by Pete Schow | February 6, 2018 | Real Estate
Throughout my years in the Commercial/Investment Real Estate (IRE) sector, one thing I have never heard is, “Now that we have reached $XBIL in AUM, there is no need to worry about future growth.” The goal in IRE is always continual growth through a mix of lower risk, “Core” fund offerings (Class A buildings with long term, solvent tenants) and higher risk, opportunistic strategies (redevelop, repurpose, renovate).
With the focus at the start-up of a new IRE firm being heavily weighted toward fast, targeted acquisitions while only incurring bare minimum expenses, a long term, robust IT strategy is rarely even a blip on the radar at this point. Generally, consideration is limited to general network, desktop, and cyber security needs. The flexibility and power offered by Microsoft Excel alone meets the majority of all business solution requirements in the early months and years.
But as many successful shops have learned, by the time they stabilize, come up for air, and take a breath, their operation has long exceeded the capabilities of utilizing Excel as the core of the IT ecosystem. The “lookback” then illustrates quite a variance from the initial IT budget projections.
So, in the era of the digital age, how do firms establish an IT strategy early on, not only to support, but empower long term growth while controlling headcount to AUM ratios?
Aside from the general areas of IT described above, the earlier IRE firms incorporate standardized processes and metrics into their operational cadence the smoother the transition from tools such as Excel to more robust, specialized business solutions. Areas IRE firms should incorporate into their early strategy should include:
1. Consistent capture and storage of acquisition details with specific variables related to property type (Office, Multifamily, Industrial, etc) and Investment Strategy
2. Property/Investment Level Accounting:
a. Alignment with property managers regarding revenue and expenses and how these are reported
b. Clearly defined timelines for submitting financials to support timely asset and portfolio level reporting
3. How many times is the same entered into separate systems? How and where can integration reduce the number of touchpoints?
4. Are the variances in your business processes between your Core and Opportunity Funds clearly defined and does your IT strategy support the needs of both?
Without a clearly defined IT strategy that aligns with your projected growth, any of the factors above will lead to unnecessary costs in terms of infrastructure, licensing, headcount, and redundant business processes. A solid IT strategy should allow your AUM to grow without a direct correlation to headcount.
We at Saxony Partners believe in the mantra of providing the right solutions and technology for our clients. We let the data tell how a product or process should be created or improved. And we do so with a passion for getting our clients and their customers what they need at the appropriate time for it. When you partner with us, you partner for success.
Contact us at (214) 389-7903 or firstname.lastname@example.org to learn how we can help you.
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