Our GP customers often ask us what institutional investors are looking for in a real estate investment manager. We went straight to the source to get some answers, gathering dozens of the largest institutional LPs in the United States at a recent virtual event to ask them what’s on their minds as they think about real estate now and in the future.
𐩑 Only one in seven LPs said they receive “good data in a timely manner” on their real estate investments, with a majority noting that, after quarter end, it often takes three months or more for managers to provide aggregate portfolio data for the preceding quarter.
𐩑 Most LPs say real estate investment managers don’t provide them with enough data to empower their investment-making decisions, and all wanted more property performance data.
𐩑 Across the board, LPs wanted technology that improves the presentation of data and clarifies investment costs and performance.
𐩑 LPs are bullish on the commercial real estate market long term and think it will flourish again as people, investors, and developers adapt to a post-COVID world.
Here’s what we heard these investors want from their real estate investment managers:
Most LPs we spoke with approve of how their real estate managers are managing their investments overall. But most expressed some dissatisfaction with the reporting, feeling they spend too much time chasing data they need. For a majority, it took three months or more for their managers to provide aggregate portfolio data for the preceding quarter.
Data is one of the most effective ways to communicate your value and help investors see what’s different about how your firm manages real estate investments. Timely, consistent, thorough reporting gives LPs greater control in how they review and use your data, and allows them to make more informed investing decisions.
Not a single LP told us that they were getting all of the data they would like to receive. Nearly 40% report that they get much better data about their investments in other asset classes, and roughly 60% believe that the data they are getting from their real estate managers is insufficient.
What’s missing? Property performance data was the number one request of every LP we spoke with. LPs also expressed an interest in getting more or better tenancy, fee, debt, and fund performance data.
Here’s a sampling of what we heard from LPs about the data they are looking for:
- “We’d like to better monitor tenant and industry exposure in our office, industrial, and residential properties.”
- “We always want to know more about sector exposure and which assets are performing well.”
- “We’re looking for more details on leverage exposure, the impact of leverage and fees, and what fees are being paid to third parties.”
- “Cleaner data would help us all become better investors and allow us to re-allocate team resources to more value-add activities.”
Once investors receive data, many feel they spend too much time trying to understand it, instead of making decisions. This time would be far better spent having more in-depth discussions with their investment managers about specific properties and what’s driving performance so they can manage risk, and ultimately make more informed investing decisions.
The response below sums it up:
“We have certain targets and run strategy sessions to understand whether we’re meeting them in the funds where we’re invested. We need to understand things like current portfolio risk and tenant levels. If a manager made an investment decision on a large asset, where would they put that in their portfolio? What’s the forecast of when they’re getting returns? How should we populate our pacing model? If they buy a property, are they then overweight to a certain tenant or strategy? Getting data that answers these questions is key.”
Investors are pressed for time so presentation matters. It’s important to make sure your reporting is easy to interpret and visually consistent to make the most of their time. Investors want reporting to be a clean, clear, and consistent representation of relevant performance factors and the value their managers provide.
Using technology to consolidate data in one easily accessible place and in the forms various stakeholders need will reduce the time it takes to produce reports, improve accuracy, and free up your team to focus on more strategic activities.
Without good, in-depth data and consistent reporting, you aren’t communicating the true value of your investment process. When data is lacking, it leaves performance open to interpretation, which can have an impact on your effectiveness because your investors might not fully understand your investment decisions or the value you provide. It can also make it harder to differentiate your firm from others, so it’s imperative that you own and optimize the reporting that others see.
How Juniper Square can help you
Thinking about upgrading your reporting? Make sure that you’re working with a partner that understands your business and is invested in your success. We work hand in hand with GPs and LPs, combining their insights with our deep expertise in how technology can solve your core business problems. You can rely on us to help you provide the right reporting so you communicate better with your investors and empower their investment-making decisions.