By Mark Luijcks, Head of Real Estate in the Netherlands
It may sound like a cliché, but most real estate investors tend to be cut from the same cloth. In my experience – having worked with prime real estate companies for many years – property investors usually have ‘bricks and mortar’ in their DNA. They love the fact that their asset class is so tangible, and there’s nothing that gets them more excited than going out on a site visit on a sunny day to chat with like-minded individuals in the industry.
What I often hear from these investors, however, is that they are increasingly being distracted from the core business they love due to an almost insurmountable administrative burden. Compliance is one major challenge they face. As a result of complex regulation such as the EU’s Alternative Investment Fund Managers Directive (AIFMD), professional real estate investors now have to spend a considerable amount of time on low-value regulatory tasks. Internal administration is another key challenge. New software training, ESG issues, legal administration and stakeholder management all take up time.
For those who run global real estate portfolios, the challenges are amplified. An international fund manager may have funds registered in country A, a staffed asset management platform in country B, and managed assets in many other jurisdictions. Put together all the varying rules and regulations and it can be a real headache. In this kind of environment, talking ‘bricks and mortar’ takes a back seat.
Compounding the problem is the cyclical nature of the industry. Changing market conditions mean constant internal reorganisation. Yet recruiting quality staff in an upturn can be time-consuming. And when employees are hired, a burden is placed on the existing staff, as they have to train their new colleagues while work is piling up.
Getting back to the core business
In order to go back to focusing on the core business (securing the best deals, working with tenants, satisfying equity partners, etc.) global real estate investors should look for more efficient ways to run their businesses and avoid undesired ‘organisational waste’.
The solution to the ever-increasing non-core workload is not setting up an expensive global network of fully-staffed offices. This approach would undermine the earnings model of any venture, particularly in times of adversity.
Instead, firms should embrace affordable third-party asset reporting tools, and outsource non-core tasks in the areas of compliance, KYC and ESG to external specialists with a comprehensive outsourcing offering and an international presence. This will create a far more resilient, automated organisation.
There are many benefits to outsourcing to a full-suite international investor services firm, including:
- Cost control: By outsourcing certain roles or functions you can avoid expenses associated with hiring and training of specialists, office space, IT, payroll and equipment. This cost-effective approach can enable you to focus more on core portfolio management and allocate financial resources more strategically, helping to maximise revenues
- Scalability: You can adjust the number of outsourced employees based on fluctuating workloads or project requirements without the need for extensive hiring or layoffs
- Access to skills and expertise: Outsourcing allows you to tap into an international pool of industry expertise that may not be available internally or at all if labour markets are stressed. By outsourcing operations to a specialist servicer, you can ensure rapid deal execution and high-quality work
- More focus on core competencies: By delegating secondary non-core operational (finance and legal) tasks to external experts, you can enhance operational efficiency, streamline and optimise processes, meet transactional deadlines, and concentrate on strategic initiatives that directly contribute to your competitive advantage
- Access to a global talent pool: A global servicer’s presence means you are no longer limited to local talent. You can engage with highly skilled professionals around the world with 24/7 availability no matter the time zone. This access to global talent can provide you with a broader range of options in all your investment markets and allow you to assemble diverse teams with varied perspectives and innovative ideas
- Risk mitigation: A quality servicer has well established (and thoroughly tested) processes, best practices and expertise in all the relevant domains. So, outsourcing can help you diversify operations and reduce dependence on a single location or workforce, enhancing overall risk management
Speak to IQ-EQ
At IQ-EQ, we offer comprehensive outsourcing solutions to international real estate investors lacking the critical mass to justify setting up expensive, multi-disciplinary local asset management teams in specific investment markets.
With an extensive international office network and sophisticated technological solutions, we offer our clients crucial local knowledge of legal, accounting and compliance requirements for commercial real estate structures and transactions.
To learn more about how we can help you with outsourcing support, please click here or get in touch today: