in the first place.
I think the more pleasant surprise has been how our investors have connected with it.
Tom ended by saying, “There’s nothing lost in translation. I’m highly confident that, over time, as we add more funds, more strategies, and more investors, we’ll feel the benefits even more acutely.”
Click here to watch the full conversation.
Ready to get help like Tom did? Request a call from the Juniper Square team now.