The private equity real estate market has enjoyed a steady resurgence from the infamous crisis in 2008. The latest Ernst Young Global Market Outlook: Trends in Private Equity Real Estate report noted that “the market this year has been characterized by healthy levels of deal flow across the gamut of fund products, from core, opportunity, and value-add, to separate accounts and direct investments by sovereign wealth and pension funds,” adding that “there is a record high level of capital available for real estate investment globally.”
The strong opportunities in this investment space have been complemented by higher levels of competition for the best investments. High net-worth investors have been widely reported to be “hungry for real estate investments,” particularly investors in Asian markets, where burgeoning family offices have been allocating significant percentages of their portfolio to real estate assets (27.3% according to Volume 10, Issue 5 of PEI Alternative Insight PERE). Crowdfunding for real estate investments has also gained momentum, with the number of sites providing crowdfunding investment opportunities multiplying rapidly.
Private equity real estate investors, facing these unique competitive challenges, are now under pressure to identify and close the best deals quickly, and the market realities make a quick close unlikely. The Ernst Young report stated that the average time for private equity real estate firms to close a fund is now 21 months, which impedes these firms’ ability to hit their fundraising target and improve overall market share. When competition is this fierce and fund closing times are prolonged, firms often alternate tactics for fundraising. These strategies include raising funds deal-by-deal, or finding methods to expedite the fund-by-fund fundraising process.
Asset management systems produced by industry-specific technology vendors provide real estate investment firms with opportunities to streamline both a deal-by-deal and fund-by-fund fundraising strategy. An online investor portal facilitates efficient deal-by-deal fundraising by posting deal opportunity information to investors who fit the ideal profile for the opportunity. These profiles are generated through the collective correspondence and activity logged into your firm’s CRM system. Once you have identified these preferences, they can be entered into configured fields, and leveraged into customized email lists distributed through a Mail Merge Wizard into the portal. The capability to instantly notify qualified investors about enticing investment opportunities also enhance the brand equity of the firm, conveying deep attention to investors’ interests.
Fundraising on a fund-by-fund basis can be optimized by adopting a robust internal communication platform, by effectively determining marketing traction, and maintaining a steady flow of information through constant reporting. An asset management system enables users to assign specific responsibilities for different elements of the fundraising pipeline, ensuring accountability for the status of fund-by-fund marketing initiatives. The system can also assign stages for investor interest and a level that aligns with the firm’s internal terminology, and display the anticipated amount of investment. These fields can be grouped into a report that can be immediately distributed to all related team members, ensuring total visibility on a fund-level fundraising effort.
Accessibility is important for any type of fundraising strategy, and consequently a mobile app is essential for private equity real estate fundraising teams. As noted in Dynamo Software’s Fundraising for Mobile Applications white paper, Complementary mobile apps for investment management platforms ensure that fundraising teams can meet ad hoc fundraising challenges, keep everyone in the firm informed on developments occurring during road trips, access the complete data library of portfolio performance and investor interactions on demand from a tablet or smartphone.
The Ernst Young report’s “Managing Complexity” section poses the question, “Should [firms] focus on their core business…while outsourcing some or all of their administrative functions? Or should they invest in the technology platforms and people required to meet the administrative demands of today’s real estate fund management industry?” Trusting your internal workforce, and investing in technology to assist with their performance, is not only cost-effective, but enables firms to tailor their strategies to the evolving nature of private equity real estate.
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