Fundraising with capital calls is easier than ever with Covercy’s all-in-one investment management platform for commercial real estate firms.
Capital Call Definition
A capital call is a request from a commercial real estate investment fund or sponsor to investors to provide additional capital. This can happen for a variety of reasons, such as to fund a new acquisition, make repairs to a property, or cover unexpected expenses.
Capital Flexibility
When investors commit to funding a commercial real estate fund, they typically don’t transfer the full amount of their investment right away. Instead, they agree to provide the capital on a call-as-needed basis. This gives the fund the flexibility to raise capital quickly when needed, without having to wait for investors to wire the funds.
Benefits for GPs
Capital calls offer multiple advantages to General Partners (GPs). Firstly, capital calls provide the GPs with immediate liquidity, ensuring that they have access to requisite funds whenever new investment opportunities arise. This immediacy can be pivotal in the highly competitive real estate landscape, where deals often need to be sealed promptly, and waiting for traditional financing methods might result in missed opportunities. Additionally, by utilizing capital calls, GPs can strategically leverage their equity positions in various properties or projects, allowing them to undertake a wider array of ventures with a limited initial capital outlay. By doing so, GPs can optimize their portfolio diversification, spreading risks across multiple assets while still preserving the upside potential.
Benefits for LPs (Investors)
Capital calls mean that LPs don’t have to provide the entirety of their commitment upfront; instead, they can keep their capital in other interest-earning assets until it is called upon. This allows LPs to maximize the utility of their capital, potentially earning returns in other avenues until it is required in the real estate investment. Secondly, capital calls give LPs better visibility into how their money is being utilized. Since GPs can only call capital as and when required for specific investments or operational needs, LPs have a clearer understanding of the deployment of their funds. The periodic nature of capital calls can serve as a checkpoint for LPs, allowing them to assess the project’s progress and the GP’s performance at regular intervals.
Capital Call Notices & Consequences
Capital calls are typically issued in a written notice, which specifies the amount of capital that is being called, the deadline for investors to provide the funds, and the consequences for failing to meet the deadline. If an investor is unable to meet a capital call, there may be consequences, such as:
Capital Calls in Commercial Real Estate
It is important for investors to carefully read the fund’s offering documents before investing, so that they understand the terms of any potential capital calls. Here are some additional things to keep in mind about capital calls in commercial real estate:
If you are considering investing in a commercial real estate fund, it is important to understand the terms of any potential capital calls. This will help you to make an informed decision about whether or not to invest.
Covercy is the first real estate capital calls platform with true end-to-end capital-raising features for General Partners (GPs).
Because of Covercy’s integrated banking features, GPs and investors can move money back-and-forth in a matter of minutes, and even earn high APY rates on uncalled capital without delayed access to funds.
Covercy also integrates distribution payments seamlessly with other powerful investor management tools. Try it free today.
Automation
A fundraising & capital calls platform like Covercy provides the ability to automate many of the tasks involved in fundraising, such as sending out investor communications, tracking investor commitments, and collecting capital calls.
Integration
Covercy’s investor management tool gives GPs the ability to integrate with other commercial real estate software solutions, such as property management software and accounting software.
Visibility
Investor reporting tools like Covercy give GPs the ability to provide real-time visibility into the fundraising process so that fund managers can track the progress of their fundraising efforts (and so can their investors).
Reporting
Covercy offers GPs and LPs the ability to generate and view reports on fundraising, capital calls, and profit distribution data so that managers and investors can analyze the performance of their investments.
The use of fundraising and capital calls software like Covercy can help streamline the fundraising process and improve the efficiency of capital calls. This can save GPs time and money, and it can help to ensure that capital calls are met on time.
Remember, real estate firms do not always issue capital calls!
For example, if a real estate firm is acquiring a property that is already stabilized and generating cash flow, the firm may not need to issue a capital call. The firm may be able to use the cash flow from the property to fund any necessary repairs or improvements.
Another example is if a real estate firm is acquiring a property with a single partner instead of multiple outside investors or syndication. In this case, the two partners may agree to share the costs of any necessary repairs or improvements. This would eliminate the need for a capital call.
However, in most cases, real estate firms will issue capital calls to investors. This is because capital calls provide a way for the firm to raise additional capital quickly and easily. This can be important in situations where the firm needs to make repairs to a property or cover unexpected expenses.
The amount of capital that is called will vary depending on the specific circumstances. However, it is typically a small percentage of the total investment. For example, a firm may issue a capital call for 10% of the total investment.
Features to Look For
in CRE Fundraising Software
Here are some of the features to look for when evaluating investment management fundraising platforms:
Overall, fundraising and capital calls software can be a valuable tool for investment funds and sponsors. By automating many of the tasks involved in fundraising and capital calls, and providing real-time visibility into the fundraising process, this software can help to streamline the fundraising process, improve capital call compliance, and make data-driven decisions about future fundraising efforts.
The first all-in-one fundraising & capital calls platform for commercial real estate professionals
Share a professional prospectus of a new property to potential investors with a click of a button on the platform.
Manage your investors in the process from potential to soft circle to signed and finally to invested. Monitor your progress within the real estate fundraising software via a central dashboard which reflects the different status so you always have an eye on your fundraising target. Know right where you are with making your investment goal so you can close your deal on time.
Once all your investors have signed, you are ready to issue a Capital Call to collect the funds in a few simple clicks. There are three easy steps:
Issue: Auto-generate a request for Capital.
Process: Collect funds with ACH debit into your primary account.
Track: Create a system of record of all incoming funds and status.
Note: Distribution payments work similarly! Read more about ACH debit distribution payments here.
Send professional offering decks
Share a professional prospectus of a new property to potential investors with a click of a button on the platform.
Track investor commitments & collect e-Signatures
Manage your investors in the process from potential to soft circle to signed and finally to invested. Monitor your progress within the real estate fundraising software via a central dashboard which reflects the different status so you always have an eye on your fundraising target. Know right where you are with making your investment goal so you can close your deal on time.
Collect funds & issue capital calls with ACH Debit
Once all your investors have signed, you are ready to issue a Capital Call to collect the funds in a few simple clicks. There are three easy steps:
Issue: Auto-generate a request for Capital.
Process: Collect funds with ACH debit into your primary account.
Track: Create a system of record of all incoming funds and status.
Note: Distribution payments work similarly! Read more about ACH debit distribution payments here.
Track and organize all documents
All documents for each investor are tracked and stored by each investor. Covercy’s real estate fundraising software is fully integrated with Dropbox Sign (formerly HelloSign) so signed agreements are automatically stored.
Once an investor has expressed a solid interest, share the agreement via the platform to be e-signed. You can even create templates of agreements and reuse them and have selected fields pre-populated such as names and amounts.
After signing, the investor will get a copy immediately and you will get notified together with the signed agreement. Read more about document sharing here.
Blog Post
Why You Should Automate Capital Calls & Distribution Processing Now
Ebook
Making Banking Count:
Streamlining Capital Calls in CRE
Help Center
How to Issue Capital Calls on Covercy GP
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