Issue & collect
capital calls
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Fundraising with capital calls is easier than ever with Covercy’s all-in-one investment management platform for commercial real estate firms.

everything you need to know about capital calls in commercial real estate

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Everything you need to
know about capital calls

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:

  • Share dilution: The investor’s ownership stake in the fund may be diluted, as other investors may be able to contribute the required capital.
  • Lawsuit: The fund may sue the investor for breach of contract.
  • Loss of equity: The investor may lose their entire investment in the fund.
  • Forced sale: The fund may force the investor to sell their interest in the fund.

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:

  • Capital calls are typically not required for all investors in a fund. The fund’s offering documents will specify which investors are subject to capital calls.
  • The amount of capital that is called may vary depending on the circumstances. For example, a larger capital call may be issued if the fund is acquiring a large property.
  • The deadline for investors to provide the required capital may also vary. However, it is typically within a few weeks of the capital call being issued.

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.

The benefits of using
a platform for capital calls

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.

When to Issue Capital Calls

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.

automated capital calls - CRE

Features to Look For
in CRE Fundraising Software

Here are some of the features to look for when evaluating investment management fundraising platforms:

  • Task automation: Fundraising and capital calls software can help to automate many of the tasks involved in fundraising, such as sending out investor communications, tracking investor commitments, and collecting capital calls. This can save fund managers time and effort, and it can help to ensure that the fundraising process is efficient.
  • Compliance tracking: Fundraising and capital calls software can help to ensure that capital calls are met on time and in full. This can help to avoid penalties and other problems that can arise from missed capital calls.
  • Real-time visibility: Fundraising and capital calls software can provide real-time visibility into the fundraising process. This allows fund managers to track the progress of their fundraising efforts and make adjustments as needed.
  • Data-driven decision making: Fundraising and capital calls software can generate reports on fundraising and capital calls data. This data can be used to analyze fundraising performance and make informed decisions about future fundraising efforts.

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.

automated capital calls - CRE

Capital Calls
with Covercy

The first all-in-one fundraising & capital calls platform for commercial real estate professionals

 

capital calls - prospectus and offering memorandum

Send professional offering decks

Share a professional prospectus of a new property to potential investors with a click of a button on the platform.

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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. 

capital calls - track and organize documents

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.

capital calls - prospectus and offering memorandum
dropbox sign covercy integration
capital calls - track and organize documents

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.

More about capital
calls in real estate

Blog Post

Why You Should Automate Capital Calls & Distribution Processing Now

Ebook

Making Banking Count:
Streamlining Capital Calls in CRE

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How to Issue Capital Calls on Covercy GP

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