Many CRE Firms Want an Upgrade for Investment Management Accounting

In the chaotic first months of the coronavirus pandemic, many real estate companies struggled to provide fast answers to their investors.

“These companies were getting daily calls,” says Chris Barbier, industry principal for investment management at Yardi. Investors wanted to know about rent payments — and many asked how that might affect the distributions they depended on of profits from their buildings.

The pandemic exposed the shortfalls of organizations with disparate systems in place to communicate with investors, as staff working from home struggled to accurately get visibility into the data to quickly answer these questions.

Close to half (44%) of real estate executives feel their companies do not have the software systems they need to properly asset manage their properties, according to Yardi’s recent Proptech Survey. Slightly fewer executives (42%) felt their companies already have the right systems in place.

Not every company that has an investment in real estate feels they need specialized software to account for these investments — the survey finds that roughly half still rely on manual spreadsheets.

“They might be doing the waterfall calculations in Microsoft Excel and then posting the results to cut the check in Quickbooks,” says Barbier. “It is not a scalable solution as their company grows — in terms of volume or complexity of the ownership structures they may have.”

Even among real estate companies that use investment management accounting software, the majority (over 55%) do not have the functionality to automate financial consolidations and performance metrics or automatically provide information to investors, according to Yardi.

Investors are especially eager to get information when their investments are threatened by rapid changes in the economy. “The key is transparency and quick access to the information within the organization and to investors,” says Barbier. “Investors are expecting immediate results and responses and grow impatient waiting for answers.”

Many investors now expect to get information whenever they want it. “They are expecting more of an online experience where they can access their information on their devices,” says Barbier. “If you are emailing them a spreadsheet or reports, that is probably not what many investors are expecting now.”

“We are seeing mid and smaller organizations adopting technology to communicate with investors,” he continued. “We’ve seen all types of clients, from family offices, small start-ups, owner operators – even traditional fee managers that have established new lines of business – adopt this type of technology to meet investor expectations and compete for capital.”

“Investor’s want a portal to be more than document repositories, says Barbier. “The investors want to drill down to see the health of the asset.” However, according to Yardi, less than half of the respondents reported their investor portal integrated with an investment management system and less than 80% integrated with a proptech platform. Barbier added, “A connected system benefits all stakeholders providing visibility from the asset to investment to investor.